G.R. No.

162308

November 22, 2006

G & M PHILIPPINES, INC., Petitioner, vs. ROMIL V. CUAMBOT,* Respondent.

DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision1 of
the Court of Appeals (CA) in CA-G.R. SP No. 64744, as well as the Resolution2 dated February 20,
2004 denying the motion for reconsideration thereof.
The antecedent facts are as follows:
On November 7, 1994, respondent Romil V. Cuambot applied for deployment to Saudi Arabia as a car
body builder with petitioner G & M Philippines, Inc., a duly licensed placement and recruitment agency.
Respondents application was duly processed and he later signed a two-year employment contract to
work at the Al Waha Workshop in Unaizah City, Gassim, Kingdom of Saudi Arabia. He left the country
on January 5, 1995. However, respondent did not finish his contract and returned to the Philippines
barely six months later, on July 24, 1995. On July 26, 1995, he filed before the National Labor Relations
Commission (NLRC) a complaint for unpaid wages, withheld salaries, refund of plane ticket and
repatriation bond, later amended to include illegal dismissal, claim for the unexpired portion of his
employment contract, actual, exemplary and moral damages, and attorneys fees. The complaint was
docketed as NLRC-NCR Case No. 00-07-05252-95.
Respondent narrated that he began working for Mohd Al Motairi,3 the President and General Manager of
the Al Waha Workshop, on January 8, 1995. Along with his Filipino co-workers, he was subjected to
inhuman and unbearable working conditions, to wit:
1. [He] was required to work from 7:00 oclock in the morning to 10:00 oclock in the evening
everyday, except Friday, or six (6) hours overtime work daily from the usual eight (8) working
hours per day.
2. [He] was never paid x x x his monthly basic salary of 1,200 [Riyals] including his overtime
pay for the six (6) hours overtime work he rendered every working day during his work in Saudi
Arabia except for the amount of 100 [Riyals] given every month for his meal allowance;
3. [He] was subjected to serious insult by respondent Muthiri everytime he asked or demanded
for his salary; and,
4. [S]ome of complainants letters that were sent by his family were not given by respondent
Muthiri and/or his staff x x x.4
When respondent asked Motairi for his salary, he was told that since a huge sum had been paid to the
agency for his recruitment and deployment, he would only be paid after the said amount had already
been recovered. He was also told that his salary was only 800 Saudi Riyals (SAR) per month, in contrast
to the SAR1200 that was promised him under the contract. Motairi warned that he would be sent home
the next time he demanded for his salary. Due to his familys incessant letters asking for financial
support, however, respondent mustered the courage to again demand for his salaries during the second
week of July 1996. True to his word, Motairi ordered him to pack up and leave. He was able to purchase
his plane ticket only through the contributions of his fellow Filipinos. Motairi even accompanied him to

the airport when he bought his plane ticket. In the meantime, his wife had been making inquiries about
him.
To corroborate his claims, respondent submitted the following documents: an undated letter5 he had
written addressed to the Philippine Labor Attach in Riyadh, with Arabic translation;6 his wifes
letter7 dated June 28, 1995 addressed to the "Gulangco Monteverde Agency, Manila Head Office,"
asking for a "favor to help [her] husband to come home as early as possible;" a fax message8 dated July
17, 1995 from a representative of the Land Bank of the Philippines (LBP) to a counterpart in Riyadh,
asking for assistance to locate respondent;9 and the reply10 from the Riyadh LBP representative
requesting for contact numbers to facilitate communication with respondent.1wphi1
Respondent further claimed that his employers actuations violated Articles 83 and 103 of the Labor
Code. While he was entitled to terminate his employment in accordance with Article 285 (b) due to the
treatment he received, he did not exercise this right. He was nevertheless illegally dismissed by his
employer when he tried to collect the salaries due him. Respondent further claimed that the reduction of
his monthly salary from SAR1,200 to SAR800 and petitioners failure to furnish him a copy of the
employment contract before his departure amounted to prohibited practices under Article 34 (i) and (k)
of the Labor Code.
Respondent prayed for the following relief:
WHEREFORE, premises considered, complainant most respectfully prays unto this Honorable Office
that the instant complaint be given due course and that a decision be rendered in his favor and against
respondents G & M (Phils.), Inc., Alwaha (sic) Workshop and/or Muhamd (sic) Muthiri, as follows:
(1) Ordering the respondents to pay, jointly and severally, complainant the unpaid salaries and
overtime pay in the amounts of P61,560.00 and P66,484.80, respectively, including interests,
until the same will be fully paid;
(2) Ordering the respondents to pay, jointly and severally, complainant[s] salary for the
unexpired portion of the contract in the amount of P184,680.00, including interests, until the
same will be fully paid;
(3) Ordering the respondents to pay, jointly and severally, complainant[s] actual expenses which
he incurred in applying for the job, including expenses in leaving for the job, including expenses
in leaving for Saudi Arabia and plane ticket, as well as repatriation bond and incidental expenses
in going home to the Philippines in the amounts of P49,000.00 and P20,000.00, respectively,
including interests, until the same will be fully paid;
(4) Ordering the respondents to pay, jointly and severally, complainant moral damages in the
amount ofP150,000.00 and exemplary damages in the amount of P150,000.00, including
interests, until the same will be fully paid;
(5) Ordering the respondents to pay, jointly and severally, complainant for and as attorneys fees
in the amount of P68,172.48 or the amount equivalent to 10% of the total amount of the
foregoing claims and damages that may be awarded by the Honorable Office to the
complainant.11
In its position paper, petitioner alleged that respondent was deployed "for overseas work as car body
builder for its Principal Golden Wings Est. for General Services and Recruitment in Saudi Arabia for an
employment period of 24 months, with a monthly salary of US$400.00."12 It insisted that respondent was
religiously paid his salaries as they fell due. After working for a little over seven months, respondent

pleaded with his employer to be allowed to return home since there were family problems he had to
settle personally. Respondent even submitted a resignation letter13 dated July 23, 1995.
To support its claim that respondent had been paid his salaries as they fell due, petitioner submitted in
evidence copies of seven payslip14 authenticated by the Philippine Labor Attach in Riyadh, Saudi
Arabia. Petitioner asserted that since respondent only worked for a little over seven months and did not
finish his contract, he should pay the cost of the plane ticket. It pointed out that according to the standard
employment contract, the employer would provide the employee with a free plane ticket for the flight
home only if the worker finishes his contract.
Respondent countered that his signatures in the purported payslips were forged. He denied having
received his salaries for the said period, except only for the SAR100 as monthly allowance. He pointed
out that the authentication of the alleged pay slips and resignation letter before the labor attach in
Riyadh is immaterial, since the documents themselves were falsified.
Respondent further claimed that petitioner required him to pay a P10,000.00 placement fee and that he
had to borrow P2,000.00 from a relative. He was then told that the amount would be considered as an
advance payment and that the balance would be deducted from his salary. He was not, however, given
any receipt. He insisted that the employment contract which he signed indicated that he was supposed to
receive a monthly salary of SAR1,200 for working eight hours a day, excluding overtime pay. He was
repeatedly promised to be furnished a copy of the contract and was later told that it would be given to
his wife, Minda. However, she was also given the run-around and was told that the contract had already
been given to her husband.
To counter the allegation of forgery, petitioner claimed that there was a great possibility that respondent
had changed his signature while abroad so that he could file a complaint for illegal dismissal upon his
return. The argument that the stroke and handwriting on the payslip was written by one and the same
person is mere conjecture, as respondent could have requested someone, i.e., the cashier, to prepare the
resignation letter for him. While it is the employer who fills up the pay slip, respondent could have
asked another employee to prepare the resignation letter, particularly if he (respondent) did not know
how to phrase it himself. Moreover, it could not be presumed that the payslip and resignation letter were
prepared by one and the same person, as respondent is not a handwriting expert. Petitioner further
pointed out that respondent has different signatures, not only in the pleadings submitted before the Labor
Arbiter, but also in respondents personal documents.
On January 30, 1997, Labor Arbiter Jose De Vera ruled in favor of respondent on the following
ratiocination:
What convinced this Arbitration Branch about the unreliability of the complainants signature in the
payslip is the close semblance of the handwritings in the payslips and the handwritings in the purported
handwritten resignation of the complainant. It unmistakably appears to this Arbitration Branch that the
payslips as well as the handwritten letter-resignation were prepared by one and the same person. If it
were true that the handwritten letter-resignation was prepared by the complainant, it follows that he also
prepared the payslips because the handwritings in both documents are exactly the same and identical.
But [this] is quite unbelievable that complainant himself as the payee prepared the payslips with the
corresponding entries therein in his own handwriting. Under the circumstances, the only logical
conclusion is that both the payslips and the handwritten letter-resignation were prepared and signed by
one and the same person definitely not the complainant.
With the foregoing findings and conclusions, this Arbitration Branch is of the well-considered view that
complainant was not paid his salaries from January 5, 1995 up to July 23, 1995 and that he was
unjustifiably dismissed from his employment when he repeatedly demanded for his unpaid salaries.

Respondents are, therefore, liable to pay the complainant his salaries from January 5, 1995 up to July 23,
1995 which amount to US$2,640.00 (US$400 x 6.6 mos). Further, respondents are also liable to the
complainant for the latters salaries for the unexpired portion of his contract up to the maximum of three
(3) months pursuant to Section 10 of RA 8042, which amount to US$1,200.00. Respondents must also
refund complainants plane fare for his return flight. And finally, being compelled to litigate his claims,
it is but just and x x x that complainant must be awarded attorneys fees at the rate of ten percent (10%)
of the judgment award.
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered ordering the
respondents to pay complainant the aggregate sum of US$3,840.00 or its equivalent in Philippine
Currency at the exchange rate prevailing at the time of payment, and to refund complainants plane fare
for his return flight. Further, respondents are ordered to pay complainant attorneys fees at the rate of
Ten percent (10%) of the foregoing judgment award.15
Petitioner appealed the Decision of the Labor Arbiter to the NLRC, alleging that the Labor Arbiter, not
being a handwriting expert, committed grave abuse of discretion amounting to lack of jurisdiction in
finding for respondent. In its Decision16 dated December 9, 1997, the NLRC upheld this contention and
remanded the case "to the Arbitration Branch of origin for referral to the government agency concerned
for calligraphy examination of the questioned documents."17
The case was then re-raffled to Labor Arbiter Enrico Angelo Portillo. On September 11, 1998, the parties
agreed to a resetting to enable petitioner to secure the original copies of documents from its foreign
principal. However, on December 9, 1998, the parties agreed to submit the case for resolution based on
the pleadings and on the evidence on record.
This time, the complaint was dismissed for lack of merit. According to Labor Arbiter Portillo, aside from
respondents bare allegations, he failed to substantiate his claim of poor working conditions and long
hours of employment. The fact that he executed a handwritten resignation letter is enough evidence of
the fact that he voluntarily resigned from work. Moreover, respondent failed to submit any evidence to
refute the pay slips duly signed and authenticated by the labor attach in Saudi Arabia, inasmuch as their
probative value cannot be impugned by mere self-serving allegations. The Labor Arbiter concluded that
as between the oral allegations of workers that they were not paid monetary benefits and the
documentary evidence presented by employer, the latter should prevail. 18
Respondent appealed the decision before the NLRC, alleging that the Labor Arbiter failed to consider
the genuineness of the signature which appears in the purported resignation letter dated July 23, 1995, as
well as those that appear in the seven pay slips. He insisted that these documents should have been
endorsed to the National Bureau of Investigation Questioned Documents Division or the Philippine
National Police Crime Laboratory for calligraphy examination.
The NLRC dismissed the appeal for lack of merit in a Resolution19 dated December 27, 2000. It held
that the questioned documents could not be endorsed to the agency concerned since mere photocopies
had been submitted in evidence. The records also revealed that petitioner had communicated to the
foreign employer abroad, who sent the original copies, but there was no response from respondent. It
also stressed that during the December 9, 1998 hearing, the parties agreed to submit the case for
resolution on the basis of the pleadings and the evidence on record; if respondent had wanted to have the
documents endorsed to the NBI or the PNP, he should have insisted that the documents be examined by
a handwriting expert of the government. Thus, respondent was estopped from assailing the Labor
Arbiters ruling.
Unsatisfied, respondent elevated the matter to the CA via petition for certiorari. He pointed out that he
merely acceded to the submission of the case for resolution due to the inordinate delays in the case.

Moreover, the questioned documents were within petitioners control, and it was petitioner that
repeatedly failed to produce the original copies.
The CA reversed the ruling of the NLRC. According to the appellate court, a visual examination of the
questioned signatures would instantly reveal significant differences in the handwriting movement,
stroke, and structure, as well as the quality of lines of the signatures; Labor Arbiter Portillo committed
patent error in examining the signatures, and it is the decision of Labor Arbiter De Vera which must be
upheld. The CA also pointed out the initial ruling of the NLRC (Second Division) dated December 9,
1997 which set aside the earlier decision of Labor Arbiter De Vera included a special directive to the
Arbitration Branch of origin to endorse the questioned documents for calligraphy examination.
However, respondent Cuambot failed to produce original copies of the documents; hence, Labor Arbiter
Portillo proceeded with the case and ruled in favor of petitioner G.M.Phils. The dispositive portion of
the CA ruling reads:
IN VIEW OF ALL THE FOREGOING, the instant petition is hereby GRANTED. Accordingly, the
assailed Resolutions dated 27 December 2000 and 12 February 2001, respectively, of the NLRC Second
Division are hereby SET ASIDE and the Decision dated 20 February 1997 rendered by Labor Arbiter
Jose De Vera is hereby REINSTATED.20
Petitioner filed a motion for reconsideration, which the CA denied for lack of merit in its
Resolution21 dated February 20, 2004.
Hence, the present petition, where petitioner claims that
THE COURT OF APPEALS GRAVELY ERRED ON A MATTER OF LAW IN HOLDING THAT
LABOR ARBITER ENRICO PORTILLO GRAVELY ABUSED HIS DISCRETION WHEN HE HELD
THAT THE SIGNATURES APPEARING ON THE QUESTIONED DOCUMENTS ARE THOSE OF
THE PETITIONER.22
Petitioner points out that most of the signatures which Labor Arbiter De Vera used as standards for
comparison with the signatures appearing on the questioned documents were those in the pleadings filed
by the respondent long after the questioned documents had been supposedly signed by him. It claims
that respondent affixed his signatures on the pleadings in question and intentionally made them different
from his true signature so that he could later on conveniently impugn their authenticity. Petitioner claims
that "had Labor Arbiter De Vera taken pains in considering these circumstances, he could have
determined that respondent may have actually intentionally given a different name and slightly changed
his signature in his application, which name and signature he used when he signed the questioned letter
of resignation and payslips, only to conveniently disown the same when he came back to the country to
file the present case."23 Thus, according to petitioner, the CA clearly committed a palpable error of law
when it reversed the ruling of the NLRC, which in turn affirmed Labor Arbiter Portillos decision.
For his part, respondent contends that petitioners arguments were already raised in the pleadings filed
before Labor Arbiter De Vera which had already been passed upon squarely in the Labor Arbiters
Decision of January 30, 1997.
The determinative issues in this case are essentially factual in nature - (a) whether the signatures of
respondent in the payslips are mere forgeries, and (b) whether respondent executed the resignation letter.
Generally, it is not our function to review findings of fact. However, in case of a divergence in the
findings and conclusions of the NLRC on the one hand, and those of the Labor Arbiter and the CA on
the other, the Court may examine the evidence presented by the parties to determine whether or not the
employee was illegally dismissed or voluntarily resigned from employment. 24 The instant case thus falls
within the exception.

We have carefully examined the evidence on record and find that the petition must fail.
In its Decision25 dated December 9, 1997, the NLRC had ordered the case remanded to the Labor Arbiter
precisely so that the questioned documents purportedly signed/executed by respondent could be
subjected to calligraphy examination by experts. It is precisely where a judgment or ruling fails to make
findings of fact that the case may be remanded to the lower tribunal to enable it to determine
them.26 However, instead of referring the questioned documents to the NBI or the PNP as mandated by
the Commissions ruling, Labor Arbiter Portillo proceeded to rule in favor of petitioner, concluding that
respondents signatures were not forged, and as such, respondents separation from employment was
purely voluntary. In fine, then, the Labor Arbiter gravely abused his discretion when he ruled in favor of
petitioner without abiding by the Commissions directive.
We note, however, that a remand of the case at this juncture would only result in unnecessary delay,
especially considering that this case has been pending since 1995. Indeed, it is this Courts duty to settle,
whenever possible, the entire controversy in a single proceeding, "leaving no root or branch to bear the
seeds of future litigation."27 Hence, the case shall be fully resolved on its merits.
We find that petitioners failure to submit the original copies of the pay slips and the resignation letter
raises doubts as to the veracity of its claim that they were actually signed/penned by respondent. The
failure of a party to produce the original copy of the document which is in issue has been taken against
such party, and has even been considered as a mere "bargaining chip," a dilatory tactic so that such party
would be granted the opportunity to adduce controverting evidence.28 In fact, petitioner did not even
present in evidence the original copy of the employment contract, much less a machine copy, giving
credence to respondents claim that he was not at all given a copy of the employment contract after he
signed it. What petitioner presented was a mere photocopy of the OCW Info Sheet29 issued by the
Philippine Overseas Employment Administration as well as the Personal Data Sheet30 which respondent
filled up. It bears stressing that the original copies of all these documents, including the employment
contract, were in the possession of petitioner, or, at the very least, petitioners principal.
Moreover, as correctly noted by the CA, the opinions of handwriting experts, although helpful in the
examination of forged documents because of the technical procedure involved in the analysis, are not
binding upon the courts.31 As such, resort to these experts is not mandatory or indispensable to the
examination or the comparison of handwriting. A finding of forgery does not depend entirely on the
testimonies of handwriting experts, because the judge must conduct an independent examination of the
questioned signature in order to arrive at a reasonable conclusion as to its authenticity.32 No less than
Section 22, Rule 132 of the Rules of Court explicitly authorizes the court, by itself, to make a
comparison of the disputed handwriting "with writings admitted or treated as genuine by the party
against whom the evidence is offered or proved to be genuine to the satisfaction of the judge." Indeed,
the authenticity of signatures is not a highly technical issue in the same sense that questions concerning,
e.g., quantum physics or topology, or molecular biology, would constitute matters of a highly technical
nature. The opinion of a handwriting expert on the genuineness of a questioned signature is certainly
much less compelling upon a judge than an opinion rendered by a specialist on a highly technical issue.33
Even a cursory perusal of the resignation letter34 and the handwritten pay slips will readily show that
they were written by only one person. A mere layman will immediately notice that the strokes and letters
in the documents are very similar, if not identical, to one another. It is also quite apparent from a
comparison of the signatures in the pay slips that they are inconsistent, irregular, with uneven and
faltering strokes.
We also find it unbelievable that after having waited for so long to be deployed to Saudi Arabia and with
the hopes of opportunity to earn a better living within his reach, respondent would just suddenly decide
to abandon his work and go home due to "family problems." At the very least, respondent could have at

least specified the reason or elaborated on the details of such an urgent matter so as not to jeopardize
future employment opportunities.
That respondent also filed the complaint immediately gives more credence to his claim that he was
illegally dismissed.1wphi1 He arrived in the Philippines on July 24, 1995, and immediately filed his
complaint for illegal dismissal two days later, on July 26, 1995.
We are not impervious of petitioners claim that respondent could have asked another person to execute
the resignation letter for him. However, petitioner failed to present even an affidavit from a
representative of its foreign principal in order to support this allegation.
Indeed, the rule is that all doubts in the implementation and the interpretation of the Labor Code shall be
resolved in favor of labor,35 in order to give effect to the 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," and to "assure the rights of workers to self-organization,
collective bargaining, security of tenure, and just and humane conditions of work."36 We reiterate the
following pronouncement in Nicario v. National Labor Relations Commission:37
It is a well-settled doctrine, that 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. It is a time-honored 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 formers favor. 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.
Moreover, one who pleads payment has the burden of proving it. The reason for the rule is that the
pertinent personnel files, payrolls, records, remittances and other similar documents which will show
that overtime, differentials, service incentive leave, and other claims of workers have been paid are not
in the possession of the worker but in the custody and absolute control of the employer. Thus, the burden
of showing with legal certainty that the obligation has been discharged with payment falls on the debtor,
in accordance with the rule that one who pleads payment has the burden of proving it.38 Only when the
debtor introduces evidence that the obligation has been extinguished does the burden shift to the
creditor, who is then under a duty of producing evidence to show why payment does not extinguish the
obligation.39 In this case, petitioner was unable to present ample evidence to prove its claim that
respondent had received all his salaries and benefits in full.1wphi1
IN LIGHT OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. The Decision of the
Court of Appeals in CA-G.R. SP No. 64744 is AFFIRMED. Costs against the petitioners.
SO ORDERED.
G.R. No. 167813 June 27, 2006
BENJAMIN L. SAROCAM, Petitioner, vs. INTERORIENT MARITIME ENT., INC., and
DEMACO UNITED LTD., Respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is a Petition for Review on certiorari under Rule 45 of the Rules of Court of the
Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 84883, which affirmed the February 19,

2004[2] and April 27, 2004[3] Resolutions of the National Labor Relations Commission (NLRC) in
NCR Case No. 01-11-2492-00.
The Antecedents
On June 27, 2000 petitioner Benjamin L. Sarocam was hired by Interorient Maritime Ent., Inc. and
Demaco United Ltd., for a twelve-month contract as 'bosun on board M/V Despina. His basic monthly
salary was US$450.00 on a 48-hour work week, with a fixed overtime pay of US$180.00 per month for
105 hours, supplementary wage of US$70.00, and vacation leave with pay of 2.5 days.[4]
While the vessel was navigating to China, petitioner suffered lumbar sprain when he accidentally fell
from a ladder.[5] On November 15, 2000, he was examined and found to have neuromyositis with the
waist and diabetes. The examining physician prescribed medicine and recommended the signing off and
hospitalization of petitioner.[6] His employers agreed to repatriate him on November 30, 2000.
On December 5, 2000, petitioner was referred to the company-designated physician, Dr. Teodoro F.
Pidlaoan, Medical Director of the Our Lady of Fatima Medical Clinic. The x-ray of his lumbosacral
spine revealed normal results and his Fasting Blood Sugar test revealed 9.1 (NV 4.1-6.1
umol/l). Petitioner was given Alaxan tablet for his back pain and Euglocon for his elevated blood
sugar. He was also advised to return for follow-up evaluation. On December 13, 2000, he returned to the
clinic with no more complaints of back pains. His sugar examination likewise revealed normal results.
Petitioner was then declared 'fit for duty effective on that day.[7]
On March 20, 2001, or barely three months from being pronounced fit to work, petitioner executed a
release and quitclaim[8] in favor of his employers where he acknowledged the receipt of US$405.00 as
his sickwages and freed his employers from further liability.

However, on November 27, 2001, petitioner filed a complaint with the labor arbitration branch of the
NLRC for disability benefit, illness allowance/reimbursement of medical expenses, damages and
attorney's fees.[9] To support his claim, he presented the following: (1) a medical certificate[10] dated
July 25, 2001 issued by Dr. Rimando C. Saguin recommending a Grade VIII disability under the POEA
schedule of disability grading; (2) a medical certificate[11] dated July 27, 2001 issued by Dr. Antonio A.
Pobre, recommending the same Grade VIII disability; and (3) a medical certificate[12] dated August 2,
2001 issued by Dr. Efren R. Vicaldo recommending a Grade VI disability.
On July 11, 2003, Labor Arbiter Antonio R. Macam rendered a Decision[13] dismissing the complaint,
holding that petitioner was not entitled to disability benefits because he was declared 'fit for duty. The
Labor Arbiter noted that petitioner had previously executed a release and quitclaim in favor of his
employers and already received his sickness allowance. Thus, he could not claim for reimbursement for
medical expenses due to lack of pertinent substantiation. Petitioner's claim for moral damages and
attorney's fees were, likewise, not awarded on the Labor Arbiter's ruling that there was no evidence of
bad faith and malice on the part of the employers.
The fallo of the Labor Arbiter's decision reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered

dismissing the complaint for lack of merit.
SO ORDERED.[14]
Petitioner appealed the Decision[15] to the NLRC onJuly 31, 2003 which issued its
Resolution[16] dated February 19, 2004, affirming the decision of the Labor Arbiter, with the
modification that petitioner was entitled to US$1,350.00 or its peso equivalent, representing his salary
for three (3) months. The NLRC ruled that petitioner should have been reinstated by respondents
considering that when the former was declared 'fit for duty, his employment contract had not yet expired.
Thus, respondents were liable for his salary corresponding to the unexpired portion of the employment
contract or three months' salary for every year of the unexpired term whichever is less, pursuant to
Section 10 of Republic Act No. 8042. The fallo of the Resolution reads:
WHEREFORE, premises considered, the Appeal is DENIED. However, for reasons
stated above, the Decision dated 11 July 2003 is hereby MODIFIED, ordering
respondents-appellees to indemnify complainant-appellant in the amount of
US$1,350.00 or its peso equivalent at time of payment.
SO ORDERED.[17]

Petitioner filed a Motion for Reconsideration which the NLRC denied on April 27, 2004.[18] He
forthwith filed a Petition for Certiorari[19] with the CA, assailing the ruling of the labor tribunal.
On January 25, 2005, the CA rendered judgment dismissing the petition.The appellate court declared
that the issues raised by petitioner relating to the credibility and probative weight of the evidence
presented were factual in nature, hence, proscribed under Rule 65 of the Rules of Court. The CA noted
that petitioner did not even contest the due execution, voluntariness and veracity of his own handwritten
quitclaim. Thus, he was estopped from assailing the Deed of Release and Quitclaim he executed after
receiving US$405.00 from respondents.Considering that petitioner was examined by the companydesignated physician and did not protest the findings thereon and later received sickwages, the appellate
court concluded that the NLRC was correct in its ruling. The dispositive portion of the CA decision
states:
IN VIEW OF ALL THE FOREGOING, the instant petition is ordered DISMISSED. No
pronouncements as to costs.
SO ORDERED.[20]
Petitioner's motion for reconsideration was denied by the CA in its Resolution[21] datedApril 19, 2005.
Petitioner thus filed the instant petition, raising the following issues:

I.
IN LIGHT OF THE DECISION OF THIS HONORABLE COURT IN 'GERMAN
MARINE AGENCIES, INC. VS. NLRC, ET AL., 350 SCRA 629, CAN THE
RESPONDENTS' COMPANY-DESIGNATED DOCTOR BE CONSIDERED
COMPETENT AND RELIABLE ENOUGH TO DECLARE PETITIONER AS FIT TO
WORK CONTRARY TO THE DECLARATIONS OF THREE (3) INDEPENDENT
PHYSICIANS SIMILARLY FINDING HIM OTHERWISE?
II.
DOES THE EXECUTION BY PETITIONER OF A RELEASE AND QUITCLAIM
ESTOP HIM FROM CLAIMING DISABILITY BENEFITS UNDER THE POEA
STANDARD EMPLOYMENT CONTRACT?[22]

The Court's Ruling

As in the CA, the issues raised by the petitioner are factual.He maintains that the diagnosis of his three
(3) personal doctors declaring him unfit to work is more accurate and reliable than that of Dr. Pidlaoan,
the company-designated physician. These three physicians, two of whom are orthopedic surgeons, are
likewise in a better position to determine his fitness or unfitness for work, unlike Dr. Pidlaoan whose
expertise cannot be ascertained from the medical certificate he issued. Petitioner thus assails the
competence of Dr. Pidlaoan to assess his fitness to work.
Petitioner avers that the quitclaim he executed is invalid, as the amount he received as consideration
therefor was much lower than what he should have received under the POEA Standard Employment
Contract. He went on to argue that quitclaims are frowned upon by this Court as they are contrary to
public policy.
It must be stressed that in a petition for review on certiorari under Rule 45 of the Rules of Court, only
questions of law may be raised.[23] The Court is not a trier of facts and is not to reassess the credibility
and probative weight of the evidence of the parties and the findings and conclusions of the Labor Arbiter
and the NLRC as affirmed by the appellate court. Moreover, the factual findings of the Labor Arbiter
and the NLRC are accorded respect and finality when supported by substantial evidence, which means
suchevidence as that which a reasonable mind might accept as adequate to support a conclusion. 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.[24]
In the instant case, the CA, the NLRC and the Labor Arbiter are one in their findings that based on the
evidence on record, petitioner is not entitled to disability benefits.
Prescinding from the foregoing, the Court finds and so rules that under the Standard Terms and
Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going Vessel or the
POEA Standard Employment Contract issued pursuant to DOLE Department Order No. 4, and POEA

Memorandum Circular No. 9, both Series of 2000, petitioner is not entitled to disability benefits.
Section 20-B, paragraph 2 of the POEA Standard Employment Contract provides:
SECTION 20. COMPENSATION AND BENEFITS
xxxx
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness
during the term of his contract are as follows:
xxxx
2. If the injury or illness requires medical and/or dental treatment in a foreign port,
the employer shall be liable for the full cost of such medical, serious dental, surgical
and hospital treatment as well as board and lodging until the seafarer is declared fit
to work or to be repatriated.
However, if after repatriation, the seafarer still requires medical attention arising
from said injury or illness, he shall be so provided at cost to the employer until such
time he is declared fit or the degree of his disability has been established by the
company-designated physician.

In the instant case, Dr. Pidlaoan diagnosed petitioner as 'fit for duty as gleaned from hisDecember 13,
2000 Medical Report, to wit:
xxxx
Referred and consulted our medical clinic on December 05, 2000 still complaining of
on-and-off low back pain aggravated by movements. X-ray of the lumbosacral spine
revealed normal findings, Fasting Blood Sugar revealed 9.1 (NV 4.1 - 6.1 umol/l).
Patient was given Alaxan tablet 2-3x a day for his back pain and Eugoclon 1 tablet daily
for his elevated blood sugar and advised to come back regularly for repeat blood sugar
and for follow-up evaluation on his back pain.
Today, December 13, 2000, he came back with no more complaints of back pain and
repeat sugar examination revealed already normal results.
DIAGNOSIS: Lumbar Strain
Diabetes Mellitus
RECOMMENDATION: Fit for duty effective today, December 13, 2000.
xxxx
Since he was declared fit for work, petitioner has no more right to claim disability benefits under the
contractual provisions of the POEA Standard Employment Contract.

Under Section 20-B, paragraph 3 of the said contract, petitioner is obliged to submit himself to a postemployment medical examination by a company-designated physician within three working days upon
his return, except when he is physically incapacitated to do so, in which case, a written notice to the
agency within the same period is deemed as compliance. Failure to comply with this mandatory
reporting requirement shall result in forfeiture of the right to claim the above benefits.It is likewise
provided that if a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be
agreed jointly between the employer and the seafarer whose decision shall be final and binding on both
parties.
Petitioner did not question the findings of Dr. Pidlaoan and his recommendation.He questioned the
doctor's competency and the correctness of his findings only when he filed the complaint against
respondents before the Labor Arbiter, roughly 11 months after petitioner was examined by the
doctor. Petitioner consulted his personal doctors only in July and August 2001, long after he had been
examined by the company-designated physician.
Petitioner's invocation of this Court's ruling in German Marine Agencies v. NLRC[25]militates against
his claim for disability benefits. As explicitly laid in the said case, it is the company-designated
physician who should determine the degree of disability of the seaman or his fitness to work, thus:
x x x In order to claim disability benefits under the Standard Employment Contract, it is
the company-designated physician who must proclaim that the seaman suffered a
permanent disability, whether total or partial, due to either injury or illness, during the
term of the latter's employment. x x x It is a cardinal rule in the interpretation of contracts
that if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control.There is no
ambiguity in the wording of the Standard Employment Contract ' the only qualification
prescribed for the physician entrusted with the task of assessing the seaman's disability is
that he be company-designated.[26]
Dr. Pidlaoan examined and treated petitioner from the time he was repatriated up to his recovery and
subsequent assessment as fit for duty on December 13, 2000. As in theGerman Marine case, the
extensive medical attention extended by Dr. Pidlaoan enabled the latter to acquire familiarity, if not
detailed knowledge, of petitioner's medical condition. No doubt such specialized knowledge enabled Dr.
Pidlaoan to arrive at a much more accurate appraisal of petitioner's condition, as compared to another
physician not privy to petitioner's case from the very beginning.[27] Indeed, the assessment of the three
other personal doctors of petitioner could not have been that reliable considering that they based their
conclusions on the prior findings of Dr. Pidlaoan; moreover, they examined petitioner 7 or 8 months
after he was assessed as fit to work and treated him for only one day.

The only requirement stated in the POEA Standard Employment Contract, as explained in the German
Marine case, is that the doctor be company-designated, and no other. Though it is prudent and advisable
to have a doctor specialized in his field to examine the seafarer's condition ordegree of illness, the
contractual provisions of the parties only require that the doctor be 'company-designated. When the
language of the contract is explicit, as in the case at bar, leaving no doubt as to the intention of the

drafters thereof, the courts may not read into it any other intention that would contradict its plain import.
[28]
Furthermore and most importantly, petitioner did not question the competency of Dr. Pidlaoan and his
assessment when the latter declared him as fit for duty or fit to work.
Additionally, petitioner, instead of questioning the assessment of the company-designated doctor,
executed a release and quitclaim in favor ofrespondents, around three months after the assessment. In
executing the said document, petitioner thus impliedly admitted the correctness of the assessment of the
company-designated physician, and acknowledged that he could no longer claim for disability benefits.
While petitioner may be correct in stating that quitclaims are frowned upon for being contrary to public
policy, the Court has, likewise, recognized legitimate waivers that represent a voluntary and reasonable
settlement of a worker's claim which should be respected as the law between the parties. Where the
person making the waiver has done so voluntarily, with a full understanding thereof, and the
consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a
valid and binding undertaking.[29]
In the instant case, petitioner, by his own hand, wrote the following in the March 20, 2001 release and
quitclaim:
That I have read this paper from beginning to and [sic] and understand the contents
thereof.
That I know this paper that I am signing.
That I know that signing this paper settles and ends every right or claim I have
for all damages including but not limited to loss of earning capacity [sic] of past and
future maintenance. [sic] support [sic] suffering [sic] mental anguish. [sic] serious
anxiety and similar injury.
That I have received the amount of US$405 or P18,630.
That I know that upon receipt of the above amount I waive all claims I may have for
damage against the vessel's owners and her agents, insurers, charterers, operators [sic]
underwriters, p.i. clube [sic], shipper and all other persons in interest therein or thereon,
under all and all other countries.[30]
From the document itself, the element of voluntariness in its execution is evident. Petitioner also
appears to have fully understood the contents of the document he was signing, as the important
provision thereof had been relayed to him in Filipino. Thus, the document also states:
Na alam ko na pagkatanggap ko nang halagang ito ay pinawawalang bisa at iniuurong
ko nang lahat [ng] aking interes, karapatan, at anumang reklamo o damyos laban sa
barko, may-ari nito, mga ahente, seguro at lahat-lahat ng may kinalaman sa barkong ito
maging dito sa Pilipinas o anumang bansa.[31]

Likewise, the US$405.00 which he received in consideration of the quitclaim is a credible and
reasonable amount. He was truly entitled thereto, no more and no less, given that he was sick for only
less than a month or from November 15, 2000 to December 13, 2000. The same would not, therefore,
invalidate the said quitclaim. As we held in Periquet v. National Labor Relations Commission:[32]
Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the
parties and may not later be disowned simply because of a change of mind. It is only
where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its face, that the law will step in
to annul the questionable transaction. But where it is shown that the person making the
waiver did so voluntarily, with full understanding of what he was doing, and the
consideration for the quitclaim is credible and reasonable, the transaction must be
recognized as a valid and binding undertaking.[33]

As a final note, let it be emphasized that the constitutional policy to provide full protection to labor is
not meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does
not prevent us from sustaining the employer when it is in the right.[34]
WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 84883 are AFFIRMED. Costs against the
petitioner.
SO ORDERED.
G.R. No. 167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty.
Their earnings have built houses, provided health care, equipped schools and planted the seeds of
businesses. They have woven together the world by transmitting ideas and knowledge from country to
country. They have provided the dynamic human link between cultures, societies and economies. Yet,
only recently have we begun to understand not only how much international migration impacts
development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10,
Republic Act (R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of
his placement fee with interest of 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.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but
exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal
to their lump-sum salary either for the unexpired portion of their employment contract "or for three
months for every year of the unexpired term, whichever is less" (subject clause). Petitioner claims that
the last clause violates the OFWs' constitutional rights in that it impairs the terms of their contract,
deprives them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8,
2004 Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject
clause, entreating this Court to declare the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents)
under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment
with the following terms and conditions:
Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded
employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the
assurance and representation of respondents that he would be made Chief Officer by the end of April
1998.6
Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner refused
to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19,
1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and seven
(7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal
and for payment of his money claims in the total amount of US$26,442.73, broken down as follows:

May
US$ 413.90
27/31,
1998 (5
days)
incl.
Leave
pay
June
01/30,
1998

2,590.00

July
01/31,
1998

2,590.00

August
01/31,
1998

2,590.00

Sept.
01/30,
1998

2,590.00

Oct.
01/31,
1998

2,590.00

Nov.
01/30,
1998

2,590.00

Dec.
01/31,
1998

2,590.00

Jan.
01/31,
1999

2,590.00

Feb.
01/28,
1999

2,590.00

Mar.
1/19,
1999
(19
days)
incl.
leave
pay

1,640.00

------------------------------------------------------------------------------25,382.23

Amount
adjusted
to chief
mate's
salary
(March 1,060.5010
19/31,
1998 to
April
1/30,
1998) +
--------------------------------------------------------------------------------------------TOTAL US$ 26,442.7311
CLAIM
as well as moral and exemplary damages and attorney's fees.
The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and
awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of
the complainant (petitioner) by the respondents in the above-entitled case was illegal and the
respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount
of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00),
representing the complainants salary for three (3) months of the unexpired portion of the
aforesaid contract of employment.1avvphi1
The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in
Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount
of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainants claim for a
salary differential. In addition, the respondents are hereby ordered to pay the complainant, jointly
and severally, in Philippine Currency, at the exchange rate prevailing at the time of payment, the
complainants (petitioner's) claim for attorneys fees equivalent to ten percent (10%) of the total
amount awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages are hereby DISMISSED for
lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the
salary period of three months only -- rather than the entire unexpired portion of nine months and
23 days of petitioner's employment contract - applying the subject clause. However, the LA
applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary,

US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation

leave pay = US$2,590.00/compensation per month."14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the
finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the
ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations
Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered
to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of
exchange at the time of payment the following:
1. Three (3) months salary
$1,400 x 3 US$4,200.00
2. Salary differential

45.00

US$4,245.00
3. 10% Attorneys fees

424.50

TOTAL US$4,669.50
The other findings are affirmed.
SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing
the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide
for the award of overtime pay, which should be proven to have been actually performed, and for
vacation leave pay."20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of
the subject clause.21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the
subject clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due
course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the petition
for certiorari, docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the
applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this
Court on the following grounds:
I

The Court of Appeals and the labor tribunals have decided the case in a way not in accord with
applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker
back wages equal to the unexpired portion of his contract of employment instead of limiting it to three
(3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their
interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely
erred in law when it failed to discharge its judicial duty to decide questions of substance not theretofore
determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the
petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits
payment of the award for back wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court
of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation pay
provided in his contract since under the contract they form part of his salary.28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly,
and he intends to make use of the monetary award for his medical treatment and medication.29 Required
to comment, counsel for petitioner filed a motion, urging the court to allow partial execution of the
undisputed monetary award and, at the same time, praying that the constitutional question be resolved.30
Considering that the parties have filed their respective memoranda, the Court now takes up the full merit
of the petition mindful of the extreme importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not
disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three
fora. What remains disputed is only the computation of the lump-sum salary to be awarded to petitioner
by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the
monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of nine
months and 23 days of his employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the
US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of
US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his employment
contract, computed at the monthly rate of US$2,590.00.31
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of
OFWs to negotiate for and stipulate in their overseas employment contracts a determinate employment
period and a fixed salary package.32 It also impinges on the equal protection clause, for it treats OFWs
differently from local Filipino workers (local workers) by putting a cap on the amount of lump-sum
salary to which OFWs are entitled in case of illegal dismissal, while setting no limit to the same
monetary award for local workers when their dismissal is declared illegal; that the disparate treatment is

not reasonable as there is no substantial distinction between the two groups;33 and that it defeats Section
18,34 Article II of the Constitution which guarantees the protection of the rights and welfare of all
Filipino workers, whether deployed locally or overseas.35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with
existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are
conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of affected
OFWs.36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other
purpose but to benefit local placement agencies. He marks the statement made by the Solicitor General
in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the
event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer
reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their
obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to
promote their continued helpful contribution in deploying Filipino migrant workers, liability for money
claims was reduced under Section 10 of R.A. No. 8042.37 (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause
sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off than
local employers because in cases involving the illegal dismissal of employees, foreign employers are
liable for salaries covering a maximum of only three months of the unexpired employment contract
while local employers are liable for the full lump-sum salaries of their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages they
have to give their employees they have illegally dismissed, following well-entrenched and unequivocal
jurisprudence on the matter. On the other hand, foreign employers will only be limited to giving the
illegally dismissed migrant workers the maximum of three (3) months unpaid salaries notwithstanding
the unexpired term of the contract that can be more than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the
salaries and other emoluments he is entitled to under his fixed-period employment contract.39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should not be
entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at the
earliest opportunity, which was when he filed an appeal before the NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its
provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042
having preceded petitioner's contract, the provisions thereof are deemed part of the minimum terms of
petitioner's employment, especially on the matter of money claims, as this was not stipulated upon by
the parties.42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their
employment, such that their rights to monetary benefits must necessarily be treated differently. The OSG
enumerates the essential elements that distinguish OFWs from local workers: first, while local workers

perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers, over
whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible to
enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission43 and
Millares v. National Labor Relations Commission,44 OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can become regular employees.
Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not available to
OFWs; that these peculiarities make for a reasonable and valid basis for the differentiated treatment
under the subject clause of the money claims of OFWs who are illegally dismissed. Thus, the provision
does not violate the equal protection clause nor Section 18, Article II of the Constitution.45
Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to
mitigate the solidary liability of placement agencies for this "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."46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such
as the Congress, it does so only when these conditions obtain: (1) that there is an actual case or
controversy involving a conflict of rights susceptible of judicial determination;47 (2) that the
constitutional question is raised by a proper party48 and at the earliest opportunity;49 and (3) that the
constitutional question is the very lis mota of the case,50otherwise the Court will dismiss the case or
decide the same on some other ground.51
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is
personally aggrieved that the labor tribunals and the CA computed his monetary award based on the
salary period of three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a
constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the
pleadings before acompetent court, such that, if the issue is not raised in the pleadings before that
competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be
considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause was
first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration with
said labor tribunal,53 and reiterated in his Petition forCertiorari before the CA.54 Nonetheless, the issue is
deemed seasonably raised because it is not the NLRC but the CA which has the competence to resolve
the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its
function in the present case is limited to determining questions of fact to which the legislative policy of
R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid
down by the law itself;55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not
to inquire into the validity of its provisions. The CA, on the other hand, is vested with the power of
judicial review or the power to declare unconstitutional a law or a provision thereof, such as the subject
clause.56Petitioner's interposition of the constitutional issue before the CA was undoubtedly seasonable.
The CA was therefore remiss in failing to take up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise obtains
because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his
12-month employment contract, and not just for a period of three months, strikes at the very core of the
subject clause.

Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the
term of his employment and the fixed salary package he will receive57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation,58and cannot affect acts or contracts already perfected;59 however, as to laws already in
existence, their provisions are read into contracts and deemed a part thereof.60 Thus, the non-impairment
clause under Section 10, Article II is limited in application to laws about to be enacted that would in any
way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the
intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the
employment contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A.
No. 8042, particularly the subject clause, impaired the employment contract of the parties. Rather, when
the parties executed their 1998 employment contract, they were deemed to have incorporated into it all
the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared
unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in the
exercise of the police power of the State to regulate a business, profession or calling, particularly the
recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the dignity and
well-being of OFWs wherever they may be employed.61 Police power legislations adopted by the State
to promote the health, morals, peace, education, good order, safety, and general welfare of the people are
generally applicable not only to future contracts but even to those already in existence, for all private
contracts must yield to the superior and legitimate measures taken by the State to promote public
welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person
be denied the equal protection of the law.

Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without
distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to
economic security and parity: all monetary benefits should be equally enjoyed by workers of similar
category, while all monetary obligations should be borne by them in equal degree; none should be
denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like
circumstances.65
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees
fit, a system of classification into its legislation; however, to be valid, the classification must comply
with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the
law; 3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class.66
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification
embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification
needs only be shown to be rationally related to serving a legitimate state interest;67 b) the middle-tier or
intermediate scrutiny in which the government must show that the challenged classification serves an
important state interest and that the classification is at least substantially related to serving that
interest;68 and c) strict judicial scrutiny69 in which a legislative classification which impermissibly
interferes with the exercise of a fundamental right70 or operates to the peculiar disadvantage of a suspect
class71 is presumed unconstitutional, and the burden is upon the government to prove that the
classification is necessary to achieve a compelling state interest and that it is theleast restrictive
means to protect such interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications73 based on
race74 or gender75 but not when the classification is drawn along income categories.76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of
the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for
maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the
rank-and-file employees of other GFIs had been exempted from the SSL by their respective charters.
Finding that the disputed provision contained a suspect classification based on salary grade, the Court
deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said
provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial
philosophy, to wit:
Congress retains its wide discretion in providing for a valid classification, and its policies should be
accorded recognition and respect by the courts of justice except when they run afoul of the Constitution.
The deference stops where the classification violates a fundamental right, or prejudices persons
accorded special protection by the Constitution. When these violations arise, this Court must
discharge its primary role as the vanguard of constitutional guaranties, and require a stricter and more
exacting adherence to constitutional limitations. Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a
stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these
foreign decisions and authorities are not per se controlling in this jurisdiction. At best, they are
persuasive and have been used to support many of our decisions. We should not place undue and
fawning reliance upon them and regard them as indispensable mental crutches without which we cannot
come to our own decisions through the employment of our own endowments. We live in a different
ambience and must decide our own problems in the light of our own interests and needs, and of our

qualities and even idiosyncrasies as a people, and always with our own concept of law and justice. Our
laws must be construed in accordance with the intention of our own lawmakers and such intent may be
deduced from the language of each law and the context of other local legislation related thereto. More
importantly, they must be construed to serve our own public interest which is the be-all and the end-all
of all our laws. And it need not be stressed that our public interest is distinct and different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of
effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble
proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The
command to promote social justice in Article II, Section 10, in "all phases of national development,"
further explicitated in Article XIII, are clear commands to the State to take affirmative action in the
direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal
support for a more vigorous state effort towards achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to
marginalized groups of society, including labor. Under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane justification that those with
less privilege in life should have more in law. And the obligation to afford protection to labor is
incumbent not only on the legislative and executive branches but also on the judiciary to translate this
pledge into a living reality. Social justice calls for the humanization of laws and the equalization of
social and economic forces by the State so that justice in its rational and objectively secular conception
may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power.
Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion would be
given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation
of prejudice against persons favored by the Constitution with special protection, judicial scrutiny
ought to be more strict. A weak and watered down view would call for the abdication of this Courts
solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true
whether the actor committing the unconstitutional act is a private person or the government itself or one
of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the
actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee
status. It is akin to a distinction based on economic class and status, with the higher grades as recipients
of a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher
compensation packages that are competitive with the industry, while the poorer, low-salaried employees
are limited to the rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file
employees are paid the strictly regimented rates of the SSL while employees higher in rank - possessing
higher and better education and opportunities for career advancement - are given higher compensation
packages to entice them to stay. Considering that majority, if not all, the rank-and-file employees consist

of people whose status and rank in life are less and limited, especially in terms of job marketability, it is
they - and not the officers - who have the real economic and financial need for the adjustment . This is in
accord with the policy of the Constitution "to free the people from poverty, provide adequate social
services, extend to them a decent standard of living, and improve the quality of life for all." Any act of
Congress that runs counter to this constitutional desideratum deserves strict scrutiny by this Court before
it can pass muster. (Emphasis supplied)
Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case
also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect
classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a
closer examination reveals that the subject clause has a discriminatory intent against, and an invidious
impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs with employment
contracts ofone year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with employment
contracts of one year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission79 (Second Division, 1999) that the Court laid down the following rules on the application of
the periods prescribed under Section 10(5) of R.A. No. 804, to wit:
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 x x x 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 wellestablished rule in legal hermeneutics that in interpreting a statute, care should be taken that every part
or word thereof be given effect since the law-making body is presumed to know the meaning of the
words employed in the statue and to have used them advisedly. Ut res magis valeat quam
pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but
was awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on
Section 10(5). One was Asian Center for Career and Employment System and Services v. National
Labor Relations Commission(Second Division, October 1998),81 which involved an OFW who was
awarded a two-year employment contract,but was dismissed after working for one year and two months.
The LA declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary covering eight
months, the unexpired portion of his contract. On appeal, the Court reduced the award to SR3,600.00
equivalent to his three months salary, this being the lesser value, to wit:

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid
or authorized cause is entitled to his salary for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3) months
or a total of SR3,600.82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third
Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was
originally granted a 12-month contract, which was deemed renewed for another 12 months. After
serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and the
Court awarded her salaries for the entire unexpired portion of four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in
the Computation
of the Monetary
Award

Skippers v.
Maguad84

6 months

2 months

4 months

4 months

Bahia Shipping
v. Reynaldo
Chua 85

9 months

8 months

4 months

4 months

Centennial
Transmarine v.
dela Cruz l86

9 months

4 months

5 months

5 months

Talidano v.
Falcon87

12 months

3 months

9 months

3 months

Univan v. CA88

12 months

3 months

9 months

3 months

Oriental v.
CA89

12 months

more than 2
months

10 months

3 months

PCL v. NLRC90 12 months

more than 2
months

more or less 9
months

3 months

Olarte v.
Nayona91

12 months

21 days

11 months and 9
days

3 months

JSS v.Ferrer92

12 months

16 days

11 months and
24 days

3 months

Pentagon v.
Adelantar93

12 months

Phil. Employ v. 12 months

9 months and 2 months and 23

7 days
days
10 months

2 months

2 months and 23
days
Unexpired portion

Paramio, et
al.94
Flourish
Maritime v.
Almanzor 95

2 years

26 days

23 months and 4
days

6 months or 3
months for each
year of contract

Athenna
Manpower v.
Villanos 96

1 year, 10
months and
28 days

1 month

1 year, 9 months
and 28 days

6 months or 3
months for each
year of contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first
category includes OFWs with fixed-period employment contracts of less than one year; in case of illegal
dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The second
category consists of OFWs with fixed-period employment contracts of one year or more; in case of
illegal dismissal, they are entitled to monetary award equivalent to only 3 months of the unexpired
portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent
OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries for the
remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for
about 2 months out of their 12-month contracts were awarded their salaries for only 3 months of the
unexpired portion of their contracts. Even the OFWs involved in Talidano and Univan who had worked
for a longer period of 3 months out of their 12-month contracts before being illegally dismissed were
awarded their salaries for only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an
employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B
with an employment contract of 15 months with the same monthly salary rate of US$1,000.00. Both
commenced work on the same day and under the same employer, and were illegally dismissed after one
month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his
salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only
US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of
US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser
amount.
The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to
the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the
period of their employment contracts, were entitled to their salaries for the entire unexpired portions of
their contracts. The matrix below speaks for itself:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in
the Computation of
the Monetary Award

ATCI v. CA, et
al.98

2 years

2 months

22 months

22 months

Phil. Integrated
v. NLRC99

2 years

7 days

23 months
and 23 days

23 months and 23
days

JGB v. NLC100

2 years

9 months

15 months

15 months

Agoy v.
NLRC101

2 years

2 months

22 months

22 months

EDI v. NLRC,
et al.102

2 years

5 months

19 months

19 months

Barros v.
NLRC, et al.103

12 months

4 months

8 months

8 months

Philippine
Transmarine v.
Carilla104

12 months

6 months 5 months and 5 months and 18 days

and 22 days
18 days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired
portions thereof, were treated alike in terms of the computation of their monetary benefits in case of
illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries
multiplied by the entire unexpired portion of their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of
the money claims of illegally dismissed OFWs based on their employment periods, in the
process singling out one category whose contracts have an unexpired portion of one year or more and
subjecting them to the peculiar disadvantage of having their monetary awards limited to their salaries for
3 months or for the unexpired portion thereof, whichever is less, but all the while sparing the other
category from such prejudice, simply because the latter's unexpired contracts fall short of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has
misgivings on the accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired
term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its
ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that "every
year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term must be at
least one year, for if it were any shorter, there would be no occasion for such unexpired term to be
measured by every year; and second, the original term must be more than one year, for otherwise,
whatever would be the unexpired term thereof will not reach even a year. Consequently, the more
decisive factor in the determination of when the subject clause "for three (3) months forevery year of the
unexpired term, whichever is less" shall apply is not the length of the original contract period as held
in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause
applies in cases when the unexpired portion of the contract period is at least one year, which
arithmetically requires that the original contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose
contract periods are for more than one year: those who are illegally dismissed with less than one year
left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while
those who are illegally dismissed with one year or more remaining in their contracts shall be covered by
the subject clause, and their monetary benefits limited to their salaries for three months only.

To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court
assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of
US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th
month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the
subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be entitled,
not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the contract, but
to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired
term of the contract. On the other hand, OFW-D is spared from the effects of the subject clause, for there
are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00,
which is equivalent to his/her total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards
of illegally dismissed OFWs was in place. This uniform system was applicable even to local workers
with fixed-term employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of
Commerce (1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees should have
been made of a fixed period, none of the contracting parties, without the consent of the other, may
withdraw from the fulfillment of said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the
exception of the provisions contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the
liability of a shipping company for the illegal discharge of its managers prior to the expiration of their
fixed-term employment. The Court therein held the shipping company liable for the salaries of its
managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce
which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a
definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for
reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused
to the vessel or to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of its
illegally dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was
replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a
certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract.
(Emphasis supplied.)

Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a
conjunctive "and" so as to apply the provision to local workers who are employed for a time certain
although for no particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v.
Hotel de France Company.113 And in both Lemoine and Palomar, the Court adopted the general principle
that in actions for wrongful discharge founded on Article 1586, local workers are entitled to recover
damages to the extent of the amount stipulated to be paid to them by the terms of their contract. On the
computation of the amount of such damages, the Court in Aldaz v. Gay114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our
attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it
is his duty to seek other employment of the same kind in the same community, for the purpose of
reducing the damages resulting from such wrongful discharge. However, while this is the general rule,
the burden of showing that he failed to make an effort to secure other employment of a like nature, and
that other employment of a like nature was obtainable, is upon the defendant. When an employee is
wrongfully discharged under a contract of employment his prima facie damage is the amount which he
would be entitled to had he continued in such employment until the termination of the period. (Howard
vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)115 (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment:
Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3
(Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil
Code of 1889, the new provisions of the Civil Code do not expressly provide for the remedies available
to a fixed-term worker who is illegally discharged. However, it is noted that in Mackay Radio &
Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on the payment of damages
underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving the illegal
discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the
new Civil Code was already in effect.118
More significantly, the same principles were applied to cases involving overseas Filipino workers whose
fixed-term employment contracts were illegally terminated, such as in First Asian Trans & Shipping
Agency, Inc. v. Ople,119involving seafarers who were illegally discharged. In Teknika Skills and Trade
Services, Inc. v. National Labor Relations Commission,120 an OFW who was illegally dismissed prior to
the expiration of her fixed-period employment contract as a baby sitter, was awarded salaries
corresponding to the unexpired portion of her contract. The Court arrived at the same ruling in Anderson
v. National Labor Relations Commission,121 which involved a foreman hired in 1988 in Saudi Arabia for
a fixed term of two years, but who was illegally dismissed after only nine months on the job -- the Court
awarded him salaries corresponding to 15 months, the unexpired portion of his contract. In Asia World
Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a security officer in
1989 in Angola was awarded his salaries for the remaining period of his 12-month contract after he was
wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations
Commission,123 an OFW whose 12-month contract was illegally cut short in the second month was
declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally
discharged were treated alike in terms of the computation of their money claims: they were uniformly
entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of
R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an
unexpired portion of one year or more in their employment contract have since been differently treated
in that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local
workers with fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes
a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their
contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The
subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution, the
Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a
compelling state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the
Constitution and calibrated by history.124 It is akin to the paramount interest of the state125 for which
some individual liberties must give way, such as the public interest in safeguarding health or maintaining
medical standards,126 or in maintaining access to information on matters of public concern.127
In the present case, the Court dug deep into the records but found no compelling state interest that the
subject clause may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the employment of
Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have
better chance of getting hired by foreign employers." The limitation also protects the interest of local
placement agencies, which otherwise may be made to shoulder millions of pesos in "termination pay." 128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the
event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer
reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their
obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to
promote their continued helpful contribution in deploying Filipino migrant workers, liability for money
are reduced under Section 10 of RA 8042.
This measure 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.129 (Emphasis
supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of
the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship
of House Bill No. 14314 (HB 14314), from which the law originated;130 but the speech makes no
reference to the underlying reason for the adoption of the subject clause. That is only natural for none of
the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of the complaint, the claim arising out of an employer-

employee relationship or by virtue of any law or contract involving Filipino workers for overseas
employment including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this
Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of
damages under this Section shall not be less than fifty percent (50%) of such money claims: Provided,
That any installment payments, if applicable, to satisfy any such compromise or voluntary settlement
shall not be more than two (2) months. Any compromise/voluntary agreement in violation of this
paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section shall
subject the responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the
prescribed period shall be, or caused to be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five
(5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which
any such official may have incurred under other existing laws or rules and regulations as a consequence
of violating the provisions of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money
claims.
A rule on the computation of money claims containing the subject clause was inserted and eventually
adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the
subject clause in the transcripts of the "Bicameral Conference Committee (Conference Committee)
Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill
No. 14314)." However, the Court finds no discernible state interest, let alone a compelling one, that is
sought to be protected or advanced by the adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state
interest that would justify the perpetuation of the discrimination against OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment
of OFWs by mitigating the solidary liability of placement agencies, such callous and cavalier rationale
will have to be rejected. There can never be a justification for any form of government action that
alleviates the burden of one sector, but imposes the same burden on another sector, especially when the
favored sector is composed of private businesses such as placement agencies, while the disadvantaged
sector is composed of OFWs whose protection no less than the Constitution commands. The idea that
private business interest can be elevated to the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement
agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be employed
to achieve that purpose without infringing on the constitutional rights of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas
Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring foreign
employers who default on their contractual obligations to migrant workers and/or their Philippine
agents. These disciplinary measures range from temporary disqualification to preventive suspension.
The POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers, dated May
23, 2003, contains similar administrative disciplinary measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of aiding local
placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of
petitioner and other OFWs to equal protection.1avvphi1
Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality
of the subject clause from the lone perspective that the clause directly violates state policy on labor
under Section 3,131Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which
this Court has declared not judicially enforceable, Article XIII being one,133 particularly Section 3
thereof, the nature of which, this Court, in Agabon v. National Labor Relations Commission,134 has
described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as selfexecuting in the sense that these are automatically acknowledged and observed without need for any
enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the
full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when
examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a
blanket shield in favor of labor against any form of removal regardless of circumstance. This
interpretation implies an unimpeachable right to continued employment-a utopian notion, doubtless-but
still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the
parameters of these guaranteed rights to ensure the protection and promotion, not only the rights of the
labor sector, but of the employers' as well. Without specific and pertinent legislation, judicial bodies will
be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive
enforceable right to stave off the dismissal of an employee for just cause owing to the failure to serve
proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on
social justice require legislative enactments for their enforceability.135 (Emphasis added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the
violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk
opening the floodgates of litigation to every worker or union over every conceivable violation of so
broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual
enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges
protection through executive or legislative action and judicial recognition. Its utility is best limited to
being an impetus not just for the executive and legislative departments, but for the judiciary as well, to
protect the welfare of the working class. And it was in fact consistent with that constitutional agenda that
the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko

Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated
the judicial precept that when the challenge to a statute is premised on the perpetuation of prejudice
against persons favored by the Constitution with special protection -- such as the working class or a
section thereof -- the Court may recognize the existence of a suspect classification and subject the same
to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central
Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless
apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause. Article
XIII, by itself, without the application of the equal protection clause, has no life or force of its own as
elucidated in Agabon.
Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's
right to substantive due process, for it deprives him of property, consisting of monetary benefits, without
any existing valid governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the
entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give them a better
chance of getting hired by foreign employers. This is plain speculation. As earlier discussed, there is
nothing in the text of the law or the records of the deliberations leading to its enactment or the pleadings
of respondent that would indicate that there is an existing governmental purpose for the subject clause,
or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for that precise
reason that the clause violates not just petitioner's right to equal protection, but also her right to
substantive due process under Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired
period of nine months and 23 days of his employment contract, pursuant to law and jurisprudence prior
to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the
computation of his monetary award, because these are fixed benefits that have been stipulated into his
contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner,
DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers,
in which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses;
whereas overtime pay is compensation for all work "performed" in excess of the regular eight hours, and
holiday pay is compensation for any work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday
pay in the computation of petitioner's monetary award, unless there is evidence that he performed work
during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in
Cagampan v. National Labor Relations Commission, to wit:

The rendition of overtime work and the submission of sufficient proof that said 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.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is
unwarranted since the same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every
year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No.
8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005
Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his
salaries for the entire unexpired portion of his employment contract consisting of nine months and 23
days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.
G.R. No. 170139, August 05, 2014
SAMEER OVERSEAS PLACEMENT AGENCY, INC., Petitioner, v. JOY C.
CABILES, Respondent.
DECISION
LEONEN, J.:
This case involves an overseas Filipino worker with shattered dreams. It is our duty, given the facts and
the law, to approximate justice for her.
We are asked to decide a petition for review1 on certiorari assailing the Court of Appeals decision2dated
June 27, 2005. This decision partially affirmed the National Labor Relations Commissions resolution
dated March 31, 2004,3 declaring respondents dismissal illegal, directing petitioner to pay respondents
three-month salary equivalent to New Taiwan Dollar (NT$) 46,080.00, and ordering it to reimburse the
NT$3,000.00 withheld from respondent, and pay her NT$300.00 attorneys fees.4 red
Petitioner, Sameer Overseas Placement Agency, Inc., is a recruitment and placement
agency.5Responding to an ad it published, respondent, Joy C. Cabiles, submitted her application for a
quality control job in Taiwan.6 red
Joys application was accepted.7 Joy was later asked to sign a one-year employment contract for a
monthly salary of NT$15,360.00.8 She alleged that Sameer Overseas Agency required her to pay a
placement fee of P70,000.00 when she signed the employment contract.9 red
Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997.10 She alleged that in
her employment contract, she agreed to work as quality control for one year.11 In Taiwan, she was asked
to work as a cutter.12 red
Sameer Overseas Placement Agency claims that on July 14, 1997, a certain Mr. Huwang from Wacoal
informed Joy, without prior notice, that she was terminated and that she should immediately report to
their office to get her salary and passport.13 She was asked to prepare for immediate repatriation.14 red

Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000.15 According to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila.16 red
On October 15, 1997, Joy filed a complaint17 with the National Labor Relations Commission against
petitioner and Wacoal. She claimed that she was illegally dismissed.18 She asked for the return of her
placement fee, the withheld amount for repatriation costs, payment of her salary for 23 months as well
as moral and exemplary damages.19 She identified Wacoal as Sameer Overseas Placement Agencys
foreign principal.20 red
Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency,
negligence in her duties, and her failure to comply with the work requirements [of] her foreign
[employer].21 The agency also claimed that it did not ask for a placement fee of ?70,000.00.22 As
evidence, it showed Official Receipt No. 14860 dated June 10, 1997, bearing the amount of ?
20,360.00.23 Petitioner added that Wacoal's accreditation with petitioner had already been transferred to
the Pacific Manpower & Management Services, Inc. (Pacific) as of August 6, 1997.24 Thus, petitioner
asserts that it was already substituted by Pacific Manpower.25 red
Pacific Manpower moved for the dismissal of petitioners claims against it.26 It alleged that there was no
employer-employee relationship between them.27 Therefore, the claims against it were outside the
jurisdiction of the Labor Arbiter.28 Pacific Manpower argued that the employment contract should first
be presented so that the employers contractual obligations might be identified.29 It further denied that it
assumed liability for petitioners illegal acts.30 red
On July 29, 1998, the Labor Arbiter dismissed Joys complaint.31 Acting Executive Labor Arbiter Pedro
C. Ramos ruled that her complaint was based on mere allegations.32 The Labor Arbiter found that there
was no excess payment of placement fees, based on the official receipt presented by petitioner.33 The
Labor Arbiter found unnecessary a discussion on petitioners transfer of obligations to Pacific34 and
considered the matter immaterial in view of the dismissal of respondents complaint.35 red
Joy appealed36 to the National Labor Relations Commission.
In a resolution37 dated March 31, 2004, the National Labor Relations Commission declared that Joy was
illegally dismissed.38 It reiterated the doctrine that the burden of proof to show that the dismissal was
based on a just or valid cause belongs to the employer.39 It found that Sameer Overseas Placement
Agency failed to prove that there were just causes for termination.40 There was no sufficient proof to
show that respondent was inefficient in her work and that she failed to comply with company
requirements.41 Furthermore, procedural due process was not observed in terminating respondent.42 red
The National Labor Relations Commission did not rule on the issue of reimbursement of placement fees
for lack of jurisdiction.43 It refused to entertain the issue of the alleged transfer of obligations to
Pacific.44 It did not acquire jurisdiction over that issue because Sameer Overseas Placement Agency
failed to appeal the Labor Arbiters decision not to rule on the matter.45 red
The National Labor Relations Commission awarded respondent only three (3) months worth of salary in
the amount of NT$46,080, the reimbursement of the NT$3,000 withheld from her, and attorneys fees of
NT$300.46 red
The Commission denied the agencys motion for reconsideration47 dated May 12, 2004 through a
resolution48 dated July 2, 2004.
Aggrieved by the ruling, Sameer Overseas Placement Agency caused the filing of a petition49 for

certiorari with the Court of Appeals assailing the National Labor Relations Commissions resolutions
dated March 31, 2004 and July 2, 2004.
The Court of Appeals50 affirmed the decision of the National Labor Relations Commission with respect
to the finding of illegal dismissal, Joys entitlement to the equivalent of three months worth of salary,
reimbursement of withheld repatriation expense, and attorneys fees.51 The Court of Appeals remanded
the case to the National Labor Relations Commission to address the validity of petitioner's allegations
against Pacific.52 The Court of Appeals held, thus:
Although the public respondent found the dismissal of the complainant-respondent illegal, we should
point out that the NLRC merely awarded her three (3) months backwages or the amount of
NT$46,080.00, which was based upon its finding that she was dismissed without due process, a finding
that we uphold, given petitioners lack of worthwhile discussion upon the same in the proceedings below
or before us. Likewise we sustain NLRCs finding in regard to the reimbursement of her fare, which is
squarely based on the law; as well as the award of attorneys fees.
But we do find it necessary to remand the instant case to the public respondent for further proceedings,
for the purpose of addressing the validity or propriety of petitioners third-party complaint against the
transferee agent or the Pacific Manpower & Management Services, Inc. and Lea G. Manabat. We should
emphasize that as far as the decision of the NLRC on the claims of Joy Cabiles, is concerned, the same
is hereby affirmed with finality, and we hold petitioner liable thereon, but without prejudice to further
hearings on its third party complaint against Pacific for reimbursement.
WHEREFORE, premises considered, the assailed Resolutions are hereby partlyAFFIRMED in
accordance with the foregoing discussion, but subject to the caveat embodied in the last sentence. No
costs.
SO ORDERED.53
Dissatisfied, Sameer Overseas Placement Agency filed this petition.54 red
We are asked to determine whether the Court of Appeals erred when it affirmed the ruling of the
National Labor Relations Commission finding respondent illegally dismissed and awarding her three
months worth of salary, the reimbursement of the cost of her repatriation, and attorneys fees despite the
alleged existence of just causes of termination.
Petitioner reiterates that there was just cause for termination because there was a finding of Wacoal that
respondent was inefficient in her work.55 Therefore, it claims that respondents dismissal was valid.56 red
Petitioner also reiterates that since Wacoals accreditation was validly transferred to Pacific at the time
respondent filed her complaint, it should be Pacific that should now assume responsibility for Wacoals
contractual obligations to the workers originally recruited by petitioner.57 red
Sameer Overseas Placement Agencys petition is without merit. We find for respondent.
I
Sameer Overseas Placement Agency failed to show that there was just cause for causing Joys dismissal.
The employer, Wacoal, also failed to accord her due process of law.
Indeed, employers have the prerogative to impose productivity and quality standards at work.58They may
also impose reasonable rules to ensure that the employees comply with these standards.59Failure to

comply may be a just cause for their dismissal.60 Certainly, employers cannot be compelled to retain the
services of an employee who is guilty of acts that are inimical to the interest of the employer.61 While the
law acknowledges the plight and vulnerability of workers, it does not authorize the oppression or selfdestruction of the employer.62 Management prerogative is recognized in law and in our jurisprudence.
This prerogative, however, should not be abused. It is tempered with the employees right to security of
tenure.63 Workers are entitled to substantive and procedural due process before termination. They may
not be removed from employment without a valid or just cause as determined by law and without going
through the proper procedure.
Security of tenure for labor is guaranteed by our Constitution.64 red
Employees are not stripped of their security of tenure when they move to work in a different jurisdiction.
With respect to the rights of overseas Filipino workers, we follow the principle of lex loci contractus.
Thus, in Triple Eight Integrated Services, Inc. v. NLRC,65 this court noted:
Petitioner likewise attempts to sidestep the medical certificate requirement by contending that since
Osdana was working in Saudi Arabia, her employment was subject to the laws of the host country.
Apparently, petitioner hopes to make it appear that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the dismissal of employees due to illness.
Again, petitioners argument is without merit.
First, established is the rule that lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. There is no question that the contract of employment in this case was
perfected here in the Philippines. Therefore, the Labor Code, its implementing rules and regulations,
and other laws affecting labor apply in this case. Furthermore, settled is the rule that the courts of the
forum will not enforce any foreign claim obnoxious to the forums public policy. Here in the Philippines,
employment agreements are more than contractual in nature. The Constitution itself, in Article XIII,
Section 3, guarantees the special protection of workers, to wit:
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.
. . . .chanrobleslaw
This public policy should be borne in mind in this case because to allow foreign employers to determine
for and by themselves whether an overseas contract worker may be dismissed on the ground of illness
would encourage illegal or arbitrary pre-termination of employment contracts.66 (Emphasis supplied,
citation omitted)
Even with respect to fundamental procedural rights, this court emphasized in PCL Shipping Philippines,
Inc. v. NLRC,67 to wit:
Petitioners admit that they did not inform private respondent in writing of the charges against him and
that they failed to conduct a formal investigation to give him opportunity to air his side. However,

petitioners contend that the twin requirements of notice and hearing applies strictly only when the
employment is within the Philippines and that these need not be strictly observed in cases of
international maritime or overseas employment.
The Court does not agree. The provisions of the Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees whether working within the Philippines or abroad.
Moreover, the principle of lex loci contractus (the law of the place where the contract is made)
governs in this jurisdiction. In the present case, it is not disputed that the Contract of Employment
entered into by and between petitioners and private respondent was executed here in the Philippines with
the approval of the Philippine Overseas Employment Administration (POEA). Hence, the Labor Code
together with its implementing rules and regulations and other laws affecting labor apply in this
case.68 (Emphasis supplied, citations omitted)
By our laws, overseas Filipino workers (OFWs) may only be terminated for a just or authorized cause
and after compliance with procedural due process requirements.
Article 282 of the Labor Code enumerates the just causes of termination by the employer. Thus:
Art. 282. Termination by employer. An employer may terminate an employment for any of the following
causes: lawlibrary
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; andChanRoblesVirtualawlibrary
(e) Other causes analogous to the foregoing.
Petitioners allegation that respondent was inefficient in her work and negligent in her duties69 may,
therefore, constitute a just cause for termination under Article 282(b), but only if petitioner was able to
prove it.
The burden of proving that there is just cause for termination is on the employer. The employer must
affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.70 Failure
to show that there was valid or just cause for termination would necessarily mean that the dismissal was
illegal.71 red
To show that dismissal resulting from inefficiency in work is valid, it must be shown that: 1) the
employer has set standards of conduct and workmanship against which the employee will be judged; 2)
the standards of conduct and workmanship must have been communicated to the employee; and 3) the
communication was made at a reasonable time prior to the employees performance assessment.
This is similar to the law and jurisprudence on probationary employees, which allow termination of the
employee only when there is just cause or when [the probationary employee] fails to qualify as a
regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his [or her] engagement.72 red

However, we do not see why the application of that ruling should be limited to probationary
employment. That rule is basic to the idea of security of tenure and due process, which are guaranteed to
all employees, whether their employment is probationary or regular.
The pre-determined standards that the employer sets are the bases for determining the probationary
employees fitness, propriety, efficiency, and qualifications as a regular employee. Due process requires
that the probationary employee be informed of such standards at the time of his or her engagement so he
or she can adjust his or her character or workmanship accordingly. Proper adjustment to fit the standards
upon which the employees qualifications will be evaluated will increase ones chances of being
positively assessed for regularization by his or her employer.
Assessing an employees work performance does not stop after regularization. The employer, on a
regular basis, determines if an employee is still qualified and efficient, based on work standards. Based
on that determination, and after complying with the due process requirements of notice and hearing, the
employer may exercise its management prerogative of terminating the employee found unqualified.
The regular employee must constantly attempt to prove to his or her employer that he or she meets all
the standards for employment. This time, however, the standards to be met are set for the purpose of
retaining employment or promotion. The employee cannot be expected to meet any standard of character
or workmanship if such standards were not communicated to him or her. Courts should remain vigilant
on allegations of the employers failure to communicate work standards that would govern ones
employment if [these are] to discharge in good faith [their] duty to adjudicate.73 red
In this case, petitioner merely alleged that respondent failed to comply with her foreign employers work
requirements and was inefficient in her work.74No evidence was shown to support such allegations.
Petitioner did not even bother to specify what requirements were not met, what efficiency standards
were violated, or what particular acts of respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the standards against which her
work efficiency and performance were judged. The parties conflict as to the position held by
respondent showed that even the matter as basic as the job title was not clear.
The bare allegations of petitioner are not sufficient to support a claim that there is just cause for
termination. There is no proof that respondent was legally terminated.
Petitioner failed to comply with
the due process requirements
Respondents dismissal less than one year from hiring and her repatriation on the same day show not
only failure on the part of petitioner to comply with the requirement of the existence of just cause for
termination. They patently show that the employers did not comply with the due process requirement.
A valid dismissal requires both a valid cause and adherence to the valid procedure of dismissal.75The
employer is required to give the charged employee at least two written notices before termination. 76 One
of the written notices must inform the employee of the particular acts that may cause his or her
dismissal.77 The other notice must [inform] the employee of the employers decision.78 Aside from the
notice requirement, the employee must also be given an opportunity to be heard.79 red
Petitioner failed to comply with the twin notices and hearing requirements. Respondent started working
on June 26, 1997. She was told that she was terminated on July 14, 1997 effective on the same day and
barely a month from her first workday. She was also repatriated on the same day that she was informed

of her termination. The abruptness of the termination negated any finding that she was properly notified
and given the opportunity to be heard. Her constitutional right to due process of law was violated.
II
Respondent Joy Cabiles, having been illegally dismissed, is entitled to her salary for the unexpired
portion of the employment contract that was violated together with attorneys fees and reimbursement of
amounts withheld from her salary.
Section 10 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos
Act of 1995, states that overseas workers who were terminated without just, valid, or authorized cause
shall be entitled to the full reimbursement of his placement fee with interest of twelve (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.
Sec. 10. MONEY CLAIMS. Notwithstanding any provision of law to the contrary, the Labor Arbiters
of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction
to hear and decide, within ninety (90) calendar days after filing of the complaint, the claims arising out
of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral, exemplary and other forms of damages.
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 provisions [sic] 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 workers shall be entitled to the full reimbursement of his placement fee with interest of
twelve (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.
....
(Emphasis supplied)chanrobleslaw
Section 15 of Republic Act No. 8042 states that repatriation of the worker and the transport of his [or
her] personal belongings shall be the primary responsibility of the agency which recruited or deployed
the worker overseas. The exception is when termination of employment is due solely to the fault of the
worker,80 which as we have established, is not the case. It reads:

SEC. 15. REPATRIATION OF WORKERS; EMERGENCY REPATRIATION FUND. The repatriation

of the worker and the transport of his personal belongings shall be the primary responsibility of the
agency which recruited or deployed the worker overseas. All costs attendant to repatriation shall be
borne by or charged to the agency concerned and/or its principal. Likewise, the repatriation of remains
and transport of the personal belongings of a deceased worker and all costs attendant thereto shall be
borne by the principal and/or local agency. However, in cases where the termination of employment is
due solely to the fault of the worker, the principal/employer or agency shall not in any manner be
responsible for the repatriation of the former and/or his belongings.
....
The Labor Code81 also entitles the employee to 10% of the amount of withheld wages as attorneys fees
when the withholding is unlawful.
The Court of Appeals affirmed the National Labor Relations Commissions decision to award
respondent NT$46,080.00 or the three-month equivalent of her salary, attorneys fees of NT$300.00, and
the reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of the three-month
equivalent of respondents salary should, however, be increased to the amount equivalent to the
unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc.,82 this court ruled that the
clause or for three (3) months for every year of the unexpired term, whichever is less83 is
unconstitutional for violating the equal protection clause and substantive due process.84 red
A statute or provision which was declared unconstitutional is not a law. It confers no rights; it imposes
no duties; it affords no protection; it creates no office; it is inoperative as if it has not been passed at
all.85 red
We are aware that the clause or for three (3) months for every year of the unexpired term, whichever is
less was reinstated in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010.
Section 7 of Republic Act No. 10022 provides:
Section 7. Section 10 of Republic Act No. 8042, as amended, is hereby amended to read as follows:
SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after 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 damage.
Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with the
developments in the global services industry.
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 de
[sic] 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 thirty (30) days from 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, or any unauthorized deductions from the migrant workers salary, the worker shall be
entitled to the full reimbursement if [sic] 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.
In case of a final and executory judgement against a foreign employer/principal, it shall be automatically
disqualified, without further proceedings, from participating in the Philippine Overseas Employment
Program and from recruiting and hiring Filipino workers until and unless it fully satisfies the judgement
award.
Noncompliance with the mandatory periods for resolutions of case provided under this section shall
subject the responsible officials to any or all of the following penalties: lawlibrary
(a) The salary of any such official who fails to render his decision or resolution within the prescribed
period shall be, or caused to be, withheld until the said official complies therewith;
(b) Suspension for not more than ninety (90) days; or
(c) Dismissal from the service with disqualification to hold any appointive public office for five (5)
years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which
any such official may have incured [sic] under other existing laws or rules and regulations as a
consequence of violating the provisions of this paragraph. (Emphasis supplied)
Republic Act No. 10022 was promulgated on March 8, 2010. This means that the reinstatement of the
clause in Republic Act No. 8042 was not yet in effect at the time of respondents termination from work
in 1997.86 Republic Act No. 8042 before it was amended by Republic Act No. 10022 governs this case.
When a law is passed, this court awaits an actual case that clearly raises adversarial positions in their
proper context before considering a prayer to declare it as unconstitutional.
However, we are confronted with a unique situation. The law passed incorporates the exact clause
already declared as unconstitutional, without any perceived substantial change in the circumstances.
This may cause confusion on the part of the National Labor Relations Commission and the Court of
Appeals. At minimum, the existence of Republic Act No. 10022 may delay the execution of the
judgment in this case, further frustrating remedies to assuage the wrong done to petitioner. Hence, there
is a necessity to decide this constitutional issue.
Moreover, this court is possessed with the constitutional duty to [p]romulgate rules concerning the
protection and enforcement of constitutional rights.87 When cases become moot and academic, we do
not hesitate to provide for guidance to bench and bar in situations where the same violations are capable

of repetition but will evade review. This is analogous to cases where there are millions of Filipinos
working abroad who are bound to suffer from the lack of protection because of the restoration of an
identical clause in a provision previously declared as unconstitutional.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may
exercise its powers in any manner inconsistent with the Constitution, regardless of the existence of any
law that supports such exercise. The Constitution cannot be trumped by any other law. All laws must be
read in light of the Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the Constitution, the nullity
cannot be cured by reincorporation or reenactment of the same or a similar law or provision. A law or
provision of law that was already declared unconstitutional remains as such unless circumstances have
so changed as to warrant a reverse conclusion.
We are not convinced by the pleadings submitted by the parties that the situation has so changed so as to
cause us to reverse binding precedent.
Likewise, there are special reasons of judicial efficiency and economy that attend to these cases.
The new law puts our overseas workers in the same vulnerable position as they were prior toSerrano.
Failure to reiterate the very ratio decidendi of that case will result in the same untold economic
hardships that our reading of the Constitution intended to avoid. Obviously, we cannot countenance
added expenses for further litigation that will reduce their hard-earned wages as well as add to the
indignity of having been deprived of the protection of our laws simply because our precedents have not
been followed. There is no constitutional doctrine that causes injustice in the face of empty procedural
niceties. Constitutional interpretation is complex, but it is never unreasonable.
Thus, in a resolution88 dated October 22, 2013, we ordered the parties and the Office of the Solicitor
General to comment on the constitutionality of the reinstated clause in Republic Act No. 10022.
In its comment,89 petitioner argued that the clause was constitutional.90 The legislators intended a
balance between the employers and the employees rights by not unduly burdening the local recruitment
agency.91 Petitioner is also of the view that the clause was already declared as constitutional in Serrano.92
red
The Office of the Solicitor General also argued that the clause was valid and constitutional.93However,
since the parties never raised the issue of the constitutionality of the clause as reinstated in Republic Act
No. 10022, its contention is that it is beyond judicial review.94 red
On the other hand, respondent argued that the clause was unconstitutional because it infringed on
workers right to contract.95 red
We observe that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process.96 Petitioner as well as the Solicitor General
have failed to show any compelling change in the circumstances that would warrant us to revisit the
precedent.
We reiterate our finding in Serrano v. Gallant Maritime that limiting wages that should be recovered
by an illegally dismissed overseas worker to three months is both a violation of due process and the
equal protection clauses of the Constitution.
Equal protection of the law is a guarantee that persons under like circumstances and falling within the

same class are treated alike, in terms of privileges conferred and liabilities enforced.97 It is a guarantee
against undue favor and individual or class privilege, as well as hostile discrimination or the oppression
of inequality.98 red
In creating laws, the legislature has the power to make distinctions and classifications.99 In exercising
such power, it has a wide discretion.100 red
The equal protection clause does not infringe on this legislative power.101 A law is void on this basis,
only if classifications are made arbitrarily.102 There is no violation of the equal protection clause if the
law applies equally to persons within the same class and if there are reasonable grounds for
distinguishing between those falling within the class and those who do not fall within the class.103 A law
that does not violate the equal protection clause prescribes a reasonable classification.104 red
A reasonable classification (1) must rest on substantial distinctions; (2) must be germane to the
purposes of the law; (3) must not be limited to existing conditions only; and (4) must apply equally to all
members of the same class.105 red
The reinstated clause does not satisfy the requirement of reasonable classification.
In Serrano, we identified the classifications made by the reinstated clause. It distinguished between
fixed-period overseas workers and fixed-period local workers.106 It also distinguished between overseas
workers with employment contracts of less than one year and overseas workers with employment
contracts of at least one year.107 Within the class of overseas workers with at least one-year employment
contracts, there was a distinction between those with at least a year left in their contracts and those with
less than a year left in their contracts when they were illegally dismissed.108 red
The Congress classification may be subjected to judicial review. In Serrano, there is a legislative
classification which impermissibly interferes with the exercise of a fundamental right or operates to the
peculiar disadvantage of a suspect class.109 red
Under the Constitution, labor is afforded special protection.110 Thus, this court in Serrano, [i]mbued
with the same sense of obligation to afford protection to labor, . . . employ[ed] the standard of strict
judicial scrutiny, for it perceive[d] in the subject clause a suspect classification prejudicial to OFWs.111
red
We also noted in Serrano that before the passage of Republic Act No. 8042, the money claims of
illegally terminated overseas and local workers with fixed-term employment were computed in the same
manner.112 Their money claims were computed based on the unexpired portions of their
contracts.113 The adoption of the reinstated clause in Republic Act No. 8042 subjected the money claims
of illegally dismissed overseas workers with an unexpired term of at least a year to a cap of three months
worth of their salary.114 There was no such limitation on the money claims of illegally terminated local
workers with fixed-term employment.115 red
We observed that illegally dismissed overseas workers whose employment contracts had a term of less
than one year were granted the amount equivalent to the unexpired portion of their employment
contracts.116 Meanwhile, illegally dismissed overseas workers with employment terms of at least a year
were granted a cap equivalent to three months of their salary for the unexpired portions of their
contracts.117 red
Observing the terminologies used in the clause, we also found that the subject clause creates a sublayer of discrimination among OFWs whose contract periods are for more than one year: those who are
illegally dismissed with less than one year left in their contracts shall be entitled to their salaries for the

entire unexpired portion thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the reinstated clause, and their monetary benefits limited
to their salaries for three months only.118 red
We do not need strict scrutiny to conclude that these classifications do not rest on any real or substantial
distinctions that would justify different treatments in terms of the computation of money claims resulting
from illegal termination.
Overseas workers regardless of their classifications are entitled to security of tenure, at least for the
period agreed upon in their contracts. This means that they cannot be dismissed before the end of their
contract terms without due process. If they were illegally dismissed, the workers right to security of
tenure is violated.
The rights violated when, say, a fixed-period local worker is illegally terminated are neither greater than
nor less than the rights violated when a fixed-period overseas worker is illegally terminated. It is state
policy to protect the rights of workers without qualification as to the place of employment. 119In both
cases, the workers are deprived of their expected salary, which they could have earned had they not been
illegally dismissed. For both workers, this deprivation translates to economic insecurity and
disparity.120 The same is true for the distinctions between overseas workers with an employment contract
of less than one year and overseas workers with at least one year of employment contract, and between
overseas workers with at least a year left in their contracts and overseas workers with less than a year
left in their contracts when they were illegally dismissed.
For this reason, we cannot subscribe to the argument that [overseas workers] are contractual employees
who can never acquire regular employment status, unlike local workers121 because it already justifies
differentiated treatment in terms of the computation of money claims.122 red
Likewise, the jurisdictional and enforcement issues on overseas workers money claims do not justify a
differentiated treatment in the computation of their money claims.123 If anything, these issues justify an
equal, if not greater protection and assistance to overseas workers who generally are more prone to
exploitation given their physical distance from our government.
We also find that the classifications are not relevant to the purpose of the law, which is to establish a
higher standard of protection and promotion of the welfare of migrant workers, their families and
overseas Filipinos in distress, and for other purposes.124 Further, we find specious the argument that
reducing the liability of placement agencies redounds to the benefit of the [overseas] workers.125 red
Putting a cap on the money claims of certain overseas workers does not increase the standard of
protection afforded to them. On the other hand, foreign employers are more incentivized by the
reinstated clause to enter into contracts of at least a year because it gives them more flexibility to violate
our overseas workers rights. Their liability for arbitrarily terminating overseas workers is decreased at
the expense of the workers whose rights they violated. Meanwhile, these overseas workers who are
impressed with an expectation of a stable job overseas for the longer contract period disregard other
opportunities only to be terminated earlier. They are left with claims that are less than what others in the
same situation would receive. The reinstated clause, therefore, creates a situation where the law meant to
protect them makes violation of rights easier and simply benign to the violator.
As Justice Brion said in his concurring opinion in Serrano:
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 legallyimposed 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. . . .
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. . . .126
Further, [t]here can never be a justification for any form of government action that alleviates the burden
of one sector, but imposes the same burden on another sector, especially when the favored sector is
composed of private businesses such as placement agencies, while the disadvantaged sector is composed
of OFWs whose protection no less than the Constitution commands. The idea that private business
interest can be elevated to the level of a compelling state interest is odious.127 red
Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it
deprives overseas workers of their monetary claims without any discernable valid purpose.128 red
Respondent Joy Cabiles is entitled to her salary for the unexpired portion of her contract, in accordance
with Section 10 of Republic Act No. 8042. The award of the three-month equivalence of respondents
salary must be modified accordingly. Since she started working on June 26, 1997 and was terminated on
July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June 25, 1998. To rule
otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal
that principals/employers and recruitment/manning agencies may violate an OFWs security of tenure
which an employment contract embodies and actually profit from such violation based on an
unconstitutional provision of law.129 red
III
On the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013, which revised
the interest rate for loan or forbearance from 12% to 6% in the absence of stipulation, applies in this
case. The pertinent portions of Circular No. 799, Series of 2013, read:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2

of Circular No. 905, Series of 1982: lawlibrary

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Through the able ponencia of Justice Diosdado Peralta, we laid down the guidelines in computing legal
interest in Nacar v. Gallery Frames:130 red
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages,
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.131
Circular No. 799 is applicable only in loans and forbearance of money, goods, or credits, and in
judgments when there is no stipulation on the applicable interest rate. Further, it is only applicable if the
judgment did not become final and executory before July 1, 2013.132 red
We add that Circular No. 799 is not applicable when there is a law that states otherwise. While the
Bangko Sentral ng Pilipinas has the power to set or limit interest rates,133 these interest rates do not apply
when the law provides that a different interest rate shall be applied. [A] Central Bank Circular cannot

repeal a law. Only a law can repeal another law.134 red

For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas
workers are entitled to the reimbursement of his or her placement fee with an interest of 12% per annum.
Since Bangko Sentral ng Pilipinas circulars cannot repeal Republic Act No. 8042, the issuance of
Circular No. 799 does not have the effect of changing the interest on awards for reimbursement of
placement fees from 12% to 6%. This is despite Section 1 of Circular No. 799, which provides that the
6% interest rate applies even to judgments.
Moreover, laws are deemed incorporated in contracts. The contracting parties need not repeat them.
They do not even have to be referred to. Every contract, thus, contains not only what has been explicitly
stipulated, but the statutory provisions that have any bearing on the matter.135 There is, therefore, an
implied stipulation in contracts between the placement agency and the overseas worker that in case the
overseas worker is adjudged as entitled to reimbursement of his or her placement fees, the amount shall
be subject to a 12% interest per annum. This implied stipulation has the effect of removing awards for
reimbursement of placement fees from Circular No. 799s coverage.
The same cannot be said for awards of salary for the unexpired portion of the employment contract
under Republic Act No. 8042. These awards are covered by Circular No. 799 because the law does not
provide for a specific interest rate that should apply.
In sum, if judgment did not become final and executory before July 1, 2013 and there was no stipulation
in the contract providing for a different interest rate, other money claims under Section 10 of Republic
Act No. 8042 shall be subject to the 6% interest per annum in accordance with Circular No. 799.
This means that respondent is also entitled to an interest of 6% per annum on her money claims from the
finality of this judgment.
IV
Finally, we clarify the liabilities of Wacoal as principal and petitioner as the employment agency that
facilitated respondents overseas employment.
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign
employer and the local employment agency are jointly and severally liable for money claims including
claims arising out of an employer-employee relationship and/or damages. This section also provides that
the performance bond filed by the local agency shall be answerable for such money claims or damages if
they were awarded to the employee.
This provision is in line with the states policy of affording protection to labor and alleviating workers
plight.136 red
In overseas employment, the filing of money claims against the foreign employer is attended by
practical and legal complications. The distance of the foreign employer alone makes it difficult for an
overseas worker to reach it and make it liable for violations of the Labor Code. There are also possible
conflict of laws, jurisdictional issues, and procedural rules that may be raised to frustrate an overseas
workers attempt to advance his or her claims.
It may be argued, for instance, that the foreign employer must be impleaded in the complaint as an
indispensable party without which no final determination can be had of an action.137 red
The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995

assures overseas workers that their rights will not be frustrated with these complications.
The fundamental effect of joint and several liability is that each of the debtors is liable for the entire
obligation.138 A final determination may, therefore, be achieved even if only one of the joint and several
debtors are impleaded in an action. Hence, in the case of overseas employment, either the local agency
or the foreign employer may be sued for all claims arising from the foreign employers labor law
violations. This way, the overseas workers are assured that someone the foreign employers local
agent may be made to answer for violations that the foreign employer may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in
law despite the circumstances of their employment. By providing that the liability of the foreign
employer may be enforced to the full extent139 against the local agent, the overseas worker is assured
of immediate and sufficient payment of what is due them.140 red
Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in
the Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign
employer from the overseas worker to the local employment agency. However, it must be emphasized
that the local agency that is held to answer for the overseas workers money claims is not left without
remedy. The law does not preclude it from going after the foreign employer for reimbursement of
whatever payment it has made to the employee to answer for the money claims against the foreign
employer.
A further implication of making local agencies jointly and severally liable with the foreign employer is
that an additional layer of protection is afforded to overseas workers. Local agencies, which are
businesses by nature, are inoculated with interest in being always on the lookout against foreign
employers that tend to violate labor law. Lest they risk their reputation or finances, local agencies must
already have mechanisms for guarding against unscrupulous foreign employers even at the level prior to
overseas employment applications.
With the present state of the pleadings, it is not possible to determine whether there was indeed a
transfer of obligations from petitioner to Pacific. This should not be an obstacle for the respondent
overseas worker to proceed with the enforcement of this judgment. Petitioner is possessed with the
resources to determine the proper legal remedies to enforce its rights against Pacific, if any.
V
Many times, this court has spoken on what Filipinos may encounter as they travel into the farthest and
most difficult reaches of our planet to provide for their families. In Prieto v. NLRC:141 red
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.142chanrobleslaw
But it seems that we have not said enough.
We face a diaspora of Filipinos. Their travails and their heroism can be told a million times over; each of

their stories as real as any other. Overseas Filipino workers brave alien cultures and the heartbreak of
families left behind daily. They would count the minutes, hours, days, months, and years yearning to see
their sons and daughters. We all know of the joy and sadness when they come home to see them all
grown up and, being so, they remember what their work has cost them. Twitter accounts, Facetime, and
many other gadgets and online applications will never substitute for their lost physical presence.
Unknown to them, they keep our economy afloat through the ebb and flow of political and economic
crises. They are our true diplomats, they who show the world the resilience, patience, and creativity of
our people. Indeed, we are a people who contribute much to the provision of material creations of this
world.
This government loses its soul if we fail to ensure decent treatment for all Filipinos. We default by
limiting the contractual wages that should be paid to our workers when their contracts are breached by
the foreign employers. While we sit, this court will ensure that our laws will reward our overseas
workers with what they deserve: their dignity.
Inevitably, their dignity is ours as well.
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED with
modification. Petitioner Sameer Overseas Placement Agency is ORDERED to pay respondent Joy C.
Cabiles the amount equivalent to her salary for the unexpired portion of her employment contract at an
interest of 6% per annum from the finality of this judgment. Petitioner is also ORDERED to reimburse
respondent the withheld NT$3,000.00 salary and pay respondent attorneys fees of NT$300.00 at an
interest of 6% per annum from the finality of this judgment.
The clause, or for three (3) months for every year of the unexpired term, whichever is less in Section 7
of Republic Act No. 10022 amending Section 10 of Republic Act No. 8042 is declared unconstitutional
and, therefore, null and void.
SO ORDERED.
G.R. No. 117040

January 27, 2000

RUBEN SERRANO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT
STORE, respondents.
MENDOZA, J.:
This is a Petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the
National Labor Relations Commission (NLRC) which reversed the decision of the Labor Arbiter and
dismissed petitioner Ruben Serrano's complaint for illegal dismissal and denied his motion for
reconsideration. The facts are as follows:
Petitioner was hired by private respondent Isetann Department Store as a security checker to apprehend
shoplifters and prevent pilferage of merchandise.1 Initially hired on October 4, 1984 on contractual
basis, petitioner eventually became a regular employee on April 4, 1985. In 1988, he became head of the
Security Checkers Section of private respondent.2

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security
section and engage the services of an independent security agency. For this reason, it wrote petitioner the
following memorandum:3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Seranno,
In view of the retrenchment program of the company, we hereby reiterate our verbal
notice to you of your termination as Security Section Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for
illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of
salary and overtime pay.4
The parties were required to submit their position papers, on the basis of which the Labor Arbiter
defined the issues as follows:5
Whether or not there is a valid ground for the dismissal of the complainant.
Whether or not complainant is entitled to his monetary claims for underpayment of wages,
nonpayment of salaries, 13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding
petitioner to have been illegally dismissed. He ruled that private respondent failed to establish that it had
retrenched its security section to prevent or minimize losses to its business; that private respondent
failed to accord due process to petitioner; that private respondent failed to use reasonable standards in
selecting employees whose employment would be terminated; that private respondent had not shown
that petitioner and other employees in the security section were so inefficient so as to justify their
replacement by a security agency, or that "cost-saving devices [such as] secret video cameras (to monitor
and prevent shoplifting) and secret code tags on the merchandise" could not have been employed;
instead, the day after petitioner's dismissal, private respondent employed a safety and security supervisor
with duties and functions similar to those of petitioner.1wphi1.nt
Accordingly, the Labor Arbiter ordered:6
WHEREFORE, above premises considered, judgment is hereby decreed:

(a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is
ordered to pay complainant full backwages without qualification or deduction in the amount
of P74,740.00 from the time of his dismissal until reinstatement. (computed till promulgation
only) based on his monthly salary of P4,040.00/month at the time of his termination but limited
to (3) three years;
(b) Ordering the Respondent to immediately reinstate the complainant to his former position as
security section head or to a reasonably equivalent supervisorial position in charges of security
without loss of seniority rights, privileges and benefits. This order is immediately executory even
pending appeal;
(c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and
proportionate 13th month pay in the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10%
attorney's fees based on the total judgment award of P79,959.12.
All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack
of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution of March 30, 1994; reversed the
decision of the Labor Arbiter and ordered petitioner to be given separation pay equivalent to one month
pay for every year of service, unpaid salary, and proportionate 13th month pay. Petitioner filed a motion
for reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent's security section and the hiring of an
independent security agency constituted an exercise by private respondent of "[a] legitimate business
decision whose wisdom we do not intend to inquire into and for which we cannot substitute our
judgment"; that the distinction made by the Labor Arbiter between "retrenchment" and the employment
of cost-saving devices" under Art. 283 of the Labor Code was insignificant because the company official
who wrote the dismissal letter apparently used the term "retrenchment" in its "plain and ordinary sense:
to layoff or remove from one's job, regardless of the reason therefor"; that the rule of "reasonable
criteria" in the selection of the employees to be retrenched did not apply because all positions in the
security section had been abolished; and that the appointment of a safety and security supervisor referred
to by petitioner to prove bad faith on private respondent's part was of no moment because the position
had long been in existence and was separate from petitioner's position as head of the Security Checkers
Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE
RESPONDENT TO REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND
FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE LATTER? 7
Petitioner contends that abolition of private respondent's Security Checkers Section and the employment
of an independent security agency do not fall under any of the authorized causes for dismissal under Art.
283 of the Labor Code.
Petitioner Laid Off for Cause

Petitioner's contention has no merit. Art. 283 provides:

Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operations of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the, workers and the Department of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay or
to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due
to serious business losses or financial reverses, the separation pay shall be equivalent to at least 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 as one (1) whole year.
In De Ocampo v. National Labor Relations Commission,8 this Court upheld the termination of
employment of three mechanics in a transportation company and their replacement by a company
rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the company's cost-saving program,
the services rendered by the mechanics became redundant and superfluous, and therefore
properly terminable. The company merely exercised its business judgment or management
prerogative. And in the absence of any proof that the management abused its discretion or acted
in a malicious or arbitrary manner, the court will not interfere with the exercise of such
prerogative.9
In Asian Alcohol Corporation v. National Labor Relations Commission,10 the Court likewise upheld the
termination of employment of water pump tenders and their replacement by independent contractors. It
ruled that an employer's good faith in implementing a redundancy program is not necessarily put in
doubt by the availment of the services of an independent contractor to replace the services of the
terminated employees to promote economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty
of promoting efficiency and attaining economy by a study of what units are essential for its operation. To
it belongs the ultimate determination of whether services should be performed by its personnel or
contracted to outside agencies . . . [While there] should be mutual consultation, eventually deference is
to be paid to what management decides."11 Consequently, absent proof that management acted in a
malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an
employer.12
In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section,
private respondent's real purpose was to avoid payment to the security checkers of the wage increases
provided in the collective bargaining agreement approved in 1990.13 Such an assertion is not sufficient
basis for concluding that the termination of petitioner's employment was not a bona fide decision of
management to obtain reasonable return from its investment, which is a right guaranteed to employers
under the Constitution.14 Indeed, that the phase-out of the security section constituted a "legitimate
business decision" is a factual finding of an administrative agency which must be accorded respect and
even finality by this Court since nothing can be found in the record which fairly detracts from such
finding.15

Accordingly, we hold that the termination of petitioner's services was for an authorized cause, i.e.,
redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at
the rate of one month pay for every year of service.
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes
the employer must serve "a written notice on the workers and the Department of Labor and Employment
at least one (1) month before the intended date thereof." In the case at bar, petitioner was given a notice
of termination on October 11, 1991. On the same day, his services were terminated. He was thus denied
his right to be given written notice before the termination of his employment, and the question is the
appropriate sanction for the violation of petitioner's right.
To be sure, this is not the first time this question has arisen. In Subuguero v. NLRC,16 workers in a
garment factory were temporarily laid off due to the cancellation of orders and a garment embargo. The
Labor Arbiter found that the workers had been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand, found that this was a case of retrenchment
due to business losses and ordered the payment of separation pay without backwages. This Court
sustained the NLRC's finding. However, as the company did not comply with the 30-day written notice
in Art. 283 of the Labor Code, the Court ordered the employer to pay the workers P2,000.00 each as
indemnity.
The decision followed the ruling in several cases involving dismissals which, although based on any of
the just causes under Art. 282,17 were effected without notice and hearing to the employee as required by
the implementing rules.18 As this Court said: "It is now settled that where the dismissal of one employee
is in fact for a just and valid cause and is so proven to be but he is not accorded his right to due
process, i.e., he was not furnished the twin requirements of notice and opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for non-compliance with the
requirements of, or for failure to observe, due process."19
The rule reversed a long standing policy theretofore followed that even though the dismissal is based on
a just cause or the termination of employment is for an authorized cause, the dismissal or termination is
illegal if effected without notice to the employee. The shift in doctrine took place in 1989 in Wenphil
Corp. v. NLRC.20 In announcing the change, this Court said:21
The Court holds that the policy of ordering the reinstatement to the service of an employee
without loss of seniority and the payment of his wages during the period of his separation until
his actual reinstatement but not exceeding three (3) years without qualification or deduction,
when it appears he was not afforded due process, although his dismissal was found to be for just
and authorized cause in an appropriate proceeding in the Ministry of Labor and Employment,
should be re-examined. It will be highly prejudicial to the interests of the employer to impose on
him the services of an employee who has been shown to be guilty of the charges that warranted
his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if
not undesirable, remains in the service.
xxx

xxx

xxx

However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due
process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed
a sanction for its failure to give a formal notice and conduct an investigation as required by law

before dismissing petitioner from employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this
award depends on the facts of each case and the gravity of the omission committed by the
employer.
The fines imposed for violations of the notice requirement have varied from P1,000.0022 to
P2,000.0023 to P5,000.0024 to P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate sanctions for violations of the notice
experience during the last decade or so with the Wenphil doctrine. The number of cases involving
dismissals without the requisite notice to the employee, although effected for just or authorized causes,
suggest that the imposition of fine for violation of the notice requirement has not been effective in
deterring violations of the notice requirement. Justice Panganiban finds the monetary sanctions "too
insignificant, too niggardly, and sometimes even too late." On the other hand, Justice Puno says there
has in effect been fostered a policy of "dismiss now; pay later" which moneyed employers find more
convenient to comply with than the requirement to serve a 30-day written notice (in the case of
termination of employment for an authorized cause under Arts. 283-284) or to give notice and hearing
(in the case of dismissals for just causes under Art. 282).
For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even
though there are just or authorized cause for such dismissal or layoff. Consequently, in their view, the
employee concerned should be reinstated and paid backwages.
Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the
sanction of fine for an employer's disregard of the notice requirement. We do not agree, however, that
disregard of this requirement by an employer renders the dismissal or termination of employment null
and void. Such a stance is actually a reversion to the discredited pre-Wenphil rule of ordering an
employee to be reinstated and paid backwages when it is shown that he has not been given notice and
hearing although his dismissal or layoff is later found to be for a just or authorized cause. Such rule was
abandoned in Wenphil because it is really unjust to require an employer to keep in his service one who is
guilty, for example, of an attempt on the life of the employer or the latter's family, or when the employer
is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's right to notice before he is dismissed or
laid off, at the same time acknowledges the right of the employer to dismiss for any of the just causes
enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned in Arts.
283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an
employee for cause without prior notice is deemed ineffective in deterring employer violations of the
notice requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for
such dismissal or if the termination is for an authorized cause. That would be to uphold the right of the
employee but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the
payment to the employee of full backwages from the time of his dismissal until the court finds that the
dismissal was for a just cause. But, otherwise, his dismissal must be upheld and he should not be
reinstated. This is because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of
a labor-saving device, but the employer did not give him and the DOLE a 30-day written notice of
termination in advance, then the termination of his employment should be considered ineffectual and he

should be paid backwages. However, the termination of his employment should not be considered void
but he should simply be paid separation pay as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with the notice requirement constitutes a denial
of the employee's right to due process. Prescinding from this premise, he quotes the statement of Chief
Justice Concepcion Vda. de Cuaycong v. Vda. de Sengbengco26 that "acts of Congress, as well as of the
Executive, can deny due process only under the pain of nullity, and judicial proceedings suffering from
the same flaw are subject to the same sanction, any statutory provision to the contrary notwithstanding."
Justice Puno concludes that the dismissal of an employee without notice and hearing, even if for a just
cause, as provided in Art. 282, or for an authorized cause, as provided in Arts. 283-284, is a nullity.
Hence, even if just or authorized cause exist, the employee should be reinstated with full back pay. On
the other hand, Justice Panganiban quotes from the statement in People v. Bocar27 that "[w]here the
denial of the fundamental right of due process is apparent, a decision rendered in disregard of that right
is void for lack of jurisdiction."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by the
State, which is not the case here. There are three reasons why, on the other hand, violation by the
employer of the notice requirement cannot be considered a denial of due process resulting in the nullity
of the employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It
does not apply to the exercise of private power, such as the termination of employment under the Labor
Code. This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person shall be deprived of
life, liberty, or property without due process of law. . . ." The reason is simple: Only the State has
authority to take the life, liberty, or property of the individual. The purpose of the Due Process Clause is
to ensure that the exercise of this power is consistent with what are considered civilized methods.
The second reason is that notice and hearing are required under the Due Process Clause before the
power of organized society are brought to bear upon the individual. This is obviously not the case of
termination of employment under Art. 283. Here the employee is not faced with an aspect of the
adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not
to afford him an opportunity to be heard on any charge against him, for there is none. The purpose rather
is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to determine
whether economic causes do exist justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to
comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage.
Then that is the time we speak of notice and hearing as the essence of procedural due process. Thus,
compliance by the employer with the notice requirement before he dismisses an employee does not
foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "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."
Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882
which gave either party to the employer-employee relationship the right to terminate their relationship
by giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one month.28 This provision was repealed by Art. 2270
of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052,

otherwise known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the
law was amended by R.A. No. 1787 providing for the giving of advance notice or the payment of
compensation at the rate of one-half month for every year of service.29
The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of
which was to give the employer the opportunity to find a replacement or substitute, and the employee
the equal opportunity to look for another job or source of employment. Where the termination of
employment was for a just cause, no notice was required to be given to the, employee. 30 It was only on
September 4, 1981 that notice was required to be given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued by the then Minister of Labor and
Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later
when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No.
6715 on March 2, 1989. It cannot be that the former regime denied due process to the employee.
Otherwise, there should now likewise be a rule that, in case an employee leaves his job without cause
and without prior notice to his employer, his act should be void instead of simply making him liable for
damages.
The third reason why the notice requirement under Art. 283 can not be considered a requirement of the
Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of
his own cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e.,
serious misconduct or willful disobedience by the employee of the lawful orders of the employer, gross
and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime
against the employer or the latter's immediate family or duly authorized representatives, or other
analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been
won by employees before the grievance committees manned by impartial judges of the company." The
grievance machinery is, however, different because it is established by agreement of the employer and
the employees and composed of representatives from both sides. That is why, in Batangas Laguna
Tayabas Bus Co. v. Court of Appeals,31 which Justice Puno cites, it was held that "Since the right of [an
employee] to his labor is in itself a property and that the labor agreement between him and [his
employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation
of his property without due process of law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance machinery. Accordingly in Montemayor v.
Araneta University Foundation,32 although a professor was dismissed without a hearing by his
university, his dismissal for having made homosexual advances on a student was sustained, it appearing
that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply part of a procedure to be
followed before a right granted to a party can be exercised. Others are simply an application of the
Justinian precept, embodied in the Civil Code,33 to act with justice, give everyone his due, and observe
honesty and good faith toward one's fellowmen. Such is the notice requirement in Arts. 282-283. The
consequence of the failure either of the employer or the employee to live up to this precept is to make
him liable in damages, not to render his act (dismissal or resignation, as the case may be) void. The
measure of damages is the amount of wages the employee should have received were it not for the
termination of his employment without prior notice. If warranted, nominal and moral damages may also
be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer's failure to comply
with the notice requirement does not constitute a denial of due process but a mere failure to observe a

procedure for the termination of employment which makes the termination of employment merely
ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of
the Civil Code34 in rescinding a contract for the sale of immovable property. Under these provisions,
while the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in cases
involving the sale of immovable property, the vendor cannot exercise this power even though the vendee
defaults in the payment of the price, except by bringing an action in court or giving notice of rescission
by means of a notarial demand.35 Consequently, a notice of rescission given in the letter of an attorney
has no legal effect, and the vendee can make payment even after the due date since no valid notice of
rescission has been given.36
Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can
make the dismissal of an employee illegal. This is clear from Art. 279 which 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 dismissedfrom 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.37
Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and,
therefore, the employee should be reinstated and paid backwages. To contend, as Justices Puno and
Panganiban do, that even if the termination is for a just or authorized cause the employee concerned
should be reinstated and paid backwages would be to amend Art. 279 by adding another ground for
considering a dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he is leaving the service of the latter, at
least one month in advance, his failure to comply with the legal requirement does not result in making
his resignation void but only in making him liable for damages.38 This disparity in legal treatment, which
would result from the adoption of the theory of the minority cannot simply be explained by invoking
resident Ramon Magsaysay's motto that "he who has less in life should have more in law." That would
be a misapplication of this noble phrase originally from Professor Thomas Reed Powell of the Harvard
Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in support of his view that an illegal
dismissal results not only from want of legal cause but also from the failure to observe "due process."
The Pepsi-Cola case actually involved a dismissal for an alleged loss of trust and confidence which, as
found by the Court, was not proven. The dismissal was, therefore, illegal, not because there was a denial
of due process, but because the dismissal was without cause. The statement that the failure of
management to comply with the notice requirement "taints the dismissal with illegality" was merely a
dictum thrown in as additional grounds for holding the dismissal to be illegal.
Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the
payment of backwages for the period when the employee is considered not to have been effectively
dismissed or his employment terminated. The sanction is not the payment alone of nominal damages as
Justice Vitug contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal
The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For not
giving notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even

of an attempt against the life of the employer, an employer will be forced to keep in his employ such
guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force."40 But so does it declare that
it "recognizes the indispensable role of the private sector, encourages private enterprise, and provides
incentives to needed investment."41 The Constitution bids the State to "afford full protection to
labor."42 But it is equally true that "the law, in protecting the right's of the laborer, authorizes neither
oppression nor self-destruction of the employer." 43 And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in operation when it is not
economically in his interest to do so.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination
of employment was due to an authorized cause, then the employee concerned should not be ordered
reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he must be
granted separation pay in accordance with Art. 283, to wit:
In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay
or to at least one month for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking
not due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six months shall be considered one (1) whole year.
If the employee's separation is without cause, instead of being given separation pay, he should be
reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid full
backwages if he has been laid off without written notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee
was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that article,
he should not be reinstated. However, he must be paid backwages from the time his employment was
terminated until it is determined that the termination of employment is for a just cause because the
failure to hear him before he is dismissed renders the termination of his employment without legal
effect.
WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations
Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay
petitioner separation pay equivalent to one (1) month pay for every year of service, his unpaid salary,
and his proportionate 13th month pay and, in addition, full backwages from the time his employment
was terminated on October 11, 1991 up to the time the decision herein becomes final. For this purpose,
this case is REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and
other monetary awards to petitioner.
SO ORDERED.
G.R. No. 158693

November 17, 2004

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

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

DECISION

YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision1 of the Court of Appeals dated January 23, 2003, in
CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in
NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing
ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as
gypsum board and cornice installers on January 2, 19922 until February 23, 1999 when they were
dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims 3 and on December
28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private
respondent to pay the monetary claims. The dispositive portion of the decision states:
WHEREFORE, premises considered, We find the termination of the complainants illegal.
Accordingly, respondent is hereby ordered to pay them their backwages up to November 29,
1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of
service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and service incentive
leave pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest
days and Virgilio Agabon's 13th month pay differential amounting to TWO THOUSAND ONE
HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY
ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for
Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED
TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached
computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned
their work, and were not entitled to backwages and separation pay. The other money claims awarded by
the Labor Arbiter were also denied for lack of evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court
of Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had
abandoned their employment but ordered the payment of money claims. The dispositive portion of the
decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only
insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay
petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their
service incentive leave pay for said years, and to pay the balance of petitioner Virgilio Agabon's
13th month pay for 1998 in the amount of P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.7
Petitioners assert that they were dismissed because the private respondent refused to give them
assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on February
23, 1999. They did not agree on this arrangement because it would mean losing benefits as Social
Security System (SSS) members. Petitioners also claim that private respondent did not comply with the
twin requirements of notice and hearing.8
Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned
their work.9 In fact, private respondent sent two letters to the last known addresses of the petitioners
advising them to report for work. Private respondent's manager even talked to petitioner Virgilio Agabon
by telephone sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers
involving 40,000 square meters of cornice installation work. However, petitioners did not report for
work because they had subcontracted to perform installation work for another company. Petitioners also
demanded for an increase in their wage to P280.00 per day. When this was not granted, petitioners
stopped reporting for work and filed the illegal dismissal case.10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only
respect but even finality if the findings are supported by substantial evidence. This is especially so when
such findings were affirmed by the Court of Appeals.11 However, if the factual findings of the NLRC and
the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the records and
examine for itself the questioned findings.12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal
was for a just cause. They had abandoned their employment and were already working for another
employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins
the employer to give the employee the opportunity to be heard and to defend himself.13 Article 282 of
the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or
willful disobedience by the employee of the lawful orders of his employer or the latter's representative in
connection with the employee's work; (b) gross and habitual neglect by the employee of his duties; (c)
fraud or willful breach by the employee of the trust reposed in him by his employer or his duly
authorized representative; (d) commission of a crime or offense by the employee against the person of
his employer or any immediate member of his family or his duly authorized representative; and (e) other
causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. 14 It is a
form of neglect of duty, hence, a just cause for termination of employment by the employer.15 For a valid
finding of abandonment, these two factors should be present: (1) the failure to report for work or

absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second as the more determinative factor which is manifested by overt acts from
which it may be deduced that the employees has no more intention to work. The intent to discontinue the
employment must be shown by clear proof that it was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for an installation work for
another company. Subcontracting for another company clearly showed the intention to sever the
employer-employee relationship with private respondent. This was not the first time they did this. In
January 1996, they did not report for work because they were working for another company. Private
respondent at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee
relationship. The record of an employee is a relevant consideration in determining the penalty that
should be meted out to him.17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from work without
leave or permission from his employer, for the purpose of looking for a job elsewhere, is considered to
have abandoned his job. We should apply that rule with more reason here where petitioners were absent
because they were already working in another company.
The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment. On
the other hand, the law also recognizes the right of the employer to expect from its workers not only
good performance, adequate work and diligence, but also good conduct19 and loyalty. The employer may
not be compelled to continue to employ such persons whose continuance in the service will patently be
inimical to his interests.20
After establishing that the terminations were for a just and valid cause, we now determine if the
procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus
Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all cases of termination of employment,
the following standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination,
and giving to said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel
if the employee so desires, is given opportunity to respond to the charge, present his evidence or
rebut the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon due consideration
of all the circumstances, grounds have been established to justify his termination.
In case of termination, the foregoing notices shall be served on the employee's last known
address.
Dismissals based on just causes contemplate acts or omissions attributable to the employee while
dismissals based on authorized causes involve grounds under the Labor Code which allow the employer

to terminate employees. A termination for an authorized cause requires payment of separation pay. When
the termination of employment is declared illegal, reinstatement and full backwages are mandated under
Article 279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be
granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity to be heard if requested by the employee
before terminating the employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the
decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284,
the employer must give the employee and the Department of Labor and Employment written notices 30
days prior to the effectivity of his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause
under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons
under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause
but due process was observed; (3) the dismissal is without just or authorized cause and there was no due
process; and (4) the dismissal is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the
employee is entitled to reinstatement without loss of seniority rights and other privileges and full
backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the
time the compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it
should not invalidate the dismissal. However, the employer should be held liable for non-compliance
with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent,
however, did not follow the notice requirements and instead argued that sending notices to the last
known addresses would have been useless because they did not reside there anymore. Unfortunately for
the private respondent, this is not a valid excuse because the law mandates the twin notice requirements
to the employee's last known address.21 Thus, it should be held liable for non-compliance with the
procedural requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and timely to clarify the
various rulings on employment termination in the light of Serrano v. National Labor Relations
Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any
notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission,23 we reversed this
long-standing rule and held that the dismissed employee, although not given any notice and hearing, was
not entitled to reinstatement and backwages because the dismissal was for grave misconduct and
insubordination, a just ground for termination under Article 282. The employee had a violent temper and
caused trouble during office hours, defying superiors who tried to pacify him. We concluded that
reinstating the employee and awarding backwages "may encourage him to do even worse and will
render a mockery of the rules of discipline that employees are required to observe."24 We further held
that:

Under the circumstances, the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employment.
However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due
process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed
a sanction for its failure to give a formal notice and conduct an investigation as required by law
before dismissing petitioner from employment. Considering the circumstances of this case
petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this
award depends on the facts of each case and the gravity of the omission committed by the
employer.25
The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow
the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an
indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the
violation by the employer of the notice requirement in termination for just or authorized causes was not
a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the
employer must pay full backwages from the time of termination until it is judicially declared that the
dismissal was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of
cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way
of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now
required payment of full backwages from the time of dismissal until the time the Court finds the
dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full
backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the
Labor Code which states:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
This means that the termination is illegal only if it is not for any of the justified or authorized causes
provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if
the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has
prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of
rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be
deemed fundamental to a civilized society as conceived by our entire history. Due process is that which

comports with the deepest notions of what is fair and right and just.26 It is a constitutional restraint on the
legislative as well as on the executive and judicial powers of the government provided by the Bill of
Rights.
Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e.,
the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e.,
the manner of dismissal. Procedural due process requirements for dismissal are found in the
Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines in
Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10.27 Breaches of these due
process requirements violate the Labor Code. Therefore statutory due process should be differentiated
from failure to comply with constitutional due process.
Constitutional due process protects the individual from the government and assures him of his rights in
criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and
Implementing Rules protects employees from being unjustly terminated without just cause after notice
and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and valid cause but
the employee was not accorded due process. The dismissal was upheld by the Court but the employer
was sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the
facts of each case and the gravity of the omission committed by the employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was not given
due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for
just cause,albeit without due process, did not entitle the employee to reinstatement, backwages, damages
and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor
Relations Commission,30 which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly observed by an
employer, it would not be right to order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with the procedure prescribed by
law in terminating the services of the employee, the employer must be deemed to have opted or,
in any case, should be made liable, for the payment of separation pay. It might be pointed out
that the notice to be given and the hearing to be conducted generally constitute the two-part due
process requirement of law to be accorded to the employee by the employer. Nevertheless,
peculiar circumstances might obtain in certain situations where to undertake the above steps
would be no more than a useless formality and where, accordingly, it would not be imprudent to
apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the
employee. x x x.31
After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of the twin
requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer.
Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be
able to achieve a fair result by dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not
complying with statutory due process may have far-reaching consequences.

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

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not
nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the
employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.36 The indemnity to be imposed should be stiffer to discourage the abhorrent practice of
"dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the
nature of indemnification or penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.37
As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an employer is liable
to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting
such dismissal, the employer fails to comply with the requirements of due process. The Court, after
considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the
employee's one month salary. This indemnity is intended not to penalize the employer but to vindicate or
recognize the employee's right to statutory due process which was violated by the employer.39
The violation of the petitioners' right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the
sound discretion of the court, taking into account the relevant circumstances.40 Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this
form of damages would serve to deter employers from future violations of the statutory due process
rights of employees. At the very least, it provides a vindication or recognition of this fundamental right
granted to the latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners'
holiday pay, service incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for
petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where the employee must
allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather
than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid are not in the
possession of the worker but in the custody and absolute control of the employer.41
In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave
pay, it could have easily presented documentary proofs of such monetary benefits to disprove the claims
of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash
vouchers showing payments of the benefit in the years disputed.42 Allegations by private respondent that
it does not operate during holidays and that it allows its employees 10 days leave with pay, other than
being self-serving, do not constitute proof of payment. Consequently, it failed to discharge the onus
probandi thereby making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th
month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is

to grant an additional income in the form of the 13th month pay to employees not already receiving the
same43 so as "to further protect the level of real wages from the ravages of world-wide
inflation."44 Clearly, as additional income, the 13th month pay is included in the definition of wage under
Article 97(f) of the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money whether fixed or ascertained on a time, task,
piece , or commission basis, or other method of calculating the same, which is payable by an
employer to an employee under a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee"
from which an employer is prohibited under Article 11345 of the same Code from making any deductions
without the employee's knowledge and consent. In the instant case, private respondent failed to show
that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th
month pay was authorized by the latter. The lack of authority to deduct is further bolstered by the fact
that petitioner Virgilio Agabon included the same as one of his money claims against private respondent.
The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the
private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to
1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of
P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of
P2,150.00.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio
Agabon abandoned their work, and ordering private respondent to pay each of the petitioners holiday
pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay
for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month
pay for 1998 in the amount of P2,150.00 is AFFIRMED with the MODIFICATION that private
respondent Riviera Home Improvements, Inc. is further ORDERED to pay each of the petitioners the
amount of P30,000.00 as nominal damages for non-compliance with statutory due process.
No costs.
SO ORDERED.
G.R. No. 192571

July 23, 2013

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

MARIA OLIVIA T. YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G.
ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated December 10,2009 and
Resolution3dated June 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 101045 which

pronounced that the National Labor Relations Commission (NLRC) did not gravely abuse its discretion
when it ruled that respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally dismissed from her
employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused the publication in a major
broadsheet newspaper of its need for a Medical and Regulatory Affairs Manager (Regulatory Affairs
Manager) who would: (a) be responsible for drug safety surveillance operations, staffing, and budget;
(b) lead the development and implementation of standard operating procedures/policies for drug safety
surveillance and vigilance; and (c) act as the primary interface with internal and external customers
regarding safety operations and queries.4 Alcaraz - who was then a Regulatory Affairs and Information
Manager at Aventis Pasteur Philippines, Incorporated (another pharmaceutical company like Abbott)
showed interest and submitted her application on October 4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the abovementioned position which was an item
under the companys Hospira Affiliate Local Surveillance Unit (ALSU) department. 6 In Abbotts offer
sheet.7 it was stated that Alcaraz was to be employed on a probationary basis.8 Later that day, she
accepted the said offer and received an electronic mail (e-mail) from Abbotts Recruitment Officer,
petitioner Teresita C. Bernardo (Bernardo), confirming the same. Attached to Bernardos e-mail were
Abbotts organizational chart and a job description of Alcarazs work.9
On February 12, 2005, Alcaraz signed an employment contract which stated, inter alia, that she was to
be placed on probation for a period of six (6) months beginning February 15, 2005 to August 14, 2005.
The said contract was also signed by Abbotts General Manager, petitioner Edwin Feist (Feist):10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment requirements, you are hereby appointed as
follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005
Basic Salary : P110,000.00/ month
It is understood that you agree to abide by all existing policies, rules and regulations of the company, as
well as those, which may be hereinafter promulgated.
Unless renewed, probationary appointment expires on the date indicated subject to earlier termination by
the Company for any justifiable reason.

If you agree to the terms and conditions of your employment, please signify your conformity below and
return a copy to HRD.
Welcome to Abbott!
Very truly yours,
Sgd.
EDWIN D. FEIST
General Manager
CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcarazs pre-employment orientation, petitioner Allan G. Almazar (Almazar), Hospiras
Country Transition Manager, briefed her on her duties and responsibilities as Regulatory Affairs
Manager, stating that: (a) she will handle the staff of Hospira ALSU and will directly report to Almazar
on matters regarding Hopiras local operations, operational budget, and performance evaluation of the
Hospira ALSU Staff who are on probationary status; (b) she must implement Abbotts Code of Good
Corporate Conduct (Code of Conduct), office policies on human resources and finance, and ensure that
Abbott will hire people who are fit in the organizational discipline; (c) petitioner Kelly Walsh (Walsh),
Manager of the Literature Drug Surveillance Drug Safety of Hospira, will be her immediate supervisor;
(d) she should always coordinate with Abbotts human resource officers in the management and
discipline of the staff; (e) Hospira ALSU will spin off from Abbott in early 2006 and will be officially
incorporated and known as Hospira, Philippines. In the interim, Hospira ALSU operations will still be
under Abbotts management, excluding the technical aspects of the operations which is under the control
and supervision of Walsh; and (f) the processing of information and/or raw material data subject of
Hospira ALSU operations will be strictly confined and controlled under the computer system and
network being maintained and operated from the United States. For this purpose, all those involved in
Hospira ALSU are required to use two identification cards: one, to identify them as Abbotts employees
and another, to identify them as Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbotts Human Resources (HR)
Director, sent Alcaraz an e-mail which contained an explanation of the procedure for evaluating the
performance of probationary employees and further indicated that Abbott had only one evaluation
system for all of its employees. Alcaraz was also given copies of Abbotts Code of Conduct and
Probationary Performance Standards and Evaluation (PPSE) and Performance Excellence Orientation
Modules (Performance Modules) which she had to apply in line with her task of evaluating the Hospira
ALSU staff.12
Abbotts PPSE procedure mandates that the job performance of a probationary employee should be
formally reviewed and discussed with the employee at least twice: first on the third month and second
on the fifth month from the date of employment. The necessary Performance Improvement Plan should
also be made during the third-month review in case of a gap between the employees performance and
the standards set. These performance standards should be discussed in detail with the employee within
the first two (2) weeks on the job. It was equally required that a signed copy of the PPSE form must be
submitted to Abbotts Human Resources Department (HRD) and shall serve as documentation of the
employees performance during his/her probationary period. This shall form the basis for recommending
the confirmation or termination of the probationary employment.13

During the course of her employment, Alcaraz noticed that some of the staff had disciplinary problems.
Thus, she would reprimand them for their unprofessional behavior such as non-observance of the dress
code, moonlighting, and disrespect of Abbott officers. However, Alcarazs method of management was
considered by Walsh to be "too strict."14 Alcaraz approached Misa to discuss these concerns and was told
to "lie low" and let Walsh handle the matter. Misa even assured her that Abbotts HRD would support
her in all her management decisions.15
On April 12, 2005, Alcaraz received an e-mail from Misa requesting immediate action on the staffs
performance evaluation as their probationary periods were about to end. This Alcaraz eventually
submitted.16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible (Terrible), Abbotts former HR
Director, to discuss certain issues regarding staff performance standards. In the course thereof, Alcaraz
accidentally saw a printed copy of an e-mail sent by Walsh to some staff members which essentially
contained queries regarding the formers job performance. Alcaraz asked if Walshs action was the
normal process of evaluation. Terrible said that it was not.17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where she was informed that
she failed to meet the regularization standards for the position of Regulatory Affairs
Manager.18 Thereafter, Walsh and Terrible requested Alcaraz to tender her resignation, else they be
forced to terminate her services. She was also told that, regardless of her choice, she should no longer
report for work and was asked to surrender her office identification cards. She requested to be given one
week to decide on the same, but to no avail.19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales (Gonzales), that she would
be on leave for that day. However, Gonzales told her that Walsh and Terrible already announced to the
whole Hospira ALSU staff that Alcaraz already resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that her
services had been terminated effective May 19, 2005.21 The letter detailed the reasons for Alcarazs
termination particularly, that Alcaraz: (a) did not manage her time effectively; (b) failed to gain the
trust of her staff and to build an effective rapport with them; (c) failed to train her staff effectively; and
(d) was not able to obtain the knowledge and ability to make sound judgments on case processing and
article review which were necessary for the proper performance of her duties.22 On May 27, 2005,
Alcaraz received another copy of the said termination letter via registered mail.23
Alcaraz felt that she was unjustly terminated from her employment and thus, filed a complaint for illegal
dismissal and damages against Abbott and its officers, namely, Misa, Bernardo, Almazar, Walsh,
Terrible, and Feist.24 She claimed that she should have already been considered as a regular and not a
probationary employee given Abbotts failure to inform her of the reasonable standards for her
regularization upon her engagement as required under Article 29525 of the Labor Code. In this relation,
she contended that while her employment contract stated that she was to be engaged on a probationary
status, the same did not indicate the standards on which her regularization would be based.26 She further
averred that the individual petitioners maliciously connived to illegally dismiss her when: (a) they
threatened her with termination; (b) she was ordered not to enter company premises even if she was still
an employee thereof; and (c) they publicly announced that she already resigned in order to humiliate
her.27
On the contrary, petitioners maintained that Alcaraz was validly terminated from her probationary
employment given her failure to satisfy the prescribed standards for her regularization which were made
known to her at the time of her engagement.28

The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcarazs complaint for lack of merit.
The LA rejected Alcarazs argument that she was not informed of the reasonable standards to qualify as
a regular employee considering her admissions that she was briefed by Almazar on her work during her
pre-employment orientation meeting30 and that she received copies of Abbotts Code of Conduct and
Performance Modules which were used for evaluating all types of Abbott employees.31 As Alcaraz was
unable to meet the standards set by Abbott as per her performance evaluation, the LA ruled that the
termination of her probationary employment was justified.32 Lastly, the LA found that there was no
evidence to conclude that Abbotts officers and employees acted in bad faith in terminating Alcarazs
employment.33
Displeased with the LAs ruling, Alcaraz filed an appeal with the National Labor Relations Commission
(NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a Decision,34 annulling and setting aside the LAs ruling,
the dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is hereby reversed,
annulled and set aside and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to have committed illegal
dismissal;
2. Respondents are ordered to immediately reinstate complainant to her former position without
loss of seniority rights immediately upon receipt hereof;
3. To jointly and severally pay complainant backwages computed from 16 May 2005 until
finality of this decision. As of the date hereof the backwages is computed at
a. Backwages for 15 months -

PhP 1,650,000.00

b. 13th month pay TOTAL

110,000.00
PhP 1,760,000.00

4. Respondents are ordered to pay complainant moral damages of P50,000.00 and exemplary
damages ofP50,000.00.
5. Respondents are also ordered to pay attorneys fees of 10% of the total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was no evidence showing that Alcaraz
had been apprised of her probationary status and the requirements which she should have complied with
in order to be a regular employee.36 It held that Alcarazs receipt of her job description and Abbotts
Code of Conduct and Performance Modules was not equivalent to her being actually informed of the

performance standards upon which she should have been evaluated on.37 It further observed that Abbott
did not comply with its own standard operating procedure in evaluating probationary employees.38 The
NLRC was also not convinced that Alcaraz was terminated for a valid cause given that petitioners
allegation of Alcarazs "poor performance" remained unsubstantiated.39
Petitioners filed a motion for reconsideration which was denied by the NLRC in a Resolution dated July
31, 2007.40
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction, docketed as CA G.R. SP No.
101045 (First CA Petition), alleging grave abuse of discretion on the part of NLRC when it ruled that
Alcaraz was illegally dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved for the execution of the NLRCs Decision
before the LA, which petitioners strongly opposed. The LA denied the said motion in an Order dated
July 8, 2008 which was, however, eventually reversed on appeal by the NLRC.42 Due to the foregoing,
petitioners filed another Petition for Certiorari with the CA, docketed as CA G.R. SP No. 111318
(Second CA Petition), assailing the propriety of the execution of the NLRC decision.43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision44 dated December 10, 2009, affirmed the
ruling of the NLRC and held that the latter did not commit any grave abuse of discretion in finding that
Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the reasonable standards
under which she could qualify as a regular employee. 45 This was based on its examination of the
employment contract which showed that the same did not contain any standard of performance or any
stipulation that Alcaraz shall undergo a performance evaluation before she could qualify as a regular
employee.46 It also found that Abbott was unable to prove that there was any reasonable ground to
terminate Alcarazs employment.47 Abbott moved for the reconsideration of the aforementioned ruling
which was, however, denied by the CA in a Resolution48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a Resolution dated May 18, 2010 (May 18, 2010
Resolution) and ruled that the NLRC was correct in upholding the execution of the NLRC
Decision.49 Thus, petitioners filed a motion for reconsideration.
While the petitioners motion for reconsideration of the CAs May 18, 2010 Resolution was pending,
Alcaraz again moved for the issuance of a writ of execution before the LA. On June 7, 2010, petitioners
received the LAs order granting Alcarazs motion for execution which they in turn appealed to the
NLRC through a Memorandum of Appeal dated June 16, 2010 (June 16, 2010 Memorandum of
Appeal ) on the ground that the implementation of the LAs order would render its motion for
reconsideration moot and academic.50
Meanwhile, petitioners motion for reconsideration of the CAs May 18, 2010 Resolution in the Second
CA Petition was denied via a Resolution dated October 4, 2010.51 This attained finality on January 10,
2011 for petitioners failure to timely appeal the same.52 Hence, as it stands, only the issues in the First
CA petition are left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges that petitioners were guilty
of forum shopping when they filed the Second CA Petition pending the resolution of their motion for
reconsideration of the CAs December 10, 2009 Decision i.e., the decision in the First CA Petition.53 She

also contends that petitioners have not complied with the certification requirement under Section 5, Rule
7 of the Rules of Court when they failed to disclose in the instant petition the filing of the June 16, 2010
Memorandum of Appeal filed before the NLRC.54
The Issues Before the Court
The following issues have been raised for the Courts resolution: (a) whether or not petitioners are guilty
of forum shopping and have violated the certification requirement under Section 5, Rule 7 of the Rules
of Court; (b) whether or not Alcaraz was sufficiently informed of the reasonable standards to qualify her
as a regular employee; (c) whether or not Alcaraz was validly terminated from her employment; and (d)
whether or not the individual petitioners herein are liable.
The Courts Ruling
A. Forum Shopping and
Violation of Section 5, Rule 7
of the Rules of Court.
At the outset, it is noteworthy to mention that the prohibition against forum shopping is different from a
violation of the certification requirement under Section 5, Rule 7 of the Rules of Court. In Sps. Ong v.
CA,55 the Court explained that:
x x x The distinction between the prohibition against forum shopping and the certification requirement
should by now be too elementary to be misunderstood. To reiterate, compliance with the certification
against forum shopping is separate from and independent of the avoidance of the act of forum shopping
itself. There is a difference in the treatment between failure to comply with the certification requirement
and violation of the prohibition against forum shopping not only in terms of imposable sanctions but
also in the manner of enforcing them. The former constitutes sufficient cause for the dismissal without
prejudice to the filing of the complaint or initiatory pleading upon motion and after hearing, while the
latter is a ground for summary dismissal thereof and for direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant files multiple suits involving the same parties,
either simultaneously or successively, to secure a favorable judgment. It exists where the elements of
litis pendentia are present, namely: (a) identity of parties, or at least such parties who represent the same
interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on
the same facts; and (c) the identity with respect to the two preceding particulars in the two (2) cases is
such that any judgment that may be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case.57
In this case, records show that, except for the element of identity of parties, the elements of forum
shopping do not exist. Evidently, the First CA Petition was instituted to question the ruling of the NLRC
that Alcaraz was illegally dismissed. On the other hand, the Second CA Petition pertains to the propriety
of the enforcement of the judgment award pending the resolution of the First CA Petition and the finality
of the decision in the labor dispute between Alcaraz and the petitioners. Based on the foregoing, a
judgment in the Second CA Petition will not constitute res judicata insofar as the First CA Petition is
concerned. Thus, considering that the two petitions clearly cover different subject matters and causes of
action, there exists no forum shopping.
As to the second, Alcaraz further imputes that the petitioners violated the certification requirement under
Section 5, Rule 7 of the Rules of Court58 by not disclosing the fact that it filed the June 16, 2010
Memorandum of Appeal before the NLRC in the instant petition.

In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a plaintiff who files a case should
provide a complete statement of the present status of any pending case if the latter involves the same
issues as the one that was filed. If there is no such similar pending case, Section 5(a) of the same rule
provides that the plaintiff is obliged to declare under oath that to the best of his knowledge, no such
other action or claim is pending.
Records show that the issues raised in the instant petition and those in the June 16, 2010 Memorandum
of Appeal filed with the NLRC likewise cover different subject matters and causes of action. In this case,
the validity of Alcarazs dismissal is at issue whereas in the said Memorandum of Appeal, the propriety
of the issuance of a writ of execution was in question.
Thus, given the dissimilar issues, petitioners did not have to disclose in the present petition the filing of
their June 16, 2010 Memorandum of Appeal with the NLRC. In any event, considering that the issue on
the propriety of the issuance of a writ of execution had been resolved in the Second CA Petition which
in fact had already attained finality the matter of disclosing the June 16, 2010 Memorandum of Appeal
is now moot and academic.
Having settled the foregoing procedural matter, the Court now proceeds to resolve the substantive
issues.
B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of
probationary employment, aside from just or authorized causes of termination, an additional ground is
provided under Article 295 of the Labor Code, i.e., the probationary employee may also be terminated
for failure to qualify as a regular employee in accordance with the reasonable standards made known by
the employer to the employee at the time of the engagement.59 Thus, the services of an employee who
has been engaged on probationary basis may be terminated for any of the following: (a) a just or (b) an
authorized cause; and (c) when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer.60
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code provides
that if the employer fails to inform the probationary employee of the reasonable standards upon which
the regularization would be based on at the time of the engagement, then the said employee shall be
deemed a regular employee, viz.:
(d) In all cases of probationary employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of his engagement. Where no
standards are made known to the employee at that time, he shall be deemed a regular employee.
In other words, the employer is made to comply with two (2) requirements when dealing with a
probationary employee: first, the employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such communication at the time of the
probationary employees engagement. If the employer fails to comply with either, the employee is
deemed as a regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made known the standards that would qualify a
probationary employee to be a regular employee when it has exerted reasonable efforts to apprise the
employee of what he is expected to do or accomplish during the trial period of probation. This goes
without saying that the employee is sufficiently made aware of his probationary status as well as the
length of time of the probation.

The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case of
maids, cooks, drivers, or messengers.61 Also, in Aberdeen Court, Inc. v. Agustin,62 it has been held that
the rule on notifying a probationary employee of the standards of regularization should not be used to
exculpate an employee who acts in a manner contrary to basic knowledge and common sense in regard
to which there is no need to spell out a policy or standard to be met. In the same light, an employees
failure to perform the duties and responsibilities which have been clearly made known to him constitutes
a justifiable basis for a probationary employees non-regularization.
In this case, petitioners contend that Alcaraz was terminated because she failed to qualify as a regular
employee according to Abbotts standards which were made known to her at the time of her
engagement. Contrarily, Alcaraz claims that Abbott never apprised her of these standards and thus,
maintains that she is a regular and not a mere probationary employee.
The Court finds petitioners assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed complied with the above-stated
requirements. This conclusion is largely impelled by the fact that Abbott clearly conveyed to Alcaraz her
duties and responsibilities as Regulatory Affairs Manager prior to, during the time of her engagement,
and the incipient stages of her employment. On this score, the Court finds it apt to detail not only the
incidents which point out to the efforts made by Abbott but also those circumstances which would show
that Alcaraz was well-apprised of her employers expectations that would, in turn, determine her
regularization:
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its need
for a Regulatory Affairs Manager, indicating therein the job description for as well as the duties
and responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit her
application to Abbott on October 4, 2004;
(b) In Abbotts December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed on a
probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated, inter
alia, that she was to be placed on probation for a period of six (6) months beginning February 15,
2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbotts employment offer, Bernardo sent her copies of
Abbotts organizational structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar informed her that
she had to implement Abbotts Code of Conduct and office policies on human resources and
finance and that she would be reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her orientation;
(g) Alcaraz received copies of Abbotts Code of Conduct and Performance Modules from Misa
who explained to her the procedure for evaluating the performance of probationary employees;
she was further notified that Abbott had only one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had
admitted to have an "extensive training and background" to acquire the necessary skills for her
job.63

Considering the totality of the above-stated circumstances, it cannot, therefore, be doubted that Alcaraz
was well-aware that her regularization would depend on her ability and capacity to fulfill the
requirements of her position as Regulatory Affairs Manager and that her failure to perform such would
give Abbott a valid cause to terminate her probationary employment.
Verily, basic knowledge and common sense dictate that the adequate performance of ones duties is, by
and of itself, an inherent and implied standard for a probationary employee to be regularized; such is a
regularization standard which need not be literally spelled out or mapped into technical indicators in
every case. In this regard, it must be observed that the assessment of adequate duty performance is in the
nature of a management prerogative which when reasonably exercised as Abbott did in this case
should be respected. This is especially true of a managerial employee like Alcaraz who was tasked with
the vital responsibility of handling the personnel and important matters of her department.
In fine, the Court rules that Alcarazs status as a probationary employee and her consequent dismissal
must stand. Consequently, in holding that Alcaraz was illegally dismissed due to her status as a regular
and not a probationary employee, the Court finds that the NLRC committed a grave abuse of discretion.
To elucidate, records show that the NLRC based its decision on the premise that Alcarazs receipt of her
job description and Abbotts Code of Conduct and Performance Modules was not equivalent to being
actually informed of the performance standards upon which she should have been evaluated on.64 It,
however, overlooked the legal implication of the other attendant circumstances as detailed herein which
should have warranted a contrary finding that Alcaraz was indeed a probationary and not a regular
employee more particularly the fact that she was well-aware of her duties and responsibilities and that
her failure to adequately perform the same would lead to her non-regularization and eventually, her
termination.
Accordingly, by affirming the NLRCs pronouncement which is tainted with grave abuse of discretion,
the CA committed a reversible error which, perforce, necessitates the reversal of its decision.
C. Probationary employment;
termination procedure.
A different procedure is applied when terminating a probationary employee; the usual two-notice rule
does not govern.65 Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code states that
"if the termination is brought about by the x x x failure of an employee to meet the standards of the
employer in case of probationary employment, it shall be sufficient that a written notice is served the
employee, within a reasonable time from the effective date of termination."
As the records show, Alcaraz's dismissal was effected through a letter dated May 19, 2005 which she
received on May 23, 2005 and again on May 27, 2005. Stated therein were the reasons for her
termination, i.e., that after proper evaluation, Abbott determined that she failed to meet the reasonable
standards for her regularization considering her lack of time and people management and decisionmaking skills, which are necessary in the performance of her functions as Regulatory Affairs
Manager.66 Undeniably, this written notice sufficiently meets the criteria set forth above, thereby
legitimizing the cause and manner of Alcarazs dismissal as a probationary employee under the
parameters set by the Labor Code.67
D. Employers violation of
company policy and
procedure.

Nonetheless, despite the existence of a sufficient ground to terminate Alcarazs employment and
Abbotts compliance with the Labor Code termination procedure, it is readily apparent that Abbott
breached its contractual obligation to Alcaraz when it failed to abide by its own procedure in evaluating
the performance of a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract between the employer and
employee. In Parts Depot, Inc. v. Beiswenger,68 it has been held that:
Employer statements of policy . . . can give rise to contractual rights in employees without evidence that
the parties mutually agreed that the policy statements would create contractual rights in the employee,
and, hence, although the statement of policy is signed by neither party, can be unilaterally amended by
the employer without notice to the employee, and contains no reference to a specific employee, his job
description or compensation, and although no reference was made to the policy statement in preemployment interviews and the employee does not learn of its existence until after his hiring. Toussaint,
292 N.W .2d at 892. The principle is akin to estoppel. Once an employer establishes an express
personnel policy and the employee continues to work while the policy remains in effect, the policy is
deemed an implied contract for so long as it remains in effect. If the employer unilaterally changes the
policy, the terms of the implied contract are also thereby changed.1wphi1 (Emphasis and underscoring
supplied.)
Hence, given such nature, company personnel policies create an obligation on the part of both the
employee and the employer to abide by the same.
Records show that Abbotts PPSE procedure mandates, inter alia, that the job performance of a
probationary employee should be formally reviewed and discussed with the employee at least twice: first
on the third month and second on the fifth month from the date of employment. Abbott is also required
to come up with a Performance Improvement Plan during the third month review to bridge the gap
between the employees performance and the standards set, if any.69 In addition, a signed copy of the
PPSE form should be submitted to Abbotts HRD as the same would serve as basis for recommending
the confirmation or termination of the probationary employment.70
In this case, it is apparent that Abbott failed to follow the above-stated procedure in evaluating Alcaraz.
For one, there lies a hiatus of evidence that a signed copy of Alcarazs PPSE form was submitted to the
HRD. It was not even shown that a PPSE form was completed to formally assess her performance.
Neither was the performance evaluation discussed with her during the third and fifth months of her
employment. Nor did Abbott come up with the necessary Performance Improvement Plan to properly
gauge Alcarazs performance with the set company standards.
While it is Abbotts management prerogative to promulgate its own company rules and even
subsequently amend them, this right equally demands that when it does create its own policies and
thereafter notify its employee of the same, it accords upon itself the obligation to faithfully implement
them. Indeed, a contrary interpretation would entail a disharmonious relationship in the work place for
the laborer should never be mired by the uncertainty of flimsy rules in which the latters labor rights and
duties would, to some extent, depend.
In this light, while there lies due cause to terminate Alcarazs probationary employment for her failure to
meet the standards required for her regularization, and while it must be further pointed out that Abbott
had satisfied its statutory duty to serve a written notice of termination, the fact that it violated its own
company procedure renders the termination of Alcarazs employment procedurally infirm, warranting
the payment of nominal damages. A further exposition is apropos.

Case law has settled that an employer who terminates an employee for a valid cause but does so through
invalid procedure is liable to pay the latter nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that where the dismissal is for a just cause, the
lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual.
However, the employer should indemnify the employee for the violation of his statutory rights.72 Thus,
in Agabon, the employer was ordered to pay the employee nominal damages in the amount
of P30,000.00.73
Proceeding from the same ratio, the Court modified Agabon in the case of Jaka Food Processing
Corporation v. Pacot (Jaka)74 where it created a distinction between procedurally defective dismissals
due to a just cause, on one hand, and those due to an authorized cause, on the other.
It was explained that if the dismissal is based on a just cause under Article 282 of the Labor Code (now
Article 296) but the employer failed to comply with the notice requirement, the sanction to be imposed
upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable
to the employee; if the dismissal is based on an authorized cause under Article 283 (now Article 297) but
the employer failed to comply with the notice requirement, the sanction should be stiffer because the
dismissal process was initiated by the employers exercise of his management prerogative.75 Hence, in
Jaka, where the employee was dismissed for an authorized cause of retrenchment76 as
contradistinguished from the employee in Agabon who was dismissed for a just cause of neglect of
duty77 the Court ordered the employer to pay the employee nominal damages at the higher amount
of P50,000.00.
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the necessity to deter employers
from future violations of the statutory due process rights of employees.78 In similar regard, the Court
deems it proper to apply the same principle to the case at bar for the reason that an employers
contractual breach of its own company procedure albeit not statutory in source has the parallel effect
of violating the laborers rights. Suffice it to state, the contract is the law between the parties and thus,
breaches of the same impel recompense to vindicate a right that has been violated. Consequently, while
the Court is wont to uphold the dismissal of Alcaraz because a valid cause exists, the payment of
nominal damages on account of Abbotts contractual breach is warranted in accordance with Article
2221 of the Civil Code.79
Anent the proper amount of damages to be awarded, the Court observes that Alcarazs dismissal
proceeded from her failure to comply with the standards required for her regularization. As such, it is
undeniable that the dismissal process was, in effect, initiated by an act imputable to the employee, akin
to dismissals due to just causes under Article 296 of the Labor Code. Therefore, the Court deems it
appropriate to fix the amount of nominal damages at the amount of P30,000.00, consistent with its
rulings in both Agabon and Jaka.
E. Liability of individual
petitioners as corporate
officers.
It is hornbook principle that personal liability of corporate directors, trustees or officers attaches only
when: (a) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith
or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to
the corporation, its stockholders or other persons; (b) they consent to the issuance of watered down
stocks or when, having knowledge of such issuance, do not forthwith file with the corporate secretary
their written objection; (c) they agree to hold themselves personally and solidarily liable with the

corporation; or (d) they are made by specific provision of law personally answerable for their corporate
action.80
In this case, Alcaraz alleges that the individual petitioners acted in bad faith with regard to the supposed
crude manner by which her probationary employment was terminated and thus, should be held liable
together with Abbott. In the same vein, she further attributes the loss of some of her remaining
belongings to them.81
Alcarazs contention fails to persuade.
A judicious perusal of the records show that other than her unfounded assertions on the matter, there is
no evidence to support the fact that the individual petitioners herein, in their capacity as Abbotts officers
and employees, acted in bad faith or were motivated by ill will in terminating
Alcarazs services. The fact that Alcaraz was made to resign and not allowed to enter the workplace does
not necessarily indicate bad faith on Abbotts part since a sufficient ground existed for the latter to
actually proceed with her termination. On the alleged loss of her personal belongings, records are bereft
of any showing that the same could be attributed to Abbott or any of its officers. It is a well-settled rule
that bad faith cannot be presumed and he who alleges bad faith has the onus of proving it. All told, since
Alcaraz failed to prove any malicious act on the part of Abbott or any of its officers, the Court finds the
award of moral or exemplary damages unwarranted.
WHEREFORE, the petition is GRANTED. The Decision dated December 10, 2009 and Resolution
dated June 9, 2010 of the Court of Appeals in CA-G.R. SP No. 101045 are hereby REVERSED and SET
ASIDE. Accordingly, the Decision dated March 30, 2006 of the Labor Arbiter is REINSTATED with the
MODIFICATION that petitioner Abbott Laboratories, Philippines be ORDERED to pay respondent
Pearlie Ann F. Alcaraz nominal damages in the amount of P30,000.00 on account of its breach of its own
company procedure.
SO ORDERED.
G.R. No. 152396

November 20, 2007

EX-BATAAN VETERANS SECURITY AGENCY, INC., petitioner,

vs.
THE SECRETARY OF LABOR BIENVENIDO E. LAGUESMA, REGIONAL DIRECTOR
BRENDA A. VILLAFUERTE, ALEXANDER POCDING, FIDEL BALANGAY, BUAGEN
CLYDE, DENNIS EPI, DAVID MENDOZA, JR., GABRIEL TAMULONG, ANTON PEDRO,
FRANCISCO PINEDA, GASTON DUYAO, HULLARUB, NOLI DIONEDA, ATONG CENON,
JR., TOMMY BAUCAS, WILLIAM PAPSONGAY, RICKY DORIA, GEOFREY MINO,
ORLANDO RILLASE, SIMPLICIO TELLO, M. G. NOCES, R. D. ALEJO, and P. C.
DINTAN,respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 with prayer for the issuance of a temporary restraining order or writ of
preliminary injunction of the 29 May 2001 Decision2 and the 26 February 2002 Resolution3 of the Court
of Appeals in CA-G.R. SP No. 57653. The 29 May 2001 Decision of the Court of Appeals affirmed the 4

October 1999 Order of the Secretary of Labor in OS-LS-04-4-097-280. The 26 February 2002
Resolution denied the motion for reconsideration.
The Facts
Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing security services
while private respondents are EBVSAI's employees assigned to the National Power Corporation at
Ambuklao Hydro Electric Plant, Bokod, Benguet (Ambuklao Plant).
On 20 February 1996, private respondents led by Alexander Pocding (Pocding) instituted a
complaint4 for underpayment of wages against EBVSAI before the Regional Office of the Department of
Labor and Employment (DOLE).
On 7 March 1996, the Regional Office conducted a complaint inspection at the Ambuklao Plant where
the following violations were noted: (1) non-presentation of records; (2) non-payment of holiday pay;
(3) non-payment of rest day premium; (4) underpayment of night shift differential pay; (5) non-payment
of service incentive leave; (6) underpayment of 13th month pay; (7) no registration; (8) no annual
medical report; (9) no annual work accidental report; (10) no safety committee; and (11) no trained first
aider.5 On the same date, the Regional Office issued a notice of hearing6 requiring EBVSAI and private
respondents to attend the hearing on 22 March 1996. Other hearings were set for 8 May 1996, 27 May
1996 and 10 June 1996.
On 19 August 1996, the Director of the Regional Office (Regional Director) issued an Order, the
dispositive portion of which reads:
WHEREFORE, premises considered, respondent EX-BATAAN VETERANS SECURITY
AGENCY is herebyORDERED to pay the computed deficiencies owing to the affected
employees in the total amount of SEVEN HUNDRED SIXTY THREE THOUSAND NINE
HUNDRED NINETY SEVEN PESOS and 85/PESOS within ten (10) calendar days upon
receipt hereof. Otherwise, a Writ of Execution shall be issued to enforce compliance of this
Order.
NAME
1. ALEXANDER POCDING

DEFICIENCY
P 36,380.85

2. FIDEL BALANGAY

36,380.85

3. BUAGEN CLYDE

36,380.85

4. DENNIS EPI

36,380.85

5. DAVID MENDOZA, JR.

36,380.85

6. GABRIEL TAMULONG

36,380.85

7. ANTON PEDRO

36,380.85

8. FRANCISCO PINEDA

36,380.85

9. GASTON DUYAO

36,380.85

10. HULLARUB

36,380.85

11. NOLI D[EO]NIDA

36,380.85

12. ATONG CENON, JR.

36,380.85

13. TOMMY BAUCAS

36,380.85

14. WILIAM PAPSONGAY

36,380.85

15. RICKY DORIA

36,380.85

16. GEOFREY MINO

36,380.85

17. ORLANDO R[IL]LASE

36,380.85

18. SIMPLICO TELLO

36,380.85

19. NOCES, M.G.

36,380.85

20. ALEJO, R.D.

36,380.85

21. D[I]NTAN, P.C.

36,380.85
TOTAL

P 763,997.85

xxxx
SO ORDERED.7
EBVSAI filed a motion for reconsideration8 and alleged that the Regional Director does not have
jurisdiction over the subject matter of the case because the money claim of each private respondent
exceeded P5,000. EBVSAI pointed out that the Regional Director should have endorsed the case to the
Labor Arbiter.
In a supplemental motion for reconsideration,9 EBVSAI questioned the Regional Director's basis for the
computation of the deficiencies due to each private respondent.
In an Order10 dated 16 January 1997, the Regional Director denied EBVSAI's motion for reconsideration
and supplemental motion for reconsideration. The Regional Director stated that, pursuant to Republic
Act No. 7730 (RA 7730),11 the limitations under Articles 12912 and 217(6)13 of the Labor Code no longer
apply to the Secretary of Labor's visitorial and enforcement powers under Article 128(b).14 The Secretary
of Labor or his duly authorized representatives are now empowered to hear and decide, in a summary
proceeding, any matter involving the recovery of any amount of wages and other monetary claims
arising out of employer-employee relations at the time of the inspection.
EBVSAI appealed to the Secretary of Labor.
The Ruling of the Secretary of Labor
In an Order15 dated 4 October 1999, the Secretary of Labor affirmed with modification the Regional
Director's 19 August 1996 Order. The Secretary of Labor ordered that the P1,000 received by private
respondents Romeo Alejo, Atong Cenon, Jr., Geofrey Mino, Dennis Epi, and Ricky Doria be deducted
from their respective claims. The Secretary of Labor ruled that, pursuant to RA 7730, the Court's
decision in the Servando16 case is no longer controlling insofar as the restrictive effect of Article 129 on
the visitorial and enforcement power of the Secretary of Labor is concerned.
The Secretary of Labor also stated that there was no denial of due process because EBVSAI was
accorded several opportunities to present its side but EBVSAI failed to present any evidence to
controvert the findings of the Regional Director. Moreover, the Secretary of Labor doubted the veracity
and authenticity of EBVSAI's documentary evidence. The Secretary of Labor noted that these
documents were not presented at the initial stage of the hearing and that the payroll documents did not
indicate the periods covered by EBVSAI's alleged payments.
EVBSAI filed a motion for reconsideration which was denied by the Secretary of Labor in his 3 January
2000 Order.17

EBVSAI filed a petition for certiorari before the Court of Appeals.

The Ruling of the Court of Appeals
In its 29 May 2001 Decision, the Court of Appeals dismissed the petition and affirmed the Secretary of
Labor's decision. The Court of Appeals adopted the Secretary of Labor's ruling that RA 7730 repealed
the jurisdictional limitation imposed by Article 129 on Article 128 of the Labor Code. The Court of
Appeals also agreed with the Secretary of Labor's finding that EBVSAI was accorded due process.
The Court of Appeals also denied EBVSAI's motion for reconsideration in its 26 February 2002
Resolution.
Hence, this petition.
The Issues
This case raises the following issues:
1. Whether the Secretary of Labor or his duly authorized representatives acquired jurisdiction
over EBVSAI; and
2. Whether the Secretary of Labor or his duly authorized representatives have jurisdiction over
the money claims of private respondents which exceed P5,000.
The Ruling of the Court
The petition has no merit.
On the Regional Director's Jurisdiction over EBVSAI
EBVSAI claims that the Regional Director did not acquire jurisdiction over EBVSAI because he failed
to comply with Section 11, Rule 14 of the 1997 Rules of Civil Procedure.18 EBVSAI points out that the
notice of hearing was served at the Ambuklao Plant, not at EBVSAI's main office in Makati, and that it
was addressed to Leonardo Castro, Jr., EBVSAI's Vice-President.
The Rules on the Disposition of Labor Standards Cases in the Regional Offices19 (rules) specifically
state that notices and copies of orders shall be served on the parties or their duly authorized
representatives at their last known address or, if they are represented by counsel, through the latter.20 The
rules shall be liberally construed21 and only in the absence of any applicable provision will the Rules of
Court apply in a suppletory character.22
In this case, EBVSAI does not deny having received the notices of hearing. In fact, on 29 March and 13
June 1996, Danilo Burgos and Edwina Manao, detachment commander and bookkeeper of EBVSAI,
respectively, appeared before the Regional Director. They claimed that the 22 March 1996 notice of
hearing was received late and manifested that the notices should be sent to the Manila office. Thereafter,
the notices of hearing were sent to the Manila office. They were also informed of EBVSAI's violations
and were asked to present the employment records of the private respondents for verification. They
were, moreover, asked to submit, within 10 days, proof of compliance or their position paper. The
Regional Director validly acquired jurisdiction over EBVSAI. EBVSAI can no longer question the
jurisdiction of the Regional Director after receiving the notices of hearing and after appearing before the
Regional Director.

On the Regional Director's Jurisdiction over the Money Claims

EBVSAI maintains that under Articles 129 and 217(6) of the Labor Code, the Labor Arbiter, not the
Regional Director, has exclusive and original jurisdiction over the case because the individual monetary
claim of private respondents exceeds P5,000. EBVSAI also argues that the case falls under the exception
clause in Article 128(b) of the Labor Code. EBVSAI asserts that the Regional Director should have
certified the case to the Arbitration Branch of the National Labor Relations Commission (NLRC) for a
full-blown hearing on the merits.
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:
While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has
jurisdiction to hear and decide cases where the aggregate money claims of each employee
exceeds P5,000.00, said provisions of law do not contemplate nor cover the visitorial and
enforcement powers of the Secretary of Labor or his duly authorized representatives.
Rather, said powers are defined and set forth in Article 128 of the Labor Code (as amended by
R.A. No. 7730) thus:
Art. 128 Visitorial and enforcement power. --- x x x
(b) Notwithstanding the provisions of Article[s] 129 and 217 of this Code to the contrary,
and in cases where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the power to
issue compliance orders to give effect to [the labor standards provisions of this Code and
other] labor legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The Secretary or
his duly authorized representatives shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases where the employer contests
the findings of the labor employment and enforcement officer and raises issues supported
by documentary proofs which were not considered in the course of inspection.
xxxx
The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of the
Labor Code by the phrase "(N)otwithstanding the provisions of Articles 129 and 217of this Code
to the contrary x x x" thereby retaining and further strengthening the power of the Secretary of
Labor or his duly authorized representatives to issue compliance orders to give effect to the labor
standards provisions of said Code and other labor legislation based on the findings of labor
employment and enforcement officer or industrial safety engineer made in the course of
inspection.23 (Italics in the original)
This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v. Sensing,24 where we sustained
the jurisdiction of the DOLE Regional Director and held that "the visitorial and enforcement powers
of the DOLE Regional Director to order and enforce compliance with labor standard laws can be
exercised even where the individual claim exceeds P5,000."
However, if the labor standards case is covered by the exception clause in Article 128(b) of the Labor
Code, then the Regional Director will have to endorse the case to the appropriate Arbitration Branch of
the NLRC. In order to divest the Regional Director or his representatives of jurisdiction, the following
elements must be present: (a) that the employer contests the findings of the labor regulations officer and
raises issues thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary

matters; and (c) that such matters are not verifiable in the normal course of inspection.25 The rules also
provide that the employer shall raise such objections during the hearing of the case or at any time after
receipt of the notice of inspection results.26
In this case, the Regional Director validly assumed jurisdiction over the money claims of private
respondents even if the claims exceeded P5,000 because such jurisdiction was exercised in accordance
with Article 128(b) of the Labor Code and the case does not fall under the exception clause.
The Court notes that EBVSAI did not contest the findings of the labor regulations officer during the
hearing or after receipt of the notice of inspection results. It was only in its supplemental motion for
reconsideration before the Regional Director that EBVSAI questioned the findings of the labor
regulations officer and presented documentary evidence to controvert the claims of private respondents.
But even if this was the case, the Regional Director and the Secretary of Labor still looked into and
considered EBVSAI's documentary evidence and found that such did not warrant the reversal of the
Regional Director's order. The Secretary of Labor also doubted the veracity and authenticity of
EBVSAI's documentary evidence. Moreover, the pieces of evidence presented by EBVSAI were
verifiable in the normal course of inspection because all employment records of the employees should
be kept and maintained in or about the premises of the workplace, which in this case is in Ambuklao
Plant, the establishment where private respondents were regularly assigned.27
WHEREFORE, we DENY the petition. We AFFIRM the 29 May 2001 Decision and the 26 February
2002 Resolution of the Court of Appeals in CA-G.R. SP No. 57653.
SO ORDERED.
G.R. No. 179652

March 6, 2012

PEOPLE'S BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.), Petitioner,

vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE
REGIONAL DIRECTOR, DOLE REGION VII, and JANDELEON JUEZAN, Respondents.
RESOLUTION
VELASCO, JR., J.:
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo
Phils., Inc.) questioned the Decision and Resolution of the Court of Appeals (CA) dated October 26,
2006 and June 26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855.
Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of Labor
and Employment (DOLE) Regional Office No. VII, Cebu City, for illegal deduction, nonpayment of
service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of
benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and Philhealth.1 After the
conduct of summary investigations, and after the parties submitted their position papers, the DOLE
Regional Director found that private respondent was an employee of petitioner, and was entitled to his
money claims.2 Petitioner sought reconsideration of the Directors Order, but failed. The Acting DOLE
Secretary dismissed petitioners appeal on the ground that petitioner submitted a Deed of Assignment of
Bank Deposit instead of posting a cash or surety bond. When the matter was brought before the CA,
where petitioner claimed that it had been denied due process, it was held that petitioner was accorded
due process as it had been given the opportunity to be heard, and that the DOLE Secretary had
jurisdiction over the matter, as the jurisdictional limitation imposed by Article 129 of the Labor Code on

the power of the DOLE Secretary under Art. 128(b) of the Code had been repealed by Republic Act No.
(RA) 7730.3
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against
petitioner was dismissed. The dispositive portion of the Decision reads as follows:
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution
dated 26 June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET
ASIDE. The Order of the then Acting Secretary of the Department of Labor and Employment dated 27
January 2005 denying petitioners appeal, and the Orders of the Director, DOLE Regional Office No.
VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The complaint against
petitioner is DISMISSED.4
The Court found that there was no employer-employee relationship between petitioner and private
respondent. It was held that while the DOLE may make a determination of the existence of an employeremployee relationship, this function could not be co-extensive with the visitorial and enforcement power
provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National Labor Relations
Commission (NLRC) was held to be the primary agency in determining the existence of an employeremployee relationship. This was the interpretation of the Court of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128(b).5
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision
(with Leave of Court). The PAO sought to clarify as to when the visitorial and enforcement power of the
DOLE be not considered as co-extensive with the power to determine the existence of an employeremployee relationship.6 In its Comment,7 the DOLE sought clarification as well, as to the extent of its
visitorial and enforcement power under the Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion for reconsideration, granting said
motion and reinstating the petition.8 It is apparent that there is a need to delineate the jurisdiction of the
DOLE Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to
hear and decide any matter involving the recovery of wages and other monetary claims and benefits was
qualified by the proviso that the complaint not include a claim for reinstatement, or that the aggregate
money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the Visitorial and
Enforcement Powers of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the
DOLE Secretary to exercise its visitorial and enforcement power for claims beyond PhP 5,000. The only
qualification to this expanded power of the DOLE was only that there still be an existing employeremployee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been terminated or it
has not existed from the start, the DOLE has no jurisdiction. Under Art. 128(b) of the Labor Code, as
amended by RA 7730, the first sentence reads, "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." It is clear and beyond debate that an employer-employee relationship must
exist for the exercise of the visitorial and enforcement power of the DOLE. The question now arises,
may the DOLE make a determination of whether or not an employer-employee relationship exists, and if
so, to what extent?

The first portion of the question must be answered in the affirmative.

The prior decision of this Court in the present case accepts such answer, but places a limitation upon the
power of the DOLE, that is, the determination of the existence of an employer-employee relationship
cannot be co-extensive with the visitorial and enforcement power of the DOLE. But even in conceding
the power of the DOLE to determine the existence of an employer-employee relationship, the Court held
that the determination of the existence of an employer-employee relationship is still primarily within the
power of the NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the existence of an
employer-employee relationship. No procedure was laid down where the DOLE would only make a
preliminary finding, that the power was primarily held by the NLRC. The law did not say that the DOLE
would first seek the NLRCs determination of the existence of an employer-employee relationship, or
that should the existence of the employer-employee relationship be disputed, the DOLE would refer the
matter to the NLRC. The DOLE must have the power to determine whether or not an employeremployee relationship exists, and from there to decide whether or not to issue compliance orders in
accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a ready set of
guidelines to follow, the same guide the courts themselves use. 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; (4) the employers power to control the employees conduct.9 The
use of this test is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can
utilize the same test, even in the course of inspection, making use of the same evidence that would have
been presented before the NLRC.
The determination of the existence of an employer-employee relationship by the DOLE must be
respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be
rendered nugatory if the alleged employer could, by the simple expedient of disputing the employeremployee relationship, force the referral of the matter to the NLRC. The Court issued the declaration
that at least a prima facie showing of the absence of an employer-employee relationship be made to oust
the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the
DOLE that will weigh it, to see if the same does successfully refute the existence of an employeremployee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes
cognizance of the matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction only if
the employer-employee relationship has already been terminated, or it appears, upon review, that no
employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation would eliminate
the prospect of competing conclusions between the DOLE and the NLRC. The prospect of competing
conclusions could just as well have been eliminated by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the more prudent course of action to take.
This is not to say that the determination by the DOLE is beyond question or review.1avvphi1 Suffice it
to say, there are judicial remedies such as a petition for certiorari under Rule 65 that may be availed of,
should a party wish to dispute the findings of the DOLE.

It must also be remembered that the power of the DOLE to determine the existence of an employeremployee relationship need not necessarily result in an affirmative finding. The DOLE may well make
the determination that no employer-employee relationship exists, thus divesting itself of jurisdiction over
the case. It must not be precluded from being able to reach its own conclusions, not by the parties, and
certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial
and enforcement power, subject to judicial review, not review by the NLRC.
There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a
threshold amount set by Arts. 129 and 217 of the Labor Code when money claims are involved, i.e., that
if it is for PhP 5,000 and below, the jurisdiction is with the regional director of the DOLE, under Art.
129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter, under Art.
217. The view states that despite the wording of Art. 128(b), this would only apply in the course of
regular inspections undertaken by the DOLE, as differentiated from cases under Arts. 129 and 217,
which originate from complaints. There are several cases, however, where the Court has ruled that Art.
128(b) has been amended to expand the powers of the DOLE Secretary and his duly authorized
representatives by RA 7730. In these cases, the Court resolved that the DOLE had the jurisdiction,
despite the amount of the money claims involved. Furthermore, in these cases, the inspection held by the
DOLE regional director was prompted specifically by a complaint. Therefore, the initiation of a case
through a complaint does not divest the DOLE Secretary or his duly authorized representative of
jurisdiction under Art. 128(b).
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards
provisions of the Labor Code or other labor legislation, and there is a finding by the DOLE that there is
an existing employer-employee relationship, the DOLE exercises jurisdiction to the exclusion of the
NLRC. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is properly
with the NLRC. If a complaint is filed with the DOLE, and it is accompanied by a claim for
reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor Code,
which provides that the Labor Arbiter has original and exclusive jurisdiction over those cases involving
wages, rates of pay, hours of work, and other terms and conditions of employment, if accompanied by a
claim for reinstatement. If a complaint is filed with the NLRC, and there is still an existing employeremployee relationship, the jurisdiction is properly with the DOLE. The findings of the DOLE, however,
may still be questioned through a petition for certiorari under Rule 65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an employer-employee
relationship has been subjected to review by this Court, with the finding being that there was no
employer-employee relationship between petitioner and private respondent, based on the evidence
presented. Private respondent presented self-serving allegations as well as self-defeating evidence.10 The
findings of the Regional Director were not based on substantial evidence, and private respondent failed
to prove the existence of an employer-employee relationship. The DOLE had no jurisdiction over the
case, as there was no employer-employee relationship present. Thus, the dismissal of the complaint
against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the
MODIFICATION that in the exercise of the DOLEs visitorial and enforcement power, the Labor
Secretary or the latters authorized representative shall have the power to determine the existence of an
employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED

G.R. No. 138938

October 24, 2000

CELESTINO VIVIERO, petitioner,

vs.
COURT OF APPEALS, HAMMONIA MARINE SERVICES, and HANSEATIC SHIPPING CO.,
LTD. respondents.
DECISION
BELLOSILLO, J.:
CELESTINO VIVERO, in this petition for review, seeks the reversal of the Decision of the Court of
Appeals of 26 May 1999 setting aside the Decision of the National Labor Relations Commission of 28
May 1998 as well as its Resolution of 23 July 1998 denying his motion for its reconsideration, and
reinstating the decision of the Labor Arbiter of 21 January 1997.
Petitioner Vivero, a licensed seaman, is a member of the Associated Marine Officers and Seamen's
Union of the Philippines (AMOSUP). The Collective Bargaining Agreement entered into by AMOSUP
and private respondents provides, among others ARTICLE XII
GRIEVANCE PROCEDURE
xxxx
Sec. 3. A dispute or grievance arising in connection with the terms and provisions of this Agreement
shall be adjusted in accordance with the following procedure:
1. Any seaman who feels that he has been unjustly treated or even subjected to an unfair consideration
shall endeavor to have said grievance adjusted by the designated representative of the unlicensed
department abroad the vessel in the following manner:
A. Presentation of the complaint to his immediate superior.
B. Appeal to the head of the department in which the seaman involved shall be employed.
C. Appeal directly to the Master.
Sec. 4. If the grievance cannnot be resolved under the provision of Section 3, the decision of the Master
shall govern at sea x x x x in foreign ports and until the vessel arrives at a port where the Master shall
refer such dispute to either the COMPANY or the UNION in order to resolve such dispute. It is
understood, however, if the dispute could not be resolved then both parties shall avail of the grievance
procedure.
Sec. 5. In furtherance of the foregoing principle, there is hereby created a GRIEVANCE COMMITTEE
to be composed of two COMPANY REPRESENTATIVES to be designated by the COMPANY and two
LABOR REPRESENTATIVES to be designated by the UNION.
Sec. 6. Any grievance, dispute or misunderstanding concerning any ruling, practice, wages or working
conditions in the COMPANY, or any breach of the Employment Contract, or any dispute arising from

the meaning or the application of the provision of this Agreement or a claim of violation thereof or any
complaint that any such crewmembers may have against the COMPANY, as well as complaint which the
COMPANY may have against such crewmembers shall be brought to the attention of the GRIEVANCE
COMMITTEE before either party takes any action, legal or otherwise.
Sec. 7. The COMMITTEE shall resolve any dispute within seven (7) days from and after the same is
submitted to it for resolution and if the same cannot be settled by the COMMITTEE or if the
COMMITTEE fails to act on the dispute within the 7-day period herein provided, the same shall be
referred to a VOLUNTARY ARBITRATION COMMITTEE.
An "impartial arbitrator" will be appointed by mutual choice and consent of the UNION and the
COMPANY who shall hear and decide the dispute or issue presented to him and his decision
shall be final and unappealable x x x x1
As found by the Labor Arbiter Complainant was hired by respondent as Chief Officer of the vessel "M.V. Sunny Prince" on 10
June 1994 under the terms and conditions, to wit:
Duration of Contract - - - - 10 months
Basic Monthly Salary - - - - US $1,100.00
Hours of Work - - - - 44 hrs./week
Overtime - - - - 495 lump O.T.
Vacation leave with pay - - - - US $220.00/mo.
On grounds of very poor performance and conduct, refusal to perform his job, refusal to report to the
Captain or the vessels Engineers or cooperate with other ship officers about the problem in cleaning the
cargo holds or of the shipping pump and his dismal relations with the Captain of the vessel, complainant
was repatriated on 15 July 1994.
On 01 August 1994, complainant filed a complaint for illegal dismissal at Associated Marine Officers
and Seamans Union of the Philippines (AMOSUP) of which complainant was a member. Pursuant to
Article XII of the Collective Bargaining Agreement, grievance proceedings were conducted; however,
parties failed to reach and settle the dispute amicably, thus, on 28 November 1994, complainant filed [a]
complaint with the Philippine Overseas Employment Administration (POEA).2
The law in force at the time petitioner filed his Complaint with the POEA was EO No. 247.3
While the case was pending before the POEA, private respondents filed a Motion to Dismiss on the
ground that the POEA had no jurisdiction over the case considering petitioner Vivero's failure to refer it
to a Voluntary Arbitration Committee in accordance with the CBA between the parties. Upon the
enactment of RA 8042, theMigrant Workers and Overseas Filipinos Act of 1995, the case was
transferred to the Adjudication Branch of the National Labor Relations Commission.
On 21 January 1997 Labor Arbiter Jovencio Ll. Mayor Jr., on the basis of the pleadings and documents
available on record, rendered a decision dismissing the Complaint for want of jurisdiction.4 According to
the Labor Arbiter, since the CBA of the parties provided for the referral to a Voluntary Arbitration

Committee should the Grievance Committee fail to settle the dispute, and considering the mandate of
Art. 261 of the Labor Code on the original and exclusive jurisdiction of Voluntary Arbitrators, the Labor
Arbiter clearly had no jurisdiction over the case.5
Petitioner (complainant before the Labor Arbiter) appealed the dismissal of his petition to the NLRC. On
28 May 1998 the NLRC set aside the decision of the Labor Arbiter on the ground that the record was
clear that petitioner had exhausted his remedy by submitting his case to the Grievance Committee of
AMOSUP. Considering however that he could not obtain any settlement he had to ventilate his case
before the proper forum, i.e., the Philippine Overseas Employment Administration.6 The NLRC further
held that the contested portion in the CBA providing for the intercession of a Voluntary Arbitrator was
not binding upon petitioner since both petitioner and private respondents had to agree voluntarily to
submit the case before a Voluntary Arbitrator or Panel of Voluntary Arbitrators. This would entail
expenses as the Voluntary Arbitrator chosen by the parties had to be paid. Inasmuch however as
petitioner chose to file his Complaint originally with POEA, then the Labor Arbiter to whom the case
was transferred would have to take cognizance of the case.7
The NLRC then remanded the case to the Labor Arbiter for further proceedings. On 3 July 1998
respondents filed a Motion for Reconsideration which was denied by the NLRC on 23 July 1998.
Thus, private respondents raised the case to the Court of Appeals contending that the provision in the
CBA requiring a dispute which remained unresolved by the Grievance Committee to be referred to a
Voluntary Arbitration Committee, was mandatory in character in view of the CBA between the parties.
They stressed that "since it is a policy of the state to promote voluntary arbitration as a mode of settling
labor disputes, it is clear that the public respondent gravely abused its discretion in taking cognizance of
a case which was still within the mantle of the Voluntary Arbitration Commitees jurisdiction."8
On the other hand, petitioner argued (A)s strongly suggested by its very title, referral of cases of this nature to the Voluntary Arbitration
Committee is voluntary in nature. Otherwise, the committee would not have been called Voluntary
Arbitration Committee but rather, a Compulsory Arbitration Committee. Moreover, if the referral of
cases of similar nature to the Voluntary Arbitration Committee would be deemed mandatory by virtue of
the provisions in the CBA, the [NLRC] would then be effectively deprived of its jurisdiction to try, hear
and decide termination disputes, as provided for under Article 217 of the Labor Code. Lastly,
[respondents] ought to be deemed to have waived their right to question the procedure followed by
[petitioner], considering that they have already filed their Position Paper before belatedly filing a Motion
to Dismiss x x x x 9
But the Court of Appeals ruled in favor of private respondents. It held that the CBA "is the law between
the parties and compliance therewith is mandated by the express policy of the law."10 Hence, petitioner
should have followed the provision in the CBA requiring the submission of the dispute to the Voluntary
Arbitration Committee once the Grievance Committee failed to settle the controversy.11 According to the
Court of Appeals, the parties did not have the choice to "volunteer" to refer the dispute to the Voluntary
Arbitrator or a Panel of Arbitrators when there was already an agreement requiring them to do so.
"Voluntary Arbitration" means that it is binding because of a prior agreement or contract, while
"Compulsory Arbitration" is when the law declares the dispute subject to arbitration, regardless of the
consent or desire of the parties.12
The Court of Appeals further held that the Labor Code itself enumerates the original and exclusive
jurisdiction of the Voluntary Arbitrator or Panel of Voluntary Arbitrators, and prohibits the NLRC and
the Regional Directors of the Department of Labor and Employment (DOLE) from entertaining cases
falling under the same.13 Thus, the fact that private respondents filed their Position Paper first before

filing their Motion to Dismiss was immaterial and did not operate to confer jurisdiction upon the Labor
Arbiter, following the well-settled rule that jurisdiction is determined by law and not by consent or
agreement of the parties or by estoppel.14
Finally, the appellate court ruled that a case falling under the jurisdiction of the Labor Arbiter as
provided under Art. 217 of the Labor Code may be lodged instead with a Voluntary Arbitrator because
the law prefers, or gives primacy, to voluntary arbitration instead of compulsory
arbitration.15 Consequently, the contention that the NLRC would be deprived of its jurisdiction to try,
hear and decide termination disputes under Art. 217 of the Labor Code, should the instant dispute be
referred to the Voluntary Arbitration Committee, is clearly bereft of merit.16 Besides, the Voluntary
Arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency
independent of, and apart from, the NLRC since his decisions are not appealable to the latter.17
Celestino Vivero, in his petition for review assailing the Decision of the Court of Appeals, alleges that
the appellate court committed grave abuse of discretion in holding that a Voluntary Arbitrator or Panel of
Voluntary Arbitrators, and not the Adjudication Branch of the NLRC, has jurisdiction over his complaint
for illegal dismissal. He claims that his complaint for illegal dismissal was undeniably a termination
dispute and did not, in any way, involve an "interpretation or implementation of collective bargaining
agreement" or "interpretation" or "enforcement" of company personnel policies. Thus, it should fall
within the original and exclusive jurisdiction of the NLRC and its Labor Arbiter, and not with a
Voluntary Arbitrator, in accordance with Art. 217 of the Labor Code.
Private respondents, on the other hand, allege that the case is clearly one "involving the
proper interpretation andimplementation of the Grievance Procedure found in the Collective Bargaining
Agreement (CBA) between the parties"18 because of petitioners allegation in his claim/assistance
request form submitted to the Union, to wit:
NATURE OF COMPLAINT
3. Illegal Dismissal - Reason: (1) That in this case it was the master of M.V. SUNNY PRINCE Capt.
Andersen who created the trouble with physical injury and stating false allegation; (2) That there was no
proper procedure of grievance; (3) No proper notice of dismissal.
Is there a Notice of dismissal? _x_ Yes or ____ No
What date? 11 July 1994
Is there a Grievance Procedure observed? ____ Yes or _x_ No19
Private respondents further allege that the fact that petitioner sought the assistance of his Union
evidently shows that he himself was convinced that his Complaint was within the ambit of the
jurisdiction of the grievance machinery and subsequently by a Panel of Voluntary Arbitrators as
provided for in their CBA, and as explicitly mandated by Art. 261 of the Labor Code.20
Thus, the issue is whether the NLRC is deprived of jurisdiction over illegal dismissal cases whenever a
CBA provides for grievance machinery and voluntary arbitration proceedings. Or, phrased in another
way, does the dismissal of an employee constitute a "grievance between the parties," as defined under
the provisions of the CBA, and consequently, within the exclusive original jurisdiction of the Voluntary
Arbitrators, thereby rendering the NLRC without jurisdiction to decide the case?
On the original and exclusive jurisdiction of Labor Arbiters, Art. 217 of the Labor Code provides -

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 wages, rates of
pay, hours of work and other terms and conditions of employment; (4) Claims for actual, moral,
exemplary and other forms of damages arising from the employer-employee relations; (5) Cases arising
from any violation of Article 264 of this Code, including questions involving the legality of strikes and
lockouts; and, (6) Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.
(c) Cases arising from the interpretation 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 (emphasis supplied).
However, any or all of these cases may, by agreement of the parties, be submitted to a Voluntary
Arbitrator or Panel of Voluntary Arbitrators for adjudication. Articles 261 and 262 of the Labor Code
provide Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. - The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company personnel
policies referred to in the immediately preceding article. Accordingly, violations of a Collective
Bargaining Agreement, except those which are gross in character, shall no longer be treated as unfair
labor practice and shall be resolved as grievances under the Collective Bargaining Agreement. For
purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or
malicious refusal to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose
and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the Collective
Bargaining Agreement.
Art. 262. Jurisdiction Over Other Labor Disputes. - The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including
unfair labor practices and bargaining deadlocks (emphasis supplied).
Private respondents attempt to justify the conferment of jurisdiction over the case on the Voluntary
Arbitrator on the ground that the issue involves the proper interpretation and implementation of the
Grievance Procedure found in the CBA. They point out that when petitioner sought the assistance of his
Union to avail of the grievance machinery, he in effect submitted himself to the procedure set forth in
the CBA regarding submission of unresolved grievances to a Voluntary Arbitrator.

The argument is untenable. The case is primarily a termination dispute. It is clear from the
claim/assistance request form submitted by petitioner to AMOSUP that he was challenging the legality
of his dismissal for lack of cause and lack of due process. The issue of whether there was proper
interpretation and implementation of the CBA provisions comes into play only because the grievance
procedure provided for in the CBA was not observed after he sought his Unions assistance in contesting
his termination. Thus, the question to be resolved necessarily springs from the primary issue of whether
there was a valid termination; without this, then there would be no reason to invoke the need to interpret
and implement the CBA provisions properly.
In San Miguel Corp. v. National Labor Relations Commission21 this Court held that the phrase "all other
labor disputes" may include termination disputes provided that the agreement between the Union and the
Company states "in unequivocal language that [the parties] conform to the submission of termination
disputes and unfair labor practices to voluntary arbitration."22 Ergo, it is not sufficient to merely say that
parties to the CBA agree on the principle that "all disputes" should first be submitted to a Voluntary
Arbitrator. There is a need for an express stipulation in the CBA that illegal termination disputes should
be resolved by a Voluntary Arbitrator or Panel of Voluntary Arbitrators, since the same fall within a
special class of disputes that are generally within the exclusive original jurisdiction of Labor Arbiters by
express provision of law. Absent such express stipulation, the phrase "all disputes" should be construed
as limited to the areas of conflict traditionally within the jurisdiction of Voluntary Arbitrators, i.e.,
disputes relating to contract-interpretation, contract-implementation, or interpretation or enforcement of
company personnel policies. Illegal termination disputes - not falling within any of these categories should then be considered as a special area of interest governed by a specific provision of law.
In this case, however, while the parties did agree to make termination disputes the proper subject of
voluntary arbitration, such submission remains discretionary upon the parties. A perusal of the CBA
provisions shows that Sec. 6, Art. XII (Grievance Procedure) of the CBA is the general agreement of the
parties to refer grievances, disputes or misunderstandings to a grievance committee, and henceforth, to a
voluntary arbitration committee. The requirement of specificity is fulfilled by Art. XVII (Job Security)
where the parties agreed Sec. 1. Promotion, demotion, suspension, dismissal or disciplinary action of the seaman shall be left to
the discretion of the Master, upon consultation with the Company and notification to the Union. This
notwithstanding, any and all disciplinary action taken on board the vessel shall be provided for in
Appendix "B" of this Agreement x x x x 23
Sec. 4. x x x x Transfer, lay-off or discipline of seamen for incompetence, inefficiency, neglect of work,
bad behavior, perpetration of crime, drunkenness, insubordination, desertion, violation of x x x
regulations of any port touched by the Companys vessel/s and other just and proper causes shall be at
Masters discretion x x x in the high seas or foreign ports. The Master shall refer the case/dispute upon
reaching port and if not satisfactorily settled, the case/dispute may be referred to the grievance
machinery or procedure hereinafter provided (emphasis supplied).24
The use of the word "may" shows the intention of the parties to reserve the right to submit the illegal
termination dispute to the jurisdiction of the Labor Arbiter, rather than to a Voluntary Arbitrator.
Petitioner validly exercised his option to submit his case to a Labor Arbiter when he filed
his Complaint before the proper government agency.
Private respondents invoke Navarro III v. Damasco25 wherein the Court held that "it is the policy of the
state to promote voluntary arbitration as a mode of settling disputes."26 It should be noted, however, that
in Navarro III all the parties voluntarily submitted to the jurisdiction of the Voluntary Arbitrator when
they filed their respective position papers and submitted documentary evidence before him.
Furthermore, they manifested during the initial conference that they were not questioning the authority

of the Voluntary Arbitrator.27 In the case at bar, the dispute was never brought to a Voluntary Arbitrator
for resolution; in fact, petitioner precisely requested the Court to recognize the jurisdiction of the Labor
Arbiter over the case. The Court had held in San Miguel Corp. v. NLRC28 that neither officials nor
tribunals can assume jurisdiction in the absence of an express legal conferment. In the same manner,
petitioner cannot arrogate into the powers of Voluntary Arbitrators the original and exclusive jurisdiction
of Labor Arbiters over unfair labor practices, termination disputes, and claims for damages, in the
absence of an express agreement between the parties in order for Art. 262 of the Labor Code to apply in
the case at bar. In other words, the Court of Appeals is correct in holding that Voluntary Arbitration is
mandatory in character if there is a specific agreement between the parties to that effect. It must be
stressed however that, in the case at bar, the use of the word "may" shows the intention of the parties to
reserve the right of recourse to Labor Arbiters.
The CBA clarifies the proper procedure to be followed in situations where the parties expressly stipulate
to submit termination disputes to the jurisdiction of a Voluntary Arbitrator or Panel of Voluntary
Arbitrators. For when the parties have validly agreed on a procedure for resolving grievances and to
submit a dispute to voluntary arbitration then that procedure should be strictly observed.1wphi1 Noncompliance therewith cannot be excused, as petitioner suggests, by the fact that he is not well-versed
with the "fine prints" of the CBA. It was his responsibility to find out, through his Union, what the
provisions of the CBA were and how they could affect his rights. As provided in Art. 241, par. (p), of the
Labor Code (p) It shall be the duty of any labor organization and its officers to inform its members on the provisions
of its constitution and by-laws, collective bargaining agreement, the prevailing labor relations system
and all their rights and obligations under existing labor laws.
In fact, any violation of the rights and conditions of union membership is a "ground for cancellation of
union registration or expulsion of officer from office, whichever is appropriate. At least thirty percent
(30%) of all the members of a union or any member or members especially concerned may report such
violation to the Bureau [of Labor Relations] x x x x"29
It may be observed that under Policy Instruction No. 56 of the Secretary of Labor, dated 6 April 1993,
"Clarifying the Jurisdiction Between Voluntary Arbitrators and Labor Arbiters Over Termination Cases
and Providing Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the NCMB,"
termination cases arising in or resulting from the interpretation and implementation of collective
bargaining agreements and interpretation and enforcement of company personnel policies which were
initially processed at the various steps of the plant-level Grievance Procedures under the parties'
collective bargaining agreements fall within the original and exclusive jurisdiction of the voluntary
arbitrator pursuant to Art. 217 (c) and Art. 261 of the Labor Code; and, if filed before the Labor Arbiter,
these cases shall be dismissed by the Labor Arbiter for lack of jurisdiction and referred to the concerned
NCMB Regional Branch for appropriate action towards an expeditious selection by the parties of a
Voluntary Arbitrator or Panel of Arbitrators based on the procedures agreed upon in the CBA.
As earlier stated, the instant case is a termination dispute falling under the original and exclusive
jurisdiction of the Labor Arbiter, and does not specifically involve the application, implementation or
enforcement of company personnel policies contemplated in Policy Instruction No. 56.
Consequently, Policy Instruction No. 56 does not apply in the case at bar. In any case, private
respondents never invoked the application of Policy Instruction No. 56 in their Position Papers, neither
did they raise the question in their Motion to Dismiss which they filed nine (9) months after the filing of
their Position Papers. At this late stage of the proceedings, it would not serve the ends of justice if this
case is referred back to a Voluntary Arbitrator considering that both the AMOSUP and private
respondents have submitted to the jurisdiction of the Labor Arbiter by filing their respective Position
Papers and ignoring the grievance procedure set forth in their CBA.

After the grievance proceedings have failed to bring about a resolution, AMOSUP, as agent of petitioner,
should have informed him of his option to settle the case through voluntary arbitration. Private
respondents, on their part, should have timely invoked the provision of their CBA requiring the referral
of their unresolved disputes to a Voluntary Arbitrator once it became apparent that the grievance
machinery failed to resolve it prior to the filing of the case before the proper tribunal. The private
respondents should not have waited for nine (9) months from the filing of their Position Paper with the
POEA before it moved to dismiss the case purportedly for lack of jurisdiction. As it is, private
respondents are deemed to have waived their right to question the procedure followed by petitioner,
assuming that they have the right to do so. Under their CBA, both Union and respondent companies are
responsible for selecting an impartial arbitrator or for convening an arbitration committee;30 yet, it is
apparent that neither made a move towards this end. Consequently, petitioner should not be deprived of
his legitimate recourse because of the refusal of both Union and respondent companies to follow the
grievance procedure.
WHEREFORE, the Decision of the Court of Appeals is SET ASIDE and the case is remanded to the
Labor Arbiter to dispose of the case with dispatch until terminated considering the undue delay already
incurred.
SO ORDERED.
G.R. No. 197309

October 10, 2012

ACE NAVIGATION CO., INC., VELA INTERNATIONAL MARINE LTD., and/or RODOLFO
PAMINTUAN,Petitioners,
vs.
TEODORICO FERNANDEZ, assisted by GLENITA FERNANDEZ, Respondent.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari1 which seeks to nullify the decision2 dated
September 22, 2010 and the resolution3 dated May 26,2011 ofthe Court of Appeals (CA) in CA-G.R. SP
No. 112081.
The Antecedents
On October 9, 2008, seaman Teodorico Fernandez (Fernandez), assisted by his wife, Glenita Fernandez,
filed with the National Labor Relations Commission (NLRC) a complaint for disability benefits, with
prayer for moral and exemplary damages, plus attorneys fees, against Ace Navigation Co., Inc., Vela
International Marine Ltd., and/or Rodolfo Pamintuan (petitioners).
The petitioners moved to dismiss the complaint,4 contending that the labor arbiter had no jurisdiction
over the dispute. They argued that exclusive original jurisdiction is with the voluntary arbitrator or panel
of voluntary arbitrators, pursuant to Section 29 of the POEA Standard Employment Contract (POEASEC), since the parties are covered by the AMOSUP-TCC or AMOSUP-VELA (as later cited by the
petitioners) collective bargaining agreement (CBA). Under Section 14 of the CBA, a dispute between a
seafarer and the company shall be settled through the grievance machinery and mandatory voluntary
arbitration.
Fernandez opposed the motion.5 He argued that inasmuch as his complaint involves a money claim,
original and exclusive jurisdiction over the case is vested with the labor arbiter.

The Compulsory Arbitration Rulings

On December 9, 2008, Labor Arbiter Romelita N. Rioflorido denied the motion to dismiss, holding that
under Section 10 of Republic Act (R.A.) No. 8042, the Migrant Workers and Overseas Filipinos Act of
1995, the labor arbiter has original and exclusive jurisdiction over money claims arising out of an
employer-employee relationship or by virtue of any law or contract, notwithstanding any provision of
law to the contrary.6
The petitioners appealed to the NLRC, but the labor agency denied the appeal. It agreed with the labor
arbiter that the case involves a money claim and is within the jurisdiction of the labor arbiter, in
accordance with Section 10 of R.A. No. 8042. Additionally, it declared that the denial of the motion to
dismiss is an interlocutory order which is not appealable. Accordingly, it remanded the case to the labor
arbiter for further proceedings. The petitioners moved for reconsideration, but the NLRC denied the
motion, prompting the petitioners to elevate the case to the CA through a petition for certiorari under
Rule 65 of the Rules of Court.
The CA Decision
Through its decision of September 22, 2010,7 the CA denied the petition on procedural and substantive
grounds.
Procedurally, it found the petitioners to have availed of the wrong remedy when they challenged the
labor arbiters denial of their motion to dismiss by way of an appeal to the NLRC. It stressed that
pursuant to the NLRC rules,8an order denying a motion to dismiss is interlocutory and is not subject to
appeal.
On the merits of the case, the CA believed that the petition cannot also prosper. It rejected the
petitioners submission that the grievance and voluntary arbitration procedure of the parties CBA has
jurisdiction over the case, to the exclusion of the labor arbiter and the NLRC. As the labor arbiter and
the NLRC did, it opined that under Section 10 of R.A. No. 8042, the labor arbiter has the original and
exclusive jurisdiction to hear Fernandezs money claims.
Further, the CA clarified that while the law9 allows parties to submit to voluntary arbitration other labor
disputes, including matters falling within the original and exclusive jurisdiction of the labor arbiters
under Article 217 of the Labor Code as this Court recognized in Vivero v. Court of Appeals,10 the parties
submission agreement must be expressed in unequivocal language. It found no such unequivocal
language in the AMOSUP/TCC CBA that the parties agreed to submit money claims or, more
specifically, claims for disability benefits to voluntary arbitration.
The CA also took note of the POEA-SEC11 which provides in its Section 29 that in cases of claims and
disputes arising from a Filipino seafarers employment, the parties covered by a CBA shall submit the
claim or dispute to the original and exclusive jurisdiction of the voluntary arbitrator or panel of
voluntary arbitrators. The CA explained that the relevant POEA-SEC provisions should likewise be
qualified by the ruling in the Vivero case, the Labor Code, and other applicable laws and jurisprudence.
In sum, the CA stressed that the jurisdiction of voluntary arbitrators is limited to the seafarers claims
which do not fall within the labor arbiters original and exclusive jurisdiction or even in cases where the
labor arbiter has jurisdiction, the parties have agreed in unmistakable terms (through their CBA) to
submit the case to voluntary arbitration.

The petitioners moved for reconsideration of the CA decision, but the appellate court denied the motion,
reiterating its earlier pronouncement that on the ground alone of the petitioners wrong choice of
remedy, the petition must fail.
The Petition
The petitioners are now before this Court praying for a reversal of the CA judgment on the following
grounds:
1. The CA committed a reversible error in disregarding the Omnibus Implementing Rules and
Regulations (IRR) of the Migrant Workers and Overseas Filipinos Act of 1995,12 as amended by R.A.
No. 10022,13 mandating that "For OFWs with collective bargaining agreements, the caseshall be
submitted for voluntary arbitration in accordance with Articles 261 and 262 of the Labor Code."14
The petitioners bewail the CAs rejection of the above argument for the reason that the remedy they
pursued was inconsistent with the 2005 Revised Rules of Procedure of the NLRC. Citing Municipality
of Sta. Fe v. Municipality of Aritao,15 they argue that the "dismissal of a case for lack of jurisdiction may
be raised at any stage of the proceedings."
In any event, they posit that the IRR of R.A. No. 10022 is in the nature of an adjective or procedural law
which must be given retroactive effect and which should have been applied by the CA in resolving the
present case.
2. The CA committed a reversible error in ruling that the AMOSUP-VELA CBA does not contain
unequivocal wordings for the mandatory referral of Fernandezs claim to voluntary arbitration.
The petitioners assail the CAs failure to explain the basis "for ruling that no explicit or unequivocal
wordings appeared on said CBA for the mandatory referral of the disability claim to arbitration." 16They
surmise that the CA construed the phrase "either party may refer the case to a MANDATORY
ARBITRATION COMMITTEE" under Section 14.7(a) of the CBA as merely permissive and not
mandatory because of the use of the word "may." They contend that notwithstanding the use of the word
"may," the parties unequivocally and unmistakably agreed to refer the present disability claim to
mandatory arbitration.
3. The CA committed a reversible error in disregarding the NLRC memorandum prescribing the
appropriate action for complaints and/or proceedings which were initially processed in the grievance
machinery of existing CBAs. In their motion for reconsideration with the CA, the petitioners manifested
that the appellate courts assailed decision had been modified by the following directive of the NLRC:
As one of the measures being adopted by our agency in response to the Platform and Policy
Pronouncements on Labor Employment, you are hereby directed to immediately dismiss the complaint
and/or terminate proceedings which were initially processed in the grievance machinery as provided in
the existing Collective Bargaining Agreements (CBAs) between parties, through the issuance of an
Order of Dismissal and referral of the disputes to the National Conciliation Mediation Board (NCMB)
for voluntary arbitration.
FOR STRICT COMPLIANCE.17
4. On July 31, 2012,18 the petitioners manifested before the Court that on June 13, 2012, the Courts
Second Division issued a ruling in G.R. No. 172642, entitled Estate of Nelson R. Dulay, represented by
his wife Merridy Jane P. Dulay v. Aboitiz Jebsen Maritime, Inc., and General Charterers, Inc.,upholding
the jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators over a seafarers money

claim. They implore the Court that since the factual backdrop and the issues involved in the case are
similar to the present dispute, the Dulay ruling should be applied to this case and which should
accordingly be referred to the National Conciliation and Mediation Board for voluntary arbitration.
The Case for Fernandez
In compliance with the Courts directive,19 Fernandez filed on October 7, 2011 his Comment20 (on the
Petition) with the plea that the petition be dismissed for lack of merit. Fernandez presents the following
arguments:
1. The IRR of the Migrant Workers and Overseas Filipinos Act of 1995 (R.A. No. 8042), as
amended by R.A. No. 10022,21 did not divest the labor arbiters of their original and exclusive
jurisdiction over money claims arising from employment, for nowhere in said IRR is there such a
divestment.
2. The voluntary arbitrators do not have jurisdiction over the present controversy as can be
deduced from Articles 261 and 262 of the Labor Code. Fernandez explains that his complaint
does not involve any "unresolved grievances arising from the interpretation or implementation of
the Collective Bargaining Agreement [nor] from the interpretation or enforcement of company
personnel policies[.]"22 As he never referred his claim to the grievance machinery, there is no
"unresolved grievance" to speak of. His complaint involves a claim for compensation and
damages which is outside the voluntary arbitrators jurisdiction under Article 261. Further, only
disputes involving the union and the company shall be referred to the grievance machinery and
to voluntary arbitration, as the Court held in Sanyo Philippines Workers Union-PSSLU v.
Caizares23 and Silva v. CA.24
3. The CA correctly ruled that no unequivocal wordings appear in the CBA for the mandatory
referral of Fernandezs disability claim to a voluntary arbitrator.
The Courts Ruling
We first rule on the procedural question arising from the labor arbiters denial of the petitioners motion
to dismiss the complaint. On this point, Section 6, Rule V of The 2005 Revised Rules of Procedure of
the NLRC provides:
On or before the date set for the mandatory conciliation and mediation conference, the respondent may
file a motion to dismiss. Any motion to dismiss on the ground of lack of jurisdiction, improper venue, or
that the cause of action is barred by prior judgment, prescription, or forum shopping, shall be
immediately resolved by the Labor Arbiter through a written order. An order denying the motion to
dismiss, or suspending its resolution until the final determination of the case, is not appealable.
[underscoring ours]
Corollarily, Section 10, Rule VI of the same Rules states:
Frivolous or Dilatory Appeals. No appeal from an interlocutory order shall be entertained. To
discourage frivolous or dilatory appeals, including those taken from interlocutory orders, the
Commission may censure or cite in contempt the erring parties and their counsels, or subject them to
reasonable fine or penalty.
In Indiana Aerospace University v. Comm. on Higher Educ.,25 the Court declared that "[a]n order
denying a motion to dismiss is interlocutory"; the proper remedy in this situation is to appeal after a

decision has been rendered. Clearly, the denial of the petitioners motion to dismiss in the present case
was an interlocutory order and, therefore, not subject to appeal as the CA aptly noted.
The petitions procedural lapse notwithstanding, the CA proceeded to review the merits of the case and
adjudged the petition unmeritorious. We find the CAs action in order. The Labor Code itself declares
that "it is the spirit and intention of this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due process."26
We now address the focal question of who has the original and exclusive jurisdiction over Fernandezs
disability claim the labor arbiter under Section 10 of R.A. No. 8042, as amended, or the voluntary
arbitration mechanism as prescribed in the parties CBA and the POEA-SEC?
The answer lies in the States labor relations policy laid down in the Constitution and fleshed out in the
enabling statute, the Labor Code. Section 3, Article XIII (on Social Justice and Human Rights) of the
Constitution declares:
xxxx
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.
Article 260 of the Labor Code (Grievance machinery and voluntary arbitration) states:
The parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the
mutual observance of its terms and conditions. They shall establish a machinery for the adjustment and
resolution of grievances arising from the interpretation or implementation of their Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel policies.
Article 261 of the Labor Code (Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators),
on the other hand, reads in part:
The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction
to hear and decide all unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation or enforcement of company
personnel policies[.]
Article 262 of the Labor Code (Jurisdiction over other labor disputes) declares:
The Voluntary Arbitrator or panel of Voluntary Arbitrators, upon agreement of the parties, shall also hear
and decide all other labor disputes including unfair labor practices and bargaining deadlocks.
Further, the POEA-SEC, which governs the employment of Filipino seafarers, provides in its Section 29
on Dispute Settlement Procedures:
In cases of claims and disputes arising from this employment, the parties covered by a collective
bargaining agreement shall submit the claim or dispute to the original and exclusive jurisdiction
of the voluntary arbitrator or panel of voluntary arbitrators. If the parties are not covered by a
collective bargaining agreement, the parties may at their option submit the claim or dispute to either the
original and exclusive jurisdiction of the National Labor Relations Commission (NLRC), pursuant to

Republic Act (RA) 8042 otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995
or to the original and exclusive jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators.
If there is no provision as to the voluntary arbitrators to be appointed by the parties, the same shall be
appointed from the accredited voluntary arbitrators of the National Conciliation and Mediation Board of
the Department of Labor and Employment. [emphasis ours]
We find merit in the petition.
Under the above-quoted constitutional and legal provisions, the voluntary arbitrator or panel of
voluntary arbitrators has original and exclusive jurisdiction over Fernandezs disability claim. There is
no dispute that the claim arose out of Fernandezs employment with the petitioners and that their
relationship is covered by a CBA the AMOSUP/TCC or the AMOSUP-VELA CBA. The CBA
provides for a grievance procedure for the resolution of grievances or disputes which occur during the
employment relationship and, like the grievance machinery created under Article 261 of the Labor Code,
it is a two-tiered mechanism, with voluntary arbitration as the last step.1wphi1
Contrary to the CAs reading of the CBAs Article 14, there is unequivocal or unmistakable language in
the agreement which mandatorily requires the parties to submit to the grievance procedure any dispute
or cause of action they may have against each other. The relevant provisions of the CBA state:
14.6 Any Dispute, grievance, or misunderstanding concerning any ruling, practice, wages or
working conditions in the COMPANY or any breach of the Contract of Employment, or any
dispute arising from the meaning or application of the provisions of this Agreement or a claim of
violation thereof or any complaint or cause of action that any such Seaman may have against the
COMPANY, as well as complaints which the COMPANY may have against such Seaman shall be
brought to the attention of the GRIEVANCE RESOLUTION COMMITTEE before either party
takes any action, legal or otherwise. Bringing such a dispute to the Grievance Resolution
Committee shall be unwaivable prerequisite or condition precedent for bringing any action, legal
or otherwise, in any forum and the failure to so refer the dispute shall bar any and all legal or
other actions.
14.7a) If by reason of the nature of the Dispute, the parties are unable to amicably settle the
dispute, either party may refer the case to a MANDATORY ARBITRATION COMMITTEE. The
MANDATORY ARBITRATION COMMITTEE shall consist of one representative to be designated by
the UNION, and one representative to be designated by the COMPANY and a third member who shall
act as Chairman and shall be nominated by mutual choice of the parties. xxx
h) Referral of all unresolved disputes from the Grievance Resolution Committee to the Mandatory
Arbitration Committee shall be unwaivable prerequisite or condition precedent for bringing any
action, claim, or cause of action, legal or otherwise, before any court, tribunal, or panel in any
jurisdiction. The failure by a party or seaman to so refer and avail oneself to the dispute resolution
mechanism contained in this action shall bar any legal or other action. All parties expressly agree
that the orderly resolution of all claims in the prescribed manner served the interests of reaching
settlements or claims in an orderly and uniform manner, as well as preserving peaceful and
harmonious labor relations between seaman, the Union, and the Company.27 (emphases ours)
What might have caused the CA to miss the clear intent of the parties in prescribing a grievance
procedure in their CBA is, as the petitioners have intimated, the use of the auxiliary verb "may" in
Article 14.7(a) of the CBA which, to reiterate, provides that "if by reason of the nature of the
Dispute, the parties are unable to amicably settle the dispute, either party may refer the case to a
MANDATORY ARBITRATION COMMITTEE."28

While the CA did not qualify its reading of the subject provision of the CBA, it is reasonable to conclude
that it viewed as optional the referral of a dispute to the mandatory arbitration committee when the
parties are unable to amicably settle the dispute.
We find this a strained interpretation of the CBA provision. The CA read the provision separately, or in
isolation of the other sections of Article 14, especially 14.7(h), which, in clear, explicit language, states
that the "referral of all unresolved disputes from the Grievance Resolution Committee to the
Mandatory Arbitration Committee shall be unwaivable prerequisite or condition precedent for
bringing any action, claim, or cause of action, legal or otherwise, before any court, tribunal, or
panel in any jurisdiction"29 and that the failure by a party or seaman to so refer the dispute to the
prescribed dispute resolution mechanism shall bar any legal or other action.
Read in its entirety, the CBAs Article 14 (Grievance Procedure) unmistakably reflects the parties
agreement to submit any unresolved dispute at the grievance resolution stage to mandatory voluntary
arbitration under Article 14.7(h) of the CBA. And, it should be added that, in compliance with Section
29 of the POEA-SEC which requires that in cases of claims and disputes arising from a seafarers
employment, the parties covered by a CBA shall submit the claim or dispute to the original and
exclusive jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators.
Since the parties used unequivocal language in their CBA for the submission of their disputes to
voluntary arbitration (a condition laid down in Vivero for the recognition of the submission to voluntary
arbitration of matters within the original and exclusive jurisdiction of labor arbiters), we find that the CA
committed a reversible error in its ruling; it disregarded the clear mandate of the CBA between the
parties and the POEA-SEC for submission of the present dispute to voluntary arbitration.
Consistent with this finding, Fernandezs contention that his complaint for disability benefits is a
money claim that falls within the original and exclusive jurisdiction of the labor arbiter under Section 10
of R.A. No. 8042 is untenable. We likewise reject his argument that he never referred his claim to the
grievance machinery (so that no unresolved grievance exists as required under Article 261 of the Labor
Code), and that the parties to the case are not the union and the employer.30 Needless to state, no such
distinction exists in the parties CBA and the POEA-SEC.
It bears stressing at this point that we are upholding the jurisdiction of the voluntary arbitrator or panel
of voluntary arbitrators over the present dispute, not only because of the clear language of the parties
CBA on the matter; more importantly, we so uphold the voluntary arbitrators jurisdiction, in recognition
of the States express preference for voluntary modes of dispute settlement, such as conciliation and
voluntary arbitration as expressed in the Constitution, the law and the rules.
In this light, we see no need to further consider the petitioners submission regarding the IRR of the
Migrant Workers and Overseas Filipinos Act of 1995, as amended by R.A. No. 10022, except to note
that the IRR lends further support to our ruling.
In closing, we quote with approval a most recent Court pronouncement on the same issue, thus
It is settled that when the parties have validly agreed on a procedure for resolving grievances and
to submit a dispute to voluntary arbitration then that procedure should be strictly
observed.31 (emphasis ours)
WHEREFORE, premises considered, the petition is GRANTED. The assailed decision and resolution
of the Court of Appeals are SET ASIDE. Teodorico Fernandez's disability claim is REFERRED to the
Grievance Resolution Committee of the parties' collective bargaining agreement and/or the Mandatory
Arbitration Committee, if warranted.

SO ORDERED.
G.R. No. 196539

October 10, 2012

MARIETTA N. PORTILLO, Petitioner,

vs.
RUDOLF LIETZ, INC., RUDOLF LIETZ and COURT OF APPEALS Respondents.
DECISION
PEREZ, J.:
Before us is a petition for certiorari assailing the Resolution 1 dated 14 October 2010 of the Court of
Appeals in CA-G.R. SP No. I 065g I which modified its Decision2 dated 31 March 2009, thus allowing
the legal compensation or petitioner Marietta N. Portillo's (Portillo) monetary claims against respondent
corporation Rudolf Lietz, Inc.'s (Lietz Inc.)3 claim for liquidated damages arising from Portillos alleged
violation of the "Goodwill Clause" in the employment contract executed by the parties.
The facts are not in dispute.
In a letter agreement dated 3 May 1991, signed by individual respondent Rudolf Lietz (Rudolf) and
conformed to by Portillo, the latter was hired by the former under the following terms and conditions:
A copy of [Lietz Inc.s] work rules and policies on personnel is enclosed and an inherent part of the
terms and conditions of employment.
We acknowledge your proposal in your application specifically to the effect that you will not engage in
any other gainful employment by yourself or with any other company either directly or indirectly
without written consent of [Lietz Inc.], and we hereby accept and henceforth consider your proposal an
undertaking on your part, a breach of which will render you liable to [Lietz Inc.] for liquidated damages.
If you are in agreement with these terms and conditions of employment, please signify your conformity
below.4
On her tenth (10th) year with Lietz Inc., specifically on 1 February 2002, Portillo was promoted to Sales
Representative and received a corresponding increase in basic monthly salary and sales quota. In this
regard, Portillo signed another letter agreement containing a "Goodwill Clause:"
It remains understood and you agreed that, on the termination of your employment by act of either you
or [Lietz Inc.], and for a period of three (3) years thereafter, you shall not engage directly or indirectly as
employee, manager, proprietor, or solicitor for yourself or others in a similar or competitive business or
the same character of work which you were employed by [Lietz Inc.] to do and perform. Should you
breach this good will clause of this Contract, you shall pay [Lietz Inc.] as liquidated damages the
amount of 100% of your gross compensation over the last 12 months, it being agreed that this sum is
reasonable and just.5
Three (3) years thereafter, on 6 June 2005, Portillo resigned from Lietz Inc. During her exit interview,
Portillo declared that she intended to engage in businessa rice dealership, selling rice in wholesale.
On 15 June 2005, Lietz Inc. accepted Portillos resignation and reminded her of the "Goodwill Clause"
in the last letter agreement she had signed. Upon receipt thereof, Portillo jotted a note thereon that the

latest contract she had signed in February 2004 did not contain any "Goodwill Clause" referred to by
Lietz Inc. In response thereto, Lietz Inc. categorically wrote:
Please be informed that the standard prescription of prohibiting employees from engaging in business or
seeking employment with organizations that directly or indirectly compete against [Lietz Inc.] for three
(3) years after resignation remains in effect.
The documentation you pertain to is an internal memorandum of your salary increase, not an
employment contract. The absence of the three-year prohibition clause in this document (or any
document for that matter) does not cancel the prohibition itself. We did not, have not, and will not issue
any cancellation of such in the foreseeable future[.] [T]hus[,] regretfully, it is erroneous of you to believe
otherwise.6
In a subsequent letter dated 21 June 2005, Lietz Inc. wrote Portillo and supposed that the exchange of
correspondence between them regarding the "Goodwill Clause" in the employment contract was a moot
exercise since Portillos articulated intention to go into business, selling rice, will not compete with Lietz
Inc.s products.
Subsequently, Lietz Inc. learned that Portillo had been hired by Ed Keller Philippines, Limited to head
its Pharma Raw Material Department. Ed Keller Limited is purportedly a direct competitor of Lietz Inc.
Meanwhile, Portillos demands from Lietz Inc. for the payment of her remaining salaries and
commissions went unheeded. Lietz Inc. gave Portillo the run around, on the pretext that her salaries and
commissions were still being computed.
On 14 September 2005, Portillo filed a complaint with the National Labor Relations Commission
(NLRC) for non-payment of 1 months salary, two (2) months commission, 13th month pay, plus
moral, exemplary and actual damages and attorneys fees.
In its position paper, Lietz Inc. admitted liability for Portillos money claims in the total amount of
P110,662.16. However, Lietz Inc. raised the defense of legal compensation: Portillos money claims
should be offset against her liability to Lietz Inc. for liquidated damages in the amount of
869,633.097 for Portillos alleged breach of the "Goodwill Clause" in the employment contract when
she became employed with Ed Keller Philippines, Limited.
On 25 May 2007, Labor Arbiter Daniel J. Cajilig granted Portillos complaint:
WHEREFORE, judgment is hereby rendered ordering respondents Rudolf Lietz, Inc. to pay complainant
Marietta N. Portillo the amount of Php110,662.16, representing her salary and commissions, including
13th month pay.8
On appeal by respondents, the NLRC, through its Second Division, affirmed the ruling of Labor Arbiter
Daniel J. Cajilig. On motion for reconsideration, the NLRC stood pat on its ruling.
Expectedly, respondents filed a petition for certiorari before the Court of Appeals, alleging grave abuse
of discretion in the labor tribunals rulings.
As earlier adverted to, the appellate court initially affirmed the labor tribunals:
WHEREFORE, considering the foregoing premises, judgment is hereby rendered by us DENYING the
petition filed in this case. The Resolution of the National Labor Relations Commission (NLRC), Second

Division, in the labor case docketed as NLRC NCR Case No. 00-09- 08113-2005 [NLRC LAC No. 07001965-07(5)] is herebyAFFIRMED.9
The disposition was disturbed. The Court of Appeals, on motion for reconsideration, modified its
previous decision, thus:
WHEREFORE, in view of the foregoing premises, we hereby MODIFY the decision promulgated on
March 31, 2009 in that, while we uphold the monetary award in favor of the [petitioner] in the aggregate
sum of 110,662.16 representing the unpaid salary, commission and 13th month pay due to her, we
hereby allow legal compensation or set-off of such award of monetary claims by her liability to
[respondents] for liquidated damages arising from her violation of the "Goodwill Clause" in her
employment contract with them.10
Portillos motion for reconsideration was denied.
Hence, this petition for certiorari listing the following acts as grave abuse of discretion of the Court of
Appeals:
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING TO
RECOGNIZE (sic) THAT THE RESPONDENTS EARLIER PETITION IS FATALLY DEFECTIVE;
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY OVERSTEPPING
THE BOUNDS OF APPELLATE JURISDICTION[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY MODIFYING
ITS PREVIOUS DECISION BASED ON AN ISSUE THAT WAS RAISED ONLY ON THE FIRST
INSTANCE AS AN APPEAL BUT WAS NEVER AT THE TRIAL COURT AMOUNTING TO
DENIAL OF DUE PROCESS[;]
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION BY EVADING THE
POSITIVE DUTY TO UPHOLD THE RELEVANT LAWS[.]11
Simply, the issue is whether Portillos money claims for unpaid salaries may be offset against
respondents claim for liquidated damages.
Before anything else, we address the procedural error committed by Portillo, i.e., filing a petition
for certiorari, a special civil action under Rule 65 of the Rules of Court, instead of a petition for review
on certiorari, a mode of appeal, under Rule 45 thereof. On this score alone, the petition should have
been dismissed outright.
Section 1, Rule 45 of the Rules of Court expressly provides that a party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of Appeals may file a verified
petition for review on certiorari. Considering that, in this case, appeal by certiorari was available to
Portillo, that available recourse foreclosed her right to resort to a special civil action for certiorari, a
limited form of review and a remedy of last recourse, which lies only where there is no appeal or plain,
speedy and adequate remedy in the ordinary course of law.12
A petition for review on certiorari under Rule 45 and a petition for certiorari under Rule 65 are
mutually exclusive remedies. Certiorari cannot co-exist with an appeal or any other adequate
remedy.13 If a petition for review is available, even prescribed, the nature of the questions of law
intended to be raised on appeal is of no consequence. It may well be that those questions of law will
treat exclusively of whether or not the judgment or final order was rendered without or in excess of

jurisdiction, or with grave abuse of discretion. This is immaterial. The remedy is appeal,
not certiorari as a special civil action.14
Be that as it may, on more than one occasion, to serve the ultimate purpose of all rules of procedures
attaining substantial justice as expeditiously as possible15we have accepted procedurally incorrect
petitions and decided them on the merits. We do the same here.
The Court of Appeals anchors its modified ruling on the ostensible causal connection between Portillos
money claims and Lietz Inc.s claim for liquidated damages, both claims apparently arising from the
same employment relations. Thus, did it say:
x x x This Court will have to take cognizance of and consider the "Goodwill Clause" contained [in] the
employment contract signed by and between [respondents and Portillo]. There is no gainsaying the fact
that such "Goodwill Clause" is part and parcel of the employment contract extended to [Portillo], and
such clause is not contrary to law, morals and public policy. There is thus a causal connection between
[Portillos] monetary claims against [respondents] and the latters claim for liquidated damages against
the former. Consequently, we should allow legal compensation or set-off to take place. [Respondents and
Portillo] are both bound principally and, at the same time, are creditors of each other. [Portillo] is a
creditor of [respondents] in the sum of 110,662.16 in connection with her monetary claims against the
latter. At the same time, [respondents] are creditors of [Portillo] insofar as their claims for liquidated
damages in the sum of 980,295.2516 against the latter is concerned.17
We are not convinced.
Paragraph 4 of Article 217 of the Labor Code appears to have caused the reliance by the Court of
Appeals on the "causal connection between [Portillos] monetary claims against [respondents] and the
latters claim from liquidated damages against the former."
Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided
under this code, the Arbiters shall have original and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the case by the parties for decision without extension,
even in the absence of stenographic notes, the following case involving all workers, whether agricultural
or nonagricultural:
xxxx
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations; (Underscoring supplied)
Evidently, the Court of Appeals is convinced that the claim for liquidated damages emanates from the
"Goodwill Clause of the employment contract and, therefore, is a claim for damages arising from the
employeremployee relations."
As early as Singapore Airlines Limited v. Pao,18 we established that not all disputes between an
employer and his employee(s) fall within the jurisdiction of the labor tribunals. We differentiated
between abandonment per seand the manner and consequent effects of such abandonment and ruled that
the first, is a labor case, while the second, is a civil law case.
Upon the facts and issues involved, jurisdiction over the present controversy must be held to belong to
the civil Courts. While seemingly petitioner's claim for damages arises from employer-employee
relations, and the latest amendment to Article 217 of the Labor Code under PD No. 1691 and BP Blg.
130 provides that all other claims arising from employer-employee relationship are cognizable by Labor

Arbiters [citation omitted], in essence, petitioner's claim for damages is grounded on the "wanton failure
and refusal" without just cause of private respondent Cruz to report for duty despite repeated notices
served upon him of the disapproval of his application for leave of absence without pay. This, coupled
with the further averment that Cruz "maliciously and with bad faith" violated the terms and conditions of
the conversion training course agreement to the damage of petitioner removes the present controversy
from the coverage of the Labor Code and brings it within the purview of Civil Law.
Clearly, the complaint was anchored not on the abandonment per se by private respondent Cruz of his
jobas the latter was not required in the Complaint to report back to workbut on
the manner and consequent effects of such abandonment of work translated in terms of the damages
which petitioner had to suffer.
Squarely in point is the ruling enunciated in the case of Quisaba vs. Sta. Ines Melale Veneer & Plywood,
Inc. [citation omitted], the pertinent portion of which reads:
"Although the acts complained of seemingly appear to constitute 'matter involving employee-employer'
relations as Quisaba's dismissal was the severance of a pre-existing employee-employer relations, his
complaint is grounded not on his dismissal per se, as in fact he does not ask for reinstatement or
backwages, but on the manner of his dismissal and the consequent effects of such dismissal.
"Civil law consists of that 'mass of precepts that determine or regulate the relations . . . that exist
between members of a society for the protection of private interest (1 Sanchez Roman 3).
"The 'right' of the respondents to dismiss Quisaba should not be confused with the manner in which the
right was exercised and the effects flowing therefrom. If the dismissal was done anti-socially or
oppressively as the complaint alleges, then the respondents violated Article 1701 of the Civil Code
which prohibits acts of oppression by either capital or labor against the other, and Article 21, which
makes a person liable for damages if he wilfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy, the sanction for which, by way of moral damages, is
provided in article 2219, No. 10. [citation omitted]"
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the
Labor Code. The primary relief sought is for liquidated damages for breach of a contractual
obligation. The other items demanded are not labor benefits demanded by workers generally
taken cognizance of in labor disputes, such as payment of wages, overtime compensation or
separation pay. The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.19(Emphasis supplied)
Subsequent rulings amplified the teaching in Singapore Airlines. The reasonable causal connection rule
was discussed. Thus, in San Miguel Corporation v. National Labor Relations Commission,20 we held:
While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the
entire universe of money claims that might be asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction of Labor Arbiters. In the first place, paragraph 3
should be read not in isolation from but rather within the context formed by paragraph 1 (relating to
unfair labor practices), paragraph 2 (relating to claims concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a particular species of employer-employee relations),
and paragraph 5 (relating to certain activities prohibited to employees or to employers). It is evident that
there is a unifying element which runs through paragraph 1 to 5 and that is, that they all refer to cases or
disputes arising out of or in connection with an employer-employee relationship. This is, in other words,
a situation where the rule of noscitur a sociis may be usefully invoked in clarifying the scope of
paragraph 3, and any other paragraph of Article 217 of the Labor Code, as amended. We reach the above

conclusion from an examination of the terms themselves of Article 217, as last amended by B.P. Blg.
227, and even though earlier versions of Article 217 of the Labor Code expressly brought within the
jurisdiction of the Labor Arbiters and the NLRC "cases arising from employer-employee relations,
[citation omitted]" which clause was not expressly carried over, in printer's ink, in Article 217 as it exists
today. For it cannot be presumed that money claims of workers which do not arise out of or in
connection with their employer-employee relationship, and which would therefore fall within the general
jurisdiction of regular courts of justice, were intended by the legislative authority to be taken away from
the jurisdiction of the courts and lodged with Labor Arbiters on an exclusive basis. The Court,
therefore, believes and so holds that the "money claims of workers" referred to in paragraph 3 of
Article 217 embraces money claims which arise out of or in connection with the employeremployee relationship, or some aspect or incident of such relationship. Put a little differently, that
money claims of workers which now fall within the original and exclusive jurisdiction of Labor
Arbiters are those money claims which have some reasonable causal connectionwith the employeremployee relationship.21 (Emphasis supplied)
We thereafter ruled that the "reasonable causal connection with the employer-employee relationship" is a
requirement not only in employees money claims against the employer but is, likewise, a condition
when the claimant is the employer.
In Dai-Chi Electronics Manufacturing Corporation v. Villarama, Jr.,22 which reiterated the San
Miguel ruling and allied jurisprudence, we pronounced that a non-compete clause, as in the "Goodwill
Clause" referred to in the present case, with a stipulation that a violation thereof makes the employee
liable to his former employer for liquidated damages, refers to post-employment relations of the parties.
In Dai-Chi, the trial court dismissed the civil complaint filed by the employer to recover damages from
its employee for the latters breach of his contractual obligation. We reversed the ruling of the trial court
as we found that the employer did not ask for any relief under the Labor Code but sought to recover
damages agreed upon in the contract as redress for its employees breach of contractual obligation to its
"damage and prejudice." We iterated that Article 217, paragraph 4 does not automatically cover all
disputes between an employer and its employee(s). We noted that the cause of action was within the
realm of Civil Law, thus, jurisdiction over the controversy belongs to the regular courts. At bottom, we
considered that the stipulation referred to post-employment relations of the parties.
That the "Goodwill Clause" in this case is likewise a postemployment issue should brook no argument.
There is no dispute as to the cessation of Portillos employment with Lietz Inc.23 She simply claims her
unpaid salaries and commissions, which Lietz Inc. does not contest. At that juncture, Portillo was no
longer an employee of Lietz Inc.24 The "Goodwill Clause" or the "Non-Compete Clause" is a contractual
undertaking effective after the cessation of the employment relationship between the parties. In
accordance with jurisprudence, breach of the undertaking is a civil law dispute, not a labor law case.
It is clear, therefore, that while Portillos claim for unpaid salaries is a money claim that arises out of or
in connection with an employer-employee relationship, Lietz Inc.s claim against Portillo for violation of
the goodwill clause is a money claim based on an act done after the cessation of the employment
relationship. And, while the jurisdiction over Portillos claim is vested in the labor arbiter, the
jurisdiction over Lietz Inc.s claim rests on the regular courts. Thus:
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages
based on the parties' contract of employment as redress for respondent's breach thereof. Such cause of
action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular
courts. More so must this be in the present case, what with the reality that the stipulation refers to the
postemployment relations of the parties.

For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter is one of
claim for damages arising from a breach of contract, which is within the ambit of the regular court's
jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined upon the allegations made in the
complaint, irrespective of whether or not the plaintiff is entitled to recover upon the claim asserted
therein, which is a matter resolved only after and as a result of a trial. Neither can jurisdiction of a court
be made to depend upon the defenses made by a defendant in his answer or motion to dismiss. If such
were the rule, the question of jurisdiction would depend almost entirely upon the defendant.25 [citation
omitted]
xxxx
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to
claims for damages filed by employees [citation omitted], we hold that by the designating clause
"arising from the employer-employee relations" Article 217 should apply with equal force to the claim
of an employer for actual damages against its dismissed employee, where the basis for the claim arises
from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in
the illegal dismissal case.26
xxxx
This is, of course, to distinguish from cases of actions for damages where the employer-employee
relationship is merely incidental and the cause of action proceeds from a different source of
obligation. Thus, the jurisdiction of regular courts was upheld where the damages, claimed for
were based on tort[citation omitted], malicious prosecution [citation omitted], or breach of contract,
as when the claimant seeks to recover a debt from a former employee [citation omitted] or seeks
liquidated damages in enforcement of a prior employment contract. [citation omitted]
Neither can we uphold the reasoning of respondent court that because the resolution of the issues
presented by the complaint does not entail application of the Labor Code or other labor laws, the dispute
is intrinsically civil. Article 217(a) of the Labor Code, as amended, clearly bestows upon the Labor
Arbiter original and exclusive jurisdiction over claims for damages arising from employer-employee
relationsin other words, the Labor Arbiter has jurisdiction to award not only the reliefs provided by
labor laws, but also damages governed by the Civil Code.27 (Emphasis supplied)
In the case at bar, the difference in the nature of the credits that one has against the other, conversely, the
nature of the debt one owes another, which difference in turn results in the difference of the forum where
the different credits can be enforced, prevents the application of compensation. Simply, the labor
tribunal in an employees claim for unpaid wages is without authority to allow the compensation of such
claims against the post employment claim of the former employer for breach of a post employment
condition. The labor tribunal does not have jurisdiction over the civil case of breach of contract.
We are aware that in Baez v. Hon. Valdevilla, we mentioned that:
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to
claims for damages filed by employees [citation omitted], we hold that by the designating clause
"arising from the employer-employee relations" Article 217 should apply with equal force to the claim
of an employer for actual damages against its dismissed employee, where the basis for the claim arises
from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in
the illegal dismissal case.28

While on the surface, Baez supports the decision of the Court of Appeals, the facts beneath premise an
opposite conclusion. There, the salesman-employee obtained from the NLRC a final favorable judgment
of illegal dismissal. Afterwards, the employer filed with the trial court a complaint for damages for
alleged nefarious activities causing damage to the employer. Explaining further why the claims for
damages should be entered as a counterclaim in the illegal dismissal case, we said:
Even under Republic Act No. 875 (the Industrial Peace Act, now completely superseded by the Labor
Code), jurisprudence was settled that where the plaintiffs cause of action for damages arose out of, or
was necessarily intertwined with, an alleged unfair labor practice committed by the union, the
jurisdiction is exclusively with the (now defunct) Court of Industrial Relations, and the assumption of
jurisdiction of regular courts over the same is a nullity. To allow otherwise would be "to sanction split
jurisdiction, which is prejudicial to the orderly administration of justice." Thus, even after the enactment
of the Labor Code, where the damages separately claimed by the employer were allegedly incurred as a
consequence of strike or picketing of the union, such complaint for damages is deeply rooted from the
labor dispute between the parties, and should be dismissed by ordinary courts for lack of jurisdiction. As
held by this Court in National Federation of Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that on policy grounds, and
equally so in the interest of greater promptness in the disposition of labor matters, a court is spared the
often onerous task of determining what essentially is a factual matter, namely, the damages that may be
incurred by either labor or management as a result of disputes or controversies arising from employeremployee relations.29
Evidently, the ruling of the appellate court is modeled after the basis used in Baez which is the
"intertwined" facts of the claims of the employer and the employee or that the "complaint for damages is
deeply rooted from the labor dispute between the parties." Thus, did the appellate court say that:
There is no gainsaying the fact that such "Goodwill Clause" is part and parcel of the employment
contract extended to [Portillo], and such clause is not contrary to law, morals and public policy. There is
thus a causal connection between [Portillos] monetary claims against [respondents] and the latters
claim for liquidated damages against the former. Consequently, we should allow legal compensation or
set-off to take place.30
The Court of Appeals was misguided. Its conclusion was incorrect.
There is no causal connection between the petitioner employees claim for unpaid wages and the
respondent employers claim for damages for the alleged "Goodwill Clause" violation. Portillos claim
for unpaid salaries did not have anything to do with her alleged violation of the employment contract as,
in fact, her separation from employment is not "rooted" in the alleged contractual violation. She resigned
from her employment. She was not dismissed. Portillos entitlement to the unpaid salaries is not even
contested. Indeed, Lietz Inc.s argument about legal compensation necessarily admits that it owes the
money claimed by Portillo.
The alleged contractual violation did not arise during the existence of the employer-employee
relationship. It was a post-employment matter, a post-employment violation. Reminders are apt. That is
provided by the fairly recent case of Yusen Air and Sea Services Phils., Inc. v. Villamor,31 which harked
back to the previous rulings on the necessity of "reasonable causal connection" between the tortious
damage and the damage arising from the employer-employee relationship. Yusen proceeded to
pronounce that the absence of the connection results in the absence of jurisdiction of the labor arbiter.
Importantly, such absence of jurisdiction cannot be remedied by raising before the labor tribunal the
tortious damage as a defense. Thus:

When, as here, the cause of action is based on a quasi-delict or tort, which has no reasonable causal
connection with any of the claims provided for in Article 217, jurisdiction over the action is with the
regular courts. [citation omitted]
As it is, petitioner does not ask for any relief under the Labor Code. It merely seeks to recover damages
based on the parties contract of employment as redress for respondents breach thereof. Such cause of
action is within the realm of Civil Law, and jurisdiction over the controversy belongs to the regular
courts. More so must this be in the present case, what with the reality that the stipulation refers to the
postemployment relations of the parties.
For sure, a plain and cursory reading of the complaint will readily reveal that the subject matter is one of
claim for damages arising from a breach of contract, which is within the ambit of the regular courts
jurisdiction. [citation omitted]
It is basic that jurisdiction over the subject matter is determined upon the allegations made in the
complaint, irrespective of whether or not the plaintiff is entitled to recover upon the claim asserted
therein, which is a matter resolved only after and as a result of a trial. Neither can jurisdiction of a court
be made to depend upon the defenses made by a defendant in his answer or motion to dismiss. If such
were the rule, the question of jurisdiction would depend almost entirely upon the
defendant.32 (Underscoring supplied).
The error of the appellate court in its Resolution of 14 October 2010 is basic. The original decision, the
right ruling, should not have been reconsidered.1wphi1
Indeed, the application of compensation in this case is effectively barred by Article 113 of the Labor
Code which prohibits wage deductions except in three circumstances:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any
deduction from wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized
by the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
WHEREFORE, the petition is GRANTED. The Resolution of the Court of Appeals in CA-G.R. SP
No. I 06581 dated 14 October 20 I 0 is SET ASIDE. The Decision of the Court of Appeals in CA-G.R.
SP No. I 06581 dated 3 I March :2009 is REINSTATED. No costs.
SO ORDERED.
G.R. No. 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 intra-corporate inasmuch as the respondent was a member of Matlings Board of Directors aside
from being its Vice-President 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
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.
(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 intra-corporate 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.
902-A 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 bylaws" found in Section 25 of the Corporation Code should be clearly and expressly stated in the ByLaws; 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 by-laws 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 By-Laws; 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 intra-corporate 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.
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 CA-G.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 coemployees.15
In refuting Cosares complaint, the respondents argued that Cosare was neither illegally suspended nor
dismissed from employment. They also contended that Cosare committed the following acts inimical to
the interests of Broadcom: (a) he failed to sell any broadcast equipment since the year 2007; (b) he
attempted to sell a Panasonic HMC 150 Camera which was to be sourced from a competitor; and (c) he
made an unauthorized request in Broadcoms name for its principal, Panasonic USA, to issue an
invitation for Cosares friend, one Alex Paredes, to attend the National Association of Broadcasters
Conference in Las Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job17 by
continually failing to report for work beginning April 1, 2009, prompting them to issue on April 14,
2009 a memorandum18 accusing Cosare of absence without leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19 dismissing the
complaint on the ground of Cosares failure to establish that he was dismissed, constructively or
otherwise, from his employment. For the LA, what transpired on March 30, 2009 was merely the
respondents issuance to Cosare of a 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 x x
We hold that [the respondents] were able to present substantial evidence that [Cosare] indeed held a
corporate office, as evidenced by the General Information Sheet which was submitted to the Securities
and Exchange Commission (SEC) on October 22, 2009.27 (Citations omitted and emphasis supplied)
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 intra-corporate 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 by-laws."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 bylaws empowering its board of directors to create additional officers, even with the subsequent passage of
a board resolution to that effect, cannot make such position a corporate office. The board of directors has
no power to create other corporate offices without first amending the corporate 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 intracorporate dispute, the status or relationship of the parties and the nature of the question that is the
subject of the controversy must be taken into account.43 Considering that the pending dispute particularly
relates to Cosares rights and obligations as a regular officer of Broadcom, instead of as a stockholder of
the corporation, the controversy cannot be 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 intracorporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to
the controversy or if there will still be conflict even if the relationship does not exist, then no intracorporate controversy exists.45 (Citation omitted)
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.
G.R. No. 164267

March 31, 2009

PHILIPPINE AIRLINES, INC., Petitioner,

vs.
HEIRS OF BERNARDIN J. ZAMORA,* Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 166996

March 31, 2009

PHILIPPINE AIRLINES, INCORPORATED, FRANCISCO X. YNGENTE IV, PAG-ASA C.

RAMOS, JESUS FEDERICO V. VIRAY, RICARDO D. ABUYUAN, Petitioners,
vs.
BERNARDIN J. ZAMORA, Respondent.
DECISION
QUISUMBING, J.:
Before this Court are two petitions, now consolidated. The first petition, docketed as G.R. No. 164267,
filed by Philippine Airlines, Inc., assails the Decision1 dated April 27, 2004 and the Resolution2 dated
June 29, 2004, of the Court of Appeals in CA-G.R. SP No. 56428.
The second petition, docketed as G.R. No. 166996, filed by Philippine Airlines, Inc., Francisco X.
Yngente IV, Pag-asa C. Ramos, Jesus Federico V. Viray, and Ricardo D. Abuyuan, assails the
Decision3 dated August 13, 2004 and the Amended Decision4 dated February 1, 2005, of the Court of
Appeals in CA-G.R. SP No. 68795.
The records reveal the following antecedent proceedings:5
Bernardin J. Zamora was a cargo representative assigned at the International Cargo Operations-Import
Operations Division (ICO-IOD) of petitioner Philippine Airlines, Inc. (PAL). He alleged that sometime
in December 1993, his immediate supervisor, petitioner Ricardo D. Abuyuan, instructed him to alter
some entries in the Customs Boatnote and Inbound Handling Report to conceal Abuyuans smuggling

and pilferage activities. When he refused to follow this order, Abuyuan concocted charges of
insubordination and neglect of customers against him.
On November 6, 1995, Zamora received a Memorandum informing him of his temporary transfer to the
Domestic Cargo Operations (DCO) effective November 13, 1995. Zamora refused to follow the
directive because: first, there was no valid and legal reason for his transfer; second, the transfer violated
the collective bargaining agreement between the management and the employees union that no
employee shall be transferred without just and proper cause; and third, the transfer did not comply with
the 15-day prior notice rule.
Meantime, Zamora wrote to the management requesting that an investigation be conducted on the
smuggling and pilferage activities. He disclosed that he has a telex from Honolulu addressed to Abuyuan
to prove Abuyuans illegal activities. As a result, the management invited Zamora to several conferences
to substantiate his allegations. Zamora claimed that during these conferences, he was instructed to
continue reporting to the ICO-IOD to observe the activities therein. Even so, his salaries were withheld
starting December 15, 1995.
For its part, PAL claimed that sometime in October 1995, Zamora had an altercation with Abuyuan to
the point of a fistfight. The management requested Zamora to explain in writing the incident. It found his
explanation unsatisfactory.
To diffuse the tension between the parties, the management decided to temporarily transfer Zamora to
the DCO. It issued several directives informing Zamora of his transfer. However, Zamora refused to
receive these and continued reporting to the ICO-IOD. Consequently, he was reported absent at the DCO
since November 13, 1995. His salaries were subsequently withheld. He also ignored the managements
directive requiring him to explain in writing his continued absence.
Meanwhile, the management acted on Zamoras letter exposing the smuggling and pilferage activities.
Despite several notices, however, Zamora failed to appear during the conferences.
On February 22, 1996, the management served Zamora a Notice of Administrative Charge for Absence
Without Official Leave (AWOL). Then on January 30, 1998, he was informed of his termination due to
Insubordination/Neglect of Customer, Disrespect to Authority, and AWOL.
On March 12, 1996, Zamora filed a complaint6 for illegal dismissal, unfair labor practice, non-payment
of wages, and damages.
On September 28, 1998, the Labor Arbiter dismissed the complaint for lack of merit. The Labor Arbiter
ruled that Zamoras transfer was temporary and intended only to diffuse the tension between Zamora and
Abuyuan. The Labor Arbiter also said that the 15-day prior notice did not apply to Zamora since it is
required only in transfers involving change of domicile. Furthermore, Zamoras refusal to report to the
DCO was a clear case of insubordination and utter disregard of the managements directive. Thus, the
Labor Arbiter ordered Zamora to report to his new assignment at the DCO.
On July 26, 1999, the National Labor Relations Commission (NLRC) reversed the Labor Arbiters
decision and declared Zamoras transfer illegal. It ruled that there was no valid and legal reason for the
transfer other than Zamoras report of the smuggling and pilferage activities. The NLRC disposed as
follows:
WHEREFORE, in the light of the foregoing, the instant appeal is hereby GRANTED. The assailed
Decision dated September 28, 1998 is hereby ordered SET ASIDE and a new one is hereby entered
declaring complainants transfer at the Domestic Cargo Operations on November 13, 1996 illegal.

Moreover, respondents are hereby ordered to immediately reinstate complainant Bernardin J. Zamora to
his former position as Cargo Representative at the Import Operations Division of respondent PAL
without loss of seniority rights and other privileges and to pay him back salaries and backwages
beginning December 15, 1995 until his actual reinstatement, inclusive of allowances and other benefits
and increases thereto.
All other reliefs herein sought and prayed for are hereby DENIED for lack of merit.
SO ORDERED.7
Thereafter, Zamoras counsel demanded from PAL execution of the NLRC decision with respect to his
reinstatement and various monetary benefits on the ground that it has become final and executory.8
PAL filed a motion to be furnished with a copy of the NLRC decision. Zamora opposed the motion
alleging that the record of the NLRC indicated that copies of the NLRC decision were sent via registered
mail on August 11, 1999 to PAL and its counsel, but the same remained unclaimed for a time and were
later on returned to sender. He added that as of August 16, 1999, or five days later, service upon PAL of
copies of the NLRC decision was deemed completed. Zamora also filed a motion for partial entry of
judgment with respect to his reinstatement and various monetary benefits.
PAL opposed the motion for partial entry of judgment and moved for reconsideration of the NLRC
decision. Zamora opposed the motion and moved to have it expunged from the record of the case on the
ground that the NLRC decision had long become final and executory.
The NLRC denied reconsideration of its decision. Undeterred, PAL filed a petition for certiorari
docketed as CA-G.R. SP No. 56428 before the Court of Appeals.
Meanwhile, Zamora filed anew a motion for partial execution reiterating his prayer for the execution of
the NLRC decision with respect to his reinstatement and various monetary benefits. Later, he filed a
motion for contempt before the Labor Arbiter praying that PAL be declared in contempt for refusing to
physically reinstate him to his former position or in the payroll. PAL opposed the motion.
On January 8, 2001, the Labor Arbiter issued an Order9 citing PAL for indirect contempt for its failure to
comply with the directive contained in the NLRC decision and ordering the issuance of a writ of
execution. The dispositive portion of the Order provides:
WHEREFORE, finding the motion to be well taken and in order, the same is granted and respondents
are hereby cited for indirect contempt for their failure to comply with the order of the Hon. Commission.
They are directed anew to reinstate complainant immediately to his former position as Cargo
Representative, physically or in the payroll, and fined an amount of P100.00 per day from 16 August
1999 until compliance.
Further, let a writ of execution be issued.
SO ORDERED.
PAL appealed to the NLRC praying for the reversal of the Order and the suspension of the proceedings
due to PALs rehabilitation.
On April 27, 2001, the NLRC issued a Resolution10 setting aside the Order of the Labor Arbiter and
ordering the issuance of a writ of execution implementing, albeit with modification, the Labor Arbiters

decision. The NLRC relied on the copy of the structural organization of PALs Cargo Services SubDepartment showing that as of June 30, 2000, the ICO-IOD had already been abolished. Instead of
ordering Zamoras reinstatement, it awarded separation pay equivalent to one months salary for every
year of service, i.e., from February 9, 1981 to June 30, 2000. It also computed the award of backwages
from December 15, 1995 until June 30, 2000. The fallo of the Resolution reads:
WHEREFORE, the Order appealed from is hereby SET ASIDE.
The Labor Arbiter is hereby advised to forthwith issue a Writ of Execution which, due to a supervening
event, the abolition of PALs Import Operations Division must vary the terms of the final judgment to
the extent that: (1) the complainant must be awarded, in lieu of reinstatement, separation pay equivalent
to one months salary for every year of service from February 9, 1981 to June 30, 2000; and (2) the
award of backwages must be computed from December 15, 1995 to June 30, 2000.
SO ORDERED.
Both parties moved for reconsideration. Zamora disputed the finding that the ICO-IOD had already been
abolished as of June 30, 2000. On the other hand, PAL argued that the NLRC erred in ordering the
issuance of a writ of execution considering that it was undergoing rehabilitation.
On October 31, 2001, the NLRC disposed of the motions in this wise:
WHEREFORE, complainants Motion for Partial Reconsideration is DENIED for lack of merit.
Respondents Partial Motion for Reconsideration is GRANTED. The instant case is hereby referred to
the permanent rehabilitation receiver and the proceedings hereon are deemed SUSPENDED while
respondent Philippine Airlines, Inc. is under rehabilitation receivership.
SO ORDERED.11
Zamora questioned the NLRC resolutions before the Court of Appeals via a petition for certiorari
docketed as CA-G.R. SP No. 68795.
On April 27, 2004, the appellate court resolved CA-G.R. SP No. 56428 and affirmed the NLRC
Decision dated July 26, 1999 declaring Zamoras transfer at the DCO illegal and ordering his immediate
reinstatement and payment of various monetary benefits. It disposed thus:
WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.
SO ORDERED.12
On June 29, 2004, the appellate court denied reconsideration.
On August 13, 2004, the appellate court resolved CA-G.R. SP No. 68795 and set aside the NLRC
Resolution dated April 27, 2001 which awarded Zamora separation pay in lieu of reinstatement due to
the abolition of the ICO-IOD. The appellate court ruled that the NLRC gravely abused its discretion
when it varied the terms of its decision by suspending the proceedings and referring the case to PALs
rehabilitation receiver instead of ordering Zamoras reinstatement. The appellate court also rejected
PALs evidence which supposedly showed that Zamoras former position had already been abolished.
PAL moved for reconsideration and manifested that Zamora has been detained in jail for the crime of
murder since October 2, 2000. On February 1, 2005, the appellate court amended its decision and

recalled its order of reinstatement in view of Zamoras incarceration. The Court of Appeals dispositive
portion of the amended decision reads:
WHEREFORE, this Courts August 13, 2004 decision is hereby AMENDED, the dispositive portion to
read as follows:
"WHEREFORE, in view of the foregoing, the petition is GRANTED. The NLRC resolution dated April
27, 2001 isMODIFIED. Considering that petitioner is a detention prisoner making reinstatement
impossible, PAL is hereby ordered to pay petitioner Zamora his separation pay, in lieu of
reinstatement, to be computed at one month salary for every year of service from February 9,
1981 and backwages to be computed from December 15, 1995, both up to October 1, 2000, the date of
his incarceration.
"SO ORDERED."
Considering that PAL is still under receivership, the monetary claims of petitioner Zamora must be
presented to the PAL Rehabilitation Receiver, subject to the rules on preference of credits.
SO ORDERED.13
From the Court of Appeals decision in CA-G.R. SP No. 56428, PAL filed a petition with this Court
docketed as G.R. No. 164267 raising the following procedural and substantive issues.
THE PROCEDURAL ISSUES:
I.
Whether or not the Court of Appeals seriously erred in holding that the 26 July 1999 NLRC decision
became final and executory based solely on the certifications issued by the Deputy Executive Clerk of
the NLRC.
II.
Whether or not the NLRC may take cognizance of a seasonably filed motion for reconsideration from a
decision a copy of which was previously stamped "moved" and "return to sender" but was
thereafter officially served and officially received by the party seeking reconsideration.
III.
MAY a counsel for justifiable reason defer the filing of a notice of change of address.
THE SUBSTANTIVE ISSUES[:]
I.
MAY an employer be required to state in writing the reason for transferring an employee despite the
absence of such requirement in the CBA.
II.

MAY an employer be required to observe a 15-day prior notice before effecting an employee transfer
notwithstanding the fact that under the CBA said notice is required only in case the transfer involves a
change in domicile.
III.
MAY an employer seeking to transfer an employee for the purpose of diffusing escalating hostility
between an employee and his supervisor be required to wait for fifteen (15) days before effecting the
employee transfer.
IV.
MAY a court validly order the reinstatement of an employee as well as grant monetary award
notwithstanding the absence of factual finding as to the legality or illegality of the dismissal in the
decision itself.14
On the other hand, from the Court of Appeals amended decision in CA-G.R. SP No. 68795, PAL, et al.,
filed a petition, which this Court docketed as G.R. No. 166996, raising the following issues:
I.
THE COURT OF APPEALS COMMITTED A SERIOUS AND GRAVE ERROR AMOUNTING TO
LACK AND/OR EXCESS OF JURISDICTION IN DECLARING ILLEGAL THE DISMISSAL OF
RESPONDENT ZAMORA AND THE DECISION OF THE NLRC DATED JULY 26, 1999 FINAL
AND EXECUTORY. IN SO DOING, THE COURT OF APPEALS PREMATURELY RULED ON THE
MERITS OF THE CASE.
II.
THE COURT OF APPEALS COMMITTED A PALPABLE ERROR IN ORDERING PAL TO PAY
RESPONDENT ZAMORA HIS "SEPARATION PAY, IN LIEU OF REINSTATEMENT, TO BE
COMPUTED AT ONE MONTH SALARY FOR EVERY YEAR OF SERVICE FROM FEBRUARY 9,
1981 AND BACKWAGES TO BE COMPUTED FROM DECEMBER 15, 1995, BOTH UP TO
OCTOBER 12 (sic), 2000, THE DATE OF HIS INCARCERATION."
III.
THE COURT OF APPEALS COMMITTED A SERIOUS AND GRAVE ERROR IN ORDERING
THAT RESPONDENT ZAMORAS MONETARY CLAIM BE PRESENTED TO THE PAL
REHABILITATION RECEIVER, SUBJECT TO THE RULES ON PREFERENCE OF CREDITS. 15
In our Resolutions dated February 6, 2007 and November 23, 2007, we suspended the proceedings in
G.R. No. 166996 and G.R. No. 164267, respectively, and directed PAL to submit a status report on its
then on-going rehabilitation. Pursuant to our directive, PAL submitted a Manifestation and
Compliance,16 informing us that the Securities and Exchange Commission granted its request to exit
from the rehabilitation proceedings on September 28, 2007.17 In view of this development, we shall now
resolve the instant consolidated petitions.
Simply, the issues are: (1) Did the Decision dated July 26, 1999 of the NLRC become final and
executory? (2) Was PALs motion for reconsideration of the Labor Arbiters decision seasonably filed?
(3) Was Zamoras transfer legal? (4) Was Zamoras dismissal legal? (5) Should PAL pay Zamora

separation pay in lieu of reinstatement due to his incarceration? and (6) Should Zamora present his
monetary claim to PALs rehabilitation receiver?
The consolidated petitions have no merit.
Anent the first and second issues, PAL contends that other than the Certification18 issued by the NLRC
Deputy Executive Clerk, there was no evidence that service of the NLRC decision via registered mail
was deemed completed as of August 16, 1999, or five days after the first notice on August 11, 1999. It
adds that a certification from the postmaster was the best evidence to prove completeness of the service
by mail.
PAL also avers that when it received a copy of the NLRC resolution denying Zamoras motion for partial
reconsideration of the NLRC decision, it immediately filed a motion to be furnished with a copy of the
NLRC decision. Acting on the motion, the NLRC furnished it with a copy of the NLRC decision which
it received on October 26, 1999. Since it filed its motion for reconsideration on October 29, 1999, PAL
argues that its motion was seasonably filed and the NLRC decision did not become final and executory.
Zamora counters that the Certification issued by the NLRC Deputy Executive Clerk was reinforced by
the stamped markings and notation19 on the face and dorsal sides of the envelopes containing the NLRC
decision. He adds that at the time service of the NLRC decision via registered mail was made, PAL
moved to a new office address without filing any notice of change of address with the NLRC. Thus,
PALs failure to receive the NLRC decision was due to its own fault.
Zamora also maintains that since PAL only had 10 days from August 16, 1999 to file its motion for
reconsideration, the motion filed on October 29, 1999 was late.
The rule on service by registered mail contemplates two situations: (1) actual service, the completeness
of which is determined upon receipt by the addressee of the registered mail; and (2) constructive service,
the completeness of which is determined upon expiration of five days from the date the addressee
received the first notice of the postmaster. A party who relies on constructive service or who contends
that his adversary has received a copy of a final order or judgment upon the expiration of five days from
the date the addressee received the first notice sent by the postmaster must prove that the first notice was
actually received by the addressee. Such proof requires a certified or sworn copy of the notice given by
the postmaster to the addressee.20
In the instant case, there is no postmasters certification to the effect that the registered mail containing
the NLRC decision was unclaimed by the addressee and thus returned to sender, after first notice was
sent to and received by the addressee on a specified date. All that appears from the records are the
envelopes containing the NLRC decision with the stamped markings and notation on the face and dorsal
sides thereof showing "RTS" (meaning, "Return To Sender") and "MOVED." Still, we must rule that
service upon PAL and the other petitioners was complete.
First, the NLRC Deputy Executive Clerk issued a Certification that the envelopes containing the NLRC
decision addressed to Mr. Jose Pepiton Garcia and Atty. Bienvenido T. Jamoralin, Jr. were returned to
the NLRC with the notation "RTS" and "MOVED." Yet, they and the other petitioners, including PAL,
have not filed any notice of change of address at any time prior to the issuance of the NLRC decision up
to the date when the Certification was issued on January 24, 2000.
Second, the non-receipt by PAL and the other petitioners of the copies of the NLRC decision was due to
their own failure to immediately file a notice of change of address with the NLRC, which they expressly
admitted. It is settled that where a party appears by attorney in an action or proceeding in a court of
record, all notices or orders required to be given therein must be given to the attorney of record.

Accordingly, notices to counsel should be properly sent to his address of record, and, unless the counsel
files a notice of change of address, his official address remains to be that of his address of record.21
PALs argument that its chaotic situation due to its rehabilitation rendered the filing of a notice of change
of address impractical does not merit consideration. Since moving out from its office at Allied Bank
Center, where the NLRC decision was sent, PAL occupied four different office addresses. Yet these
office addresses could be found in the same building, the PAL Center Building in Makati City. PAL
merely moved from one floor to another. To our mind, it would have been more prudent had PAL
informed the NLRC that it has moved from one floor to another rather than allowed its old address at
Allied Bank Center to remain as its official address. To rule in favor of PAL considering the
circumstances in the instant case would negate the purpose of the rules on completeness of service and
the notice of change of address, which is to place the date of receipt of pleadings, judgments and
processes beyond the power of the party being served to determine at his pleasure.22
Resultantly, service of the NLRC decision via registered mail was deemed completed as of August 16,
1999, or five days after the first notice on August 11, 1999. As such, PAL only had 10 days from August
16, 1999 to file its motion for reconsideration. Its motion filed on October 29, 1999 was therefore late.
Hence the NLRC decision became final and executory.
With this conclusion, it is no longer necessary to dwell on the other issues raised.
One final note. In CA-G.R. SP No. 68795, PAL conceded that Zamoras reinstatement is no longer
possible due to his detention in jail for the crime of murder since October 2, 2000. As such, we defer to
the order of the Court of Appeals which mandated the payment of separation pay instead.
WHEREFORE, the consolidated petitions are DENIED. The Amended Decision dated February 1, 2005
of the Court of Appeals in CA-G.R. SP No. 68795 is hereby AFFIRMED. The Decision dated April 27,
2004 in CA-G.R. SP No. 56428 is AFFIRMED with the modification that the order for immediate
reinstatement is deleted.
Costs against the petitioners.
SO ORDERED.
G.R. No. 172013

October 2, 2009

PATRICIA HALAGUEA, MA. ANGELITA L. PULIDO, MA. TERESITA P. SANTIAGO,

MARIANNE V. KATINDIG, BERNADETTE A. CABALQUINTO, LORNA B. TUGAS, MARY
CHRISTINE A. VILLARETE, CYNTHIA A. STEHMEIER, ROSE ANNA G. VICTA, NOEMI R.
CRESENCIO, and other flight attendants of PHILIPPINE AIRLINES, Petitioners,
vs.
PHILIPPINE AIRLINES INCORPORATED, Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision1 and the Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No.
86813.

Petitioners were employed as female flight attendants of respondent Philippine Airlines (PAL) on
different dates prior to November 22, 1996. They are members of the Flight Attendants and Stewards
Association of the Philippines (FASAP), a labor organization certified as the sole and exclusive certified
as the sole and exclusive bargaining representative of the flight attendants, flight stewards and pursers of
respondent.
On July 11, 2001, respondent and FASAP entered into a Collective Bargaining Agreement3 incorporating
the terms and conditions of their agreement for the years 2000 to 2005, hereinafter referred to as PALFASAP CBA.
Section 144, Part A of the PAL-FASAP CBA, provides that:
A. For the Cabin Attendants hired before 22 November 1996:
xxxx
3. Compulsory Retirement
Subject to the grooming standards provisions of this Agreement, compulsory retirement shall be fiftyfive (55) for females and sixty (60) for males. x x x.
In a letter dated July 22, 2003,4 petitioners and several female cabin crews manifested that the
aforementioned CBA provision on compulsory retirement is discriminatory, and demanded for an equal
treatment with their male counterparts. This demand was reiterated in a letter5 by petitioners' counsel
addressed to respondent demanding the removal of gender discrimination provisions in the coming renegotiations of the PAL-FASAP CBA.
On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA
proposals6 and manifested their willingness to commence the collective bargaining negotiations between
the management and the association, at the soonest possible time.
On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the
Issuance of Temporary Restraining Order and Writ of Preliminary Injunction7 with the Regional Trial
Court (RTC) of Makati City, Branch 147, docketed as Civil Case No. 04-886, against respondent for the
invalidity of Section 144, Part A of the PAL-FASAP CBA. The RTC set a hearing on petitioners'
application for a TRO and, thereafter, required the parties to submit their respective memoranda.
On August 9, 2004, the RTC issued an Order8 upholding its jurisdiction over the present case. The RTC
reasoned that:
In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA which is allegedly
discriminatory as it discriminates against female flight attendants, in violation of the Constitution, the
Labor Code, and the CEDAW. The allegations in the Petition do not make out a labor dispute arising
from employer-employee relationship as none is shown to exist. This case is not directed specifically
against respondent arising from any act of the latter, nor does it involve a claim against the respondent.
Rather, this case seeks a declaration of the nullity of the questioned provision of the CBA, which is
within the Court's competence, with the allegations in the Petition constituting the bases for such relief
sought.
The RTC issued a TRO on August 10, 2004,9 enjoining the respondent for implementing Section 144,
Part A of the PAL-FASAP CBA.

The respondent filed an omnibus motion10 seeking reconsideration of the order overruling its objection
to the jurisdiction of the RTC the lifting of the TRO. It further prayed that the (1) petitioners' application
for the issuance of a writ of preliminary injunction be denied; and (2) the petition be dismissed or the
proceedings in this case be suspended.
On September 27, 2004, the RTC issued an Order11 directing the issuance of a writ of preliminary
injunction enjoining the respondent or any of its agents and representatives from further implementing
Sec. 144, Part A of the PAL-FASAP CBA pending the resolution of the case.
Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with Prayer
for a Temporary Restraining Order and Writ of Preliminary Injunction12 with the Court of Appeals (CA)
praying that the order of the RTC, which denied its objection to its jurisdiction, be annuled and set aside
for having been issued without and/or with grave abuse of discretion amounting to lack of jurisdiction.
The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and ruled that:
WHEREFORE, the respondent court is by us declared to have NO JURISDICTION OVER THE CASE
BELOW and, consequently, all the proceedings, orders and processes it has so far issued therein are
ANNULED and SET ASIDE. Respondent court is ordered to DISMISS its Civil Case No. 04-886.
SO ORDERED.
Petitioner filed a motion for reconsideration,13 which was denied by the CA in its Resolution dated
March 7, 2006.
Hence, the instant petition assigning the following error:
THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR
DISPUTE OR GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.
The main issue in this case is whether the RTC has jurisdiction over the petitioners' action challenging
the legality or constitutionality of the provisions on the compulsory retirement age contained in the CBA
between respondent PAL and FASAP.
Petitioners submit that the RTC has jurisdiction in all civil actions in which the subject of the litigation is
incapable of pecuniary estimation and in all cases not within the exclusive jurisdiction of any court,
tribunal, person or body exercising judicial or quasi-judicial functions. The RTC has the power to
adjudicate all controversies except those expressly witheld from the plenary powers of the court.
Accordingly, it has the power to decide issues of constitutionality or legality of the provisions of Section
144, Part A of the PAL-FASAP CBA. As the issue involved is constitutional in character, the labor
arbiter or the National Labor Relations Commission (NLRC) has no jurisdiction over the case and, thus,
the petitioners pray that judgment be rendered on the merits declaring Section 144, Part A of the PALFASAP CBA null and void.
Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the present case, as
the controversy partakes of a labor dispute. The dispute concerns the terms and conditions of petitioners'
employment in PAL, specifically their retirement age. The RTC has no jurisdiction over the subject
matter of petitioners' petition for declaratory relief because the Voluntary Arbitrator or panel of
Voluntary Arbitrators have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the CBA. Regular courts have no power
to set and fix the terms and conditions of employment. Finally, respondent alleged that petitioners'

prayer before this Court to resolve their petition for declaratory relief on the merits is procedurally
improper and baseless.
The petition is meritorious.
Jurisdiction of the court is determined on the basis of the material allegations of the complaint and the
character of the relief prayed for irrespective of whether plaintiff is entitled to such relief.14
In the case at bar, the allegations in the petition for declaratory relief plainly show that petitioners' cause
of action is the annulment of Section 144, Part A of the PAL-FASAP CBA. The pertinent portion of the
petition recites:
CAUSE OF ACTION
24. Petitioners have the constitutional right to fundamental equality with men under Section 14,
Article II, 1987 of the Constitution and, within the specific context of this case, with the male
cabin attendants of Philippine Airlines.
26. Petitioners have the statutory right to equal work and employment opportunities with men
under Article 3, Presidential Decree No. 442, The Labor Code and, within the specific context of
this case, with the male cabin attendants of Philippine Airlines.
27. It is unlawful, even criminal, for an employer to discriminate against women employees with
respect to terms and conditions of employment solely on account of their sex under Article 135
of the Labor Code as amended by Republic Act No. 6725 or the Act Strengthening Prohibition
on Discrimination Against Women.
28. This discrimination against Petitioners is likewise against the Convention on the Elimination
of All Forms of Discrimination Against Women (hereafter, "CEDAW"), a multilateral convention
that the Philippines ratified in 1981. The Government and its agents, including our courts, not
only must condemn all forms of discrimination against women, but must also implement
measures towards its elimination.
29. This case is a matter of public interest not only because of Philippine Airlines' violation of
the Constitution and existing laws, but also because it highlights the fact that twenty-three years
after the Philippine Senate ratified the CEDAW, discrimination against women continues.
31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory retirement from
service is invidiously discriminatory against and manifestly prejudicial to Petitioners because,
they are compelled to retire at a lower age (fifty-five (55) relative to their male counterparts
(sixty (60).
33. There is no reasonable, much less lawful, basis for Philippine Airlines to distinguish,
differentiate or classify cabin attendants on the basis of sex and thereby arbitrarily set a lower
compulsory retirement age of 55 for Petitioners for the sole reason that they are women.
37. For being patently unconstitutional and unlawful, Section 114, Part A of the PAL-FASAP
2000-2005 CBA must be declared invalid and stricken down to the extent that it discriminates
against petitioner.

38. Accordingly, consistent with the constitutional and statutory guarantee of equality between
men and women, Petitioners should be adjudged and declared entitled, like their male
counterparts, to work until they are sixty (60) years old.
PRAYER
WHEREFORE, it is most respectfully prayed that the Honorable Court:
c. after trial on the merits:
(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID, NULL and VOID to the
extent that it discriminates against Petitioners; x x x x
From the petitioners' allegations and relief prayed for in its petition, it is clear that the issue raised is
whether Section 144, Part A of the PAL-FASAP CBA is unlawful and unconstitutional. Here, the
petitioners' primary relief in Civil Case No. 04-886 is the annulment of Section 144, Part A of the PALFASAP CBA, which allegedly discriminates against them for being female flight attendants. The subject
of litigation is incapable of pecuniary estimation, exclusively cognizable by the RTC, pursuant to
Section 19 (1) of Batas Pambansa Blg. 129, as amended.15 Being an ordinary civil action, the same is
beyond the jurisdiction of labor tribunals.
The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the application
of the Constitution, labor statutes, law on contracts and the Convention on the Elimination of All Forms
of Discrimination Against Women,16 and the power to apply and interpret the constitution and CEDAW
is within the jurisdiction of trial courts, a court of general jurisdiction. In Georg Grotjahn GMBH & Co.
v. Isnani,17 this Court held that not every dispute between an employer and employee involves matters
that only labor arbiters and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee relationship which can only be resolved by reference to
the Labor Code, other labor statutes, or their collective bargaining agreement.
Not every controversy or money claim by an employee against the employer or vice-versa is within the
exclusive jurisdiction of the labor arbiter. Actions between employees and employer where the
employer-employee relationship is merely incidental and the cause of action precedes from a different
source of obligation is within the exclusive jurisdiction of the regular court.18 Here, the employeremployee relationship between the parties is merely incidental and the cause of action ultimately arose
from different sources of obligation, i.e., the Constitution and CEDAW.
Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or other
labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction
over the dispute belongs to the regular courts of justice and not to the labor arbiter and the NLRC. In
such situations, resolution of the dispute requires expertise, not in labor management relations nor in
wage structures and other terms and conditions of employment, but rather in the application of the
general civil law. Clearly, such claims fall outside the area of competence or expertise ordinarily
ascribed to labor arbiters and the NLRC and the rationale for granting jurisdiction over such claims to
these agencies disappears.19
If We divest the regular courts of jurisdiction over the case, then which tribunal or forum shall determine
the constitutionality or legality of the assailed CBA provision?
This Court holds that the grievance machinery and voluntary arbitrators do not have the power to
determine and settle the issues at hand. They have no jurisdiction and competence to decide

constitutional issues relative to the questioned compulsory retirement age. Their exercise of jurisdiction
is futile, as it is like vesting power to someone who cannot wield it.
In Gonzales v. Climax Mining Ltd.,20 this Court affirmed the jurisdiction of courts over questions on
constitutionality of contracts, as the same involves the exercise of judicial power. The Court said:
Whether the case involves void or voidable contracts is still a judicial question. It may, in some
instances, involve questions of fact especially with regard to the determination of the circumstances of
the execution of the contracts. But the resolution of the validity or voidness of the contracts remains a
legal or judicial question as it requires the exercise of judicial function. It requires the ascertainment of
what laws are applicable to the dispute, the interpretation and application of those laws, and the
rendering of a judgment based thereon. Clearly, the dispute is not a mining conflict. It is essentially
judicial. The complaint was not merely for the determination of rights under the mining contracts since
the very validity of those contracts is put in issue.
In Saura v. Saura, Jr.,21 this Court emphasized the primacy of the regular court's judicial power
enshrined in the Constitution that is true that the trend is towards vesting administrative bodies like the
SEC with the power to adjudicate matters coming under their particular specialization, to insure a more
knowledgeable solution of the problems submitted to them. This would also relieve the regular courts of
a substantial number of cases that would otherwise swell their already clogged dockets. But as
expedient as this policy may be, it should not deprive the courts of justice of their power to decide
ordinary cases in accordance with the general laws that do not require any particular expertise or
training to interpret and apply. Otherwise, the creeping take-over by the administrative agencies of
the judicial power vested in the courts would render the judiciary virtually impotent in the discharge
of the duties assigned to it by the Constitution.
To be sure, in Rivera v. Espiritu,22 after Philippine Airlines (PAL) and PAL Employees Association
(PALEA) entered into an agreement, which includes the provision to suspend the PAL-PALEA CBA for
10 years, several employees questioned its validity via a petition for certiorari directly to the Supreme
Court. They said that the suspension was unconstitutional and contrary to public policy. Petitioners
submit that the suspension was inordinately long, way beyond the maximum statutory life of 5 years for
a CBA provided for in Article 253-A of the Labor Code. By agreeing to a 10-year suspension, PALEA,
in effect, abdicated the workers' constitutional right to bargain for another CBA at the mandated time.
In that case, this Court denied the petition for certiorari, ruling that there is available to petitioners a
plain, speedy, and adequate remedy in the ordinary course of law. The Court said that while the petition
was denominated as one for certiorari and prohibition, its object was actually the nullification of the
PAL-PALEA agreement. As such, petitioners' proper remedy is an ordinary civil action for annulment of
contract, an action which properly falls under the jurisdiction of the regional trial courts.
The change in the terms and conditions of employment, should Section 144 of the CBA be held invalid,
is but a necessary and unavoidable consequence of the principal relief sought, i.e., nullification of the
alleged discriminatory provision in the CBA. Thus, it does not necessarily follow that a resolution of
controversy that would bring about a change in the terms and conditions of employment is a labor
dispute, cognizable by labor tribunals. It is unfair to preclude petitioners from invoking the trial court's
jurisdiction merely because it may eventually result into a change of the terms and conditions of
employment. Along that line, the trial court is not asked to set and fix the terms and conditions of
employment, but is called upon to determine whether CBA is consistent with the laws.
Although the CBA provides for a procedure for the adjustment of grievances, such referral to the
grievance machinery and thereafter to voluntary arbitration would be inappropriate to the petitioners,

because the union and the management have unanimously agreed to the terms of the CBA and their
interest is unified.
In Pantranco North Express, Inc., v. NLRC,23 this Court held that:
x x x Hence, only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an agreement regarding
the dismissal of private respondents. No grievance between them exists which could be brought to a
grievance machinery. The problem or dispute in the present case is between the union and the company
on the one hand and some union and non-union members who were dismissed, on the other hand. The
dispute has to be settled before an impartial body. The grievance machinery with members designated by
the union and the company cannot be expected to be impartial against the dismissed employees. Due
process demands that the dismissed workers grievances be ventilated before an impartial body. x x x .
Applying the same rationale to the case at bar, it cannot be said that the "dispute" is between the union
and petitioner company because both have previously agreed upon the provision on "compulsory
retirement" as embodied in the CBA. Also, it was only private respondent on his own who questioned
the compulsory retirement. x x x.
In the same vein, the dispute in the case at bar is not between FASAP and respondent PAL, who have
both previously agreed upon the provision on the compulsory retirement of female flight attendants as
embodied in the CBA. The dispute is between respondent PAL and several female flight attendants who
questioned the provision on compulsory retirement of female flight attendants. Thus, applying the
principle in the aforementioned case cited, referral to the grievance machinery and voluntary arbitration
would not serve the interest of the petitioners.
Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator under the CBA
would be futile because respondent already implemented Section 114, Part A of PAL-FASAP CBA when
several of its female flight attendants reached the compulsory retirement age of 55.
Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its association's bargaining
proposal for the remaining period of 2004-2005 of the PAL-FASAP CBA, which includes the
renegotiation of the subject Section 144. However, FASAP's attempt to change the questioned provision
was shallow and superficial, to say the least, because it exerted no further efforts to pursue its proposal.
When petitioners in their individual capacities questioned the legality of the compulsory retirement in
the CBA before the trial court, there was no showing that FASAP, as their representative, endeavored to
adjust, settle or negotiate with PAL for the removal of the difference in compulsory age retirement
between its female and male flight attendants, particularly those employed before November 22, 1996.
Without FASAP's active participation on behalf of its female flight attendants, the utilization of the
grievance machinery or voluntary arbitration would be pointless.
The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA.
Interpretation, as defined in Black's Law Dictionary, is the art of or process of discovering and
ascertaining the meaning of a statute, will, contract, or other written document.24 The provision
regarding the compulsory retirement of flight attendants is not ambiguous and does not require
interpretation. Neither is there any question regarding the implementation of the subject CBA provision,
because the manner of implementing the same is clear in itself. The only controversy lies in its intrinsic
validity.

Although it is a rule that a contract freely entered between the parties should be respected, since a
contract is the law between the parties, said rule is not absolute.
In Pakistan International Airlines Corporation v. Ople,25 this Court held that:
The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article
1306, of our Civil Code is that the contracting parties may establish such stipulations as they may deem
convenient, "provided they are not contrary to law, morals, good customs, public order or public policy."
Thus, counter-balancing the principle of autonomy of contracting parties is the equally general rule that
provisions of applicable law, especially provisions relating to matters affected with public policy, are
deemed written into the contract. Put a little differently, the governing principle is that parties may not
contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest. The law relating to labor and employment is clearly such an area
and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws
and regulations by simply contracting with each other.
Moreover, the relations between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good.x x x 26 The supremacy of the
law over contracts is explained by the fact that labor contracts are not ordinary contracts; these are
imbued with public interest and therefore are subject to the police power of the state.27 It should not be
taken to mean that retirement provisions agreed upon in the CBA are absolutely beyond the ambit of
judicial review and nullification. A CBA, as a labor contract, is not merely contractual in nature but
impressed with public interest. If the retirement provisions in the CBA run contrary to law, public
morals, or public policy, such provisions may very well be voided.28
Finally, the issue in the petition for certiorari brought before the CA by the respondent was the alleged
exercise of grave abuse of discretion of the RTC in taking cognizance of the case for declaratory relief.
When the CA annuled and set aside the RTC's order, petitioners sought relief before this Court through
the instant petition for review under Rule 45. A perusal of the petition before Us, petitioners pray for the
declaration of the alleged discriminatory provision in the CBA against its female flight attendants.
This Court is not persuaded. The rule is settled that pure questions of fact may not be the proper subject
of an appeal by certiorari under Rule 45 of the Revised Rules of Court. This mode of appeal is generally
limited only to questions of law which must be distinctly set forth in the petition. The Supreme Court is
not a trier of facts.29
The question as to whether said Section 114, Part A of the PAL-FASAP CBA is discriminatory or not is a
question of fact. This would require the presentation and reception of evidence by the parties in order for
the trial court to ascertain the facts of the case and whether said provision violates the Constitution,
statutes and treaties. A full-blown trial is necessary, which jurisdiction to hear the same is properly
lodged with the the RTC. Therefore, a remand of this case to the RTC for the proper determination of the
merits of the petition for declaratory relief is just and proper.1avvphi1
WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of
Appeals, dated August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813
are REVERSED and SET ASIDE. The Regional Trial Court of Makati City, Branch 147 is DIRECTED
to continue the proceedings in Civil Case No. 04-886 with deliberate dispatch.
SO ORDERED.
G.R. No. 180962

February 26, 2014

PIDLTRANCO SERVICE ENTERPRISES, INC., represented by its Vice-President for

Administration, M/GEN. NEMESIO M. SIGAYA, Petitioner,
vs.
PHILTRANCO WORKERS UNION-ASSOCIATION OF GENUINE LABOR
ORGANIZATIONS (PWU-AGLO), represented by JOSE JESSIE OLIVAR, Respondent.
DECISION
DEL CASTILLO, J.:
While a government office1 may prohibit altogether the filing of a motion for reconsideration with
respect to its decisions or orders, the fact remains that certiorari inherently requires the filing of a motion
for reconsideration, which is the tangible representation of the opportunity given to the office to correct
itself. Unless it is filed, there could be no occasion to rectify. Worse, the remedy of certiorari would be
unavailing. Simply put, regardless of the proscription against the filing of a motion for reconsideration,
the same may be filed on the assumption that rectification of the decision or order must be obtained, and
before a petition for certiorari may be instituted.
This Petition for Review on Certiorari2 seeks a review and setting aside of the September 20, 2007
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 100324,4 as well as its December 14, 2007
Resolution5 denying petitioners Motion for Reconsideration.
Factual Antecedents
On the ground that it was suffering business losses, petitioner Philtranco Service Enterprises, Inc., a
local land transportation company engaged in the business of carrying passengers and freight, retrenched
21 of its employees. Consequently, the company union, herein private respondent Philtranco Workers
Union-Association of Genuine Labor Organizations (PWU-AGLU), filed a Notice of Strike with the
Department of Labor and Employment (DOLE), claiming that petitioner engaged in unfair labor
practices. The case was docketed as NCMB-NCR CASE No. NS-02-028-07.
Unable to settle their differences at the scheduled February 21, 2007 preliminary conference held before
Conciliator-Mediator Amorsolo Aglibut (Aglibut) of the National Conciliation and Mediation Board
(NCMB), the case was thereafter referred to the Office of the Secretary of the DOLE (Secretary of
Labor), where the case was docketed as Case No. OS-VA-2007-008.
After considering the parties respective position papers and other submissions, Acting DOLE Secretary
Danilo P. Cruz issued a Decision6 dated June 13, 2007, the dispositive portion of which reads, as
follows:
WHEREFORE, premises considered, we hereby ORDER Philtranco to:
1. REINSTATE to their former positions, without loss of seniority rights, the ILLEGALLY
TERMINATED 17 "union officers", x x x, and PAY them BACKWAGES from the time of
termination until their actual or payroll reinstatement, provided in the computation of backwages
among the seventeen (17) who had received their separation pay should deduct the payments
made to them from the backwages due them.
2. MAINTAIN the status quo and continue in full force and effect the terms and conditions of the
existing CBA specifically, Article VI on Salaries and Wages (commissions) and Article XI, on
Medical and Hospitalization until a new agreement is reached by the parties; and

3. REMIT the withheld union dues to PWU-AGLU without unnecessary delay.

The PARTIES are enjoined to strictly and fully comply with the provisions of the existing CBA and the
other dispositions of this Decision.
SO ORDERED.7
Petitioner received a copy of the above Decision on June 14, 2007. It filed a Motion for Reconsideration
on June 25, 2007, a Monday. Private respondent, on the other hand, submitted a "Partial Appeal."
In an August 15, 2007 Order8 which petitioner received on August 17, 2007, the Secretary of Labor
declined to rule on petitioners Motion for Reconsideration and private respondents "Partial Appeal",
citing a DOLE Regulation9 which provided that voluntary arbitrators decisions, orders, resolutions or
awards shall not be the subject of motions for reconsideration. The Secretary of Labor held:
WHEREFORE, the complainants and the respondents respective pleadings are hereby NOTED as
pleadings that need not be acted upon for lack of legal basis.
SO ORDERED.10
The Assailed Court of Appeals Resolutions
On August 29, 2007, petitioner filed before the CA an original Petition for Certiorari and Prohibition,
and sought injunctive relief, which case was docketed as CA-G.R. SP No. 100324.
On September 20, 2007, the CA issued the assailed Resolution which decreed as follows:
WHEREFORE, premises considered, the instant Petition for Certiorari and Prohibition with Prayer for
Temporary Restraining Order and Preliminary Injunction is hereby DISMISSED. Philtrancos pleading
entitled "Reiterating Motion for The Issuance of Writ of Preliminary Injunction and/or Temporary
Restraining Order" is NOTED.
SO ORDERED.11
The CA held that, in assailing the Decision of the DOLE voluntary arbitrator, petitioner erred in filing a
petition for certiorari under Rule 65 of the 1997 Rules, when it should have filed a petition for review
under Rule 43 thereof, which properly covers decisions of voluntary labor arbitrators.12 For this reason,
the petition is dismissible pursuant to Supreme Court Circular No. 2-90.13 The CA added that since the
assailed Decision was not timely appealed within the reglementary 15-day period under Rule 43, the
same became final and executory. Finally, the appellate court ruled that even assuming for the sake of
argument that certiorari was indeed the correct remedy, still the petition should be dismissed for being
filed out of time. Petitioners unauthorized Motion for Reconsideration filed with the Secretary of Labor
did not toll the running of the reglementary 60-day period within which to avail of certiorari; thus, from
the time of its receipt of Acting Labor Secretary Cruzs June 13, 2007 Decision on June 14 or the
following day, petitioner had until August 13 to file the petition yet it filed the same only on August
29.
Petitioner filed a Motion for Reconsideration, which was denied by the CA through the second assailed
December 14, 2007 Resolution. In denying the motion, the CA held that the fact that the Acting
Secretary of Labor rendered the decision on the voluntary arbitration case did not remove the same from
the jurisdiction of the NCMB, which thus places the case within the coverage of Rule 43.

Issues
In this Petition,14 the following errors are assigned:
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER
AVAILED OF THE ERRONEOUS REMEDY IN FILING A PETITION FOR CERTIORARI UNDER
RULE 65 INSTEAD OF UNDER RULE 43 OF THE RULES OF COURT.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE PETITION FOR
CERTIORARI WAS FILED OUT OF TIME.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION
OUTRIGHT ON THE BASIS OF PURE TECHNICALITY.15
Petitioners Arguments
In its Petition and Reply,16 petitioner argues that a petition for certiorari under Rule 65 and not a
petition for review under Rule 43 is the proper remedy to assail the June 13, 2007 Decision of the
DOLE Acting Secretary, pointing to the Courts pronouncement in National Federation of Labor v. Hon.
Laguesma17 that the remedy of an aggrieved party against the decisions and discretionary acts of the
NLRC as well as the Secretary of Labor is to timely file a motion for reconsideration, and then
seasonably file a special civil action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
Petitioner adds that, contrary to the CAs ruling, NCMB-NCR CASE No. NS-02-028-07 is not a simple
voluntary arbitration case. The character of the case, which involves an impending strike by petitioners
employees; the nature of petitioners business as a public transportation company, which is imbued with
public interest; the merits of its case; and the assumption of jurisdiction by the Secretary of Labor all
these circumstances removed the case from the coverage of Article 262,18 and instead placed it under
Article 263,19 of the Labor Code. Besides, Rule 43 does not apply to judgments or final orders issued
under the Labor Code.20
On the procedural issue, petitioner insists that it timely filed the Petition for Certiorari with the CA,
arguing that Rule 65 fixes the 60-day period within which to file the petition from notice of the denial of
a timely filed motion for reconsideration, whether such motion is required or not. It cites the Courts
pronouncement in ABS-CBN Union Members v. ABS-CBN Corporation21 that "before a petition for
certiorari under Rule 65 of the Rules of Court may be availed of, the filing of a motion for
reconsideration is a condition sine qua non to afford an opportunity for the correction of the error or
mistake complained of" and since "a decision of the Secretary of Labor is subject to judicial review only
through a special civil action of certiorari x x x [it] cannot be resorted to without the aggrieved party
having exhausted administrative remedies through a motion for reconsideration".
Respondents Arguments
In its Comment,22 respondent argues that the Secretary of Labor decided Case No. OS-VA-2007-008 in
his capacity as voluntary arbitrator; thus, his decision, being that of a voluntary arbitrator, is only
assailable via a petition for review under Rule 43. It further echoes the CAs ruling that even granting
that certiorari was the proper remedy, the same was filed out of time as the filing of a motion for
reconsideration, which was an unauthorized pleading, did not toll the running of the 60-day period.
Finally, it argues that on the merits, petitioners case could not hold water as it failed to abide by the
requirements of law in effecting a retrenchment on the ground of business losses.
Our Ruling

The Court grants the Petition.

It cannot be said that in taking cognizance of NCMB-NCR CASE No. NS-02-028-07, the Secretary of
Labor did so in a limited capacity, i.e., as a voluntary arbitrator. The fact is undeniable that by referring
the case to the Secretary of Labor, Conciliator-Mediator Aglibut conceded that the case fell within the
coverage of Article 263 of the Labor Code; the impending strike in Philtranco, a public transportation
company whose business is imbued with public interest, required that the Secretary of Labor assume
jurisdiction over the case, which he in fact did. By assuming jurisdiction over the case, the provisions of
Article 263 became applicable, any representation to the contrary or that he is deciding the case in his
capacity as a voluntary arbitrator notwithstanding.
It has long been settled that the remedy of an aggrieved party in a decision or resolution of the Secretary
of Labor is to timely file a motion for reconsideration as a precondition for any further or subsequent
remedy, and then seasonably file a special civil action for certiorari under Rule 65 of the 1997 Rules on
Civil Procedure.23 There is no distinction: when the Secretary of Labor assumes jurisdiction over a labor
case in an industry indispensable to national interest, "he exercises great breadth of discretion" in finding
a solution to the parties dispute.24 "[T]he authority of the Secretary of Labor to assume jurisdiction over
a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to national
interest includes and extends to all questions and controversies arising therefrom. The power is plenary
and discretionary in nature to enable him to effectively and efficiently dispose of the primary
dispute."25 This wide latitude of discretion given to the Secretary of Labor may not be the subject of
appeal.
Accordingly, the Secretary of Labors Decision in Case No. OS-VA-2007-008 is a proper subject of
certiorari, pursuant to the Courts pronouncement in National Federation of Labor v. Laguesma,26 thus:
Though appeals from the NLRC to the Secretary of Labor were eliminated, presently there are several
instances in the Labor Code and its implementing and related rules where an appeal can be filed with the
Office of the Secretary of Labor or the Secretary of Labor issues a ruling, to wit:
xxxx
(6) Art. 263 provides that the Secretary of Labor shall decide or resolve the labor dispute [over] which
he assumed jurisdiction within thirty (30) days from the date of the assumption of jurisdiction. His
decision shall be final and executory ten (10) calendar days after receipt thereof by the parties.
From the foregoing we see that the Labor Code and its implementing and related rules generally do not
provide for any mode for reviewing the decision of the Secretary of Labor. It is further generally
provided that the decision of the Secretary of Labor shall be final and executory after ten (10) days from
notice. Yet, like decisions of the NLRC which under Art. 223 of the Labor Code become final after ten
(10) days, decisions of the Secretary of Labor come to this Court by way of a petition for certiorari even
beyond the ten-day period provided in the Labor Code and the implementing rules but within the
reglementary period set for Rule 65 petitions under the 1997 Rules of Civil Procedure. x x x
xxxx
In fine, we find that it is procedurally feasible as well as practicable that petitions for certiorari under
Rule 65 against the decisions of the Secretary of Labor rendered under the Labor Code and its
implementing and related rules be filed initially in the Court of Appeals. Paramount consideration is
strict observance of the doctrine on the hierarchy of the courts, emphasized in St. Martin Funeral Homes
v. NLRC, on "the judicial policy that this Court will not entertain direct resort to it unless the redress

desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances
justify availment of a remedy within and calling for the exercise of our primary jurisdiction."27
On the question of whether the Petition for Certiorari was timely filed, the Court agrees with petitioners
submission. Rule 65 states that where a motion for reconsideration or new trial is timely filed, whether
such motion is required or not, the petition shall be filed not later than 60 days counted from the notice
of the denial of the motion.28 This can only mean that even though a motion for reconsideration is not
required or even prohibited by the concerned government office, and the petitioner files the motion just
the same, the 60-day period shall nonetheless be counted from notice of the denial of the motion. The
very nature of certiorari which is an extraordinary remedy resorted to only in the absence of plain,
available, speedy and adequate remedies in the course of law requires that the office issuing the
decision or order be given the opportunity to correct itself. Quite evidently, this opportunity for
rectification does not arise if no motion for reconsideration has been filed. This is precisely what the
Court said in the ABS-CBN Union Members case, whose essence continues to this day. Thus:
Section 8, Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code, provides:
"The Secretary shall have fifteen (15) calendar days within which to decide the appeal from receipt of
the records of the case. The decision of the Secretary shall be final and inappealable." x x x
The aforecited provision cannot be construed to mean that the Decision of the public respondent cannot
be reconsidered since the same is reviewable by writ of certiorari under Rule 65 of the Rules of Court.
As a rule, the law requires a motion for reconsideration to enable the public respondent to correct his
mistakes, if any. In Pearl S. Buck Foundation, Inc., vs. NLRC, this Court held:
"Hence, the only way by which a labor case may reach the Supreme Court is through a petition for
certiorari under Rule 65 of the Rules of Court alleging lack or excess of jurisdiction or grave abuse of
discretion. Such petition may be filed within a reasonable time from receipt of the resolution denying the
motion for reconsideration of the NLRC decision." x x x
Clearly, before a petition for certiorari under Rule 65 of the Rules of Court may be availed of, the filing
of a motion for reconsideration is a condition sine qua non to afford an opportunity for the correction of
the error or mistake complained of.
So also, considering that a decision of the Secretary of Labor is subject to judicial review only through a
special civil action of certiorari and, as a rule, cannot be resorted to without the aggrieved party having
exhausted administrative remedies through a motion for reconsideration, the aggrieved party, must be
allowed to move for a reconsideration of the same so that he can bring a special civil action for certiorari
before the Supreme Court.29
Indeed, what needs to be realized is that while a government office may prohibit altogether the filing of
a motion for reconsideration with respect to its decisions or orders, the fact remains that certiorari
inherently requires the filing of a motion for reconsideration, which is the tangible representation of the
opportunity given to the office to correct itself. Unless it is filed, there could be no occasion to rectify.
Worse, the remedy of certiorari would be unavailing. Simply put, regardless of the proscription against
the filing of a motion for reconsideration, the same may be filed on the assumption that rectification of
the decision or order must be obtained, and before a petition for certiorari may be instituted.
Petitioner received a copy of the Acting Secretary of Labors Decision on June 14, 2007.1wphi1 It
timely filed a Motion for Reconsideration on June 25, which was a Monday, or the first working day
following the last day (Sunday, June 24) for filing the motion. But for lack of procedural basis, the same
was effectively denied by the Secretary of Labor via his August 15, 2007 Order which petitioner

received on August 17. It then filed the Petition for Certiorari on August 29, or well within the fresh 60day period allowed by the Rules from August 17. Given these facts, the Court finds that the Petition was
timely filed.
Going by the foregoing pronouncements, the CA doubly erred in dismissing CA-G.R. SP No. 100324.
WHEREFORE, the Petition is GRANTED. The assailed September 20, 2007 and December 14, 2007
Resolutions of the Court of Appeals are REVERSED and SET ASIDE. The Petition in CA-G.R. SP No.
100324 is ordered REINSTATED and the Court of Appeals is DIRECTED to RESOLVE the same with
DELIBERATE DISPATCH.
SO ORDERED.
G.R. No. 170054

January 21, 2013

GOYA, INC., Petitioner,

vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks to reverse and
set aside the June 16, 2005 Decision1 and October 12, 2005 Resolution2 of the Court of Appeals in CAG.R. SP No. 87335, which sustained the October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido
E. Laguesma, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of unfair labor
practice in engaging the services of PESO.
The company is, however, directed to observe and comply with its commitment as it pertains to the
hiring of casual employees when necessitated by business circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in the
manufacture, importation, and wholesale of top quality food products, hired contractual employees from
PESO Resources Development Corporation (PESO) to perform temporary and occasional services in its
factory in Parang, Marikina City. This prompted respondent Goya, Inc. Employees UnionFFW (Union)
to request for a grievance conference on the ground that the contractual workers do not belong to the
categories of employees stipulated in the existing Collective Bargaining Agreement (CBA).5 When the
matter remained unresolved, the grievance was referred to the National Conciliation and Mediation
Board (NCMB) for voluntary arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary Arbitrator
(VA) Bienvenido E. Laguesma that amicable settlement was no longer possible; hence, they agreed to
submit for resolution the solitary issue of "[w]hether or not the Company is guilty of unfair labor acts in
engaging the services of PESO, a third party service provider, under the existing CBA, laws, and
jurisprudence."6 Both parties thereafter filed their respective pleadings.

The Union asserted that the hiring of contractual employees from PESO is not a management
prerogative and in gross violation of the CBA tantamount to unfair labor practice (ULP). It noted that the
contractual workers engaged have been assigned to work in positions previously handled by regular
workers and Union members, in effect violating Section 4, Article I of the CBA, which provides for
three categories of employees in the Company, to wit:
Section 4. Categories of Employees. The parties agree on the following categories of employees:
(a) Probationary Employee. One hired to occupy a regular rank-and-file position in the Company and
is serving a probationary period. If the probationary employee is hired or comes from outside the
Company (non-Goya, Inc. employee), he shall be required to undergo a probationary period of six (6)
months, which period, in the sole judgment of management, may be shortened if the employee has
already acquired the knowledge or skills required of the job. If the employee is hired from the casual
pool and has worked in the same position at any time during the past two (2) years, the probationary
period shall be three (3) months.
(b) Regular Employee. An employee who has satisfactorily completed his probationary period and
automatically granted regular employment status in the Company.
(c) Casual Employee, One hired by the Company to perform occasional or seasonal work directly
connected with the regular operations of the Company, or one hired for specific projects of limited
duration not connected directly with the regular operations of the Company.
It was averred that the categories of employees had been a part of the CBA since the 1970s and that due
to this provision, a pool of casual employees had been maintained by the Company from which it hired
workers who then became regular workers when urgently necessary to employ them for more than a
year. Likewise, the Company sometimes hired probationary employees who also later became regular
workers after passing the probationary period. With the hiring of contractual employees, the Union
contended that it would no longer have probationary and casual employees from which it could obtain
additional Union members; thus, rendering inutile Section 1, Article III (Union Security) of the CBA,
which states:
Section 1. Condition of Employment. As a condition of continued employment in the Company, all
regular rank-and-file employees shall remain members of the Union in good standing and that new
employees covered by the appropriate bargaining unit shall automatically become regular employees of
the Company and shall remain members of the Union in good standing as a condition of continued
employment.
The Union moreover advanced that sustaining the Companys position would easily weaken and
ultimately destroy the former with the latters resort to retrenchment and/or retirement of employees and
not filling up the vacant regular positions through the hiring of contractual workers from PESO, and that
a possible scenario could also be created by the Company wherein it could "import" workers from PESO
during an actual strike.
In countering the Unions allegations, the Company argued that: (a) the law expressly allows contracting
and subcontracting arrangements through Department of Labor and Employment (DOLE) Order No. 1802; (b) the engagement of contractual employees did not, in any way, prejudice the Union, since not a
single employee was terminated and neither did it result in a reduction of working hours nor a reduction
or splitting of the bargaining unit; and (c) Section 4, Article I of the CBA merely provides for the
definition of the categories of employees and does not put a limitation on the Companys right to engage
the services of job contractors or its management prerogative to address temporary/occasional needs in
its operation.

On October 26, 2004, VA Laguesma dismissed the Unions charge of ULP for being purely speculative
and for lacking in factual basis, but the Company was directed to observe and comply with its
commitment under the CBA. The VA opined:
We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the Company and
indeed the agreement prescribes three (3) categories of employees in the Company and provides for the
definition, functions and duties of each. Material to the case at hand is the definition as regards the
functions of a casual employee described as follows:
Casual Employee One hired by the COMPANY to perform occasional or seasonal work directly
connected with the regular operations of the COMPANY, or one hired for specific projects of limited
duration not connected directly with the regular operations of the COMPANY.
While the foregoing agreement between the parties did eliminate managements prerogative of
outsourcing parts of its operations, it serves as a limitation on such prerogative particularly if it involves
functions or duties specified under the aforequoted agreement. It is clear that the parties agreed that in
the event that the Company needs to engage the services of additional workers who will perform
"occasional or seasonal work directly connected with the regular operations of the COMPANY," or
"specific projects of limited duration not connected directly with the regular operations of the
COMPANY", the Company can hire casual employees which is akin to contractual employees. If we
note the Companys own declaration that PESO was engaged to perform "temporary or occasional
services" (See the Companys Position Paper, at p. 1), then it should have directly hired the services of
casual employees rather than do it through PESO.
It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of the
CBA provision in question. It must, however, be stressed that the right of management to outsource parts
of its operations is not totally eliminated but is merely limited by the CBA. Given the foregoing, the
Companys engagement of PESO for the given purpose is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of the VA Decision,8 the Company immediately filed
a petition for review9 before the Court of Appeals (CA) under Rule 43 of the Revised Rules of Civil
Procedure to set aside the directive to observe and comply with the CBA commitment pertaining to the
hiring of casual employees when necessitated by business circumstances. Professing that such order was
not covered by the sole issue submitted for voluntary arbitration, the Company assigned the following
errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH WAS
EXPRESSLY GRANTED AND LIMITED BY BOTH PARTIES IN RULING THAT THE
ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA. 10
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND PALPABLE
ERROR IN DECLARING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE
INTENT AND SPIRIT OF THE CBA.11
On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the controversy, it
held:
This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the
engagement of PESO is not in keeping with the intent and spirit of the CBA." The said ruling is
interrelated and intertwined with the sole issue to be resolved that is, "Whether or not the Company is
guilty of unfair labor practice in engaging the services of PESO, a third party service provider, under
existing CBA, laws, and jurisprudence." Both issues concern the engagement of PESO by the Company

which is perceived as a violation of the CBA and which constitutes as unfair labor practice on the part of
the Company. This is easily discernible in the decision of the Hon. Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not
constitute unfair labor practice as it (sic) not characterized under the law as a gross violation of the
CBA. Violations of a CBA, except those which are gross in character, shall no longer be treated as unfair
labor practice. Gross violations of a CBA means flagrant and/or malicious refusal to comply with the
economic provisions of such agreement. x x x
Anent the second assigned error, the Company contends that the Hon. Voluntary Arbitrator erred in
declaring that the engagement of PESO is not in keeping with the intent and spirit of the CBA. The
Company justified its engagement of contractual employees through PESO as a management
prerogative, which is not prohibited by law. Also, it further alleged that no provision under the CBA
limits or prohibits its right to contract out certain services in the exercise of management prerogatives.
Germane to the resolution of the above issue is the provision in their CBA with respect to the categories
of the employees:
xxxx
A careful reading of the above-enumerated categories of employees reveals that the PESO contractual
employees do not fall within the enumerated categories of employees stated in the CBA of the parties.
Following the said categories, the Company should have observed and complied with the provision of
their CBA. Since the Company had admitted that it engaged the services of PESO to perform temporary
or occasional services which is akin to those performed by casual employees, the Company should have
tapped the services of casual employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a management prerogative. It
bears stressing that a management prerogative refers to the right of the employer to regulate all aspects
of employment, such as the freedom to prescribe work assignments, working methods, processes to be
followed, regulation regarding transfer of employees, supervision of their work, lay-off and discipline,
and dismissal and recall of work, presupposing the existence of employer-employee relationship. On the
basis of the foregoing definition, the Companys engagement of PESO was indeed a management
prerogative. This is in consonance with the pronouncement of the Supreme Court in the case of Manila
Electric Company vs. Quisumbing where it ruled that contracting out of services is an exercise of
business judgment or management prerogative.
This management prerogative of contracting out services, however, is not without limitation. In
contracting out services, the management must be motivated by good faith and the contracting out
should not be resorted to circumvent the law or must not have been the result of malicious arbitrary
actions. In the case at bench, the CBA of the parties has already provided for the categories of the
employees in the Companysestablishment. These categories of employees particularly with respect to
casual employees serve as limitation to the Companys prerogative to outsource parts of its operations
especially when hiring contractual employees. As stated earlier, the work to be performed by PESO was
similar to that of the casual employees. With the provision on casual employees, the hiring of PESO
contractual employees, therefore, is not in keeping with the spirit and intent of their CBA. (Citations
omitted)12
The Company moved to reconsider the CA Decision,13 but it was denied;14 hence, this petition.
Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this Court that its
stockholders and directors unanimously voted to shorten the Companys corporate existence only until

June 30, 2006, and that the three-year period allowed by law for liquidation of the Companys affairs
already expired on June 30, 2009. Referring to Gelano v. Court of Appeals,16 Public Interest Center, Inc.
v. Elma,17 and Atienza v. Villarosa,18 it urged Us, however, to still resolve the case for future guidance of
the bench and the bar as the issue raised herein allegedly calls for a clarification of a legal principle,
specifically, whether the VA is empowered to rule on a matter not covered by the issue submitted for
arbitration.
Even if this Court would brush aside technicality by ignoring the supervening event that renders this
case moot and academic19 due to the permanent cessation of the Companys business operation on June
30, 2009, the arguments raised in this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue submitted for voluntary
arbitration. Resultantly, the CA did not commit serious error when it sustained the ruling that the hiring
of contractual employees from PESO was not in keeping with the intent and spirit of the CBA. Indeed,
the opinion of the VA is germane to, or, in the words of the CA, "interrelated and intertwined with," the
sole issue submitted for resolution by the parties. This being said, the Companys invocation of Sections
4 and 5, Rule IV20 and Section 5, Rule VI21of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings dated October 15, 2004 issued by the NCMB is plainly out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v.
Saornido.22 In Ludo, the company was engaged in the manufacture of coconut oil, corn starch, glucose
and related products. In the course of its business operations, it engaged the arrastre services of CLAS
for the loading and unloading of its finished products at the wharf. The arrastre workers deployed by
CLAS to perform the services needed were subsequently hired, on different dates, as Ludos regular
rank-and-file employees. Thereafter, said employees joined LEU, which acted as the exclusive
bargaining agent of the rank-and-file employees. When LEU entered into a CBA with Ludo, providing
for certain benefits to the employees (the amount of which vary according to the length of service
rendered), it requested to include in its members period of service the time during which they rendered
arrastre services so that they could get higher benefits. The matter was submitted for voluntary
arbitration when Ludo failed to act. Per submission agreement executed by both parties, the sole issue
for resolution was the date of regularization of the workers. The VA Decision ruled that: (1) the subject
employees were engaged in activities necessary and desirable to the business of Ludo, and (2) CLAS is a
labor-only contractor of Ludo. It then disposed as follows: (a) the complainants were considered regular
employees six months from the first day of service at CLAS; (b) the complainants, being entitled to the
CBA benefits during the regular employment, were awarded sick leave, vacation leave, and annual wage
and salary increases during such period; (c) respondents shall pay attorneys fees of 10% of the total
award; and (d) an interest of 12% per annum or 1% per month shall be imposed on the award from the
date of promulgation until fully paid. The VA added that all separation and/or retirement benefits shall
be construed from the date of regularization subject only to the appropriate government laws and other
social legislation. Ludo filed a motion for reconsideration, but the VA denied it. On appeal, the CA
affirmed in toto the assailed decision; hence, a petition was brought before this Court raising the issue,
among others, of whether a voluntary arbitrator can award benefits not claimed in the submission
agreement. In denying the petition, We ruled:
Generally, the arbitrator is expected to decide only those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator can assume that he has the necessary power to make
a final settlement since arbitration is the final resort for the adjudication of disputes. The succinct
reasoning enunciated by the CA in support of its holding, that the Voluntary Arbitrator in a labor
controversy has jurisdiction to render the questioned arbitral awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those questions expressly stated and limited in the
submission agreement. However, since arbitration is the final resort for the adjudication of disputes, the

arbitrator can assume that he has the power to make a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide whether an employee was discharged for just cause, the
arbitrator in this instance can reasonably assume that his powers extended beyond giving a yes-or-no
answer and included the power to reinstate him with or without back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary jurisdiction and
authority to interpret the agreement to arbitrate and to determine the scope of his own authority subject
only, in a proper case, to the certiorari jurisdiction of this Court. The Arbitrator, as already indicated,
viewed his authority as embracing not merely the determination of the abstract question of whether or
not a performance bonus was to be granted but also, in the affirmative case, the amount thereof.
By the same token, the issue of regularization should be viewed as two-tiered issue. While the
submission agreement mentioned only the determination of the date or regularization, law and
jurisprudence give the voluntary arbitrator enough leeway of authority as well as adequate prerogative to
accomplish the reason for which the law on voluntary arbitration was created speedy labor justice. It
bears stressing that the underlying reason why this case arose is to settle, once and for all, the ultimate
question of whether respondent employees are entitled to higher benefits. To require them to file another
action for payment of such benefits would certainly undermine labor proceedings and contravene the
constitutional mandate providing full protection to labor.23
Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case
reaffirms the plenary jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to
determine the scope of his/her own authority. Subject to judicial review, the leeway of authority as well
as adequate prerogative is aimed at accomplishing the rationale of the law on voluntary arbitration
speedy labor justice. In this case, a complete and final adjudication of the dispute between the parties
necessarily called for the resolution of the related and incidental issue of whether the Company still
violated the CBA but without being guilty of ULP as, needless to state, ULP is committed only if there is
gross violation of the agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of
contractual workers from PESO was a valid exercise of management prerogative. It is confused. To
emphasize, declaring that a particular act falls within the concept of management prerogative is
significantly different from acknowledging that such act is a valid exercise thereof. What the VA and the
CA correctly ruled was that the Companys act of contracting out/outsourcing is within the purview of
management prerogative. Both did not say, however, that such act is a valid exercise thereof. Obviously,
this is due to the recognition that the CBA provisions agreed upon by the Company and the Union
delimit the free exercise of management prerogative pertaining to the hiring of contractual employees.
Indeed, the VA opined that "the right of the management to outsource parts of its operations is not totally
eliminated but is merely limited by the CBA," while the CA held that "this management prerogative of
contracting out services, however, is not without limitation. x x x These categories of employees
particularly with respect to casual employees serve as limitation to the Companys prerogative to
outsource parts of its operations especially when hiring contractual employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit.1wphi1 As in all contracts, the parties in a CBA may establish such

stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary
to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control. x x x.24
In this case, Section 4, Article I (on categories of employees) of the CBA between the Company and the
Union must be read in conjunction with its Section 1, Article III (on union security). Both are
interconnected and must be given full force and effect. Also, these provisions are clear and
unambiguous. The terms are explicit and the language of the CBA is not susceptible to any other
interpretation. Hence, the literal meaning should prevail. As repeatedly held, the exercise of
management prerogative is not unlimited; it is subject to the limitations found in law, collective
bargaining agreement or the general principles of fair play and justice25 Evidently, this case has one of
the restrictions- the presence of specific CBA provisions-unlike in San Miguel Corporation Employees
Union-PTGWO v. Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol Corporation v. NLRC,28 and
Serrano v. NLRC29cited by the Company. To reiterate, the CBA is the norm of conduct between the
parties and compliance therewith is mandated by the express policy of the law.30
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as the October 12,
2005 Resolution of the Court of Appeals, which sustained the October 26, 2004 Decision of the
Voluntary Arbitrator, are hereby AFFIRMED.
SO ORDERED.
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.

DE LEON, JR., J.:

Before us is a petition for certiorari seeking to annul the Resolution1 and the Order2 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, 19903 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 9,0005employees, 9446 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 Petition8 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 Notice9 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.
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 15dated 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 vice- president 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
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 27dated August 7, 1991 denied PICOP's motion for reconsideration.
Hence, this petition.
PICOP anchors its petition on two (2) grounds, to wit:
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
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-Cola 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 notipso 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
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.1wphi1
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.1wphi1.nt
G.R. No. 161933

April 22, 2008

STANDARD CHARTERED BANK EMPLOYEES UNION (SCBEU-NUBE), petitioner,

vs.

STANDARD CHARTERED BANK and ANNEMARIE DURBIN, in her capacity as Chief

Executive Officer, Philippines, Standard Chartered Bank, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For resolution is an appeal by certiorari filed by petitioner under Rule 45 of the Rules of Court,
assailing the Decision1 dated October 9, 2002 and Resolution2 dated January 26, 2004 issued by the
Court of Appeals (CA), dismissing their petition and affirming the Secretary of Labor and Employment's
Orders dated May 31, 2001 and August 30, 2001.
Petitioner and the Standard Chartered Bank (Bank) began negotiating for a new Collective Bargaining
Agreement (CBA) in May 2000 as their 1998-2000 CBA already expired. Due to a deadlock in the
negotiations, petitioner filed a Notice of Strike prompting the Secretary of Labor and Employment to
assume jurisdiction over the labor dispute.
On May 31, 2001, Secretary Patricia A. Sto. Tomas of the Department of Labor and Employment
(DOLE) issued an Order with the following dispositive portion:
WHEREFORE, PREMISES CONSIDERED, the Standard Chartered Bank and the Standard
Chartered Bank Employees Union are directed to execute their collective bargaining agreement
effective 01 April 2001 until 30 March 2003 incorporating therein the foregoing dispositions and
the agreements they reached in the course of negotiations and conciliation. All other submitted
issues that were not passed upon are dismissed.
The charge of unfair labor practice for bargaining in bad faith and the claim for damages relating
thereto are hereby dismissed for lack of merit.
Finally, the charge of unfair labor practice for gross violation of the economic provisions of the
CBA is hereby dismissed for want of jurisdiction.
SO ORDERED.3
Both petitioner and the Bank filed their respective motions for reconsideration, which were denied by
the Secretary per Order dated August 30, 2001.4
Petitioner sought recourse with the CA via a petition for certiorari, and in the assailed Decision dated
October 9, 20025 and Resolution dated January 26, 2004,6 the CA dismissed their petition and affirmed
the Secretary's Orders.
Hence, herein petition based on the following grounds:
I.
THE COURT A QUO ERRED IN DECIDING THAT THERE WAS NO BASIS FOR
REVISING THE SCOPE OF EXCLUSIONS FROM THE APPROPRIATE BARGAINING
UNIT UNDER THE CBA.
II.

THE COURT A QUO ERRED IN DECIDING THAT A ONE-MONTH OR LESS

TEMPORARY OCCUPATION OF A POSITION (ACTING CAPACITY) DOES NOT MERIT
ADJUSTMENT IN REMUNERATION.7
The resolution of this case has been overtaken by the execution of the parties' 2003-2005 CBA. While
this would render the case moot and academic, nevertheless, the likelihood that the same issues will
come up in the parties' future CBA negotiations is not far-fetched, thus compelling its resolution. Courts
will decide a question otherwise moot if it is capable of repetition yet evading review.[8]
The CBA provisions in dispute are the exclusion of certain employees from the appropriate bargaining
unit and the adjustment of remuneration for employees serving in an acting capacity for one month.
In their proposal, petitioner sought the exclusion of only the following employees from the appropriate
bargaining unit all managers who are vested with the right to hire and fire employees, confidential
employees, those with access to labor relations materials, Chief Cashiers, Assistant Cashiers, personnel
of the Telex Department and one Human Resources (HR) staff.9
In the previous 1998-2000 CBA,10 the excluded employees are as follows:
A. All covenanted and assistant officers (now called National Officers)
B. One confidential secretary of each of the:
1. Chief Executive, Philippine Branches
2. Deputy Chief Executive/Head, Corporate Banking Group
3. Head, Finance
4. Head, Human Resources
5. Manager, Cebu
6. Manager, Iloilo
7. Covenanted Officers provided said positions shall be filled by new recruits.
C. The Chief Cashiers and Assistant Cashiers in Manila, Cebu and Iloilo, and in any other branch
that the BANK may establish in the country.
D. Personnel of the Telex Department
E. All Security Guards
F. Probationary employees, without prejudice to Article 277 (c) of the Labor Code, as amended
by R.A. 6715, casuals or emergency employees; and
G. One (1) HR Staff11
The Secretary, however, maintained the previous exclusions because petitioner failed to show that the
employees sought to be removed from the list qualify for exclusion.12

With regard to the remuneration of employees working in an acting capacity, it was petitioner's position
that additional pay should be given to an employee who has been serving in a temporary/acting capacity
for one week. The Secretary likewise rejected petitioner's proposal and instead, allowed additional pay
for those who had been working in such capacity for one month. The Secretary agreed with the Bank's
position that a restrictive provision would curtail management's prerogative, and at the same time,
recognized that employees should not be made to work in an acting capacity for long periods of time
without adequate compensation.
The Secretary's disposition of the issues raised by petitioner were affirmed by the CA.13 The Court
sustains the CA.
Whether or not the employees sought to be excluded from the appropriate bargaining unit are
confidential employees is a question of fact, which is not a proper issue in a petition for review under
Rule 45 of the Rules of Court.14 This holds more true in the present case in which petitioner failed to
controvert with evidence the findings of the Secretary and the CA.
The disqualification of managerial and confidential employees from joining a bargaining unit for rank
and file employees is already well-entrenched in jurisprudence. While Article 245 of the Labor Code
limits the ineligibility to join, form and assist any labor organization to managerial employees,
jurisprudence has extended this prohibition to confidential employees or those who by reason of their
positions or nature of work are required to assist or act in a fiduciary manner to managerial employees
and hence, are likewise privy to sensitive and highly confidential records.15
In this case, the question that needs to be answered is whether the Bank's Chief Cashiers and Assistant
Cashiers, personnel of the Telex Department and HR staff are confidential employees, such that they
should be excluded.
As regards the qualification of bank cashiers as confidential employees, National Association of Trade
Unions (NATU) Republic Planters Bank Supervisors Chapter v. Torres16 declared that they are
confidential employees having control, custody and/or access to confidential matters, e.g., the branch's
cash position, statements of financial condition, vault combination, cash codes for telegraphic transfers,
demand drafts and other negotiable instruments, pursuant to Sec. 1166.4 of the Central Bank Manual
regarding joint custody, and therefore, disqualified from joining or assisting a union; or joining, assisting
or forming any other labor organization.17
Golden Farms, Inc. v. Ferrer-Calleja18 meanwhile stated that "confidential employees such as
accounting personnel, radio and telegraph operators who, having access to confidential information,
may become the source of undue advantage. Said employee(s) may act as spy or spies of either party to
a collective bargaining agreement."19
Finally, in Philips Industrial Development, Inc. v. National Labor Relations Commission,20 the Court
designatedpersonnel staff, in which human resources staff may be qualified, as confidential employees
because by the very nature of their functions, they assist and act in a confidential capacity to, or have
access to confidential matters of, persons who exercise managerial functions in the field of labor
relations.
Petitioner insists that the foregoing employees are not confidential employees; however, it failed to
buttress its claim. Aside from its generalized arguments, and despite the Secretary's finding that there
was no evidence to support it, petitioner still failed to substantiate its claim. Petitioner did not even
bother to state the nature of the duties and functions of these employees, depriving the Court of any
basis on which it may be concluded that they are indeed confidential employees. As aptly stated by the
CA:

While We agree that petitioner's proposed revision is in accordance with the law, this does not
necessarily mean that the list of exclusions enumerated in the 1998-2000 CBA is contrary to law.
As found by public respondent, petitioner failed to show that the employees sought to be
removed from the list of exclusions are actually rank and file employees who are not
managerial or confidential in status and should, accordingly, be included in the appropriate
bargaining unit.
Absent any proof that Chief Cashiers and Assistant Cashiers, personnel of the Telex
department and one (1) HR Staff have mutuality of interest with the other rank and file
employees, then they are rightfully excluded from the appropriate bargaining unit. x x
x21(Emphasis supplied)
Petitioner cannot simply rely on jurisprudence without explaining how and why it should apply to this
case. Allegations must be supported by evidence. In this case, there is barely any at all.
There is likewise no reason for the Court to disturb the conclusion of the Secretary and the CA that the
additional remuneration should be given to employees placed in an acting capacity for one month. The
CA correctly stated:
Likewise, We uphold the public respondent's Order that no employee should be temporarily
placed in a position (acting capacity) for more than one month without the corresponding
adjustment in the salary. Such order of the public respondent is not in violation of the "equal pay
for equal work" principle, considering that after one (1) month, the employee performing the job
in an acting capacity will be entitled to salary corresponding to such position.
xxxx
In arriving at its Order, the public respondent took all the relevant evidence into account and
weighed both parties arguments extensively. Thus, public respondent concluded that a restrictive
provision with respect to employees being placed in an acting capacity may curtail management's
valid exercise of its prerogative. At the same time, it recognized that employees should not be
made to perform work in an acting capacity for extended periods of time without being
adequately compensated. x x x22
Thus, the Court reiterates the doctrine that:
[T]he office of a petition for review on certiorari under Rule 45 of the Rules of Court requires
that it shall raise only questions of law. The factual findings by quasi-judicial agencies, such as
the Department of Labor and Employment, when supported by substantial evidence, are entitled
to great respect in view of their expertise in their respective fields. Judicial review of labor cases
does not go so far as to evaluate the sufficiency of evidence on which the labor official's findings
rest. It is not our function to assess and evaluate all over again the evidence, testimonial and
documentary, adduced by the parties to an appeal, particularly where the findings of both the trial
court (here, the DOLE Secretary) and the appellate court on the matter coincide, as in this case at
bar. The Rule limits that function of the Court to the review or revision of errors of law and not
to a second analysis of the evidence. x x x Thus, absent any showing of whimsical or capricious
exercise of judgment, and unless lack of any basis for the conclusions made by the appellate
court be amply demonstrated, we may not disturb such factual findings.23
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 108855

February 28, 1996

METROLAB INDUSTRIES, INC., petitioner,

vs.
HONORABLE MA. NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of the
Department of Labor and Employment and METRO DRUG CORPORATION EMPLOYEES
ASSOCIATION - FEDERATION OF FREE WORKERS, respondents.
DECISION
KAPUNAN, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court seeking the annulment of
the Resolution and Omnibus Resolution of the Secretary of Labor and Employment dated 14 April 1992
and 25 January 1993, respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-91; NCMB-NCR-NS09-678-91) on grounds that these were issued with grave abuse of discretion and in excess of
jurisdiction.
Private respondent Metro Drug Corporation Employees Association-Federation of Free Workers
(hereinafter referred to as the Union) is a labor organization representing the rank and file employees of
petitioner Metrolab Industries, Inc. (hereinafter referred to as Metrolab/MII) and also of Metro Drug,
Inc.
On 31 December 1990, the Collective Bargaining Agreement (CBA) between Metrolab and the Union
expired. The negotiations for a new CBA, however, ended in a deadlock.
Consequently, on 23 August 1991, the Union filed a notice of strike against Metrolab and Metro Drug
Inc. The parties failed to settle their dispute despite the conciliation efforts of the National Conciliation
and Mediation Board.
To contain the escalating dispute, the then Secretary of Labor and Employment, Ruben D. Torres, issued
an assumption order dated 20 September 1991, the dispositive portion of which reads, thus:
WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the Labor Code,
as amended, this Office hereby assumes jurisdiction over the entire labor dispute at Metro Drug,
Inc. - Metro Drug Distribution Division and Metrolab Industries, Inc.
Accordingly, any strike or lockout is hereby strictly enjoined. The Companies and the Metro
Drug Corp.Employees Association - FFW are likewise directed to cease and desist from
committing any and all acts that might exacerbate the situation.
Finally, the parties are directed to submit their position papers and evidence on the aforequoted
deadlocked issues to this office within twenty (20) days from receipt hereof.
SO ORDERED.1 (Emphasis ours.)
On 27 December 1991, then Labor Secretary Torres issued an order resolving all the disputed items in
the CBA and ordered the parties involved to execute a new CBA.
Thereafter, the union filed a motion for reconsideration.

On 27 January 1992, during the pendency of the abovementioned motion for reconsideration, Metrolab
laid off 94 of its rank and file employees.
On the same date, the Union filed a motion for a cease and desist order to enjoin Metrolab from
implementing the mass layoff, alleging that such act violated the prohibition against committing acts that
would exacerbate the dispute as specifically directed in the assumption order. 2
On the other hand, Metrolab contended that the layoff was temporary and in the exercise of its
management prerogative. It maintained that the company would suffer a yearly gross revenue loss of
approximately sixty-six (66) million pesos due to the withdrawal of its principals in the Toll and
Contract Manufacturing Department. Metrolab further asserted that with the automation of the
manufacture of its product "Eskinol," the number of workers required for its production is significantly
reduced.3
Thereafter, on various dates, Metrolab recalled some of the laid off workers on a temporary basis due to
availability of work in the production lines.
On 14 April 1992, Acting Labor Secretary Nieves Confesor issued a resolution declaring the layoff of
Metrolab's 94 rank and file workers illegal and ordered their reinstatement with full backwages. The
dispositive portion reads as follows:
WHEREFORE, the Union's motion for reconsideration is granted in part, and our order of 28
December 1991 is affirmed subject to the modifications in allowances and in the close shop
provision. The layoff of the 94 employees at MII is hereby declared illegal for the failure of the
latter to comply with our injunction against committing any act which may exacerbate the
dispute and with the 30-day notice requirement. Accordingly, MII is hereby ordered to reinstate
the 94 employees, except those who have already been recalled, to their former positions or
substantially equivalent, positions with full backwages from the date they were illegally laid off
on 27 January 1992 until actually reinstated without loss of seniority rights and other benefits.
Issues relative to the CBA agreed upon by the parties and not embodied in our earlier order are
hereby ordered adopted for incorporation in the CBA. Further, the dispositions and directives
contained in all previous orders and resolutions relative to the instant dispute, insofar as not
inconsistent herein, are reiterated. Finally, the parties are enjoined to cease and desist from
committing any act which may tend to circumvent this resolution.
SO RESOLVED. 4
On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration alleging that the layoff did not
aggravate the dispute since no untoward incident occurred as a result thereof. It, likewise, filed a motion
for clarification regarding the constitution of the bargaining unit covered by the CBA.
On 29 June 1992, after exhaustive negotiations, the parties entered into a new CBA. The execution,
however, was without prejudice to the outcome of the issues raised in the reconsideration and
clarification motions submitted for decision to the Secretary of Labor. 5
Pending the resolution of the aforestated motions, on 2 October 1992, Metrolab laid off 73 of its
employees on grounds of redundancy due to lack of work which the union again promptly opposed on 5
October 1992.
On 15 October 1992, Labor Secretary Confesor again issued a cease and desist order. Metrolab moved
for a reconsiderations.6

On 25 January 1993, Labor Secretary Confesor issued the assailed Omnibus Resolution containing the
following orders:
xxx

xxx

xxx

1. MII's motion for partial reconsideration of our 14 April 1992 resolution specifically that
portion thereof assailing our ruling that the layoff of the 94 employees is illegal, is hereby
denied. MII is hereby ordered to pay such employees their full backwages computed from the
time of actual layoff to the time of actual recall;
2. For the parties to incorporate in their respective collective bargaining agreements the
clarifications herein contained; and
3. MII's motion for reconsideration with respect to the consequences of the second wave of
layoff affecting 73 employees, to the extent of assailing our ruling that such layoff tended to
exacerbate the dispute, is hereby denied. But inasmuch as the legality of the layoff was not
submitted for our resolution and no evidence had been adduced upon which a categorical finding
thereon can be based, the same is hereby referred to the NLRC for its appropriate action.
Finally, all prohititory injunctions issued as a result of our assumption of jurisdiction over this
dispute are hereby lifted.
SO RESOLVED.7
Labor Secretary Confesor also ruled that executive secretaries are excluded from the closed-shop
provision of the CBA, not from the bargaining unit.
On 4 February 1993, the Union filed a motion for execution. Metrolab opposed. Hence, the present
petition forcertiorari with application for issuance of a Temporary Restraining Order.
On 4 March 1993, we issued a Temporary Restraining Order enjoining the Secretary of Labor from
enforcing and implementing the assailed Resolution and Omnibus Resolution dated 14 April 1992 and
25 January 1993, respectively.
In its petition, Metrolab assigns the following errors:
A.
THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT
COMMITTED GRAVE ABUSE OF DISCRETION AND EXCEEDED HER JURISDICTION
IN DECLARING THE TEMPORARY LAYOFF ILLEGAL, AND ORDERING THE
REINSTATEMENT AND PAYMENT OF BACKWAGES TO THE AFFECTED EMPLOYEES. *
B.
THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT
GRAVELY ABUSED HER DISCRETION IN INCLUDING EXECUTIVE SECRETARIES AS
PART OF THE BARGAINING UNIT OF RANK AND FILE EMPLOYEES. 8
Anent the first issue, we are asked to determine whether or not public respondent Labor Secretary
committed grave abuse of discretion and exceeded her jurisdiction in declaring the subject layoffs

instituted by Metrolab illegal on grounds that these unilateral actions aggravated the conflict between
Metrolab and the Union who were, then, locked in a stalemate in CBA negotiations.
Metrolab argues that the Labor Secretary's order enjoining the parties from committing any act that
might exacerbate the dispute is overly broad, sweeping and vague and should not be used to curtail the
employer's right to manage his business and ensure its viability.
We cannot give credence to Metrolab's contention.
This Court recognizes the exercise of management prerogatives and often declines to interfere with the
legitimate business decisions of the employer. However, this privilege is not absolute but subject to
limitations imposed by law. 9
In PAL v. NLRC, 10 we issued this reminder:
xxx

xxx

xxx

. . . the exercise of management prerogatives was never considered boundless. Thus, in Cruz
vs. Medina(177 SCRA 565 [1989]), it was held that management's prerogatives must be without
abuse of discretion. . . .
xxx

xxx

xxx

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It
is circumscribed by limitations found in law, a collective bargaining agreement, or the general
principles of fair play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758
[1990]) . . . . (Emphasis ours.)
xxx

xxx

xxx

The case at bench constitutes one of the exceptions. The Secretary of Labor is expressly given the power
under the Labor Code to assume jurisdiction and resolve labor disputes involving industries
indispensable to national interest. The disputed injunction is subsumed under this special grant of
authority. Art. 263 (g) of the Labor Code specifically provides that:
xxx

xxx

xxx

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout
in an industry indispensable to the national interest, the Secretary of Labor and Employment may
assume jurisdiction over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the effect of automatically
enjoining the intended or impending strike or lockout as specified in the assumption or
certification order. If one has already taken place at the time of assumption or certification, all
striking or locked out employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the same terms and conditions
prevailing before the strike or lockout. The Secretary of Labor and Employment or the
Commission may seek the assistance of law enforcement agencies to ensure compliance with this
provisionas well as with such orders as he may issue to enforce the same. . . . (Emphasis ours.)
xxx

xxx

xxx

That Metrolab's business is of national interest is not disputed. Metrolab is one of the leading
manufacturers and suppliers of medical and pharmaceutical products to the country.
Metrolab's management prerogatives, therefore, are not being unjustly curtailed but duly balanced with
and tempered by the limitations set by law, taking into account its special character and the particular
circumstances in the case at bench.
As aptly declared by public respondent Secretary of Labor in its assailed resolution:
xxx

xxx

xxx

MII is right to the extent that as a rule, we may not interfere with the legitimate exercise of
management prerogatives such as layoffs. But it may nevertheless be appropriate to mention here
that one of the substantive evils which Article 263 (g) of the Labor Code seeks to curb is the
exacerbation of a labor dispute to the further detriment of the national interest. When a labor
dispute has in fact occurred and a general injunction has been issued restraining the commission
of disruptive acts, management prerogatives must always be exercise consistently with the
statutory objective. 11
xxx

xxx

xxx

Metrolab insists that the subject layoffs did not exacerbate their dispute with the Union since no
untoward incident occurred after the layoffs were implemented. There were no work disruptions or
stoppages and no mass actions were threatened or undertaken. Instead, petitioner asserts, the affected
employees calmly accepted their fate "as this was a matter which they had been previously advised
would be inevitable. 12
After a judicious review of the record, we find no compelling reason to overturn the findings of the
Secretary of Labor.
We reaffirm the doctrine that considering their expertise in their respective fields, factual findings of
administrative agencies supported by substantial evidence are accorded great respect and binds this
Court. 13
The Secretary of Labor ruled, thus:
xxx

xxx

xxx

Any act committed during the pendency of the dispute that tends to give rise to further
contentious issues or increase the tensions between the parties should be considered an act of
exacerbation. One must look at the act itself, not on speculative reactions. A misplaced recourse
is not needed to prove that a dispute has been exacerbated. For instance, the Union could not be
expected to file another notice of strike. For this would depart from its theory of the case that the
layoff is subsumed under the instant dispute, for which a notice of strike had already been filed.
On the other hand, to expect violent reactions, unruly behavior, and any other chaotic or drastic
action from the Union is to expect it to commit acts disruptive of public order or acts that may be
illegal. Under a regime of laws, legal remedies take the place of violent ones. 14
xxx

xxx

xxx

Protest against the subject layoffs need not be in the form of violent action or any other drastic measure.
In the instant case the Union registered their dissent by swiftly filing a motion for a cease and desist
order. Contrary to petitioner's allegations the Union strongly condemned the layoffs and threatened mass
action if the Secretary of Labor fails to timely intervene:
xxx

xxx

xxx

3. This unilateral action of management is a blatant violation of the injunction of this Office
against committing acts which would exacerbate the dispute. Unless such act is enjoined the
Union will be compelled to resort to its legal right to mass actions and concerted activities to
protest and stop the said management action. This mass layoff is clearly one which would result
in a very serious labor dispute unless this Office swiftly intervenes. 15
xxx

xxx

xxx

Metrolab and the Union were still in the process of resolving their CBA deadlock when petitioner
implemented the subject layoffs. As a result, motions and oppositions were filed diverting the parties',
attention, delaying resolution of the bargaining deadlock and postponing the signing of their new CBA,
thereby aggravating the whole conflict.
We, likewise, find untenable Metrolab's contention that the layoff of the 94 rank-and-file employees was
temporary, despite the recall of some of the laid off workers.
If Metrolab intended the layoff of the 94 workers to be temporary, it should have plainly stated so in the
notices it sent to the affected employees and the Department of Labor and Employment. Consider the
tenor of the pertinent portions of the layoff notice to the affected employees:
xxx

xxx

xxx

Dahil sa mga bagay na ito, napilitan ang ating kumpanya na magsagawa ng "lay-off" ng mga
empleyado sa Rank & File dahil nabawasan ang trabaho at puwesto para sa kanila. Marami sa
atin ang kasama sa "lay-off" dahil wala nang trabaho para sa kanila. Mahirap tanggapin ang
mga bagay na ito subalit kailangan nating gawin dahil hindi kaya ng kumpanya ang magbayad
ng suweldo kung ang empleyado ay walang trabaho. Kung tayo ay patuloy na magbabayad ng
suweldo, mas hihina ang ating kumpanya at mas marami ang maaaring maapektuhan.
Sa pagpapatupad ng "lay-off" susundin natin ang LAST IN-FIRST OUT policy. Ang mga
empleyadong may pinakamaikling serbisyo sa kumpanya ang unang maaapektuhan. Ito ay batay
na rin sa nakasaad sa ating CBA na ang mga huling pumasok sa kumpanya ang unang masasama
sa "lay-off" kapag nagkaroon ng ganitong mga kalagayan.
Ang mga empleyado na kasama sa "lay-off" ay nakalista sa sulat na ito. Ang umpisa ng lay-off
ay sa Lunes, Enero 27. Hindi na muna sila papasok sa kumpanya. Makukuha nila ang suweldo
nila sa Enero 30, 1992.
Hindi po natin matitiyak kung gaano katagal ang "lay-off", ngunit ang aming tingin ay
matatagalan bago maakaroon na dagdag na trabaho. Dahil dito, sinimulan na namin ang isang
"Redundancy Program" sa mga supervisors. Mabawasan ang mga puwesto para sa kanila, kaya
sila ay mawawalan ng trabaho at bibigyan na ng redundancy pay. 16 (Emphasis ours.)
xxx

xxx

xxx

We agree with the ruling of the Secretary of Labor, thus:

xxx

xxx

xxx

. . . MII insists that the layoff in question is temporary not permanent. It then cites International
Hardware,Inc. vs. NLRC, 176 SCRA 256, in which the Supreme Court held that the 30-day
notice required under Article 283 of the Labor Code need not be complied with if the employer
has no intention to permanently severe (sic) the employment relationship.
We are not convinced by this argument. International Hardware involves a case where there had
been a reduction of workload. Precisely to avoid laying off the employees, the employer therein
opted to give them work on a rotating basis. Though on a limited scale, work was available. This
was the Supreme Court's basis for holding that there was no intention to permanently severe (sic)
the employment relationship.
Here, there is no circumstance at all from which we can infer an intention from MII not to sever
the employment relationship permanently. If there was such an intention, MII could have made it
very clear in the notices of layoff. But as it were, the notices are couched in a language so
uncertain that the only conclusion possible is the permanent termination, not the continuation, of
the employment relationship.
MII also seeks to excuse itself from compliance with the 30-day notice with a tautology. While
insisting that there is really no best time to announce a bad news, (sic) it also claims that it broke
the bad news only on 27 January 1992 because had it complied with the 30-day notice, it could
have broken the bad news on 02 January 1992, the first working day of the year. If there is really
no best time to announce a bad news (sic), it wouldn't have mattered if the same was announced
at the first working day of the year. That way, MII could have at least complied with the
requirement of the law. 17
The second issue raised by petitioner merits our consideration.
In the assailed Omnibus Resolution, Labor Secretary Confesor clarified the CBA provisions on closedshop and the scope of the bargaining unit in this wise:
xxx

xxx

xxx

xxx

xxx

Appropriateness of the bargaining unit.

xxx

Exclusions. In our 14 April 1992 resolution, we ruled on the issue of exclusion as follows:
These aside, we reconsider our denial of the modifications which the Union proposes to
introduce on the close shop provision. While we note that the provision as presently
worded has served the relationship of the parties well under previous CBA'S, the shift in
constitutional policy toward expanding the right of all workers to self-organization
should now be formally by the parties, subject to the following exclusions only:
1. Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, Vice-President,

Vice-President for Sales, Personnel manager, and Director for Corporate Planning who
may have access to vital labor relations information or who may otherwise act in a
confidential capacity to persons who determine or formulate management policies.
The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall thus be
modified consistently with the foregoing.
Article I (b) of the 1988-1990 CBA provides:
b) Close Shop. - All Qualified Employees must join the Association immediately upon
regularization as a condition for continued employment. This provision shall not apply to:
(i) managerial employees who are excluded from the scope of the bargaining unit; (ii) the
auditors and executive secretaries of senior executive officers, such as, the President,
Executive Vice-President, Vice-President for Finance, Head of Legal, Vice-President for
Sales, who are excluded from membership in the Association; and (iii) those employees
who are referred to in Attachment I hereof, subject, however, to the application of the
provision of Article II, par. (b) hereof. Consequently, the above-specified employees are
not required to join the Association as a condition for their continued employment.
On the other hand, Attachment I provides:
Exclusion from the Scope of the Close Shop Provision.
The following positions in the Bargaining Unit are not covered by the Close Shop
provision of the CBA (Article I, par. b):
1. Executive Secretaries of Vice-Presidents, or equivalent positions.
2. Executive Secretary of the Personnel Manager, or equivalent Positions.
3. Executive Secretary, of the Director for Corporate Planning, or equivalent positions.
4. Some personnel in the Personnel Department, EDP Staff at Head Office, Payroll Staff
at Head office, Accounting Department at Head Office, and Budget Staff, who because of
the nature of their duties and responsibilities need not join the Association as a condition
for their employment.
5. Newly-hired secretaries of Branch Managers and Regional Managers.
Both MDD and MII read the exclusion of managerial employees and executive secretaries in our
14 April 1992 resolution as exclusion from the bargaining unit. They point out that managerial
employees are lumped under one classification with executive secretaries, so that since the
former are excluded from the bargaining unit, so must the latter be likewise excluded.
This reading is obviously contrary to the intent of our 14 April 1992 resolution. By recognizing
the expanded scope of the right to self-organization, our intent was to delimit the types of
employees excluded from the close shop provision, not from the bargaining unit, to executive
secretaries only. Otherwise, the conversion of the exclusionary provision to one that refers to the
bargaining unit from one that merely refers to the close shop provision would effectively curtail
all the organizational rights of executive secretaries.

The exclusion of managerial employees, in accordance with law, must therefore still carry the
qualifying phrase "from the bargaining unit", in Article I (b) (i) of the 1988-1990 CBA. In the
same manner, the exclusion of executive secretaries should be read together with the qualifying
phrase "are excluded from membership in the Association" of the same Article and with the
heading of Attachment I. The latter refers to "Exclusions from Scope of Close Shop Provision"
and provides that "[t]he following positions in Bargaining Unit are not covered by the close shop
provision of the CBA."
The issue of exclusion has different dimension in the case of MII. In an earlier motion for
clarification, MII points out that it has done away with the positions of Executive Vice-President,
Vice-President for Sales, and Director for Corporate Planning. Thus, the foregoing group of
exclusions is no longer appropriate in its present organizational structure. Nevertheless, there
remain MII officer positions for which there may be executive secretaries. These include the
General Manager and members of the Management Committee, specifically i) the Quality
Assurance Manager; ii) the Product Development Manager; iii) the Finance Director; iv) the
Management System Manager; v) the Human Resources Manager; vi) the Marketing Director;
vii) the Engineering Manager., viii) the Materials Manager; and ix) the Production Manager.
xxx

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xxx

The basis for the questioned exclusions, it should be noted, is no other than the previous CBA
between MII and the Union. If MII had undergone an organizational restructuring since then, this
is a fact to which we have never been made privy. In any event, had this been otherwise the
result would have been the same. To repeat, we limited the exclusions to recognize the expanded
scope of the right to self-organization as embodied in the Constitution. 18
Metrolab, however, maintains that executive secretaries of the General Manager and the executive
secretaries of the Quality Assurance Manager, Product Development Manager, Finance Director,
Management System Manager, Human Resources Manager, Marketing Director, Engineering Manager,
Materials Manager and Production Manager, who are all members of the company's Management
Committee should not only be exempted from the closed-shop provision but should be excluded from
membership in the bargaining unit of rank and file employees as well on grounds that their executive
secretaries are confidential employees, having access to "vital labor information." 19
We concur with Metrolab.
Although Article 245 of the Labor Code 20 limits the ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence has extended this prohibition to confidential
employees or those who by reason of their positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees and hence, are likewise privy to sensitive and highly
confidential records.
The rationale behind the exclusion of confidential employees from the bargaining unit of the rank and
file employees and their disqualification to join any labor organization was succinctly discussed
in Philips Industrial Development v. NLRC: 21
xxx

xxx

xxx

On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave
abuse of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that
PIDI's "Service Engineers, Sales Force, division secretaries, all Staff of General Management,

Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems
are included within the rank and file bargaining unit."
In the first place, all these employees, with the exception of the service engineers and the sales
force personnel, are confidential employees. Their classification as such is not seriously disputed
by PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered
them as confidential employees. By the very nature of their functions, they assist and act in a
confidential capacity to, or have access to confidential matters of, persons who exercise
managerial functions in the field of labor relations. As such, the rationale behind the ineligibility
of managerial employees to form, assist or join a labor union equally applies to them.
In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this court elaborated on this rationale,
thus:
. . . The rationale for this inhibition has been stated to be, because if these managerial
employees would belong to or be affiliated with a Union, the latter might not be assured
of their loyalty to the Union in view of evident conflict of interests. The union can also
become company-dominated with the presence of managerial employees in Union
membership.
In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this rationale applicable to
confidential employees:
This rationale holds true also for confidential employees such as accounting personnel,
radio and telegraph operators, who having access to confidential information, may
become the source of undue advantage. Said employees may act as a spy or spies of
either party to a collective bargaining agreement. This is specially true in the present case
where the petitioning Union is already the bargaining agent of the rank-and-file
employees in the establishment. To allow the confidential employees to join the existing
Union of the rank-and-file would be in violation of the terms of the Collective Bargaining
Agreement wherein this kind of employees by the nature of their functions/positions are
expressly excluded.
xxx

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xxx

Similarly, in National Association of Trade Union-Republic Planters Bank Supervisors Chapter

v. Torres 22we declared:
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xxx

. . . As regards the other claim of respondent Bank that Branch Managers/OICs, Cashiers
and Controllers are confidential employees, having control, custody and/or access to
confidential matters, e.g., the branch's cash position, statements of financial condition,
vault combination, cash codes for telegraphic transfers, demand drafts and other
negotiable instruments, pursuant to Sec. 1166.4 of the Central Bank Manual regarding
joint custody, this claim is not even disputed by petitioner. A confidential employee is one
entrusted with confidence on delicate matters, or with the custody, handling, or care and
protection of the employer's property. While Art. 245 of the Labor Code singles out
managerial employees as ineligible to join, assist or form any labor organization, under
the doctrine of necessary implication, confidential employees are similarly
disqualified. . . .

xxx

xxx

xxx

. . . (I)n the collective bargaining process, managerial employees are supposed to be on

the side of the employer, to act as its representatives, and to see to it that its interest are
well protected. The employer is not assured of such protection if these employees
themselves are union members. Collective bargaining in such a situation can become onesided. It is the same reason that impelled this Court to consider the position of
confidential employees as included in the disqualification found in Art. 245 as if the
disqualification of confidential employees were written in the provision. If confidential
employees could unionize in order to bargain for advantages for themselves, then they
could be governed by their own motives rather than the interest of the employers.
Moreover, unionization of confidential employees for the purpose of collective
bargaining would mean the extension of the law to persons or individuals who are
supposed to act "in the interest of the employers. It is not farfetched that in the course of
collective bargaining, they might jeopardize that interest which they are duty-bound to
protect. . . .
xxx

xxx

xxx

And in the latest case of Pier 8 Arrastre & Stevedoring Services, Inc. vs. Roldan-Confesor, 23 we ruled
that:
xxx

xxx

xxx

Upon the other hand, legal secretaries are neither managers nor supervisors. Their work is
basically routinary and clerical. However, they should be, differentiated from rank-and-file
employees because they are tasked with, among others, the typing of legal documents,
memoranda and correspondence, the keeping of records and files, the giving of and receiving
notices, and such other duties as required by the legal personnel of the corporation. Legal
secretaries therefore fall under the category of confidential employees. . . .
xxx

xxx

xxx

We thus hold that public respondent acted with grave abuse of discretion in not excluding the
four foremen and legal secretary from the bargaining unit composed of rank-and-file employees.
xxx

xxx

xxx

In the case at bench, the Union does not disagree with petitioner that the executive secretaries are
confidential employees. It however, makes the following contentions:
xxx

xxx

xxx

There would be no danger of company domination of the Union since the confidential employees
would not be members of and would not participate in the decision making processes of the
Union.
Neither would there be a danger of espionage since the confidential employees would not have
any conflict of interest, not being members of the Union. In any case, there is always the danger
that any employee would leak management secrets to the Union out of sympathy for his fellow
rank and filer even if he were not a member of the union nor the bargaining unit.

Confidential employees are rank and file employees and they, like all the other rank and file
employees, should be granted the benefits of the Collective Bargaining Agreement. There is no
valid basis for discriminating against them. The mandate of the Constitution and the Labor Code,
primarily of protection to Labor, compels such conclusion. 24
xxx

xxx

xxx

The Union's assurances fail to convince. The dangers sought to be prevented, particularly the threat of
conflict of, interest and espionage, are not eliminated by non-membership of Metrolab's executive
secretaries or confidential employees in the Union. Forming part of the bargaining unit, the executive
secretaries stand to benefit from any agreement executed between the Union and Metrolab. Such a
scenario, thus, gives rise to a potential conflict between personal interests and their duty as confidential
employees to act for and in behalf of Metrolab. They do not have to be union members to affect or
influence either side.
Finally, confidential employees cannot be classified as rank and file. As previously discussed, the nature
of employment of confidential employees is quite distinct from the rank and file, thus, warranting a
separate category. Excluding confidential employees from the rank and file bargaining unit, therefore, is
not tantamount to discrimination.
WHEREFORE, premises considered, the petition is partially GRANTED. The resolutions of public
respondent Secretary of Labor dated 14 April 1992 and 25 January 1993 are hereby MODIFIED to the
extent that executive secretaries of petitioner Metrolab's General Manager and the executive secretaries
of the members of its Management Committee are excluded from the bargaining unit of petitioner's rank
and file employees.
SO ORDERED.
G.R. No. L-25246 September 12, 1974
BENJAMIN VICTORIANO, plaintiff-appellee,
vs.
ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE FACTORY, INC., defendants,
ELIZALDE ROPE WORKERS' UNION, defendant-appellant.
Salonga, Ordonez, Yap, Sicat & Associates for plaintiff-appellee.
Cipriano Cid & Associates for defendant-appellant.

ZALDIVAR, J.:p
Appeal to this Court on purely questions of law from the decision of the Court of First Instance of
Manila in its Civil Case No. 58894.
The undisputed facts that spawned the instant case follow:
Benjamin Victoriano (hereinafter referred to as Appellee), a member of the religious sect known as the
"Iglesia ni Cristo", had been in the employ of the Elizalde Rope Factory, Inc. (hereinafter referred to as
Company) since 1958. As such employee, he was a member of the Elizalde Rope Workers' Union

(hereinafter referred to as Union) which had with the Company a collective bargaining agreement
containing a closed shop provision which reads as follows:
Membership in the Union shall be required as a condition of employment for all
permanent employees workers covered by this Agreement.
The collective bargaining agreement expired on March 3, 1964 but was renewed the following day,
March 4, 1964.
Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its amendment by Republic Act No.
3350, the employer was not precluded "from making an agreement with a labor organization to require
as a condition of employment membership therein, if such labor organization is the representative of the
employees." On June 18, 1961, however, Republic Act No. 3350 was enacted, introducing an
amendment to paragraph (4) subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but
such agreement shall not cover members of any religious sects which prohibit affiliation of their
members in any such labor organization".
Being a member of a religious sect that prohibits the affiliation of its members with any labor
organization, Appellee presented his resignation to appellant Union in 1962, and when no action was
taken thereon, he reiterated his resignation on September 3, 1974. Thereupon, the Union wrote a formal
letter to the Company asking the latter to separate Appellee from the service in view of the fact that he
was resigning from the Union as a member. The management of the Company in turn notified Appellee
and his counsel that unless the Appellee could achieve a satisfactory arrangement with the Union, the
Company would be constrained to dismiss him from the service. This prompted Appellee to file an
action for injunction, docketed as Civil Case No. 58894 in the Court of First Instance of Manila to enjoin
the Company and the Union from dismissing Appellee. 1 In its answer, the Union invoked the "union
security clause" of the collective bargaining agreement; assailed the constitutionality of Republic Act
No. 3350; and contended that the Court had no jurisdiction over the case, pursuant to Republic Act No.
875, Sections 24 and 9 (d) and (e). 2 Upon the facts agreed upon by the parties during the pre-trial
conference, the Court a quo rendered its decision on August 26, 1965, the dispositive portion of which
reads:
IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant Elizalde
Rope Factory, Inc. from dismissing the plaintiff from his present employment and
sentencing the defendant Elizalde Rope Workers' Union to pay the plaintiff P500 for
attorney's fees and the costs of this action.3
From this decision, the Union appealed directly to this Court on purely questions of law, assigning the
following errors:
I. That the lower court erred when it did not rule that Republic Act No. 3350 is
unconstitutional.
II. That the lower court erred when it sentenced appellant herein to pay plaintiff the sum
of P500 as attorney's fees and the cost thereof.
In support of the alleged unconstitutionality of Republic Act No. 3350, the Union contented, firstly, that
the Act infringes on the fundamental right to form lawful associations; that "the very phraseology of said
Republic Act 3350, that membership in a labor organization is banned to all those belonging to such
religious sect prohibiting affiliation with any labor organization" 4 , "prohibits all the members of a given
religious sect from joining any labor union if such sect prohibits affiliations of their members thereto" 5 ;
and, consequently, deprives said members of their constitutional right to form or join lawful associations

or organizations guaranteed by the Bill of Rights, and thus becomes obnoxious to Article III, Section 1
(6) of the 1935 Constitution. 6
Secondly, the Union contended that Republic Act No. 3350 is unconstitutional for impairing the
obligation of contracts in that, while the Union is obliged to comply with its collective bargaining
agreement containing a "closed shop provision," the Act relieves the employer from its reciprocal
obligation of cooperating in the maintenance of union membership as a condition of employment; and
that said Act, furthermore, impairs the Union's rights as it deprives the union of dues from members
who, under the Act, are relieved from the obligation to continue as such members. 7
Thirdly, the Union contended that Republic Act No. 3350 discriminatorily favors those religious sects
which ban their members from joining labor unions, in violation of Article Ill, Section 1 (7) of the 1935
Constitution; and while said Act unduly protects certain religious sects, it leaves no rights or protection
to labor organizations. 8
Fourthly, Republic Act No. 3350, asserted the Union, violates the constitutional provision that "no
religious test shall be required for the exercise of a civil right," in that the laborer's exercise of his civil
right to join associations for purposes not contrary to law has to be determined under the Act by his
affiliation with a religious sect; that conversely, if a worker has to sever his religious connection with a
sect that prohibits membership in a labor organization in order to be able to join a labor organization,
said Act would violate religious freedom. 9
Fifthly, the Union contended that Republic Act No. 3350, violates the "equal protection of laws" clause
of the Constitution, it being a discriminately legislation, inasmuch as by exempting from the operation
of closed shop agreement the members of the "Iglesia ni Cristo", it has granted said members undue
advantages over their fellow workers, for while the Act exempts them from union obligation and
liability, it nevertheless entitles them at the same time to the enjoyment of all concessions, benefits and
other emoluments that the union might secure from the employer. 10
Sixthly, the Union contended that Republic Act No. 3350 violates the constitutional provision regarding
the promotion of social justice. 11
Appellant Union, furthermore, asserted that a "closed shop provision" in a collective bargaining
agreement cannot be considered violative of religious freedom, as to call for the amendment introduced
by Republic Act No. 3350;12 and that unless Republic Act No. 3350 is declared unconstitutional, trade
unionism in this country would be wiped out as employers would prefer to hire or employ members of
the Iglesia ni Cristo in order to do away with labor organizations. 13
Appellee, assailing appellant's arguments, contended that Republic Act No. 3350 does not violate the
right to form lawful associations, for the right to join associations includes the right not to join or to
resign from a labor organization, if one's conscience does not allow his membership therein, and the Act
has given substance to such right by prohibiting the compulsion of workers to join labor
organizations; 14 that said Act does not impair the obligation of contracts for said law formed part of, and
was incorporated into, the terms of the closed shop agreement; 15that the Act does not violate the
establishment of religion clause or separation of Church and State, for Congress, in enacting said law,
merely accommodated the religious needs of those workers whose religion prohibits its members from
joining labor unions, and balanced the collective rights of organized labor with the constitutional right of
an individual to freely exercise his chosen religion; that the constitutional right to the free exercise of
one's religion has primacy and preference over union security measures which are merely contractual 16 ;
that said Act does not violate the constitutional provision of equal protection, for the classification of
workers under the Act depending on their religious tenets is based on substantial distinction, is germane
to the purpose of the law, and applies to all the members of a given class; 17 that said Act, finally, does

not violate the social justice policy of the Constitution, for said Act was enacted precisely to equalize
employment opportunities for all citizens in the midst of the diversities of their religious beliefs." 18
I. Before We proceed to the discussion of the first assigned error, it is necessary to premise that there are
some thoroughly established principles which must be followed in all cases where questions of
constitutionality as obtains in the instant case are involved. All presumptions are indulged in favor of
constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond
a reasonable doubt, that a law may work hardship does not render it unconstitutional; that if any
reasonable basis may be conceived which supports the statute, it will be upheld, and the challenger must
negate all possible bases; that the courts are not concerned with the wisdom, justice, policy, or
expediency of a statute; and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted. 19
1. Appellant Union's contention that Republic Act No. 3350 prohibits and bans the members of such
religious sects that forbid affiliation of their members with labor unions from joining labor unions
appears nowhere in the wording of Republic Act No. 3350; neither can the same be deduced by
necessary implication therefrom. It is not surprising, therefore, that appellant, having thus misread the
Act, committed the error of contending that said Act is obnoxious to the constitutional provision on
freedom of association.
Both the Constitution and Republic Act No. 875 recognize freedom of association. Section 1 (6) of
Article III of the Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973,
provide that the right to form associations or societies for purposes not contrary to law shall not be
abridged. Section 3 of Republic Act No. 875 provides that employees shall have the right to selforganization and to form, join of assist labor organizations of their own choosing for the purpose of
collective bargaining and to engage in concerted activities for the purpose of collective bargaining and
other mutual aid or protection. What the Constitution and the Industrial Peace Act recognize and
guarantee is the "right" to form or join associations. Notwithstanding the different theories propounded
by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely
said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely:
first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself
without being prevented by law; and second, power, whereby an employee may, as he pleases, join or
refrain from Joining an association. It is, therefore, the employee who should decide for himself whether
he should join or not an association; and should he choose to join, he himself makes up his mind as to
which association he would join; and even after he has joined, he still retains the liberty and the power to
leave and cancel his membership with said organization at any time. 20 It is clear, therefore, that the right
to join a union includes the right to abstain from joining any union. 21 Inasmuch as what both the
Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the "right"
to join associations of his choice, it would be absurd to say that the law also imposes, in the same breath,
upon the employee the duty to join associations. The law does not enjoin an employee to sign up with
any association.
The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act
is, however, limited. The legal protection granted to such right to refrain from joining is withdrawn by
operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of which
the employer may employ only member of the collective bargaining union, and the employees must
continue to be members of the union for the duration of the contract in order to keep their jobs. Thus
Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350, provides
that although it would be an unfair labor practice for an employer "to discriminate in regard to hire or
tenure of employment or any term or condition of employment to encourage or discourage membership
in any labor organization" the employer is, however, not precluded "from making an agreement with a
labor organization to require as a condition of employment membership therein, if such labor

organization is the representative of the employees". By virtue, therefore, of a closed shop agreement,
before the enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs, wishes
to be employed or to keep his employment, he must become a member of the collective bargaining
union. Hence, the right of said employee not to join the labor union is curtailed and withdrawn.
To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced an
exception, when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: "but such
agreement shall not cover members of any religious sects which prohibit affiliation of their members in
any such labor organization". Republic Act No. 3350 merely excludes ipso jure from the application and
coverage of the closed shop agreement the employees belonging to any religious sects which prohibit
affiliation of their members with any labor organization. What the exception provides, therefore, is that
members of said religious sects cannot be compelled or coerced to join labor unions even when said
unions have closed shop agreements with the employers; that in spite of any closed shop agreement,
members of said religious sects cannot be refused employment or dismissed from their jobs on the sole
ground that they are not members of the collective bargaining union. It is clear, therefore, that the
assailed Act, far from infringing the constitutional provision on freedom of association, upholds and
reinforces it. It does not prohibit the members of said religious sects from affiliating with labor unions. It
still leaves to said members the liberty and the power to affiliate, or not to affiliate, with labor unions. If,
notwithstanding their religious beliefs, the members of said religious sects prefer to sign up with the
labor union, they can do so. If in deference and fealty to their religious faith, they refuse to sign up, they
can do so; the law does not coerce them to join; neither does the law prohibit them from joining; and
neither may the employer or labor union compel them to join. Republic Act No. 3350, therefore, does
not violate the constitutional provision on freedom of association.
2. Appellant Union also contends that the Act is unconstitutional for impairing the obligation of its
contract, specifically, the "union security clause" embodied in its Collective Bargaining Agreement with
the Company, by virtue of which "membership in the union was required as a condition for employment
for all permanent employees workers". This agreement was already in existence at the time Republic Act
No. 3350 was enacted on June 18, 1961, and it cannot, therefore, be deemed to have been incorporated
into the agreement. But by reason of this amendment, Appellee, as well as others similarly situated,
could no longer be dismissed from his job even if he should cease to be a member, or disaffiliate from
the Union, and the Company could continue employing him notwithstanding his disaffiliation from the
Union. The Act, therefore, introduced a change into the express terms of the union security clause; the
Company was partly absolved by law from the contractual obligation it had with the Union of
employing only Union members in permanent positions, It cannot be denied, therefore, that there was
indeed an impairment of said union security clause.
According to Black, any statute which introduces a change into the express terms of the contract, or its
legal construction, or its validity, or its discharge, or the remedy for its enforcement, impairs the
contract. The extent of the change is not material. It is not a question of degree or manner or cause, but
of encroaching in any respect on its obligation or dispensing with any part of its force. There is an
impairment of the contract if either party is absolved by law from its performance. 22 Impairment has
also been predicated on laws which, without destroying contracts, derogate from substantial contractual
rights. 23
It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not
absolute and unqualified. The prohibition is general, affording a broad outline and requiring construction
to fill in the details. The prohibition is not to be read with literal exactness like a mathematical formula,
for it prohibits unreasonable impairment only. 24 In spite of the constitutional prohibition, the State
continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to
safeguarding said interests may modify or abrogate contracts already in effect. 25 For not only are
existing laws read into contracts in order to fix the obligations as between the parties, but the reservation

of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. All
contracts made with reference to any matter that is subject to regulation under the police power must be
understood as made in reference to the possible exercise of that power. 26 Otherwise, important and
valuable reforms may be precluded by the simple device of entering into contracts for the purpose of
doing that which otherwise may be prohibited. The policy of protecting contracts against impairment
presupposes the maintenance of a government by virtue of which contractual relations are worthwhile a
government which retains adequate authority to secure the peace and good order of society. The contract
clause of the Constitution must, therefore, be not only in harmony with, but also in subordination to, in
appropriate instances, the reserved power of the state to safeguard the vital interests of the people. It
follows that not all legislations, which have the effect of impairing a contract, are obnoxious to the
constitutional prohibition as to impairment, and a statute passed in the legitimate exercise of police
power, although it incidentally destroys existing contract rights, must be upheld by the courts. This has
special application to contracts regulating relations between capital and labor which are not merely
contractual, and said labor contracts, for being impressed with public interest, must yield to the common
good. 27
In several occasions this Court declared that the prohibition against impairing the obligations of
contracts has no application to statutes relating to public subjects within the domain of the general
legislative powers of the state involving public welfare. 28 Thus, this Court also held that the Blue
Sunday Law was not an infringement of the obligation of a contract that required the employer to
furnish work on Sundays to his employees, the law having been enacted to secure the well-being and
happiness of the laboring class, and being, furthermore, a legitimate exercise of the police power.29
In order to determine whether legislation unconstitutionally impairs contract obligations, no unchanging
yardstick, applicable at all times and under all circumstances, by which the validity of each statute may
be measured or determined, has been fashioned, but every case must be determined upon its own
circumstances. Legislation impairing the obligation of contracts can be sustained when it is enacted for
the promotion of the general good of the people, and when the means adopted to secure that end are
reasonable. Both the end sought and the means adopted must be legitimate, i.e., within the scope of the
reserved power of the state construed in harmony with the constitutional limitation of that power. 30
What then was the purpose sought to be achieved by Republic Act No. 3350? Its purpose was to insure
freedom of belief and religion, and to promote the general welfare by preventing discrimination against
those members of religious sects which prohibit their members from joining labor unions, confirming
thereby their natural, statutory and constitutional right to work, the fruits of which work are usually the
only means whereby they can maintain their own life and the life of their dependents. It cannot be
gainsaid that said purpose is legitimate.
The questioned Act also provides protection to members of said religious sects against two aggregates of
group strength from which the individual needs protection. The individual employee, at various times in
his working life, is confronted by two aggregates of power collective labor, directed by a union, and
collective capital, directed by management. The union, an institution developed to organize labor into a
collective force and thus protect the individual employee from the power of collective capital, is,
paradoxically, both the champion of employee rights, and a new source of their frustration. Moreover,
when the Union interacts with management, it produces yet a third aggregate of group strength from
which the individual also needs protection the collective bargaining relationship. 31
The aforementioned purpose of the amendatory law is clearly seen in the Explanatory Note to House
Bill No. 5859, which later became Republic Act No. 3350, as follows:
It would be unthinkable indeed to refuse employing a person who, on account of his
religious beliefs and convictions, cannot accept membership in a labor organization

although he possesses all the qualifications for the job. This is tantamount to punishing
such person for believing in a doctrine he has a right under the law to believe in. The law
would not allow discrimination to flourish to the detriment of those whose religion
discards membership in any labor organization. Likewise, the law would not commend
the deprivation of their right to work and pursue a modest means of livelihood, without in
any manner violating their religious faith and/or belief. 32
It cannot be denied, furthermore, that the means adopted by the Act to achieve that purpose
exempting the members of said religious sects from coverage of union security agreements is
reasonable.
It may not be amiss to point out here that the free exercise of religious profession or belief is superior to
contract rights. In case of conflict, the latter must, therefore, yield to the former. The Supreme Court of
the United States has also declared on several occasions that the rights in the First Amendment, which
include freedom of religion, enjoy a preferred position in the constitutional system. 33 Religious freedom,
although not unlimited, is a fundamental personal right and liberty, 34 and has a preferred position in the
hierarchy of values. Contractual rights, therefore, must yield to freedom of religion. It is only where
unavoidably necessary to prevent an immediate and grave danger to the security and welfare of the
community that infringement of religious freedom may be justified, and only to the smallest extent
necessary to avoid the danger.
3. In further support of its contention that Republic Act No. 3350 is unconstitutional, appellant Union
averred that said Act discriminates in favor of members of said religious sects in violation of Section 1
(7) of Article Ill of the 1935 Constitution, and which is now Section 8 of Article IV of the 1973
Constitution, which provides:
No law shall be made respecting an establishment of religion, or prohibiting the free
exercise thereof, and the free exercise and enjoyment of religious profession and worship,
without discrimination and preference, shall forever be allowed. No religious test shall be
required for the exercise of civil or political rights.
The constitutional provision into only prohibits legislation for the support of any religious tenets or the
modes of worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the
practice of any form of worship, 35 but also assures the free exercise of one's chosen form of religion
within limits of utmost amplitude. It has been said that the religion clauses of the Constitution are all
designed to protect the broadest possible liberty of conscience, to allow each man to believe as his
conscience directs, to profess his beliefs, and to live as he believes he ought to live, consistent with the
liberty of others and with the common good. 36 Any legislation whose effect or purpose is to impede the
observance of one or all religions, or to discriminate invidiously between the religions, is invalid, even
though the burden may be characterized as being only indirect. 37 But if the stage regulates conduct by
enacting, within its power, a general law which has for its purpose and effect to advance the state's
secular goals, the statute is valid despite its indirect burden on religious observance, unless the state can
accomplish its purpose without imposing such burden. 38
In Aglipay v. Ruiz 39 , this Court had occasion to state that the government should not be precluded from
pursuing valid objectives secular in character even if the incidental result would be favorable to a
religion or sect. It has likewise been held that the statute, in order to withstand the strictures of
constitutional prohibition, must have a secular legislative purpose and a primary effect that neither
advances nor inhibits religion. 40 Assessed by these criteria, Republic Act No. 3350 cannot be said to
violate the constitutional inhibition of the "no-establishment" (of religion) clause of the Constitution.

The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not spiritual or religious or
holy and eternal. It was intended to serve the secular purpose of advancing the constitutional right to the
free exercise of religion, by averting that certain persons be refused work, or be dismissed from work, or
be dispossessed of their right to work and of being impeded to pursue a modest means of livelihood, by
reason of union security agreements. To help its citizens to find gainful employment whereby they can
make a living to support themselves and their families is a valid objective of the state. In fact, the state is
enjoined, in the 1935 Constitution, to afford protection to labor, and regulate the relations between labor
and capital and industry. 41 More so now in the 1973 Constitution where it is mandated that "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 relation between workers and
employers. 42
The primary effects of the exemption from closed shop agreements in favor of members of religious
sects that prohibit their members from affiliating with a labor organization, is the protection of said
employees against the aggregate force of the collective bargaining agreement, and relieving certain
citizens of a burden on their religious beliefs; and by eliminating to a certain extent economic insecurity
due to unemployment, which is a serious menace to the health, morals, and welfare of the people of the
State, the Act also promotes the well-being of society. It is our view that the exemption from the effects
of closed shop agreement does not directly advance, or diminish, the interests of any particular religion.
Although the exemption may benefit those who are members of religious sects that prohibit their
members from joining labor unions, the benefit upon the religious sects is merely incidental and indirect.
The "establishment clause" (of religion) does not ban regulation on conduct whose reason or effect
merely happens to coincide or harmonize with the tenets of some or all religions. 43 The free exercise
clause of the Constitution has been interpreted to require that religious exercise be preferentially
aided. 44
We believe that in enacting Republic Act No. 3350, Congress acted consistently with the spirit of the
constitutional provision. It acted merely to relieve the exercise of religion, by certain persons, of a
burden that is imposed by union security agreements. It was Congress itself that imposed that burden
when it enacted the Industrial Peace Act (Republic Act 875), and, certainly, Congress, if it so deems
advisable, could take away the same burden. It is certain that not every conscience can be
accommodated by all the laws of the land; but when general laws conflict with scrupples of conscience,
exemptions ought to be granted unless some "compelling state interest" intervenes.45 In the instant case,
We see no such compelling state interest to withhold exemption.
Appellant bewails that while Republic Act No. 3350 protects members of certain religious sects, it
leaves no right to, and is silent as to the protection of, labor organizations. The purpose of Republic Act
No. 3350 was not to grant rights to labor unions. The rights of labor unions are amply provided for in
Republic Act No. 875 and the new Labor Code. As to the lamented silence of the Act regarding the
rights and protection of labor unions, suffice it to say, first, that the validity of a statute is determined by
its provisions, not by its silence 46 ; and, second, the fact that the law may work hardship does not render
it unconstitutional. 47
It would not be amiss to state, regarding this matter, that to compel persons to join and remain members
of a union to keep their jobs in violation of their religious scrupples, would hurt, rather than help, labor
unions, Congress has seen it fit to exempt religious objectors lest their resistance spread to other
workers, for religious objections have contagious potentialities more than political and philosophic
objections.
Furthermore, let it be noted that coerced unity and loyalty even to the country, and a fortiori to a labor
union assuming that such unity and loyalty can be attained through coercion is not a goal that is

constitutionally obtainable at the expense of religious liberty. 48 A desirable end cannot be promoted by
prohibited means.
4. Appellants' fourth contention, that Republic Act No. 3350 violates the constitutional prohibition
against requiring a religious test for the exercise of a civil right or a political right, is not well taken. The
Act does not require as a qualification, or condition, for joining any lawful association membership in
any particular religion or in any religious sect; neither does the Act require affiliation with a religious
sect that prohibits its members from joining a labor union as a condition or qualification for withdrawing
from a labor union. Joining or withdrawing from a labor union requires a positive act. Republic Act No.
3350 only exempts members with such religious affiliation from the coverage of closed shop
agreements. So, under this Act, a religious objector is not required to do a positive act to exercise the
right to join or to resign from the union. He is exempted ipso jure without need of any positive act on his
part. A conscientious religious objector need not perform a positive act or exercise the right of resigning
from the labor union he is exempted from the coverage of any closed shop agreement that a labor
union may have entered into. How then can there be a religious test required for the exercise of a right
when no right need be exercised?
We have said that it was within the police power of the State to enact Republic Act No. 3350, and that its
purpose was legal and in consonance with the Constitution. It is never an illegal evasion of a
constitutional provision or prohibition to accomplish a desired result, which is lawful in itself, by
discovering or following a legal way to do it.49
5. Appellant avers as its fifth ground that Republic Act No. 3350 is a discriminatory legislation,
inasmuch as it grants to the members of certain religious sects undue advantages over other workers,
thus violating Section 1 of Article III of the 1935 Constitution which forbids the denial to any person of
the equal protection of the laws. 50
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws
upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional
prohibition against inequality, that every man, woman and child should be affected alike by a statute.
Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but
on persons according to the circumstances surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which are different in fact be treated in law as
though they were the same. The equal protection clause does not forbid discrimination as to things that
are different. 51 It does not prohibit legislation which is limited either in the object to which it is directed
or by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows classification. Classification in law, as
in the other departments of knowledge or practice, is the grouping of things in speculation or practice
because they agree with one another in certain particulars. A law is not invalid because of simple
inequality. 52 The very idea of classification is that of inequality, so that it goes without saying that the
mere fact of inequality in no manner determines the matter of constitutionality. 53 All that is required of a
valid classification is that it be reasonable, which means that the classification should be based on
substantial distinctions which make for real differences; that it must be germane to the purpose of the
law; that it must not be limited to existing conditions only; and that it must apply equally to each
member of the class. 54 This Court has held that the standard is satisfied if the classification or distinction
is based on a reasonable foundation or rational basis and is not palpably arbitrary. 55
In the exercise of its power to make classifications for the purpose of enacting laws over matters within
its jurisdiction, the state is recognized as enjoying a wide range of discretion. 56 It is not necessary that
the classification be based on scientific or marked differences of things or in their relation. 57 Neither is it
necessary that the classification be made with mathematical nicety. 58 Hence legislative classification

may in many cases properly rest on narrow distinctions, 59 for the equal protection guaranty does not
preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as
they may appear.
We believe that Republic Act No. 3350 satisfies the aforementioned requirements. The Act classifies
employees and workers, as to the effect and coverage of union shop security agreements, into those who
by reason of their religious beliefs and convictions cannot sign up with a labor union, and those whose
religion does not prohibit membership in labor unions. Tile classification rests on real or substantial, not
merely imaginary or whimsical, distinctions. There is such real distinction in the beliefs, feelings and
sentiments of employees. Employees do not believe in the same religious faith and different religions
differ in their dogmas and cannons. Religious beliefs, manifestations and practices, though they are
found in all places, and in all times, take so many varied forms as to be almost beyond imagination.
There are many views that comprise the broad spectrum of religious beliefs among the people. There are
diverse manners in which beliefs, equally paramount in the lives of their possessors, may be articulated.
Today the country is far more heterogenous in religion than before, differences in religion do exist, and
these differences are important and should not be ignored.
Even from the phychological point of view, the classification is based on real and important differences.
Religious beliefs are not mere beliefs, mere ideas existing only in the mind, for they carry with them
practical consequences and are the motives of certain rules. of human conduct and the justification of
certain acts. 60 Religious sentiment makes a man view things and events in their relation to his God. It
gives to human life its distinctive character, its tone, its happiness or unhappiness its enjoyment or
irksomeness. Usually, a strong and passionate desire is involved in a religious belief. To certain persons,
no single factor of their experience is more important to them than their religion, or their not having any
religion. Because of differences in religious belief and sentiments, a very poor person may consider
himself better than the rich, and the man who even lacks the necessities of life may be more cheerful
than the one who has all possible luxuries. Due to their religious beliefs people, like the martyrs, became
resigned to the inevitable and accepted cheerfully even the most painful and excruciating pains. Because
of differences in religious beliefs, the world has witnessed turmoil, civil strife, persecution, hatred,
bloodshed and war, generated to a large extent by members of sects who were intolerant of other
religious beliefs. The classification, introduced by Republic Act No. 3350, therefore, rests on substantial
distinctions.
The classification introduced by said Act is also germane to its purpose. The purpose of the law is
precisely to avoid those who cannot, because of their religious belief, join labor unions, from being
deprived of their right to work and from being dismissed from their work because of union shop security
agreements.
Republic Act No. 3350, furthermore, is not limited in its application to conditions existing at the time of
its enactment. The law does not provide that it is to be effective for a certain period of time only. It is
intended to apply for all times as long as the conditions to which the law is applicable exist. As long as
there are closed shop agreements between an employer and a labor union, and there are employees who
are prohibited by their religion from affiliating with labor unions, their exemption from the coverage of
said agreements continues.
Finally, the Act applies equally to all members of said religious sects; this is evident from its provision.
The fact that the law grants a privilege to members of said religious sects cannot by itself render the Act
unconstitutional, for as We have adverted to, the Act only restores to them their freedom of association
which closed shop agreements have taken away, and puts them in the same plane as the other workers
who are not prohibited by their religion from joining labor unions. The circumstance, that the other
employees, because they are differently situated, are not granted the same privilege, does not render the

law unconstitutional, for every classification allowed by the Constitution by its nature involves
inequality.
The mere fact that the legislative classification may result in actual inequality is not violative of the right
to equal protection, for every classification of persons or things for regulation by law produces
inequality in some degree, but the law is not thereby rendered invalid. A classification otherwise
reasonable does not offend the constitution simply because in practice it results in some
inequality. 61 Anent this matter, it has been said that whenever it is apparent from the scope of the law
that its object is for the benefit of the public and the means by which the benefit is to be obtained are of
public character, the law will be upheld even though incidental advantage may occur to individuals
beyond those enjoyed by the general public. 62
6. Appellant's further contention that Republic Act No. 3350 violates the constitutional provision on
social justice is also baseless. Social justice is intended to promote the welfare of all the
people. 63 Republic Act No. 3350 promotes that welfare insofar as it looks after the welfare of those who,
because of their religious belief, cannot join labor unions; the Act prevents their being deprived of work
and of the means of livelihood. In determining whether any particular measure is for public advantage, it
is not necessary that the entire state be directly benefited it is sufficient that a portion of the state be
benefited thereby.
Social justice also means the adoption by the Government of measures calculated to insure economic
stability of all component elements of society, through the maintenance of a proper economic and social
equilibrium in the inter-relations of the members of the community. 64 Republic Act No. 3350 insures
economic stability to the members of a religious sect, like the Iglesia ni Cristo, who are also component
elements of society, for it insures security in their employment, notwithstanding their failure to join a
labor union having a closed shop agreement with the employer. The Act also advances the proper
economic and social equilibrium between labor unions and employees who cannot join labor unions, for
it exempts the latter from the compelling necessity of joining labor unions that have closed shop
agreements and equalizes, in so far as opportunity to work is concerned, those whose religion prohibits
membership in labor unions with those whose religion does not prohibit said membership. Social justice
does not imply social equality, because social inequality will always exist as long as social relations
depend on personal or subjective proclivities. Social justice does not require legal equality because legal
equality, being a relative term, is necessarily premised on differentiations based on personal or natural
conditions. 65 Social justice guarantees equality of opportunity 66 , and this is precisely what Republic
Act No. 3350 proposes to accomplish it gives laborers, irrespective of their religious scrupples, equal
opportunity for work.
7. As its last ground, appellant contends that the amendment introduced by Republic Act No. 3350 is not
called for in other words, the Act is not proper, necessary or desirable. Anent this matter, it has been
held that a statute which is not necessary is not, for that reason, unconstitutional; that in determining the
constitutional validity of legislation, the courts are unconcerned with issues as to the necessity for the
enactment of the legislation in question. 67 Courts do inquire into the wisdom of laws. 68 Moreover,
legislatures, being chosen by the people, are presumed to understand and correctly appreciate the needs
of the people, and it may change the laws accordingly. 69 The fear is entertained by appellant that unless
the Act is declared unconstitutional, employers will prefer employing members of religious sects that
prohibit their members from joining labor unions, and thus be a fatal blow to unionism. We do not agree.
The threat to unionism will depend on the number of employees who are members of the religious sects
that control the demands of the labor market. But there is really no occasion now to go further and
anticipate problems We cannot judge with the material now before Us. At any rate, the validity of a
statute is to be determined from its general purpose and its efficacy to accomplish the end desired, not
from its effects on a particular case. 70 The essential basis for the exercise of power, and not a mere

incidental result arising from its exertion, is the criterion by which the validity of a statute is to be
measured. 71
II. We now pass on the second assignment of error, in support of which the Union argued that the
decision of the trial court ordering the Union to pay P500 for attorney's fees directly contravenes Section
24 of Republic Act No. 875, for the instant action involves an industrial dispute wherein the Union was a
party, and said Union merely acted in the exercise of its rights under the union shop provision of its
existing collective bargaining contract with the Company; that said order also contravenes Article 2208
of the Civil Code; that, furthermore, Appellee was never actually dismissed by the defendant Company
and did not therefore suffer any damage at all . 72
In refuting appellant Union's arguments, Appellee claimed that in the instant case there was really no
industrial dispute involved in the attempt to compel Appellee to maintain its membership in the union
under pain of dismissal, and that the Union, by its act, inflicted intentional harm on Appellee; that since
Appellee was compelled to institute an action to protect his right to work, appellant could legally be
ordered to pay attorney's fees under Articles 1704 and 2208 of the Civil Code. 73
The second paragraph of Section 24 of Republic Act No. 875 which is relied upon by appellant provides
that:
No suit, action or other proceedings shall be maintainable in any court against a labor
organization or any officer or member thereof for any act done by or on behalf of such
organization in furtherance of an industrial dispute to which it is a party, on the ground
only that such act induces some other person to break a contract of employment or that it
is in restraint of trade or interferes with the trade, business or employment of some other
person or with the right of some other person to dispose of his capital or labor. (Emphasis
supplied)
That there was a labor dispute in the instant case cannot be disputed for appellant sought the discharge
of respondent by virtue of the closed shop agreement and under Section 2 (j) of Republic Act No. 875 a
question involving tenure of employment is included in the term "labor dispute". 74 The discharge or the
act of seeking it is the labor dispute itself. It being the labor dispute itself, that very same act of the
Union in asking the employer to dismiss Appellee cannot be "an act done ... in furtherance of an
industrial dispute". The mere fact that appellant is a labor union does not necessarily mean that all its
acts are in furtherance of an industrial dispute. 75 Appellant Union, therefore, cannot invoke in its favor
Section 24 of Republic Act No. 875. This case is not intertwined with any unfair labor practice case
existing at the time when Appellee filed his complaint before the lower court.
Neither does Article 2208 of the Civil Code, invoked by the Union, serve as its shield. The article
provides that attorney's fees and expenses of litigation may be awarded "when the defendant's act or
omission has compelled the plaintiff ... to incur expenses to protect his interest"; and "in any other case
where the court deems it just and equitable that attorney's fees and expenses of litigation should be
recovered". In the instant case, it cannot be gainsaid that appellant Union's act in demanding Appellee's
dismissal caused Appellee to incur expenses to prevent his being dismissed from his job. Costs
according to Section 1, Rule 142, of the Rules of Court, shall be allowed as a matter of course to the
prevailing party.
WHEREFORE, the instant appeal is dismissed, and the decision, dated August 26, 1965, of the Court of
First Instance of Manila, in its Civil Case No. 58894, appealed from is affirmed, with costs against
appellant Union. It is so ordered.
G.R. No. 91086 May 8, 1990

VIRGILIO S. CARIO petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, HARRISON INDUSTRIAL
CORPORATION and HARRISON INDUSTRIAL WORKERS' UNION, respondents.
Federico C. Leynes for petitioner.
Banzuela, Flores, Miralles, Raeses Sy, Taquio & Associates for respondent Union.
Armando V. Ampil for respondent Harrison.
RE S O LUTI ON

FELICIANO, J.:
Petitioner asks the Court to declare null and void a Decision dated 26 May 1989 of the National Labor
Relations Commission (NLRC) in NLRC Case No. NCR-00-09-03225-87 and to reinstate the Decision
of the Labor Arbiter which the NLRC had modified.
Petitioner Cario was the former President of private respondent Harrison Industrial Workers' Union
("Union"). Because he was widely believed to have grossly mismanaged Union affairs, the other officers
of the Union formed an investigating committee and several times invited petitioner Cario to answer
the complaints and charges against him. These charges were, principally:
1. Conspiring with the company during the negotiation of the CBA, resulting in, among other things,
Article 22 entitled "Retirement" which provided for retirement pay of one (1) day's basic salary for
every year of service.
2. Paying attorney's fees to Atty. Federico Leynes, Union counsel, out of Union funds without obtaining
corresponding receipts therefor.
3. Unilaterally increasing the membership dues by an additional P17.00 per member in order to pay
increased attorney's fees.
4. Concealing the CBA, failure to present and to explain the provisions of the same prior to ratification
by the union membership.
5. Refusal to turn over the custody and management of Union funds to the Union treasurer.
Petitioner Cario, however, failed to respond to the calls or invitations made by the investigating
committee. Finally, the investigation committee caged a general membership meeting on 11 June 1987.
At this general membership meeting, the charges against petitioner were presented and discussed and the
Union decided to file a petition for special election of its officers.
On 16 June 1987, a petition for special election of officers was filed by the Union with the Bureau of
Labor Relations, Department of Labor and Employment. Several hearings were field at the BLR always
with due notice to petitioner Cario petitioner, however, failed to appear even once.

On 5 August 1987, a general Union membership meeting was held for the impeachment of Cario. The
general membership found Cario guilty of the above-mentioned charges and decided to expel him from
the Union and to recommend his termination from employment. Atty. Federico Leynes also ceased to be
counsel for the Union.
The Union accordingly informed private respondent Harrison Industrial Corporation ("Company") of the
expulsion of petitioner Cario from the Union and demanded application of the Union Security Clause
of the then existing Collective Bargaining Agreement (CBA) on 15 September 1987. Petitioner Cario
received a letter of termination from the Company, effective the next day.
Petitioner Cario, now represented by Atty. Leynes, the former lawyer of the Union, filed a complaint
for illegal dismissal with the Labor Arbiter.
In a Decision dated 7 October, 1988, the Labor Arbiter held that there was no just cause for the dismissal
of petitioner Cario, none of the causes for suspension or dismissal of Union members enumerated in
the Union's Constitution and By-Laws being applicable to petitioner's situation. The Labor Arbiter also
held that the manner of petitioner's dismissal had been in disregard of the requirements of notice and
hearing laid down in the Labor Code. The Labor Arbiter ordered petitioner's reinstatement with full
backwages and payment of attorney's fees, the monetary liability to be borne solidarily by the Company
and the Union.
The Company and the Union went on appeal before the public respondent National Labor Relations
Commission (NLRC). The NLRC, in a Decision promulgated on 26 May 1989, reversed the Labor
Arbiter's award. The NLRC noted that petitioner Cario had merely denied the serious charges of
mismanagement preferred against him, as set out in the affidavit of Dante Maroya, the incumbent
President of the Union, which affidavit had been adopted by the Union as its position paper in the
proceedings before the Labor Arbiter. The NLRC held Cario's silence as "tantamount to [an] admission
of guilt" and as constituting the ultimate cause for his dismissal. However, the NLRC agreed with the
Labor Arbiter's finding that the manner of petitioner Cario's dismissal was inconsistent with the
requirements of due process. The NLRC accordingly found the Company and the Union solidarily
liable, "by way of penalty and financial assistance", to petitioner Cario for payment of separation pay,
at the rate of one-half (1/2) month's salary for each year of service.
In the instant Petition for Certiorari, petitioner Cario basically seeks reinstatement of the Decision of
the Labor Arbiter.
1. Petitioner Cario contended that the NLRC had erred in taking cognizance of the Union's admittedly
late appeal. We agree, however, with the Solicitor General that it is a settled principle of remedial law
that reversal of a judgment obtained by a party appealing from it also benefits a co-party who had not
appealed, or who had appealed out of time, where the rights and liabilities of both parties under the
modified decision are so interwoven and inter-dependent as to be substantively inseparable. 1
In the instant case, the NLRC could take cognizance of the late appeal of the Union, considering that the
lawfulness of petitioner Cario's dismissal by the Company could be determined only after ascertaining,
among other things, the validity of the Union's act of expelling Cario from its membership. In other
words, the Company having seasonably appealed the Labor Arbiter's Decision and the Company's and
the Union's liability being closely intertwined the NLRC could properly take account of the Union's
appeal even though not seasonably filed.
2. The NLRC in effect held that there had been just cause for petitioner Cario's dismissal. The Court
considers that the NLRC was correct in so holding, considering the following documentary provisions:

a) Article II, Sections 4 and 5 of the Collective Bargaining Agreement between the Company and the
Union provided as follows:
Sec. 4. Any employee or worker obliged to join the UNION and/or maintain membership
therein under the foregoing sections who fails to do so and/or maintain such membership
shall be dismiss without pay upon formal request of the UNION.
Sec. 5. Any UNION member may be suspended and/or expelled by the UNION for:
a) Non-payment of dues or special assessment to the UNION.
b) Organizing or joining another UNION or affiliating with a labor federation.
c) Commission of a crime as defined by the Revised Penal Code against any UNION
officer in relation to activities for and in behalf of the UNION.
d) Participation in an unfair labor practice or any derogatory act against the UNION or
any of its officers or members; and
e) Involvement in any violation of this Agreement or the UNION's Constitution and ByLaws.
The UNION assumes full and complete responsibility for all dismiss of any worker/employee effected
by the UNION and conceded in turn, by the COMPANY pursuant to the provisions hereof.
The UNION shall defend and hold the COMPANY free and harmless against any and all claims the
dismissed worker/employee might bring and/or obtain from the Company for such
dismissal. 2 (Emphasis supplied)
b) The Constitution of the Union contains the following provisions:
(i) Article X Section 5 reads:
ARTICLE X-FEES, DUES SPECIAL ASSESSMENTS, FINES AND OTHER PAYMENTS
xxx xxx xxx
Sec. 5. Special assessments or other extraordinary fees such as for payment of attorney's
fees shall be made only upon a resolution duly ratified by the general membership by
secret balloting.
xxx xxx xxx
(Emphasis supplied.)
(ii) Article XV entitled "Discipline" provides in Section I thereof that:
Sec. 1. Any individual union members and/or union officer may be disciplined or
expelled from the UNION by the Executive Board if the latter should find the former
guilty of charges, based on the following grounds preferred officially against him:

a) Non-payment of dues and other assessments for two (2) months;

b) Culpable violation of the Constitution and By Laws;
c) Deliberate refusal to implement policies, rules and regulations decisions and/or support
the programs or projects of the UNION as laid down by its governing organs or its
officers; and
d) Any act inimical to the interest of the UNION and/or its officers, such as but not
limited to rumor mongering which tends to discredit the name and integrity of the
UNION and/or its officers and creating or causing to create dissension among the
UNION members thereof. 4 (Emphasis supplied.)
Article XVI entitled "Impeachment and Recall" specified, in Section 1 thereof, the grounds for
impeachment or recall of the President and other Union officers, in the following terms:
a) Committing or causing the commission directly or indirectly of acts against the
interest and welfare of the UNION;
b) Malicious attack against the UNION, its officers or against a fellow UNION officer or
member;
c) Failure to comply with the obligation to turn over and return to the UNION Treasurer
within three (3) days are [sic] unexpected sum or sum of money received an authorized
UNION purpose;
d) Gross misconduct unbecoming of a UNION officer;
e) Misappropriation of UNION funds and property. This is without prejudice to the filing
of an appropriate criminal or civil action against the responsible officer or officers by any
interested party
f) Willful violation of any provisions on this Constitution or rules, regulations, measures,
resolution and decisions of the UNION. 5 (Emphasis supplied.)
It appears to the Court that the particular charges raised against petitioner Cario, set out earlier,
reasonably fall within the underscored provisions of the foregoing documents. The NLRC impliedly
recognized this when it described the charges of mismanagement against Carino as serious.
The Labor Arbiter, however, also held that petitioner Cario had been deprived of procedural due
process on the union level in view of alleged failure to comply with the required procedure, governing
impeachment and recall proceedings set out in Article XVI, Section 2, of the Constitution of the Union.
Article XVI, Section 2 reads as follows:
a) Impeachment or recall proceedings shall be initiated by a formal petition or resolution
signed by at least thirty (30%) percent of all bona fide members of the UNION and
addressed to the Chairman of the Executive board.
b) The Board Chairman shall then convene a general membership fee to consider the
impeachment or recall of an officer or a group of officers, whether elective or appointive

c) UNION officers against whom impeachment or recall charges have been filed shall be
given ample opportunity to defend themselves before any impeachment or recall vote is
finally taken.
d) A majority of all members of the UNION shall be required to impeach or recall
UNION officers.
e) The UNION officers impeached shall ipso facto be considered resigned or ousted from
office and shall no longer be elected nor appointed to any position in the UNION.
f) The decision of the general membership on the impeachment or recall charge shall be
final and executory. 6
The NLRC, for its part, noted that while the prescribed procedural steps had not all been followed or
complied with, still,
Be that as it may, the general membership of the Union had spoken and decided to expel
complainant as Union President and member and ultimately, requested the company to
terminate his services per CBA prescription. It is worthy to note that the charges aired by
Mr. Dante Maroya are serious enough for complainant to specifically respond and explain
his side at the arbitral proceedings below. While it appears that due process was lacking
at the plant level, this was cured by the arbitration process conducted by the Labor
Arbiter. Despite the ample opportunity to explain his side, complainant failed to do so
and instead, relied completely on alleged denial of due process. Complainant's silence in
this respect is tantamount to [an] admission of guilt. 7 (Emphasis supplied.)
It is true that the impeachment of Cario had not been initiated by a formal petition or resolution signed
by at least thirty percent (30%) of an the bona fide members of the Union. A general meeting had,
however, been called to take up the charges against petitioner Carino who had been given multiple
opportunities to defend himself before the investigating committee of the Union officers and before the
general Union members as well as before the Bureau of Labor Relations. Petitioner Cario, however,
chose to disregard all calls for him to appear and defend himself. At the general membership meeting,
therefore, petitioner Cario was impeached and ordered recalled byunanimous vote of the membership.
Under these circumstances, failure to comply literally with step (a) of Article XVI Section 2 of the
Union's Constitution must be regarded as non-material: the prescribed impeachment and recall
proceeding had been more than substantially complied with.
4. Turning now to the involvement of the Company in the dismissal of petitioner Cario we note that the
Company upon being formally advised in writing of the expulsion of petitioner Carino from the Union,
in turn simply issued a termination letter to Cario, the termination being made effective the very next
day. We believe that the Company should have given petitioner Carino an opportunity to explain his side
of the controversy with the Union. Notwithstanding the Unions Security Clause in the CBA, the
Company should have reasonably satisfied itself by its own inquiry that the Union had not been merely
acting arbitrarily and capriciously in impeaching and expelling petitioner Cario. From what was
already discussed above, it is quite clear that had the Company taken the trouble to investigate the acts
and proceedings of the Union, it could have very easily determined that the Union had not acted
arbitrarily in impeaching and expelling from its ranks petitioner Cario. The Company offered the
excuse that the Union had threatened to go on strike if its request had not been forthwith granted.
Assuming that such a threat had in fact been made, if a strike was in fact subsequently called because the
Company had insisted on conducting its own inquiry, the Court considers that such would have
been prima facie an illegal strike. The Company also pleaded that for it to inquire into the lawfulness of

the acts of the Union in this regard would constitute interference by the Company in the administration
of Union affairs. We do not believe so.
In Liberty Cotton Mills Worker's Union, et al. v. Liberty Cotton Mills, et al. 8 the Court held respondent
company to have acted in bad faith in dismissing the petitioner workers without giving them an
opportunity to present their side in their controversy with their own union.
xxx xxx xxx
It is OUR considered view that respondent company is equally liable for the payment of
backwages for having acted in bad faith in effecting the dismissal of the individual
petitioners. Bad faith on the part of respondent company may be gleaned from the fact
that the petitioner workers were dismissed hastily and summarily. At best, it was guilty of
a tortious act, for which it must assume solidary liability, since it apparently chose to
summarily dismiss the workers at the union's instance secure in the union's contractual
undertaking that the union would hold it "free from any liability" arising from such
dismissal.
xxx xxx xxx
While respondent company, under the Maintenance of Membership prevision of the
Collective Bargaining Agreement, is bound to dismiss any employee expelled by PAFLU
for disloyalty, upon its written request, this undertaking should not be done hastily and
summarily. The company acted in bad faith in dismissing petitioner workers without
giving them the benefit of a hearing. It did not even bother to inquire from the workers
concerned and from PAFLU itself about the cause of the expulsion of the petitioner
workers. Instead, the company immediately dismissed the workers on May 29, 1964 in
a span of only one day stating that it had no alternative but to comply with its
obligation under the Security Agreement in the Collective Bargaining Agreement thereby
disregarding the right of the workers to due process, self-organization and security of
tenure.
xxx xxx xxx
The power to dismiss is a normal prerogative of the employer. However, this is not
without limitations.The employer is bound to exercise caution in terminating the services
of his employee especially so when it is made upon the request of a labor union pursuant
to the Collective Bargaining Agreement,as in the instant case. Dismissals must not be
arbitrary and capricious. Due process must be observed in dismissing an employee
because it affects not only his position but also his means of livelihood. Employers should
therefore respect and protect the rights of their employees, which include the right to
labor. . . .
xxx xxx xxx
(Emphasis supplied.)
In Manila Cordage Company v. Court of industrial Relations, et al., 10 the Court stressed the
requirement of good faith on the part of the company in dismissing the complainant and in effect held
that precipitate action in dismissing the complainant is indication of lack of good faith.
xxx xxx xxx

The contention of the petitioners that they acted in good faith in dismissing the
complainants and, therefore, should not be held liable to pay their back wages has no
merit. The dismissal of the complainants by the petitioners was precipitate and done with
undue haste. Considering that the so-called "maintainance of membership" clause did
not clearly give the petitioners the right to dismiss the complainants if said complainants
did not maintain their membership in the Manco Labor Union, the petitioners should
have raised the issue before the Court of industrial Relations in a petition for permission
to dismiss the complainants.
xxx xxx xxx
(Emphasis supplied.)
5. We conclude that the Company had failed to accord to petitioner Cario the latter's right to procedural
due process. The right of an employee to be informed of the charges against him and to reasonable
opportunity to present his side in a controversy with either the Company or his own Union, is not wiped
away by a Union Security Clause or a Union Shop Clause in a CBA. An employee is entitled to be
protected not only from a company which disregards his rights but also from his own Union the
leadership of which could yield to the temptation of swift and arbitrary expulsion from membership and
hence dismissal from his job.
The Court does not believe, however, that the grant of separation pay to petitioner Cario was an
appropriate response (there having been just cause for the dismissal) to the failure of the Company to
accord him his full measure of due process. Since petitioner Cario had clearly disdained answering the
charges preferred against him within the Union, there was no reason to suppose that if the Company had
held formal proceedings before dismissing him, he would have appeared in a Company investigation
and pleaded his defenses, if he had any, against the charges against him. There was no indication that the
Company had in fact conspired with the Union to bring about the expulsion and dismissal of petitioner
Cario indeed, the Union membership believed it was Cario who had conspired with the company in
the course of negotiating the CBA. Considering all the circumstances of this case, and considering
especially the nature of the charges brought against petitioner Cario before his own Union, the Court
believes that a penalty of P5,000 payable to petitioner Carino should be quite adequate, the penalty to be
borne by the Company and the Union solidarily The Court also considers that because the charges raised
against petitioner and unanswered by him have marked overtones of dishonesty, this is not a case where
"financial (humanitarian) assistance" to the dismissed employee is warranted. 12
WHEREFORE, the Court DISMISSED the Petition for certiorari for lack of merit but MODIFIED the
Decision of the public respondent National Labor Relations Commission dated 26 May 1989 by
eliminating the grant of separation pay and in lieu thereof imposing a penalty of P5,000.00 payable to
the petitioner to be borne solidarily by the Company and the Union. No pronouncement as to costs.
G.R. No. 179402
NATIONAL UNION OF WORKERS IN HOTELS, RESTAURANTS AND ALLIED
INDUSTRIESMANILA PAVILLION HOTEL CHAPTER, Petitioner,- versus - NATIONAL
LABOR RELATIONS COMMISSION and ACESITE PHILIPPINES HOTEL
CORPORATION, Respondents.
DECISION
CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision1dated 30 May 2007 rendered by the Court of Appeals in CA-G.R. SP No. 96171, which
affirmed the Resolution2 dated 5 May 2006 of the National Labor Relations Commission (NLRC) in
NLRC NCR CC No. 000307-05 NCMB NCR NS 09-199-05, dismissing for lack of merit the complaint
for unfair labor practice filed by petitioner National Union of Workers in Hotels, Restaurants and Allied
Industries-Manila Pavilion Hotel (NUWHRAIN) against Manila Pavilion Hotel (the Hotel).
Petitioner NUWHRAIN is a legitimate labor organization composed of rank-and-file employees of the
Hotel,3 while respondent Acesite Philippines Hotel Corporation is the owner and operator of said Hotel.4
The factual antecedents of the instant Petition are as follows:
The Hotel entered into a Collective Bargaining Agreement with HI-MANILA PAVILION HOTEL
LABOR UNION (HIMPHLU), the exclusive bargaining agent of the rank-and-file employees of the
Hotel. Both parties consented that the representation aspect and other non-economic provisions of the
Collective Bargaining Agreement were to be effective for five years or until 30 June 2005; and the
economic provisions of the same were to be effective for three years or until 30 June 2003. The parties
subsequently re-negotiated the economic provisions of the Collective Bargaining Agreement and
extended the term of their effectivity for another two years or until 30 June 2005.5
During the 60-day freedom period which preceded the expiration of the Collective Bargaining
Agreement, starting on 1 May 2005 and ending on 30 June 2005, the Hotel and HIMPHLU negotiated
the extension of the provisions of the existing Collective Bargaining Agreement for two years, effective
1 July 2005 to 30 June 2007. The parties signed the Memorandum of Agreement on 20 May 2005 and
the employees ratified it on 27 May 2005.6
On 21 June 2005, NUWHRAIN was accorded by the Labor Relations Division of the Department of
Labor and Employment (DOLE) the status of a legitimate labor organization.7 Thereafter, NUWHRAIN
exercised the right to challenge the majority status of the incumbent union, HIMPHLU, by filing a
Petition for Certification Election on 28 June 2005.8
On 5 July 2007, the Industrial Relations Division of the DOLE allowed the registration of the
Memorandum of Agreement executed between HIMPHLU and the Hotel, extending the effectivity of
the existing Collective Bargaining Agreement for another two years.9
After the lapse of the 60-day freedom period, but pending the disposition of the Petition for Certification
Election filed by NUWHRAIN, HIMPHLU served the Hotel with a written demand dated 28 July
200510 for the dismissal of 36 employees following their expulsion from HIMPHLU for alleged acts of
disloyalty and violation of its Constitution and by-laws. An Investigation Report11 was attached to the
said written demand, stating that the 36 employees, who were members of HIMPHLU, joined
NUWHRAIN, in violation of Section 2, Article IV of the Collective Bargaining Agreement, which
provided for a union security clause that reads: 12
Section 2. DISMISSAL PURSUANT TO UNION SECURITY CLAUSE. Accordingly, failure to join
the UNION within the period specified in the immediately preceding section or failure to maintain
membership with the UNION in good standing either through resignation or expulsion from the UNION
in accordance with the UNIONs Constitution and by-laws due to disloyalty, joining another union or
non-payment of UNION dues shall be a ground for the UNION to demand the dismissal from the
HOTEL of the employee concerned. The demand shall be accompanied by the UNIONs investigation
report and the HOTEL shall act accordingly subject to existing laws and jurisprudence on the matter,
provided, however, that the UNION shall hold the HOTEL free and harmless from any and all liabilities
that may arise should the dismissed employee question in any manner the dismissal. The HOTEL shall

not, however, be compelled to act on any such UNION demand if made within a period of sixty (60)
days prior to the expiry date of this agreement. (Emphasis provided)
On 1 August 2005, the Hotel issued Disciplinary Action Notices13 (Notices) to the 36 employees
identified in the written demand of HIMPHLU. The Notices directed the 36 employees to submit a
written explanation for their alleged acts of disloyalty and violation of the union security clause for
which HIMPHLU sought their dismissal.
The Hotel called the contending unions and the employees concerned for a reconciliatory conference in
an attempt to avoid the dismissal of the 36 employees. The reconciliatory conferences facilitated by the
Hotel were held on 5 August 2005 and 1 September 2005.14 However, NUWHRAIN proceeded to file a
Notice of Strike before the National Conciliation and Mediation Board (NCMB) on 8 September 2005
on the ground of unfair labor practice under Article 248, paragraphs (a) and (b) of the Labor Code.15 The
Secretary of Labor intervened and certified the case for compulsory arbitration with the NLRC. The case
was docketed as NLRC NCR CC No. 000307-05 NCMB NCR NS 09-199-05, entitled IN RE: Labor
Dispute at Manila Pavilion Hotel.16
NUWHRAIN asserted that the Hotel committed unfair labor practice when it issued the Notices to the
36 employees who switched allegiance from HIMPHLU to NUWHRAIN. During the reconciliatory
conference held on 5 August 2005, respondents Vice President, Norma Azores, stated her preference to
deal with HIMPHLU, while blaming NUWHRAIN for the labor problems of the Hotel. On 1 September
2005, the Resident Manager of the Hotel, Bernardo Corpus, Jr., implored NUWHRAINs members to
withdraw their Petition for Certification Election and reaffirm their membership in HIMPHLU. The
Notices and the statements made by the officers of the respondent and the Hotel were allegedly intended
to intimidate and coerce the employees in the exercise of their right to self-organization. NUWHRAIN
claimed that it was entitled to moral damages in the amount of P50,000.00 and exemplary damages
of P20,000.0017
Respondent countered that it merely complied with its contractual obligations with HIMPHLU when it
issued the assailed Notices, and clarified that none of the 36 employees were dismissed by the Hotel. It
further denied that respondents Vice President Norma Azores and the Hotels Resident Manager
Bernardo Corpus, Jr. made the statements attributed to them, purportedly expressing their preference for
HIMPHLU during the reconciliatory conferences. Thus, respondent insisted that it did not commit unfair
labor practice, nor was it liable for moral and exemplary damages.18
In a Resolution19 dated 5 May 2006, the NLRC pronounced that the Hotel was not guilty of unfair labor
practice. Firstly, the NLRC adjudged that the execution of the Memorandum of Agreement between
respondent and HIMPHLU, extending the effectivity of the existing Collective Bargaining Agreement,
was entered into with the view of responding to the employees economic needs, and not intended to
interfere with or restrain the exercise of the right to self-organization of NUWHRAINs members.
Secondly, the NLRC determined that the issuance of the Notices directing the 36 employees to explain
why they should not be dismissed was in compliance with the Collective Bargaining Agreement
provisions regarding the union security clause. Even thereafter, the Hotel had not acted improperly as it
did not wrongfully terminate any of the 36 employees. Thirdly, the NLRC interpreted the statements
made by the officials of respondent and the Hotel during the reconciliatory conferences encouraging
the withdrawal of the Petition for Certification Election and the reaffirmation by the 36 employees of
their membership in HIMPHLU as proposed solutions to avoid the dismissal of the said employees.
The NLRC concluded that these statements did not constitute unfair labor practice for they could not
have coerced or influenced either of the contending unions, both of whom did not agree in the suggested
course of action or to any other manner of settling the dispute. Finally, the NLRC declared that the claim
for moral and exemplary damages of NUWHRAIN lacked sufficient factual and legal bases.

NUWHRAIN filed a Motion for Reconsideration of the foregoing NLRC Resolution. It was denied by
the NLRC in another Resolution dated 30 June 2006.20 Thus, NUWHRAIN filed a Petition
forCertiorari before the Court of Appeals, docketed as C.A. G.R. SP No. 96171.
In the meantime, on 16 June 2006, the Certification Election for regular rank and file employees of the
Hotel was held, which HIMPHLU won. It was accordingly certified as the exclusive bargaining agent
for rank and file employees of the Hotel.21
On 30 May 2007, the Court of Appeals promulgated its Decision22 in C.A. G.R. SP No. 96171,
upholding the Resolution dated 5 May 2006 of the NLRC in NLRC NCR CC No. 000307-05 NCMB
NCR NS 09-199-05. It declared that the Hotel had acted prudently when it issued the Notices to the 36
employees after HIMPHLU demanded their dismissal. It clarified that these Notices did not amount to
the termination of the employees concerned but merely sought their explanation on why the union
security clause should not be applied to them. The appellate court also gave credence to the denial by the
officers of the respondent and the Hotel that they made statements favoring HIMPHLU over
NUWHRAIN during the reconciliatory conferences. The Court of Appeals further noted that the
unhampered organization and registration of NUWHRAIN negated its allegation that the Hotel required
its employees not to join a labor organization as a condition for their employment.
NUWHRAINs Motion for Reconsideration of the aforementioned Decision of the Court of Appeals was
denied by the same court in a Resolution dated 24 August 2007.23
Hence, the present Petition, in which NUWHRAIN makes the following assignment of errors:
I
THE COURT OF APPEALS GAVE MORE PROBATIVE VALUE TO RESPONDENT
HOTELS GENERAL AND UNSWORN DENIAL VERSUS THAT OF PETITIONERS
SWORN TESTIMONY NARRATING RESPONDENTS HOTELS VIOLATION OF
PETITIONERS RIGHT TO SELF ORGANIZATION. SUCH A RULING CONTRADICTS
EXISTING JURISPRUDENCE SUCH AS MASAGANA CONCRETE PRODUCTS INC. V.
NLRC, G.R. NO. 106916, SEPTEBMER 3, 1999; JRS BUSINESS CORPORATION V. NLRC,
246 SCRA 445 [1995]; and ASUNCION V. NLRC, 362 SCRA 56 [2001].
II
THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT HOTEL IS NOT
GUILTY OF UNFAIR LABOR PRACTICE CONTRARY TO ARTICLE 248 OF THE LABOR
CODE AND THE SUPREME COURTS RULING IN PROGRESSINVE DEVELOPMENT
CORPORATION V. CIR, 80 SCRA 434 [1977] and INSULAR LIFE ASSURANCE CO. LTC
EMPLOYEES ASSOCIATION-NATU V. THE INSULAR LIFE ASSURANCE CO. LTD., 37
SCRA 244 [1971].24
The instant Petition lacks merit, and must accordingly be denied.
NUWHRAIN maintains that the respondent committed unfair labor practice when (1) the Hotel issued
the Notices to the 36 employees, former members of HIMPHLU, who switched allegiance to
NUWHRAIN; and (2) the officers of the respondent and the Hotel allegedly uttered statements during
the reconciliatory conferences indicating their preference for HIMPHLU and their disapproval of
NUWHRAIN. This argument is specious.

The records clearly show that the Notices were issued after HIMPHLU served the Hotel with a letter
dated 28 July 2005, demanding the dismissal of 36 of its former members who joined NUWHRAIN. In
its letter, HIMPHLU alleged that it had found these members guilty of disloyalty and demanded their
dismissal pursuant to the union security clause in the Collective Bargaining Agreement. Had the Hotel
totally ignored this demand, as NUWHRAIN suggests it should have done, the Hotel would have been
subjected to a suit for its failure to comply with the terms of the Collective Bargaining Agreement.
"Union security" is a generic term which is applied to and comprehends "closed shop," "union shop,"
"maintenance of membership" or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment.25 Article 248(e)
of the Labor Code recognizes the effectivity of a union shop clause:
Art. 248. Unfair labor practices of employers.
(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment in
order to encourage or discourage membership in any labor organization. Nothing in this Code or in any
other law shall prevent the parties from requiring membership in a recognized collective bargaining
agent as a condition for employment, except of those employees who are already members of another
union at the time of the signing of the collective bargaining agreement x x x. (Emphasis supplied.)
The law allows stipulations for "union shop" and "closed shop" as a means of encouraging workers to
join and support the union of their choice in the protection of their rights and interests vis--vis the
employer. By thus promoting unionism, workers are able to negotiate with management on an even
playing field and with more persuasiveness than if they were to individually and separately bargain with
the employer.26 In Villar v. Inciong,27 this Court held that employees have the right to disaffiliate from
their union and form a new organization of their own; however, they must suffer the consequences of
their separation from the union under the security clause of the Collective Bargaining Agreement.
In the present case, the Collective Bargaining Agreement includes a union security provision.28 To avoid
the clear possibility of liability for breaching the union security clause of the Collective Bargaining
Agreement and to protect its own interests, the only sensible option left to the Hotel, upon its receipt of
the demand of HIMPHLU for the dismissal of the 36 employees, was to conduct its own inquiry so as to
make its own findings on whether there was sufficient ground to dismiss the said employees who
defected from HIMPHLU. The issuance by the respondent of the Notices requiring the 36 employees to
submit their explanations to the charges against them was the reasonable and logical first step in a fair
investigation. It is important to note that the Hotel did not take further steps to terminate the 36
employees. Instead, it arranged for reconciliatory conferences between the contending unions in order to
avert the possibility of dismissing the 36 employees for violation of the union security clause of the
Collective Bargaining Agreement.
This Court, in Malayang Samahan ng Manggagawa sa M. Greenfield v. Ramos29 clearly stated the
general rule: the dismissal of an employee by the company pursuant to a labor unions demand in
accordance with a union security agreement does not constitute unfair labor practice. An employer is not
considered guilty of unfair labor practice if it merely complied in good faith with the request of the
certified union for the dismissal of employees expelled from the union pursuant to the union security
clause in the Collective Bargaining Agreement.30 In the case at bar, there is even less possibility of
sustaining a finding of guilt for unfair labor practice where respondent did not dismiss the 36 employees,
despite the insistence of HIMPHLU, the sole bargaining agent for the rank and file employees of the
Hotel, on the basis of the union security clause of the Collective Bargaining Agreement. The only act
attributed to the respondent is its issuance of the Notices which, contrary to being an unfair labor
practice, even afforded the employees involved a chance to be heard.

The cases cited by NUWHRAIN are not applicable to the present case given their diverse factual
backgrounds. In Progressive Development Corporation v. Court of Industrial Relations,31 the Court
declared the employer guilty of unfair labor practice for singling out its workers who refused to join the
employers preferred union by not giving them work assignments and regular status, and eventually
dismissing said employees. The employer was found guilty of unfair labor practice in Insular Life
Assurance Co., Ltd., Employees Association-NATU v. Insular Life Assurance Co., Ltd.,32 for (1) the
dismissal of some of its striking employees without even giving them an opportunity to explain their
side; and (2) the acts of discrimination, including the delayed reinstatement of striking employees and
the offering of bribes, bonuses, and wage increases to loyal employees after refusing to bargain with the
union. None of these acts were attributed to the respondent in the present case.
NUWHRAIN claimed that during the reconciliatory conferences, respondents Vice President Norma
Azores expressed her preference to deal with HIMPHLU, while blaming NUWHRAIN for the Hotels
labor problems; and the Hotels Resident Manager Bernardo Corpus, Jr. implored NUWHRAINs
members to withdraw their Petition for Certification Election and reaffirm their membership in
HIMPHLU. Before the Court of Appeals, respondent denied that such statements were made and that the
officers of the respondent and the Hotel were merely misquoted. During the reconciliatory conferences,
wherein the officers of the respondent and the Hotel acted as mediators, one of the proposals laid on the
table to settle the dispute between the unions and preclude the dismissal of the 36 employees was for
NUWHRAIN to withdraw its Petition for Certification Election and, in return, for HIMPHLU to reaccept the employees without sanctions.
Still, NUWHRAIN asserts that the sworn testimony signed by its six union members that the officers of
the respondent and the Hotel did utter the offending statements deserve more credence than the unsworn
denial of respondent.
NUWHRAIN has the burden of proving its allegation that Norma Azores and Bernardo Corpus, Jr. did
make the statements being attributed to them. The burden of proof rests upon the party who asserts the
affirmative of an issue.33 And in labor cases, the quantum of proof necessary is substantial evidence, or
such amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion,34 which NUWHRAIN failed to discharge in the present case.
Undoubtedly, the members of NUWHRAIN would owe their loyalty to their union, a natural bias which
somewhat puts into question their credibility as witnesses, especially since the success of this case
would also redound to their benefit. The fact that six members of the union signed a single statement,
instead of each member presenting their sincere and individual narrations of events, gives the impression
that it was signed in a perfunctory manner and motivated by a sense of union solidarity. The self-serving
statement signed by six of NUWHRAINs members have very little weight, even if made under oath,
absent any other independent evidence which indicates that the officers of the respondent and the Hotel
made such hostile and coercive utterances that tend to interfere or influence the employees exercise of
the right to self-organization.
In the case at bar, the NLRC found, and the Court of Appeals affirmed, that the officers of the
respondent and the Hotel did not make statements that would have constituted unfair labor practice.
Findings of fact of the NLRC are given much weight and are considered conclusive by this Court. It is
only when such findings are not substantially supported by the records that this Court will step in and
make its independent evaluation of the facts. 35 Considering the expertise of these agencies in matters
pertaining to labor disputes, the findings of administrative agencies of the Department of Labor are
generally accorded not only respect, but also finality.36
Even the surrounding circumstances would contradict NUWHRAINs allegation that the respondent
interfered with or coerced its employees in their choice of union membership. In their Reply before the

NLRC, NUWHRAIN admitted that before issuing its Notices, the respondent maintained a neutral stand
in the dispute between HIMPHLU and NUWHRAIN. 37 Neither did the respondent threaten the 36
employees who shifted their allegiance to NUWHRAIN with any form of reprisal; they were not
dismissed for their affiliation with NUWHRAIN. The records are bereft of any instance that would show
that respondent rode roughshod over its employees freedom to decide which union to join.
In all, respondent had not committed any act which would constitute unfair labor practice.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision dated 30 May
2007 of the Court of Appeals in CA-G.R. SP No. 96171 is hereby AFFIRMED. Costs against petitioner
NUWHRAIN.
SO ORDERED.

FIRST DIVISION
G.R. No. 171914, July 23, 2014
SOLEDAD L. LAVADIA, Petitioner, v. HEIRS OF JUAN LUCES LUNA, REPRESENTED BY
GREGORIO Z. LUNA AND EUGENIA ZABALLERO-LUNA, Respondents.
DECISION
BERSAMIN, J.:
Divorce between Filipinos is void and ineffectual under the nationality rule adopted by Philippine law.
Hence, any settlement of property between the parties of the first marriage involving Filipinos submitted
as an incident of a divorce obtained in a foreign country lacks competent judicial approval, and cannot
be enforceable against the assets of the husband who contracts a subsequent marriage.
The Case
The petitioner, the second wife of the late Atty. Juan Luces Luna, appeals the adverse decision
promulgated on November 11, 2005,1 whereby the Court of Appeals (CA) affirmed with modification
the decision rendered on August 27, 2001 by the Regional Trial Court (RTC), Branch 138, in Makati
City.2 The CA thereby denied her right in the 25/100 pro indiviso share of the husband in a condominium
unit, and in the law books of the husband acquired during the second marriage.
Antecedents
The antecedent facts were summarized by the CA as follows:
ATTY. LUNA, a practicing lawyer, was at first a name partner in the prestigious law firm Sycip, Salazar,
Luna, Manalo, Hernandez & Feliciano Law Offices at that time when he was living with his first wife,
herein intervenor-appellant Eugenia Zaballero-Luna (EUGENIA), whom he initially married in a civil
ceremony conducted by the Justice of the Peace of Paraaque, Rizal on September 10, 1947 and later

solemnized in a church ceremony at the Pro-Cathedral in San Miguel, Bulacan on September 12, 1948.
In ATTY. LUNAs marriage to EUGENIA, they begot seven (7) children, namely: Regina Maria L.
Nadal, Juan Luis Luna, Araceli Victoria L. Arellano, Ana Maria L. Tabunda, Gregorio Macario Luna,
Carolina Linda L. Tapia, and Cesar Antonio Luna. After almost two (2) decades of marriage, ATTY.
LUNA and EUGENIA eventually agreed to live apart from each other in February 1966 and agreed to
separation of property, to which end, they entered into a written agreement entitled AGREEMENT
FOR SEPARATION AND PROPERTY SETTLEMENT dated November 12, 1975, whereby they
agreed to live separately and to dissolve and liquidate their conjugal partnership of property.
On January 12, 1976, ATTY. LUNA obtained a divorce decree of his marriage with EUGENIA from the
Civil and Commercial Chamber of the First Circumscription of the Court of First Instance of Sto.
Domingo, Dominican Republic. Also in Sto. Domingo, Dominican Republic, on the same date, ATTY.
LUNA contracted another marriage, this time with SOLEDAD. Thereafter, ATTY. LUNA and
SOLEDAD returned to the Philippines and lived together as husband and wife until 1987.
Sometime in 1977, ATTY. LUNA organized a new law firm named: Luna, Puruganan, Sison and
Ongkiko (LUPSICON) where ATTY. LUNA was the managing partner.
On February 14, 1978, LUPSICON through ATTY. LUNA purchased from Tandang Sora Development
Corporation the 6th Floor of Kalaw-Ledesma Condominium Project (condominium unit) at Gamboa St.,
Makati City, consisting of 517.52 square meters, for P1,449,056.00, to be paid on installment basis for
36 months starting on April 15, 1978. Said condominium unit was to be used as law office of
LUPSICON. After full payment, the Deed of Absolute Sale over the condominium unit was executed on
July 15, 1983, and CCT No. 4779 was issued on August 10, 1983, which was registered bearing the
following names:
JUAN LUCES LUNA, married to Soledad L. Luna (46/100); MARIO E. ONGKIKO, married to Sonia
P.G. Ongkiko (25/100); GREGORIO R. PURUGANAN, married to Paz A. Puruganan (17/100); and
TERESITA CRUZ SISON, married to Antonio J.M. Sison (12/100) x x x
Subsequently, 8/100 share of ATTY. LUNA and 17/100 share of Atty. Gregorio R. Puruganan in the
condominium unit was sold to Atty. Mario E. Ongkiko, for which a new CCT No. 21761 was issued on
February 7, 1992 in the following names:
JUAN LUCES LUNA, married to Soledad L. Luna (38/100); MARIO E. ONGKIKO, married to Sonia
P.G. Ongkiko (50/100); TERESITA CRUZ SISON, married to Antonio J.M. Sison (12/100) x x x
Sometime in 1992, LUPSICON was dissolved and the condominium unit was partitioned by the partners
but the same was still registered in common under CCT No. 21716. The parties stipulated that the
interest of ATTY. LUNA over the condominium unit would be 25/100 share.
ATTY. LUNA thereafter established and headed another law firm with Atty. Renato G. De la Cruz and
used a portion of the office condominium unit as their office. The said law firm lasted until the death of
ATTY. JUAN on July 12, 1997.
After the death of ATTY. JUAN, his share in the condominium unit including the lawbooks, office
furniture and equipment found therein were taken over by Gregorio Z. Luna, ATTY. LUNAs son of the
first marriage. Gregorio Z. Luna then leased out the 25/100 portion of the condominium unit belonging
to his father to Atty. Renato G. De la Cruz who established his own law firm named Renato G. De la
Cruz & Associates.
The 25/100 pro-indiviso share of ATTY. Luna in the condominium unit as well as the law books, office
furniture and equipment became the subject of the complaint filed by SOLEDAD against the heirs of
ATTY. JUAN with the RTC of Makati City, Branch 138, on September 10, 1999, docketed as Civil Case
No. 99-1644. The complaint alleged that the subject properties were acquired during the existence of the
marriage between ATTY. LUNA and SOLEDAD through their joint efforts that since they had no

children, SOLEDAD became co-owner of the said properties upon the death of ATTY. LUNA to the
extent of pro-indiviso share consisting of her share in the said properties plus her share in the net
estate of ATTY. LUNA which was bequeathed to her in the latters last will and testament; and that the
heirs of ATTY. LUNA through Gregorio Z. Luna excluded SOLEDAD from her share in the subject
properties. The complaint prayed that SOLEDAD be declared the owner of the portion of the subject
properties; that the same be partitioned; that an accounting of the rentals on the condominium unit
pertaining to the share of SOLEDAD be conducted; that a receiver be appointed to preserve ad
administer the subject properties; and that the heirs of ATTY. LUNA be ordered to pay attorneys fees
and costs of the suit to SOLEDAD.3chanrobleslaw
Ruling of the RTC
On August 27, 2001, the RTC rendered its decision after trial upon the aforementioned facts,4disposing
thusly:
WHEREFORE, judgment is rendered as follows: lawlibrary
(a) The 24/100 pro-indiviso share in the condominium unit located at the SIXTH FLOOR of the
KALAW LEDESMA CONDOMINIUM PROJECT covered by Condominium Certificate of Title No.
21761 consisting of FIVE HUNDRED SEVENTEEN (517/100) SQUARE METERS is adjudged to
have been acquired by Juan Lucas Luna through his sole industry;
(b) Plaintiff has no right as owner or under any other concept over the condominium unit, hence the
entry in Condominium Certificate of Title No. 21761 of the Registry of Deeds of Makati with respect to
the civil status of Juan Luces Luna should be changed from JUAN LUCES LUNA married to Soledad
L. Luna to JUAN LUCES LUNA married to Eugenia Zaballero Luna;
(c) Plaintiff is declared to be the owner of the books Corpus Juris, Fletcher on Corporation, American
Jurisprudence and Federal Supreme Court Reports found in the condominium unit and defendants are
ordered to deliver them to the plaintiff as soon as appropriate arrangements have been made for transport
and storage.
No pronouncement as to costs.
SO ORDERED.5chanrobleslaw
Decision of the CA
Both parties appealed to the CA.6 red
On her part, the petitioner assigned the following errors to the RTC, namely:
I.
II.
III.

THE LOWER COURT ERRED IN RULING THAT THE CONDOMINIUM UNIT WAS
ACQUIRED THRU THE SOLE INDUSTRY OF ATTY. JUAN LUCES LUNA;
THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT DID NOT
CONTRIBUTE MONEY FOR THE ACQUISITION OF THE CONDOMINIUM UNIT;
THE LOWER COURT ERRED IN GIVING CREDENCE TO PORTIONS OF THE
TESTIMONY OF GREGORIO LUNA, WHO HAS NO ACTUAL KNOWLEDGE OF THE
ACQUISITION OF THE UNIT, BUT IGNORED OTHER PORTIONS OF HIS TESTIMONY
FAVORABLE TO THE PLAINTIFF-APPELLANT;

IV.

THE LOWER COURT ERRED IN NOT GIVING SIGNIFICANCE TO THE FACT THAT THE
CONJUGAL PARTNERSHIP BETWEEN LUNA AND INTERVENOR-APPELLANT WAS
ALREADY DISSOLVED AND LIQUIDATED PRIOR TO THE UNION OF PLAINTIFFAPPELLANT AND LUNA;

V.

THE LOWER COURT ERRED IN GIVING UNDUE SIGNIFICANCE TO THE ABSENCE OF

THE DISPOSITION OF THE CONDOMINIUM UNIT IN THE HOLOGRAPHIC WILL OF
THE PLAINTIFF-APPELLANT;

VI.

VII.

THE LOWER COURT ERRED IN GIVING UNDUE SIGNIFICANCE TO THE FACT THAT
THE NAME OF PLAINTIFF-APPELLANT DID NOT APPEAR IN THE DEED OF
ABSOLUTE SALE EXECUTED BY TANDANG SORA DEVELOPMENT CORPORATION
OVER THE CONDOMINIUM UNIT;
THE LOWER COURT ERRED IN RULING THAT NEITHER ARTICLE 148 OF THE
FAMILY CODE NOR ARTICLE 144 OF THE CIVIL CODE OF THE PHILIPPINES ARE
APPLICABLE;

VIII.

THE LOWER COURT ERRED IN NOT RULING THAT THE CAUSE OF ACTION OF THE
INTERVENOR-APPELLANT HAS BEEN BARRED BY PESCRIPTION AND LACHES;
andChanRoblesVirtualawlibrary

IX.

THE LOWER COURT ERRED IN NOT EXPUNGING/DISMISSING THE INTERVENTION

FOR FAILURE OF INTERVENOR-APPELLANT TO PAY FILING FEE.7

In contrast, the respondents attributed the following errors to the trial court, to wit:
I.

THE LOWER COURT ERRED IN HOLDING THAT CERTAIN FOREIGN LAW BOOKS IN
THE LAW OFFICE OF ATTY. LUNA WERE BOUGHT WITH THE USE OF PLAINTIFFS
MONEY;

II.

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF PROVED BY

PREPONDERANCE OF EVIDENCE (HER CLAIM OVER) THE SPECIFIED FOREIGN
LAW BOOKS FOUND IN ATTY. LUNAS LAW OFFICE; andChanRoblesVirtualawlibrary

III.

THE LOWER COURT ERRED IN NOT HOLDING THAT, ASSUMING PLAINTIFF PAID
FOR THE SAID FOREIGN LAW BOOKS, THE RIGHT TO RECOVER THEM HAD
PRESCRIBED AND BARRED BY LACHES AND ESTOPPEL.8

On November 11, 2005, the CA promulgated its assailed modified decision,9 holding and ruling:
EUGENIA, the first wife, was the legitimate wife of ATTY. LUNA until the latters death on July 12,
1997. The absolute divorce decree obtained by ATTY. LUNA in the Dominican Republic did not
terminate his prior marriage with EUGENIA because foreign divorce between Filipino citizens is not
recognized in our jurisdiction. x x x10 red
xxxx
WHEREFORE, premises considered, the assailed August 27, 2001 Decision of the RTC of Makati
City, Branch 138, is hereby MODIFIED as follows:

(a) The 25/100 pro-indiviso share in the condominium unit at the SIXTH FLOOR of the KALAW
LEDESMA CONDOMINIUM PROJECT covered by Condominium Certificate of Title No. 21761
consisting of FIVE HUNDRED SEVENTEEN (517/100) (sic) SQUARE METERS is hereby adjudged
to defendants-appellants, the heirs of Juan Luces Luna and Eugenia Zaballero-Luna (first marriage),
having been acquired from the sole funds and sole industry of Juan Luces Luna while marriage of Juan
Luces Luna and Eugenia Zaballero-Luna (first marriage) was still subsisting and valid;
(b) Plaintiff-appellant Soledad Lavadia has no right as owner or under any other concept over the
condominium unit, hence the entry in Condominium Certificate of Title No. 21761 of the Registry of
Deeds of Makati with respect to the civil status of Juan Luces Luna should be changed from JUAN
LUCES LUNA married to Soledad L. Luna to JUAN LUCES LUNA married to Eugenia Zaballero
Luna;
(c) Defendants-appellants, the heirs of Juan Luces Luna and Eugenia Zaballero-Luna (first marriage) are
hereby declared to be the owner of the books Corpus Juris, Fletcher on Corporation, American
Jurisprudence and Federal Supreme Court Reports found in the condominium unit.
No pronouncement as to costs.
SO ORDERED.11chanrobleslaw
On March 13, 2006,12 the CA denied the petitioners motion for reconsideration.13 red
Issues
In this appeal, the petitioner avers in her petition for review on certiorari that:
A. The Honorable Court of Appeals erred in ruling that the Agreement for Separation and Property
Settlement executed by Luna and Respondent Eugenia was unenforceable; hence, their conjugal
partnership was not dissolved and liquidated;
B. The Honorable Court of Appeals erred in not recognizing the Dominican Republic courts
approval of the Agreement;
C. The Honorable Court of Appeals erred in ruling that Petitioner failed to adduce sufficient proof
of actual contribution to the acquisition of purchase of the subject condominium unit;
andChanRoblesVirtualawlibrary
D. The Honorable Court of Appeals erred in ruling that Petitioner was not entitled to the subject law

books.14
The decisive question to be resolved is who among the contending parties should be entitled to the
25/100 pro indiviso share in the condominium unit; and to the law books (i.e., Corpus Juris, Fletcher on
Corporation, American Jurisprudence and Federal Supreme Court Reports).
The resolution of the decisive question requires the Court to ascertain the law that should determine,
firstly, whether the divorce between Atty. Luna and Eugenia Zaballero-Luna (Eugenia) had validly
dissolved the first marriage; and, secondly, whether the second marriage entered into by the late Atty.
Luna and the petitioner entitled the latter to any rights in property.
Ruling of the Court
We affirm the modified decision of the CA.

1.
Atty. Lunas first marriage with Eugenia
subsisted up to the time of his death
The first marriage between Atty. Luna and Eugenia, both Filipinos, was solemnized in the Philippines on
September 10, 1947. The law in force at the time of the solemnization was the Spanish Civil Code,
which adopted the nationality rule. The Civil Code continued to follow the nationality rule, to the effect
that Philippine laws relating to family rights and duties, or to the status, condition and legal capacity of
persons were binding upon citizens of the Philippines, although living abroad.15 Pursuant to the
nationality rule, Philippine laws governed this case by virtue of both Atty. Luna and Eugenio having
remained Filipinos until the death of Atty. Luna on July 12, 1997 terminated their marriage.
From the time of the celebration of the first marriage on September 10, 1947 until the present, absolute
divorce between Filipino spouses has not been recognized in the Philippines. The non-recognition of
absolute divorce between Filipinos has remained even under the Family Code,16 even if either or both of
the spouses are residing abroad.17 Indeed, the only two types of defective marital unions under our laws
have been the void and the voidable marriages. As such, the remedies against such defective marriages
have been limited to the declaration of nullity of the marriage and the annulment of the marriage.
It is true that on January 12, 1976, the Court of First Instance (CFI) of Sto. Domingo in the Dominican
Republic issued the Divorce Decree dissolving the first marriage of Atty. Luna and
Eugenia.18Conformably with the nationality rule, however, the divorce, even if voluntarily obtained
abroad, did not dissolve the marriage between Atty. Luna and Eugenia, which subsisted up to the time of
his death on July 12, 1997. This finding conforms to the Constitution, which characterizes marriage as
an inviolable social institution,19 and regards it as a special contract of permanent union between a man
and a woman for the establishment of a conjugal and family life.20 The non-recognition of absolute
divorce in the Philippines is a manifestation of the respect for the sanctity of the marital union especially
among Filipino citizens. It affirms that the extinguishment of a valid marriage must be grounded only
upon the death of either spouse, or upon a ground expressly provided by law. For as long as this public
policy on marriage between Filipinos exists, no divorce decree dissolving the marriage between them
can ever be given legal or judicial recognition and enforcement in this jurisdiction.
2.
The Agreement for Separation and Property Settlement
was void for lack of court approval
The petitioner insists that the Agreement for Separation and Property Settlement (Agreement) that the
late Atty. Luna and Eugenia had entered into and executed in connection with the divorce proceedings
before the CFI of Sto. Domingo in the Dominican Republic to dissolve and liquidate their conjugal
partnership was enforceable against Eugenia. Hence, the CA committed reversible error in decreeing
otherwise.
The insistence of the petitioner was unwarranted.
Considering that Atty. Luna and Eugenia had not entered into any marriage settlement prior to their
marriage on September 10, 1947, the system of relative community or conjugal partnership of gains
governed their property relations. This is because the Spanish Civil Code, the law then in force at the
time of their marriage, did not specify the property regime of the spouses in the event that they had not
entered into any marriage settlement before or at the time of the marriage. Article 119 of theCivil
Code clearly so provides, to wit: lawlibrary
Article 119. The future spouses may in the marriage settlements agree upon absolute or relative

community of property, or upon complete separation of property, or upon any other regime. In the
absence of marriage settlements, or when the same are void, the system of relative community or
conjugal partnership of gains as established in this Code, shall govern the property relations
between husband and wife.
Article 142 of the Civil Code has defined a conjugal partnership of gains thusly:
Article 142. By means of the conjugal partnership of gains the husband and wife place in a common
fund the fruits of their separate property and the income from their work or industry, and divide equally,
upon the dissolution of the marriage or of the partnership, the net gains or benefits obtained
indiscriminately by either spouse during the marriage.
The conjugal partnership of gains subsists until terminated for any of various causes of termination
enumerated in Article 175 of the Civil Code, viz:
Article 175. The conjugal partnership of gains terminates: lawlibrary
(1) Upon the death of either spouse;
(2) When there is a decree of legal separation;
(3) When the marriage is annulled;
(4) In case of judicial separation of property under Article 191.
The mere execution of the Agreement by Atty. Luna and Eugenia did not per se dissolve and liquidate
their conjugal partnership of gains. The approval of the Agreement by a competent court was still
required under Article 190 and Article 191 of the Civil Code, as follows:
Article 190. In the absence of an express declaration in the marriage settlements, the separation of
property between spouses during the marriage shall not take place save in virtue of a judicial order.
(1432a)
Article 191. The husband or the wife may ask for the separation of property, and it shall be decreed
when the spouse of the petitioner has been sentenced to a penalty which carries with it civil interdiction,
or has been declared absent, or when legal separation has been granted.
xxxx
The husband and the wife may agree upon the dissolution of the conjugal partnership during the
marriage, subject to judicial approval. All the creditors of the husband and of the wife, as well as of
the conjugal partnership shall be notified of any petition for judicial approval or the voluntary
dissolution of the conjugal partnership, so that any such creditors may appear at the hearing to safeguard
his interests. Upon approval of the petition for dissolution of the conjugal partnership, the court shall
take such measures as may protect the creditors and other third persons.
After dissolution of the conjugal partnership, the provisions of articles 214 and 215 shall apply. The
provisions of this Code concerning the effect of partition stated in articles 498 to 501 shall be applicable.
(1433a)
But was not the approval of the Agreement by the CFI of Sto. Domingo in the Dominican Republic
sufficient in dissolving and liquidating the conjugal partnership of gains between the late Atty. Luna and

Eugenia?
The query is answered in the negative. There is no question that the approval took place only as an
incident of the action for divorce instituted by Atty. Luna and Eugenia, for, indeed, the justifications for
their execution of the Agreement were identical to the grounds raised in the action for divorce.21With the
divorce not being itself valid and enforceable under Philippine law for being contrary to Philippine
public policy and public law, the approval of the Agreement was not also legally valid and enforceable
under Philippine law. Consequently, the conjugal partnership of gains of Atty. Luna and Eugenia
subsisted in the lifetime of their marriage.
3.
Atty. Lunas marriage with Soledad, being bigamous,
was void; properties acquired during their marriage
were governed by the rules on co-ownership
What law governed the property relations of the second marriage between Atty. Luna and Soledad?
The CA expressly declared that Atty. Lunas subsequent marriage to Soledad on January 12, 1976 was
void for being bigamous,22 on the ground that the marriage between Atty. Luna and Eugenia had not
been dissolved by the Divorce Decree rendered by the CFI of Sto. Domingo in the Dominican Republic
but had subsisted until the death of Atty. Luna on July 12, 1997.
The Court concurs with the CA.
In the Philippines, marriages that are bigamous, polygamous, or incestuous are void. Article 71 of
theCivil Code clearly states:
Article 71. All marriages performed outside the Philippines in accordance with the laws in force in the
country where they were performed, and valid there as such, shall also be valid in this country, except
bigamous, polygamous, or incestuous marriages as determined by Philippine law.
Bigamy is an illegal marriage committed by contracting a second or subsequent marriage before the first
marriage has been legally dissolved, or before the absent spouse has been declared presumptively dead
by means of a judgment rendered in the proper proceedings.23 A bigamous marriage is considered
void ab initio.24 red
Due to the second marriage between Atty. Luna and the petitioner being void ab initio by virtue of its
being bigamous, the properties acquired during the bigamous marriage were governed by the rules on
co-ownership, conformably with Article 144 of the Civil Code, viz:
Article 144. When a man and a woman live together as husband and wife, but they are not married, or
their marriage is void from the beginning, the property acquired by either or both of them through their
work or industry or their wages and salaries shall be governed by the rules on co-ownership.(n)
In such a situation, whoever alleges co-ownership carried the burden of proof to confirm such fact. To
establish co-ownership, therefore, it became imperative for the petitioner to offer proof of her actual
contributions in the acquisition of property. Her mere allegation of co-ownership, without sufficient and
competent evidence, would warrant no relief in her favor. As the Court explained inSaguid v. Court of
Appeals:25 red
In the cases of Agapay v. Palang, and Tumlos v. Fernandez, which involved the issue of co-ownership of
properties acquired by the parties to a bigamous marriage and an adulterous relationship, respectively,

we ruled that proof of actual contribution in the acquisition of the property is essential. The claim of coownership of the petitioners therein who were parties to the bigamous and adulterous union is without
basis because they failed to substantiate their allegation that they contributed money in the purchase of
the disputed properties. Also in Adriano v. Court of Appeals, we ruled that the fact that the controverted
property was titled in the name of the parties to an adulterous relationship is not sufficient proof of coownership absent evidence of actual contribution in the acquisition of the property.
As in other civil cases, the burden of proof rests upon the party who, as determined by the pleadings or
the nature of the case, asserts an affirmative issue. Contentions must be proved by competent evidence
and reliance must be had on the strength of the partys own evidence and not upon the weakness of the
opponents defense. This applies with more vigor where, as in the instant case, the plaintiff was allowed
to present evidence ex parte. The plaintiff is not automatically entitled to the relief prayed for. The law
gives the defendant some measure of protection as the plaintiff must still prove the allegations in the
complaint. Favorable relief can be granted only after the court is convinced that the facts proven by the
plaintiff warrant such relief. Indeed, the party alleging a fact has the burden of proving it and a mere
allegation is not evidence.26
The petitioner asserts herein that she sufficiently proved her actual contributions in the purchase of the
condominium unit in the aggregate amount of at least P306,572.00, consisting in direct contributions of
P159,072.00, and in repaying the loans Atty. Luna had obtained from Premex Financing and Banco
Filipino totaling P146,825.30;27 and that such aggregate contributions of P306,572.00 corresponded to
almost the entire share of Atty. Luna in the purchase of the condominium unit amounting to P362,264.00
of the units purchase price of P1,449,056.00.28 red
The petitioner further asserts that the lawbooks were paid for solely out of her personal funds, proof of
which Atty. Luna had even sent her a thank you note;29 that she had the financial capacity to make the
contributions and purchases; and that Atty. Luna could not acquire the properties on his own due to the
meagerness of the income derived from his law practice.
Did the petitioner discharge her burden of proof on the co-ownership?
In resolving the question, the CA entirely debunked the petitioners assertions on her actual
contributions through the following findings and conclusions, namely:
SOLEDAD was not able to prove by preponderance of evidence that her own independent funds were
used to buy the law office condominium and the law books subject matter in contention in this case
proof that was required for Article 144 of the New Civil Code and Article 148 of the Family Code to
apply as to cases where properties were acquired by a man and a woman living together as husband
and wife but not married, or under a marriage which was void ab initio. Under Article 144 of the New
Civil Code, the rules on co-ownership would govern. But this was not readily applicable to many
situations and thus it created a void at first because it applied only if the parties were not in any way
incapacitated or were without impediment to marry each other (for it would be absurd to create a coownership where there still exists a prior conjugal partnership or absolute community between the man
and his lawful wife). This void was filled upon adoption of the Family Code. Article 148 provided that:
only the property acquired by both of the parties through their actual joint contribution of money,
property or industry shall be owned in common and in proportion to their respective contributions. Such
contributions and corresponding shares were prima facie presumed to be equal. However, for this
presumption to arise, proof of actual contribution was required. The same rule and presumption was to
apply to joint deposits of money and evidence of credit. If one of the parties was validly married to
another, his or her share in the co-ownership accrued to the absolute community or conjugal partnership
existing in such valid marriage. If the party who acted in bad faith was not validly married to another,
his or her share shall be forfeited in the manner provided in the last paragraph of the Article 147. The

rules on forfeiture applied even if both parties were in bad faith.

Co-ownership was the exception while conjugal partnership of gains was the strict rule whereby
marriage was an inviolable social institution and divorce decrees are not recognized in the Philippines,
as was held by the Supreme Court in the case ofTenchavez vs. Escao, G.R. No. L-19671, November 29,
1965, 15 SCRA 355, thus:
xxxx
As to the 25/100 pro-indiviso share of ATTY. LUNA in the condominium unit, SOLEDAD failed to
prove that she made an actual contribution to purchase the said property. She failed to establish that the
four (4) checks that she presented were indeed used for the acquisition of the share of ATTY. LUNA in
the condominium unit. This was aptly explained in the Decision of the trial court, viz.:
x x x The first check, Exhibit M for P55,000.00 payable to Atty. Teresita Cruz Sison was issued on
January 27, 1977, which was thirteen (13) months before the Memorandum of Agreement, Exhibit 7
was signed. Another check issued on April 29, 1978 in the amount of P97,588.89, Exhibit P was
payable to Banco Filipino. According to the plaintiff, this was in payment of the loan of Atty. Luna. The
third check which was for P49,236.00 payable to PREMEX was dated May 19, 1979, also for payment
of the loan of Atty. Luna. The fourth check, Exhibit M, for P4,072.00 was dated December 17, 1980.
None of the foregoing prove that the amounts delivered by plaintiff to the payees were for the
acquisition of the subject condominium unit. The connection was simply not established. x x x
SOLEDADs claim that she made a cash contribution of P100,000.00 is unsubstantiated. Clearly, there is
no basis for SOLEDADs claim of co-ownership over the 25/100 portion of the condominium unit and
the trial court correctly found that the same was acquired through the sole industry of ATTY. LUNA,
thus:
The Deed of Absolute Sale, Exhibit 9, covering the condominium unit was in the name of Atty. Luna,
together with his partners in the law firm. The name of the plaintiff does not appear as vendee or as the
spouse of Atty. Luna. The same was acquired for the use of the Law firm of Atty. Luna. The loans from
Allied Banking Corporation and Far East Bank and Trust Company were loans of Atty. Luna and his
partners and plaintiff does not have evidence to show that she paid for them fully or partially. x x x
The fact that CCT No. 4779 and subsequently, CCT No. 21761 were in the name ofJUAN LUCES
LUNA, married to Soledad L. Luna was no proof that SOLEDAD was a co-owner of the condominium
unit. Acquisition of title and registration thereof are two different acts. It is well settled that registration
does not confer title but merely confirms one already existing. The phrase married to preceding
Soledad L. Luna is merely descriptive of the civil status of ATTY. LUNA.
SOLEDAD, the second wife, was not even a lawyer. So it is but logical that SOLEDAD had no
participation in the law firm or in the purchase of books for the law firm. SOLEDAD failed to prove that
she had anything to contribute and that she actually purchased or paid for the law office amortization
and for the law books. It is more logical to presume that it was ATTY. LUNA who bought the law office
space and the law books from his earnings from his practice of law rather than embarrassingly beg or
ask from SOLEDAD money for use of the law firm that he headed.30
The Court upholds the foregoing findings and conclusions by the CA both because they were
substantiated by the records and because we have not been shown any reason to revisit and undo them.
Indeed, the petitioner, as the party claiming the co-ownership, did not discharge her burden of proof. Her
mere allegations on her contributions, not being evidence,31 did not serve the purpose. In contrast, given
the subsistence of the first marriage between Atty. Luna and Eugenia, the presumption that Atty. Luna
acquired the properties out of his own personal funds and effort remained. It should then be justly
concluded that the properties in litis legally pertained to their conjugal partnership of gains as of the time

of his death. Consequently, the sole ownership of the 25/100 pro indiviso share of Atty. Luna in the
condominium unit, and of the lawbooks pertained to the respondents as the lawful heirs of Atty. Luna.
WHEREFORE, the Court AFFIRMS the decision promulgated on November 11, 2005;
and ORDERSthe petitioner to pay the costs of suit.
SO ORDERED.
G.R. No. 174912

July 24, 2013

BPI EMPLOYEES UNION-DAVAO CITY-FUBU (BPIEU-DAVAO CITY-FUBU), Petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS (BPI), and BPI OFFICERS CLARO M. REYES, CECIL
CONANAN and GEMMA VELEZ, Respondents.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, assailing the April 5, 2006 Decision1 and August 17, 2006 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 74595 affirming the December 21, 20013 and August 23,
20024 Resolutions of the National Labor Relations Commission (NLRC) in declaring as valid and legal
the action of respondent Bank of the Philippine Islands-Davao City (BPI-Davao) in contracting out
certain functions to BPI Operations Management Corporation (BOMC).
The Factual Antecedents
BOMC, which was created pursuant to Central Bank5 Circular No. 1388, Series of 1993 (CBP Circular
No. 1388, 1993), and primarily engaged in providing and/or handling support services for banks and
other financial institutions, is a subsidiary of the Bank of Philippine Islands (BPI) operating and
functioning as an entirely separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPIs Metro Manila
branches. In this agreement, BOMC undertook to provide services such as check clearing, delivery of
bank statements, fund transfers, card production, operations accounting and control, and cash servicing,
conformably with BSP Circular No. 1388. Not a single BPI employee was displaced and those
performing the functions, which were transferred to BOMC, were given other assignments.
The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a complaint for
unfair labor practice (ULP). The Labor Arbiter (LA) decided the case in favor of the union. The decision
was, however, reversed on appeal by the NLRC. BPIEU-Metro Manila-FUBU filed a petition for
certiorari before the CA which denied it, holding that BPI transferred the employees in the affected
departments in the pursuit of its legitimate business. The employees were neither demoted nor were their
salaries, benefits and other privileges diminished.6
On January 1, 1996, the service agreement was likewise implemented in Davao City. Later, a merger
between BPI and Far East Bank and Trust Company (FEBTC) took effect on April 10, 2000 with BPI as
the surviving corporation. Thereafter, BPIs cashiering function and FEBTCs cashiering, distribution
and bookkeeping functions were handled by BOMC. Consequently, twelve (12) former FEBTC
employees were transferred to BOMC to complete the latters service complement.

BPI Davaos rank and file collective bargaining agent, BPI Employees Union-Davao City-FUBU
(Union), objected to the transfer of the functions and the twelve (12) personnel to BOMC contending
that the functions rightfully belonged to the BPI employees and that the Union was deprived of
membership of former FEBTC personnel who, by virtue of the merger, would have formed part of the
bargaining unit represented by the Union pursuant to its union shop provision in the CBA.7
The Union then filed a formal protest on June 14, 2000 addressed to BPI Vice Presidents Claro M.
Reyes and Cecil Conanan reiterating its objection. It requested the BPI management to submit the
BOMC issue to the grievance procedure under the CBA, but BPI did not consider it as "grievable."
Instead, BPI proposed a Labor Management Conference (LMC) between the parties.8
During the LMC, BPI invoked management prerogative stating that the creation of the BOMC was to
preserve more jobs and to designate it as an agency to place employees where they were most needed.
On the other hand, the Union charged that BOMC undermined the existence of the union since it
reduced or divided the bargaining unit. While BOMC employees perform BPI functions, they were
beyond the bargaining units coverage. In contracting out FEBTC functions to BOMC, BPI effectively
deprived the union of the membership of employees handling said functions as well as curtailed the right
of those employees to join the union.
Thereafter, the Union demanded that the matter be submitted to the grievance machinery as the resort to
the LMC was unsuccessful. As BPI allegedly ignored the demand, the Union filed a notice of strike
before the National Conciliation and Mediation Board (NCMB) on the following grounds:
a) Contracting out services/functions performed by union members that interfered with,
restrained and/or coerced the employees in the exercise of their right to self-organization;
b) Violation of duty to bargain; and
c) Union busting.9
BPI then filed a petition for assumption of jurisdiction/certification with the Secretary of the Department
of Labor and Employment (DOLE), who subsequently issued an order certifying the labor dispute to the
NLRC for compulsory arbitration. The DOLE Secretary directed the parties to cease and desist from
committing any act that might exacerbate the situation.
On October 27, 2000, a hearing was conducted. Thereafter, the parties were required to submit their
respective position papers. On November 29, 2000, the Union filed its Urgent Omnibus Motion to Cease
and Desist with a prayer that BPI-Davao and/or Mr. Claro M. Reyes and Mr. Cecil Conanan be held in
contempt for the following alleged acts of BPI:
1. The Bank created a Task Force Committee on November 20, 2000 composed of six (6) former
FEBTC employees to handle the Cashiering, Distributing, Clearing, Tellering and Accounting
functions of the former FEBTC branches but the "task force" conducts its business at the office
of the BOMC using the latters equipment and facilities.
2. On November 27, 2000, the bank integrated the clearing operations of the BPI and the
FEBTC. The clearing function of BPI, then solely handled by the BPI Processing Center prior to
the labor dispute, is now encroached upon by the BOMC because with the merger, differences
between BPI and FEBTC operations were diminished or deleted. What the bank did was simply
to get the total of all clearing transactions under BPI but the BOMC employees process the
clearing of checks at the Clearing House as to checks coming from former FEBTC branches.
Prior to the labor dispute, the run-up and distribution of the checks of BPI were returned to the

BPI processing center, now all checks whether of BPI or of FEBTC were brought to the BOMC.
Since the clearing operations were previously done by the BPI processing center with BPI
employees, said function should be performed by BPI employees and not by BOMC.10
On December 21, 2001, the NLRC came out with a resolution upholding the validity of the service
agreement between BPI and BOMC and dismissing the charge of ULP. It ruled that the engagement by
BPI of BOMC to undertake some of its activities was clearly a valid exercise of its management
prerogative.11 It further stated that the spinning off by BPI to BOMC of certain services and functions
did not interfere with, restrain or coerce employees in the exercise of their right to selforganization.12 The Union did not present even an iota of evidence showing that BPI had terminated
employees, who were its members. In fact, BPI exerted utmost diligence, care and effort to see to it that
no union member was terminated.13 The NLRC also stressed that Department Order (D.O.) No. 10 series
of 1997, strongly relied upon by the Union, did not apply in this case as BSP Circular No. 1388, series
of 1993, was the applicable rule.
After the denial of its motion for reconsideration, the Union elevated its grievance to the CA via a
petition for certiorari under Rule 65. The CA, however, affirmed the NLRCs December 21, 2001
Resolution with modification that the enumeration of functions listed under BSP Circular No. 1388 in
the said resolution be deleted. The CA noted at the outset that the petition must be dismissed as it merely
touched on factual matters which were beyond the ambit of the remedy availed of.14 Be that as it may,
the CA found that the factual findings of the NLRC were supported by substantial evidence and, thus,
entitled to great respect and finality. To the CA, the NLRC did not act with grave abuse of discretion as
to merit the reversal of the resolution.15
Furthermore, the CA ratiocinated that, considering the ramifications of the corporate merger, it was well
within BPIs prerogatives "to determine what additional tasks should be performed, who should best
perform it and what should be done to meet the exigencies of business."16 It pointed out that the Union
did not, by the mere fact of the merger, become the bargaining agent of the merged employees17 as the
Unions right to represent said employees did not arise until it was chosen by them. 18
As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said order did not apply as
BPI, being a commercial bank, its transactions were subject to the rules and regulations of the BSP.
Not satisfied, the Union filed a motion for reconsideration which was, however, denied by the
CA.1wphi1
Hence, the present petition with the following
ASSIGNMENT OF ERRORS:
A. THE PETITION BEFORE THE COURT OF APPEALS INVOLVED QUESTIONS OF LAW
AND ITS DECISION DID NOT ADDRESS THE ISSUE OF WHETHER BPIS ACT OF
OUTSOURCING FUNCTIONS FORMERLY PERFORMED BY UNION MEMBERS
VIOLATES THE CBA.
B. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT DOLE
DEPARTMENT ORDER NO. 10 DOES NOT APPLY IN THIS CASE.
The Union is of the position that the outsourcing of jobs included in the existing bargaining unit to
BOMC is a breach of the union-shop agreement in the CBA. In transferring the former employees of
FEBTC to BOMC instead of absorbing them in BPI as the surviving corporation in the merger, the
number of positions covered by the bargaining unit was decreased, resulting in the reduction of the

Unions membership. For the Union, BPIs act of arbitrarily outsourcing functions formerly performed
by the Union members and, in fact, transferring a number of its members beyond the ambit of the Union,
is a violation of the CBA and interfered with the employees right to self organization. The Union insists
that the CBA covers the agreement with respect, not only to wages and hours of work, but to all other
terms and conditions of work. The union shop clause, being part of these conditions, states that the
regular employees belonging to the bargaining unit, including those absorbed by way of the corporate
merger, were required to join the bargaining union "as a condition for employment." Simply put, the
transfer of former FEBTC employees to BOMC removed them from the coverage of unionized
establishment. While the Union admitted that BPI has the prerogative to determine what should be done
to meet the exigencies of business in accordance with the case of Sime Darby Pilipinas, Inc. v.
NLRC,19 it insisted that the exercise of management prerogative is not absolute, thus, requiring good
faith and adherence to the law and the CBA. Citing the case of Shell Oil Workers Union v. Shell
Company of the Philippines, Ltd.,20 the Union claims that it is unfair labor practice for an employer to
outsource the positions in the existing bargaining unit.
Position of BPI-Davao
For its part, BPI defended the validity of its service agreement with BOMC on three (3) grounds: 1] that
it was pursuant to the prevailing law at that time, CBP Circular No. 1388; 2] that the creation of BOMC
was within management prerogatives intended to streamline the operations and provide focus for BPIs
core activities; and 3] that the Union recognized, in its CBA, the exclusive right and prerogative of BPI
to conduct the management and operation of its business.21
BPI argues that the case of Shell Oil Workers Union v. Shell Company of the Philippines, Ltd.,22 cited
by the Union, is not on all fours with the present case. In said case, the company dissolved its security
guard section and replaced it with an outside agency, claiming that such act was a valid exercise of
management prerogative. The Court, however, ruled against the said outsourcing because there was an
express assurance in the CBA that the security guard section would continue to exist. Having failed to
reserve its right to effect a dissolution, the companys act of outsourcing and transferring security guards
was invalidated by the Court, ruling that the unfair labor practice strike called by the Union did have the
impression of validity. In contrast, there is no provision in the CBA between BPI and the Union
expressly stipulating the continued existence of any position within the bargaining unit. For BPI, the
absence of this peculiar fact is enough reason to prevent the application of Shell to this case.
BPI likewise invokes settled jurisprudence,23 where the Court upheld the acts of management to contract
out certain functions held by employees, and even notably those held by union members. In these cases,
the decision to outsource certain functions was a justifiable business judgment which deserved no
judicial interference. The only requisite of this act is good faith on the part of the employer and the
absence of malicious and arbitrary action in the outsourcing of functions to BOMC.
On the issue of the alleged curtailment of the right of the employees to self-organization, BPI refutes the
Unions allegation that ULP was committed when the number of positions in the bargaining was
reduced. It cites as correct the CA ruling that the representation of the Unions prospective members is
contingent on the choice of the employee, that is, whether or not to join the Union. Hence, it was
premature for the Union to claim that the rights of its prospective members to self-organize were
restrained by the transfer of the former FEBTC employees to BOMC.
The Courts Ruling
In essence, the primordial issue in this case is whether or not the act of BPI to outsource the cashiering,
distribution and bookkeeping functions to BOMC is in conformity with the law and the existing CBA.
Particularly in dispute is the validity of the transfer of twelve (12) former FEBTC employees to BOMC,

instead of being absorbed in BPI after the corporate merger. The Union claims that a union shop
agreement is stipulated in the existing CBA. It is unfair labor practice for employer to outsource the
positions in the existing bargaining unit, citing the case of Shell Oil
Workers Union v. Shell Company of the Philippines, Ltd.24
The Unions reliance on the Shell Case is misplaced. The rule now is covered by Article 261 of the
Labor Code, which took effect on November 1, 1974.25 Article 261 provides:
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. x x x Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in character, shall no
longer be treated as unfair labor practice and shall be resolved as grievances under the Collective
Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining Agreement
shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement.
[Emphases supplied]
Clearly, only gross violations of the economic provisions of the CBA are treated as ULP. Otherwise,
they are mere grievances.
In the present case, the alleged violation of the union shop agreement in the CBA, even assuming it was
malicious and flagrant, is not a violation of an economic provision in the agreement. The provisions
relied upon by the Union were those articles referring to the recognition of the union as the sole and
exclusive bargaining representative of all rank-and-file employees, as well as the articles on union
security, specifically, the maintenance of membership in good standing as a condition for continued
employment and the union shop clause.26 It failed to take into consideration its recognition of the banks
exclusive rights and prerogatives, likewise provided in the CBA, which included the hiring of
employees, promotion, transfers, and dismissals for just cause and the maintenance of order, discipline
and efficiency in its operations.27
The Union, however, insists that jobs being outsourced to BOMC were included in the existing
bargaining unit, thus, resulting in a reduction of a number of positions in such unit. The reduction
interfered with the employees right to self-organization because the power of a union primarily depends
on its strength in number.28
It is incomprehensible how the "reduction of positions in the collective bargaining unit" interferes with
the employees right to self-organization because the employees themselves were neither transferred nor
dismissed from the service. As the NLRC clearly stated:
In the case at hand, the union has not presented even an iota of evidence that petitioner bank has started
to terminate certain employees, members of the union. In fact, what appears is that the Bank has exerted
utmost diligence, care and effort to see to it that no union member has been terminated. In the process of
the consolidation or merger of the two banks which resulted in increased diversification of functions,
some of these non-banking functions were merely transferred to the BOMC without affecting the union
membership.29
BPI stresses that not a single employee or union member was or would be dislocated or terminated from
their employment as a result of the Service Agreement.30 Neither had it resulted in any diminution of
salaries and benefits nor led to any reduction of union membership.31
As far as the twelve (12) former FEBTC employees are concerned, the Union failed to substantially
prove that their transfer, made to complete BOMCs service complement, was motivated by ill will, antiunionism or bad faith so as to affect or interfere with the employees right to self-organization.

It is to be emphasized that contracting out of services is not illegal perse.1wphi1 It is an exercise of

business judgment or management prerogative. Absent proof that the management acted in a malicious
or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.32 In this
case, bad faith cannot be attributed to BPI because its actions were authorized by CBP Circular No.
1388, Series of 199333 issued by the Monetary Board of the then Central Bank of the Philippines (now
Bangko Sentral ng Pilipinas). The circular covered amendments in Book I of the Manual of Regulations
for Banks and Other Financial Intermediaries, particularly on the matter of bank service contracts. A
finding of ULP necessarily requires the alleging party to prove it with substantial evidence.
Unfortunately, the Union failed to discharge this burden.
Much has been said about the applicability of D.O. No. 10. Both the NLRC and the CA agreed with BPI
that the said order does not apply. With BPI, as a commercial bank, its transactions are subject to the
rules and regulations of the governing agency which is the Bangko Sentral ng Pilipinas.34 The Union
insists that D.O. No. 10 should prevail.
The Court is of the view, however, that there is no conflict between D.O. No. 10 and CBP Circular No.
1388. In fact, they complement each other.
Consistent with the maxim, interpretare et concordare leges legibus est optimus interpretandi modus, a
statute should be construed not only to be consistent with itself but also to harmonize with other laws on
the same subject matter, as to form a complete, coherent and intelligible system of jurisprudence.35 The
seemingly conflicting provisions of a law or of two laws must be harmonized to render each
effective.36 It is only when harmonization is impossible that resort must be made to choosing which law
to apply.37
In the case at bench, the Union submits that while the Central Bank regulates banking, the Labor Code
and its implementing rules regulate the employment relationship. To this, the Court agrees. The fact that
banks are of a specialized industry must, however, be taken into account. The competence in
determining which banking functions may or may not be outsourced lies with the BSP. This does not
mean that banks can simply outsource banking functions allowed by the BSP through its circulars,
without giving regard to the guidelines set forth under D.O. No. 10 issued by the DOLE.
While D.O. No. 10, Series of 1997, enumerates the permissible contracting or subcontracting activities,
it is to be observed that, particularly in Sec. 6(d) invoked by the Union, the provision is general in
character "x x x Works or services not directly related or not integral to the main business or operation
of the principal x x x." This does not limit or prohibit the appropriate government agency, such as the
BSP, to issue rules, regulations or circulars to further and specifically determine the permissible services
to be contracted out. CBP Circular No. 138838enumerated functions which are ancillary to the business
of banks, hence, allowed to be outsourced. Thus, sanctioned by said circular, BPI outsourced the
cashiering (i.e., cash-delivery and deposit pick-up) and accounting requirements of its Davao City
branches.39 The Union even described the extent of BPIs actual and intended contracting out to BOMC
as follows:
"As an initiatory move, the functions of the Cashiering Unit of the Processing Center of BPI, handled by
its regular rank and file employees who are members of the Union, xxx [were] transferred to BOMC
with the Accounting Department as next in line. The Distributing, Clearing and Bookkeeping functions
of the Processing Center of the former FEBTC were likewise contracted out to BOMC."40
Thus, the subject functions appear to be not in any way directly related to the core activities of banks.
They are functions in a processing center of BPI which does not handle or manage deposit transactions.
Clearly, the functions outsourced are not inherent banking functions, and, thus, are well within the
permissible services under the circular.

The Court agrees with BPI that D.O. No. 10 is but a guide to determine what functions may be
contracted out, subject to the rules and established jurisprudence on legitimate job contracting and
prohibited labor-only contracting.41 Even if the Court considers D.O. No. 10 only, BPI would still be
within the bounds of D.O. No. 10 when it contracted out the subject functions. This is because the
subject functions were not related or not integral to the main business or operation of the principal which
is the lending of funds obtained in the form of deposits.42From the very definition of "banks" as provided
under the General Banking Law, it can easily be discerned that banks perform only two (2) main or basic
functions deposit and loan functions. Thus, cashiering, distribution and bookkeeping are but ancillary
functions whose outsourcing is sanctioned under CBP Circular No. 1388 as well as D.O. No. 10. Even
BPI itself recognizes that deposit and loan functions cannot be legally contracted out as they are directly
related or integral to the main business or operation of banks. The CBP's Manual of Regulations has
even categorically stated and emphasized on the prohibition against outsourcing inherent banking
functions, which refer to any contract between the bank and a service provider for the latter to supply, or
any act whereby the latter supplies, the manpower to service the deposit transactions of the former.43
In one case, the Court held that it is management prerogative to farm out any of its activities, regardless
of whether such activity is peripheral or core in nature.44 What is of primordial importance is that the
service agreement does not violate the employee's right to security of tenure and payment of benefits to
which he is entitled under the law. Furthermore, the outsourcing must not squarely fall under labor-only
contracting where the contractor or sub-contractor merely recruits, supplies or places workers to perform
a job, work or service for a principal or if any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and 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; or
ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.45
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. No. 170830

August 11, 2010

PHIMCO INDUSTRIES, INC., Petitioner,

vs.
PHIMCO INDUSTRIES LABOR ASSOCIATION (PILA), and ERLINDA VAZQUEZ,
RICARDO SACRISTAN, LEONIDA CATALAN, MAXIMO PEDRO, NATHANIELA
DIMACULANGAN,* RODOLFO MOJICO, ROMEO CARAMANZA, REYNALDO
GANITANO, ALBERTO BASCONCILLO,** and RAMON FALCIS, in their capacity as officers
of PILA, and ANGELITA BALOSA,*** DANILO BANAAG, ABRAHAM CADAY, ALFONSO
CLAUDIO, FRANCISCO DALISAY,**** ANGELITO DEJAN,***** PHILIP GARCES, NICANOR
ILAGAN, FLORENCIO LIBONGCOGON,****** NEMESIO MAMONONG, TEOFILO
MANALILI, ALFREDO PEARSON,******** MARIO PEREA,******** RENATO RAMOS,
MARIANO ROSALES, PABLO SARMIENTO, RODOLFO TOLENTINO, FELIPE
VILLAREAL, ARSENIO ZAMORA, DANILO BALTAZAR, ROGER
CABER,********* REYNALDO CAMARIN, BERNARDO CUADRA,**********ANGELITO DE
GUZMAN, GERARDO FELICIANO,*********** ALEX IBAEZ, BENJAMIN JUAN, SR., RAMON
MACAALAY, GONZALO MANALILI, RAUL MICIANO, HILARIO PEA, TERESA

PERMOCILLO,************ERNESTO RIO, RODOLFO SANIDAD, RAFAEL STA. ANA, JULIAN

TUGUIN and AMELIA ZAMORA, as members of PILA, Respondents.
DECISION
BRION, J.:
Before us is the petition for review on certiorari1 filed by petitioner Phimco Industries, Inc. (PHIMCO),
seeking to reverse and set aside the decision,2 dated February 10, 2004, and the resolution,3 dated
December 12, 2005, of the Court of Appeals (CA) in CA-G.R. SP No. 70336. The assailed CA decision
dismissed PHIMCOs petition for certiorari that challenged the resolution, dated December 29, 1998,
and the decision, dated February 20, 2002, of the National Labor Relations Commission (NLRC); the
assailed CA resolution denied PHIMCOs subsequent motion for reconsideration.
FACTUAL BACKGROUND
The facts of the case, gathered from the records, are briefly summarized below.
PHIMCO is a corporation engaged in the production of matches, with principal address at Phimco
Compound, Felix Manalo St., Sta. Ana, Manila. Respondent Phimco Industries Labor Association
(PILA) is the duly authorized bargaining representative of PHIMCOs daily-paid workers. The 47
individually named respondents are PILA officers and members.
When the last collective bargaining agreement was about to expire on December 31, 1994, PHIMCO
and PILA negotiated for its renewal. The negotiation resulted in a deadlock on economic issues, mainly
due to disagreements on salary increases and benefits.
On March 9, 1995, PILA filed with the National Conciliation and Mediation Board (NCMB) a Notice of
Strike on the ground of the bargaining deadlock. Seven (7) days later, or on March 16, 1995, the union
conducted a strike vote; a majority of the union members voted for a strike as its response to the
bargaining impasse. On March 17, 1995, PILA filed the strike vote results with the NCMB. Thirty-five
(35) days later, or on April 21, 1995, PILA staged a strike.
On May 3, 1995, PHIMCO filed with the NLRC a petition for preliminary injunction and temporary
restraining order (TRO), to enjoin the strikers from preventing through force, intimidation and
coercion the ingress and egress of non-striking employees into and from the company premises. On
May 15, 1995, the NLRC issued an ex-parte TRO, effective for a period of twenty (20) days, or until
June 5, 1995.
On June 23, 1995, PHIMCO sent a letter to thirty-six (36) union members, directing them to explain
within twenty-four (24) hours why they should not be dismissed for the illegal acts they committed
during the strike. Three days later, or on June 26, 1995, the thirty-six (36) union members were informed
of their dismissal.
On July 6, 1995, PILA filed a complaint for unfair labor practice and illegal dismissal (illegal dismissal
case) with the NLRC. The case was docketed as NLRC NCR Case No. 00-07-04705-95, and raffled to
Labor Arbiter (LA) Pablo C. Espiritu, Jr.
On July 7, 1995, then Acting Labor Secretary Jose S. Brillantes assumed jurisdiction over the labor
dispute, and ordered all the striking employees (except those who were handed termination papers on
June 26, 1995) to return to work within twenty-four (24) hours from receipt of the order. The Secretary

ordered PHIMCO to accept the striking employees, under the same terms and conditions prevailing prior
to the strike.4 On the same day, PILA ended its strike.
On August 28, 1995, PHIMCO filed a Petition to Declare the Strike Illegal (illegal strike case) with the
NLRC, with a prayer for the dismissal of PILA officers and members who knowingly participated in the
illegal strike. PHIMCO claimed that the strikers prevented ingress to and egress from the PHIMCO
compound, thereby paralyzing PHIMCOs operations. The case was docketed as NLRC NCR Case No.
00-08-06031-95, and raffled to LA Jovencio Ll. Mayor.
On March 14, 1996, the respondents filed their Position Paper in the illegal strike case. They countered
that they complied with all the legal requirements for the staging of the strike, they put up no barricade,
and conducted their strike peacefully, in an orderly and lawful manner, without incident.
LA Mayor decided the case on February 4, 1998,5 and found the strike illegal; the respondents
committed prohibited acts during the strike by blocking the ingress to and egress from PHIMCOs
premises and preventing the non-striking employees from reporting for work. He observed that it was
not enough that the picket of the strikers was a moving picket, since the strikers should allow the free
passage to the entrance and exit points of the company premises. Thus, LA Mayor declared that the
respondent employees, PILA officers and members, have lost their employment status.
On March 5, 1998, PILA and its officers and members appealed LA Mayors decision to the NLRC.
THE NLRC RULING
The NLRC decided the appeal on December 29, 1998, and set aside LA Mayors decision.6 The NLRC
did not give weight to PHIMCOs evidence, and relied instead on the respondents evidence showing
that the union conducted a peaceful moving picket.
On January 28, 1999, PHIMCO filed a motion for reconsideration in the illegal strike case.7
In a parallel development, LA Espiritu decided the unions illegal dismissal case on March 2, 1999. He
ruled the respondents dismissal as illegal, and ordered their reinstatement with payment of backwages.
PHIMCO appealed LA Espiritus decision to the NLRC.
Pending the resolution of PHIMCOs motion for reconsideration in the illegal strike case and the appeal
of the illegal dismissal case, PHIMCO moved for the consolidation of the two (2) cases. The NLRC
acted favorably on the motion and consolidated the two (2) cases in its Order dated August 5, 1999.
On February 20, 2002, the NLRC rendered its Decision in the consolidated cases, ruling totally in the
unions favor.8 It dismissed the appeal of the illegal dismissal case, and denied PHIMCOs motion for
reconsideration in the illegal strike case. The NLRC found that the picket conducted by the striking
employees was not an illegal blockade and did not obstruct the points of entry to and exit from the
companys premises; the pictures submitted by the respondents revealed that the picket was moving, not
stationary. With respect to the illegal dismissal charge, the NLRC observed that the striking employees
were not given ample opportunity to explain their side after receipt of the June 23, 1995 letter. Thus, the
NLRC affirmed the Decision of LA Espiritu with respect to the payment of backwages until the
promulgation of the decision, plus separation pay at one (1) month salary per year of service in lieu of
reinstatement, and 10% of the monetary award as attorneys fees. It ruled out reinstatement because of
the damages sustained by the company brought about by the strike.
On March 14, 2002, PHIMCO filed a motion for reconsideration of the consolidated decision.

On April 26, 2002, without waiting for the result of its motion for reconsideration, PHIMCO elevated its
case to the CA through a petition for certiorari under Rule 65 of the Rules of Court.9
THE CA RULING
In a Decision10 promulgated on February 10, 2004, the CA dismissed PHIMCOs petition for certiorari.
The CA noted that the NLRC findings, that the picket was peaceful and that PHIMCOs evidence failed
to show that the picket constituted an illegal blockade or that it obstructed the points of entry to and exit
from the company premises, were supported by substantial evidence.
PHIMCO came to us through the present petition after the CA denied11 PHIMCOs motion for
reconsideration.12
THE PETITION
The petitioner argues that the strike was illegal because the respondents committed the prohibited acts
under Article 264(e) of the Labor Code, such as blocking the ingress and egress of the company
premises, threat, coercion, and intimidation, as established by the evidence on record.
THE CASE FOR THE RESPONDENTS
The respondents, on the other hand, submit that the issues raised in this case are factual in nature that we
cannot generally touch in a petition for review, unless compelling reasons exist; the company has not
shown any such compelling reason as the picket was peaceful and uneventful, and no human barricade
blocked the company premises.
THE ISSUE
In Montoya v. Transmed Manila Corporation,13 we laid down the basic approach that should be followed
in the review of CA decisions in labor cases, thus:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review
for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the review of
questions of law raised against the assailed CA decision. In ruling for legal correctness, we have to view
the CA decision in the same context that the petition for certiorari it ruled upon was presented to it; we
have to examine the CA decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the
NLRC decision on the merits of the case was correct. In other words, we have to be keenly aware that
the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it.
This is the approach that should be basic in a Rule 45 review of a CA ruling in a labor case. In question
form, the question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse
of discretion in ruling on the case?
In this light, the core issue in the present case is whether the CA correctly ruled that the NLRC did not
act with grave abuse of discretion in ruling that the unions strike was legal.
OUR RULING
We find the petition partly meritorious.
Requisites of a valid strike

A strike is the most powerful weapon of workers in their struggle with management in the course of
setting their terms and conditions of employment. Because it is premised on the concept of economic
war between labor and management, it is a weapon that can either breathe life to or destroy the union
and its members, and one that must also necessarily affect management and its members.14
In light of these effects, the decision to declare a strike must be exercised responsibly and must always
rest on rational basis, free from emotionalism, and unswayed by the tempers and tantrums of hot heads;
it must focus on legitimate union interests. To be legitimate, a strike should not be antithetical to public
welfare, and must be pursued within legal bounds. The right to strike as a means of attaining social
justice is never meant to oppress or destroy anyone, least of all, the employer.15
Since strikes affect not only the relationship between labor and management but also the general peace
and progress of the community, the law has provided limitations on the right to strike. Procedurally, for a
strike to be valid, it must comply with Article 26316 of the Labor Code, which requires that: (a) a notice
of strike be filed with the Department of Labor and Employment (DOLE) 30 days before the intended
date thereof, or 15 days in case of unfair labor practice; (b) a strike vote be approved by a majority of the
total union membership in the bargaining unit concerned, obtained by secret ballot in a meeting called
for that purpose; and (c) a notice be given to the DOLE of the results of the voting at least seven days
before the intended strike.
These requirements are mandatory, and the unions failure to comply renders the strike illegal.17 The 15
to 30-day cooling-off period is designed to afford the parties the opportunity to amicably resolve the
dispute with the assistance of the NCMB conciliator/mediator, while the seven-day strike ban is intended
to give the DOLE an opportunity to verify whether the projected strike really carries the imprimatur of
the majority of the union members.18
In the present case, the respondents fully satisfied the legal procedural requirements; a strike notice was
filed on March 9, 1995; a strike vote was reached on March 16, 1995; notification of the strike vote was
filed with the DOLE on March 17, 1995; and the actual strike was launched only on April 25, 1995.
Strike may be illegal for commission of prohibited acts
Despite the validity of the purpose of a strike and compliance with the procedural requirements, a strike
may still be held illegal where the means employed are illegal.19 The means become illegal when they
come within the prohibitions under Article 264(e) of the Labor Code which provides:
No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct
the free ingress to or egress from the employer's premises for lawful purposes, or obstruct public
thoroughfares.
Based on our examination of the evidence which the LA viewed differently from the NLRC and
the CA, we find the PILA strike illegal. We intervene and rule even on the evidentiary and factual
issues of this case as both the NLRC and the CA grossly misread the evidence, leading them to
inordinately incorrect conclusions, both factual and legal. While the strike undisputably had not been
marred by actual violence and patent intimidation, the picketing that respondent PILA officers and
members undertook as part of their strike activities effectively blocked the free ingress to and egress
from PHIMCOs premises, thus preventing non-striking employees and company vehicles from entering
the PHIMCO compound. In this manner, the picketers violated Article 264(e) of the Labor Code.
The Evidence

We gather from the case record the following pieces of relevant evidence adduced in the compulsory
arbitration proceedings.20
For the Company
1. Pictures taken during the strike, showing that the respondents prevented free ingress to and
egress from the company premises;21
2. Affidavit of PHIMCO Human Resources Manager Francis Ferdinand Cinco, stating that he
was one of the employees prevented by the strikers from entering the PHIMCO premises;22
3. Affidavit of Cinco, identifying Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo
Pedro, Nathaniela R. Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano,
Alberto Basconcillo, and Ramon Falcis as PILA officers;23
4. Affidavit of Cinco identifying other members of PILA;24
5. Folder 1, containing pictures taken during the strike identifying and showing Leonida Catalan,
Renato Ramos, Arsenio Zamora, Reynaldo Ganitano, Amelia Zamora, Angelito Dejan, Teresa
Permocillo, and Francisco Dalisay as the persons preventing Cinco and his group from entering
the company premises;25
6. Folder 2, with pictures taken on May 30, 1995, showing Cinco, together with non-striking
PHIMCO employees, reporting for work but being refused entry by strikers Teofilo Manalili,
Nathaniela Dimaculangan, Bernando Cuadra, Maximo Pedro, Nicanor Ilagan, Julian Tuguin,
Nemesio Mamonong, Abraham Caday, Ernesto Rio, Benjamin Juan, Sr., Ramon Macaalay,
Gerardo Feliciano, Alberto Basconcillo, Rodolfo Sanidad, Mariano Rosales, Roger Caber,
Angelito de Guzman, Angelito Balosa and Philip Garces who blocked the company gate;26
7. Folder 3, with pictures taken on May 30, 1995, showing the respondents denying free ingress
to and egress from the company premises;27
8. Folder 4, with pictures taken during the strike, showing that non-striking employees failed to
enter the company premises as a result of the respondents refusal to let them in;28
9. Affidavit of Joaquin Aguilar stating that the pictures presented by Cinco were taken during the
strike;29
10. Pictures taken by Aguilar during the strike, showing non-striking employees being refused
entry by the respondents;30
11. Joint affidavit of Orlando Marfil and Rodolfo Digo, identifying the pictures they took during
the strike, showing that the respondents blocked ingress to and egress from the company
premises;31 and,
12. Testimonies of PHIMCO employees Rodolfo Eva, Aguilar and Cinco, as well as those of
PILA officers Maximo Pedro and Leonida Catalan.
For the Respondents

1. Affidavit of Leonida Catalan, stating that the PILA strike complied with all the legal
requirements, and the strike/picket was conducted peacefully with no incident of any illegality; 32
2. Affidavit of Maximo Pedro, stating that the strike/picket was conducted peacefully; the picket
was always moving with no acts of illegality having been committed during the strike;33
3. Certification of Police Station Commander Bienvenido de los Reyes that during the strike
there was no report of any untoward incident;34
4. Certification of Rev. Father Erick Adeviso of Dambanang Bayan Parish Church that the strike
was peaceful and without any untoward incident;35
5. Certification of Priest-In-Charge Angelito Fausto of the Philippine Independent Church in
Punta, Santa Ana, that the strike complied with all the requirements for a lawful strike, and the
strikers conducted themselves in a peaceful manner;36
6. Clearance issued by Punong Barangay Mario O. dela Rosa and Barangay Secretary Pascual
Gesmundo, Jr. that the strike from April 21 to July 7, 1995 was conducted in an orderly manner
with no complaints filed;37 and,
7. Testimonies at the compulsory arbitration proceedings.
In its resolution of December 29, 1998,38 the NLRC declared that "the string of proofs" the company
presented was "overwhelmingly counterbalanced by the numerous pieces of evidence adduced by
respondents x x x all depicting a common story that respondents put up a peaceful moving picket, and
did not commit any illegal acts x x x specifically obstructing the ingress to and egress from the company
premises[.]"39
We disagree with this finding as the purported "peaceful moving picket" upon which the NLRC
resolution was anchored was not an innocuous picket, contrary to what the NLRC said it was; the picket,
under the evidence presented, did effectively obstruct the entry and exit points of the company premises
on various occasions.
To strike is to withhold or to stop work by the concerted action of employees as a result of an industrial
or labor dispute.40 The work stoppage may be accompanied by picketing by the striking employees
outside of the company compound. While a strike focuses on stoppage of work, picketing focuses on
publicizing the labor dispute and its incidents to inform the public of what is happening in the company
struck against. A picket simply means to march to and from the employers premises, usually
accompanied by the display of placards and other signs making known the facts involved in a labor
dispute.41 It is a strike activity separate and different from the actual stoppage of work.
grievances,43 these rights are by no means absolute. Protected picketing does not extend to blocking
ingress to and egress from the company premises.44 That the picket was moving, was peaceful and was
not attended by actual violence may not free it from taints of illegality if the picket effectively blocked
entry to and exit from the company premises.
In this regard, PHIMCO employees Rodolfo Eva and Joaquin Aguilar, and the companys Human
Resources Manager Francis Ferdinand Cinco testified during the compulsory arbitration hearings:
ATTY. REYES: this incident on May 22, 1995, when a coaster or bus attempted to enter PHIMCO
compound, you mentioned that it was refused entry. Why was this (sic) it refused entry?

WITNESS: Because at that time, there was a moving picket at the gate that is why the bus was not able
to enter.45
xxxx
Q: Despite this TRO, which was issued by the NLRC, were you allowed entry by the strikers?
A: We made several attempts to enter the compound, I remember on May 7, 1995, we tried to
enter the PHIMCO compound but we were not allowed entry.
Q: Aside from May 27, 1995, were there any other instances wherein you were not allowed entry
at PHIMCO compound?
A: On May 29, I recall I was riding with our Production Manager with the Pick-up. We tried to
enter but we were not allowed by the strikers.46
xxxx
ARBITER MAYOR: How did the strikers block the ingress of the company?
A: They hold around, joining hands, moving picket.47
xxxx
ARBITER MAYOR: Reform the question, and because of that moving picket conducted by the
strikers, no employees or vehicles can come in or go out of the premises?
A: None, sir.48
These accounts were confirmed by the admissions of respondent PILA officers Maximo Pedro and
Leonida Catalan that the strikers prevented non-striking employees from entering the company
premises. According to these union officers:
ATTY. CHUA: Mr. witness, do you recall an incident when a group of managers of PHIMCO,
with several of the monthly paid employees who tried to enter the PHIMCO compound during
the strike?
MR. PEDRO: Yes, sir.
ATTY. CHUA: Can you tell us if these (sic) group of managers headed by Francis Cinco entered
the compound of PHIMCO on that day, when they tried to enter?
MR. PEDRO: No, sir. They were not able to enter.49
xxxx
ATTY. CHUA: Despite having been escorted by police Delos Reyes, you still did not give way,
and instead proceeded with your moving picket?
MR. PEDRO: Yes, sir.

ATTY. CHUA: In short, these people were not able to enter the premises of PHIMCO, Yes or No.
MR. PEDRO: Yes, sir. 50
xxxx
ATTY. CHUA: Madam witness, even if Major Delos Reyes instructed you to give way so as to
allow the employees and managers to enter the premises, you and your co-employees did not
give way?
MS. CATALAN: No sir.
ATTY. CHUA: the managers and the employees were not able to enter the premises?
MS. CATALAN: Yes, sir.51
The NLRC resolution itself noted the above testimonial evidence, "all building up a scenario that the
moving picket put up by [the] respondents obstructed the ingress to and egress from the company
premises[,]"52 yet it ignored the clear import of the testimonies as to the true nature of the picket.
Contrary to the NLRC characterization that it was a "peaceful moving picket," it stood, in fact, as an
obstruction to the companys points of ingress and egress.
Significantly, the testimonies adduced were validated by the photographs taken of the strike area,
capturing the strike in its various stages and showing how the strikers actually conducted the picket.
While the picket was moving, it was maintained so close to the company gates that it virtually
constituted an obstruction, especially when the strikers joined hands, as described by Aguilar, or were
moving in circles, hand-to-shoulder, as shown by the photographs, that, for all intents and purposes,
blocked the free ingress to and egress from the company premises. In fact, on closer examination, it
could be seen that the respondents were conducting the picket right at the company gates.53
The obstructive nature of the picket was aggravated by the placement of benches, with strikers standing
on top, directly in front of the open wing of the company gates, clearly obstructing the entry and exit
points of the company compound.54
With a virtual human blockade and real physical obstructions (benches and makeshift structures both
outside and inside the gates),55 it was pure conjecture on the part of the NLRC to say that "[t]he nonstrikers and their vehicles were x x x free to get in and out of the company compound undisturbed by the
picket line."56 Notably, aside from non-strikers who wished to report for work, company vehicles
likewise could not enter and get out of the factory because of the picket and the physical obstructions the
respondents installed. The blockade went to the point of causing the build up of traffic in the immediate
vicinity of the strike area, as shown by photographs.57This, by itself, renders the picket a prohibited
activity. Pickets may not aggressively interfere with the right of peaceful ingress to and egress from the
employers shop or obstruct public thoroughfares; picketing is not peaceful where the sidewalk or
entrance to a place of business is obstructed by picketers parading around in a circle or lying on the
sidewalk.58
What the records reveal belies the NLRC observation that "the evidence x x x tends to show that what
respondents actually did was walking or patrolling to and fro within the company vicinity and by word
of mouth, banner or placard, informing the public concerning the dispute."59
The "peaceful moving picket" that the NLRC noted, influenced apparently by the certifications (Mayor
delos Reyes, Fr. Adeviso, Fr. Fausto and Barangay Secretary Gesmundo presented in evidence by the

respondents, was "peaceful" only because of the absence of violence during the strike, but the
obstruction of the entry and exit points of the company premises caused by the respondents picket was
by no means a "petty blocking act" or an "insignificant obstructive act."60
As we have stated, while the picket was moving, the movement was in circles, very close to the gates,
with the strikers in a hand-to-shoulder formation without a break in their ranks, thus preventing nonstriking workers and vehicles from coming in and getting out. Supported by actual blocking benches and
obstructions, what the union demonstrated was a very persuasive and quietly intimidating strategy
whose chief aim was to paralyze the operations of the company, not solely by the work stoppage of the
participating workers, but by excluding the company officials and non-striking employees from access
to and exit from the company premises. No doubt, the strike caused the company operations
considerable damage, as the NLRC itself recognized when it ruled out the reinstatement of the dismissed
strikers.61
Intimidation
Article 264(e) of the Labor Code tells us that picketing carried on with violence, coercion or
intimidation is unlawful.62 According to American jurisprudence, what constitutes unlawful intimidation
depends on the totality of the circumstances.63 Force threatened is the equivalent of force exercised.
There may be unlawful intimidation without direct threats or overt acts of violence. Words or acts which
are calculated and intended to cause an ordinary person to fear an injury to his person, business or
property are equivalent to threats.64
The manner in which the respondent union officers and members conducted the picket in the present
case had created such an intimidating atmosphere that non-striking employees and even company
vehicles did not dare cross the picket line, even with police intervention. Those who dared cross the
picket line were stopped. The compulsory arbitration hearings bear this out.
Maximo Pedro, a PILA officer, testified, on July 30, 1997, that a group of PHIMCO managers led by
Cinco, together with several monthly-paid employees, tried to enter the company premises on May 27,
1995 with police escort; even then, the picketers did not allow them to enter.65Leonida Catalan, another
union officer, testified that she and the other picketers did not give way despite the instruction of Police
Major de los Reyes to the picketers to allow the group to enter the company premises.66 (To be sure,
police intervention and participation are, as a rule, prohibited acts in a strike, but we note this
intervention solely as indicators of how far the union and its members have gone to block ingress to and
egress from the company premises.)
Further, PHIMCO employee Rodolfo Eva testified that on May 22, 1995, a company coaster or bus
attempted to enter the PHIMCO compound but it was refused entry by the "moving picket."67 Cinco, the
company personnel manager, also testified that on May 27, 1995, when the NLRC TRO was in force, he
and other employees tried to enter the PHIMCO compound, but they were not allowed entry; on May
29, 1995, Cinco was with the PHIMCO production manager in a pick-up and they tried to enter the
company compound but, again, they were not allowed by the strikers.68 Another employee, Joaquin
Aguilar, when asked how the strikers blocked the ingress of the company, replied that the strikers "hold
around, joining hands, moving picket" and, because of the moving picket, no employee or vehicle could
come in and go out of the premises.69
The evidence adduced in the present case cannot be ignored. On balance, it supports the companys
submission that the respondent PILA officers and members committed acts during the strike prohibited
under Article 264(e) of the Labor Code. The testimonies of non-striking employees, who were prevented
from gaining entry into the company premises, and confirmed no less by two officers of the union, are
on record.

The photographs of the strike scene, also on record, depict the true character of the picket; while
moving, it, in fact, constituted a human blockade, obstructing free ingress to and egress from the
company premises, reinforced by benches planted directly in front of the company gates. The
photographs do not lie these photographs clearly show that the picketers were going in circles, without
any break in their ranks or closely bunched together, right in front of the gates. Thus, company vehicles
were unable to enter the company compound, and were backed up several meters into the street leading
to the company gates.
Despite all these clear pieces of evidence of illegal obstruction, the NLRC looked the other way and
chose not to see the unmistakable violations of the law on strikes by the union and its respondent
officers and members. Needless to say, while the law protects the rights of the laborer, it authorizes
neither the oppression nor the destruction of the employer.70 For grossly ignoring the evidence before it,
the NLRC committed grave abuse of discretion; for supporting these gross NLRC errors, the CA
committed its own reversible error.
Liabilities of union officers and members
In the determination of the liabilities of the individual respondents, the applicable provision is Article
264(a) of the Labor Code:
Art. 264. Prohibited activities. (a) x x x
xxxx
Any union officer who knowingly participates in an illegal strike and any worker or union officer who
knowingly participates in the commission of illegal acts during a strike may be declared to have lost his
employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute
sufficient ground for termination of his employment, even if a replacement had been hired by the
employer during such lawful strike.
We explained in Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines, Inc.71 that the
effects of illegal strikes, outlined in Article 264 of the Labor Code, make a distinction between
participating workers and union officers. The services of an ordinary striking worker cannot be
terminated for mere participation in an illegal strike; proof must be adduced showing that he or she
committed illegal acts during the strike. The services of a participating union officer, on the other hand,
may be terminated, not only when he actually commits an illegal act during a strike, but also if he
knowingly participates in an illegal strike.72
In all cases, the striker must be identified. But proof beyond reasonable doubt is not required; substantial
evidence, available under the attendant circumstances, suffices to justify the imposition of the penalty of
dismissal on participating workers and union officers as above described.73
In the present case, respondents Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro,
Nathaniela Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto
Basconcillo, and Ramon Falcis stand to be dismissed as participating union officers, pursuant to
Article 264(a), paragraph 3, of the Labor Code. This provision imposes the penalty of dismissal on "any
union officer who knowingly participates in an illegal strike." The law grants the employer the option of
declaring a union officer who participated in an illegal strike as having lost his employment.74
PHIMCO was able to individually identify the participating union members thru the affidavits of
PHIMCO employees Martimer Panis75 and Rodrigo A. Ortiz,76 and Personnel Manager Francis
Ferdinand Cinco,77 and the photographs78 of Joaquin Aguilar. Identified were respondents Angelita

Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio, Francisco Dalisay, Angelito Dejan, Philip
Garces, Nicanor Ilagan, Florencio Libongcogon, Nemesio Mamonong, Teofilo Manalili, Alfredo
Pearson, Mario Perea, Renato Ramos, Mariano Rosales, Pablo Sarmiento, Rodolfo Tolentino, Felipe
Villareal, Arsenio Zamora, Danilo Baltazar, Roger Caber, Reynaldo Camarin, Bernardo Cuadra,
Angelito de Guzman, Gerardo Feliciano, Alex Ibaez, Benjamin Juan, Sr., Ramon Macaalay, Gonzalo
Manalili, Raul Miciano, Hilario Pea, Teresa Permocillo, Ernesto Rio, Rodolfo Sanidad, Rafael Sta.
Ana, Julian Tuguin and Amelia Zamora as the union members who actively participated in the strike by
blocking the ingress to and egress from the company premises and preventing the passage of nonstriking employees. For participating in illegally blocking ingress to and egress from company premises,
these union members stand to be dismissed for their illegal acts in the conduct of the unions strike.
PHIMCO failed to observe due process
We find, however, that PHIMCO violated the requirements of due process of the Labor Code when it
dismissed the respondents.
Under Article 277(b)79 of the Labor Code, the employer must send the employee, who is about to be
terminated, a written notice stating the cause/s for termination and must give the employee the
opportunity to be heard and to defend himself.
We explained in Suico v. National Labor Relations Commission,80 that Article 277(b), in relation to
Article 264(a) and (e) of the Labor Code recognizes the right to due process of all workers, without
distinction as to the cause of their termination, even if the cause was their supposed involvement in
strike-related violence prohibited under Article 264(a) and (e) of the Labor Code.
To meet the requirements of due process in the dismissal of an employee, an employer must furnish him
or her with two (2) written notices: (1) a written notice specifying the grounds for termination and
giving the employee a reasonable opportunity to explain his side and (2) another written notice
indicating that, upon due consideration of all circumstances, grounds have been established to justify the
employer's decision to dismiss the employee.81
In the present case, PHIMCO sent a letter, on June 23, 1995, to thirty-six (36) union members, generally
directing them to explain within twenty-four (24) hours why they should not be dismissed for the illegal
acts they committed during the strike; three days later, or on June 26, 1995, the thirty-six (36) union
members were informed of their dismissal from employment.1avvphi1
We do not find this company procedure to be sufficient compliance with the due process requirements
that the law guards zealously. It does not appear from the evidence that the union officers were
specifically informed of the charges against them and given the chance to explain and present their side.
Without the specifications they had to respond to, they were arbitrarily separated from work in total
disregard of their rights to due process and security of tenure.
As to the union members, only thirty-six (36) of the thirty-seven (37) union members included in this
case were notified of the charges against them thru the letters dated June 23, 1995, but they were not
given an ample opportunity to be heard and to defend themselves; the notice of termination came on
June 26, 1995, only three (3) days from the first notice - a perfunctory and superficial attempt to comply
with the notice requirement under the Labor Code. The short interval of time between the first and
second notice speaks for itself under the circumstances of this case; mere token recognition of the due
process requirements was made, indicating the companys intent to dismiss the union members involved,
without any meaningful resort to the guarantees accorded them by law.

Under the circumstances, where evidence sufficient to justify the penalty of dismissal has been adduced
but the workers concerned were not accorded their essential due process rights, our ruling in Agabon v.
NLRC82 finds full application; the employer, despite the just cause for dismissal, must pay the dismissed
workers nominal damages as indemnity for the violation of the workers right to statutory due process.
Prevailing jurisprudence sets the amount of nominal damages at P30,000.00, which same amount we
find sufficient and appropriate in the present case.83
WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the decision
dated February 10, 2004 and the resolution dated December 12, 2005 of the Court of Appeals in CAG.R. SP No. 70336, upholding the rulings of the National Labor Relations Commission.
The Decision, dated February 4, 1998, of Labor Arbiter Jovencio Ll. Mayor should prevail and is
REINSTATED with the MODIFICATION that Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan,
Maximo Pedro, Nathaniela Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano,
Alberto Basconcillo, Ramon Falcis, Angelita Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio,
Francisco Dalisay, Angelito Dejan, Philip Garces, Nicanor Ilagan, Florencio Libongcogon, Nemesio
Mamonong, Teofilo Manalili, Alfredo Pearson, Mario Perea, Renato Ramos, Mariano Rosales, Pablo
Sarmiento, Rodolfo Tolentino, Felipe Villareal, Arsenio Zamora, Danilo Baltazar, Roger Caber,
Reynaldo Camarin, Bernardo Cuadra, Angelito de Guzman, Gerardo Feliciano, Alex Ibaez, Benjamin
Juan, Sr., Ramon Macaalay, Gonzalo Manalili, Raul Miciano, Hilario Pea, Teresa Permocillo, Ernesto
Rio, Rodolfo Sanidad, Rafael Sta. Ana, Julian Tuguin, and Amelia Zamora are each awarded nominal
damages in the amount of P30,000.00. No pronouncement as to costs.
SO ORDERED.
G.R. No. 170351

March 30, 2011

LEYTE GEOTHERMAL POWER PROGRESSIVE EMPLOYEES UNION - ALU TUCP, Petitioner,

vs.
PHILIPPINE NATIONAL OIL COMPANY - ENERGY DEVELOPMENT
CORPORATION, Respondent.
DECISION
NACHURA, J.:
Under review is the Decision1 dated June 30, 2005 of the Court of Appeals (CA) in CA-G.R. SP No.
65760, which dismissed the petition for certiorari filed by petitioner Leyte Geothermal Power
Progressive Employees Union ALUTUCP (petitioner Union) to annul and set aside the
decision2 dated December 10, 1999 of the National Labor Relations Commission (NLRC) in NLRC
Certified Case No. V-02-99.
The facts, fairly summarized by the CA, follow.
[Respondent Philippine National Oil Corporation]-Energy Development Corporation [PNOC-EDC] is a
government-owned and controlled corporation engaged in exploration, development, utilization,
generation and distribution of energy resources like geothermal energy.
Petitioner is a legitimate labor organization, duly registered with the Department of Labor and
Employment (DOLE) Regional Office No. VIII, Tacloban City.

Among [respondents] geothermal projects is the Leyte Geothermal Power Project located at the Greater
Tongonan Geothermal Reservation in Leyte. The said Project is composed of the Tongonan 1
Geothermal Project (T1GP) and the Leyte Geothermal Production Field Project (LGPF) which provide
the power and electricity needed not only in the provinces and cities of Central and Eastern Visayas
(Region VII and VIII), but also in the island of Luzon as well. Thus, the [respondent] hired and
employed hundreds of employees on a contractual basis, whereby, their employment was only good up
to the completion or termination of the project and would automatically expire upon the completion of
such project.
Majority of the employees hired by [respondent] in its Leyte Geothermal Power Projects had become
members of petitioner. In view of that circumstance, the petitioner demands from the [respondent] for
recognition of it as the collective bargaining agent of said employees and for a CBA negotiation with it.
However, the [respondent] did not heed such demands of the petitioner. Sometime in 1998 when the
project was about to be completed, the [respondent] proceeded to serve Notices of Termination of
Employment upon the employees who are members of the petitioner.
On December 28, 1998, the petitioner filed a Notice of Strike with DOLE against the [respondent] on
the ground of purported commission by the latter of unfair labor practice for "refusal to bargain
collectively, union busting and mass termination." On the same day, the petitioner declared a strike and
staged such strike.
To avert any work stoppage, then Secretary of Labor Bienvenido E. Laguesma intervened and issued the
Order, dated January 4, 1999, certifying the labor dispute to the NLRC for compulsory arbitration.
Accordingly, all the striking workers were directed to return to work within twelve (12) hours from
receipt of the Order and for the [respondent] to accept them back under the same terms and conditions of
employment prior to the strike. Further, the parties were directed to cease and desist from committing
any act that would exacerbate the situation.
However, despite earnest efforts on the part of the Secretary of Labor and Employment to settle the
dispute amicably, the petitioner remained adamant and unreasonable in its position, causing the failure
of the negotiation towards a peaceful compromise. In effect, the petitioner did not abide by [the]
assumption order issued by the Secretary of Labor.
Consequently, on January 15, 1999, the [respondent] filed a Complaint for Strike Illegality, Declaration
of Loss of Employment and Damages at the NLRC-RAB VIII in Tacloban City and at the same time,
filed a Petition for Cancellation of Petitioners Certificate of Registration with DOLE, Regional Office
No. VIII. The two cases were later on consolidated pursuant to the New NLRC Rules of Procedure. The
consolidated case was docketed as NLRC Certified Case No. V-02-99 (NCMB-RAB VIII-NS-12-019098; RAB Case No. VIII-1-0019-99). The said certified case was indorsed to the NLRC 4th Division in
Cebu City on June 21, 1999 for the proper disposition thereof.3
In due course, the NLRC 4th Division rendered a decision in favor of respondent, to wit:
WHEREFORE, based on the foregoing premises, judgment is hereby rendered as follows:
1. Declaring the officers and members of [petitioner] Union as project employees;
2. Declaring the termination of their employment by reason of the completion of the project, or a
phase or portion thereof, to which they were assigned, as valid and legal;

3. Declaring the strike staged and conducted by [petitioner] Union through its officers and
members on December 28, 1998 to January 6, 1999 as illegal for failure to comply with the
mandatory requirements of the law on strike[;]
4. Declaring all the officers and members of the board of [petitioner] Union who instigated and
spearheaded the illegal strike to have lost their employment[;]
5. Dismissing the claim of [petitioner] Union against PNOC-EDC for unfair labor practice for
lack of merit[;]
6. Dismissing both parties claims against each other for violation of the Assumption Order dated
January 4, 1999 for lack of factual basis[;]
7. Dismissing all other claims for lack of merit.4
Petitioner Union filed a motion for reconsideration of the NLRC decision, which was subsequently
denied. Posthaste, petitioner Union filed a petition for certiorari before the CA, alleging grave abuse of
discretion in the decision of the NLRC. As previously adverted to, the CA dismissed the petition for
certiorari, thus:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the
Petition. The assailed Decision dated December 10, 1999 of the NLRC 4th Division in NLRC Certified
Case No. V-02-99 (NCMB-RAB VIII-NS-12-0190-98; RAB Case No. VIII-1-0019-99) and its Order
dated March 30, 2001 are hereby AFFIRMED.
Costs against the Petitioner.5
Hence, this appeal by certiorari filed by petitioner Union, positing the following questions of law:
1. MAY THE HONORABLE COURT OF APPEALS SUSTAIN THE "PROJECT CONTRACTS"
THAT ARE DESIGNED TO DENY AND DEPRIVE THE EMPLOYEES THEIR RIGHT TO
SECURITY OF TENURE BY MAKING IT APPEAR THAT THEY ARE MERE PROJECT
EMPLOYEES?
2. WHEN THERE ARE NO INTERVALS IN THE EMPLOYEES CONTRACT, SUCH THAT THE
SO-CALLED UNDERTAKING WAS CONTINUOUS, ARE THE EMPLOYEES PROPERLY
TREATED AS PROJECT EMPLOYEES?
3. MAY THE HONORABLE COURT OF APPEALS IGNORE THE FIRMS OWN ESTIMATE OF
JOB COMPLETION, PROVING THAT THERE IS STILL 56.25% CIVIL/STRUCTURAL WORK TO
BE ACCOMPLISHED, AND RULE THAT THE EMPLOYEES WERE DISMISSED FOR
COMPLETION [OF] THE "PROJECT?"
4. MAY A FIRM HIDE UNDER THE SPURIOUS CLOAK OF "PROJECT COMPLETION" TO
DISMISS EN MASSE THE EMPLOYEES WHO HAVE ORGANIZED AMONG THEMSELVES A
LEGITIMATE LABOR ORGANIZATION TO PROTECT THEIR RIGHTS?
5. WHEN THERE IS NO STOPPAGE OF WORK, MAY A PROTEST ACTIVITY BE CONSIDERED
AS A STRIKE CONTRARY TO ITS CONCEPTUAL DEFINITION UNDER ARTICLE 212 (O) OF
THE LABOR CODE OF THE PHILIPPINES?

6. WHEN THE DISMISSAL IS AIMED AT RIDDING THE COMPANY OF MEMBERS OF THE

UNION, IS THIS UNION BUSTING?6
Stripped of rhetoric, the issues for our resolution are:
1. Whether the officers and members of petitioner Union are project employees of respondent;
and
2. Whether the officers and members of petitioner Union engaged in an illegal strike.
On the first issue, petitioner Union contends that its officers and members performed activities that were
usually necessary and desirable to respondents usual business. In fact, petitioner Union reiterates that its
officers and members were assigned to the Construction Department of respondent as carpenters and
masons, and to other jobs pursuant to civil works, which are usually necessary and desirable to the
department. Petitioner Union likewise points out that there was no interval in the employment contract
of its officers and members, who were all employees of respondent, which lack of interval, for petitioner
Union, "manifests that the undertaking is usually necessary and desirable to the usual trade or business
of the employer."
We cannot subscribe to the view taken by petitioner Union.
The distinction between a regular and a project employment is provided in Article 280, paragraph 1, of
the Labor Code:
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 service to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and
his employment shall continue while such actually exists.7
The foregoing contemplates four (4) kinds of employees: (a) regular employees or those who have been
"engaged to perform activities which are usually necessary or desirable in the usual business or trade of
the employer"; (b) project employees or those "whose employment has been fixed for a specific project
or undertaking[,] the completion or termination of which has been determined at the time of the
engagement of the employee"; (c) seasonal employees or those who work or perform services which are
seasonal in nature, and the employment is for the duration of the season;8 and (d) casual employees or
those who are not regular, project, or seasonal employees. Jurisprudence has added a fifth kind a
fixed-term employee.9
Article 280 of the Labor Code, as worded, establishes that the nature of the employment is determined
by law, regardless of any contract expressing otherwise. The supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is to bring to life the policy enshrined
in the Constitution to "afford full protection to labor."10 Thus, labor contracts are placed on a higher
plane than ordinary contracts; these are imbued with public interest and therefore subject to the police
power of the State.11

However, notwithstanding the foregoing iterations, project employment contracts which fix the
employment for a specific project or undertaking remain valid under the law:
x x x By entering into such a contract, an employee is deemed to understand that his employment is
coterminous with the project. He may not expect to be employed continuously beyond the completion of
the project. It is of judicial notice that project employees engaged for manual services or those for
special skills like those of carpenters or masons, are, as a rule, unschooled. However, this fact alone is
not a valid reason for bestowing special treatment on them or for invalidating a contract of employment.
Project employment contracts are not lopsided agreements in favor of only one party thereto. The
employers interest is equally important as that of the employee[s] for theirs is the interest that propels
economic activity. While it may be true that it is the employer who drafts project employment contracts
with its business interest as overriding consideration, such contracts do not, of necessity, prejudice the
employee. Neither is the employee left helpless by a prejudicial employment contract. After all, under
the law, the interest of the worker is paramount.12
In the case at bar, the records reveal that the officers and the members of petitioner Union signed
employment contracts indicating the specific project or phase of work for which they were hired, with a
fixed period of employment. The NLRC correctly disposed of this issue:
A deeper examination also shows that [the individual members of petitioner Union] indeed signed and
accepted the [employment contracts] freely and voluntarily. No evidence was presented by [petitioner]
Union to prove improper pressure or undue influence when they entered, perfected and consummated
[the employment] contracts. In fact, it was clearly established in the course of the trial of this case, as
explained by no less than the President of [petitioner] Union, that the contracts of employment were
read, comprehended, and voluntarily accepted by them. x x x.
xxxx
As clearly shown by [petitioner] Unions own admission, both parties had executed the contracts freely
and voluntarily without force, duress or acts tending to vitiate the worker[s] consent. Thus, we see no
reason not to honor and give effect to the terms and conditions stipulated therein. x x x.13
Thus, we are hard pressed to find cause to disturb the findings of the NLRC which are supported by
substantial evidence.
It is well-settled in jurisprudence that factual findings of administrative or quasi-judicial bodies, which
are deemed to have acquired expertise in matters within their respective jurisdictions, are generally
accorded not only respect but even finality, and bind the Court when supported by substantial
evidence.14 Rule 133, Section 5 defines substantial evidence as "that amount of relevant evidence which
a reasonable mind might accept as adequate to justify a conclusion."
Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in
labor cases.15 We may take cognizance of and resolve factual issues, only when the findings of fact and
conclusions of law of the Labor Arbiter or the NLRC are inconsistent with those of the CA.16
In the case at bar, both the NLRC and the CA were one in the conclusion that the officers and the
members of petitioner Union were project employees. Nonetheless, petitioner Union insists that they
were regular employees since they performed work which was usually necessary or desirable to the
usual business or trade of the Construction Department of respondent.
The landmark case of ALU-TUCP v. NLRC17 instructs on the two (2) categories of project employees:

It is evidently important to become clear about the meaning and scope of the term "project" in the
present context. The "project" for the carrying out of which "project employees" are hired would
ordinarily have some relationship to the usual business of the employer. Exceptionally, the "project"
undertaking might not have an ordinary or normal relationship to the usual business of the employer. In
this latter case, the determination of the scope and parameters of the "project" becomes fairly easy. x x x.
From the viewpoint, however, of the legal characterization problem here presented to the Court, there
should be no difficulty in designating the employees who are retained or hired for the purpose of
undertaking fish culture or the production of vegetables as "project employees," as distinguished from
ordinary or "regular employees," so long as the duration and scope of the project were determined or
specified at the time of engagement of the "project employees." For, as is evident from the provisions of
Article 280 of the Labor Code, quoted earlier, the principal test for determining whether particular
employees are properly characterized as "project employees" as distinguished from "regular employees,"
is whether or not the "project employees" were assigned to carry out a "specific project or undertaking,"
the duration (and scope) of which were specified at the time the employees were engaged for that
project.
In the realm of business and industry, we note that "project" could refer to one or the other of at least
two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking
that is within the regular or usual business of the employer company, but which is distinct and separate,
and identifiable as such, from the other undertakings of the company. Such job or undertaking begins
and ends at determined or determinable times. The typical example of this first type of project is a
particular construction job or project of a construction company. A construction company ordinarily
carries out two or more [distinct] identifiable construction projects: e.g., a twenty-five-storey hotel in
Makati; a residential condominium building in Baguio City; and a domestic air terminal in Iloilo City.
Employees who are hired for the carrying out of one of these separate projects, the scope and duration of
which has been determined and made known to the employees at the time of employment, are properly
treated as "project employees," and their services may be lawfully terminated at completion of the
project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times.18
Plainly, the litmus test to determine whether an individual is a project employee lies in setting a fixed
period of employment involving a specific undertaking which completion or termination has been
determined at the time of the particular employees engagement.
In this case, as previously adverted to, the officers and the members of petitioner Union were
specifically hired as project employees for respondents Leyte Geothermal Power Project located at the
Greater Tongonan Geothermal Reservation in Leyte. Consequently, upon the completion of the project
or substantial phase thereof, the officers and the members of petitioner Union could be validly
terminated.
Petitioner Union is adamant, however, that the lack of interval in the employment contracts of its officer
and members negates the latters status
as mere project employees. For petitioner Union, the lack of interval further drives home its point that its
officers and members are regular employees who performed work which was usually necessary or
desirable to the usual business or trade of respondent.
We are not persuaded.

Petitioner Unions members employment for more than a year does equate to their regular employment
with respondent. In this regard, Mercado, Sr. v. NLRC19 illuminates:
The first paragraph [of Article 280 of the Labor Code] answers the question of who are regular
employees. It states that, regardless of any written or oral agreement to the contrary, an employee is
deemed regular where he is engaged in necessary or desirable activities in the usual business or trade of
the employer, except for project employees.
A project employee has been defined to be one whose employment has been fixed for a specific project
or undertaking, the completion or termination of which has been determined at the time of the
engagement of the employee, or where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season, as in the present case.
The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not
fall under the definition of the preceding paragraph. The proviso, in said second paragraph, deems as
regular employees those "casual" employees who have rendered at least one year of service regardless of
the fact that such service may be continuous or broken.
Petitioners, in effect, contend that the proviso in the second paragraph of Art. 280 is applicable to their
case and that the Labor Arbiter should have considered them regular by virtue of said proviso. The
contention is without merit.
The general rule is that the office of a proviso is to qualify or modify only the phrase immediately
preceding it or restrain or limit the generality of the clause that it immediately follows. Thus, it has been
held that a proviso is to be construed with reference to the immediately preceding part of the provision
to which it is attached, and not to the statute itself or to other sections thereof. The only exception to this
rule is where the clear legislative intent is to restrain or qualify not only the phrase immediately
preceding it (the proviso) but also earlier provisions of the statute or even the statute itself as a whole.
Policy Instruction No. 12 of the Department of Labor and Employment discloses that the concept of
regular and casual employees was designed to put an end to casual employment in regular jobs, which
has been abused by many employers to prevent so called casuals from enjoying the benefits of regular
employees or to prevent casuals from joining unions. The same instructions show that the proviso in the
second paragraph of Art. 280 was not designed to stifle small-scale businesses nor to oppress
agricultural land owners to further the interests of laborers, whether agricultural or industrial. What it
seeks to eliminate are abuses of employers against their employees and not, as petitioners would have us
believe, to prevent small-scale businesses from engaging in legitimate methods to realize profit. Hence,
the proviso is applicable only to the employees who are deemed "casuals" but not to the "project"
employees nor the regular employees treated in paragraph one of Art. 280.
Clearly, therefore, petitioners being project employees, or, to use the correct term, seasonal employees,
their employment legally ends upon completion of the project or the [end of the] season. The termination
of their employment cannot and should not constitute an illegal dismissal.
Considering our holding that the officers and the members of petitioner Union were project employees,
its claim of union busting is likewise dismissed.
On the second issue, petitioner Union contends that there was no stoppage of work; hence, they did not
strike. Euphemistically, petitioner Union avers that it "only engaged in picketing,"20 and maintains that
"without any work stoppage, [its officers and members] only engaged in xxx protest activity."
We are not convinced. Petitioner Union splits hairs.

To begin with, quite evident from the records is the undisputed fact that petitioner Union filed a Notice
of Strike on December 28, 1998 with the Department of Labor and Employment, grounded on
respondents purported
unfair labor practices, i.e., "refusal to bargain collectively, union busting and mass termination." On even
date, petitioner Union declared and staged a strike.
Second, then Secretary of Labor, Bienvenido E. Laguesma, intervened and issued a Return-to-Work
Order21dated January 4, 1999, certifying the labor dispute to the NLRC for compulsory arbitration. The
Order narrates the facts leading to the labor dispute, to wit:
On 28 December 1998, [petitioner Union] filed a Notice of Strike against [respondent] citing unfair
labor practices, specifically: refusal to bargain collectively, union busting and mass termination as the
grounds [therefor]. On the same day, [petitioner] Union went on strike and took control over
[respondents] facilities of its Leyte Geothermal Project.
Attempts by the National Conciliation and Mediation Board RBVIII to forge a mutually acceptable
solution proved futile.
In the meantime, the strike continues with no settlement in sight placing in jeopardy the supply of much
needed power supply in the Luzon and Visayas grids.
xxxx
The on-going strike threatens the availability of continuous electricity to these areas which is critical to
day-to-day life, industry, commerce and trade. Without doubt, [respondents] operations [are]
indispensable to the national interest and falls (sic) within the purview of Article 263 (g) of the Labor
Code, as amended, which warrants (sic) the intervention of this Office.
Third, petitioner Union itself, in its pleadings, used the word "strike."
Ultimately, petitioner Unions asseverations are belied by the factual findings of the NLRC, as affirmed
by the CA:
The failure to comply with the mandatory requisites for the conduct of strike is both admitted and
clearly shown on record. Hence, it is undisputed that no strike vote was conducted; likewise, the
cooling-off period was not observed and that the 7-day strike ban after the submission of the strike vote
was not complied with since there was no strike vote taken.
xxxx
The factual issue of whether a notice of strike was timely filed by [petitioner] Union was resolved by the
evidence on record. The evidence revealed that [petitioner] Union struck even before it could file the
required notice of strike. Once again, this relied on [petitioner] Unions proof. [Petitioner] Union[s]
witness said:
Atty. Sinsuat : You stated that you struck on 28 December 1998 is that correct?
Witness : Early in the morning of December 1998.
xxxx

Atty. Sinsuat : And you went there to conduct the strike did you not?
Witness : Our plan then was to strike at noon of December 28 and the strikers will be positioned at their
respective areas.22
Article 263 of the Labor Code enumerates the requisites for holding a strike:
Art. 263. Strikes, picketing, and lockouts. (a) x x x.
x x x x.
(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may file a
notice of strike or the employer may file a notice of lockout with the Department at least 30 days
before the intended date thereof. In cases of unfair labor practice, the period of notice shall be 15
days and in the absence of a duly certified bargaining agent, the notice of strike may be filed by
any legitimate labor organization in behalf of its members. However, in case of dismissal from
employment of union officers duly elected in accordance with the union constitution and bylaws, which may constitute union busting, where the existence of the union is threatened, the 15day cooling-off period shall not apply and the union may take action immediately.
(d) The notice must be in accordance with such implementing rules and regulations as the
Department of Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the Department to exert all efforts at
mediation and conciliation to effect a voluntary settlement. Should the dispute remain unsettled
until the lapse of the requisite number of days from the mandatory filing of the notice, the labor
union may strike or the employer may declare a lockout.
(f) A decision to declare a strike must be approved by a majority of the total union membership
in the bargaining unit concerned, obtained by secret ballot in meetings or referenda called for
that purpose. A decision to declare a lockout must be approved by a majority of the board of
directors of the corporation or association or of the partners in a partnership, obtained by secret
ballot in a meeting called for that purpose. The decision shall be valid for the duration of the
dispute based on substantially the same grounds considered when the strike or lockout vote was
taken. The Department may, at its own initiative or upon the request of any affected party,
supervise the conduct of the secret balloting. In every case, the union or the employer shall
furnish the Department the results of the voting at least seven days before the intended strike or
lockout, subject to the cooling-off period herein provided.
In fine, petitioner Unions bare contention that it did not hold a strike cannot trump the factual findings
of the NLRC that petitioner Union indeed struck against respondent. In fact, and more importantly,
petitioner Union failed to comply with the requirements set by law prior to holding a strike.1avvphi1
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
65760 is AFFIRMED. Costs against petitioner Union.
SO ORDERED.
G.R. No. 155109

March 14, 2012

C. ALCANTARA & SONS, INC., Petitioner,

vs.
COURT OF APPEALS, LABOR ARBITER ANTONIO M. VILLANUEVA, LABOR ARBITER
ARTURO L. GAMOLO, SHERIFF OF NLRC RAB-XI-DAVAO CITY, NAGKAHIUSANG
MAMUMUO SA ALSONS-SPFL (NAMAAL-SPFL), FELIXBERTO IRAG, JOSHUA
BARREDO, ERNESTO CUARIO, EDGAR MONDAY, EDILBERTO DEMETRIA, HERMINIO
ROBILLO, ROMULO LUNGAY, MATROIL DELOS SANTOS, BONERME MATURAN, RAUL
CANTIGA, EDUARDO CAMPUSO, RUDY ANADON, GILBERTO GABRONINO,
BONIFACIO SALVADOR, CIRILO MINO, ROBERTO ABONADO, WARLITO MONTE,
PEDRO ESQUIERDO, ALFREDO TROPICO, DANILO MEJOS, HECTOR ESTUITA,
BARTOLOME CASTILLANES, EDUARDO CAPUYAN, SATURNINO CAGAS, ALEJANDRO
HARDER, EDUARDO LARENA, JAIME MONTEDERAMOS, ERMELANDO BASADRE,
REYNALDO LIMPAJAN, ELPIDIO LIBRANZA, TEDDY SUELO, JOSE AMOYLIN,
TRANQUILINO ORALLO, CARLOS BALDOS, MANOLITO SABELLANO, CARMELITO
TOBIAS, PRIMITIVO GARCIA, JUANITO ALDEPOLLA, LUDIVICO ABAD, WENCISLAO
INGHUG, RICARDO ALTO, EPIFANIO JARABAY, FELICIANO AMPER, ALEXANDER
JUDILLA, ROBERTO ANDRADE, ALFREDO LESULA, JULIO ANINO, BENITO
MAGPUSAO, PEDRO AQUINO, EDDIE MANSANADES, ROMEO ARANETA, ARGUILLAO
MANTICA, CONSTANCIO ARNAIZ, ERNESTO HOTOY, JUSTINO ASCANO, RICARDO
MATURAN, EDILBERTO YAMBAO, ANTONIO MELARGO, JESUS BERITAN, ARSENIO
MELICOR, DIOSDADO BONGABONG, LAURO MONTENEGRO, CARLITO BURILLO,
LEO MORA, PABLO BUTIL, ARMANDO GUCILA, JEREMIAH CAGARA, MARIO NAMOC,
CARLITO CAL, GERWINO NATIVIDAD, ROLANDO CAPUYAN, EDGARDO ORDIZ,
LEONARDO CASURRA, PATROCINIO ORTEGA, FILEMON CESAR, MARIO PATAN,
ROMEO COMPRADO, JESUS PATOC, RAMON CONSTANTINO, ALBERTO PIELAGO,
SAMUEL DELA LLANA, NICASIO PLAZA, ROSALDO DAGONDON, TITO GUADES,
BONIFACIO DINAGUDOS, PROCOPIO RAMOS, JOSE EBORAN, ROSENDO SAJOL,
FRANCISCO EMPUERTO, PATRICIO SALOMON, NESTOR ENDAYA, MARIO
SALVALEON, ERNESTO ESTILO, BONIFACIO SIGUE, VICENTE FABROA, JAIME
SUCUAHI, CELSO HUISO, ALEX TAUTO-AN, SATURNINO YAGON, CLAUDIO TIROL,
SULPECIO GAGNI, JOSE TOLERO, FERVIE GALVEZ, ALFREDO TORALBA and
EDUARDO GENELSA, Respondents.
x-----------------------x
G.R. No. 155135
NAGKAHIUSANG MAMUMUO SA ALSONS-SPFL (NAMAAL-SPFL), FELIXBERTO IRAG,
JOSHUA BARREDO, ERNESTO CUARIO, EDGAR MONDAY, EDILBERTO DEMETRIA,
HERMINIO ROBILLO, ROMULO LUNGAY, MATROIL DELOS SANTOS, BONERME
MATURAN, RAUL CANTIGA, EDUARDO CAMPUSO, RUDY ANADON, GILBERTO
GABRONINO, BONIFACIO SALVADOR, CIRILO MINO, ROBERTO ABONADO, WARLITO
MONTE, PEDRO ESQUIERDO, ALFREDO TROPICO, DANILO MEJOS, HECTOR
ESTUITA, BARTOLOME CASTILLANES, EDUARDO CAPUYAN, SATURNINO CAGAS,
ALEJANDRO HARDER, EDUARDO LARENA, JAIME MONTEDERAMOS, ERMELANDO
BASADRE, REYNALDO LIMPAJAN, ELPIDIO LIBRANZA, TEDDY SUELO, JOSE
AMOYLIN, TRANQUILINO ORALLO, CARLOS BALDOS, MANOLITO SABELLANO,
CARMELITO TOBIAS, PRIMITIVO GARCIA, JUANITO ALDEPOLLA, LUDIVICO ABAD,
WENCISLAO INGHUG, RICARDO ALTO, EPIFANIO JARABAY, FELICIANO AMPER,
ALEXANDER JUDILLA, ROBERTO ANDRADE, ALFREDO LESULA, JULIO ANINO,
BENITO MAGPUSAO, PEDRO AQUINO, EDDIE MANSANADES, ROMEO ARANETA,
ARGUILLAO MANTICA, CONSTANCIO ARNAIZ, ERNESTO HOTOY, JUSTINO ASCANO,

RICARDO MATURAN, EDILBERTO YAMBAO, ANTONIO MELARGO, JESUS BERITAN,

ARSENIO MELICOR, DIOSDADO BONGABONG, LAURO MONTENEGRO, CARLITO
BURILLO, LEO MORA, PABLO BUTIL, ARMANDO GUCILA, JEREMIAH CAGARA,
MARIO NAMOC, CARLITO CAL, GERWINO NATIVIDAD, ROLANDO CAPUYAN,
JUANITO NISNISAN, AURELIO CARIN, PRIMO OPLIMO, ANGELITO CASTANEDA,
EDGARDO ORDIZ, LEONARDO CASURRA, PATROCINIO ORTEGA, FILEMON CESAR,
MARIO PATAN, ROMEO COMPRADO, JESUS PATOC, RAMON CONSTANTINO, MANUEL
PIAPE, ROY CONSTANTINO, ALBERTO PIELAGO, SAMUEL DELA LLANA, NICASIO
PLAZA, ROSALDO DAGONDON, TITO GUADES, BONIFACIO DINAGUDOS, PROCOPIO
RAMOS, JOSE EBORAN, ROSENDO SAJOL, FRANCISCO EMPUERTO, PATRICIO
SALOMON, NESTOR ENDAYA, MARIO SALVALEON, ERNESTO ESTILO, BONIFACIO
SIGUE, VICENTE FABROA, JAIME SUCUAHI, CELSO HUISO, ALEX TAUTO-AN,
SATURNINO YAGON, CLAUDIO TIROL, SULPECIO GAGNI, JOSE TOLERO, FERVIE
GALVEZ, ALFREDO TORALBA and EDUARDO GENELSA, Petitioners,
vs.
C. ALCANTARA & SONS, INC., EDITHA I. ALCANTARA, ATTY. NELIA A. CLAUDIO,
CORNELIO E. CAGUIAT, JESUS S. DELA CRUZ, ROLANDO Z. ANDRES and JOSE MA.
MANUEL YRASUEGUI, Respondents.
x-----------------------x
G.R. No. 179220
NAGKAHIUSANG MAMUMUO SA ALSONS-SPFL (NAMAAL-SPFL), AND ITS MEMBERS
whose names are listed below, Petitioners,
vs.
C. ALCANTARA & SONS, INC., Respondent.
RE S O LUTI ON
PERALTA, J.:
For resolution are the (1) Motion for Partial Reconsideration1 filed by C. Alcantara & Sons, Inc. (CASI)
and (2) Motion for Reconsideration2 filed by Nagkahiusang Mamumuo sa Alsons-SPFL (the Union) and
the Union officers3 and their striking members4 of the Courts Decision5 dated September 29, 2010. In a
Resolution6 dated December 13, 2010, the parties were required to submit their respective Comments.
After several motions for extension, the parties submitted the required comments. Hence, this resolution.
For a proper perspective, we state briefly the facts of the case.
The negotiation between CASI and the Union on the economic provisions of the Collective Bargaining
Agreement (CBA) ended in a deadlock prompting the Union to stage a strike,7 but the strike was later
declared by the Labor Arbiter (LA) to be illegal having been staged in violation of the CBAs no strikeno lockout provision.8Consequently, the Union officers were deemed to have forfeited their employment
with the company and made them liable for actual damages plus interest and attorneys fees, while the
Union members were ordered to be reinstated without backwages there being no proof that they actually
committed illegal acts during the strike.9
Notwithstanding the provision of the Labor Code mandating that the reinstatement aspect of the decision
be immediately executory, the LA refused to reinstate the dismissed Union members. On November 8,
1999, the NLRC affirmed the LA decision insofar as it declared the strike illegal and ordered the Union
officers dismissed from employment and liable for damages but modified the same by considering the

Union members to have been validly dismissed from employment for committing prohibited and illegal
acts.10
On petition for certiorari, the Court of Appeals (CA) annulled the NLRC decision and reinstated that of
the LA. Aggrieved, CASI, the Union and the Union officers and members elevated the matter to this
Court. The cases were docketed as G.R. Nos. 155109 and 155135.11
During the pendency of the cases, the affected Union members (who were ordered reinstated) filed with
the LA a motion for reinstatement pending appeal and the computation of their backwages. Instead of
reinstating the Union members, the LA awarded separation pay and other benefits.12 On appeal, the
NLRC denied the Union members claim for separation pay, accrued wages and other benefits.13 When
elevated to the CA, the appellate court held that reinstatement pending appeal applies only to illegal
dismissal cases under Article 223 of the Labor Code and not to cases under Article 263.14 Hence, the
petition by the Union and its officers and members in G.R. No. 179220.
G.R. Nos. 155109, 155135, and 179220 were consolidated. On September 29, 2010, the Court rendered
a decision the dispositive portion of which reads:
WHEREFORE, the Court DENIES the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and its
officers and members in G.R. No. 155135 for lack of merit, and REVERSES and SETS ASIDE the
decision of the Court of Appeals in CA-G.R. SP 59604 dated March 20, 2002. The Court, on the other
hand, GRANTS the petition of C. Alcantara & Sons, Inc. in G.R. 155109 and REINSTATES the
decision of the National Labor Relations Commission in NLRC CA M-004996-99 dated November 8,
1999.
Further, the Court PARTIALLY GRANTS the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL
and their dismissed members in G.R. No. 179220 and ORDERS C. Alcantara & Sons, Inc. to pay the
terminated Union members backwages for four (4) months and nine (9) days and separation pays
equivalent to one-half month salary for every year of service to the company up to the date of their
termination, with interest of 12% per annum from the time this decision becomes final and executory
until such backwages and separation pays are paid. The Court DENIES all other claims.
SO ORDERED.15
The Court agreed with the CA on the illegality of the strike as well as the termination of the Union
officers, but disagreed with the CA insofar as it affirmed the reinstatement of the Union members. The
Court, instead, sustained the dismissal not only of the Union officers but also the Union members who,
during the illegal strike, committed prohibited acts by threatening, coercing, and intimidating nonstriking employees, officers, suppliers and customers; obstructing the free ingress to and egress from the
company premises; and resisting and defying the implementation of the writ of preliminary injunction
issued against the strikers.16
The Court further held that the terminated Union members, who were ordered reinstated by the LA,
should have been immediately reinstated due to the immediate executory nature of the reinstatement
aspect of the LA decision. In view, however, of CASIs failure to reinstate the dismissed employees, the
Court ordered CASI to pay the terminated Union members their accrued backwages from the date of the
LA decision until the eventual reversal by the NLRC of the order of reinstatement.17 In addition to the
accrued backwages, the Court awarded separation pay as a form of financial assistance to the Union
members equivalent to one-half month salary for every year of service to the company up to the date of
their termination.18

Not satisfied, CASI filed a Motion for Partial Reconsideration of the above decision based on the
following grounds:
I.
IT IS RESPECTFULLY SUBMITTED THAT A PRECEDENT SETTING RULING OF THIS
HONORABLE COURT IN ESCARIO V. NLRC [G.R. No. 160302, 27 SEPTEMBER 2010]
PARTICULARLY ON THE PROPER APPLICATION OF ARTICLES 264 AND 279 OF THE
LABOR CODE SUPPORTS THE AFFIRMATION AND NOT THE REVERSAL OF THE
FINDINGS OF THE COURT OF APPEALS ["CA"], AND NEGATES THE ENTITLEMENT
TO ACCRUED WAGES OF THE UNION MEMBERS WHO COMMITTED ILLEGAL ACTS
DURING THE ILLEGAL STRIKE, NOTWITHSTANDING THAT THE LABOR ARBITER
AWARDED THE SAME.
II.
IT IS RESPECTFULY SUBMITTED THAT THIS HONORABLE COURT ERRED WHEN IT
RESOLVED TO GRANT SEPARATION PAY TO THE UNION MEMBERS WHO
COMMITTED ILLEGAL ACTS DURING THE ILLEGAL STRIKE CONSIDERING THAT
JURISPRUDENCE CITED TO JUSTIFY THE GRANT OF SEPARATION PAY DO NOT
APPLY TO THE PRESENT CASE AS IT APPLIES ONLY TO DISMISSALS FOR A JUST
CAUSE.19
The Union, its officers and members likewise filed their separate motion for reconsideration assailing
the Courts conclusions that: (1) the strike is illegal; (2) that the officers of the Union and its appointed
shop stewards automatically forfeited their employment status when they participated in the strike; (3)
that the Union members committed illegal acts during the strike and are deemed to have lost their
employment status; and (4) that CASI is entitled to actual damages and attorneys fees.20 They also fault
the Court in not finding that: (1) CASI and its officers are guilty of acts of unfair labor practice or
violation of Article 248 of the Labor Code; (2) the lockout declared by the company is illegal; (3) CASI
and its officers committed acts of discrimination; (4) CASI and its officers violated Article 254 of the
Labor Code; and (5) CASI and its officers are liable for actual, moral, and exemplary damages to the
Union, its officers and members.21
Simply stated, CASI only questions the propriety of the award of backwages and separation pay, while
the Union, its officers and members seek the reversal of the Courts conclusions on the illegality of the
strike, the validity of the termination of the Union officers and members, and the award of actual
damages and attorneys fees as well as the denial of their counterclaims against CASI.
After a careful review of the records of the case, we find it necessary to reconsider the Courts
September 29, 2010 decision, but only as to the award of separation pay.
The LA, the NLRC, the CA and the Court are one in saying that the strike staged by the Union,
participated in by the Union officers and members, is illegal being in violation of the no strike-no
lockout provision of the CBA which enjoined both the Union and the company from resorting to the use
of economic weapons available to them under the law and to instead take recourse to voluntary
arbitration in settling their disputes.22 We, therefore, find no reason to depart from such conclusion.
Article 264 (a) of the Labor Code lays down the liabilities of the Union officers and members
participating in illegal strikes and/or committing illegal acts, to wit:
ART. 264. PROHIBITED ACTIVITIES

(a) x x x
Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be
entitled to reinstatement with full backwages. Any Union officer who knowingly participates in an
illegal strike and any worker or Union officer who knowingly participates in the commission of illegal
acts during a strike may be declared to have lost his employment status: Provided, That mere
participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his
employment, even if a replacement had been hired by the employer during such lawful strike.
Thus, the above-quoted provision sanctions the dismissal of a Union officer who knowingly participates
in an illegal strike or who knowingly participates in the commission of illegal acts during a lawful
strike.23 In this case, the Union officers were in clear breach of the above provision of law when they
knowingly participated in the illegal strike.24
As to the Union members, the same provision of law provides that a member is liable when he
knowingly participates in the commission of illegal acts during a strike. We find no reason to reverse the
conclusion of the Court that CASI presented substantial evidence to show that the striking Union
members committed the following prohibited acts:
a. They threatened, coerced, and intimidated non-striking employees, officers, suppliers and
customers;
b. They obstructed the free ingress to and egress from the company premises; and
c. They resisted and defied the implementation of the writ of preliminary injunction issued
against the strikers.25
The commission of the above prohibited acts by the striking Union members warrants their dismissal
from employment.
As clearly narrated earlier, the LA found the strike illegal and sustained the dismissal of the Union
officers, but ordered the reinstatement of the striking Union members for lack of evidence showing that
they committed illegal acts during the illegal strike. This decision, however, was later reversed by the
NLRC. Pursuant to Article 22326 of the Labor Code and well-established jurisprudence,27 the decision of
the LA reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned,
shall immediately be executory, pending appeal.28The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation, or, at the option of
the employee, merely reinstated in the payroll.29 It is obligatory on the part of the employer to reinstate
and pay the wages of the dismissed employee during the period of appeal until reversal by the higher
court.30 If the employer fails to exercise the option of re-admitting the employee to work or to reinstate
him in the payroll, the employer must pay the employees salaries during the period between the LAs
order of reinstatement pending appeal and the resolution of the higher court overturning that of the
LA.31 In this case, CASI is liable to pay the striking Union members their accrued wages for four months
and nine days, which is the period from the notice of the LAs order of reinstatement until the reversal
thereof by the NLRC.32
Citing Escario v. National Labor Relations Commission (Third Division),33 CASI claims that the award
of the four-month accrued salaries to the Union members is not sanctioned by jurisprudence. In Escario,
the Court categorically stated that the strikers were not entitled to their wages during the period of the
strike (even if the strike might be legal), because they performed no work during the strike. The Court
further held that it was neither fair nor just that the dismissed employees should litigate against their
employer on the latters time.34 In this case, however, the four-month accrued salaries awarded to the

Union members are not the backwages referred to in Escario. To be sure, the awards were not given as
their salaries during the period of the strike. Rather, they constitute the employers liability to the
employees for its failure to exercise the option of actual reinstatement or payroll reinstatement following
the LAs decision to reinstate the Union members as mandated by Article 223 of the Labor Code
adequately discussed earlier. In other words, such monetary award refers to the Union members accrued
salaries by reason of the reinstatement order of the LA which is self-executory pursuant to Article
223.35We, therefore, sustain the award of the four-month accrued salaries.1wphi1
Finally, as regards the separation pay as a form of financial assistance awarded by the Court, we find it
necessary to reconsider the same and delete the award pursuant to prevailing jurisprudence.
Separation pay may be given as a form of financial assistance when a worker is dismissed in cases such
as the installation of labor-saving devices, redundancy, retrenchment to prevent losses, closing or
cessation of operation of the establishment, or in case the employee was found to have been suffering
from a disease such that his continued employment is prohibited by law.36 It is a statutory right defined
as the amount that an employee receives at the time of his severance from the service and is designed to
provide the employee with the wherewithal during the period that he is looking for another
employment.37 It is oriented towards the immediate future, the transitional period the dismissed
employee must undergo before locating a replacement job.38 As a general rule, when just causes for
terminating the services of an employee exist, the employee is not entitled to separation pay because
lawbreakers should not benefit from their illegal acts.39 The rule, however, is subject to exceptions.40 The
Court, in Philippine Long Distance Telephone Co. v. NLRC,41 laid down the guidelines when separation
pay in the form of financial assistance may be allowed, to wit:
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 that the separation pay has nothing to do with the wrong he has committed x x x.42
We had the occasion to resolve the same issue in Toyota Motor Phils. Corp. Workers Association
(TMPCWA) v. National Labor Relations Commission.43 Following the declaration that the strike staged
by the Union members is illegal, the Union officers and members were considered validly dismissed
from employment for committing illegal acts during the illegal strike. The Court affirmed the CAs
conclusion that the commission of illegal acts during the illegal strike constituted serious
misconduct.44 Hence, the award of separation pay to the Union officials and members was not
sustained.45
Indeed, we applied social justice and equity considerations in several cases to justify the award of
financial assistance. In Piero v. National Labor Relations Commission,46 the Court declared the strike to
be illegal for failure to comply with the procedural requirements. We, likewise, sustained the dismissal
of the Union president for participating in said illegal strike. Considering, however, that his infraction is
not so reprehensible and unscrupulous as to warrant complete disregard of his long years of service, and
considering further that he has no previous derogatory records, we granted financial assistance to
support him in the twilight of his life after long years of service.47 The same compassion was also
applied in Aparente, Sr. v. NLRC48 where the employee was declared to have been validly terminated
from service after having been found guilty of driving without a valid drivers license, which is a clear

violation of the companys rules and regulations.49 We, likewise, awarded financial assistance in
Salavarria v. Letran College50 to the legally dismissed teacher for violation of school policy because such
infraction neither amounted to serious misconduct nor reflected that of a morally depraved person.
However, in a number of cases cited in Toyota Motor Phils. Corp. Workers Association (TMPCWA) v.
National Labor Relations Commission,51 we refrained from awarding separation pay or financial
assistance to Union officers and members who were separated from service due to their participation in
or commission of illegal acts during the strike.52 In Pilipino Telephone Corporation v. Pilipino Telephone
Employees Association (PILTEA),53the strike was found to be illegal because of procedural infirmities
and for defiance of the Secretary of Labors assumption order. Hence, we upheld the Union officers
dismissal without granting financial assistance. In Sukhotai Cuisine and Restaurant v. Court of
Appeals,54 and Manila Diamond Hotel and Resort, Inc. (Manila Diamond Hotel) v. Manila Diamond
Hotel Employees Union,55 the Union officers and members who participated in and committed illegal
acts during the illegal strike were deemed to have lost their employment status and were not awarded
financial assistance.
In Telefunken Semiconductors Employees Union v. Court of Appeals,56 the Court held that the strikers
open and willful defiance of the assumption order of the Secretary of Labor constitute serious
misconduct and reflective of their moral character, hence, granting of financial assistance to them cannot
be justified. In Chua v. National Labor Relations Commission,57 we disallowed the award of financial
assistance to the dismissed employees for their participation in the unlawful and violent strike which
resulted in multiple deaths and extensive property damage because it constitutes serious misconduct on
their part.
Here, not only did the Court declare the strike illegal, rather, it also found the Union officers to have
knowingly participated in the illegal strike. Worse, the Union members committed prohibited acts during
the strike. Thus, as we concluded in Toyota, Telefunken, Chua and the other cases cited above, we delete
the award of separation pay as a form of financial assistance.
WHEREFORE, premises considered, the motion for reconsideration of the Union, its officers and
members are DENIED for lack of merit, while the motion for partial reconsideration filed by C.
Alcantara & Sons, Inc. is PARTLY GRANTED. The Decision of the Court dated September 29, 2010 is
hereby PARTLY RECONSIDERED by deleting the award of separation pay.
SO ORDERED.
G.R. No. 196156

January 15, 2014

VISAYAS COMMUNITY MEDICAL CENTER (VCMC), Formerly known as METRO CEBU

COMMUNITY HOSPITAL (MCCH), Petitioner,
vs.
ERMA YBALLE, NELIA ANGEL, ELEUTERIA CORTEZ and EVELYN ONG, Respondents.
DECISION
VILLARAMA, JR., J.:
The present petition was included in the four consolidated cases previously decided by this
Court.1 However, its reinstatement and separate disposition became necessary due to oversight in the
issuance of the order of consolidation.
The Facts

Respondents were hired as staff nurses (Ong and Angel) and midwives (Yballe and Cortez) by petitioner
Visayas Community Medical Center (VCMC), formerly the Metro Cebu Community Hospital, Inc.
(MCCHI). MCCHI is a non-stock, non-profit corporation which operates the Metro Cebu Community
Hospital (MCCH), a tertiary medical institution owned by the United Church of Christ in the Philippines
(UCCP).
Considering the similar factual setting, we quote the relevant portions of the narration of facts in our
Decision dated December 7, 2011 in Abaria v. NLRC2:
The National Federation of Labor (NFL) is the exclusive bargaining representative of the rank-and-file
employees of MCCHI. Under the 1987 and 1991 Collective Bargaining Agreements (CBAs), the
signatories were Ciriaco B. Pongasi, Sr. for MCCHI, and Atty. Armando M. Alforque (NFL Legal
Counsel) and Paterno A. Lumapguid as President of NFL-MCCH Chapter. In the CBA effective from
January 1994 until December 31, 1995, the signatories were Sheila E. Buot as Board of Trustees
Chairman, Rev. Iyoy as MCCH Administrator and Atty. Fernando Yu as Legal Counsel of NFL, while
Perla Nava, President of Nagkahiusang Mamumuo sa MCCH (NAMA-MCCH-NFL) signed the Proof of
Posting.
On December 6, 1995, Nava wrote Rev. Iyoy expressing the unions desire to renew the CBA, attaching
to her letter a statement of proposals signed/endorsed by 153 union members. Nava subsequently
requested that the following employees be allowed to avail of one-day union leave with pay on
December 19, 1995: Celia Sabas, Jesusa Gerona, Albina Baez, Eddie Villa, Roy Malazarte, Ernesto
Canen, Jr., Guillerma Remocaldo, Catalina Alsado, Evelyn Ong, Melodia Paulin, Sofia Bautista, Hannah
Bongcaras, Ester Villarin, Iluminada Wenceslao and Perla Nava. However, MCCHI returned the CBA
proposal for Nava to secure first the endorsement of the legal counsel of NFL as the official bargaining
representative of MCCHI employees.
Meanwhile, Atty. Alforque informed MCCHI that the proposed CBA submitted by Nava was never
referred to NFL and that NFL has not authorized any other legal counsel or any person for collective
bargaining negotiations. By January 1996, the collection of union fees (check-off) was temporarily
suspended by MCCHI in view of the existing conflict between the federation and its local affiliate.
Thereafter, MCCHI attempted to take over the room being used as union office but was prevented to do
so by Nava and her group who protested these actions and insisted that management directly negotiate
with them for a new CBA. MCCHI referred the matter to Atty. Alforque, NFLs Regional Director, and
advised Nava that their group is not recognized by NFL.
In his letter dated February 24, 1996 addressed to Nava, Ernesto Canen, Jr., Jesusa Gerona, Hannah
Bongcaras, Emma Remocaldo, Catalina Alsado and Albina Baez, Atty. Alforque suspended their union
membership for serious violation of the Constitution and By-Laws. Said letter states:
xxxx
On February 26, 1996, upon the request of Atty. Alforque, MCCHI granted one-day union leave with
pay for 12 union members. The next day, several union members led by Nava and her group launched a
series of mass actions such as wearing black and red armbands/headbands, marching around the hospital
premises and putting up placards, posters and streamers. Atty. Alforque immediately disowned the
concerted activities being carried out by union members which are not sanctioned by NFL. MCCHI
directed the union officers led by Nava to submit within 48 hours a written explanation why they should
not be terminated for having engaged in illegal concerted activities amounting to strike, and placed them
under immediate preventive suspension. Responding to this directive, Nava and her group denied there
was a temporary stoppage of work, explaining that employees wore their armbands only as a sign of
protest and reiterating their demand for MCCHI to comply with its duty to bargain collectively. Rev.

Iyoy, having been informed that Nava and her group have also been suspended by NFL, directed said
officers to appear before his office for investigation in connection with the illegal strike wherein they
reportedly uttered slanderous and scurrilous words against the officers of the hospital, threatening other
workers and forcing them to join the strike. Said union officers, however, invoked the grievance
procedure provided in the CBA to settle the dispute between management and the union.
On March 13 and 19, 1996, the Department of Labor and Employment (DOLE) Regional Office No. 7
issued certifications stating that there is nothing in their records which shows that NAMA-MCCH- NFL
is a registered labor organization, and that said union submitted only a copy of its Charter Certificate on
January 31, 1995. MCCHI then sent individual notices to all union members asking them to submit
within 72 hours a written explanation why they should not be terminated for having supported the illegal
concerted activities of NAMA-MCCH-NFL which has no legal personality as per DOLE records. In
their collective response/statement dated March 18, 1996, it was explained that the picketing employees
wore armbands to protest MCCHIs refusal to bargain; it was also contended that MCCHI cannot
question the legal personality of the union which had actively assisted in CBA negotiations and
implementation.
On March 13, 1996, NAMA-MCCH-NFL filed a Notice of Strike but the same was deemed not filed for
want of legal personality on the part of the filer. The National Conciliation and Mediation Board
(NCMB) Region 7 office likewise denied their motion for reconsideration on March 25, 1996. Despite
such rebuff, Nava and her group still conducted a strike vote on April 2, 1996 during which an
overwhelming majority of union members approved the strike.
Meanwhile, the scheduled investigations did not push through because the striking union members
insisted on attending the same only as a group. MCCHI again sent notices informing them that their
refusal to submit to investigation is deemed a waiver of their right to explain their side and management
shall proceed to impose proper disciplinary action under the circumstances. On March 30, 1996,
MCCHI sent termination letters to union leaders and other members who participated in the strike and
picketing activities. On April 8, 1996, it also issued a cease-and-desist order to the rest of the striking
employees stressing that the wildcat concerted activities spearheaded by the Nava group is illegal
without a valid Notice of Strike and warning them that non-compliance will compel management to
impose disciplinary actions against them. For their continued picketing activities despite the said
warning, more than 100 striking employees were dismissed effective April 12 and 19, 1996.
Unfazed, the striking union members held more mass actions. The means of ingress to and egress from
the hospital were blocked so that vehicles carrying patients and employees were barred from entering
the premises. Placards were placed at the hospitals entrance gate stating:
"Please proceed to another hospital" and "we are on protest." Employees and patients reported acts of
intimidation and harassment perpetrated by union leaders and members. With the intensified atmosphere
of violence and animosity within the hospital premises as a result of continued protest activities by union
members, MCCHI suffered heavy losses due to low patient admission rates. The hospitals suppliers also
refused to make further deliveries on credit.
With the volatile situation adversely affecting hospital operations and the condition of confined patients,
MCCHI filed a petition for injunction in the NLRC (Cebu City) on July 9, 1996 (Injunction Case No. V0006-96). A temporary restraining order (TRO) was issued on July 16, 1996. MCCHI presented 12
witnesses (hospital employees and patients), including a security guard who was stabbed by an
identified sympathizer while in the company of Navas group. MCCHIs petition was granted and a
permanent injunction was issued on September 18, 1996 enjoining the Nava group from committing
illegal acts mentioned in Art. 264 of the Labor Code.

On August 27, 1996, the City Government of Cebu ordered the demolition of the structures and
obstructions put up by the picketing employees of MCCHI along the sidewalk, having determined the
same as a public nuisance or nuisance per se.
Thereafter, several complaints for illegal dismissal and unfair labor practice were filed by the terminated
employees against MCCHI, Rev. Iyoy, UCCP and members of the Board of Trustees of MCCHI.3
On August 4, 1999, Executive Labor Arbiter Reynoso A. Belarmino rendered his Decision4 in the
consolidated cases which included NLRC Case No. RAB-VII-02-0309-98 filed by herein respondents.
The dispositive portion of said decision reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the claim of unfair labor
practice and illegal dismissal and declaring the termination of the following as an offshoot of the illegal
strike: Perla Nava, Catalina Alsado, Albina Baez, Hannah Bongcaras, Ernesto Canen, Jesusa Gerona
and Guillerma Remocaldo but directing the respondent Metro Cebu Community Hospital to pay the
herein complainants separation pay in the sum of THREE MILLION EIGHTY FIVE THOUSAND
EIGHT HUNDRED NINETY SEVEN and [40]/100 (P3,085,897.40) detailed as follows:
xxxx
79. Erma Yballe
6/11/83 4/19/96: 12 years, 10 mos. (13 years)
P5,000.00 2 x 13 = 32,500.00
80. Eleuteria Cortez
12/13/[74]5 4/12/96: 21 years, 4 mos. (21 years)
P5,000.00 2 x 21 = 52,500.00
81. Nelia Angel
6/01/88 4/12/96: 7 years, 10 mos. (8 years)
P5,000.00 2 x 8 = 20,000.00
82. Evelyn Ong
7/07/86 4/12/96: 9 years, 9 mos. (10 years)
P5,000.00 2 x 10 = 25,000.00
xxxx
SO ORDERED.6
Executive Labor Arbiter Belarmino ruled that MCCHI and its administrators were not guilty of unfair
labor practice. He likewise upheld the termination of complainants union officers who conducted the
illegal strike. The rest of the complainants were found to have been illegally dismissed, thus:
We, however, see that the NAMA members deserve a different treatment. As the Court said, members of
a union cannot be held responsible for an illegal strike on the sole basis of such membership, or even on
an account of their affirmative vote authorizing the same. They become liable only if they actually

participated therein (ESSO Phil., Inc. vs. Malayang Manggagawa sa Esso 75 SCRA 73). But the
illegality of their participation is placed in a state of doubt they, being merely followers. Under the
circumstances, We resort to Art. 4 of the Labor Code favoring the workingman in case of doubt in the
interpretation and implementation of laws.
Obviously swayed by the actuations of their leaders, herein complainants ought to be reinstated as a
matter of policy but without backwages for they cannot be compensated having skipped work during the
illegal strike (National Federation of Sugar Workers vs. Overseas et al. 114 SCRA 354). But with their
positions already taken over by their replacements and with strained relations between the parties having
taken place, We deem it fair that complainants except for the seven officers, should be paid separation
pay of one-half (1/2) month for every year of service by the respondent hospital.7
Respondents and their co-complainants filed their respective appeals before the National Labor
Relations Commission (NLRC) Cebu City. On February 15, 2001, respondents and MCCHI jointly
moved to defer resolution of their appeal (NLRC Case No. V-001042-99) in view of a possible
compromise. Consequently, in its Decision8dated March 14, 2001, the NLRCs Fourth Division (Cebu
City) resolved only the appeals filed by respondents co-complainants. The dispositive portion of said
decision reads:
WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the
complaint for unfair labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS
declaring the dismissal of all the complainants in RAB Case No. 07-02-0394-98 and RAB Case No. 0703-0596-98 valid and legal. Necessarily, the award of separation pay and attorneys fees are hereby
Deleted.
Resolution on RAB Case No. 07-02-0309-98 is hereby Deferred upon Joint Motion of the parties.
SO ORDERED.9
The NLRC denied the motion for reconsideration of the above decision under its Resolution10 dated July
2, 2001.
Having failed to reach a settlement, respondents counsel filed a motion to resolve their appeal on
January 2, 2003. Thus, on March 12, 2003, the NLRC-Cebu City Fourth Division rendered its
Decision,11 as follows:
WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the
complaint for unfair labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS
declaring all the complainants to have been validly dismissed. Necessarily, the award of separation pay
and attorneys fees are hereby Deleted.
SO ORDERED.12
In deleting the award of separation pay and attorneys fees, the NLRC emphasized that respondents and
their co-complainants are guilty of insubordination, having persisted in their illegal concerted activities
even after MCCHI had sent them individual notices that the strike was illegal as it was filed by NAMAMCCH-NFL which is not a legitimate labor organization. It held that under the circumstances where the
striking employees harassed, threatened and prevented non-striking employees and doctors from
entering hospital premises, blocked vehicles carrying patients to the hospital premises and caused
anxiety to recuperating patients by displaying placards along the corridors of the hospital, and the
resulting decrease in hospital admission, refusal of suppliers to make further deliveries due to fears of
violence erupting as a result of picketing, and diminished income due to low admission rates, it would

be unfair to saddle MCCHI with the burden of paying separation pay to complainants who were validly
dismissed. Respondents motion for reconsideration was denied by the NLRC under its
Resolution13 dated April 13, 2004.
Meanwhile, the petition for certiorari filed by respondents co-complainants in the Court of Appeals
(CA) Cebu Station (CA-G.R. SP No. 66540) was initially dismissed by the CAs Eighth Division on the
ground that out of 88 petitioners only 47 have signed the certification against forum shopping. On
motion for reconsideration filed by said petitioners, the petition was reinstated but only with respect to
the 47 signatories. Said ruling was challenged by complainants before this Court via a petition for
review on certiorari, docketed as G.R. No. 154113 (Abaria, et al. v. NLRC, et al.).14
On October 17, 2008, the CA dismissed the petition in CA-G.R. SP No. 66540, as follows:
WHEREFORE, premises considered, judgment is hereby rendered AFFIRMING the Decision of the
National Labor Relations Commission (NLRC) Fourth Division dated March 14, 2001 in NLRC Case
No. V-001042-99, WITH MODIFICATIONS to the effect that (1) the petitioners, except the union
officers, shall be awarded separation pay equivalent to one-half (1/2) month pay for every year of
service, and (2) petitioner Cecilia Sabas shall be awarded overtime pay amounting to sixty-three (63)
hours.
SO ORDERED.15
The motion for reconsideration and motion for partial reconsideration respectively filed by the
complainants and MCCHI in CA-G.R. SP No. 66540 were likewise denied by the CA.16 Both parties
elevated the case to this Court in separate petitions: G.R. No. 187778 (Perla Nava, et al. v. NLRC, et al.)
and G.R. No. 187861 (Metro Cebu Community Hospital v. Perla Nava, et al.). Herein respondents also
filed in the CA a petition for certiorari assailing the March 12, 2003 Decision and April 13, 2004
Resolution of the NLRC, docketed as CA-G.R. SP No. 84998 (Cebu City). By Decision17 dated
November 7, 2008, the CA granted their petition, as follows:
WHEREFORE, the challenged Decision of public respondent dated March 12, 2003 and its Resolution
dated April 13, 2004 are herebyREVERSED AND SET ASIDE. Private respondent Metro Cebu
Community Hospital is ordered to reinstate petitioners Erma Yballe, Eleuteria Cortes, Nelia Angel and
Evelyn Ong without loss of seniority rights and other privileges; to pay them their full backwages
inclusive of their allowances and other benefits computed from the time of their dismissal up to the time
of their actual reinstatement.
No pronouncement as to costs.
SO ORDERED.18
Petitioner filed a motion for reconsideration which the CA denied in its February 22, 2011 Resolution.19
The Case
The present petition (G.R. No. 196156) was filed on April 27, 2011. Records showed that as early as
August 3, 2009, G.R. Nos. 187861 and 187778 were consolidated with G.R. No. 154113 pending with
the Third Division.20As to the present petition, it was initially denied under the June 8, 2011
Resolution21 issued by the Second Division for failure to show any reversible error committed by the
CA. Petitioner filed a motion for reconsideration to which respondents filed an opposition. Said motion
for reconsideration of the earlier dismissal (June 8, 2011) remained unresolved by the Second Division

which, on June 29, 2011, issued a resolution ordering the transfer of the present case to the Third
Division.22
It is further recalled that on June 23, 2011, petitioner moved to consolidate the present case with G.R.
Nos. 154113, 187861 and 187778 which was opposed by respondents. Under Resolution dated August 1,
2011, the Third Division denied the motion for consolidation, citing the earlier dismissal of the petition
on June 8, 2011.23However, on motion for reconsideration filed by petitioner, said resolution was set
aside on October 19, 2011 and the present case was ordered consolidated with G.R. Nos. 154113,
187778 and 187861 and transferred to the First Division where the latter cases are pending.24
On December 7, 2011, the Decision25 in the consolidated cases (G.R. Nos. 154113, 187778, 187861 and
196156) was rendered, the dispositive portion of which states:
WHEREFORE, the petition for review on certiorari in G.R. No. 187861 is DENIED while the petitions
in G.R. Nos. 154113, 187778 and 196156 are PARTLY GRANTED. The Decision dated October 17,
2008 of the Court of Appeals in CA-G.R. SP No. 66540 is hereby AFFIRMED with MODIFICATIONS
in that MCCHI is ordered to pay the petitioners in G.R. Nos. 154113 and 187778, except the petitioners
who are union officers, separation pay equivalent to one month pay for every year of service, and
reasonable attorneys fees in the amount ofP50,000.00. The Decision dated November 7, 2008 is
likewise AFFIRMED with MODIFICATIONS in that MCCHI is ordered to pay the private respondents
in G.R. No. 196156 separation pay equivalent to one month pay for every year of service, and that the
award of back wages is DELETED.
The case is hereby remanded to the Executive Labor Arbiter for the recomputation of separation pay due
to each of the petitioners union members in G.R. Nos. 154113, 187778 and 196156 except those who
have executed compromise agreements approved by this Court.
No pronouncement as to costs.
SO ORDERED.26
On February 7, 2012, respondents filed a Motion for Reconsideration with Motion for Severance and
Remand27asserting that they were denied due process as they had no opportunity to file a comment on
the petition prior to the rendition of the Decision dated December 7, 2011. They also point out that the
issues in the present case are different from those raised in the petitions filed by their co-complainants.
On June 18, 2012, this Court issued a Resolution (1) reinstating the petition and requiring the
respondents to file their comment on the petition; and (2) denying the motion for remand to the Second
Division.28 Respondents thus filed their Comment, to which petitioner filed its Reply. Thereafter, the
parties submitted their respective memoranda.
Issues
In their Memorandum, respondents submit that since the Decision dated December 7, 2011 in the
consolidated cases of Abaria v. NLRC have already declared the dismissal of complainants union
members as illegal but awarded separation pay and reasonable attorneys fees, the remaining issue to be
resolved in this case is whether respondents are entitled to back wages and damages.
Petitioner, however, further assail the CA in (a) allowing respondents to change their theory on appeal,
(b) finding that respondents did not commit illegal acts during the strike and (c) increasing the award of
separation pay to one month pay for every year of service as held in the December 7, 2011 Decision in
view of the damages suffered by petitioner.

Respondents Argument
Respondents maintain that there was no iota of evidence presented by petitioner that they took part in
the illegal strike conducted by the Nava group or committed illegal acts like the blocking of ingress and
egress in the hospital premises. They claim that they were never involved in work stoppage but instead
were locked out by petitioner as they were unable to resume work because hospital security personnel
prevented them from entering the hospital upon petitioners instructions.
Claiming that they have consistently manifested their non- participation in the illegal strike before the
regional arbitration branch, NLRC and the CA, respondents argue that there is absolutely no reason to
delete the awards of back wages and separation pay in lieu of reinstatement.
Petitioners Argument
Petitioner contends that respondents have surreptitiously changed their position from admitting in their
pleadings before the NLRC their participation in the illegal strike to that of mere wearing of arm bands
and alleged non-receipt of the notices in their appeal before the CA. They stress the established facts on
record that: (1) respondents signed the March 18, 1996 collective reply of the union officers and
members to the notices sent by petitioner regarding their illegal concerted activities, thus proving that
they received the said notices; (2) acknowledged Perla Nava as their union leader which belies
respondents belated attempt to distance themselves from the Nava group who led the illegal strike; and
(3) respondents did not, in their motion for reconsideration of the NLRC Decision dated March 12,
2003, make any denial of their participation in the illegal strike but even justified their resort thereto due
to the prevailing labor dispute.
With the Decision in the consolidated cases (Abaria v. NLRC) having already upheld the consistent rule
that dismissed employees who participated in an illegal strike are not entitled to back wages, petitioner
prays that the previous rulings in Philippine Diamond Hotel and Resort, Inc. (Manila Diamond Hotel) v.
Manila Diamond Hotel Employees Union,29 G & S Transport Corporation v. Infante,30 Philippine Marine
Officers Guild v. Compaia Maritima, et al.,31 and Escario v. National Labor Relations Commission
(Third Division)32 be likewise applied in this case.
Our Ruling
The petition is partly meritorious.
Paragraph 3, Article 264(a) of the Labor Code provides that ". . .any union officer who knowingly
participates in an illegal strike and any worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have lost his employment status . . ." In the
Decision dated December 7, 2011, we declared as invalid the dismissal of MCCH employees who
participated in the illegal strike conducted by NAMA-MCCH-NFL which is not a legitimate labor
organization. Since there was no showing that the complainants committed any illegal act during the
strike, they may not be deemed to have lost their employment status by their mere participation in the
illegal strike. On the other hand, the union leaders (Nava group) who conducted the illegal strike despite
knowledge that NAMA-MCCH-NFL is not a duly registered labor union were declared to have been
validly terminated by petitioner.
We stress that the law makes a distinction between union members and union officers. A worker merely
participating in an illegal strike may not be terminated from employment. It is only when he commits
illegal acts during a strike that he may be declared to have lost employment status.33 In contrast, a union
officer may be terminated from employment for knowingly participating in an illegal strike or
participates in the commission of illegal acts during a strike. The law grants the employer the option of

declaring a union officer who participated in an illegal strike as having lost his employment. It possesses
the right and prerogative to terminate the union officers from service.34
In this case, the NLRC affirmed the finding of the Labor Arbiter that respondents supported and took
part in the illegal strike and further declared that they were guilty of insubordination. It noted that the
striking employees were determined to force management to negotiate with their union and proceeded
with the strike despite knowledge that NAMA-MCCH-NFL is not a legitimate labor organization and
without regard to the consequences of their acts consisting of displaying placards and marching noisily
inside the hospital premises, and blocking the entry of vehicles and persons.
On appeal, the CA reversed the rulings of the Labor Arbiter and NLRC, ordered the reinstatement of
respondents and the payment of their full back wages. The CA found that respondents participation was
limited to the wearing of armband and thus, citing Bascon v. CA,35 declared respondents termination as
invalid in the absence of any evidence that they committed any illegal act during the strike.
In the Decision dated December 7, 2011, we likewise ruled that the mass termination of complainants
was illegal, notwithstanding the illegality of the strike in which they participated. However, since
reinstatement was no longer feasible, we ordered MCCHI to pay the dismissed employees separation
pay equivalent to one month pay for every year of service. The claim for back wages was denied,
consistent with existing law and jurisprudence. Respondents argue that the CA correctly awarded them
back wages because while they "supported the protest action" they were not part of the Nava group who
were charged with blocking the free ingress and egress of the hospital, threatening and harassing persons
entering the premises, and making boisterous and unpleasant remarks. They deny any participation in
the illegal strike and assert that no evidence of their actual participation in the strike was shown by
petitioner.
We are not persuaded by respondents attempt to dissociate themselves from the Nava group who led the
illegal strike. In their motion for reconsideration filed before the NLRC, respondents no longer denied
having participated in the strike but simply argued that no termination of employment in connection with
the strike "staged by complainants" cannot be legally sustained because MCCHI "did not file a
complaint or petition to declare the strike of complainants illegal or declare that illegal acts were
committed in the conduct of the strike." Respondents further assailed the NLRCs finding that they were
guilty of insubordination since "the proximate cause of the acts of complainants was the prevailing labor
dispute and the consequent resort by complainants of [sic] a strike action."36 When the case was elevated
to the CA, respondents shifted course and again insisted that they did not participate in the strike nor
receive the March 15, 1996 individual notices sent by petitioner to the striking employees.
Respondents inconsistent posture cannot be sanctioned. While there was indeed no evidence of any
illegal act committed by respondents during the strike, the Labor Arbiter and NLRC were one in finding
that respondents actively supported the concerted protest activities, signed the collective reply of union
members manifesting that they launched the mass actions to protest managements refusal to negotiate a
new CBA, refused to appear in the investigations scheduled by petitioner because it was the unions
stand that they would only attend these investigations as a group, and failed to heed petitioners final
directive for them to desist from further taking part in the illegal strike. The CA, on the other hand,
found that respondents participation in the strike was limited to the wearing of armbands. Since an
ordinary striking worker cannot be dismissed for such mere participation in the illegal strike, the CA
correctly ruled that respondents were illegally dismissed. However, the CA erred in awarding
respondents full back wages and ordering their reinstatement despite the prevailing circumstances.
As a general rule, back wages are granted to indemnify a dismissed employee for his loss of earnings
during the whole period that he is out of his job. Considering that an illegally dismissed employee is not
deemed to have left his employment, he is entitled to all the rights and privileges that accrue to him from

the employment.37 The grant of back wages to him is in furtherance and effectuation of the public
objectives of the Labor Code, and is in the nature of a command to the employer to make a public
reparation for his illegal dismissal of the employee in violation of the Labor Code.38
Are respondents then entitled to back wages? This Court, in G & S Transport Corporation v.
Infante,39 ruled in the negative:
With respect to backwages, the principle of a "fair days wage for a fair days labor" remains as the basic
factor in determining the award thereof. If there is no work performed by the employee there can be no
wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked
out, suspended or dismissed or otherwise illegally prevented from working. x x x In Philippine Marine
Officers Guild v. Compaia Maritima, as affirmed in Philippine Diamond Hotel and Resort v. Manila
Diamond Hotel Employees Union, the Court stressed that for this exception to apply, it is required that
the strike be legal, a situation that does not obtain in the case at bar. (Emphasis supplied)
The alternative relief for union members who were dismissed for having participated in an illegal strike
is the payment of separation pay in lieu of reinstatement under the following circumstances: (a) when
reinstatement can no longer be effected in view of the passage of a long period of time or because of the
realities of the situation; (b) reinstatement is inimical to the employers interest; (c) reinstatement is no
longer feasible; (d) reinstatement does not serve the best interests of the parties involved; (e) the
employer is prejudiced by the workers continued employment; (f) facts that make execution unjust or
inequitable have supervened; or (g) strained relations between the employer and employee.40
In the Decision dated December 7, 2011, we held that the grant of separation pay to complainants is the
appropriate relief under the circumstances, thus:
Considering that 15 years had lapsed from the onset of this labor dispute, and in view of strained
relations that ensued, in addition to the reality of replacements already hired by the hospital which had
apparently recovered from its huge losses, and with many of the petitioners either employed elsewhere,
already old and sickly, or otherwise incapacitated, separation pay without back wages is the appropriate
relief. x x x41
In fine, we sustain the CA in ruling that respondents who are mere union members were illegally
dismissed for participating in the illegal strike conducted by the Nava group. However, we set aside the
order for their reinstatement and payment of full back wages.
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated November 7, 2008 and
Resolution dated February 22, 2011 of the Court of Appeals in CA-G.R. SP No. 84998 are hereby
AFFIRMED with MODIFICATIONS. In lieu of reinstatement, petitioner Visayas Community Medical
Center formerly known as the Metro Cebu Community Hospital) is ordered to PAY respondents Erma
Yballe, Evelyn Ong, Nelia Angel and Eleuteria Cortez separation pay equivalent to one month pay for
every year of service. The award of back wages to the said respondents is DELETED.
The case is hereby remanded to the Executive Labor Arbiter for the recomputation of separation pay due
to each of the respondents.
SO ORDERED.
G.R. No. 160138

January 16, 2013

AUTOMOTIVE ENGINE REBUILDERS, INC. (AER), ANTONIO T. INDUCIL, LOURDES T.

INDUCIL, JOCELYN T. INDUCIL and MA. CONCEPCION I. DONATO, Petitioners,

vs.
PROGRESIBONG UNYON NG MGA MANGGAGAWA SA AER, ARNOLD VILLOTA, FELINO
E. AGUSTIN, RUPERTO M. MARIANO II, EDUARDO S. BRIZUELA, ARNOLD S.
RODRIGUEZ, RODOLFO MAINIT, JR., FROILAN B. MADAMBA, DANILO D. QUIBOY,
CHRISTOPHER R. NOLASCO, ROGER V. BELATCHA, CLEOFAS B. DELA BUENA, JR.,
HERMINIO P. PAPA, WILLIAM A. RITUAL, ROBERTO CALDEO, RAFAEL GACAD, JAMES
C. CAAMPUED, ESPERIDION V. LOPEZ, JR., FRISCO M. LORENZO, JR., CRISANTO
LUMBAO, JR., and RENATO SARABUNO, Respondents.
x-----------------------x
G.R. No. 160192
PROGRESIBONG UNYON NG MGA MANGGAGAWA SA AER, ARNOLD VILLOTA, FELINO
E. AGUSTIN, RUPERTO M. MARIANO II, EDUARDO S. BRIZUELA, ARNOLD S.
RODRIGUEZ, RODOLFO MAINIT, JR., FROILAN B. MADAMBA, DANILO D. QUIBOY,
CHRISTOPHER R. NOLASCO, ROGER V. BELATCHA, CLEOFAS B. DELA BUENA, JR.,
HERMINIO P. PAPA, WILLIAM A. RITUAL, ROBERTO CALDEO, RAFAEL GACAD, JAMES
C. CAAMPUED, ESPERIDION V. LOPEZ, JR., FRISCO M. LORENZO, JR., CRISANTO
LUMBAO, JR., and RENA TO SARABUNO, Petitioners,
vs.
AUTOMOTIVE ENGINEREBUILDERS, INC., and ANTONIO T. INDUCIL, Respondents.
RESOLUTION
MENDOZA, J.:
For resolution is the Motion for Partial Reconsideration filed by Progresibong Unyon Ng Mga
Manggagawa Sa AER (Unyon) which questioned the Courts July 13, 2011 Decision insofar as it failed
to award backwages to fourteen (14) of its members. The decretal portion of the decision reads:
WHEREFORE, the petitions are DENIED. Accordingly, the complaining employees should be
reinstated without backwages. If reinstatement is no longer feasible, the concerned employees should be
given separation pay up to the date set for their return in lieu of reinstatement.1
In arriving at said determination, the Court found out both parties were at fault or in pari delicto and
must bear the consequences of their own wrongdoing.2 Thus, it decreed that the striking employees must
be restored to their respective positions prior to the illegal strike and illegal lockout.
Records disclose that this labor controversy started when both parties filed charges against each other,
blaming the other party for violating labor laws. Thirty-two (32) employees filed and signed a
complaint,3 dated February 18, 1999, against Automotive Engine Rebuilders, Inc. (AER). The complaint
prayed that AER be declared guilty of Unfair Labor Practices, Illegal Dismissal, Illegal Suspension, and
Run-away shop; that the complainants be reinstated; and that they be paid "full backwages and without
loss of seniority rights and privileges, payment of wages during suspension, plus moral and exemplary
damages and attorneys fees."4
The names of the 32 complaining employees are as follows:
1. Felino Agustin
2. Ruperto Mariano II

3. Eduardo Brizuela
4. Otilio Rabino
5. Arnold Rodriguez
6. Froilan Madamba
7. Ferdinand Flores
8. Jonathan Taborda
9. Rodolfo Mainit, Jr.
10. Danilo Quiboy
11. Christopher Nolasco
12. Roger Belatcha
13. Claud Moncel
14. Cleofas dela Buena, Jr.
15. Edwin Mendoza
16. Herminio Papa
17. Oscar Macaranas
18. William Ritual
19. Roberto Caldeo
20. Rafael Gacad
21. James Caampued
22. Esperidion Lopez, Jr.
23. Frisco Lorenzo, Jr.
24. Bernardino Acosta, Jr.
25. Benson Pingol
26. Tammy Punsalan
27. Edward Ferrancol
28. Crisanto Lumbao, Jr.

29. Arnold Villota

30. Menching Mariano, Jr.
31. Carlos Carolino
32. Renato Sarabuno
Out of the 32, six (6) resigned and signed waivers and quitclaims, namely:
1. Oscar Macaranas
2. Bernardino Acosta
3. Ferdinand Flores
4. Benson Pingol
5. Otillo Rabino
6. Jonathan Taborda
On the other hand, the earlier complaint5 filed by AER against Unyon and eighteen (18) of its members
for illegal concerted activities prayed that, after notice and hearing, judgment be rendered as follows:
1. Finding respondents guilty of unfair labor practice and illegal concerted activity;
2. Finding respondents guilty of abandonment of work, serious misconduct, gross disrespect,
commission of felonies against the complainant and their respective officers, threats, coercion
and intimidation;
3. Penalizing complainants with dismissal and/or termination of employment; and
4. Adjudging respondents to be jointly and solidarily liable to complainant for moral damages in
the sum ofP500,000.00, exemplary damages in the sum of P500,000.00 and attorneys fees and
costs.
The names of the 18 workers charged with illegal strike by AER are as follows:
1. Felino Agustin
2. Eduardo Brizuela
3. Otilio Rabino
4. Ferdinand Flores
5. Jonathan Taborda
6. Rodolfo Mainit, Jr.

7. Christopher Nolasco
8. Claud Moncel
9. Cleofas dela Buena
10. Herminio Papa
11. Oscar Macaranas
12. William Ritual
13. Rafael Gacad
14. James Caampued
15. Benson Pingol
16. Frisco Lorenzo, Jr.
17. Bernardino Acosta, Jr.
18. Esperidion Lopez, Jr.
AER likewise suspended seven (7) union members who tested positive for illegal drugs, namely:
1. Froilan Madamba
2. Arnold Rodriguez
3. Roberto Caldeo
4. Roger Bilatcha
5. Ruperto Mariano
6. Edwin Fabian
7. Nazario Madala
Out of the seven (7) suspended employees, only Edwin Fabian and Nazario Madala were allowed by
AER to report back to work. The other five (5) suspended employees were not admitted by AER without
first submitting the required medical certificate attesting to their fitness to work.
On August 9, 2001, after the parties submitted their respective position papers,6 the Labor Arbiter (LA)
rendered a decision7 in favor of Unyon by directing AER to reinstate the concerned employees but
without backwages effective October 16, 2001. Both parties filed their respective appeals8 with the
National Labor Relations Commission (NLRC).
On March 5, 2002, the NLRC issued its Resolution9 modifying the LA decision by setting aside the
order of reinstatement as it ruled out illegal dismissal. The NLRC likewise ruled that the concerned

employees had no valid basis in conducting a strike. On April 19, 2002, Unyon filed a motion for
reconsideration10 insisting, among others, that AER was guilty of unfair labor practice, illegal suspension
and illegal dismissal. Unyon also argued that since AER charged only 18 of the 32 employees with
illegal strike, the employees who were not included in the said charge should have been admitted back to
work by AER. Unyon also claimed that there was no allegation that these employees, who were not
included in AERs charge for illegal strike, were involved in the January 28, 1999 incident.11
After the denial of their motion for reconsideration, Unyon and the concerned employees filed a
petition12 before the Court of Appeals (CA). Unyon reiterated its argument that AER should admit back
to work those excluded from its list of 18 employees charged with illegal strike.13
On June 27, 2003, the CA rendered a decision,14 the dispositive portion of which reads, as follows:
WHEREFORE, premises considered, the petition is GRANTED. Respondents are hereby directed to
reinstate the petitioners effective immediately but without backwages, except those who were tested
positive for illegal drugs and have failed to submit their respective medical certificates.
On October 1, 2003, ruling on the motion for partial reconsideration filed by Unyon, the CA rendered
the assailed Amended Decision,15 ordering the immediate reinstatement of all the suspended employees
without backwages. Thus,
WHEREFORE, the partial motion for reconsideration is GRANTED insofar as the reinstatement of the
suspended employees is concerned. This Courts decision dated June 27, 2003 is hereby MODIFIED.
Private respondents are hereby directed to reinstate all petitioners immediately without backwages.
Unsatisfied, both parties filed the present consolidated petitions. Unyon argued that the CA erred in not
awarding backwages to the suspended employees who were ordered reinstated. AER, on the other hand,
argued that the CA erred in ordering the reinstatement of the suspended employees.
On July 13, 2011, this Court rendered a decision,16 the dispositive portion of which reads, as follows:
WHEREFORE, the petitions are DENIED. Accordingly, the complaining employees should be
reinstated without backwages. If reinstatement is no longer feasible, the concerned employees should be
given separation pay up to the date set for their return in lieu of reinstatement.
Unyon filed the subject Motion for Partial Reconsideration17 questioning the Courts July 13, 2011
Decision insofar as it failed to award backwages to fourteen (14) of its members.
Unyon argues that backwages should have been awarded to the 14 employees who were excluded from
the complaint filed by AER and that the latter should have reinstated them immediately because they did
not have any case at all.
AER was directed to file its comment. Its Comment,18 however, failed to address the issue except to say
that the motion for partial reconsideration was pro-forma.
After going over the records again, the Court holds that only nine (9) of the fourteen (14) excluded
employees deserve to be reinstated immediately with backwages.
Records disclose that thirty-two (32) employees filed a complaint for illegal suspension and unfair labor
practice against AER. Out of these 32 workers, only eighteen (18) of them were charged by AER with

illegal strike leaving fourteen (14) of them excluded from its complaint. The names of these 14
employees are as follows:
1. Ruperto Mariano II
2. Arnold Rodriguez
3. Froilan Madamba
4. Danilo Quiboy
5. Roger Belatcha
6. Edwin Mendoza
7. Roberto Caldeo
8. Tammy Punsalan
9. Edward Ferrancol
10. Crisanto Lumbao, Jr.
11. Arnold Villota
12. Menching Mariano, Jr.
13. Carlos Carolino
14. Renato Sarabuno
Technically, as no charges for illegal strike were filed against these 14 employees, they cannot be among
those found guilty of illegal strike. They cannot be considered in pari delicto. They should be reinstated
and given their backwages.
Out of these 14 employees, however, five (5) failed to write their names and affix their signatures in the
Membership Resolution19 attached to the petition filed before the CA, authorizing Union President
Arnold Villota to represent them. It must be noted that Arnold Villota signed as the Affiant in the
Verification and Certification by virtue of the Membership Resolution.20 The names of these 5
employees are:
1. Edwin Mendoza
2. Tammy Punzalan
3. Edward Ferrancol
4. Menching Mariano, Jr.
5. Carlos Carolina

Because of their failure to affix their names and signatures in the Membership Resolution, Edwin
Mendoza, Tammy Punzalan, Edward Ferrancol, Menching Mariano, Jr. and Carlos Carolina cannot be
granted the relief that Unyon wanted for them in its Motion for Partial Reconsideration.
Only the following nine (9) employees who signed their names in the petition can be granted the relief
prayed for therein, namely:
1. Ruperto Mariano II
2. Arnold Rodriguez
3. Froilan Madamba
4. Danilo Quiboy
5. Roger Belatcha
6. Roberto Caldeo
7. Crisanto Lumbao, Jr.
8. Arnold Villota
9. Renato Sarabuno
These excluded nine (9) workers, who signed their names in their petition before the CA, deserve to be
reinstated immediately and gra:1ted backwages. It is basic in jurisprudence that illegally dismissed
workers are entitled to reinstatement with back wages pi us interest at the legal rate.21
As stated in the Amended Decision of the CA, which the Court effectively affirmed after denying the
petition of both parties, the reinstatement shall be "without prejudice to the right of private respondent
AER to subject them for further medical check-up to determine if subject petitioners are drug
dependents."22
WHEREFORE, the Motion for Pa1iial Reconsideration filed by Progresibong Unyon Ng Mga
Manggagawa Sa AER is GRANTED only insofar as the nine (9) employees are concerned, namely:
Ruperto Mariano II, Arnold Rodriguez, Froilan Madamba, Danilo Quiboy, Roger Belateha, Roberto
Caldeo, Crisanto Lumbao, Jr., Arnold Villota, and Renato Sarabuno.1wphi1
Accordingly, the July 13, 2011 Decision is hereby MODIFIED in that the aforementioned nine (9)
workers are entitled to be reinstated and granted backwages with interest at the rate of six percent (6%)
per annum which shall be increased to twelve percent (12%) after the finality of this judgment.
SO ORDERED.
G.R. No. 197384

January 30, 2013

SAMPAGUITA AUTO TRANSPORT CORPORATION, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMMISSION and EFREN I. SAGAD, Respondents.

DECISION
BRION, J.:
Before the Court is the petition for review on certiorari1 in caption, assailing the decision2 dated March
4, 2011 and the resolution3 dated June 13, 2011 of the Court of Appeals (CA) in CA-G.R. SP No.
112760.
The Antecedents
In a complaint4 dated August 10, 2007, respondent Efren I. Sagad charged the petitioner Sampaguita
Auto Transport Corporation (company); Andy Adagio, President and General Manager; Monina Ariola
Adagio, Vice-President and Finance Manager; Virgilio Olunan (referred to as Olonan by Sagad),
Operations Manager; and Gerry Dimate, HRO Officer, with illegal dismissal and damages plus
attorney's fees.
Sagad alleged that on May 14, 2006, the company hired him as a regular bus driver, not as a
probationary employee as the company claimed. He disowned his purported signature on the contract of
probationary Employment5 submitted in evidence by the company. He maintained that his signature was
forged. He further alleged that on November 5, 2006, he was dismissed by the company for allegedly
conniving with conductor Vitola in issuing tickets outside their assigned route.
The company countered that it employed Sagad as a probationary bus driver (evidenced by a
probationary employment contract6) from May 14, 2006 to October 14, 2006; he was duly informed of
his corresponding duties and responsibilities.7 He was further informed that during the probationary
period, his attendance, performance and work attitude shall be evaluated to determine whether he would
qualify for regular employment. For this purpose and as a matter of company policy, an evaluator was
deployed on a company bus (in the guise of a passenger) to observe the drivers work performance and
attitude.
Allegedly, on September 21, 2006, an evaluator boarded Sagads bus. The evaluator described Sagads
manner of driving as "reckless driver, nakikipaggitgitan, nakikipaghabulan, nagsasakay sa gitna ng
kalsada, sumusubsob ang pasahero."8 Sagad disputed the evaluators observations. In an explanation
(rendered in Filipino),9 he claimed that he could not have been driving as reported because his wife (who
was pregnant) and one of his children were with him on the bus. He admitted though that at one time, he
chased an "Everlasting" bus to serve warning on its driver not to block his bus when he was overtaking.
He also admitted that once in a while, he sped up to make up for lost time in making trips.
The company further alleged that on October 13, 2006, it conducted a thorough evaluation of Sagads
performance. It requested conductors who had worked with Sagad to comment on his work. Conductors
A. Hemoroz and Israel Lucero revealed that Sagad proposed that they cheat on the company by way of
an unreported early bus trip.10 Dispatcher E. Castillo likewise submitted a negative report and even
recommended the termination of Sagads employment.11 The company also cited Sagads involvement in
a hit-and-run accident on September 9, 2006 along Commonwealth Avenue in Quezon City while on a
trip (bus with Plate No. NYK-216 and Body No. 3094).12 Allegedly, Sagad did not report the accident to
the company.
On October 15, 2006, upon conclusion of the evaluation, the company terminated Sagads employment
for his failure to qualify as a regular employee.13
The Compulsory Arbitration Rulings

In her decision dated May 8, 2008,14 Labor Arbiter Marita V. Padolina dismissed the complaint for lack
of merit. She ruled that the company successfully proved that Sagad failed to qualify as a regular
employee. Labor Arbiter Padolina stressed that on October 15, 2006, the company ordered Sagad not to
work anymore as his probationary employment had expired. While Sagad claimed that he worked until
November 5, 2006, she pointed out that "there is no record to show that he worked beyond October 14,
2006."15
Sagad appealed the Labor Arbiters ruling. On July 10, 2009, the National Labor Relations Commission
(NLRC) rendered a decision16 declaring that Sagad had been illegally dismissed. It held that Sagad was
not a probationary employee as the company failed to prove by substantial evidence the due execution of
Sagads supposed probationary employment contract. It found credible Sagads submission that his
signature on the purported contract was a forgery. It opined that his signature on the contract was
"extremely different" from his signatures in his pleadings and in other documents on record. Further, the
NLRC brushed aside the company memorandum dated October 15, 200617 supposedly terminating
Sagads probationary employment as there was no showing that the memorandum had been served on
him.
The NLRC disregarded Sagads alleged infractions that served as grounds for the termination of his
employment, holding that his dismissal was not based on these infractions but on his alleged connivance
with a conductor in defrauding the company. The NLRC awarded Sagad backwages of P559,050.00 and
separation pay ofP45,000.00 in lieu of reinstatement, in view of the strained relations between the
parties resulting from the filing of the complaint.
Both parties moved for reconsideration of the NLRC decision, to no avail. The company then elevated
the case to the CA through a petition for certiorari under Rule 65 of the Rules of Court.
The CA Decision
The CA, in its currently assailed decision,18 affirmed the NLRC rulings in toto, finding no grave abuse of
discretion in the labor tribunals reversal of the labor arbiters dismissal of the complaint. It found the
"genuineness of respondents signature on the employment contract is tainted with doubt."19 It agreed
with the NLRC that Sagad had been illegally dismissed considering, as it noted, that the grounds the
company relied upon for the termination of Sagads employment were not among the causes for a valid
dismissal enumerated under Article 282 of the Labor Code. It added that even if it had been otherwise,
the company failed to comply with the twin-notice requirement in employee dismissals.
The Petition
The company seeks the reversal of the appellate courts decision through the present appeal,20 and raises
the following issues:
1. Whether it dismissed Sagad illegally; and
2. Whether Sagad is entitled to backwages and separation pay, totaling P604,050.00, after
working with the company for barely five months.
The company insists that Sagad entered into a contract of probationary employment with it. It was thus
surprised with Sagads allegation that his signature appearing in the contract was a forgery. It explained
that his signature on the contract is the same as his signatures on his employment papers (which include
the probationary employment contract). In any event, it faults the NLRC for not considering other pieces
of evidence indicating Sagads actual employment status.

The company points out that one such piece of competent and compelling evidence is Sagads admission
of the nature of his employment expressed in his letter dated October 16, 2006, addressed to Adagio and
Olunan.21 In this letter, he asked for another chance to work with the company.
The company posits that with the letter, Sagad acknowledged that his probationary employment had
expired.22
The company maintains that it terminated Sagads employment in good faith. They are not expected to
follow the procedure for dismissing a regular employee, as the NLRC opined, considering that Sagad
was merely on probation. Lastly, it contends that the award of backwages and separation pay to Sagad
amounting toP604,050.00 is unwarranted and confiscatory since he worked for only five months. It
laments that the award would put a premium on reckless driving and would encourage other drivers to
follow Sagads example.
The company disputes the NLRCs basis for the award Sagads purported average daily commission
ofP1,000.00 as non-existent. They contend in this respect that the payslips Sagad submitted to the
NLRC rarely showed his daily commission to reach P1,000.00. It explains that Sagad presented only one
(1) payslip for November 2006, five (5) for October 2006, one (1) each for July, August and September
2006. It posits that the company payrolls from June 29, 2006 to October 8, 2006 showed that his daily
commissions were belowP1,000.00.
The Case for Sagad
Through his Comment (on the Petition),23 Sagad asks that the petition be denied due course. He presents
the following arguments:
1. He was not a probationary employee. The signature on the alleged probationary employment
contract attributed to him was not his; it was a forgery, as confirmed by the NLRC and the CA.
The same thing is true with the supposed letter (dated October 16, 2006)24 in which he allegedly
appealed to be given another chance to work for the company. Not only was the letter not in his
handwriting (it allegedly belonged to Vitara, a bus conductor of the company), the signature on
the letter attributed to him was also falsified.
2. On the assumption that he was a probationary employee, it is not correct to say that he failed
to qualify for regular employment. The written statements of bus conductors Hemoroz and
Lucero25 regarding his alleged attempt to cheat on the company are without probative value. The
statements were not under oath and the irregular acts he allegedly proposed could only be done
by the conductors.
The companys claim that he figured in a "hit-and-run" accident on September 9, 2006, which he
allegedly did not report to management, is not also correct. It was not his bus that was involved in the
accident that he duly reported to the management. Further, the companys contention that he drove
recklessly on September 16, 2006 cannot be used to support his dismissal as he had already been
penalized for the incident with a five-day suspension.26
Also, the company grounds in Castillos evaluation report27 (that the company relied upon to justify the
non-renewal of his contract) are not just causes for the termination of his employment as the CA
correctly ruled.
3. He was a regular employee. He continued to work as driver until November 4, 2006. The
companys notice of termination of his Employment28 was not served on him because no such
letter existed. If his probationary employment was to expire on October 14, 2006, he asks: why

was he evaluated only on October 13 and 14, 2006 and why did the company serve him the
termination notice only on October 15, 2006, when he was supposed to have been separated the
previous day, October 14, 2006? He adds: when was the notice served on him that would have
prompted him to write the company a letter on October 16, 2006 to ask for a second chance? All
these nagging questions, he stresses, demonstrate the incredibility of the companys claim that he
was a probationary employee.
4. He does not have to prove his denial that the signatures on the above-mentioned documents
were not really his. He posits that evidence need not be given in support of a negative allegation
and this is particularly true in dismissal cases where the burden of proof is on the employer.
5. The petition suffers from a procedural defect as it raises only questions of fact and not of law,
in violation of Rule 45 of the Rules of Court.
The Courts Ruling
The procedural issue
This Court, as a rule, only reviews questions of law in a Rule 45 petition for review. In labor cases, the
factual findings of the labor arbiter and of the NLRC are generally respected and, if supported by
substantial evidence, accorded finality. This rule, however, is not absolute. When the factual findings of
the CA conflict with those of the labor authorities, the Court is forced to review the evidence on record.29
In this case, the labor arbiters factual conclusions, on the one hand, and those of the NLRC and the CA,
on the other hand, differ. The labor arbiter found that Sagad was a probationary employee and was
validly dismissed for his failure to qualify for regular employment, whereas the NLRC and the CA
concluded that he was a regular employee and was illegally dismissed. We thus find the need to review
the facts in the present labor dispute.
The merits of the case
After a review of the records, we are convinced that Sagad was dismissed, not as a probationary
employee, but as one who had attained regular status. The companys evidence on Sagads purported
hiring as a probationary employee is inconclusive. To start with, Sagad denied that he entered into a
probationary employment contract with the company, arguing that the signature on the supposed
contract was not his.30 He also denied receiving the alleged notice31 terminating his probationary
employment. The same thing is true with his purported letter32asking that he be given another chance to
work for the company. He asserts that not only is the letter not in his handwriting, the signature on the
letter was also not his.
The submissions of the parties on the issue created a doubt on whether Sagad really entered into a
probationary employment contract with the company. The NLRC resolved the doubt in Sagads favor,
ruling that Sagads signature on the contract was not his, because it was a forgery. It declared that his
signature on the contract "is extremely different from those in his pleadings and from the other
documents on record,"33 without explaining how and why the two sets of signatures were vastly
different. Lending further support to the NLRC conclusion, which the CA upheld, is its finding that the
company failed to refute Sagads denial of his signature in the contract, which the labor tribunal
considered as an admission of the veracity of Sagads statement, pursuant to the Rules of Court.34
Independently of the above discussion and even if we were to consider that Sagad went through a
probationary period, the records indicate that he was retained even beyond the expiration of his
supposed probationary employment on October 14, 2006. As the NLRC noted, Sagad claimed that he

was dismissed by the company on November 5, 2006, after he was accused of conniving with conductor
Vitola in issuing tickets outside their assigned route.
The company never refuted this particular assertion of Sagad and its silence can only mean that Sagad
remained in employment until November 4, 2006, thereby attaining regular status as of that date. Under
the law, "an employee who is allowed to work after a probationary period shall be considered a regular
employee."35
Further, when the company questioned the payslips submitted by Sagad to substantiate his claim that he
earned on the average a daily commission of P1,000.00, it pointed out that Sagad presented only one (1)
payslip for the whole month of November 2006, five (5) payslips for the month of October 2006, and
one (1) payslip each for the months of July, August and September 2006.36 This seemingly harmless
allegation is significant in that it revealed that Sagad continued working until the first week of
November 2006 and was paid his salary for at least one payroll period. Sagad, therefore, had become a
regular employee when he was dismissed on November 5, 2006.
Is Sagads dismissal illegal?
The NLRC and the CA ruled in the affirmative. The labor tribunal opined that the infractions which
Sagad allegedly committed and which disqualified him from attaining regular status are "unavailing"
with respect to his dismissal because the dismissal was not based on those infractions but on his alleged
connivance with conductor Vitola to cheat on the company.
The CA concurred with the NLRC but for a different reason. It declared that the "grounds upon which
petitioners based respondents termination from employment, viz: hindi lahat ng schedule nailalabas,
mababa ang revenue ng bus, laging kasama ang asawa sa byahe and maraming naririnig na kwento
tungkol sa kanya, nag-uutos ng conductor para kumita sa hindi magandang paraan, xxx are not among
those enumerated under Article 282 of the Labor Code as just causes for termination of
employment."37 The CA added that on the assumption that the cited grounds can be considered just
causes, the company nonetheless failed to comply with the twin-notice requirement for the termination
of Sagads employment.
We disagree with the finding that Sagads dismissal had no basis.
First. It is not disputed that the company called Sagads attention to his negative actuations as a bus
driver, which were reported by a company evaluator38 who boarded his bus on September 21, 2006. The
evaluator reported that he was driving recklessly, racing and jostling for position on the road, thereby
jarring the passengers on their seats, and picking up passengers on the middle of the road. He disputed
the evaluators observations,39 claiming that he could not have been driving as reported because his
pregnant wife and one of his children were with him on the bus at the time. He admitted, however, that
on one occasion, he chased an "Everlasting" bus to warn its driver not to block him. He also admitted
that once in a while, he sped up to compensate for lost time in his trips.
Sagads explanation reveals more than what it stated. During his brief employment with the company, he
exhibited the tendency to speed up when he finds the need for it, very obviously in violation of traffic
rules, regulations and company policy. Instead of negating the evaluators observations, his admissions
make them credible.
Second. He was also asked to react to the comments of conductors who had worked with him (Hemoroz
and Lucero) to the effect that he proposed to them that they cheat on the company by making early (but
not to be reported) bus trips.40 Further, there was Castillos evaluation dated

October 13, 2006,41 rating Sagads work performance as poor on account of: (1) the low revenue of
Sagads bus; (2) his inability to make all his scheduled trips; and (3) his habit of bringing his wife with
him on his trips. Castillo also heard of talks of Sagads orders to the conductors to earn money in a
questionable way.
During the arbitration, Sagad disputed the conductors comments, maintaining that they were not under
oath and that the fraudulent proposal they mentioned could only be committed by conductors. With
respect to Castillos evaluation, Sagad invoked the CAs pronouncement that the infractions mentioned
in the report are not just causes for the termination of his employment.
Sagads position fails to convince us. We find no evidence that Hemoroz and Lucero had an ax to grind
against Sagad so that they would lie about their impression of him as a bus driver. Significantly, their
statements validate Castillos own observation that he heard talks of Sagads orders to the conductors for
them to cheat on the company. The scheme, contrary to Sagads explanation, can only be committed
with the cooperation, or even at the behest, of the driver, as the proposed scheme is for the bus to make
unscheduled, but unreported, early trips.
Lastly, the company cites Sagads involvement in a hit-and-run incident on September 9, 2006 while
driving his assigned bus (with Plate No. NYK-216 and Body No. 3094).42 Once more, he denies the
charge, claiming that it was not his bus, but two other vehicles, a Honda City and an Elf truck, which
figured in the incident.43 To prove his point, he submitted the "SALAYSAY"44 of his replacement driver,
Carlito Laude, for September 10, 2006, saying that there was no dents or scratches on the bus.
Again, Sagads stance fails to persuade us. Sagads statements vis--vis the incident, as well as those of
Laude, are belied by the Traffic Accident Investigation Report45 which mentioned the "Unidentified
driver of Public Utility Bus with plate No. NYK-216 and Body No. 3094." The report was corroborated
by the sworn statements of Ronald Apura, driver of the Elf truck, UFF-597, the second party in the
incident,46 and Bibiana Fuentes, driver of the White Honda City, WDV-422 (owned by Purefoods
Hormel Co.), the first party in the vehicular accident. There was also the letter to the company of
Standard Insurance Co., Inc. dated February 14, 200747 demanding the reimbursement of P24,667.54 it
paid to Purefoods Hormel Co. by way of damages sustained by the Honda City.
Third. The CA misappreciated the law when it declared that the grounds relied upon by the company in
terminating Sagads employment are not among those enumerated under Article 282 of the Labor Code
as just causes for employee dismissals.1wphi1 Article 282 of the Code provides:
Art. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing. [emphasis supplied]

The irregularities or infractions committed by Sagad in connection with his work as a bus driver
constitute a serious misconduct or, at the very least, conduct analogous to serious misconduct, under the
above-cited Article 282 of the Labor Code. To be sure, his tendency to speed up during his trips, his
reckless driving, his picking up passengers in the middle of the road, his racing with other buses and his
jostling for vantage positions do not speak well of him as a bus driver. While he denies being informed,
when he was hired, of the duties and responsibilities of a driver contained in a document submitted in
evidence by the company48 the requirement "3. to obey traffic rules and regulations as well as the
company policies. 4. to ensure the safety of the riding public as well as the other vehicles and motorist
(sic)"49 is so fundamental and so universal that any bus driver is expected to satisfy the requirement
whether or not he has been so informed.
Sagad tries to minimize the adverse effect of the evaluators report of September 21, 2006 about his
conduct as a driver with the argument that he had already been penalized with a five-day suspension for
chasing an "Everlasting" bus at one time. The suspension is of no moment. He was penalized for one
reckless driving incident, but it does not erase all the other infractions he committed. The conductors
comments and the dispatchers evaluation, together with the earlier on-board evaluation, all paint a
picture of a reckless driver who endangers the safety of his passengers, other motorists and the general
public. With this record, it is not surprising that he figured in a hit-and-run accident on September 9,
2006.
Under the circumstances, Sagad has become a liability rather than an asset to his employer, more so
when we consider that he attempted to cheat on the company or could have, in fact, defrauded the
company during his brief tenure as a bus driver. This calls to mind Castillos report on the low revenue
of Sagads bus, an observation which is validated by the companys Daily Operation Reports from June
to October 2006.50
All told, we find substantial evidence supporting Sagads removal as a bus driver. Through his reckless
driving and his schemes to defraud the company, Sagad committed serious misconduct and breach of the
trust and confidence of his employer, which, without doubt, are just causes for his separation from the
service. It is well to stress, at this point, an earlier pronouncement of the Court "that justice is in every
case for the deserving, to be dispensed in the light of the established facts and applicable law and
doctrine."51
The twin-notice requirement
Even as we find a just cause for Sagads dismissal, we agree with the CA that the company failed to
comply with the two-notice rule. It failed to serve notice of: (1) the particular acts for which Sagad was
being dismissed on November 5, 2006 and (2) his actual dismissal. Consistent with our ruling in Agabon
v. NLRC, 52 we hold that the violation of Sagad's right to procedural due process entitles him to an
indemnity in the form of nominal damages. Considering the circumstances in the present case, we deem
it appropriate to award Sagad P30,000.00.
WHEREFORE, premises considered, the appeal is granted. The assailed decision and resolution of the
Court of Appeals are SET ASIDE. The complaint is DISMISSED for lack of merit. Efren I. Sagad is
awarded nominal damages of P30,000.00 for violation of his right to procedural due process.
SO ORDERED.
G.R. No. 174893

July 11, 2012

FLORDELIZA MARIA REYES-RAYEL, Petitioner,

vs.

PHILIPPINE LUEN THAI HOLDINGS, CORPORATION/L&T INTERNATIONAL GROUP

PHILIPPINES, INC.,Respondents.
DECISION
DEL CASTILLO, J.:
The law is fair and just to both labor and management. Thus, while the Constitution accords an
employee security or tenure, it abhors oppression to an employer who cannot be compelled to retain an
employee whose continued employment would he patently inimical to its interest.
This Petition for Review on Certiorari 1 assails the July IR, 2006 Decision 2 or the Court of Appeals
(CA) in CJ\-G.R. SP No. 86937, which (I) reversed the National Labor Relations Commission (NLRC)
March 23, 2004 Resolution3 and in effect, its July 21, 2004 4 Resolution as well, (2) declared petitioner
Flordeliza Maria Reyes-Rayels (petitioner) dismissal from employment valid, and (3) ordered
respondents Philippine Luen Thai Holdings, Corp. (PLTHC)/L&T International Group Phils., Inc.
(L&T) (respondents) to pay petitioner an amount equivalent to three months salary pursuant to the
termination provision of the employment contract.
Factual Antecedents
In February 2000, PLTHC hired petitioner as Corporate Human Resources (CHR) Director for
Manufacturing for its subsidiary/affiliate company, L&T. In the employment contract, 5 petitioner was
tasked to perform functions in relation to administration, recruitment, benefits, audit/compliance, policy
development/ structure, project plan, and such other works as may be assigned by her immediate
superior, Frank Sauceda (Sauceda), PLTHCs Corporate Director for Human Resources.
On September 6, 2001, petitioner received a Prerequisite Notice 6 from Sauceda and the Corporate Legal
Counsel of PLTHC, Ma. Lorelie T. Edles (Edles), which reads:
This has reference to your failure to perform in accordance with management directives in various
instances, which collectively have resulted in loss of confidence in your capability to promote the
interests of the Company.
The most deleterious to the Company has been your pronouncements against the Human Resource
Information System (HRIS) or HR2 Program, a corporate initiative that is at the core and is crucial to
the enhancement of personnel management for the global operations of the Company. On numerous
occasions, in the presence of colleagues and subordinates, you made statements that serve to undermine
the Companys efforts at pursuing the HR2 Program. You ought to have realized that when leveled by an
officer of your rank, no less than a Director of the Corporate Human Resources Division, such remarks
are highly inflammatory and their negative impact is magnified.
Just as flagrant is your inability to incite collaboration and harmony within the Corporate Human
Resources Division. Instead, colleagues and subordinates complain of your negative attitude towards the
Company, its officers and people. You have established notoriety for your temper and have alienated
most members of your division. You ought to have realized that when exhibited by an officer of your
rank, no less than a Director of the Corporate Human Resources Division, poor interpersonal skills and
the lack of moral suasion are extremely damaging.
The foregoing have, in fact, manifested in your own unsatisfactory performance rating, and in the
departure of promising employees who could not work with you.

In view of the above, we afford you the opportunity to submit your written reply to this memorandum
within forty-eight (48) hours from its receipt. Failure to so submit shall be construed as waiver of your
right to be heard. Consequently, the Company shall immediately decide on this matter.
xxx7
In petitioners written response 8 dated September 10, 2001, she explained that her alleged failure to
perform management directives could be attributed to the lack of effective communication with her
superiors due to malfunctioning email system. This caused her to miss certain directives coming from
her superiors and likewise, for her superiors to overlook the reports she was submitting. She denied
uttering negative comments about the HR2 Program and instead claimed to have intimated her support
for it. She further denied causing disharmony in her division. Petitioner emphasized that in June 2001,
she received a relatively good rating of 80.2% in her overall performance appraisal 9 which meant that
she displayed dependable work level performance as well as good corporate relationship with her
superiors and subordinates.
In a Termination Notice 10 dated September 12, 2001, respondents, through Sauceda and Edles,
dismissed petitioner from the service for loss of confidence on her ability to promote the interests of the
company. This led petitioner to file a Complaint 11 for illegal dismissal, payment of separation pay,
13th month pay, moral and exemplary damages, attorneys fees, and other unpaid company benefits
against respondents and its officers, namely, Sauceda, Edles and Willie
Tan (Tan), the Executive Vice-President of PLTHC.
Proceedings before the Labor Arbiter
In her Position Paper, 12 petitioner argued that her dismissal was without valid or just cause and was
effected without due process. According to her, the causes for her dismissal as stated in the Prerequisite
Notice and Notice of Termination are not proper grounds for termination under the Labor Code and the
same do not even pertain to any willful violation of the companys code of discipline or any other
company policy. Even the alleged loss of confidence was not supported by any evidence of wrongdoing
on her part. She likewise claimed that due process was not observed since she was not afforded a
hearing, investigation and right to appeal as per company procedure for disciplining employees.
Furthermore, respondents were guilty of violating the termination provision under the employment
contract which stipulated that employment after probationary period shall be terminated by giving the
employee a three-month notice in writing or by paying three months salary in lieu of notice. Petitioner
also accused respondents of having acted in bad faith by subjecting her to public humiliation and
embarrassment when she was ordered to immediately turn over the company car, vacate her office and
remove all her belongings on the same day she received the termination notice, in full view of all the
other employees.
Respondents, on the other hand, claimed that they have a wide discretion in dismissing petitioner as she
was occupying a managerial position. They claimed in their Position Paper 13 that petitioners
inefficiency and lackadaisical attitude in performing her work were just and valid grounds for
termination. In the same token, her gross and habitual neglect of duties were enough bases for
respondents to lose all their confidence in petitioners ability to perform her job satisfactorily. Also,
petitioner was accorded due process as she was furnished with two notices - the first requiring her to
explain why she should not be terminated, and the second apprising her of the managements decision to
terminate her from employment.
Further in their Reply 14 to petitioners position paper, respondents enumerated the various instances
which manifested petitioners poor work attitude and dismal performance, to wit: 1) her failure to

perform in accordance with management directives such as when she unreasonably delayed the hiring of
a Human Rights and Compliance Manager; failed to establish communication with superiors and coworkers; failed to regularly update Sauceda of the progress of her work; requested for reimbursement of
unauthorized expenditures; and, gave orders contrary to policy on the computation of legal and holiday
pay; 2) her negative pronouncements against the companys program in the presence of colleagues and
subordinates; 3) her inability to incite collaboration and harmony within her department; 4) her negative
attitude towards the company, its officers and employees; and 5) her low performance appraisal rating
which is unacceptable for a top level personnel like herself. Exchange of emails, affidavits and other
documents were presented to provide proof of incidents which gave rise to these allegations.
Respondents also asserted that the procedure laid down in the companys code of discipline, which
provided for the mandatory requirements of notice, hearing/investigation and right to appeal, only
applies to rank and file, supervisory, junior managerial and department managerial employees and not to
petitioner, a CHR Director, who plays a key role in these termination proceedings. Further, the threemonth notice for termination, as written in the employment contract, is only necessary when there is no
just cause for the employees dismissal and, therefore, not applicable to petitioner. Respondents then
disputed petitioners money claims and also sought the dropping of Sauceda, Edles and Tan from the
complaint for not being real parties in interest.
In her rejoinder, 15 petitioner stood firm on her conviction that she was dismissed without valid cause by
presenting documentary evidence of her good performance. Further, she insisted that she was dismissed
for reasons different from those mentioned in the Prerequisite Notice and Notice of Termination, both of
which did not state gross and habitual neglect of duties as a ground. She also construed respondents act
of offering her a settlement or compensation right after her termination as their acknowledgement of the
illegal act they committed against her. Moreover, petitioner argued that the company policies on
procedural due process apply to all its employees, whether rank and file or managerial.
In a Decision 16 dated October 21, 2002, the Labor Arbiter declared petitioner to have been illegally
dismissed. It was held that petitioner cannot be charged with undermining the HR2 Program of the
company since evidence was presented to show that she was already divested of duties relative to this
program. Also, respondents accusation that petitioner caused disharmony among colleagues and
subordinates has no merit as there was ample proof that petitioner was in constant communication with
her co-workers through official channels and email. Further, the Labor Arbiter theorized that petitioners
performance rating demonstrated a passing or satisfactory grade and therefore could not be a sufficient
and legitimate basis to terminate her for loss of trust and confidence. Moreover, petitioner cannot be
dismissed based merely on these vague offenses but only for specific offenses which, under the
companys code of conduct, merit the penalty of outright dismissal. The dispositive portion of the
Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring that complainant was
illegally dismissed by respondent corporation, and the latter is hereby directed to reinstate complainant
to her former position and pay her full backwages and benefits computed below, as follows:
A. Backwages September 12, 2001 to October 21, 2002
1.
2.
3.

Salaries and Wages

P80,000 x 13.30 months =
13th month pay
P1,064,000.00 / 12 =
VL
P80,000 / 26 x 10 days =

P1,064,000.00
88,666.67
34,102.56

B. Attorneys Fees (10%)

P1,186,769.23
118,676.92
P1,305,446.15

SO ORDERED, 17
Proceedings before the National Labor Relations Commission
Respondents appealed to the NLRC.18 For her part, petitioner filed before the Labor Arbiter a Motion for
Recomputation 19 of the awards. This motion was, however, denied in an Order 20 dated March 17, 2003
on the ground that petitioner could challenge any disposition made only by way of an appeal within the
reglementary period and not through a motion.
In a Decision 21 dated August 20, 2003, the NLRC found merit in respondents appeal. To the NLRC,
respondents have sufficiently established the validity of petitioners dismissal on the ground of loss of
trust and confidence through the various emails, affidavits and other documents attached to the records.
Specifically, respondents have proven that petitioner failed to recruit a Human Rights and Compliance
Manager, ignored company policies, failed to effectively communicate with her superiors and
subordinates, and displayed ineptitude in her work as a director and in her relationship with her coworkers. These showed that there exist enough bases for respondents to lose the trust they had reposed
on petitioner, who, as a managerial employee, was expected to possess exemplary work attitude. The
NLRC, however, noted that the employment contract specifically provided for payment of three months
salary in lieu of the stipulated three-month notice in case of termination, thus:
IN LIGHT OF THE FOREGOING PREMISES, the decision appealed from is hereby
MODIFIED, to declare the dismissal of complainant legal but to order respondents to pay
complainant the sum of P240,000.00 representing three months salary as expressed in
complainants contract of employment. All other claims are DISMISSED for lack of merit.
SO ORDERED. 22
Petitioner filed a Motion for Reconsideration 23 which was granted by the NLRC. In a
Resolution 24 dated March 23, 2004, the NLRC concluded that petitioner was not afforded due process as
she was not given the opportunity to refute the charges against her through an investigation and an
appeal at the company level. Thus, respondents failed to establish the truthfulness of the allegations
against her as to support the validity of the dismissal. The NLRC also agreed with petitioners claim that
she was subjected to humiliation on the day of her termination. Consequently, the NLRC declared
petitioners dismissal as illegal and thus reinstated the Labor Arbiters Decision with modification that
respondents be ordered to pay petitioner separation pay in lieu of reinstatement due to the strained
relation between the parties.
In a Resolution 25 dated July 21, 2004, the NLRC resolved to dismiss respondents motion for
reconsideration.
Proceedings before the Court of Appeals
Respondents thus filed with the CA a Petition for Certiorari with Urgent Motion for Issuance of
Temporary Restraining Order (TRO) or Writ of Preliminary Injunction.26 Petitioner then filed her

Comment27 thereto. Subsequently, the CA denied respondents prayer for TRO in a Resolution28 dated
February 15, 2005.
On July 18, 2006, the CA rendered a Decision29 finding merit in the petition. The CA found sufficient
evidence to support the dismissal of petitioner on the ground of loss of trust and confidence. It regarded
petitioners 80.2% performance rating as below par and hence, declared that she cannot merely rely on
the same in holding on to her position as CHR Director, a highly sensitive and demanding post. Also,
despite the opportunity to improve, petitioner continued to display poor work attitude, dismal
performance and rancorous and abusive behavior towards co-workers as gleaned from the various
emails and affidavits of her superiors and other employees. These circumstances, taken together,
constitute sufficient cause for respondents to lose confidence in petitioners ability to continue in her job
and to promote the interest of the company.
Moreover, the CA did not subscribe to petitioners allegation that she was denied due
process.1wphi1 On the contrary, said court found that she was adequately notified of the charges
against her through the show cause notice which clearly stated the instances that served as sufficient
bases for the loss of trust and confidence, to wit: her failure to perform in accordance with management
directives and her actions of undermining company goals and causing disharmony among her coworkers. After finding her written response to be unsatisfactory, petitioner was likewise properly
notified of the companys decision to terminate her services. Clearly, respondents observed the
requirements of procedural due process. Nevertheless, respondents, in effecting the dismissal, should
have paid petitioner her salary for three months as provided for in the employment contract. For its
failure to do so, the CA ordered respondents to pay petitioner three months salary in accordance with
their contractual undertaking. The dispositive portion of the CA Decision states:
WHEREFORE, the Resolution of the National Labor Relations Commission dated March 23, 2004 is
REVERSED. [Respondents] are hereby ordered to pay petitioner the amount corresponding to three
[months] salary pursuant to the termination provision of the employment contract.
SO ORDERED.30
Petitioners Motion for Reconsideration31 was denied in the CA Resolution32 dated October 4, 2006.
Issues
Hence, the present petition raising the following issues:
I. WHETHER X X X THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT
REVERSED THE DECISION OF THE NLRC ON CERTIORARI DESPITE THE FACT THAT
THE NLRC DID NOT COMMIT GRAVE ABUSE OF DISCRETION WHEN IT AFFIRMED
THE FACTUAL FINDINGS OF THE LABOR ARBITER THAT PETITIONER WAS
ILLEGALLY DISMISSED FROM HER EMPLOYMENT BY RESPONDENTS.
II. WHETHER X X X THE ALLEGED VALID OR JUST CAUSE FOR TERMINATION OF
PETITIONER FROM HER EMPLOYMENT WAS PROVEN AND ESTABLISHED BY
SUBSTANTIAL EVIDENCE ON RECORD.
III. WHETHER X X X RESPONDENTS DEPRIVED PETITIONER OF HER RIGHT TO DUE
PROCESS WHEN RESPONDENTS DISMISSED PETITIONER WITHOUT CONDUCTING
ANY INVESTIGATION TO DETERMINE THE VERACITY AND TRUTHFULNESS OF THE

ALLEGATIONS AGAINST PETITIONER IN VIOLATION OF RESPONDENTS OWN

COMPANY POLICIES.33
Petitioner posits that there is no substantial evidence to establish valid grounds for her dismissal since
various emails from her superiors illustrating her accomplishments and commendations, as well as her
"good" overall performance rating negate loss of trust and confidence. She also insists that she was not
afforded due process at the company level. She claims that she was not properly informed of the
offenses charged against her due to the vagueness of the terms written in the termination notices and that
no investigation and hearing was conducted as required by company policy.
Our Ruling
The petition is devoid of merit. The Court finds no cogent reason to depart from the ruling of the CA that
petitioner was validly dismissed.
There exists a valid ground for petitioners termination from employment.
Jurisprudence provides that an employer has a distinct prerogative and wider latitude of discretion in
dismissing a managerial personnel who performs functions which by their nature require the employers
full trust and confidence.34 As distinguished from a rank and file personnel, mere existence of a basis for
believing that a managerial employee has breached the trust of the employer justifies dismissal. 35 "[L]oss
of confidence as a ground for dismissal does not require proof beyond reasonable doubt as the law
requires only that there be at least some basis to justify it."36
Petitioner, in the present case, was L&Ts CHR Director for Manufacturing. As such, she was directly
responsible for managing her own departmental staff. It is therefore without question that the CHR
Director for Manufacturing is a managerial position saddled with great responsibility. Because of this,
petitioner must enjoy the full trust and confidence of her superiors. Not only that, she ought to know that
she is "bound by more exacting work ethics"37and should live up to thishigh standard of responsibility.
However, petitioner delivered dismal performance and displayed poor work attitude which constitute
sufficient reasons for an employer to terminate an employee on the ground of loss of trust and
confidence. Respondents also impute upon petitioner gross negligence and incompetence which are
likewise justifiable grounds for dismissal.38 The burden of proving that the termination was for a valid
cause lies on the employer.39 Here, respondents were able to overcome this burden as the evidence
presented clearly support the validity of petitioners dismissal.
First, records show that petitioner indeed unreasonably failed to effectively communicate with her
immediate superior. There was an apparent neglect in her obligation to maintain constant
communication with Sauceda in order to ensure that her work is up to par. This is evident from the
various emails40 showing that she failed to update Sauceda on the progress of her important assignments
on several occasions. While petitioner explained in her written reply to the Prerequisite Notice that such
failure to communicate was due to the companys computer system breakdown, respondents however
were able to negate this as they have shown that the computer virus which affected the companys
system only damaged some email addresses of certain employees which did not include that of
Saucedas. On the other hand, petitioner failed to present any concrete proof that the said computer virus
also damaged Saucedas email account as to effectively disrupt their regular communication. Moreover,
we agree with respondents stance that petitioner could still reach Sauceda through other means of
communication and should not completely rely on the web.
Second, the affidavits of petitioners co-workers revealed her negative attitude and unprofessional
behavior towards them and the company. In her affidavit,41 Agnes Suzette Pasustento, L&Ts Manager
for the Corporate Communications Department, attested to petitioners "badmouthing" of Sauceda in

one of their meetings abroad and of discussing with her about filing a labor case against the company.
Also, in the affidavits of Rizza S. Esplana42 (Saucedas Executive Assistant), Cynthia
Yiguez 43 (Corporate Human Resources Manager of an affiliate of L&T), and Ana Wilma
Arreza44 (Human Resources and Administration Division Manager of an affiliate of L&T), they narrated
several instances which demonstrated petitioners notoriously bad temper. They all described her to have
an "irrational" behavior and "superior and condescending" attitude in the workplace. Unfortunately for
petitioner, these sworn statements which notably remain uncontroverted and unrefuted, militate against
her innocence and strengthen the adverse averments against her.45 It is well to state that as a CHR
Director tasked to efficiently manage the companys human resource team and practically being
considered the "face" of the Human Resource, petitioner should exhibit utmost concern for her
employers interest. She should likewise establish not only credibility but also respect from co-workers
which can only be attained if she demonstrates maturity and professionalism in the discharge of her
duties. She is also expected to act as a role model who displays uprightness both in her own behavior
and in her dealings with others.
The third and most important is petitioners display of inefficiency and ineptitude in her job as a CHR
Director. In the affidavit46 of Ornida B. Calma, Chief Accountant of L&Ts affiliate company, petitioner,
on two occasions, gave wrong information regarding issues on leave and holiday pay which generated
confusion among employees in the computation of salaries and wages. Due to the nature of her
functions, petitioner is expected to have strong working knowledge of labor laws and regulations to help
shed light on issues and questions regarding the same instead of complicating them. Petitioner obviously
failed in this respect.
No wonder she received a less than par performance in her performance evaluation conducted in June
2001, contrary to her assertion that an 80.2% rating illustrates good and dependable work performance.
As can be gleaned in the performance appraisal form, petitioner received deficient marks and low ratings
on areas of problem solving and decision making, interpersonal relationships, planning and organization,
project management and integrity notwithstanding an overall passing grade. As aptly remarked by the
CA, these low marks revealed the "degree of [petitioners] work handicap" and should have served as a
notice for her to improve on her job. However, she appeared complacent and remained lax in her duties
and this naturally resulted to respondents loss of confidence in her managerial abilities.
Taking all these circumstances collectively, the Court is convinced that respondents have sufficient and
valid reasons in terminating the services of petitioner as her continued employment would be patently
inimical to respondents interest. An employer "has the right to regulate, according to its discretion and
best judgment, all aspects of employment, including work assignment, working methods, processes to be
followed, working regulations, transfer of employees, work supervision, lay-off of workers and the
discipline, dismissal and recall of workers."47 "[S]o long as they are exercised in good faith for the
advancement of the employers interest and not for the purpose of defeating or circumventing the rights
of the employees under special laws or under valid agreements,"48 the exercise of this management
prerogative must be upheld.
Anent petitioners imputation of bad faith upon respondents, the same deserves no credence. That she
was publicly embarrassed when she was coerced by Sauceda and Edles to vacate her office, return the
company car and take all her personal belongings on the day she was dismissed, are all mere allegations
not substantiated by proof. And since it is hornbook rule that he who alleges must prove, we could not
therefore conclude that her termination was tainted with any malice or bad faith without any sufficient
basis to substantiate this bare allegation. Moreover, we are more inclined to believe that respondents
offer of settlement immediately after petitioners termination was more of a generous offer of financial
assistance rather than an indication of ill-motive on respondents part.
Petitioner was accorded due process.

Petitioner insists that she was not properly apprised of the specific grounds for her termination as to give
her a reasonable opportunity to explain. This is because the Prerequisite Notice and Notice of
Termination did not mention any valid or authorized cause for dismissal but rather merely contained
general allegations and vague terms.
We have examined the Prerequisite Notice and contrary to petitioners assertion, find the same to be free
from any ambiguity. The said notice properly advised petitioner to explain through a written response
her failure to perform in accordance with management directives, which deficiency resulted in the
companys loss of confidence in her capability to promote its interest. As correctly explained by the CA,
the notice cited specific incidents from various instances which showed petitioners "repeated failure to
comply with work directives, her inclination to make negative remarks about company goals and her
difficult personality," that have collectively contributed to the companys loss of trust and confidence in
her. Indeed, these specified acts, in addition to her low performance rating, demonstrated petitioners
neglect of duty and incompetence which support the termination for loss of trust and confidence.
Neither can there be any denial of due process due to the absence of a hearing or investigation at the
company level. It has been held in a plethora of cases that due process requirement is met when there is
simply an opportunity to be heard and to explain ones side even if no hearing is conducted.49 In the case
of Perez v. Philippine Telegraph and Telephone Company,50 this Court pronounced that an employee
may be afforded ample opportunity to be heard by means of any method, verbal or written, whether in a
hearing, conference or some other fair, just and reasonable way, in that:
xxxx
After receiving the first notice apprising him of the charges against him, the employee may submit a
written explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and
offer evidence in support thereof, like relevant company records (such as his 201 file and daily time
records) and the sworn statements of his witnesses. For this purpose, he may prepare his explanation
personally or with the assistance of a representative or counsel. He may also ask the employer to provide
him copy of records material to his defense. His written explanation may also include a request that a
formal hearing or conference be held. In such a case, the conduct of a formal hearing or conference
becomes mandatory, just as it is where there exist substantial evidentiary disputes or where company
rules or practice requires an actual hearing as part of employment pretermination procedure. To this
extent, we refine the decisions we have rendered so far on this point of law.
xxxx
In sum, the following are the guiding principles in connection with the hearing requirement in dismissal
cases:
(a) ample opportunity to be heard means any meaningful opportunity (verbal or written) given
to the employee to answer the charges against him and submit evidence in support of his defense,
whether in a hearing, conference or some other fair, just and reasonable way.
(b) a formal hearing or conference becomes mandatory only when requested by the employee in
writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when
similar circumstances justify it.
(c) the ample opportunity to be heard standard in the Labor Code prevails over the hearing or
conference requirement in the implementing rules and regulations.51

In this case, petitioner's written response to the Prerequisite Notice provided her with an avenue to
explain and defend her side and thus served the purpose of due process. That there was no hearing.
investigation or right to appeal. which petitioner opined to be violation of company policies, is of no
moment since the records is bereft of any showing that there is an existing company policy that requires
these procedures with respect to the termination of a CHR Director like petitioner or that company
practice calls for the same. There was also no request for a formal hearing on the part of petitioner.
As she was served with a notice apprising her of the changes against her and also a subsequent notice
informing her of the management's decision to terminate her services alter respondents found her written
response to the first notice unsatisfactory, petitioner was clearly afforded her right to due process.
WHEREFORE, the petition is DENIED. The assailed Decision dated July 18, 2006 of the Court of
Appeals in CA-GR. SP No. 86937 is AFFIRMED.
SO ORDERED.
G.R. No. 169549

September 3, 2008

JOHN HANCOCK LIFE INSURANCE CORPORATION and/or MICHAEL

PLAXTON, petitioners,
vs.
JOANNA CANTRE DAVIS, respondent.
DECISION
CORONA, J.:
Respondent Joanna Cantre Davis was agency administration officer of petitioner John Hancock Life
Insurance Corporation.1
On October 18, 2000, Patricia Yuseco, petitioner's corporate affairs manager, discovered that her wallet
was missing. She immediately reported the loss of her credit cards to AIG and BPI Express. To her
surprise, she was informed that "Patricia Yuseco" had just made substantial purchases using her credit
cards in various stores in the City of Manila. She was also told that a proposed transaction in Abenson'sRobinsons Place was disapproved because "she" gave the wrong information upon verification.
Because loss of personal property among its employees had become rampant in its office, petitioner
sought the assistance of the National Bureau of Investigation (NBI). The NBI, in the course of its
investigation, obtained a security video from Abenson's showing the person who used Yuseco's credit
cards. Yuseco and other witnesses positively identified the person in the video as respondent.
Consequently, the NBI and Yuseco filed a complaint for qualified theft against respondent in the office
of the Manila city prosecutor. But because the affidavits presented by the NBI (identifying respondent as
the culprit) were not properly verified, the city prosecutor dismissed the complaint due to insufficiency
of evidence.
Meanwhile, petitioner placed respondent under preventive suspension and instructed her to cooperate
with its ongoing investigation. Instead of doing so, however, respondent filed a complaint for illegal
dismissal2 alleging that petitioner terminated her employment without cause.

The labor arbiter, in a decision dated May 21, 2002,3 found that respondent committed serious
misconduct (she was the principal suspect for qualified theft committed inside petitioner's office during
work hours). There was a valid cause for her dismissal. Thus, the complaint was dismissed for lack of
merit.
Respondent appealed4 the labor arbiter's decision to the National Labor Relations Commission (NLRC)
which affirmed the assailed decision on July 31, 2003.5 Respondent moved for reconsideration but it was
denied in a resolution dated October 30, 2003.6
Aggrieved, respondent filed a petition for certiorari7 in the Court of Appeals (CA) claiming that the
NLRC committed grave abuse of discretion in affirming the decision of the labor arbiter. She claimed
there was no valid cause for her termination because the city prosecutor of Manila "did not find probable
cause for qualified theft against her." The dismissal of the complaint proved that the charges against her
were based on suspicion.
The CA, in its July 4, 2005 decision,8 found that the labor arbiter and NLRC merely adopted the findings
of the NBI regarding respondent's culpability. Because the affidavits of the witnesses were not verified,
they did not constitute substantial evidence. The labor arbiter and NLRC should have assessed evidence
independently as "unsubstantiated suspicions, accusations and conclusions of employers (did) not
provide legal justification for dismissing an employee." Thus, the CA granted the petition.
Petitioner moved for reconsideration but it was denied.9 Hence, this petition.
The issue in this case is whether or not petitioner substantially proved the presence of valid cause for
respondent's termination.
Petitioner essentially argues that the ground for an employee's dismissal need only be proven by
substantial evidence. Thus, the dropping of charges against an employee (specially on a technicality
such as lack of proper verification) or his subsequent acquittal does not preclude an employer from
dismissing him due to serious misconduct.
We grant the petition.
Article 282 of the Labor Code provides:
Article 282. Termination by Employer. - An employer may terminate an employment for any of
the following causes:
(a) Serious misconduct or willful disobendience by the employee of the lawful orders of
his employer or his representatives in connection with his work;
xxx

xxx

xxx

(e) Other causes analogous to the foregoing.

Misconduct involves "the transgression of some established and definite rule of action, forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment."10 For misconduct to be serious and therefore a valid ground for dismissal, it must be:
1. of grave and aggravated character and not merely trivial or unimportant and

2. connected with the work of the employee.11

In this case, petitioner dismissed respondent based on the NBI's finding that the latter stole and used
Yuseco's credit cards. But since the theft was not committed against petitioner itself but against one of its
employees,12 respondent's misconduct was not work-related and therefore, she could not be dismissed
for serious misconduct.
Nonetheless, Article 282(e) of the Labor Code talks of other analogous causes or those which are
susceptible of comparison to another in general or in specific detail.13 For an employee to be validly
dismissed for a cause analogous to those enumerated in Article 282, the cause must involve a voluntary
and/or willful act or omission of the employee.14
A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting to an
employee's moral depravity.15 Theft committed by an employee against a person other than his employer,
if proven by substantial evidence, is a cause analogous to serious misconduct.16
Did petitioner substantially prove the existence of valid cause for respondent's separation? Yes. The
labor arbiter and the NLRC relied not only on the affidavits of the NBI's witnesses but also on that of
respondent. They likewise considered petitioner's own investigative findings. Clearly, they did not
merely adopt the findings of the NBI but independently assessed evidence presented by the parties.
Their conclusion (that there was valid cause for respondent's separation from employment) was
therefore supported by substantial evidence.
All things considered, petitioner validly dismissed respondent for cause analogous to serious
misconduct.
WHEREFORE, the petition is hereby GRANTED. The July 4, 2005 decision and September 1, 2005
resolution of the Court of Appeals in CA-G.R. SP No. 81515 are REVERSED and SET ASIDE.
The July 31, 2003 decision and October 30, 2003 resolution of the National Labor Relations
Commission in NLRC CA No. 032865-02 affirming the May 21, 2002 decision of the labor arbiter
areREINSTATED.
SO ORDERED.
G.R. No. 163431

August 28, 2013

NATHANIEL N. DONGON, PETITIONER,

vs.
RAPID MOVERS AND FORWARDERS CO., INC., AND/OR NICANOR E. JAO,
JR., RESPONDENTS.
DECISION
BERSAMIN, J.:
The prerogative of the employer to dismiss an employee on the ground of willful disobedience to
company policies must be exercised in good faith and with due regard to the rights of labor.
The Case

By petition for review on certiorari, petitioner appeals the adverse decision promulgated on October 24,
2003,1whereby the Court of Appeals (CA) set aside the decision dated June 17, 2002 of the National
Labor Relations Commission (NLRC) in his favor.2 The NLRC had thereby reversed the ruling dated
September 10, 2001 of the Labor Arbiter dismissing his complaint for illegal dismissal.3
Antecedents
The following background facts of this case are stated in the CAs assailed decision, viz:
From the records, it appears that petitioner Rapid is engaged in the hauling and trucking business while
private respondent Nathaniel T. Dongon is a former truck helper leadman.
Private respondents area of assignment is the Tanduay Otis Warehouse where he has a job of facilitating
the loading and unloading [of the] petitioners trucks. On 23 April 2001, private respondent and his
driver, Vicente Villaruz, were in the vicinity of Tanduay as they tried to get some goods to be distributed
to their clients.
Tanduays security guard called the attention of private respondent as to the fact that Mr. Villaruz[s]
was not wearing an Identification Card (I.D. Card). Private respondent, then, assured the guard that he
will secure a special permission from the management to warrant the orderly release of goods.
Instead of complying with his compromise, private respondent lent his I.D. Card to Villaruz; and by
reason of such misrepresentation , private respondent and Mr. Villaruz got a clearance from Tanduay for
the release of the goods. However, the security guard, who saw the misrepresentation committed by
private respondent and Mr. Villaruz, accosted them and reported the matter to the management of
Tanduay.
On 23 May 2001, after conducting an administrative investigation, private respondent was dismissed
from the petitioning Company.
On 01 June 2001, private respondent filed a Complaint for Illegal Dismissal. x x x4
In his decision, the Labor Arbiter dismissed the complaint, and ruled that respondent Rapid Movers and
Forwarders Co., Inc. (Rapid Movers) rightly exercised its prerogative to dismiss petitioner, considering
that: (1) he had admitted lending his company ID to driver Vicente Villaruz; (2) his act had constituted
mental dishonesty and deceit amounting to breach of trust; (3) Rapid Movers relationship with Tanduay
had been jeopardized by his act; and (4) he had been banned from all the warehouses of Tanduay as a
result, leaving Rapid Movers with no available job for him.5
On appeal, however, the NLRC reversed the Labor Arbiter, and held that Rapid Movers had not
discharged its burden to prove the validity of petitioners dismissal from his employment. It opined that
Rapid Movers did not suffer any pecuniary damage from his act; and that his dismissal was a penalty
disproportionate to the act of petitioner complained of. It awarded him backwages and separation pay in
lieu of reinstatement, to wit:
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and a new one ENTERED
ordering the payment of his backwages from April 25, 2001 up to the finality of this decision and in lieu
of reinstatement, he should be paid his separation pay from date of hire on May 2, 1994 up to the finality
hereof.
SO ORDERED.6

Rapid Movers brought a petition for certiorari in the CA, averring grave abuse of discretion on the part
of the NLRC, to wit:
I.
x x x IN STRIKING DOWN THE DISMISSAL OF THE PRIVATE RESPONDENT [AS] ILLEGAL
ALLEGEDLY FOR BEING GROSSLY DISPROPORTIONATE TO THE OFFENSE COMMITTED IN
THAT NEITHER THE PETITIONERS NOR ITS CLIENT TANDUAY SUFFERED ANY
PECUNIARY DAMAGE THEREFROM THEREBY IMPLYING THAT FOR A DISHONEST
ACT/MISCONDUCT TO BE A GROUND FOR DISMISSAL OF AN EMPLOYEE, THE SAME
MUST AT LEAST HAVE RESULTED IN PECUNIARY DAMAGE TO THE EMPLOYER;
II.
x x x IN EXPRESSING RESERVATION ON THE GUILT OF THE PRIVATE RESPONDENT IN THE
LIGHT OF ITS PERCEIVED CONFLICTING DATES OF THE LETTER OF TANDUAY TO RAPID
MOVERS (JANUARY 25, 2001) AND THE OCCURRENCE OF THE INCIDENT ON APRIL 25,
2001 WHEN SAID CONFLICT OF DATES CONSIDERING THE EVIDENCE ON RECORD, WAS
MORE APPARENT THAN REAL.7
Ruling of the CA
On October 24, 2003, the CA promulgated its assailed decision reinstating the decision of the Labor
Arbiter, and upholding the right of Rapid Movers to discipline its workers, holding thusly:
There is no dispute that the private respondent lent his I.D. Card to another employee who used the same
in entering the compound of the petitioner customer, Tanduay. Considering that this amounts to
dishonesty and is provided for in the petitioning Companys Manual of Discipline, its imposition is but
proper and appropriate.
It is basic in any enterprise that an employee has the obligation of following the rules and regulations of
its employer. More basic further is the elementary obligation of an employee to be honest and truthful in
his work. It should be noted that honesty is one of the foremost criteria of an employer when hiring a
prospective employee. Thus, we see employers requiring an NBI clearance or police clearance before
formally accepting an applicant as their employee. Such rules and regulations are necessary for the
efficient operation of the business.
Employees who violate such rules and regulations are liable for the penalties and sanctions so provided,
e.g., the Companys Manual of Discipline (as in this case) and the Labor Code.
The argument of the respondent commission that no pecuniary damage was sustained is off-tangent with
the facts of the case. The act of lending an ID is an act of dishonesty to which no pecuniary estimate can
be ascribed for the simple reason that no monetary equation is involved. What is involved is plain and
simple adherence to truth and violation of the rules. The act of uttering or the making of a falsehood
does not need any pecuniary estimate for the act to gestate to one punishable under the labor laws. In
this case, the illegal use of the I.D. Card while it may appear to be initially trivial is of crucial relevance
to the petitioners customer, Tanduay, which deals with drivers and leadmen withdrawing goods and
merchandise from its warehouse. For those with criminal intentions can use anothers ID to asport goods
and merchandise.
Hence, while it can be conceded that there is no pecuniary damage involved, the fact remains that the
offense does not only constitute dishonesty but also willful disobedience to the lawful order of the

Company, e.g., to observe at all time the terms and conditions of the Manual of Discipline. Article 282
of the Labor Code provides:
"Termination by Employer An employer may terminate an employment for any of the following
causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
x x x." (Emphasis, supplied)
The constitutional protection afforded to labor does not condone wrongdoings by the employee; and an
employers power to discipline its workers is inherent to it. As honesty is always the best policy, the
Court is convinced that the ruling of the Labor Arbiter is more in accord with the spirit of the Labor
Code. "The Constitutional policy of providing full protection to labor is not intended to oppress or
destroy management (Capili vs. NLRC, 270 SCRA 488[1997]." Also, in Atlas Fertilizer Corporation vs.
NLRC, 273 SCRA 549 [1997], the Highest Magistrate declared that "The law, in protecting the rights of
the laborers, authorizes neither oppression nor self-destruction of the employer."
WHEREFORE, premises considered, the Petition is GRANTED. The assailed 17 June 2002 Decision of
respondent Commission in NLRC CA-029937-01 is hereby SET ASIDE and the 10 September 2001
Decision of Labor Arbiter Vicente R. Layawen is ordered REINSTATED. No costs.
SO ORDERED.8
Petitioner moved for a reconsideration, but the CA denied his motion on March 22, 2004.9
Undaunted, the petitioner is now on appeal.
Issue
Petitioner still asserts the illegality of his dismissal, and denies being guilty of willful disobedience. He
contends that:
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
SUSTAINING THE DECISION DATED 10 SEPTEMBER 2001 OF LABOR ARBITER VICENTE R.
LAYAWEN WHERE THE LATTER RULED THAT BY LENDING HIS ID TO VILLARUZ,
PETITIONER (COMPLAINANT) COMMITTED MISREPRESENTATION AND DECEIT
CONSTITUTING MENTAL DISHONESTY WHICH CANNOT BE DISCARDED AS
INSIGNIFICANT OR TRIVIAL.10
Petitioner argues that his dismissal was discriminatory because Villaruz was retained in his employment
as driver; and that the CA gravely abused its discretion in disregarding his showing that he did not
violate Rapid Movers rules and regulations but simply performed his work in line with the duties
entrusted to him, and in not appreciating his good faith and lack of any intention to willfully disobey the
companys rules.
In its comment,11 Rapid Movers prays that the petition for certiorari be dismissed for being an improper
remedy and apparently resorted to as a substitute for a lost appeal; and insists that the CA did not
commit grave abuse of discretion.1wphi1

In his reply,12 petitioner submits that his dismissal was a penalty too harsh and disproportionate to his
supposed violation; and that his dismissal was inappropriate due to the violation being his first infraction
that was even committed in good faith and without malice.
Based on the parties foregoing submissions, the issues to be resolved are, firstly: Was the petition
improper and dismissible?; and, secondly: If the petition could prosper, was the dismissal of petitioner
on the ground of willful disobedience to the company regulation lawful?
Ruling
The petition has merit.
1.
Petition should not be dismissed
In St. Martin Funeral Home v. National Labor Relations Commission,13 the Court has clarified that
parties seeking the review of decisions of the NLRC should file a petition for certiorari in the CA on the
ground of grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC.
Thereafter, the remedy of the aggrieved party from the CA decision is an appeal via petition for review
on certiorari.14
The petition filed here is self-styled as a petition for review on certiorari, but Rapid Movers points out
that the petition was really one for certiorari under Rule 65 of the Rules of Court due to its basis being
the commission by the CA of a grave abuse of its discretion and because the petition was filed beyond
the reglementary period of appeal under Rule 45. Hence, Rapid Movers insists that the Court should
dismiss the petition because certiorari under Rule 65 could not be a substitute of a lost appeal under Rule
45.
Ordinarily, an original action for certiorari will not prosper if the remedy of appeal is available, for an
appeal by petition for review on certiorari under Rule 45 of the Rules of Court and an original action for
certiorari under Rule 65 of the Rules of Court are mutually exclusive, not alternative nor successive,
remedies.15 On several occasions, however, the Court has treated a petition for certiorari as a petition for
review on certiorari when: (a) the petition has been filed within the 15-day reglementary period;16 (b)
public welfare and the advancement of public policy dictate such treatment; (c) the broader interests of
justice require such treatment; (d) the writs issued were null and void; or (e) the questioned decision or
order amounts to an oppressive exercise of judicial authority.17
The Court deems it proper to allow due course to the petition as one for certiorari under Rule 65 in the
broader interest of substantial justice, particularly because the NLRCs appellate adjudication was set
aside by the CA, and in order to put at rest the doubt that the CA, in so doing, exercised its judicial
authority oppressively. Whether the petition was proper or not should be of less importance than whether
the CA gravely erred in undoing and setting aside the determination of the NLRC as a reviewing forum
vis--vis the Labor Arbiter. We note in this regard that the NLRC had declared the dismissal of petitioner
to be harsh and not commensurate to the infraction committed. Given the spirit and intention underlying
our labor laws of resolving a doubtful situation in favor of the working man, we will have to review the
judgment of the CA to ascertain whether the NLRC had really committed grave abuse of its discretion.
This will settle the doubts on the propriety of terminating petitioner, and at the same time ensure that
justice is served to the parties.18
2.

Petitioner was not guilty of willful disobedience; hence, his dismissal was illegal
Petitioner maintains that willful disobedience could not be a ground for his dismissal because he had
acted in good faith and with the sole intention of facilitating deliveries for Rapid Movers when he
allowed Villaruz to use his company ID.
Willful disobedience to the lawful orders of an employer is one of the valid grounds to terminate an
employee under Article 296 (formerly Article 282) of the Labor Code.19 For willful disobedience to be a
ground, it is required that: (a) the conduct of the employee must be willful or intentional; and (b) the
order the employee violated must have been reasonable, lawful, made known to the employee, and must
pertain to the duties that he had been engaged to discharge.20 Willfulness must be attended by a wrongful
and perverse mental attitude rendering the employees act inconsistent with proper subordination. 21 In
any case, the conduct of the employee that is a valid ground for dismissal under the Labor Code
constitutes harmful behavior against the business interest or person of his employer.22 It is implied that in
every act of willful disobedience, the erring employee obtains undue advantage detrimental to the
business interest of the employer.
Under the foregoing standards, the disobedience attributed to petitioner could not be justly characterized
as willful within the contemplation of Article 296 of the Labor Code. He neither benefitted from it, nor
thereby prejudiced the business interest of Rapid Movers. His explanation that his deed had been
intended to benefit Rapid Movers was credible. There could be no wrong or perversity on his part that
warranted the termination of his employment based on willful disobedience.
Rapid Movers argues, however, that the strict implementation of company rules and regulations should
be accorded respect as a valid exercise of its management prerogative. It posits that it had the
prerogative to terminate petitioner for violating its following company rules and regulations, to wit:
(a) "Pagpayag sa paggamit ng iba o paggamit ng maling rekord ng kumpanya kaugnay sa
operations, maintenance or materyales o trabaho" (Additional Rules and Regulations No. 2); and
(b) "Pagkutsaba sa pagplano o pagpulong sa ibang tao upang labagin ang anumang alituntunin ng
kumpanya" (Article 5.28).23
We cannot sustain the argument of Rapid Movers.
It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad
discretion includes the implementation of company rules and regulations and the imposition of
disciplinary measures on its employees. But the exercise of a management prerogative like this is not
limitless, but hemmed in by good faith and a due consideration of the rights of the worker.24 In this light,
the management prerogative will be upheld for as long as it is not wielded as an implement to
circumvent the laws and oppress labor.25
To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant
circumstances have been appreciated and evaluated with the goal of ensuring that the ground for
dismissal was not only serious but true. The cause of termination, to be lawful, must be a serious and
grave malfeasance to justify the deprivation of a means of livelihood. This requirement is in keeping
with the spirit of our Constitution and laws to lean over backwards in favor of the working class, and
with the mandate that every doubt must be resolved in their favor.26
Although we recognize the inherent right of the employer to discipline its employees, we should still
ensure that the employer exercises the prerogative to discipline humanely and considerately, and that the
sanction imposed is commensurate to the offense involved and to the degree of the infraction. The

discipline exacted by the employer should further consider the employees length of service and the
number of infractions during his employment.27The employer should never forget that always at stake in
disciplining its employee are not only his position but also his livelihood,28 and that he may also have a
family entirely dependent on his earnings.29
Considering that petitioners motive in lending his company ID to Villaruz was to benefit Rapid Movers
as their employer by facilitating the loading of goods at the Tanduay Otis Warehouse for distribution to
Rapid Movers clients, and considering also that petitioner had rendered seven long unblemished years
of service to Rapid Movers, his dismissal was plainly unwarranted. The NLRCs reversal of the decision
of the Labor Arbiter by holding that penalty too harsh and disproportionate to the wrong attributed to
him was legally and factually justified, not arbitrary or whimsical. Consequently, for the CA to
pronounce that the NLRC had thereby gravely abused its discretion was not only erroneous but was
itself a grave abuse of discretion amounting to lack of jurisdiction for not being in conformity with the
pertinent laws and jurisprudence. We have held that a conclusion or finding derived from erroneous
considerations is not a mere error of judgment but one tainted with grave abuse of discretion.30
WHEREFORE, the Court GRANTS the petition; REVERSES and SETS ASIDE the decision
promulgated by the Court of Appeals on October 24, 2003; REINSTATES the decision of the National
Labor Relations Commission rendered on June 17, 2002; and ORDERS respondents to pay the costs of
suit.
SO ORDERED.
G.R. No. 194813

April 25, 2012

Kakampi and its Members, Victor Panuelos, et al., represented by David Dayalo, Kakampi Vice
President and Attorney-in-Fact, Petitioner,
vs.
Kingspoint Express and Logistic and/or MARY Ann Co, Respondents.
DECISION
REYES, J.:
This is a petition for review under Rule 45 of the Rules of Court of the Amended Decision1 dated March
16, 2010 and Resolution2 dated December 16, 2010 of the Court of Appeals (CA) in CA-G.R. SP No.
106591.
Victor Pauelos (Pauelos), Bobby Dacara (Dacara), Alson Dizon (Dizon), Saldy Dimabayao
(Dimabayao), Fernando Lupangco, Jr. (Lupangco), Sandy Pazi (Pazi), Camilo Tabarangao, Jr.
(Tabarangao), Eduardo Hizole (Hizole) and Reginald Carillo (Carillo) were the former drivers of
Kingspoint Express and Logistic (Kingspoint Express), a sole proprietorship registered in the name of
Mary Ann Co (Co) and engaged in the business of transport of goods. They were dismissed from service
on January 20, 2006 on the grounds of serious misconduct, dishonesty, loss of trust and confidence and
commission of acts inimical to the interest of Kingspoint Express.
Prior thereto, Kingspoint Express issued separate notices to explain to the individual petitioners on
January 16, 2006, uniformly stating that:
RE: CHARGES OF DISHONESTY
SERIOUS MISCONDUCT &
LOSS OF CONFIDENCE

Dear Mr. Dacara:

You are hereby formally charged with DISHONESTY, SERIOUS MISCONDUCT, LOSS OF
CONFIDENCE, and acts inimical to the company, by filing with the National Labor Relations
Commission (NLRC) false, malicious, and fabricated cases against the company. Further, your refusal to
undergo drug testing is unwarranted and against company policy.
Please submit your answer or explanation to the foregoing charges within forty-eight (48) hours [from]
receipt hereof. Your failure to do so would mean that you waive your right to submit your answer.
You may likewise opt for a formal investigation with the assistance of counsel, or proceed with the
investigation as you may choose.
In the meantime, you are place[d] under preventive suspension for thirty (30) days effective on January
16, 2006. You are physically barred from company premises while the preventive suspension exists[.]3
The individual petitioners failed to submit their written explanation within the stated period.
Subsequently, Kingspoint Express issued to them separate yet uniformly worded notices on January 20,
2006, informing them of their dismissal. Kingspoint Express expressed its decision in this wise:
On January 16, 2006, you were formally charged with DISHONESTY, SERIOUS MISCONDUCT and
LOSS OF CONFIDENCE and ACTS INIMICAL TO THE COMPANY based on the following acts:
1. FABRICATION OF BASELESS MONEY CLAIMS against the company;
2. MISLEADING FELLOW CO-WORKERS to sign the MALICIOUS COMPLAINT FOR
MONEY CLAIMS against the company;
3. REFUSAL TO UNDERGO THE COMPANYS GENERAL DRUG TEST[;]
4. EXTORTING MONEY FROM CO-WORKERS TO FUND ACTIVITIES THAT THEY
WERE NEVER FULLY INFORMED OF;
You were given two (2) days to respond to these charges, but you failed to do [so].4
In addition to the foregoing, Dacara was dismissed for consummating his sexual relations with one of
Cos household helpers inside Cos residence thus impregnating her.5
A complaint for illegal dismissal was subsequently filed, alleging that the charges against them were
fabricated and that their dismissal was prompted by Kingspoint Express aversion to their union
activities.
In a Decision6 dated April 23, 2007, Labor Arbiter Cresencio G. Ramos, Jr. (LA Ramos) found Dacara,
Lupangco, Pazi, Tabarangao, Hizole and Carillo illegally dismissed. On the other hand, the complaint
was dismissed insofar as Panuelos, Dizon and Dimabayao are concerned as they were deemed not to
have filed their position papers. While the allegation of anti-unionism as the primordial motivation for
the dismissal is considered unfounded, the respondents failed to prove that the dismissal was for a just
cause. The pertinent portion of the decision reads:

From a perusal and examination of the pieces of evidence adduced by the respondents in support of their
defense, this Office finds the same as not being sufficient and substantial to establish the charges of
serious misconduct and breach of trust. Consider the following:
On the complainants alleged refusal to undergo the companys general drug testing, the same is
explicitly nothing but an unsubstantiated allegation, therefore, undeserving of judicial and quasi-judicial
cognizance.
On the alleged act of the complainants in extorting money from co-workers to fund activities that they
were not fully informed of as well as the alleged misleading of co-workers to sign "malicious money
claims" against the company, it is to be noticed that respondents support or evidence thereto are the
joint affidavit of drivers and helpers as well as that of one Ronie Dizon. On said pieces of evidence, this
Office could not give much probative or evidentiary value and weight thereto as said sworn statements
may definitely not be said to have genuinely emanated from the affiants (sic) drivers and helpers. To be
precise, the joint-affidavit of the drivers and helpers (annex "B", respondents position paper) obviously
was "tailor-made", so to speak, to conform with the respondents position or defense in the instant case.
Said joint-affidavit in fact is couched in english, thus, tremendously lowering the probability that the
statements therein really came from the "hearts and souls" of the lowly-educated drivers and helpers.
On the breach of trust allegedly committed by Bobby Dacara with respect to the alleged act of
repeatedly sneaking in the household of respondent Mary Ann Co and thereafter impregnating one of the
latters househelps, the same is nothing but an unsubstantiated allegation and therefore, undeserving of
judicial and quasi-judicial cognizance. Jurisprudence definitely is explicit on this point that an
affirmative allegation made by a party must duly be proven to merit acceptance (People vs. Calayca, 301
SCRA 192).7
On appeal, the National Labor Relations Commission (NLRC) affirmed LA Ramos Decision dated
April 23, 2007 in its Resolution8 dated April 30, 2008, thus:
In the case at bar, We are persuaded to agree with the findings of the Labor Arbiter that "the pieces of
evidence adduced by the respondents in support of their defense x x x not being sufficient and
substantial to establish the charges of serious misconduct and breach of trust" (Records, p. 96).9
In addition, the NLRC ruled that the respondents failed to comply with the procedural requirements of
due process. Specifically:
It is also observed that much is to be desired insofar as the observance of the procedural due process
aspect is concerned. Firstly, there was no compliance with the due process requirement of the law
considering that the uniformly worded first notice, all dated January 16, 2006, sent by respondentsappellants to the complainants-appellees, did not apprise them of the particular acts or omission for
which their dismissal were sought. As clearly shown by the said individual notices, each of the
complainants-appellees was merely informed that he or she is "formally charged with DISHONESTY,
SERIOUS MISCONDUCT, LOSS OF CONFIDENCE and acts inimical to the Company" x x x without
specifying the particular or specific acts or omissions constituting the grounds for their dismissal.
The purpose of the first notice is to sufficiently apprise the employee of the acts complained of and to
enable the employee to prepare his defense. In this case, though, the said first notice did not identify the
particular acts or omissions committed by each of the complainants-appellees. The extent of their
knowledge and participation in the generally described charges were not specified in the said first notice,
hence, the complainants-appellee could not be expected to intelligently and adequately prepare their
defense. The first notice should neither be pro-forma nor vague; that it should set out clearly what each
of the employees is being held liable for. They should be given ample opportunity to be heard and not

mere opportunity. Ample opportunity means that each of the complainants-appellees should be
specifically informed of the charges in order to give each of them, an opportunity to refute such
accusations. Since, the said first notices are inadequate, their dismissal could not be in accordance with
due process x x x.
Secondly, there was no just or authorized cause for the respondents-appellants to terminate the
complainants-appellees services. It is observed that the Notices of Termination, all dated January 20,
2006, merely mentioned the ground relied upon, to wit:
xxxx
Placing side by side the first (1st) notices and the Notice of Termination, We can easily notice the wide
disparity between them. In the first (1st) notices, the alleged charges leveled against each of
complainants-appellees were couched in general terms, such as: DISHONESTY, SERIOUS
MISCONDUCT, LOSS OF CONFIDENCE and ACTS INIMICAL TO THE COMPANY, such that the
complainants-appellees could not be expected to prepare their responsive pleadings; while the uniformly
worded Notices of Termination, as earlier quoted, the charges leveled against of (sic) them are more
specific.10
Respondents moved for reconsideration and in a Decision11 dated July 17, 2008, the NLRC reversed
itself and declared the individual petitioners legally dismissed:
Respondent company is an entity engaged in the delivery of goods called "door-to-door" business. As
such, respondents are in custody of goods and moneys belonging to customers. Thus, respondents want
to ensure that their drivers are drug-free and honest. It is undeniable that persons taking prohibited drugs
tend to commit criminal activities when they are "high", as most of them are out of their minds.
Complainants are drivers and are on the road most of the time. Thus, they must see to it that they do not
cause damage to other motor vehicles and pedestrians.
Likewise, when delivering goods and money, it is not impossible that they could commit acts inimical to
the respondents interest, like failure to deliver the money or goods to the right person or do a "hold-up
me" scenario.
Thus, to guarantee complainants-drivers safety and effective performance of their assigned tasks,
respondents ordered complainants to undergo drug testing. However, they refused to follow the
directive. Neither did they give a clear explanation for their refusal to the respondents. This shows
complainants wrongful attitude to defy the reasonable orders which undoubtedly pertain to their duties
as drivers of the respondents. Such act is tantamount to willful disobedience of a lawful order, a valid
ground for dismissal under the Labor Code, as amended.
Furthermore, employees who are not complainants in this case, in a sworn statement attested to the fact
that complainants tricked them to sign papers which turned out to be a complaint for money claims.
They also accused them of abusing their trust in order to achieve their selfish motives. Complainants
even convinced them to shell out part of their salaries without authorization and consent, as "panggatos
para sa papeles, transportasyon ng abugado" but said money was used for the Unions purposes. Worse,
complainants even threatened them to file criminal charges against them if they did not follow the
complainants evil plans. x x x
In their Rejoinder, respondents also mentioned about the loss of cargoes to be delivered to Pampanga
and Nueva Ecija. Complainants failed to refute the allegations nor comment on the matter. This led to
respondents loss of trust and confidence reposed in them. Considering that the drivers have in their

possession money and goods to be delivered, the continuance of their employment depends on the trust
and confidence in them. Undeniably, trust, once lost is hard to regain.
xxxx
We disagree.
On January 16, 2006, respondents sent each of the complainants a letter stating the infractions
committed by them. They directed them to explain the said infractions with a warning that failure to do
so would mean waiver of their right to submit their answer. They further advised them to "opt for a
formal investigation with assistance of the counsel, or proceed with the investigation you may choose".
However, complainants failed to answer. Neither did they do any act to dispute the charges. They
remained silent on the infractions which a person would not normally do if he is not guilty of the said
charges. If they were really innocent, immediately, even without any notice, they should have reacted
and did everything to dispute the charges. But they failed, despite the notice to explain. This would lead
to the conclusion that they were guilty of the charges imputed against them. As a consequence thereof,
the complainants are considered to have waived their right to defend themselves.12
Petitioners moved for reconsideration but the same was denied in a Resolution13 dated September 30,
2008.
Subsequently, the petitioners filed a petition for certiorari with the CA. In a Decision14 dated July 17,
2009, the CA reversed and set aside the NLRC Decision dated July 17, 2008 and Resolution dated
September 30, 2008. Thus:
Initially, this Court must determine whether the petitioners violated the Company Policies as would
warrant their dismissal from the service. However, a painstaking review of the records of this case
negate[s] a finding of such culpability on the part of the petitioners.
The charges of dishonesty, serious misconduct and loss of confidence against the petitioners are nothing
more than bare allegations as neither the show cause orders nor the termination letters specify in clear
and unmistakable manner, the specific acts committed by the petitioners as would amount to dishonesty,
serious misconduct or loss of confidence. Neither of these notices even contain any averments as to how
and when the alleged infractions were committed by the petitioners.
xxx
In this case, respondent company had not been able to identify an act of dishonesty, serious misconduct
or any illicit act, which the petitioners may have committed in connection with their work, except the
allegation that petitioners filed false, malicious, and fabricated cases against the company which, under
the Labor Code, is not a valid ground for termination of employment. There is even no mention of any
company policy or rule violated by any of the petitioners to warrant their dismissal. The charges are
clearly unfounded.
xxxx
The superficial compliance with two notices and a hearing in this case cannot be considered valid where
the notices to explain where issued four (4) days before the petitioners were terminated. The termination
was obviously hurriedly effected, as the respondent failed to give the petitioners the avenue to contradict
the charges against them either by submission of their answer or by the conduct of an actual
investigation in order to give spirit to the requirement of due process. Petitioners were thus robbed of

their rights to explain their side, to present evidence and rebut what was presented against them, rights
ensured by the proper observance of procedural due process.15
Respondents promptly filed a motion for reconsideration. Similar to the NLRC, the CA reversed itself
and retracted its earlier finding that the individual petitioners were illegally dismissed. In its Amended
Decision16 dated March 16, 2010, the CA concluded that the two (2) notices issued by Kingspoint
Express complied with the requirements of the law:
In the assailed Decision, We conceded that all the petitioners were actually furnished with a letter dated
16 January 2006. In each letter, petitioners were individually charged with "dishonesty, serious
misconduct, loss of confidence for performing acts inimical to the company by filing with the NLRC
false, malicious and fabricated cases against the company and their refusal to undergo drug testing."
They were directed to submit an answer or explanation within forty-eight (48) hours and were even
given the option to avail of a formal investigation with the assistance of counsel. They were further
advised that failure to submit said answer/explanation would mean waiver on their part. Thus, when they
failed to submit an explanation/Answer, and failed to inform their employer that they wanted a formal
investigation on the matter, their employer was constrained to serve upon them on 20 January 2006, or
four (4) days later, separate notices of termination stating the offenses they committed, viz.:
xxxx
Show-cause letters/memoranda create a burden on the employees to explain their innocence. In turn, it is
from such explanation that the employer will be obliged to prove his case in an investigation. Since the
petitioners did not explain, much less invoke their right to investigation, it follows that they are deemed
to have waived their rights under Art. 277(b) of the Labor Code. Technically, the law on evidence
considers them to have admitted the charges against them. With such admission, the employer is
discharged from the need to prove the offenses charged. It is well-settled that in any forum, whether
judicial or administrative, a party need not prove what is admitted.17 (Citations omitted)
The CA also held that the individual petitioners performed acts, which constitute serious misconduct:
The assailed Decision admits what constitutes serious misconduct.
Here, except for Bobby Dacara, each of the three petitioners conceded the existence of the following
bases for their dismissal: (1) complainants refusal to undergo mandatory drug-testing; (2) creating
disharmony and distrust among the workers and misleading them to go against the employer; and (3)
losing cargo with a value of P250,000.00 entrusted to respondent company for door-to-door delivery.
Verily, each of the aforestated grounds independently constitute[s] serious misconduct. Each of them
were (sic) committed in relation to petitioners work. And again, the commission of said infractions
constitutes a ground to dismiss under Art. 282(a) of the Code. The Court, therefore, gravely erred when
it held that no serious misconduct was committed by petitioners in this case.
On the other hand, in the case of Bobby Dacara, records show that he committed breach of trust and
confidence by sneaking into the house of private respondent Co and engaging one of Cos helpers in
repeated sexual congress leading to her pregnancy. As held in Santos, Jr. vs. NLRC, such behavior
amounts to immorality which is a case of serious misconduct; a just cause to dismiss an
employee.18 (Citation omitted)
Petitioners moved for reconsideration but this was denied by the CA in its Resolution19 dated December
16, 2010.

The lone issue for the disposition of this Court is the validity of the individual petitioners dismissal.
It is fundamental that in order to validly dismiss an employee, the employer is required to observe both
substantive and procedural due process the termination of employment must be based on a just or
authorized cause and the dismissal must be effected after due notice and hearing.20
As to whether Kingspoint Express complied with the substantive requirements of due process, this Court
agrees with the CA that the concerned employees refusal to submit themselves to drug test is a just
cause for their dismissal.
An employer may terminate an employment on the ground of serious misconduct or willful disobedience
by the employee of the lawful orders of his employer or representative in connection with his
work.1wphi1 Willful disobedience requires the concurrence of two elements: (1) the employee's
assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and
(2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain
to the duties which he had been engaged to discharge. Both elements are present in this case.
As to the first element, that at no point did the dismissed employees deny Kingspoint Express claim that
they refused to comply with the directive for them to submit to a drug test or, at the very least, explain
their refusal gives rise to the impression that their non-compliance is deliberate. The utter lack of reason
or justification for their insubordination indicates that it was prompted by mere obstinacy, hence, willful
and warranting of dismissal.
It involves little difficulty to accuse Kingspoint Express of anti-unionism and allege that this was what
motivated the dismissal of the petitioners, but the duty to prove such an accusation is altogether
different. That the petitioners failed at the level of substantiation only goes to show that their claim of
unfair labor practice is a mere subterfuge for their willful disobedience.
As to the second element, no belabored and extensive discussion is necessary to recognize the relevance
of the subject order in the performance of their functions as drivers of Kingspoint Express. As the NLRC
correctly pointed out, drivers are indispensable to Kingspoint Express primary business of rendering
door-to-door delivery services. It is common knowledge that the use of dangerous drugs has adverse
effects on driving abilities that may render the dismissed employees incapable of performing their duties
to Kingspoint Express and acting against its interests, in addition to the threat they pose to the public.
The existence of a single just cause is enough to order their dismissal and it is now inconsequential if the
other charges against them do not merit their dismissal from service. It is therefore unnecessary to
discuss whether the other acts enumerated in the notices of termination issued by Kingspoint Express
may be considered as any of the just causes.1wphi1
Nonetheless, while Kingspoint Express had reason to sever their employment relations, this Court finds
its supposed observance of the requirements of procedural due process pretentious. While Kingspoint
Express required the dismissed employees to explain their refusal to submit to a drug test, the two (2)
days afforded to them to do so cannot qualify as "reasonable opportunity", which the Court construed in
King of Kings Transport, Inc. v. Mamac21 as a period of at least five (5) calendar days from receipt of the
notice.
Thus, even if Kingspoint Express defective attempt to comply with procedural due process does not
negate the existence of a just cause for their dismissal, Kingspoint Express is still liable to indemnify the
dismissed employees, with the exception of Panuelos, Dizon and Dimabayao, who did not appeal the
dismissal of their complaints, with nominal damages in the amount of P30,000.00.

WHEREFORE, premises considered, the Decision dated March 16, 2010 and Resolution dated
December 16, 2010 of the Court of Appeals are AFFIRMED with MODIFICATION in that respondent
Kingspoint Express and Logistic is hereby held liable for the payment of nominal damage, in the amount
of P30,000.00 each to petitioners Bobby Dacara, Fernando Lupangco, Jr., Sandy Pazi, Camilo
Tabarangao, Jr., Eduardo Hizole and Reginaldo Carillo, for non-observance of procedural due process
required in terminating employment.
SO ORDERED.
G.R. No. L-46496

February 27, 1940

ANG TIBAY, represented by TORIBIO TEODORO, manager and propietor, and

NATIONAL WORKERS BROTHERHOOD, petitioners,
vs.
THE COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION,
INC., respondents.
Office of the Solicitor-General Ozaeta and Assistant Attorney Barcelona for the Court of Industrial
Relations.
Antonio D. Paguia for National Labor Unon.
Claro M. Recto for petitioner "Ang Tibay".
Jose M. Casal for National Workers' Brotherhood.
LAUREL, J.:
The Solicitor-General in behalf of the respondent Court of Industrial Relations in the above-entitled case
has filed a motion for reconsideration and moves that, for the reasons stated in his motion, we reconsider
the following legal conclusions of the majority opinion of this Court:
1. Que un contrato de trabajo, asi individual como colectivo, sin termino fijo de duracion o que
no sea para una determinada, termina o bien por voluntad de cualquiera de las partes o cada vez
que ilega el plazo fijado para el pago de los salarios segun costumbre en la localidad o cunado se
termine la obra;
2. Que los obreros de una empresa fabril, que han celebrado contrato, ya individual ya
colectivamente, con ell, sin tiempo fijo, y que se han visto obligados a cesar en sus tarbajos por
haberse declarando paro forzoso en la fabrica en la cual tarbajan, dejan de ser empleados u
obreros de la misma;
3. Que un patrono o sociedad que ha celebrado un contrato colectivo de trabajo con sus osbreros
sin tiempo fijo de duracion y sin ser para una obra determiminada y que se niega a readmitir a
dichos obreros que cesaron como consecuencia de un paro forzoso, no es culpable de practica
injusta in incurre en la sancion penal del articulo 5 de la Ley No. 213 del Commonwealth,
aunque su negativa a readmitir se deba a que dichos obreros pertenecen a un determinado
organismo obrero, puesto que tales ya han dejado deser empleados suyos por terminacion del
contrato en virtud del paro.
The respondent National Labor Union, Inc., on the other hand, prays for the vacation of the judgement
rendered by the majority of this Court and the remanding of the case to the Court of Industrial Relations
for a new trial, and avers:

1. That Toribio Teodoro's claim that on September 26, 1938, there was shortage of leather soles
in ANG TIBAY making it necessary for him to temporarily lay off the members of the National
Labor Union Inc., is entirely false and unsupported by the records of the Bureau of Customs and
the Books of Accounts of native dealers in leather.
2. That the supposed lack of leather materials claimed by Toribio Teodoro was but a scheme to
systematically prevent the forfeiture of this bond despite the breach of his CONTRACT with the
Philippine Army.
3. That Toribio Teodoro's letter to the Philippine Army dated September 29, 1938, (re supposed
delay of leather soles from the States) was but a scheme to systematically prevent the forfeiture
of this bond despite the breach of his CONTRACT with the Philippine Army.
4. That the National Worker's Brotherhood of ANG TIBAY is a company or employer union
dominated by Toribio Teodoro, the existence and functions of which are illegal. (281 U.S., 548,
petitioner's printed memorandum, p. 25.)
5. That in the exercise by the laborers of their rights to collective bargaining, majority rule and
elective representation are highly essential and indispensable. (Sections 2 and 5, Commonwealth
Act No. 213.)
6. That the century provisions of the Civil Code which had been (the) principal source of
dissensions and continuous civil war in Spain cannot and should not be made applicable in
interpreting and applying the salutary provisions of a modern labor legislation of American
origin where the industrial peace has always been the rule.
7. That the employer Toribio Teodoro was guilty of unfair labor practice for discriminating
against the National Labor Union, Inc., and unjustly favoring the National Workers' Brotherhood.
8. That the exhibits hereto attached are so inaccessible to the respondents that even with the
exercise of due diligence they could not be expected to have obtained them and offered as
evidence in the Court of Industrial Relations.
9. That the attached documents and exhibits are of such far-reaching importance and effect that
their admission would necessarily mean the modification and reversal of the judgment rendered
herein.
The petitioner, Ang Tibay, has filed an opposition both to the motion for reconsideration of the
respondent National Labor Union, Inc.
In view of the conclusion reached by us and to be herein after stead with reference to the motion for a
new trial of the respondent National Labor Union, Inc., we are of the opinion that it is not necessary to
pass upon the motion for reconsideration of the Solicitor-General. We shall proceed to dispose of the
motion for new trial of the respondent labor union. Before doing this, however, we deem it necessary, in
the interest of orderly procedure in cases of this nature, in interest of orderly procedure in cases of this
nature, to make several observations regarding the nature of the powers of the Court of Industrial
Relations and emphasize certain guiding principles which should be observed in the trial of cases
brought before it. We have re-examined the entire record of the proceedings had before the Court of
Industrial Relations in this case, and we have found no substantial evidence that the exclusion of the 89
laborers here was due to their union affiliation or activity. The whole transcript taken contains what
transpired during the hearing and is more of a record of contradictory and conflicting statements of

opposing counsel, with sporadic conclusion drawn to suit their own views. It is evident that these
statements and expressions of views of counsel have no evidentiary value.
The Court of Industrial Relations is a special court whose functions are specifically stated in the law of
its creation (Commonwealth Act No. 103). It is more an administrative than a part of the integrated
judicial system of the nation. It is not intended to be a mere receptive organ of the Government. Unlike a
court of justice which is essentially passive, acting only when its jurisdiction is invoked and deciding
only cases that are presented to it by the parties litigant, the function of the Court of Industrial Relations,
as will appear from perusal of its organic law, is more active, affirmative and dynamic. It not only
exercises judicial or quasi-judicial functions in the determination of disputes between employers and
employees but its functions in the determination of disputes between employers and employees but its
functions are far more comprehensive and expensive. It has jurisdiction over the entire Philippines, to
consider, investigate, decide, and settle any question, matter controversy or dispute arising between,
and/or affecting employers and employees or laborers, and regulate the relations between them, subject
to, and in accordance with, the provisions of Commonwealth Act No. 103 (section 1). It shall take
cognizance or purposes of prevention, arbitration, decision and settlement, of any industrial or
agricultural dispute causing or likely to cause a strike or lockout, arising from differences as regards
wages, shares or compensation, hours of labor or conditions of tenancy or employment, between
landlords and tenants or farm-laborers, provided that the number of employees, laborers or tenants of
farm-laborers involved exceeds thirty, and such industrial or agricultural dispute is submitted to the
Court by the Secretary of Labor or by any or both of the parties to the controversy and certified by the
Secretary of labor as existing and proper to be by the Secretary of Labor as existing and proper to be
dealth with by the Court for the sake of public interest. (Section 4,ibid.) It shall, before hearing the
dispute and in the course of such hearing, endeavor to reconcile the parties and induce them to settle the
dispute by amicable agreement. (Paragraph 2, section 4, ibid.) When directed by the President of the
Philippines, it shall investigate and study all industries established in a designated locality, with a view
to determinating the necessity and fairness of fixing and adopting for such industry or locality a
minimum wage or share of laborers or tenants, or a maximum "canon" or rental to be paid by the
"inquilinos" or tenants or less to landowners. (Section 5, ibid.) In fine, it may appeal to voluntary
arbitration in the settlement of industrial disputes; may employ mediation or conciliation for that
purpose, or recur to the more effective system of official investigation and compulsory arbitration in
order to determine specific controversies between labor and capital industry and in agriculture. There is
in reality here a mingling of executive and judicial functions, which is a departure from the rigid
doctrine of the separation of governmental powers.
In the case of Goseco vs. Court of Industrial Relations et al., G.R. No. 46673, promulgated September
13, 1939, we had occasion to joint out that the Court of Industrial Relations et al., G. R. No. 46673,
promulgated September 13, 1939, we had occasion to point out that the Court of Industrial Relations is
not narrowly constrained by technical rules of procedure, and the Act requires it to "act according to
justice and equity and substantial merits of the case, without regard to technicalities or legal forms and
shall not be bound by any technicalities or legal forms and shall not be bound by any technical rules of
legal evidence but may inform its mind in such manner as it may deem just and equitable." (Section 20,
Commonwealth Act No. 103.) It shall not be restricted to the specific relief claimed or demands made by
the parties to the industrial or agricultural dispute, but may include in the award, order or decision any
matter or determination which may be deemed necessary or expedient for the purpose of settling the
dispute or of preventing further industrial or agricultural disputes. (section 13, ibid.) And in the light of
this legislative policy, appeals to this Court have been especially regulated by the rules recently
promulgated by the rules recently promulgated by this Court to carry into the effect the avowed
legislative purpose. The fact, however, that the Court of Industrial Relations may be said to be free from
the rigidity of certain procedural requirements does not mean that it can, in justifiable cases before it,
entirely ignore or disregard the fundamental and essential requirements of due process in trials and

investigations of an administrative character. There are primary rights which must be respected even in
proceedings of this character:
(1) The first of these rights is the right to a hearing, which includes the right of the party
interested or affected to present his own case and submit evidence in support thereof. In the
language of Chief Hughes, in Morgan v. U.S., 304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129,
"the liberty and property of the citizen shall be protected by the rudimentary requirements of fair
play.
(2) Not only must the party be given an opportunity to present his case and to adduce evidence
tending to establish the rights which he asserts but the tribunal must consider the evidence
presented. (Chief Justice Hughes in Morgan v. U.S. 298 U.S. 468, 56 S. Ct. 906, 80 law. ed.
1288.) In the language of this court inEdwards vs. McCoy, 22 Phil., 598, "the right to adduce
evidence, without the corresponding duty on the part of the board to consider it, is vain. Such
right is conspicuously futile if the person or persons to whom the evidence is presented can thrust
it aside without notice or consideration."
(3) "While the duty to deliberate does not impose the obligation to decide right, it does imply a
necessity which cannot be disregarded, namely, that of having something to support it is a nullity,
a place when directly attached." (Edwards vs. McCoy, supra.) This principle emanates from the
more fundamental is contrary to the vesting of unlimited power anywhere. Law is both a grant
and a limitation upon power.
(4) Not only must there be some evidence to support a finding or conclusion (City of Manila vs.
Agustin, G.R. No. 45844, promulgated November 29, 1937, XXXVI O. G. 1335), but the
evidence must be "substantial." (Washington, Virginia and Maryland Coach Co. v. national labor
Relations Board, 301 U.S. 142, 147, 57 S. Ct. 648, 650, 81 Law. ed. 965.) It means such relevant
evidence as a reasonable mind accept as adequate to support a conclusion." (Appalachian
Electric Power v. National Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor
Relations Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co.
v. National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) . . . The statute provides that "the
rules of evidence prevailing in courts of law and equity shall not be controlling.' The obvious
purpose of this and similar provisions is to free administrative boards from the compulsion of
technical rules so that the mere admission of matter which would be deemed incompetent inn
judicial proceedings would not invalidate the administrative order. (Interstate Commerce
Commission v. Baird, 194 U.S. 25, 44, 24 S. Ct. 563, 568, 48 Law. ed. 860; Interstate Commerce
Commission v. Louisville and Nashville R. Co., 227 U.S. 88, 93 33 S. Ct. 185, 187, 57 Law. ed.
431; United States v. Abilene and Southern Ry. Co. S. Ct. 220, 225, 74 Law. ed. 624.) But this
assurance of a desirable flexibility in administrative procedure does not go far as to justify orders
without a basis in evidence having rational probative force. Mere uncorroborated hearsay or
rumor does not constitute substantial evidence. (Consolidated Edison Co. v. National Labor
Relations Board, 59 S. Ct. 206, 83 Law. ed. No. 4, Adv. Op., p. 131.)"
(5) The decision must be rendered on the evidence presented at the hearing, or at least contained
in the record and disclosed to the parties affected. (Interstate Commence Commission vs. L. & N.
R. Co., 227 U.S. 88, 33 S. Ct. 185, 57 Law. ed. 431.) Only by confining the administrative
tribunal to the evidence disclosed to the parties, can the latter be protected in their right to know
and meet the case against them. It should not, however, detract from their duty actively to see
that the law is enforced, and for that purpose, to use the authorized legal methods of securing
evidence and informing itself of facts material and relevant to the controversy. Boards of inquiry
may be appointed for the purpose of investigating and determining the facts in any given case,
but their report and decision are only advisory. (Section 9, Commonwealth Act No. 103.) The

Court of Industrial Relations may refer any industrial or agricultural dispute or any matter under
its consideration or advisement to a local board of inquiry, a provincial fiscal. a justice of the
peace or any public official in any part of the Philippines for investigation, report and
recommendation, and may delegate to such board or public official such powers and functions as
the said Court of Industrial Relations may deem necessary, but such delegation shall not affect
the exercise of the Court itself of any of its powers. (Section 10, ibid.)
(6) The Court of Industrial Relations or any of its judges, therefore, must act on its or his own
independent consideration of the law and facts of the controversy, and not simply accept the
views of a subordinate in arriving at a decision. It may be that the volume of work is such that it
is literally Relations personally to decide all controversies coming before them. In the United
States the difficulty is solved with the enactment of statutory authority authorizing examiners or
other subordinates to render final decision, with the right to appeal to board or commission, but
in our case there is no such statutory authority.
(7) The Court of Industrial Relations should, in all controversial questions, render its decision in
such a manner that the parties to the proceeding can know the various issues involved, and the
reasons for the decision rendered. The performance of this duty is inseparable from the authority
conferred upon it.
In the right of the foregoing fundamental principles, it is sufficient to observe here that, except as to the
alleged agreement between the Ang Tibay and the National Worker's Brotherhood (appendix A), the
record is barren and does not satisfy the thirst for a factual basis upon which to predicate, in a national
way, a conclusion of law.
This result, however, does not now preclude the concession of a new trial prayed for the by respondent
National Labor Union, Inc., it is alleged that "the supposed lack of material claimed by Toribio Teodoro
was but a scheme adopted to systematically discharged all the members of the National Labor Union
Inc., from work" and this avernment is desired to be proved by the petitioner with the "records of the
Bureau of Customs and the Books of Accounts of native dealers in leather"; that "the National Workers
Brotherhood Union of Ang Tibay is a company or employer union dominated by Toribio Teodoro, the
existence and functions of which are illegal." Petitioner further alleges under oath that the exhibits
attached to the petition to prove his substantial avernments" are so inaccessible to the respondents that
even within the exercise of due diligence they could not be expected to have obtained them and offered
as evidence in the Court of Industrial Relations", and that the documents attached to the petition "are of
such far reaching importance and effect that their admission would necessarily mean the modification
and reversal of the judgment rendered herein." We have considered the reply of Ang Tibay and its
arguments against the petition. By and large, after considerable discussions, we have come to the
conclusion that the interest of justice would be better served if the movant is given opportunity to
present at the hearing the documents referred to in his motion and such other evidence as may be
relevant to the main issue involved. The legislation which created the Court of Industrial Relations and
under which it acts is new. The failure to grasp the fundamental issue involved is not entirely attributable
to the parties adversely affected by the result. Accordingly, the motion for a new trial should be and the
same is hereby granted, and the entire record of this case shall be remanded to the Court of Industrial
Relations, with instruction that it reopen the case, receive all such evidence as may be relevant and
otherwise proceed in accordance with the requirements set forth hereinabove. So ordered.
Avancea, C. J., Villa-Real, Imperial, Diaz, Concepcion and Moran, JJ., concur.
G.R. No. 166208

June 29, 2007

KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and MELISSA

LIM, petitioners,
vs.
SANTIAGO O. MAMAC, respondent.
DECISION
VELASCO, JR., J.:
Is a verbal appraisal of the charges against the employee a breach of the procedural due process? This is
the main issue to be resolved in this plea for review under Rule 45 of the September 16, 2004
Decision1 of the Court of Appeals (CA) in CA-GR SP No. 81961. Said judgment affirmed the dismissal
of bus conductor Santiago O. Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered
the bus company to pay full backwages for violation of the twin-notice requirement and 13th-month pay.
Likewise assailed is the December 2, 2004 CA Resolution2 rejecting KKTIs Motion for
Reconsideration.
The Facts
Petitioner KKTI is a corporation engaged in public transportation and managed by Claire Dela Fuente
and Melissa Lim.
Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation (DMTC) on April
29, 1999. The DMTC employees including respondent formed the Damayan ng mga Manggagawa,
Tsuper at Conductor-Transport Workers Union and registered it with the Department of Labor and
Employment. Pending the holding of a certification election in DMTC, petitioner KKTI was
incorporated with the Securities and Exchange Commission which acquired new buses. Many DMTC
employees were subsequently transferred to KKTI and excluded from the election.
The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings (KKKK) which
was registered with DOLE. Respondent was elected KKKK president.
Respondent was required to accomplish a "Conductors Trip Report" and submit it to the company after
each trip. As a background, this report indicates the ticket opening and closing for the particular day of
duty. After submission, the company audits the reports. Once an irregularity is discovered, the company
issues an "Irregularity Report" against the employee, indicating the nature and details of the irregularity.
Thereafter, the concerned employee is asked to explain the incident by making a written statement or
counter-affidavit at the back of the same Irregularity Report. After considering the explanation of the
employee, the company then makes a determination of whether to accept the explanation or impose
upon the employee a penalty for committing an infraction. That decision shall be stated on said
Irregularity Report and will be furnished to the employee.
Upon audit of the October 28, 2001 Conductors Report of respondent, KKTI noted an irregularity. It
discovered that respondent declared several sold tickets as returned tickets causing KKTI to lose an
income of eight hundred and ninety pesos. While no irregularity report was prepared on the October 28,
2001 incident, KKTI nevertheless asked respondent to explain the discrepancy. In his letter,3 respondent
said that the erroneous declaration in his October 28, 2001 Trip Report was unintentional. He explained
that during that days trip, the windshield of the bus assigned to them was smashed; and they had to cut
short the trip in order to immediately report the matter to the police. As a result of the incident, he got
confused in making the trip report.

On November 26, 2001, respondent received a letter4 terminating his employment effective November
29, 2001. The dismissal letter alleged that the October 28, 2001 irregularity was an act of fraud against
the company. KKTI also cited as basis for respondents dismissal the other offenses he allegedly
committed since 1999.
On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal deductions,
nonpayment of 13th-month pay, service incentive leave, and separation pay. He denied committing any
infraction and alleged that his dismissal was intended to bust union activities. Moreover, he claimed that
his dismissal was effected without due process.
In its April 3, 2002 Position Paper,5 KKTI contended that respondent was legally dismissed after his
commission of a series of misconducts and misdeeds. It claimed that respondent had violated the trust
and confidence reposed upon him by KKTI. Also, it averred that it had observed due process in
dismissing respondent and maintained that respondent was not entitled to his money claims such as
service incentive leave and 13th-month pay because he was paid on commission or percentage basis.
On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment dismissing
respondents Complaint for lack of merit.6
Aggrieved, respondent appealed to the National Labor Relations Commission (NLRC). On August 29,
2003, the NLRC rendered a Decision, the dispositive portion of which reads:
WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that respondent King of Kings
Transport Inc. is hereby ordered to indemnify complainant in the amount of ten thousand pesos
(P10,000) for failure to comply with due process prior to termination.
The other findings are AFFIRMED.
SO ORDERED.7
Respondent moved for reconsideration but it was denied through the November 14, 2003 Resolution8 of
the NLRC.
Thereafter, respondent filed a Petition for Certiorari before the CA urging the nullification of the NLRC
Decision and Resolution.
The Ruling of the Court of Appeals
Affirming the NLRC, the CA held that there was just cause for respondents dismissal. It ruled that
respondents act in "declaring sold tickets as returned tickets x x x constituted fraud or acts of dishonesty
justifying his dismissal."9
Also, the appellate court sustained the finding that petitioners failed to comply with the required
procedural due process prior to respondents termination. However, following the doctrine in Serrano v.
NLRC,10 it modified the award of PhP 10,000 as indemnification by awarding full backwages from the
time respondents employment was terminated until finality of the decision.
Moreover, the CA held that respondent is entitled to the 13th-month pay benefit.
Hence, we have this petition.

The Issues
Petitioner raises the following assignment of errors for our consideration:
Whether the Honorable Court of Appeals erred in awarding in favor of the complainant/private
respondent, full back wages, despite the denial of his petition for certiorari.
Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply with the
requirements of procedural due process before dismissing the services of the complainant/private
respondent.
Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic] it awarded in favor
of the complaint/private respondent, 13th month pay benefits contrary to PD 851.11
The Courts Ruling
The petition is partly meritorious.
The disposition of the first assigned error depends on whether petitioner KKTI complied with the due
process requirements in terminating respondents employment; thus, it shall be discussed secondly.
Non-compliance with the Due Process Requirements
Due process under the Labor Code involves two aspects: first, substantivethe valid and authorized
causes of termination of employment under the Labor Code; and second, proceduralthe manner of
dismissal.12 In the present case, the CA affirmed the findings of the labor arbiter and the NLRC that the
termination of employment of respondent was based on a "just cause." This ruling is not at issue in this
case. The question to be determined is whether the procedural requirements were complied with.
Art. 277 of the Labor Code provides the manner of termination of employment, thus:
Art. 277. Miscellaneous Provisions.x x x
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause 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.
Accordingly, the implementing rule of the aforesaid provision states:
SEC. 2. Standards of due process; requirements of notice.In all cases of termination of employment,
the following standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and
giving said employee reasonable opportunity within which to explain his side.
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if he
so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence
presented against him.
(c) A written notice of termination served on the employee, indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination. 13
In case of termination, the foregoing notices shall be served on the employees last known address.14
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.15 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.
In the instant case, KKTI admits that it had failed to provide respondent with a "charge
sheet."16 However, it maintains that it had substantially complied with the rules, claiming that
"respondent would not have issued a written explanation had he not been informed of the charges
against him."17
We are not convinced.
First, respondent was not issued a written notice charging him of committing an infraction. The law is
clear on the matter. A verbal appraisal of the charges against an employee does not comply with the first
notice requirement. In Pepsi Cola Bottling Co. v. NLRC,18 the Court held that consultations or
conferences are not a substitute for the actual observance of notice and hearing. Also, in Loadstar
Shipping Co., Inc. v. Mesano,19 the Court, sanctioning the employer for disregarding the due process

requirements, held that the employees written explanation did not excuse the fact that there was a
complete absence of the first notice.
Second, even assuming that petitioner KKTI was able to furnish respondent an Irregularity Report
notifying him of his offense, such would not comply with the requirements of the law. We observe from
the irregularity reports against respondent for his other offenses that such contained merely a general
description of the charges against him. The reports did not even state a company rule or policy that the
employee had allegedly violated. Likewise, there is no mention of any of the grounds for termination of
employment under Art. 282 of the Labor Code. Thus, KKTIs "standard" charge sheet is not sufficient
notice to the employee.
Third, no hearing was conducted. Regardless of respondents written explanation, a hearing was still
necessary in order for him to clarify and present evidence in support of his defense. Moreover,
respondent made the letter merely to explain the circumstances relating to the irregularity in his October
28, 2001 Conductors Trip Report. He was unaware that a dismissal proceeding was already being
effected. Thus, he was surprised to receive the November 26, 2001 termination letter indicating as
grounds, not only his October 28, 2001 infraction, but also his previous infractions.
Sanction for Non-compliance with Due Process Requirements
As stated earlier, after a finding that petitioners failed to comply with the due process requirements, the
CA awarded full backwages in favor of respondent in accordance with the doctrine in Serrano v.
NLRC.20 However, the doctrine in Serrano had already been abandoned in Agabon v. NLRC by ruling
that if the dismissal is done without due process, the employer should indemnify the employee with
nominal damages.21
Thus, for non-compliance with the due process requirements in the termination of respondents
employment, petitioner KKTI is sanctioned to pay respondent the amount of thirty thousand pesos (PhP
30,000) as damages.
Thirteenth (13th)-Month Pay
Section 3 of the Rules Implementing Presidential Decree No. 85122 provides the exceptions in the
coverage of the payment of the 13th-month benefit. The provision states:
SEC. 3. Employers covered.The Decree shall apply to all employers except to:
xxxx
e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are
paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof, except where the workers are paid on piece-rate basis in which case the employer
shall be covered by this issuance insofar as such workers are concerned.
Petitioner KKTI maintains that respondent was paid on purely commission basis; thus, the latter is not
entitled to receive the 13th-month pay benefit. However, applying the ruling in Philippine Agricultural
Commercial and Industrial Workers Union v. NLRC,23 the CA held that respondent is entitled to the said
benefit.
It was erroneous for the CA to apply the case of Philippine Agricultural Commercial and Industrial
Workers Union. Notably in the said case, it was established that the drivers and conductors praying for
13th- month pay were not paid purely on commission. Instead, they were receiving a commission in

addition to a fixed or guaranteed wage or salary. Thus, the Court held that bus drivers and conductors
who are paid a fixed or guaranteed minimum wage in case their commission be less than the statutory
minimum, and commissions only in case where they are over and above the statutory minimum, are
entitled to a 13th-month pay equivalent to one-twelfth of their total earnings during the calendar year.
On the other hand, in his Complaint,24 respondent admitted that he was paid on commission only.
Moreover, this fact is supported by his pay slips25 which indicated the varying amount of commissions
he was receiving each trip. Thus, he was excluded from receiving the 13th-month pay benefit.
WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision of the CA is
MODIFIED by deleting the award of backwages and 13th-month pay. Instead, petitioner KKTI is
ordered to indemnify respondent the amount of thirty thousand pesos (PhP 30,000) as nominal damages
for failure to comply with the due process requirements in terminating the employment of respondent.
No costs.
G.R. No. 152048

April 7, 2009

FELIX B. PEREZ and AMANTE G. DORIA, Petitioners,

vs.
PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY and JOSE LUIS
SANTIAGO, Respondents.
DECISION
CORONA, J.:
Petitioners Felix B. Perez and Amante G. Doria were employed by respondent Philippine Telegraph and
Telephone Company (PT&T) as shipping clerk and supervisor, respectively, in PT&Ts Shipping
Section, Materials Management Group.
Acting on an alleged unsigned letter regarding anomalous transactions at the Shipping Section,
respondents formed a special audit team to investigate the matter. It was discovered that the Shipping
Section jacked up the value of the freight costs for goods shipped and that the duplicates of the shipping
documents allegedly showed traces of tampering, alteration and superimposition.
On September 3, 1993, petitioners were placed on preventive suspension for 30 days for their alleged
involvement in the anomaly.1 Their suspension was extended for 15 days twice: first on October 3,
19932 and second on October 18, 1993.3
On October 29, 1993, a memorandum with the following tenor was issued by respondents:
In line with the recommendation of the AVP-Audit as presented in his report of October 15, 1993 (copy
attached) and the subsequent filing of criminal charges against the parties mentioned therein, [Mr. Felix
Perez and Mr. Amante Doria are] hereby dismissed from the service for having falsified company
documents.4 (emphasis supplied)
On November 9, 1993, petitioners filed a complaint for illegal suspension and illegal dismissal.5 They
alleged that they were dismissed on November 8, 1993, the date they received the above-mentioned
memorandum.

The labor arbiter found that the 30-day extension of petitioners suspension and their subsequent
dismissal were both illegal. He ordered respondents to pay petitioners their salaries during their 30-day
illegal suspension, as well as to reinstate them with backwages and 13th month pay.
The National Labor Relations Commission (NLRC) reversed the decision of the labor arbiter. It ruled
that petitioners were dismissed for just cause, that they were accorded due process and that they were
illegally suspended for only 15 days (without stating the reason for the reduction of the period of
petitioners illegal suspension).6
Petitioners appealed to the Court of Appeals (CA). In its January 29, 2002 decision,7 the CA affirmed the
NLRC decision insofar as petitioners illegal suspension for 15 days and dismissal for just cause were
concerned. However, it found that petitioners were dismissed without due process.
Petitioners now seek a reversal of the CA decision. They contend that there was no just cause for their
dismissal, that they were not accorded due process and that they were illegally suspended for 30 days.
We rule in favor of petitioners.
Respondents Failed to Prove Just
Cause and to Observe Due Process
The CA, in upholding the NLRCs decision, reasoned that there was sufficient basis for respondents to
lose their confidence in petitioners8 for allegedly tampering with the shipping documents. Respondents
emphasized the importance of a shipping order or request, as it was the basis of their liability to a cargo
forwarder.9
We disagree.
Without undermining the importance of a shipping order or request, we find respondents evidence
insufficient to clearly and convincingly establish the facts from which the loss of confidence
resulted.10 Other than their bare allegations and the fact that such documents came into petitioners hands
at some point, respondents should have provided evidence of petitioners functions, the extent of their
duties, the procedure in the handling and approval of shipping requests and the fact that no personnel
other than petitioners were involved. There was, therefore, a patent paucity of proof connecting
petitioners to the alleged tampering of shipping documents.
The alterations on the shipping documents could not reasonably be attributed to petitioners because it
was never proven that petitioners alone had control of or access to these documents. Unless duly proved
or sufficiently substantiated otherwise, impartial tribunals should not rely only on the statement of the
employer that it has lost confidence in its employee. 11
Willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative is a just cause for termination.12 However, in General Bank and Trust Co. v. CA,13 we said:
[L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which are
improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify an earlier
action taken in bad faith.
The burden of proof rests on the employer to establish that the dismissal is for cause in view of the
security of tenure that employees enjoy under the Constitution and the Labor Code. The employers
evidence must clearly and convincingly show the facts on which the loss of confidence in the employee

may be fairly made to rest.14 It must be adequately proven by substantial evidence.15 Respondents failed
to discharge this burden.
Respondents illegal act of dismissing petitioners was aggravated by their failure to observe due process.
To meet the requirements of due process in the dismissal of an employee, an employer must furnish the
worker with two written notices: (1) a written notice specifying the grounds for termination and giving
to said employee a reasonable opportunity to explain his side and (2) another written notice indicating
that, upon due consideration of all circumstances, grounds have been established to justify the
employer's decision to dismiss the employee.16
Petitioners were neither apprised of the charges against them nor given a chance to defend themselves.
They were simply and arbitrarily separated from work and served notices of termination in total
disregard of their rights to due process and security of tenure. The labor arbiter and the CA correctly
found that respondents failed to comply with the two-notice requirement for terminating employees.
Petitioners likewise contended that due process was not observed in the absence of a hearing in which
they could have explained their side and refuted the evidence against them.
There is no need for a hearing or conference. We note a marked difference in the standards of due
process to be followed as prescribed in the Labor Code and its implementing rules. The Labor Code, on
one hand, provides that an employer must provide the employee ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires:
ART. 277. Miscellaneous provisions. x x x
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause and without prejudice to the requirement of
notice under Article 283 of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the causes for termination and shall
afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated pursuant
to guidelines set by the Department of Labor and Employment. Any decision taken by the employer
shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by
filing a complaint with the regional branch of the National Labor Relations Commission. The burden of
proving that the termination was for a valid or authorized cause shall rest on the employer. (emphasis
supplied)
The omnibus rules implementing the Labor Code, on the other hand, require a hearing and
conference during which the employee concerned is given the opportunity to respond to the charge,
present his evidence or rebut the evidence presented against him:17
Section 2. Security of Tenure. x x x
(d) In all cases of termination of employment, the following standards of due process shall be
substantially observed:
For termination of employment based on just causes as defined in Article 282 of the Labor Code:
(i) A written notice served on the employee specifying the ground or grounds for termination,
and giving said employee reasonable opportunity within which to explain his side.

(ii) A hearing or conference during which the employee concerned, with the assistance of
counsel if he so desires, is given opportunity to respond to the charge, present his evidence
or rebut the evidence presented against him.
(iii) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his termination.
(emphasis supplied)
Which one should be followed? Is a hearing (or conference) mandatory in cases involving the dismissal
of an employee? Can the apparent conflict between the law and its IRR be reconciled?
At the outset, we reaffirm the time-honored doctrine that, in case of conflict, the law prevails over the
administrative regulations implementing it.18 The authority to promulgate implementing rules proceeds
from the law itself. To be valid, a rule or regulation must conform to and be consistent with the
provisions of the enabling statute.19 As such, it cannot amend the law either by abridging or expanding
its scope.20
Article 277(b) of the Labor Code provides that, in cases of termination for a just cause, an employee
must be given "ample opportunity to be heard and to defend himself." Thus, the opportunity to be heard
afforded by law to the employee is qualified by the word "ample" which ordinarily means "considerably
more than adequate or sufficient."21 In this regard, the phrase "ample opportunity to be heard" can be
reasonably interpreted as extensive enough to cover actual hearing or conference. To this extent, Section
2(d), Rule I of the Implementing Rules of Book VI of the Labor Code is in conformity with Article
277(b).
Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should not
be taken to mean that holding an actual hearing or conference is a condition sine qua non for compliance
with the due process requirement in termination of employment. The test for the fair procedure
guaranteed under Article 277(b) cannot be whether there has been a formal pretermination confrontation
between the employer and the employee. The "ample opportunity to be heard" standard is neither
synonymous nor similar to a formal hearing. To confine the employees right to be heard to a solitary
form narrows down that right. It deprives him of other equally effective forms of adducing evidence in
his defense. Certainly, such an exclusivist and absolutist interpretation is overly restrictive. The "very
nature of due process negates any concept of inflexible procedures universally applicable to every
imaginable situation."22
The standard for the hearing requirement, ample opportunity, is couched in general language revealing
the legislative intent to give some degree of flexibility or adaptability to meet the peculiarities of a given
situation. To confine it to a single rigid proceeding such as a formal hearing will defeat its spirit.
Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code itself
provides that the so-called standards of due process outlined therein shall be
observed "substantially," not strictly. This is a recognition that while a formal hearing or conference is
ideal, it is not an absolute, mandatory or exclusive avenue of due process.
An employees right to be heard in termination cases under Article 277(b) as implemented by Section
2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should be interpreted in broad
strokes. It is satisfied not only by a formal face to face confrontation but by any meaningful opportunity
to controvert the charges against him and to submit evidence in support thereof.
A hearing means that a party should be given a chance to adduce his evidence to support his side of the
case and that the evidence should be taken into account in the adjudication of the controversy.23 "To be

heard" does not mean verbal argumentation alone inasmuch as one may be heard just as effectively
through written explanations, submissions or pleadings.24 Therefore, while the phrase "ample
opportunity to be heard" may in fact include an actual hearing, it is not limited to a formal hearing only.
In other words, the existence of an actual, formal "trial-type" hearing, although preferred, is not
absolutely necessary to satisfy the employees right to be heard.
This Court has consistently ruled that the due process requirement in cases of termination of
employment does not require an actual or formal hearing. Thus, we categorically declared in Skippers
United Pacific, Inc. v. Maguad:25
The Labor Code does not, of course, require a formal or trial type proceeding before an erring
employee may be dismissed. (emphasis supplied)
In Autobus Workers Union v. NLRC,26 we ruled:
The twin requirements of notice and hearing constitute the essential elements of due process. Due
process of law simply means giving opportunity to be heard before judgment is rendered. In fact, there
is no violation of due process even if no hearing was conducted, where the party was given a
chance to explain his side of the controversy. What is frowned upon is the denial of the opportunity to
be heard.
xxxxxxxxx
A formal trial-type hearing is not even essential to due process. It is enough that the parties are
given a fair and reasonable opportunity to explain their respective sides of the controversy and to
present supporting evidence on which a fair decision can be based. This type of hearing is not even
mandatory in cases of complaints lodged before the Labor Arbiter. (emphasis supplied)
In Solid Development Corporation Workers Association v. Solid Development Corporation,27 we had the
occasion to state:
[W]ell-settled is the dictum that the twin requirements of notice and hearing constitute the essential
elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the
employer must furnish the employee with two written notices before the termination of employment can
be effected: (1) the first apprises the employee of the particular acts or omissions for which his dismissal
is sought; and (2) the second informs the employee of the employers decision to dismiss him. The
requirement of a hearing, on the other hand, is complied with as long as there was an opportunity
to be heard, and not necessarily that an actual hearing was conducted.
In separate infraction reports, petitioners were both apprised of the particular acts or omissions
constituting the charges against them. They were also required to submit their written explanation within
12 hours from receipt of the reports. Yet, neither of them complied. Had they found the 12-hour period
too short, they should have requested for an extension of time. Further, notices of termination were also
sent to them informing them of the basis of their dismissal. In fine, petitioners were given due process
before they were dismissed. Even if no hearing was conducted, the requirement of due process had
been met since they were accorded a chance to explain their side of the controversy. (emphasis
supplied)
Our holding in National Semiconductor HK Distribution, Ltd. v. NLRC28 is of similar import:
That the investigations conducted by petitioner may not be considered formal or recorded hearings
or investigations is immaterial. A formal or trial type hearing is not at all times and in all instances

essential to due process, the requirements of which are satisfied where the parties are afforded fair and
reasonable opportunity to explain their side of the controversy. It is deemed sufficient for the employer
to follow the natural sequence of notice, hearing and judgment.
The above rulings are a clear recognition that the employer may provide an employee with ample
opportunity to be heard and defend himself with the assistance of a representative or counsel in ways
other than a formal hearing. The employee can be fully afforded a chance to respond to the charges
against him, adduce his evidence or rebut the evidence against him through a wide array of methods,
verbal or written.
After receiving the first notice apprising him of the charges against him, the employee may submit a
written explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and
offer evidence in support thereof, like relevant company records (such as his 201 file and daily time
records) and the sworn statements of his witnesses. For this purpose, he may prepare his explanation
personally or with the assistance of a representative or counsel. He may also ask the employer to provide
him copy of records material to his defense. His written explanation may also include a request that a
formal hearing or conference be held. In such a case, the conduct of a formal hearing or conference
becomes mandatory, just as it is where there exist substantial evidentiary disputes29 or where company
rules or practice requires an actual hearing as part of employment pretermination procedure. To this
extent, we refine the decisions we have rendered so far on this point of law.
This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code
reasonably implements the "ample opportunity to be heard" standard under Article 277(b) of the Labor
Code without unduly restricting the language of the law or excessively burdening the employer. This not
only respects the power vested in the Secretary of Labor and Employment to promulgate rules and
regulations that will lay down the guidelines for the implementation of Article 277(b). More importantly,
this is faithful to the mandate of Article 4 of the Labor Code that "[a]ll doubts in the implementation and
interpretation of the provisions of [the Labor Code], including its implementing rules and regulations
shall be resolved in favor of labor."
In sum, the following are the guiding principles in connection with the hearing requirement in dismissal
cases:
(a) "ample opportunity to be heard" means any meaningful opportunity (verbal or written) given
to the employee to answer the charges against him and submit evidence in support of his defense,
whether in a hearing, conference or some other fair, just and reasonable way.
(b) a formal hearing or conference becomes mandatory only when requested by the employee in
writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when
similar circumstances justify it.
(c) the "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or
conference" requirement in the implementing rules and regulations.
Petitioners Were Illegally
Suspended for 30 Days
An employee may be validly suspended by the employer for just cause provided by law. Such
suspension shall only be for a period of 30 days, after which the employee shall either be reinstated or
paid his wages during the extended period.30

In this case, petitioners contended that they were not paid during the two 15-day extensions, or a total of
30 days, of their preventive suspension. Respondents failed to adduce evidence to the contrary. Thus, we
uphold the ruling of the labor arbiter on this point.
Where the dismissal was without just or authorized cause and there was no due process, Article 279 of
the Labor Code, as amended, mandates that the employee is entitled to reinstatement without loss of
seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or
their monetary equivalent computed from the time the compensation was not paid up to the time of
actual reinstatement.31 In this case, however, reinstatement is no longer possible because of the length of
time that has passed from the date of the incident to final resolution.32 Fourteen years have transpired
from the time petitioners were wrongfully dismissed. To order reinstatement at this juncture will no
longer serve any prudent or practical purpose.33
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals dated January
29, 2002 in CA-G.R. SP No. 50536 finding that petitioners Felix B. Perez and Amante G. Doria were
not illegally dismissed but were not accorded due process and were illegally suspended for 15 days,
is SET ASIDE. The decision of the labor arbiter dated December 27, 1995 in NLRC NCR CN. 1106930-93 is hereby AFFIRMED with theMODIFICATION that petitioners should be paid their
separation pay in lieu of reinstatement.
SO ORDERED.
G.R. No. 127598

February 22, 2000

MANILA ELECTRIC COMPANY, petitioner,

vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES
and WORKERS ASSOCIATION (MEWA), respondent.
RESOLUTION
YNARES-SANTIAGO, J.:
In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:
WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor
dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above. The
parties are directed to execute a Collective Bargaining Agreement incorporating the terms and
conditions contained in the unaffected portions of the Secretary of Labor's orders of August 19,
1996 and December 28, 1996, and the modifications set forth above. The retirement fund issue is
remanded to the Secretary of Labor for reception of evidence and determination of the legal
personality of the MERALCO retirement fund.1
The modifications of the public respondent's resolutions include the following:

January 27, 1999 decision

Secretary's
resolution

Wages

P1,900.00 for 1995-96

P2,200.00

X'mas bonus

modified to one month

2 months

Retirees

remanded to the Secretary

granted

Loan to coops

denied

granted

GHSIP, HMP and

Housing loans

granted up to P60,000.00

granted

Signing bonus

denied

granted

Union leave

40 days (typo error)

30 days

High voltage/pole

not apply to those who are

not exposed to the risk

members of a team

Collectors

no need for cash bond, no

need to reduce quota and
MAPL

CBU

exclude confidential
employees

include

Union security

maintenance of membership

closed shop

Contracting out

no need to consult union

consult first

All benefits

existing terms and conditions

all terms

Retroactivity

Dec. 28, 1996-Dec. 27,

199(9)

from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity)
filed a motion for intervention and a motion for reconsideration of the said Decision. A separate
intervention was likewise made by the supervisor's union (FLAMES2) of petitioner corporation alleging
that it has bona fide legal interest in the outcome of the case.3 The Court required the "proper parties" to
file a comment to the three motions for reconsideration but the Solicitor-General asked that he be
excused from filing the comment because the "petition filed in the instant case was granted" by the
Court.4 Consequently, petitioner filed its own consolidated comment. An "Appeal Seeking Immediate
Reconsideration" was also filed by the alleged newly elected president of the Union.5 Other subsequent
pleadings were filed by the parties and intervenors.
The issues raised in the motions for reconsideration had already been passed upon by the Court in the
January 27, 1999 decision. No new arguments were presented for consideration of the Court.
Nonetheless, certain matters will be considered herein, particularly those involving the amount of wages
and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed,
it would simply pass the cost covering such increase to the consumers through an increase in the rate of
electricity. This is a non sequitur. The Court cannot be threatened with such a misleading argument. An
increase in the prices of electric current needs the approval of the appropriate regulatory government
agency and does not automatically result from a mere increase in the wages of petitioner's employees.
Besides, this argument presupposes that petitioner is capable of meeting a wage increase. The All Asia
Capital report upon which the Union relies to support its position regarding the wage issue cannot be an
accurate basis and conclusive determinant of the rate of wage increase. Section 45 of Rule 130 Rules of
Evidence provides:

Commercial lists and the like. Evidence of statements of matters of interest to persons
engaged in an occupation contained in a list, register, periodical, or other published compilation
is admissible as tending to prove the truth of any relevant matter so stated if that compilation is
published for use by persons engaged in that occupation and is generally used and relied upon by
them therein.
Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if
that compilation is published for use by persons engaged in that occupation and is generally used and
relied upon by them therein." As correctly held in our Decision dated January 27, 1999, the cited report
is a mere newspaper account and not even a commercial list. At most, it is but an analysis or opinion
which carries no persuasive weight for purposes of this case as no sufficient figures to support it were
presented. Neither did anybody testify to its accuracy. It cannot be said that businessmen generally rely
on news items such as this in their occupation. Besides, no evidence was presented that the publication
was regularly prepared by a person in touch with the market and that it is generally regarded as
trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are not admissible.6 In
the same manner, newspapers containing stock quotations are not admissible in evidence when the
source of the reports is available.7 With more reason, mere analyses or projections of such reports cannot
be admitted. In particular, the source of the report in this case can be easily made available considering
that the same is necessary for compliance with certain governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion.8 An
estimate by the All Asia financial analyst stated that petitioner's net operating income for the same year
was about P5.7 billion, a figure which the Union relies on to support its claim. Assuming without
admitting the truth thereof, the figure is higher than the P4.171 billion allegedly suggested by petitioner
as its projected net operating income. The P5.7 billion which was the Secretary's basis for granting the
P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It would be proper
then to increase this Court's award of P1,900.00 to P2,000.00 for the two years of the CBA award. For
1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced to P1,350.00; for
1993; further reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase for
the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing
figures, the P2,000.00 increase for the two-year period awarded to the rank-and-file is much higher than
the highest increase granted to supervisory employees.9 As mentioned in the January 27, 1999 Decision,
the Court does "not seek to enumerate in this decision the factors that should affect wage determination"
because collective bargaining disputes particularly those affecting the national interest and public service
"requires due consideration and proper balancing of the interests of the parties to the dispute and of
those who might be affected by the dispute."10 The Court takes judicial notice that the new amounts
granted herein are significantly higher than the weighted average salary currently enjoyed by other rankand-file employees within the community. It should be noted that the relations between labor and capital
is impressed with public interest which must yield to the common good.11 Neither party should act
oppressively against the other or impair the interest or convenience of the public.12 Besides, matters of
salary increases are part of management prerogative.13
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the
renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned.
When the Secretary of Labor assumed jurisdiction and granted the arbitral awards, there was no question
that these arbitral awards were to be given retroactive effect. However, the parties dispute the reckoning
period when retroaction shall commence. Petitioner claims that the award should retroact only from such
time that the Secretary of Labor rendered the award, invoking the 1995 decision in Pier 8 case14 where
the Court, citing Union of Filipino Employees v. NLRC,15 said:
The assailed resolution which incorporated the CBA to be signed by the parties was promulgated
on June 5, 1989, the expiry date of the past CBA. Based on the provision of Section 253-A, its

retroactivity should be agreed upon by the parties. But since no agreement to that effect was
made, public respondent did not abuse its discretion in giving the said CBA a prospective effect.
The action of the public respondent is within the ambit of its authority vested by existing law.
On the other hand, the Union argues that the award should retroact to such time granted by the Secretary,
citing the 1993 decision of St. Luke's.16
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the
expiration of the previous CBA, contrary to the position of petitioner. Under the circumstances of
the case, Article 253-A cannot be properly applied to herein case. As correctly stated by public
respondent in his assailed Order of April 12, 1991 dismissing petitioner's Motion for
Reconsideration
Anent the alleged lack of basis for the retroactivity provisions awarded; we would stress
that the provision of law invoked by the Hospital, Article 253-A of the Labor Code,
speaks of agreements by and between the parties, and not arbitral awards . . .
Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity
of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code,
such as herein involved, public respondent is deemed vested with plenary and discretionary
powers to determine the effectivity thereof.
In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:
In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA negotiations
between management and the union. The Secretary of Labor assumed jurisdiction and ordered
the retroaction of the CBA to the date of expiration of the previous CBA. As in this case, it was
alleged that the Secretary of Labor gravely abused its discretion in making his award retroactive.
In dismissing this contention this Court held:
Therefore, in the absence of a specific provision of law prohibiting retroactive of the
effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g)
of the Labor Code, such as herein involved, public respondent is deemed vested with
plenary and discretionary powers to determine the effectivity thereof.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2
years counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a
three-year period. Labor laws are silent as to when an arbitral award in a labor dispute where the
Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In
general, a CBA negotiated within six months after the expiration of the existing CBA retroacts to the day
immediately following such date and if agreed thereafter, the effectivity depends on the agreement of the
parties.18 On the other hand, the law is silent as to the retroactivity of a CBA arbitral award or that
granted not by virtue of the mutual agreement of the parties but by intervention of the government.
Despite the silence of the law, the Court rules herein that CBA arbitral awards granted after six months
from the expiration of the last CBA shall retroact to such time agreed upon by both employer and the
employees or their union. Absent such an agreement as to retroactivity, the award shall retroact to the
first day after the six-month period following the expiration of the last day of the CBA should there be
one. In the absence of a CBA, the Secretary's determination of the date of retroactivity as part of his
discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by
the parties because it requires the interference and imposing power of the State thru the Secretary of

Labor when he assumes jurisdiction. However, the arbitral award can be considered as an approximation
of a collective bargaining agreement which would otherwise have been entered into by the parties.19 The
terms or periods set forth in Article 253-A pertains explicitly to a CBA. But there is nothing that would
prevent its application by analogy to an arbitral award by the Secretary considering the absence of an
applicable law. Under Article 253-A: "(I)f any such agreement is entered into beyond six months, the
parties shall agree on the duration of retroactivity thereof." In other words, the law contemplates
retroactivity whether the agreement be entered into before or after the said six-month period. The
agreement of the parties need not be categorically stated for their acts may be considered in determining
the duration of retroactivity. In this connection, the Court considers the letter of petitioner's Chairman of
the Board and its President addressed to their stockholders, which states that the CBA "for the rank-andfile employees covering the period December 1, 1995 to November 30, 1997 is still with the Supreme
Court,"20 as indicative of petitioner's recognition that the CBA award covers the said period. Earlier,
petitioner's negotiating panel transmitted to the Union a copy of its proposed CBA covering the same
period inclusive.21 In addition, petitioner does not dispute the allegation that in the past CBA arbitral
awards, the Secretary granted retroactivity commencing from the period immediately following the last
day of the expired CBA. Thus, by petitioner's own actions, the Court sees no reason to retroact the
subject CBA awards to a different date. The period is herein set at two (2) years from December 1, 1995
to November 30, 1997.
On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim that
it is no different from housing loans granted by the employer. The award of loans for housing is justified
because it pertains to a basic necessity of life. It is part of a privilege recognized by the employer and
allowed by law. In contrast, providing seed money for the establishment of the employee's cooperative is
a matter in which the employer has no business interest or legal obligation. Courts should not be utilized
as a tool to compel any person to grant loans to another nor to force parties to undertake an obligation
without justification. On the contrary, it is the government that has the obligation to render financial
assistance to cooperatives and the Cooperative Code does not make it an obligation of the employer or
any private individual.22
Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid
any confusion, it is herein declared that the union leave is only thirty (30) days as granted by the
Secretary of Labor and affirmed in the Decision of this Court.
The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6)
months or more has been rejected by the Court. Suffice it to say that the employer is allowed to contract
out services for six months or more. However, a line must be drawn between management prerogatives
regarding business operations per se and those which affect the rights of employees, and in treating the
latter, the employer should see to it that its employees are at least properly informed of its decision or
modes of action in order to attain a harmonious labor-management relationship and enlighten the
workers concerning their rights.23 Hiring of workers is within the employer's inherent freedom to
regulate and is a valid exercise of its management prerogative subject only to special laws and
agreements on the matter and the fair standards of justice.24 The management cannot be denied the
faculty of promoting efficiency and attaining economy by a study of what units are essential for its
operation. It has the ultimate determination of whether services should be performed by its personnel or
contracted to outside agencies. While there should be mutual consultation, eventually deference is to be
paid to what management decides.25 Contracting out of services is an exercise of business judgment or
management prerogative.26 Absent proof that management acted in a malicious or arbitrary manner, the
Court will not interfere with the exercise of judgment by an employer.27 As mentioned in the January 27,
1999 Decision, the law already sufficiently regulates this matter.28 Jurisprudence also provides adequate
limitations, such that the employer must be motivated by good faith and the contracting out should not
be resorted to circumvent the law or must not have been the result of malicious or arbitrary

actions.29 These are matters that may be categorically determined only when an actual suit on the matter
arises.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision is
MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995 to November 30,
1997; and (2) the award of wage is increased from the original amount of One Thousand Nine Hundred
Pesos (P1,900.00) to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is
subject to the monetary advances granted by petitioner to its rank-and-file employees during the
pendency of this case assuming such advances had actually been distributed to them. The assailed
Decision is AFFIRMED in all other respects.1wphi1.nt
SO ORDERED.
G.R. No. 181357

February 2, 2010

MALAYAN EMPLOYEES ASSOCIATION-FFW and RODOLFO MANGALINO, Petitioners,

vs.
MALAYAN INSURANCE COMPANY, INC., Respondent.
DECISION
BRION, J.:
The petitioner Malayan Employees Association-FFW (union) asks us in this petition for certiorari,1 to
set aside the June 26, 2007 decision2 and the November 29, 2007 resolution3 of the Court of Appeals
(CA) in CA-G.R. SP No. 80691, ruling that the suspension imposed by the respondent Malayan
Insurance Company, Inc. (company) on union member Rodolfo Mangalino (Mangalino) is valid.
Mangalino was suspended for taking a union leave without the prior authority of his department head
and despite a previous disapproval of the requested leave.
BACKGROUND FACTS
The union is the exclusive bargaining agent of the rank-and-file employees of the company. A provision
in the unions collective bargaining agreement (CBA) with the company allows union officials to avail of
union leaves with pay for a total of "ninety-man" days per year for the purpose of attending grievance
meetings, Labor-Management Committee meetings, annual National Labor Management Conferences,
labor education programs and seminars, and other union activities.
The company issued a rule in November 2002 requiring not only the prior notice that the CBA expressly
requires, but prior approval by the department head before the union and its members can avail of union
leaves. The rule was placed into effect in November 2002 without any objection from the union until a
union officer, Mangalino, filed union leave applications in January and February, 2004. His department
head disapproved the applications because the department was undermanned at that time.
Despite the disapproval, Mangalino proceeded to take the union leave. He said he believed in good faith
that he had complied with the existing company practice and with the procedure set forth in the CBA.
The company responded by suspending him for one week and, thereafter, for a month, for his second
offense in February 2004.
The union raised the suspensions as a grievance issue and went through all the grievance processes,
including the referral of the matter to the companys president, Yvonne Yuchengco. After all internal
remedies failed, the union went to the National Conciliation and Mediation Board for preventive

mediation. When this recourse also failed, the parties submitted the dispute to voluntary arbitration4 on
the following issues:
1. whether or not Mangalinos suspensions were valid; and
2. whether or not Mangalino should be paid backwages for the duration of the suspensions.
The Voluntary Arbitrators decided the submitted dispute on November 26, 2004,5 ruling as follows:
WHEREFORE, in view of the foregoing, this Honorable Office adjudged the suspension of Mr. Rodolfo
Mangalinos on first availment of union leave invalid while the second suspension valid but illicit in
terms of penalty of thirty (30) days suspension. We consider the honesty of the same as mitigating
circumstances, for the Chairman of this panel of Arbitrators attested that complainant attended labor
matter in the Office of Voluntary Arbitrator last January 19, 2004 and February 5, 2004. However, it is
good to note the wisdom of Justice Narvasa in the aforecited Supreme Court Ruling of obey first before
you complain.
In view thereof, this Honorable Office reduced the suspension from thirty seven (37) days to ten (10)
days only. Henceforth, the Complainant is entitled to twenty seven (27) days backwages.
Proof of payment of backwages should be submitted to the chairman of this Panel of Arbitrators within
ten (10) days from receipt hereof.
Parties are hereby enjoined to comply in this Award as provided in the submission Agreement.
SO ORDERED.
Notably, the decision was not unanimous. Voluntary Arbitrator dela Fuente submitted the following
dissent:6
The act of any employee that can only be interpreted to be an open and utter display of arrogance and
unconcern for the welfare of his Company thru the use of what he pretends to believe to be an unbridled
political right cannot be allowed to pass without sanction lest the employer desires anarchy and chaos to
reign in its midst.
Hence, having failed to comply with the requirements for availment of union leaves and for going on
such leave despite the express disapproval of his superior, Mr. Mangalinos two suspensions are valid
and he is not entitled to any backwages for the duration of his suspensions.
The company appealed the decision to the CA on May 12, 2005 through a petition for review under Rule
43 of the Rules of Court (Rules). In a decision promulgated on June 26, 2007, the CA granted the
companys petition and upheld the validity of Mangalinos suspension on the basis of the companys
prerogative to prescribe reasonable rules to regulate the use of union leaves.7
The union moved for the reconsideration of the CA decision and received the CAs denial (through its
resolution of November 29, 2007) on December 8, 2007.8
THE PETITION
The union seeks relief from this Court against the CA decision through its Rule 65 petition for certiorari
filed on February 6, 2008.9 It alleged that the CA committed grave abuse of discretion when, despite the

clear terms of the CBA grant of union leaves, it disregarded the evidence on record and recognized that
the companys use of its management prerogative as justification was proper.
In our Resolution of March 5, 2008, we resolved to treat the Rule 65 petition as a petition for review on
certiorari under Rule 45 of the Rules, and required the respondent company to comment.10 After
comment, we required the union to file its reply.11 Thereafter, the parties submitted their respective
memoranda.12
In its comment, the company raised both procedural and substantive objections.
It questioned the petitions compliance with the Rules, particularly the use of a petition for certiorari
under Rule 65 to question the CA decision, when the appropriate remedy is a petition for review on
certiorari under Rule 45. The company also asserted that the union violated Section 2, Rule 45 when it
failed to attach the material portions of the record as would support its petition, such as the companys
pleadings and the entirety of the companys evidence. More importantly, it posited that the petition is
barred by time limitation and has lapsed to finality as it was filed sixty-two (62) days after the unions
receipt of the CA decision.
On the substantive aspect, the company mainly contended that the regulation of the use of union leaves
is within the companys management prerogative, and the company was simply exercising its
management prerogative when it required its employees to first obtain the approval of either the
department head or the human resource manager before making use of any union leave. Thus,
Mangalino committed acts of insubordination when he insisted on going on leave despite the
disapproval of his leave applications.
In its reply and subsequent memorandum, the union presented its justification for the technical
deficiencies the company cited (quoted below), and maintained as well that the use of management
prerogative was improper because the CBA grant of the union leave benefit did not require prior
company approval as a condition; any change in the CBA grant requires union conformity. The union
posited as well that any unilateral change in the CBA terms violates Article 255 of the Labor Code,
which guarantees the right of employees to participate in the companys policy and decision-making
processes on matters directly affecting their interests. It argued against the company position that it had
not objected to the company rule and is now in estoppel.
THE COURTS RULING
We deny the petition for lack of merit.
The company position that the union should have filed an appeal under Rule 45 of the Rules and not a
petition for certiorari is correct. Section 1, Rule 45 of the Rules states that:
SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a
judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial
Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition
for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.
[Emphasis supplied.]
Complementing this Rule is Section 1, Rule 65 which provides that a special civil action for certiorari
under Rule 65 lies only when "there is no appeal, nor plain, speedy and adequate remedy in the ordinary
course of law." From this Rule proceeds the established jurisprudential ruling that a petition for certiorari
cannot be allowed when a party fails to appeal a judgment despite the availability of that remedy, as
certiorari is not a substitute for a lost appeal.13

In our Resolution of March 5, 2008, we opted to liberally apply the rules and to treat the petition as a
petition for review on certiorari under Rule 45 in order to have a total view of the merits of the petition
in light of the importance of a ruling on the presented issues. The union which did not present any
justification at the outset for the petitions deficiencies, particularly for the late filing had this to say:
9) In a resolution dated 05 March 2008, this Honorable Court resolved to treat the petition in the
above-captioned case as a petition for review on certiorari under Rule 45 of the Rules of Civil
Procedure. All along the petitioner thought that the filing of the petition for certiorari under Rule
65 is appropriate considering that the ground raised is grave abuse of discretion by the Honorable
Court of Appeals for reversing the decision of the majority decision of the Panel of Voluntary
Arbitration in arbitrary and whimsical manner.
10) For having treated this petition under Rule 45 of the Rules of Civil Procedure, petitioner
humbly admits that delay was incurred in the filing thereof, such delay was caused by several
factors beyond control such as the transfer of handling legal assistant to another office and the
undersigned had to reassign the case for the preparation of the petition. Furthermore, the
undersigned counsel, other than being the Chief of FFW LEGAL CENTER is also the Vice
President of the Federation of Free Workers (FFW), who has to attend similar and urgent
pressing problems of local affiliates arising from the effects of contracting out and closure of
companies.
11) Considering the issue to be resolved requires only two CBA provisions (1) the recognition
of management prerogative (Section 1, Article III of the CBA), and union leave (Section 3,
Article XV of the CBA) to guide the Honorable Court reached (sic) a decision, petitioner
honestly thought that the other pleadings referred to by respondent are not relevant.
With this kind and tenor of justification, we appear to have acted with extreme liberality in recognizing
the petition as a Rule 45 petition and in giving it due course. We cannot extend the same liberality,
however, with respect to the unions violation of the established rules on timelines in the filing of
petitions, which violations the company has kept alive by its continuing objection. While we can be
liberal in considering the mode of review of lower court decisions (and even in the contents of the
petition which the company insists are deficient), we cannot do the same with respect to the time
requirements that govern the finality of these decisions. A final judgment can no longer be disturbed
under the combined application of the principles of immutability of final judgments14 and res
judicata,15 subject only to very exceptional circumstances not at all present in this case.16
Under Rule 45, a petition for review on certiorari should be filed within 15 days from notice of
judgment, extendible in meritorious cases for a total of another 30 days.17 Given that a Rule 45 petition
is appropriate in the present case, the period of 60 days after notice of judgment is way past the deadline
allowed, so that the CA decision had lapsed to finality by the time the petition with us was filed. This
reason alone even without considering the companys other technical objection based on the unions
failure to attach relevant documents in support of the petition amply supports the denial of the petition.
The lack of merit of the petition likewise precludes us from resolving it in the unions favor. In short, we
see no reversible error in the CAs ruling.
While it is true that the union and its members have been granted union leave privileges under the CBA,
the grant cannot be considered separately from the other provisions of the CBA, particularly the
provision on management prerogatives where the CBA reserved for the company the full and complete
authority in managing and running its business.18 We see nothing in the wordings of the union leave
provision that removes from the company the right to prescribe reasonable rules and regulations to
govern the manner of availing of union leaves, particularly the prerogative to require prior approval.

Precisely, prior notice is expressly required under the CBA so that the company can appropriately
respond to the request for leave. In this sense, the rule requiring prior approval only made express what
is implied in the terms of the CBA.
In any event, any doubt in resolving any interpretative conflict is settled by subsequent developments in
the course of the parties implementation of the CBA, specifically, by the establishment of the company
regulation in November 2002 requiring prior approval before the union leave can be used. The union
accepted this regulation without objection since its promulgation (or more than a year before the present
dispute arose), and the rule on its face is not unreasonable, oppressive, nor violative of CBA terms.
Ample evidence exists in the records indicating the unions acquiescence to the rule.19 Notably, no letter
from the union complaining about the unilateral change in policy or any request for a meeting to discuss
this policy appears on record. The union and its members have willingly applied for approval as the rule
requires.20 Even Mangalino himself, in the past, had filed applications for union leave with his
department manager, and willingly complied with the disapproval without protest of any kind.21 Thus,
when Mangalino asserted his right to take a leave without prior approval, the requirement for prior
approval was already in place and established, and could no longer be removed except with the
companys consent or by negotiation and express agreement in future CBAs.
The "prior approval" policy fully supported the validity of the suspensions the company imposed on
Mangalino. We point out additionally that as an employee, Mangalino had the clear obligation to comply
with the management disapproval of his requested leave while at the same time registering his objection
to the company regulation and action. That he still went on leave, in open disregard of his superiors
orders, rendered Mangalino open to the charge of insubordination, separately from his absence without
official leave.22 This charge, of course, can no longer prosper even if laid today, given the lapse of time
that has since transpired.
In light of the petitions procedural infirmities, particularly its late filing that rendered the CA decision
final, and the petitions lack of substantive merit, denial of the petition necessarily follows.
WHEREFORE, premises considered, we DENY the petition for lack of merit. Costs against the
petitioners.
SO ORDERED.

Present:
CORONA, C. J., Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.
Promulgated:
G.R. No. 168583 July 26, 2010

ATTY. ALLAN S. MONTAO - versus - ATTY. ERNESTO C. VERCELES,

DECISION

DEL CASTILLO, J.:

The Federation/Unions Constitution and By-Laws govern the relationship between and among its
members. They are akin to ordinary contracts in that their provisions have obligatory force upon the federation/
union and its member. What has been expressly stipulated therein shall be strictly binding on both.
By this Petition for Review on Certiorari,[1] petitioner Atty. Allan S. Montao (Atty. Montao) assails the
Decision[2] dated May 28, 2004 and Resolution[3] dated June 28, 2005 of the Court of Appeals (CA) in CA-G.R.
SP No. 71731, which declared as null and void his election as the National Vice-President of Federation of Free
Workers (FFW), thereby reversing the May 8, 2002 Decision[4] of the Bureau of Labor Relations (BLR) in BLRO-TR-66-7-13-01.
Factual Antecedents
Atty. Montao worked as legal assistant of FFW Legal Center on October 1, 1994.[5] Subsequently, he
joined the union of rank-and-file employees, the FFW Staff Association, and eventually became the employees
union president in July 1997. In November 1998, he was likewise designated officer-in-charge
of FFW Legal Center.[6]
During the 21st National Convention and Election of National Officers of FFW, Atty. Montao was
nominated for the position of National Vice-President. In a letter dated May 25, 2001,[7] however, the
Commission on Election (FFW COMELEC), informed him that he is not qualified for the position as his
candidacy violates the 1998 FFW Constitution and By-Laws, particularly Section 76 of Article XIX [8]and Section
25 (a) of Article VIII,[9] both in Chapter II thereof. Atty. Montao thus filed an Urgent Motion for
Reconsideration[10] praying that his name be included in the official list of candidates.
Election ensued on May 26-27, 2001 in the National Convention held at Subic International
Hotel, Olongapo City. Despite the pending motion for reconsideration with the FFW COMELEC, and strong
opposition and protest of respondent Atty. Ernesto C. Verceles (Atty. Verceles), a delegate to the convention and
president of University of the East Employees Association (UEEA-FFW) which is an affiliate union of FFW, the
convention delegates allowed Atty. Montaos candidacy. He emerged victorious and was proclaimed as the
National Vice-President.
On May 28, 2001, through a letter[11] to the Chairman of FFW COMELEC, Atty. Verceles reiterated his
protest over Atty. Montaos candidacy which he manifested during the plenary session before the holding of the
election in the Convention. On June 18, 2001, Atty. Verceles sent a follow-up letter [12] to the President of FFW
requesting for immediate action on his protest.

Proceedings before the Bureau of Labor Relations

On July 13, 2001, Atty. Verceles, as President of UEEA-FFW and officer of the Governing Board of
FFW, filed before the BLR a petition [13] for the nullification of the election of Atty. Montao as FFW National
Vice-President. He alleged that, as already ruled by the FFW COMELEC, Atty. Montao is not qualified to run
for the position because Section 76 of Article XIX of the FFW Constitution and By-Laws prohibits federation
employees from sitting in its Governing Board. Claiming that Atty. Montaos premature assumption of duties
and formal induction as vice-president will cause serious damage, Atty. Verceles likewise prayed for injunctive
relief.[14]
Atty. Montao filed his Comment with Motion to Dismiss[15] on the grounds that the Regional Director of
the Department of Labor and Employment (DOLE) and not the BLR has jurisdiction over the case; that the filing
of the petition was premature due to the pending and unresolved protest before the FFW COMELEC; and that,
Atty. Verceles has no legal standing to initiate the petition not being the real party in interest.
Meanwhile, on July 16, 2001, the FFW COMELEC sent a letter to FFW National President, Bro. Ramon
J. Jabar, in reference to the election protest filed before it by Atty. Verceles. In this correspondence, which was
used by Atty. Verceles as an additional annex to his petition before the BLR, the FFW COMELEC intimated its
firm stand that Atty. Montaos candidacy contravenes the FFWs Constitution, by stating:
At the time Atty. Verceles lodged his opposition in the floor before the holding of the
election, we, the Comelec unanimously made the decision that Atty. Montao and others are
disqualified and barred from running for any position in the election of the Federation, in view of
pertinent provisions of the FFW Constitution.
Our decision which we repeated several times as final was however further deliberated
upon by the body, which then gave the go signal for Atty. Montaos candidacy notwithstanding
our decision barring him from running and despite the fact that several delegates took the floor
[stating] that the convention body is not a constitutional convention body and as such could not
qualify to amend the FFWs present constitution to allow Atty. Montao to run.
We would like to reiterate what we stated during the plenary session that our decision
was final in view of the cited pertinent provisions of the FFW Constitution and we submit that the
decision of the convention body in allowing Atty. Montaos candidacy is not valid in view of the
fact that it runs counter to the FFW Constitution and the body at that time was not acting as a
Constitutional Convention body empowered to amend the FFW Constitution on the spot.
Our having conducted the election does not depart from the fact that we did not
change our decision disqualifying candidates such as Atty. Allan S. Montao, and others from
running. The National Convention as a co-equal constitutional body of the Comelec was not
given the license nor the authority to violate the Constitution. It therefore, cannot reverse the final
decision of the Comelec with regard to the candidacy of Atty. Allan Montao and other
disqualified candidates.[16]

The BLR, in its Order dated August 20, 2001,[17] did not give due course to Atty. Montaos Motion to
Dismiss but ordered the latter to submit his answer to the petition pursuant to the rules. The parties thereafter
submitted their respective pleadings and position papers.
On May 8, 2002, the BLR rendered a Decision [18] dismissing the petition for lack of merit. While it
upheld its jurisdiction over the intra-union dispute case and affirmed, as well, Atty. Verceles legal personality to
institute the action as president of an affiliate union of FFW, the BLR ruled that there were no grounds to hold
Atty. Montao unqualified to run for National Vice-President of FFW. It held that the applicable provision in the
FFW Constitution and By-Laws to determine whether one is qualified to run for office is not Section 76 of Article
XIX[19] but Section 26 of Article VIII[20] thereof. The BLR opined that there was sufficient compliance with the
requirements laid down by this applicable provision and, besides, the convention delegates unanimously decided
that Atty. Montao was qualified to run for the position of National Vice-President.
Atty. Verceles filed a Motion for Reconsideration but it was denied by the BLR.
Proceedings before the Court of Appeals
Atty. Verceles thus elevated the matter to the CA via a petition for certiorari,[21] arguing that the
Convention had no authority under the FFW Constitution and By-Laws to overrule and set aside the FFW
COMELECs Decision rendered pursuant to the latters power to screen candidates.
On May 28, 2004, the CA set aside the BLRs Decision. While it agreed that jurisdiction was properly
lodged with the BLR, that Atty. Verceles has legal standing to institute the petition, and that the applicable
provision of FFW Constitution and By-Laws is Section 26 of Article VIII and not Section 76 of Article XIX, the
CA however ruled that Atty. Montao did not possess the qualification requirement under paragraph (d) of
Section 26 that candidates must be an officer or member of a legitimate labor organization. According to the CA,
since Atty. Montao, as legal assistant employed by FFW, is considered as confidential employee, consequently,
he is ineligible to join FFW Staff Association, the rank-and-file union of FFW. The CA, thus, granted the petition
and nullified the election of Atty. Montao as FFW National Vice-President.
Atty. Montao moved for reconsideration claiming that the CA seriously erred in granting Atty. Verceles
petition on the ground that FFW Staff Association, of which he is an officer and member, is not a legitimate labor
organization. He asserted that the legitimacy of the union was never raised as an issue. Besides, the declaration
of the CA that FFW Staff Association is not a legitimate labor organization amounts to a collateral attack upon its
legal personality, which is proscribed by law. Atty. Montao also reiterated his allegations of lack of jurisdiction
and lack of cause of action due to a pending protest. In addition, he claimed violation of the mandatory
requirement on certification against forum shopping and mootness of the case due to the appointment of Atty.
Verceles as Commissioner of the National Labor Relations Commission (NLRC), thereby divesting himself of
interest in any matters relating to his affiliation with FFW.

Believing that it will be prejudiced by the CA Decision since its legal existence was put at stake, the FFW
Staff Association, through its president, Danilo A. Laserna, sought intervention.
On June 28, 2005, the CA issued a Resolution[22] denying both Atty. Montaos motion for
reconsideration[23] and FFW Staff Associations motion for intervention/clarification.[24]
Issues
Hence, this petition anchored on the following grounds:
I.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION,
AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION, IN RENDERING THE
ASSAILED DECISION, IN THAT:
A.)

THE SOLE GROUND USED AND/OR INVOKED IN GRANTING

THE PETITION A QUO WAS NOT EVEN RAISED AND/OR INVOKED BY
PETITIONER;

B.)

THE DECLARATION THAT FFW STAFF ASSOCIATION IS NOT A

LEGITIMATE LABOR ORGANIZATION, WITHOUT GIVING SAID
ORGANIZATION A DAY IN COURT AMOUNTS TO A COLLATERAL
ATTACK PROSCRIBED UNDER THE LAW; AND

C.)

THE COURT OF APPEALS FAILED AND/OR REFUSED TO PASS

UPON OTHER LEGAL ISSUES WHICH HAD BEEN TIMELY RAISED,
SPECIFICALLY ON THE PREMATURITY OF THE COMPLAINT AND THE
LACK OF CERTIFICATION AGAINST FORUM SHOPPING OF THE
PETITION A QUO.

II.
THE COURT OF APPEALS ERRED IN UPHOLDING THE EXERCISE OF
JURISDICTION BY HEREIN RESPONDENT BUREAU AND IN NOT ORDERING THE
DISMISSAL OF THE CASE, DESPITE EXPRESS PROVISION OF LAW GRANTING
SAID JURISDICTION OVER CASES INVOLVING PROTESTS AND PETITIONS FOR
ANNULMENT OF RESULTS OF ELECTIONS TO THE REGIONAL DIRECTORS OF THE
DEPARTMENT OF LABOR AND EMPLOYMENT.
III.
IN THE ALTERNATIVE, THE COURT OF APPEALS LIKEWISE ERRED IN NOT
ORDERING THE DISMISSAL OF THE PETITION A QUO, IN THAT:
A.)

THE
FILING
OF
THE
PETITION
FOR
NULLIFICATION OF THE RESULT OF ELECTION IS PREMATURE, IN
VIEW OF PENDENCY OF HEREIN RESPONDENT ATTY. VERCELES
PROTEST BEFORE THE COMMISSION ON ELECTION OF THE
FEDERATION OF FREE WORKERS (FFW COMELEC) AT THE TIME
OF THE FILING OF THE SAID PETITION, HENCE, HE HAS NO CAUSE
OF ACTION; AND

B.)

HEREIN RESPONDENT ATTY. VERCELES HAS

VIOLATED SECTION 5, RULE 7 OF THE 1997 RULES ON CIVIL
PROCEDURE, AS HIS PETITION A QUO HAS NO CERTIFICATION
AGAINST FORUM SHOPPING, WHICH IS A MANDATORY
REQUIREMENT. IT IS ALSO IN UTTER DISREGARD AND IN GROSS
VIOLATION OF SUPREME COURT CIRCULAR NO. 04-94.

IV.
FINALLY, ASSUMING ARGUENDO THAT HEREIN RESPONDENT BUREAU ACTED
WITH JURISDICTION OVER THE CASE; ANDASSUMING FURTHER THAT HEREIN
RESPONDENT ATTY. VERCELES HAS A CAUSE OF ACTION, DESPITE THE
PENDENCY OF HIS PROTEST BEFORE FFWS COMELEC AT THE TIME HE FILED
HIS PETITION A QUO; AND ASSUMING FINALLY, THAT HEREIN RESPONDENT
ATTY. VERCELES BE EXCUSED IN DISREGARDING THE MANDATORY
REQUIREMENT ON CERTIFICATION AGAINST FORUM SHOPPING WHICH WAS
TIMELY OBJECTED TO, THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION, AMOUNTING TO LACK AND/OR EXCESS OF JURISDICTION, IN NOT
ORDERING THE DISMISSAL OF THE CASE FOR HAVING BEEN RENDERED MOOT
AND ACADEMIC BY A SUPERVENING EVENT THAT WAS, WHEN HEREIN
RESPONDENT ATTY. VERCELES SOUGHT APPOINTMENT AND WAS APPOINTED AS
COMMISSIONER OF THE NATIONAL LABOR RELATIONS COMMISSION (NLRC),
THUS, DIVESTING HIMSELF WITH ANY INTEREST WITH MATTERS RELATING TO
HIS FORMER MEMBERSHIP AND AFFILIATION WITH THE FEDERATION OF FREE
WORKERS (FFW), HENCE, HE IS NO LONGER A REAL PARTY IN INTEREST, AS HE
DOES NOT STAND TO BE INJURED OR BENEFITED BY THE JUDGMENT IN THE
INSTANT CASE.[25]

Atty. Montao contends that the CA gravely erred in upholding the jurisdiction of the BLR; in not
declaring as premature the petition in view of the pending protest before FFW COMELEC; in not finding that the
petition violated the rule on non-forum shopping; in not dismissing the case for being moot in view of the
appointment of Atty. Verceles as NLRC Commissioner; and in granting the petition to annul his election as FFW
National Vice-President on the ground that FFW Staff Association is not a legitimate labor organization.
Our Ruling
The petition is devoid of merit.
The BLR has jurisdiction over intra-union disputes involving a
federation.
We find no merit in petitioners claim that under Section 6 of Rule
XV in relation to Section 1 of Rule XIV[27] of Book V of the Omnibus Rules Implementing the Labor Code, it
is the Regional Director of the DOLE and not the BLR who has jurisdiction over election protests.
[26]

Section 226 of the Labor Code[28] clearly provides that the BLR and the Regional Directors of DOLE
have concurrent jurisdiction over inter-union and intra-union disputes. Such disputes include the conduct or
nullification of election of union and workers association officers.[29] There is, thus, no doubt as to the BLRs
jurisdiction over the instant dispute involving member-unions of a federation arising from disagreement over the
provisions of the federations constitution and by-laws.

We agree with BLRs observation that:

Rule XVI lays down the decentralized intra-union dispute settlement mechanism.
Section 1 states that any complaint in this regard shall be filed in the Regional Office where the
union is domiciled. The concept of domicile in labor relations regulation is equivalent to the
place where the union seeks to operate or has established a geographical presence for purposes
of collective bargaining or for dealing with employers concerning terms and conditions of
employment.
The matter of venue becomes problematic when the intra-union dispute involves a
federation, because the geographical presence of a federation may encompass more than one
administrative region. Pursuant to its authority under Article 226, this Bureau exercises original
jurisdiction over intra-union disputes involving federations. It is well-settled that FFW, having
local unions all over the country, operates in more than one administrative region. Therefore, this
Bureau maintains original and exclusive jurisdiction over disputes arising from any violation of
or disagreement over any provision of its constitution and by-laws.[30]
The petition to annul Atty. Montaos election as VP was not prematurely
filed.

There is likewise no merit to petitioners argument that the petition should have been immediately
dismissed due to a pending and unresolved protest before the FFW COMELEC pursuant to Section 6, Rule XV,
Book V of the Omnibus Rules Implementing the Labor Code.[31]
It is true that under the Implementing Rules, redress must first be sought within the organization itself in
accordance with its constitution and by-laws. However, this requirement is not absolute but yields to exception
under varying circumstances.[32] In the case at bench, Atty. Verceles made his protest over Atty. Montaos
candidacy during the plenary session before the holding of the election proceedings. The FFW COMELEC,
notwithstanding its reservation and despite objections from certain convention delegates, allowed Atty. Montaos
candidacy and proclaimed him winner for the position. Under the rules, the committee on election shall endeavor
to settle or resolve all protests during or immediately after the close of election proceedings and any protest left
unresolved shall be resolved by the committee within five days after the close of the election proceedings. [33] A
day or two after the election, Atty. Verceles made his written/formal protest over Atty. Montaos
candidacy/proclamation with the FFW COMELEC. He exhausted the remedies under the constitution and bylaws to have his protest acted upon by the proper forum and even asked for a formal hearing on the matter. Still,

the FFW COMELEC failed to timely act thereon. Thus, Atty. Verceles had no other recourse but to take the next
available remedy to protect the interest of the union he represents as well as the whole federation, especially so
that Atty. Montao, immediately after being proclaimed, already assumed and started to perform the duties of the
position. Consequently, Atty. Verceles properly sought redress from the BLR so that the right to due process will
not be violated. To insist on the contrary is to render the exhaustion of remedies within the union as illusory and
vain.[34]
The allegation regarding certification against forum shopping was
belatedly raised.

Atty. Montao accuses Atty. Verceles of violating the rules on forum shopping. We note however that this
issue was only raised for the first time in Atty. Montaos motion for reconsideration of the Decision of the CA,
hence, the same deserves no merit. It is settled that new issues cannot be raised for the first time on appeal or on
motion for reconsideration.[35] While this allegation is related to the ground of forum shopping alleged by Atty.
Montao at the early stage of the proceedings, the latter, as a ground for the dismissal of actions, is separate and
distinct from the failure to submit a proper certificate against forum shopping.[36]
There is necessity to resolve the case despite the issues having become
moot.

During the pendency of this case, the challenged term of office held and served by Atty. Montao expired
in 2006, thereby rendering the issues of the case moot. In addition, Atty. Verceles appointment in 2003 as NLRC
Commissioner rendered the case moot as such supervening event divested him of any interest in and affiliation
with the federation in accordance with Article 213 of the Labor Code. However, in a number of cases,[37] we still
delved into the merits notwithstanding supervening events that would ordinarily render the case moot, if the issues
are capable of repetition, yet evading review, as in this case.
As manifested by Atty. Verceles, Atty. Montao ran and won as FFW National President after his
challenged term as FFW National Vice-President had expired. It must be stated at this juncture that the
legitimacy of Atty. Montaos leadership as National President is beyond our jurisdiction and is not in issue in the
instant case. The only issue for our resolution is petitioners qualification to run as FFW National Vice-President
during the May 26-27, 2001 elections. We find it necessary and imperative to resolve this issue not only to
prevent further repetition but also to clear any doubtful interpretation and application of the provisions of FFW
Constitution & By-laws in order to ensure credible future elections in the interest and welfare of affiliate unions of
FFW.
Atty. Montao is not qualified to run as FFW National Vice-President in
view of the prohibition established in Section 76, Article XIX of the 1998
FFW Constitution and By-Laws.

Section 76, Article XIX of the FFW Constitution and By-laws provides that no member of the Governing
Board shall at the same time be an employee in the staff of the federation. There is no dispute that Atty. Montao,
at the time of his nomination and election for the position in the Governing Board, is the head
of FFW Legal Center and the President of FFW Staff Association. Even after he was elected, albeit challenged,
he continued to perform his functions as staff member of FFW and no evidence was presented to show that he
tendered his resignation.[38] On this basis, the FFW COMELEC disqualified Atty. Montao. The BLR, however,
overturned FFW COMELECs ruling and held that the applicable provision is Section 26 of Article VIII. The
CA subsequently affirmed this ruling of the BLR but held Atty. Montao unqualified for the position for failing to
meet the requirements set forth therein.
We find that both the BLR and CA erred in their findings.
To begin with, FFW COMELEC is vested with authority and power, under the FFW Constitution and
By-Laws, to screen candidates and determine their qualifications and eligibility to run in the election and to adopt
and promulgate rules concerning the conduct of elections.[39] Under the Rules Implementing the Labor Code, the
Committee shall have the power to prescribe rules on the qualification and eligibility of candidates and such other
rules as may facilitate the orderly conduct of elections.[40] The Committee is also regarded as the final arbiter of
all election protests.[41] From the foregoing, FFW COMELEC, undeniably, has sufficient authority to adopt its
own interpretation of the explicit provisions of the federations constitution and by-laws and unless it is shown to
have committed grave abuse of discretion, its decision and ruling will not be interfered with. The FFW
Constitution and By-laws are clear that no member of the Governing Board shall at the same time perform
functions of the rank-and-file staff. The BLR erred in disregarding this clear provision. The FFW COMELECs
ruling which considered Atty. Montaos candidacy in violation of the FFW Constitution is therefore correct.
We, thus, concur with the CA that Atty. Montao is not qualified to run for the position but not for failure
to meet the requirement specified under Section 26 (d) of Article VIII of FFW Constitution and By-Laws. We
note that the CAs declaration of the illegitimate status of FFW Staff Association is proscribed by law, owing to
the preclusion of collateral attack.[42] We nonetheless resolve to affirm the CAs finding that Atty. Montao is
disqualified to run for the position of National Vice-President in view of the proscription in the FFW Constitution
and By-Laws on federation employees from sitting in its Governing Board. Accordingly, the election of Atty.
Montao as FFW Vice-President is null and void.
WHEREFORE, the petition is DENIED. The assailed May 28, 2004 Decision of the Court of Appeals
in CA-G.R. SP No. 71731 nullifying the election of Atty. Allan S. Montao as FFW National Vice-President and
the June 28, 2005 Resolution denying the Motion for Reconsideration are AFFIRMED.
SO ORDERED.
G.R. No. 96821 December 9, 1994

LA TONDEA WORKERS UNION, petitioner,

vs.
THE HONORABLE SECRETARY OF LABOR AND EMPLOYMENT, and HON. PURA
FERRER-CALLEJA, in her capacity as Director, Bureau of Labor Relations, respondents.
Amorito V. Canete for petitioner.

MENDOZA, J.:
This is a petition for certiorari to set aside orders and the decision of respondent Director of the Bureau
of Labor Relations (BLR) and Secretary of Labor and Employment in BLR-AE-8-18-89, finding Ramon
de la Cruz and Norma Marin, president and treasurer respectively of petitioner La Tondea Worker's
Union (LTWU), accountable for union funds in the amount of P367,553.00.
Petitioner LTWU is a duly registered labor organization. For more that thirty years it was bargaining
agent of the rank-and-file workers of La Tondea Inc. at its Tondo Plant. On May 31, 1989 it lost in a
certification election to the Ilaw at Buklod ng Manggagawa (IBM).
It appears that, on March 14, 1989, about 200, out of 1,015 members of petitioner, petitioned the
National Capital Region Office of the Department of Labor and Employment (hereafter referred to as
DOLE-NCR) for an audit or examination of the funds and financial records of the union. Accordingly an
audit was ordered and, on April 17, 1989, the acting auditing examiner of the DOLE-NCR, Nepomuceno
Leao II, submitted a report finding Ramon de la Cruz and Norma Marin accountable for P367,553.00
for union dues remitted by La Tondea Inc. to LTWU.
De la Cruz and Marin appealed to then DOLE Secretary Franklin Drilon, complaining that they had not
been heard before the report was made. The case was indorsed to the respondent Director of the Bureau
of Labor Relations, who, on August 7, 1989, directed the DOLE-NCR to forward to the BLR the records
of the case.
In her order dated September 29, 1989, the respondent BLR Director found that indeed De la Cruz and
Marin had not been heard before they were held liable for union funds. For this reason she set aside the
findings and recommendations of the DOLE-NCR and ordered another audit/examination to be
conducted. The dispositive portion of her order stated:
WHEREFORE, premises considered, the findings/recommendations of the National
Capital Region contained in the letter of NCR Director Luna C. Piezas to Teodoro
Monleon, et al. petitioners, dated 11 May 1989 are hereby set aside.
Accordingly, the Labor Relations and Reporting Division (LRRD), this Bureau is hereby
directed to conduct an audit/examination of the books of accounts and other financial
records of La Tondea Workers Union (LTWU) for the period of 1986 to February 1989.
SO ORDERED.
Petitioner moved for a reconsideration of the order insofar as it ordered an audit/examination of books of
accounts and financial records. It argued that certain requirements of Art. 274 of the Labor Code, as
amended by R.A. 6715, must first be complied with before an audit/examination could be ordered, to
wit: (1) there must be a sworn written complaint, (2) it must be supported by at least 20% of the total

membership of the union and (3) it must not have been conducted during the freedom period nor within
the 30 days immediately preceding the date of election of union officials.
Petitioner's motion was denied by the BLR in a resolution dated December 1, 1989. Ramon de la Cruz,
Danilo Manrique, Arturo Bautista and Norma Marin were ordered to submit "all financial records and
related documents of the union for the period 1986 to February 1989 within ten (10) days from receipt of
this order."
The union, through its new president, Danilo Manrique, again moved for a reconsideration, this time
raising a jurisdictional question: That under Art. 274 of the Labor Code, as amended by Republic Act
No. 6715, the power to order an examination of the books of accounts and financial activities of a union
is vested in the Secretary of Labor and Employment or his representative and the BLR can not be
considered the Secretary's representative. In its order of January 22, 1990, however, the BLR denied
petitioner's motion, even as it reiterated its previous order of December 1, 1989, with warning that if the
records and documents required were not produced within five days petitioner would be deemed to have
waived the right to present its evidence.
The union filed a petition for review of the orders of December 1, 1989 and January 22, 1990 to the
DOLE Secretary. But the BLR proceeded with its examination, and, as the union officers refused to
comply with its orders, the BLR based the audit/examination on the certification of the company. In an
order dated July 5, 1990, the BLR found the union officers personally accountable and liable for the total
amount of P367,553.00, which La Tondea Inc. certified it had remitted to LTWU as union dues.
The Secretary of Labor and Employment did not act on the petition for review of the union. Instead, he
referred the petition to the BLR which denied the petition for having become moot and academic. The
dispositive portion of its order, dated November 21, 1990, states:
WHEREFORE, premises considered, the petition for review is denied for lack of merit.
The Order of this Bureau dated 5 July 1990 issued in the exercise of its appellate
jurisdiction over audit/examination case heard before the Regional Office, this
Department, is hereby affirmed in toto.
Hence this petition, alleging grave abuse of discretion by respondent Secretary of Labor and
Employment and Director of the Bureau of Labor Relations. Petitioner alleges several grounds which
raise the following issues:
1. Whether under the law the power to examine the books of accounts of petitioner is
vested in the Secretary of Labor and Employment or in the Bureau of Labor Relations.
2. If it is vested in the Secretary of Labor and Employment, whether the power was not
delegated by him in this case to the Bureau of Labor Relations.
3. Whether the examination of petitioner's books was validly ordered despite the fact that
the requirements of Art. 274 of the Labor Code had not been complied with.
4. Whether the union officers were properly held accountable for union funds.
With regard to the first issue, the petitioner cites Art. 274 of the Labor Code and Rule VIII-A of the
implementing rules, in support of its contention that the BLR had no authority to conduct an
examination of the books of the LTWU and that such authority is vested solely in the Secretary of Labor
or his duly authorized representative. These provision state:

Art. 274. Visitorial Powers. The Secretary of Labor and Employment or his duly
authorized representative is hereby empowered to inquire into the financial activities of
legitimate labor organizations upon the filing of a complaint under oath and duly
supported by the written consent of at least twenty (20%) percent of the total membership
of the labor organization concerned and to examine their books of accounts and other
records to determine compliance or non-compliance with the law and to prosecute any
violations of the law and the union constitutions and
by-laws; Provided, that such inquiry or examination shall not be conducted during the
sixty (60) day freedom period nor within the thirty (30) days immediately preceding the
date of election of union officials.
Rule VIII-A
VISITORIAL POWER
Sec. 1. Exercise of visitorial power. The Secretary of Labor and Employment or his
duly authorized representative shall inquire into the financial activities of any legitimate
labor organization and examine their books of accounts and other records to determine
compliance with the law and the organization, constitution and by-laws, upon the filing of
a complaint under oath and duly supported by the written consent of at least 20% of the
total membership of the labor organization concerned.
Sec. 2. Period of inquiry or examination. No inquiry or examination of the financial
activities and books of accounts as well as other records of any legitimate labor
organization mentioned in the preceding section shall be conducted during the 60 day
freedom period nor within 30 days immediately preceding the date of election of union
officials.
The petitioner argues that although Art. 274 authorizes the Secretary to delegate the examination of
accounts to a representative, the BLR Director cannot be considered a duly authorized representative
because the power to examine the books of accounts of a union has already been delegated to union
account officers pursuant to the implementing rules, Rule 1, sec. 1(ff) which provides:
"Union Accounts Examiners" are officials of the Bureau or the Industrial Relations
Division in the Regional Office empowered to audit books of accounts of the union.
On the other hand, the public respondents contend that union accounts examiners are actually officials of
the BLR because the word "Bureau" in sec.
1(ff) refers to the Bureau of Labor Relations. At any rate, they contend that by endorsing the case to the
BLR, the Secretary of Labor and Employment clearly designated the BLR to act on his behalf.
Respondent's contention is well taken. The "union accounts examiners of the Bureau" mentioned in Rule
1, sec. 1(ff) of the implementing rules as having the power to audit the books of accounts of unions are
actually officials of the BLR because the word "Bureau" is defined in Rule 1, sec. 1(b) of the same rules
as the Bureau of Labor Relations.
Anyway, the delegation of authority to union accounts examiners in Rule 1, sec. 1(ff) is not exclusive.
By indorsing the case to the BLR, the Secretary of Labor and Employment must be presumed to have
authorized the BLR to act on his behalf. As already stated, the Secretary made two indorsements: first,
when he referred to the BLR the letter dated July 27, 1989 of Ramon de la Cruz and Norma Marin
seeking the annulment of the audit report of the DOLE NCR, and second, on September 4, 1990 when,
instead of acting on the petition for review of the union, he indorsed it to the BLR.

Independently of any delegation, the BLR had power of its own to conduct the examination of accounts
in this case. Book IV, Title VII, Chapter 4, sec. 16 of the Administrative Code of 1987 provides:
Sec. 16. Bureau of Labor Relations. The Bureau of Labor Relations shall set policies,
standards, and procedures on the registration and supervision of legitimate labor union
activities including denial, cancellation and revocation of labor union permits. It shall
also set policies, standards, and procedure relating to collective bargaining agreements,
and the examination of financial records of accounts of labor organizations to determine
compliance with relevant laws.
The Bureau shall also provide proper orientation to workers on their rights and privileges
under existing laws and regulations, and develop schemes and project for the
improvement of the standards of living of workers and their families.
The Labor Code, as amended by RA 6715, likewise authorizes the BLR to decide intra-union disputes.
This includes the examinations of accounts. Thus, Art. 226 of the Code provides:
Art. 226. Bureau of Labor Relations. The Bureau of Labor Relations and the Labor
Relations Divisions in the regional offices of the Department of Labor shall have original
and exclusive authority to act, at their own initiative or upon request of either or both
parties, on all
inter-union and intra-union conflicts, and all disputes, grievances or problems arising
from or affecting labor-management relations in all workplaces whether agricultural or
non-agricultural, except those arising from the implementation or interpretation of
collective bargaining agreements which shall be the subject of grievance procedure
and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on labor cases before it, subject to
extension by agreement of the parties.
Petitioner's contention that the intra-union dispute mentioned in this provision does not include the
examination of accounts of the union because it contemplates intra-union conflicts affecting labormanagement relations is untenable. Conflicts affecting labor-management relations are apart from
intra-union conflicts, as is apparent from the text of Art. 226.
This brings us to the second question, whether the examination of accounts in this case is valid
considering that it was not initiated through a sworn written complaint by at least 20% of the total
membership of the LTWU. As already stated, the case arose from a letter written by 200, out of a total
membership force of 1,015 of the LTWU. These represented 19.70% of the total membership of the
union, just a little less than the required number.
The requirements referred to were inserted in Art. 274 by way of an amendment by R.A. 6715 which
took effect on March 21, 1989. On the other hand, the letter of the union members petitioning for an
examination of the financial records of the union was made on March 14, 1989, i.e., seven days before
the effectivity of the amendments. At the time the letter was made, Art. 274 merely provided:
Art. 274. Visitorial power. The Secretary of Labor or his duly authorized
representative is hereby empowered to inquire, from time to time, into the financial
activities of legitimate labor organizations and to examine their books of accounts and
other records to determine compliance or non-compliance with the law and to prosecute
any violations of the law and the union constitution and by-laws.

The validity of the request for examination of union accounts must be determined as of the time of its
filing. Hence we hold that the request of the 200 union members in this case was validly made and
conferred jurisdiction on the DOLE-NCR to conduct the examination of the books of accounts of the
petitioners.
It is indeed true that, in setting aside the audit report of the DOLE-NCR, the BLR cited the fact that the
examination of accounts had been made within the so-called "freedom period." But as the BLR pointed
out in its order dated September 29, 1989, the ban on examination or audit of union funds within 60 days
of the expiration of the collective bargaining agreement had been a policy of the Department of Labor
and Employment even before R.A. 6715 took effect. There is, therefore, nothing inconsistent in holding
that the examination of accounts by the DOLE-NCR as void for having been conducted within the
freedom period and saying now that since the letter requesting such an examination was made before the
effectivity of R.A. 6715, the requirements of sworn written complaint and support of at least 20% of the
total membership of the union do not apply.
The examination subsequently ordered by the BLR, although made after the effectivity of R.A. 6715,
was validly conducted because it was simply a continuation of proceedings already began in the DOLENCR. As a matter of fact the petitioners, in elevating the matter to the Secretary of Labor, specifically
requested that their letter be treated as a motion for reconsideration or as an appeal from the audit report
of the DOLE-NCR.
Finally, it is claimed that petitioners Ramon de la Cruz and Norma Marin were denied due process by
the BLR. As already shown, however, they were given every opportunity to defend themselves,
including a warning that if they persisted in their refusal to submit the books of accounts of the union
they would be considered to have waived the right to present their evidence. As they did not heed the
warning, we think the BLR was justified in using, as basis of its examination, the certification of La
Tondea, Inc. as to the amount remitted by it to the LTWU as union dues. This, at any rate, is a factual
matter and the rule is that the findings of facts of administrative agencies, when supported by substantial
evidence, will not be disturbed.
WHEREFORE, the petition for certiorari is DISMISSED.
SO ORDERED.