FIRST DIVISION

ST. LUKES MEDICAL CENTER

EMPLOYEES ASSOCIATION-AFW
(SLMCEA-AFW) AND MARIBEL S.
SANTOS,
Petitioners,

G.R. No. 162053

Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.

-versusNATIONAL LABOR RELATIONS

COMMISSION (NLRC) AND ST. LUKES
Promulgated:
MEDICAL CENTER, INC.,
Respondents.
March 7, 2007
x-----------------------------------------------------------------------------------------x
DECISION
AZCUNA, J.:
Challenged in this petition for review on certiorari is the Decision[1] of the Court of Appeals
(CA) dated January 29, 2004 in CA-G.R. SP No. 75732 affirming the decision [2]dated August 23,
2002 rendered by the National Labor Relations Commission (NLRC) in NLRC CA No. 026225-00.
The antecedent facts are as follows:

Petitioner Maribel S. Santos was hired as X-Ray Technician in the Radiology

department of private respondent St. Lukes Medical Center, Inc. (SLMC)
on October 13, 1984. She is a graduate of Associate in Radiologic Technology
from The Family Clinic Incorporated School of Radiologic Technology.
On April 22, 1992, Congress passed and enacted Republic Act No. 7431
known as the Radiologic Technology Act of 1992. Said law requires that no person
shall practice or offer to practice as a radiology and/or x-ray technologist in
the Philippines without having obtained the proper certificate of registration from
the Board of Radiologic Technology.
On September 12, 1995, the Assistant Executive Director-Ancillary Services
and HR Director of private respondent SLMC issued a final notice to all
practitioners of Radiologic Technology to comply with the requirement of Republic
Act No. 7431 by December 31, 1995; otherwise, the unlicensed employee will be
transferred to an area which does not require a license to practice if a slot is
available.

On March 4, 1997, the Director of the Institute of Radiology issued a final

notice to petitioner Maribel S. Santos requiring the latter to comply with Republic
Act. No. 7431 by taking and passing the forthcoming examination scheduled in
June 1997; otherwise, private respondent SLMC may be compelled to retire her
from employment should there be no other position available where she may be
absorbed.
On May 14, 1997, the Director of the Institute of Radiology, AED-Division of
Ancillary Services issued a memorandum to petitioner Maribel S. Santos directing
the latter to submit her PRC Registration form/Examination Permit per
Memorandum dated March 4, 1997.
On March 13, 1998, the Director of the Institute of Radiology issued
another memorandum to petitioner Maribel S. Santos advising her that only a
license can assure her of her continued employment at the Institute of Radiology
of the private respondent SLMC and that the latter is giving her the last chance to
take and pass the forthcoming board examination scheduled in June 1998;
otherwise, private respondent SLMC shall be constrained to take action which
may include her separation from employment.
On November 23, 1998, the Director of the Institute of Radiology issued a
notice to petitioner Maribel S. Santos informing the latter that the management of
private respondent SLMC has approved her retirement in lieu of separation pay.
On November 26, 1998, the Personnel Manager of private respondent
SLMC issued a Notice of Separation from the Company to petitioner Maribel S.
Santos effective December 30, 1998 in view of the latters refusal to accept
private respondent SLMCs offer for early retirement. The notice also states that
while said private respondent exerted its efforts to transfer petitioner Maribel S.
Santos to other position/s, her qualifications do not fit with any of the present
vacant positions in the hospital.
In a letter dated December 18, 1998, a certain Jack C. Lappay, President of
the Philippine Association of Radiologic Technologists, Inc., wrote Ms. Judith
Betita, Personnel Manager of private respondent SLMC, requesting the latter to
give due consideration to the organizations three (3) regular members of his
organization (petitioner Maribel S. Santos included) for not passing yet the Board
of Examination for X-ray Technology, by giving them an assignment in any
department of your hospital awaiting their chance to pass the future Board Exam.
On January 6, 1999, the Personnel Manager of private respondent SLMC
again issued a Notice of Separation from the Company to petitioner Maribel S.
Santos effective February 5, 1999 after the latter failed to present/ submit her
appeal for rechecking to the Professional Regulation Commission (PRC) of the
recent board examination which she took and failed.
On March 2, 1999, petitioner Maribel S. Santos filed a complaint against
private respondent SLMC for illegal dismissal and non-payment of salaries,
allowances and other monetary benefits. She likewise prayed for the award of
moral and exemplary damages plus attorneys fees.

In the meantime, petitioner Alliance of Filipino Workers (AFW), through its

President and Legal Counsel, in a letter dated September 22, 1999 addressed to
Ms. Rita Marasigan, Human Resources Director of private respondent SLMC,
requested the latter to accommodate petitioner Maribel S. Santos and assign her
to the vacant position of CSS Aide in the hospital arising from the death of an
employee more than two (2) months earlier.
In a letter dated September 24, 1999, Ms. Rita Marasigan replied thus:
Gentlemen:
Thank you for your letter of September 22, 1999 formally
requesting to fill up the vacant regular position of a CSS Aide in Ms.
Maribel Santos behalf.
The position is indeed vacant. Please refer to our Recruitment
Policy for particulars especially on minimum requirements of the
job and the need to meet said requirements, as well as other preemployment requirements, in order to be considered for the vacant
position. As a matter of fact, Ms. Santos is welcome to apply for any
vacant position on the condition that she possesses the necessary
qualifications.
As to the consensus referred to in your letter, may I correct you
that the agreement is, regardless of the vacant position Ms. Santos
decides to apply, she must go through the usual application
procedures. The formal letter, I am afraid, will not suffice for
purposes of recruitment processing. As you know, the managers
requesting to fill any vacancy has a say on the matter and correctly
so. The managers inputs are necessarily factored into the standard
recruitment procedures. Hence, the need to undergo the prescribed
steps.
Indeed we have gone through the mechanics to accommodate Ms.
Santos transfer while she was employed with SLMC given the
prescribed period. She was given 30 days from issuance of the
notice of termination to look for appropriate openings which
incidentally she wittingly declined to utilize. She did this knowing
fully well that the consequences would be that her application
beyond the 30-day period or after the effective date of her
termination from SLMC would be considered a re-application with
loss of seniority and shall be subjected to the pertinent application
procedures.
Needless to mention, one of the 3 X-ray Technologists in similar
circumstances as Ms. Santos at the time successfully managed to
get herself transferred to E.R. because she opted to apply for the
appropriate vacant position and qualified for it within the
prescribed 30-day period. The other X-ray Technologist, on the
other hand, as you may recall, was eventually terminated not just
for his failure to comply with the licensure requirement of the law
but for cause (refusal to serve a customer).

Why Ms. Santos opted to file a complaint before the Labor Courts
and not to avail of the opportunity given her, or assuming she was
not qualified for any vacant position even if she tried to look for one
within the prescribed period, I simply cannot understand why she
also refused the separation pay offered by Management in an
amount beyond the minimum required by law only to re-apply at
SLMC, which option would be available to her anyway even (if she)
chose to accept the separation pay!
Well, heres hoping that our Union can timely influence
employees to choose their options well as it has in the past.

our

(Signed)
RITA MARASIGAN
Subsequently, in a letter dated December 27, 1999, Ms. Judith Betita,
Personnel Manager of private respondent SLMC wrote Mr. Angelito Calderon,
President of petitioner union as follows:
Dear Mr. Calderon:
This is with regard to the case of Ms. Maribel Santos. Please recall
that last Oct. 8, 1999, Ms. Rita Marasigan, HR Director, discussed
with you and Mr. Greg Del Prado the terms regarding the re-hiring of
Ms. Maribel Santos. Ms. Marasigan offered Ms. Santos the position of
Secretary at the Dietary Department. In that meeting, Ms. Santos
replied that she would think about the offer. To date, we still have no
definite reply from her. Again, during the conference held on Dec.
14, 1999, Atty. Martir promised to talk to Ms. Santos, and inform us
of her reply by Dec. 21, 1999. Again we failed to hear her reply
through him.
Please be informed that said position is in need of immediate
staffing. The Dietary Department has already been experiencing
serious backlog of work due to the said vacancy. Please note that
more than 2 months has passed since Ms. Marasigan offered this
compromise. Management cannot afford to wait for her decision
while the operation of the said department suffers from vacancy.
Therefore, Management is giving Ms. Santos until the end of this
month to give her decision. If we fail to hear from her or from you as
her representatives by that time, we will consider it as a waiver and
we will be forced to offer the position to other applicants so as not to
jeopardize the Dietary Departments operation.
For your immediate action.
(Signed)
JUDITH BETITA
Personnel Manager
On September 5, 2000, the Labor Arbiter came out with a Decision ordering
private respondent SLMC to pay petitioner Maribel S. Santos the amount of One

Hundred Fifteen Thousand Five Hundred Pesos (P115,500.00) representing her

separation pay. All other claims of petitioner were dismissed for lack of merit.
Dissatisfied, petitioner Maribel S. Santos perfected an appeal with the public
respondent NLRC.
On August 23, 2002, public respondent NLRC promulgated its Decision affirming
the Decision of the Labor Arbiter. It likewise denied the Motion for
Reconsideration filed by petitioners in its Resolution promulgated on December
27, 2002.

Petitioner thereafter filed a petition for certiorari with the CA which, as previously
mentioned, affirmed the decision of the NLRC.
Hence, this petition raising the following issues:

I.

Whether the CA overlooked certain material facts and circumstances

on petitioners legal claim in relation to the complaint for illegal dismissal.

II.

Whether the CA committed grave abuse of discretion and erred in not

resolving with clarity the issues on the merit of petitioners constitutional
right of security of tenure.[3]

For its part, private respondent St. Lukes Medical Center, Inc. (SLMC) argues in its
comment[4] that: 1) the petition should be dismissed for failure of petitioners to file a motion
for reconsideration; 2) the CA did not commit grave abuse of discretion in upholding the NLRC
and the Labor Arbiters ruling that petitioner was legally dismissed; 3) petitioner was legally
and validly terminated in accordance with Republic Act Nos. 4226 and 7431; 4) private
respondents decision to terminate petitioner Santos was made in good faith and was not the
result of unfair discrimination; and 5) petitioner Santos non-transfer to another position in the
SLMC was a valid exercise of management prerogative.
The petition lacks merit.
Generally, the Court has always accorded respect and finality to the findings of fact of
the CA particularly if they coincide with those of the Labor Arbiter and the NLRC and are
supported by substantial evidence.[5] True this rule admits of certain exceptions as, for
example, when the judgment is based on a misapprehension of facts, or the findings of fact
are not supported by the evidence on record [6] or are so glaringly erroneous as to constitute
grave abuse of discretion.[7] None of these exceptions, however, has been convincingly shown
by petitioners to apply in the present case. Hence, the Court sees no reason to disturb such
findings of fact of the CA.
Ultimately, the issue raised by the parties boils down to whether petitioner Santos was
illegally dismissed by private respondent SLMC on the basis of her inability to secure a
certificate of registration from the Board of Radiologic Technology.
The requirement for a certificate of registration is set forth under R.A. No. 7431 [8] thus:
Sec. 15. Requirement for the Practice of Radiologic Technology and X-ray
Technology. Unless exempt from the examinations under Sections 16 and 17
hereof, no person shall practice or offer to practice as a radiologic and/or x-ray

technologist in the Philippines without having obtained the proper certificate of

registration from the Board.

It is significant to note that petitioners expressly concede that the sole cause for
petitioner Santos separation from work is her failure to pass the board licensure exam for Xray technicians, a precondition for obtaining the certificate of registration from the Board. It is
argued, though, that petitioner Santos failure to comply with the certification requirement did
not constitute just cause for termination as it violated her constitutional right to security of
tenure. This contention is untenable.
While the right of workers to security of tenure is guaranteed by the Constitution, its
exercise may be reasonably regulated pursuant to the police power of the State to safeguard
health, morals, peace, education, order, safety, and the general welfare of the people.
Consequently, persons who desire to engage in the learned professions requiring scientific or
technical knowledge may be required to take an examination as a prerequisite to engaging in
their chosen careers.[9] The most concrete example of this would be in the field of medicine,
the practice of which in all its branches has been closely regulated by the State. It has long
been recognized that the regulation of this field is a reasonable method of protecting the
health and safety of the public to protect the public from the potentially deadly effects of
incompetence and ignorance among those who would practice medicine. [10] The same
rationale applies in the regulation of the practice of radiologic and x-ray technology. The clear
and unmistakable intention of the legislature in prescribing guidelines for persons seeking to
practice in this field is embodied in Section 2 of the law:
Sec. 2. Statement of Policy. It is the policy of the State to upgrade the
practice of radiologic technology in the Philippines for the purpose of protecting
the public from the hazards posed by radiation as well as to ensure safe and
proper diagnosis, treatment and research through the application of machines
and/or equipment using radiation.[11]

In this regard, the Court quotes with approval the disquisition of public respondent
NLRC in its decision dated August 23, 2002:

The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise
of the States inherent police power. It should be noted that the police power
embraces the power to prescribe regulations to promote the health, morals,
educations, good order, safety or general welfare of the people. The state is
justified in prescribing the specific requirements for x-ray technicians and/or any
other professions connected with the health and safety of its citizens.
Respondent-appellee being engaged in the hospital and health care business, is a
proper subject of the cited law; thus, having in mind the legal requirements of
these laws, the latter cannot close its eyes and [let] complainant-appellants
private interest override public interest.
Indeed, complainant-appellant cannot insist on her sterling work
performance without any derogatory record to make her qualify as an x-ray
technician in the absence of a proper certificate of Registration from the Board of
Radiologic Technology which can only be obtained by passing the required
examination. The law is clear that the Certificate of Registration cannot be

substituted by any other requirement to allow a person to practice as a Radiologic

Technologist and/or X-ray Technologist (Technician). [12]

No malice or ill-will can be imputed upon private respondent as the separation of

petitioner Santos was undertaken by it conformably to an existing statute. It is undeniable
that her continued employment without the required Board certification exposed the hospital
to possible sanctions and even to a revocation of its license to operate. Certainly, private
respondent could not be expected to retain petitioner Santos despite the inimical threat posed
by the latter to its business. This notwithstanding, the records bear out the fact that petitioner
Santos was given ample opportunity to qualify for the position and was sufficiently warned
that her failure to do so would result in her separation from work in the event there were no
other vacant positions to which she could be transferred. Despite these warnings,
petitioner Santos was still unable to comply and pass the required exam. To reiterate, the
requirement for Board certification was set by statute. Justice, fairness and due process
demand that an employer should not be penalized for situations where it had no participation
or control.[13]
It would be unreasonable to compel private respondent to wait until its license is
cancelled and it is materially injured before removing the cause of the impending evil. Neither
can the courts step in to force private respondent to reassign or transfer
petitioner Santos under these circumstances. Petitioner Santos is not in the position to
demand that she be given a different work assignment when what necessitated her transfer in
the first place was her own fault or failing. The prerogative to determine the place or station
where an employee is best qualified to serve the interests of the company on the basis of the
his or her qualifications, training and performance belongs solely to the employer. [14] The
Labor Code and its implementing Rules do not vest in the Labor Arbiters nor in the different
Divisions of the NLRC (nor in the courts) managerial authority. [15]
While our laws endeavor to give life to the constitutional policy on social justice and the
protection of labor, it does not mean that every labor dispute will be decided in favor of the
workers. The law also recognizes that management has rights which are also entitled to
respect and enforcement in the interest of fair play. [16] Labor laws, to be sure, do not authorize
interference with the employer's judgment in the conduct of the latters business. Private
respondent is free to determine, using its own discretion and business judgment, all elements
of employment, "from hiring to firing" except in cases of unlawful discrimination or those
which may be provided by law. None of these exceptions is present in the instant case.
The fact that another employee, who likewise failed to pass the required exam, was
allowed by private respondent to apply for and transfer to another position with the hospital
does not constitute unlawful discrimination. This was a valid exercise of management
prerogative, petitioners not having alleged nor proven that the reassigned employee did not
qualify for the position where she was transferred. In the past, the Court has ruled that an
objection founded on the ground that one has better credentials over the appointee is
frowned upon so long as the latter possesses the minimum qualifications for the position.
[17]
Furthermore, the records show that Ms. Santos did not even seriously apply for another
position in the company.

WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.

SO ORDERED.

THIRD DIVISION
[G.R. No. 146650. January 13, 2003]
DOLE PHILIPPINES, INC., petitioner, vs. PAWIS NG MAKABAYANG OBRERO (PAMAONFL), respondent.
DECISION
CORONA, J.:
Before us is a petition for review filed under Rule 45 of the 1997 Rules of Civil Procedure,
assailing the January 9, 2001 resolution of the Court of Appeals which denied petitioners
motion for reconsideration of its September 22, 2000 decision [1] which in turn upheld the
Order issued by the voluntary arbitrator [2] dated 12 October 1998, the dispositive portion of
which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
complainant. Respondent is hereby directed to extend the free meal benefit as provided for in
Article XVIII, Section 3 of the collective bargaining agreement to those employees who have
actually performed overtime works even for exactly three (3) hours only.
SO ORDERED.

[3]

The core of the present controversy is the interpretation of the provision for free meals
under Section 3 of Article XVIII of the 1996-2001 Collective Bargaining Agreement (CBA)
between petitioner Dole Philippines, Inc. and private respondent labor union PAMAONFL. Simply put, how many hours of overtime work must a Dole employee render to be
entitled to the free meal under Section 3 of Article XVIII of the 1996-2001 CBA? Is it when he
has rendered (a) exactly, or no less than, three hours of actual overtime work or (b) more than
three hours of actual overtime work?
The antecedents are as follows:
On February 22, 1996, a new five-year Collective Bargaining Agreement for the period
starting February 1996 up to February 2001, was executed by petitioner Dole Philippines, Inc.,
and private respondent Pawis Ng Makabayang Obrero-NFL (PAMAO-NFL). Among the
provisions of the new CBA is the disputed section on meal allowance under Section 3 of Article
XVIII on Bonuses and Allowances, which reads:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of TEN
PESOS (P10.00) to all employees who render at least TWO (2) hours or more of actual
overtime work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY
FIVE PESOS (P25.00) after THREE (3) hours of actual overtime work.[4]
Pursuant to the above provision of the CBA, some departments of Dole reverted to the
previous practice of granting free meals after exactly three hours of actual overtime
work.However, other departments continued the practice of granting free meals only after
more than three hours of overtime work. Thus, private respondent filed a complaint before the
National Conciliation and Mediation Board alleging that petitioner Dole refused to comply with
the provisions of the 1996-2001 CBA because it granted free meals only to those who
rendered overtime work for more than three hours and not to those who rendered exactly
three hours overtime work.
The parties agreed to submit the dispute to voluntary arbitration. Thereafter, the
voluntary arbitrator, deciding in favor of the respondent, issued an order directing petitioner

Dole to extend the free meal benefit to those employees who actually did overtime work even
for exactly three hours only.
Petitioner sought a reconsideration of the above order but the same was denied. Hence,
petitioner elevated the matter to the Court of Appeals by way of a petition for review on
certiorari.
On September 22, 2000, the Court of Appeals rendered its decision upholding the assailed
order.
Thus, the instant petition.
Petitioner Dole asserts that the phrase after three hours of actual overtime work should be
interpreted to mean after more than three hours of actual overtime work.
On the other hand, private respondent union and the voluntary arbitrator see it as
meaning after exactly three hours of actual overtime work.
The meal allowance provision in the 1996-2001 CBA is not new. It was also in the 19851988 CBA and the 1990-1995 CBA. The 1990-1995 CBA provision on meal allowance was
amended by the parties in the 1993-1995 CBA Supplement. The clear changes in each CBA
provision on meal allowance were in the amount of the meal allowance and free meals, and
the use of the words after and after more than to qualify the amount of overtime work to be
performed by an employee to entitle him to the free meal.
To arrive at a correct interpretation of the disputed provision of the CBA, a review of the
pertinent section of past CBAs is in order.
The CBA covering the period 21 September 1985 to 20 September 1988 provided:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of FOUR
(P4.00) PESOS to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, after THREE (3) hours of actual
overtime work.[5]
The CBA for 14 January 1990 to 13 January 1995 likewise provided:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of EIGHT
PESOS (P8.00) to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, not exceeding SIXTEEN PESOS
(P16.00) after THREE (3) hours of actual overtime work.[6]
The provision above was later amended when the parties renegotiated the economic
provisions of the CBA pursuant to Article 253-A of the Labor Code. Section 3 of Article XVIII of
the 14 January 1993 to 13 January 1995 Supplement to the 1990-1995 CBA reads:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL SUBSIDY of NINE PESOS
(P9.00) to all employees who render at least TWO (2) hours or more of actual overtime work
on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY ONE PESOS
(P21.00) after more than THREE (3) hours of actual overtime work (Section 3, as amended). [7]
We note that the phrase more than was neither in the 1985-1988 CBA nor in the original
1990-1995 CBA. It was inserted only in the 1993-1995 CBA Supplement. But said phrase is
again absent in Section 3 of Article XVIII of the 1996-2001 CBA, which reverted to the phrase
after three (3) hours.

Petitioner asserts that the phrase after three (3) hours of actual overtime work does not
mean after exactly three hours of actual overtime work; it means after more than three
hours of actual overtime work. Petitioner insists that this has been the interpretation and
practice of Dole for the past thirteen years.
Respondent, on the other hand, maintains that after three (3) hours of actual overtime
work simply means after rendering exactly, or no less than, three hours of actual overtime
work.
The Court finds logic in private respondents interpretation.
The omission of the phrase more than between after and three hours in the present CBA
spells a big difference.
No amount of legal semantics can convince the Court that after more than means the
same as after.
Petitioner asserts that the more than in the 1993-1995 CBA Supplement was mere
surplusage because, regardless of the absence of said phrase in all the past CBAs, it had
always been the policy of petitioner corporation to give the meal allowance only after more
than 3 hours of overtime work. However, if this were true, why was it included only in the
1993-1995 CBA Supplement and the parties had to negotiate its deletion in the 1996-2001
CBA?
Clearly then, the reversion to the wording of previous CBAs can only mean that the parties
intended that free meals be given to employees after exactly, or no less than, three hours of
actual overtime work.
The disputed provision of the CBA is clear and unambiguous. The terms are explicit and
the language of the CBA is not susceptible to any other interpretation. Hence, the literal
meaning of free meals after three (3) hours of overtime work shall prevail, which is simply
that an employee shall be entitled to a free meal if he has rendered exactly, or no less than,
three hours of overtime work, not after more than or in excess of three hours overtime work.
Petitioner also invokes the well-entrenched principle of management prerogative that the
power to grant benefits over and beyond the minimum standards of law, or the Labor Code for
that matter, belongs to the employer x x x. According to this principle, even if the law is
solicitous of the welfare of the employees, it must also protect the right of the employer to
exercise what clearly are management prerogatives. [8] Petitioner claims that, being the
employer, it has the right to determine whether it will grant a free meal benefit to its
employees and, if so, under what conditions. To see it otherwise would amount to an
impairment of its rights as an employer.
We do not think so.
The exercise of management prerogative is not unlimited. It is subject to the limitations
found in law, a collective bargaining agreement or the general principles of fair play and
justice.[9]This situation constitutes one of the limitations. The CBA is the norm of conduct
between petitioner and private respondent and compliance therewith is mandated by the
express policy of the law.[10]
Petitioner Dole cannot assail the voluntary arbitrators interpretation of the CBA for the
supposed impairment of its management prerogatives just because the same interpretation is
contrary to its own.
WHEREFORE, petition is hereby denied.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 71813

July 20, 1987

ROSALINA PEREZ ABELLA/HDA. DANAO-RAMONA, petitioners,

vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO QUITCO and
RICARDO DIONELE, SR., respondents.
PARAS, J.:
This is a petition for review on certiorari of the April 8, 1985 Resolution of the Ministry of Labor
and Employment affirming the July 16, 1982 Decision of the Labor Arbiter, which ruled in favor
of granting separation pay to private respondents.
On June 27, 1960, herein petitioner Rosalina Perez Abella leased a farm land in Monteverde,
Negros Occidental, known as Hacienda Danao-Ramona, for a period of ten (10) years,
renewable, at her option, for another ten (10) years (Rollo, pp. 16-20).
On August 13, 1970, she opted to extend the lease contract for another ten (10) years (Ibid,
pp. 26-27).
During the existence of the lease, she employed the herein private respondents. Private
respondent Ricardo Dionele, Sr. has been a regular farm worker since 1949 and he was
promoted to Cabo in 1963. On the other hand, private respondent Romeo Quitco started as a
regular employee in 1968 and was promoted to Cabo in November of the same year.
Upon the expiration of her leasehold rights, petitioner dismissed private respondents and
turned over the hacienda to the owners thereof on October 5, 1981, who continued the
management, cultivation and operation of the farm (Rollo, pp. 33; 89).
On November 20, 1981, private respondents filed a complaint against the petitioner at the
Ministry of Labor and Employment, Bacolod City District Office, for overtime pay, illegal
dismissal and reinstatement with backwages. After the parties had presented their respective
evidence, Labor Arbiter Manuel M. Lucas, Jr., in a Decision dated July 16, 1982 (Ibid, pp. 2931), ruled that the dismissal is warranted by the cessation of business, but granted the private
respondents separation pay. Pertinent portion of the dispositive portion of the Decision reads:
In the instant case, the respondent closed its business operation not by reason of
business reverses or losses. Accordingly, the award of termination pay in complainants'
favor is warranted.
WHEREFORE, the respondent is hereby ordered to pay the complainants separation pay
at the rate of half-month salary for every year of service, a fraction of six (6) months
being considered one (1) year. (Rollo pp. 29-30)
On appeal on August 11, 1982, the National Labor Relations Commission, in a Resolution
dated April 8, 1985 (Ibid, pp. 3940), affirmed the decision and dismissed the appeal for lack of
merit.

On May 22, 1985, petitioner filed a Motion for Reconsideration (Ibid, pp. 41-45), but the same
was denied in a Resolution dated June 10, 1985 (Ibid, p. 46). Hence, the present petition (Ibid,
pp. 3-8).
The First Division of this Court, in a Resolution dated September 16, 1985, resolved to require
the respondents to comment (Ibid, p. 58). In compliance therewith, private respondents filed
their Comment on October 23, 1985 (Ibid, pp. 53-55); and the Solicitor General on December
17, 1985 (Ibid, pp. 71-73-B).
On February 19, 1986, petitioner filed her Consolidated Reply to the Comments of private and
public respondents (Ibid, pp. 80-81).
The First Division of this Court, in a Resolution dated March 31, 1986, resolved to give due
course to the petition; and to require the parties to submit simultaneous memoranda (Ibid., p.
83). In compliance therewith, the Solicitor General filed his Memorandum on June 18, 1986
(Ibid, pp. 89-94); and petitioner on July 23, 1986 (Ibid, pp. 96-194).
The petition is devoid of merit.
The sole issue in this case is
WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY.
Petitioner claims that since her lease agreement had already expired, she is not liable for
payment of separation pay. Neither could she reinstate the complainants in the farm as this is
a complete cessation or closure of a business operation, a just cause for employment
termination under Article 272 of the Labor Code.
On the other hand, the legal basis of the Labor Arbiter in granting separation pay to the
private respondents is Batas Pambansa Blg. 130, amending the Labor Code, Section 15 of
which, specifically provides:
Sec 15 Articles 285 and 284 of the Labor Code are hereby amended to read as follows:
xxx

xxx

xxx

Art. 284. Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operation of the establisment or undertaking unless the closing is for the purpose of
circumventing the provisions of this title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in
cases of closure or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service
whichever is higher. A fraction of at least six (6) months shall be considered one (1)
whole year.1avvphi1

There is no question that Article 284 of the Labor Code as amended by BP 130 is the law
applicable in this case.
Article 272 of the same Code invoked by the petitioner pertains to the just causes of
termination. The Labor Arbiter does not argue the justification of the termination of
employment but applied Article 284 as amended, which provides for the rights of the
employees under the circumstances of termination.
Petitioner then contends that the aforequoted provision violates the constitutional guarantee
against impairment of obligations and contracts, because when she leased Hacienda DanaoRamona on June 27, 1960, neither she nor the lessor contemplated the creation of the
obligation to pay separation pay to workers at the end of the lease.
Such contention is untenable.
This issue has been laid to rest in the case of Anucension v. National Labor Union (80 SCRA
368-369 [1977]) where the Supreme Court ruled:
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 read with
literal exactness like a mathematical formula for it prohibits unreasonable impairment
only. In spite of the constitutional prohibition the State continues to possess authority to
safeguard the vital interests of its people. Legislation appropriate to safeguard said
interest may modify or abrogate contracts already in effect. 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. Otherwise, important and valuable reforms may
be precluded by the simple device of entering into contracts for the purpose of doing
that which otherwise maybe prohibited. ...
In order to determine whether legislation unconstitutionally impairs contract of
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 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. (Citing Basa vs. Federacion
Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas [FOITAF] [L-27113],
November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the protection of the workers whose
employment is terminated because of the closure of establishment and reduction of
personnel. Without said law, employees like private respondents in the case at bar will lose
the benefits to which they are entitled for the thirty three years of service in the case of
Dionele and fourteen years in the case of Quitco. Although they were absorbed by the new
management of the hacienda, in the absence of any showing that the latter has assumed the
responsibilities of the former employer, they will be considered as new employees and the
years of service behind them would amount to nothing.

Moreover, to come under the constitutional prohibition, the law must effect a change in the
rights of the parties with reference to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended refers to employment
benefits to farm hands who were not parties to petitioner's lease contract with the owner of
Hacienda Danao-Ramona. That contract cannot have the effect of annulling subsequent
legislation designed to protect the interest of the working class.
In any event, it is well-settled that in the implementation and interpretation of the provisions
of the Labor Code and its implementing regulations, the workingman's welfare should be the
primordial and paramount consideration. (Volshel Labor Union v. Bureau of Labor Relations,
137 SCRA 43 [1985]). It is the kind of interpretation which gives meaning and substance to
the liberal and compassionate spirit of the law as provided for in Article 4 of the New Labor
Code which states that "all doubts in the implementation and interpretation of the provisions
of this Code including its implementing rules and regulations shall be resolved in favor of
labor." The policy is to extend the applicability of the decree to a greater number of
employees who can avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection to labor. (Sarmiento v.
Employees Compensation Commission, 144 SCRA 422 [1986] citing Cristobal v. Employees
Compensation Commission, 103 SCRA 329; Acosta v. Employees Compensation Commission,
109 SCRA 209).
PREMISES CONSIDERED, the instant petition is hereby DISMISSED and the July 16, 1982
Decision of the Labor Arbiter and the April 8, 1985 Resolution of the Ministry of Labor and
Employment are hereby AFFIRMED.
SO ORDERED.

THIRD DIVISION

FERNANDO G. MANAYA,
Petitioner,

G.R. No. 168988

Present:

- versus -

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.

ALABANG
COUNTRY
CLUB
Promulgated:
INCORPORATED,
Respondent.
June 19, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure
filed by Fernando G. Manaya (petitioner) assailing: (1) the Decision [1] of the Court of Appeals in
CA-G.R. SP No. 75417, dated 9 May 2005, granting the Petition of Alabang Country Club Inc.
(respondent) and setting aside the Resolutions dated 30 August 2002 and 30 October 2002 of
the National Labor Relations Commission (NLRC); and (2) the Resolution [2] of the Court of
Appeals dated 21 July 2005 denying petitioners Motion for Reconsideration of its earlier
Decision.
The assailed decision of the Court of Appeals reversed the Resolution of the NLRC dismissing
the appeal of the respondent for failure to perfect its appeal within the statutory
period. Instead, the Court of Appeals ordered the NLRC to give due course to the appeal of the
respondent.
The antecedent facts are:
Petitioner alleged that on 21 August 1989, he was initially hired by the respondent as a
maintenance helper[3] receiving a salary of P198.00 per day. He was later designated as
company electrician. He continued to work for the respondent until 22 August 1998 when the
latter, through its Engineering and Maintenance Department Manager, Engr. Ronnie B. de la
Cruz, informed him that his services were no longer required by the company. [4] Petitioner
alleged that he was forcibly and illegally dismissed without cause and without due process
on 22 August 1998.[5] Hence, he filed a Complaint[6] before the Labor Arbiter. He claimed that
he had not committed any infraction of company policies or rules and that he was not paid his
service incentive leave pay, holiday pay and 13 th month pay. He further asserted that with his
more or less nine years of service with the respondent, he had become a regular

employee. He, therefore, demanded his reinstatement without loss of seniority rights with full
backwages and all monetary benefits due him. [7]
In its Answer, respondent denied that petitioner was its employee. It countered by saying that
petitioner was employed by First Staffing Network Corporation (FSNC), with which respondent
had an existing Memorandum of Agreement dated 21 August 1989. Thus, by virtue of a
legitimate job contracting, petitioner, as an employee of FSNC, came to work with respondent,
first, as a maintenance helper, and subsequently as an electrician. Respondent prayed for the
dismissal of the complaint insisting that petitioner had no cause of action against it.
In a Decision, dated 20 November 2000, the Labor Arbiter held:
WHEREFORE, premises considered, complainant Fernando G. Manaya is hereby
found to be a regular employee of respondent Alabang Country Club, Inc.,
as aforediscussed. His dismissal from the service having been effected without
just and valid cause and without the due observance of due process is hereby
declared illegal. Consequently, respondent Alabang Country Club, Inc. is hereby
ordered to reinstate complainant to his former position without loss of seniority
rights and other benefits appurtenant thereto with full backwages in the partial
amount ofP160,724.48 as computed by Ms. Ma. Concepcion Manliclic and duly
noted by Ms. Ma. Elena L. Estadilla, OIC-CEU, NCR-South Sector which
computation has been made part of the records.
Furthermore, respondent Alabang Country Club, Inc. and First Staffing Network
Corporation are hereby ordered to pay complainant, jointly and severally the
following amounts by way of the following:
1. Service Incentive Leave 2,961.75
2. 13th Month Pay 15,401.10, and
3. Attorneys fees of ten (10%) percent of the total
monetary award herein adjudged due him, within ten (10) days from receipt
hereof.[8]

Respondent filed an Appeal with the NLRC which dismissed the same. [9] In a Resolution
dated 30 August 2002, the NLRC held:
PREMISES CONSIDERED, instant appeal from the Decision of November 20,
2000 is hereby DISMISSED for failure to perfect appeal within the statutory
period of appeal. The Decision is now final and executory.[10]

The
NLRC
found
that
respondents
counsel
of
record
Atty.
Angelina
A. Mailon of Monsod, Valencia and Associates received a copy of the Labor Arbiters Decision
on or before11 December 2000 as shown by the postal stamp or registry return card. [11] Said
counsel did not file a withdrawal of appearance. Instead, a Memorandum of
Appeal[12] dated 26 December 2000 was filed by the respondents new counsel, Atty. Arizala of
Tierra and Associates Law Office. Reckoned from 11 December 2000, the date of receipt of the
Decision by respondents previous counsel, the filing of the Memorandum of Appeal by its new
counsel on 26 December 2000 was clearly made beyond the reglementary period.The NLRC
held that the failure to perfect an appeal within the statutory period is not only mandatory but

jurisdictional. The appeal having been belatedly filed, the Decision of the Labor Arbiter had
become final and executory.[13]
Respondent filed a Motion for Reconsideration, [14] which the NLRC denied in a Resolution
dated 30 October 2002.[15] The NLRC held that the decision of the Labor Arbiter has become
final and executory on 28 November 2002; thus, Entry of Judgment, dated 8 January
2003[16] was issued.
Respondent filed a Petition for Certiorari[17] under Rule 65 of the Rules of Court before the
Court of Appeals. In a Decision dated 9 May 2005,[18] the Court of Appeals granted the petition
and ordered the NLRC to give due course to respondents appeal of the Labor Arbiters
Decision. Petitioner filed a Motion for Reconsideration which was denied by the Court of
Appeals in a Resolution[19] dated 21 July 2005.
Not to be dissuaded, petitioner filed the instant petition before this Court.
The issue for resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT
ORDERED THE NLRC TO GIVE DUE COURSE TO THE APPEAL OF RESPONDENT
ALABANG COUNTRY CLUB, INCORPORATED EVEN IF THE SAID APPEAL WAS FILED
BEYOND THE REGLEMENTARY PERIOD OF TEN (10) DAYS FOR PERFECTING AN
APPEAL.[20]

Essentially, the issue raised by the respondent before the NLRC in assailing the decision of the
Labor Arbiter pertains to the finding of the Labor Arbiter that petitioner was a regular
employee of the respondent.
In granting the petition, the Court of Appeals relied mainly on the case of Aguam v. Court of
Appeals,[21] where this Court held that litigation must be decided on the merits and not on
technicalities. The appellate court further justified the grant of respondents petition by saying
that the negligence of its counsel should not bind the respondent. [22]
The Court of Appeals gave credence to respondents claim that its lawyer abandoned the case;
hence, they were not effectively represented by a competent counsel. It further held that the
respondent, upon its receipt of the Decision of the Labor Arbiter on 15 December 2000, filed
its appeal on 26 December 2000 through a new lawyer. The appeal filed by respondent
through its new lawyer on 26 December 2000 was well within the reglementary period, 25
December 2000 being a holiday.
It is axiomatic that when a client is represented by counsel, notice to counsel is notice to
client. In the absence of a notice of withdrawal or substitution of counsel, the Court will rightly
assume that the counsel of record continues to represent his client and receipt of notice by
the former is the reckoning point of the reglementary period. [23] As heretofore adverted, the
original counsel did not file any notice of withdrawal. Neither was there any intimation by
respondent at that time that it was terminating the services of its counsel.
For negligence not to be binding on the client, the same must constitute gross negligence as
to amount to a deprivation of property without due process. [24] This does not exist in the case
at bar. Notice sent to counsel of record is binding upon the client and the neglect or failure of
counsel to inform him of an adverse judgment resulting in the loss of his right to appeal is not
a ground for setting aside a judgment, valid and regular on its face. [25]

Even more, it is respondents duty as a client to be in touch with his counsel so as to be

constantly posted about the case. It is mandated to inquire from its counsel about the status
and progress of the case from time to time and cannot expect that all it has to do is sit back,
relax and await the outcome of the case. [26]
On this score, we hold that the notice to respondents counsel, Atty. Angelina A. Mailon on 11
December 2000 is the controlling date of the receipt of the decision.
We now come to the issue of whether or not the Court of Appeals properly gave due course to
the petition of the respondent before it.
Of relevance is Section 1, Rule VI of the 2005 Revised Rules of the NLRC
Section 1. PERIODS OF APPEAL. Decisions, resolutions or orders of the Labor
Arbiter shall be final and executory unless appealed to the Commission by any or
both parties within ten (10) calendar days from receipt thereof; and in case of
decisions, resolutions or orders of the Regional Director of the Department of
Labor and Employment pursuant to Article 129 of the Labor Code, within five (5)
calendar days from receipt thereof. If the 10th or 5th day, as the case may be, falls
on a Saturday, Sunday or holiday, the last day to perfect the appeal shall be the
first working day following such Saturday, Sunday or holiday.
No motion or request for extension of the period within which to perfect an
appeal shall be allowed.
Remarkably, in highly exceptional instances, we have allowed the relaxing of the rules on the
application of the reglementary periods of appeal. [27] Thus:
In Ramos v. Bagasao, 96 SCRA 395, we excused the delay of four days in the
filing of a notice of appeal because the questioned decision of the trial court was
served upon appellant Ramos at a time when her counsel of record was already
dead. Her new counsel could only file the appeal four days after the prescribed
reglementary period was over. In Republic v. Court of Appeals, 83 SCRA 453, we
allowed the perfection of an appeal by the Republic despite the delay of six days
to prevent a gross miscarriage of justice since the Republic stood to lose
hundreds of hectares of land already titled in its name and had since then been
devoted for educational purposes. In Olacao v. National Labor Relations
Commission, 177 SCRA 38, 41, we accepted a tardy appeal considering that the
subject matter in issue had theretofore been judicially settled, with finality, in
another case. The dismissal of the appeal would have had the effect of the
appellant being ordered twice to make the same reparation to the appellee.[28]
We pronounced in those cases that technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.
In all these, the Court allowed liberal interpretation given the extraordinary circumstances
that justify a deviation from an otherwise stringent rule. [29]
Clearly, emphasized in these cases is that the policy of liberal interpretation is qualified by the
requirement that there must be exceptional circumstances to allow the relaxation of the rules.
[30]

Absent exceptional circumstances, we adhere to the rule that certain procedural precepts
must remain inviolable, like those setting the periods for perfecting an appeal or filing a
petition for review, for it is doctrinally entrenched that the right to appeal is a statutory right
and one who seeks to avail oneself of that right must comply with the statute or rules.The
rules, particularly the requirements for perfecting an appeal within the reglementary period
specified in the law, must be strictly followed as they are considered indispensable
interdictions
against
needless
delays
and
for
orderly
discharge
of
judicial
business. Furthermore, the perfection of an appeal in the manner and within the period
permitted by law is not only mandatory but also jurisdictional and the failure to perfect the
appeal renders the judgment of the court final and executory. Just as a losing party has the
right to file an appeal within the prescribed period, the winning party also has the correlative
right to enjoy the finality of the resolution of his/her case. [31]
In this particular case, we adhere to the strict interpretation of the rule for the following
reasons:
Firstly, in this case, entry of judgment had already been made [32] which rendered the Decision
of the Labor Arbiter as final and executory.
Secondly, it is a basic and irrefragable rule that in carrying out and in interpreting the
provisions of the Labor Code and its implementing regulations, the workingmans welfare
should be the primordial and paramount consideration. The interpretation herein made gives
meaning and substance to the liberal and compassionate spirit of the law enunciated in
Article 4 of the Labor Code that all doubts in the implementation and interpretation of the
provisions of the Labor Code including its implementing rules and regulations shall be
resolved in favor of labor.[33]
In the case of Bunagan v. Sentinel[34] we declared that:
[T]hat the perfection of an appeal within the statutory or reglementary period is
not only mandatory, but jurisdictional, and failure to do so renders the
questioned decision final and executoryand deprives the appellate court of
jurisdiction to alter the final judgment, much less to entertain the appeal. The
underlying purpose of this principle is to prevent needless delay, a circumstance
which would allow the employer to wear out the efforts and meager resources of
the worker to the point that the latter is constrained to settle for less than what
is due him. This Court has declared that although the NLRC is not bound by the
technical rules of procedure and is allowed to be liberal in the interpretation of
the rules in deciding labor cases, such liberality should not be applied where it
would render futile the very purpose for which the principle of liberality is
adopted. The liberal interpretation stems from the mandate that the
workingmans welfare should be the primordial and paramount
consideration. We see no reason in this case to waive the rules on the
perfection of appeal.[35]

The Court is aware that the NLRC is not bound by the technical rules of
procedure and is allowed to be liberal in the interpretation of rules in deciding
labor cases. However, such liberality should not be applied in the instant
case as it would render futile the very purpose for which the principle
of liberality is adopted. The liberal interpretation in favor of labor stems from
the mandate that the workingmans welfare should be the primordial and
paramount consideration. x x x.[36] (Emphases supplied.)

Indeed, there is no room for liberality in the instant case as it would render futile the very
purpose for which the principle of liberality is adopted. As so rightfully enunciated, the liberal
interpretation in favor of labor stems from the mandate that the workingmans welfare should
be the primordial and paramount consideration. This Court has repeatedly ruled that delay in
the settlement of labor cases cannot be countenanced. Not only does it involve the survival of
an employee and his loved ones who are dependent on him for food, shelter, clothing,
medicine and education; it also wears down the meager resources of the workers to the point
that, not infrequently, they either give up or compromise for less than what is due them. [37]

Without doubt, to allow the appeal of the respondent as what the Court of Appeals had done
and remand the case to the NLRC would only result in delay to the detriment of the
petitioner. In Narag v. National Labor Relations Commission,[38] citing Vir-Jen Shipping and
Marine Services, Inc. v. National Labor Relations Commission, [39] we held that delay in most
instances gives the employers more opportunity not only to prepare even ingenious defenses,
what with well-paid talented lawyers they can afford, but even to wear out the efforts and
meager resources of the workers, to the point that not infrequently the latter either give up or
compromise for less than what is due them. [40]
Nothing is more settled in our jurisprudence than the rule that when the conflicting interest of
loan and capital are weighed on the scales of social justice, the heavier influence of the latter
must be counter-balanced by the sympathy and compassion the law must accord the underprivileged worker.[41]
Thirdly, respondent has not shown sufficient justification to reverse the findings of the Labor
Arbiter as affirmed by the NLRC.
Pertinent provision of the Labor Code provides:

ART. 223. APPEAL. Decisions, awards, or orders of the Labor Arbiter are final
and executory unless appealed to the Commission by any or both parties within
ten (10) calendar days from receipt of such decisions, awards, or orders. Such
appeal may be entertained only on any of the following grounds:
(a) If there is prima facie evidence of abuse of discretion on the part of the Labor
Arbiter;
(b) If the decision, order or award was secured through fraud or coercion,
including graft an corruption;
(c) If made purely on question of law; and
(d) If serious errors in the finding of facts are raised which would cause grave or
irreparable damage or injury to the appellant.

Under the above provision, to obtain a reversal of the decision of the Labor Arbiter, the
respondent must be able to show in his appeal that any one of the above instances exists.
Respondent failed to show the existence of any of the above. A more than perfunctory reading
of the Decision of the Labor Arbiter shows that the same is supported by the evidence on
record.

Respondent narrates that it had a contract of services, first, with Supreme Construction
(Supreme). Supreme assigned petitioner to work with the respondent starting as a painter and
moving on to perform electrical jobs. Respondent terminated its contract with Supreme and
entered into another contract of services with another job-contracting agency, First Staffing
Network Corporation. Petitioner continued to work for the respondent which claimed that the
former was supplied by FNSC to it as part of its contract to supply the manpower
requirements of the respondent. Petitioner is not the employee of the respondent. He was
directly hired first by Supreme then later by FNSC and deployed to work with the respondent
based on the contract of services between respondent and these job-contracting agencies. All
these considered, respondent insists that petitioner is therefore not its employee.
We do not agree to this submission of the respondent. The Labor Arbiter concluded otherwise
and this finds support from the evidence, thus:
[R]espondent was not able to convincingly disprove complainants claims that at
the outset, he was directly hired by it as a maintenance helper on 21 August
1989. Although said respondent alleges that complainant was hired by its job
contractor, Supreme Construction, it failed to submit in evidence the Contract of
Service it had entered into in order to establish the entry of complainant as
deployed by said company for his duties at Alabang Country Club, Inc. pursuant
to the said Agreement. It can therefore be readily presumed that said respondent
did not produce the said document because the production of the same will
readily prove complainants assertion of having been hired long before said
contractor Supreme Construction entered into the picture.We have noted
complainants admission of having been later coerced to sign up with said
Supreme Construction by respondent Alabang Country Club, Inc. which he did as
he was told in his fear of losing his job.
As shown by respondent Alabang Country Club, Inc.s own evidence, it later
terminated its contract of service or Memorandum of Agreement with Supreme
Construction and entered into a new contract of service with respondent First
Staffing Network Corporation effective on 16 June 1994. However by said
respondents own allegation, even with the absence of complainants supposed
direct employer Supreme Construction, he still remained in its employ until he
signed up with respondent First Staffing Network Corporation on 11 February
1996. This indeed runs counter to the normal course of human experience such
that when a contractor losses (sic) his contract of service he packs up along with
all his employees, but in this case, complainant was not terminated from the
service notwithstanding the expiration/termination of the contract of service of
his
alleged
direct
employer. Complainant
remained
working
with
respondent AlabangCountry Club, Inc. despite the severance of the contractual
relations between itself and Supreme Construction.
The
initial
Memorandum
of
Agreement
entered
into
by
respondents Alabang Country Club, Inc. and First Staffing Network Corporation
was dated, 16 June 1994, and was apparently renewed thereafter providing
under Article III On Compensation thereof, the following, viz:
3.01 For and in consideration of the performance by FIRST STAFFING
of its obligations under this AGREEMENT, the CLIENT agrees to pay
the former based on the schedule of billing rates which shall be

specified in the Personnel Requisition Form signed

CLIENT. The schedule of billing rates is as follows, to wit:

by

the

BILLING RATES/HOUR PLUS 10% VALUE ADDED TAX

Covered Pos.
ABC
Waiters Accounting Supervisor
Janitors Data Encoders
Bag Boy Gen. Clerks
Stewards Secretary
Cook Helpers Receptionist
Messengers Secretary
Cashier
xxx.
Nowhere, does complainants position of electrician appear as covered in the said
contract. Finally, suffice it for Us to stress that the said contract covers almost all
of respondents AlabangCountry Club, Inc.s workforce including those whose jobs
or activities are directly related to said respondents business, emphasizing in no
uncertain terms that respondent First Staffing Network Corporation was not a
truly bonafide job contractor, as it did not contract out specific service but
merely supplied work personnel, a clear indication, that it was engaged in a job
only contracting which is prohibited by law.
Besides, the said respondent First Staffing Network Corporation failed to prove
that it is a bonafide job contractor by showing that it had an adequate capital or
investment in tools, equipments and machineries and premises for that matter,
and so did respondent Alabang Country Club, Inc. fail to establish the same. For
that matter, respondent First Staffing Network Corporation had waived its right to
present any evidence in its favor in this case.
Obviously, herein respondent Alabang Country Club, Inc. actually resorted to
contracting out all the positions for its workforce in violation of law in its desire to
circumvent said employees rights as regular employees under the law. [42]

The existence of an employer-employee relationship between petitioner and

respondent is fortified by the fact that during his stint with the respondent, petitioner was
given the opportunity to attend a seminar/training on refrigeration and air conditioning
from 16 January 1995 to 18 February 1995.[43] A certificate of participation signed by three of
respondents officials was issued to the petitioner.
Equally significant is Article 106 of the Labor Code, as amended, which provides that
legitimate job contracting is permitted, but labor-only contracting is prohibited. The said
provision reads:
Art. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an employer enters into
a contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any, shall be paid
in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under the
Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is laboronly contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or
intermediary shall be considered merely as an agent of the employer who shall
be responsible to the workers in the same manner and extent as if the latter
were directly employed by him.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18, distinguishes between legitimate and
labor only contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. - In
legitimate contracting, there exists a trilateral relationship under which
there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of
employment between the contractor and subcontractor and its
workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or service
to a contractor or subcontractor, the contractor or subcontractor which
has the capacity to independently undertake the performance of the
job, work or service, and the contractual workers engaged by the
contractor or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against laboronly contracting. Labor-only
contracting is hereby declared prohibited. For this purpose, labor only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal, and any of the following elements
are present:
i)

The
substantial
job, work
employees

contractor or subcontractor does not have

capital or investment which relates to the
or service to be performed and the
recruited, supplied or placed by such

ii)

contractor or subcontractor are

which are directly related to the
principal, or
The contractor does not
control over the performance
contractual employee.

performing activities
main business of the
exercise the right to
of the work of the

The foregoing provisions shall be without prejudice to the application of Article

248(c) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipments, implements,
machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service
contracted out.
The right to control shall refer to the right reserved to the person for whom the
services of the contractual workers are performed, to determine not only the end
to be achieved, but also the manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work
according to his on methods and without being subject to the control of the
employer, except only as to the results of the work.
In legitimate labor contracting, the law creates an employer-employee
relationship for a limited purpose, i.e., to ensure that the employees are paid
their wages. The principal employer becomes jointly and severally liable with the
job contractor, only for the payment of the employees wages whenever the
contractor fails to pay the same. Other than that, the principal employer is not
responsible for any claim made by the employees. [44]

Despite respondents disavowal of the existence of the employer-employee relationship

between it and petitioner and its insistence that petitioner is an employee first, of Supreme
and subsequently, of FSNC, the totality of the facts and surrounding circumstances of the case
convey otherwise.
On this point, the law is clear-cut. In laboronly contracting, the statute creates an
employeremployee relationship for a comprehensive purpose: to prevent a circumvention of
labor laws. The contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the laboronly contractor as if such employees had
been directly employed by the principal employer.
The Labor Code and its implementing rules empower the Labor Arbiter to be the trier of facts
in labor cases. Much reliance is placed on findings of facts of the Arbiter having had the
opportunity to talk to and discuss with the parties and their witnesses the factual matters of
the case during the conciliation phase. [45] We, thus, give full credence to the findings of facts
of the labor arbiter.
WHEREFORE, premises considered, the Petition is GRANTED. The Decision of the Court of
Appeals dated 9 May 2005 and its Resolution dated 21 July 2005 isREVERSED. The Decision

of the Labor Arbiter dated 20 November 2000 is REINSTATED. Let the records of the aboveentitled case be remanded to the Labor Arbiter for immediate execution of the Decision. No
costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47521

July 31, 1987

CAROLINA CLEMENTE, petitioner,

vs.
GOVERNMENT SERVICE INSURANCE SYSTEM Department of Health (Dagupan City)
and EMPLOYEES' COMPENSATION COMMISSION, respondents.
GUTIERREZ, JR., J.:
This is a petition to review the decision of the Employees' Compensation Commission in ECC
Case No. 0509 which affirmed the decision of the Government Service Insurance System
(GSIS) and denied the claim for death benefits filed by Carolina Clemente, widow of the late
Pedro Clemente,
The undisputed facts of the case are summarized in the memorandum for the respondent
Government Service Insurance System, as follows:
Petitioner's husband, the late Pedro Clemente, was for ten (10) years a janitor in the
Department of Health (Dagupan City), assigned at the Ilocos Norte Skin Clinic, Laoag
City. He was hospitalized from November 3 to 14, 1976 at the Central Luzon Sanitarium,
Tala Sanitarium, Tala, Caloocan City, due to his ailment of "nephritis," as per medical
certification of his attending physician, Dr. Winifredo Samson. He was also found to be
suffering from such ailments as portal cirrhosis and leprosy, otherwise known as
Hansen's Disease.
On November 14, 1976, Pedro Clemente died of uremia due to nephritis. Thereafter,
petitioner filed with the GSIS a claim for employees' compensation under the Labor
Code, as amended.
On February 4, 1977, the GSIS denied the claim of the petitioner because the ailments
of her husband are not occupational diseases taking into consideration the nature of his
work and/or (sic) or were not in the least causally related to his duties and conditions of
work.
On March 9, 1977, petitioner requested for reconsideration of the GSIS' denial of her
claim, stating that the ailments of her husband were contracted in the course of
employment and were aggravated by the nature of his work. Petitioner alleged that her
husband, as janitor of the Ilocos Norte Skin Clinic (Laoag City), worked in direct contact
with persons suffering from different skin diseases and was exposed to obnoxious dusts
and other dirt which contributed to his ailment of Hansen's disease. Citing further the
cases of Seven-Up Bottling Co., of the Phil. v. Rimerata, L-24349, December 24, 1968
and Avana v. Quisumbing, L-23489, March 27, 1968. Petitioner stated that her
husband's ailment recurred in the course of employment presumably due to his direct
contact with persons suffering from this ailment.

Acting upon petitioner's request for reconsideration, the GSIS, on April 11, 1977,
reiterated its previous denial of her claim.
On April 14, 1977, treating the request for reconsideration as an appeal, the GSIS
forwarded the records of the petitioner' claim for review by the ECC.
On October 26, 1977, respondent ECC affirmed the GSIS' action of denial and rendered
its own decision dismissing petitioner's claim (ECC Case No. 0509).
Respondent ECC's decision was anchored upon the findings that the ailments are not
listed as occupational diseases; that there was no substantial evidence of causal
connection; and that, in fact, the evidence was that the deceased had already
contracted the Hansen's disease before his employment. In the exact words of the ECC:
In the case at bar, since the deceased's ailments are not listed as occupational
diseases, appellant herein must prove that such ailments were caused by
deceased's employment and that the risk of contracting the same was increased
by his working conditions in order to be compensable.
A mere cursory reading of the evidences on record, however, will disclose that
appellant failed to submit the required proof of causation. There is no substantial
proof in the record from which we could draw the conclusion that indeed the
nature of deceased's employment as Janitor of Ilocos Norte Skin Clinic could be
traced as the direct cause of his ailment. Hence, in the absence of such
evidence, we are not disposed to disturb on appeal the findings of the
respondent System.
On the contrary, we find the records that the deceased, prior to his employment
in this office, was already suffering from his ailment of Hansen's disease. This
proves that his working conditions did not increase the risk of his contracting the
same. If at all, his employment merely aggravated his ailments. Unfortunately,
however, aggravation of a preexisting illness, a rule under the old law, is not
anymore a ground for compensation under the new law. Thus, the cases cited by
the appellant cannot be raised as authorities to support her claim.
Petitioner now seeks a review of the ECC decision. (pp. 76-78, Rollo)
There is no question that the claim falls under the provisions of the Labor Code, as amended.
Under Article 167(L) of the Labor Code and Section 1 (b) Rule III of the Amended Rules on
Employees' Compensation, for the sickness and the resulting disability or death to be
compensable, the sickness must be the result of an occupational disease listed under Annex
"A" of the Rules with the conditions therein satisfied; otherwise, proof must be shown that the
risk of contracting the disease is increased by the working conditions (De Jesus v. Employees'
Compensation Commission, 142 SCRA 92, 96).
As the illnesses of the deceased are admittedly, not listed under Annex "A" of the Rules as
occupational diseases, the petitioner bases her claim under the theory of increased risk. She
alleges that the deceased, as janitor of the Ilocos Norte Skin Clinic, was exposed to patients
suffering from various kinds of skin diseases, including Hansen's disease or leprosy. She avers
that for ten years, the deceased had to clean the clinic and its surroundings and to freely mix
with its patients. She claims that it was during this time that he was attacked by other
dreadful diseases such as uremia, cancer of the liver, and nephritis.

On the other hand, the respondent Employees' Compensation Commission contends that the
petitioner failed to prove by substantial evidence that the deceased's ailments were indeed
caused by his employment. It maintains that the deceased merely had a recurrence of a preexisting illness aggravated possibly by the nature of his employment and that there is no
evidence on record showing that the nature of the deceased's employment was the direct
cause of any of his illnesses.
The respondent Government Service Insurance System concurs with the views of the
respondent Commission. It, however, argues that it should be dropped as a party respondent
in this case. It claims that the petitioner has no cause of action against it, the subject of
judicial review being the adverse decision of the respondent Commission.
We rule for the petitioner.
In Sarmiento v. Employees' Compensation Commission (144 SCRA 421, 46) we held that:
Strict rules of evidence are not applicable in claims for compensation (San Valentin v.
Employees' Compensation Commission, 118 SCRA 160; Better Building, Inc., v. Puncan,
135 SCRA 62). There are no stringent criteria to follow. The degree of proof required
under P.D. 626; is merely substantial evidence, which means, "such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion" (Cristobal v.
Employees' Compensation Commission, supra, citing Ang Tibay v. Court of Industrial
Relations and National Labor Union, Inc., 69 Phil. 635; and Acosta v. Employees'
Compensation Commission, 109 SCRA 209). The claimant must show, at least, by
substantial evidence that the development of the disease is brought largely by the
conditions present in the nature of the job. What the law requires is a reasonable workconnection and not a direct causal relation (Cristobal v. Employees' Compensation
Commission, supra; Sagliba v. Employees' Compensation Commission, 128 SCRA 723;
Neri v. Employees' Compensation Commission, 127 SCRA 672; Juala v. Employees'
Compensation Commission, 128 SCRA 462; and De Vera v. Employees' Compensation
Commission, 133 SCRA 685). It is enough that the hypothesis on which the workmen's
claim is based is probable. Medical opinion to the contrary can be disregarded
especially where there is some basis in the facts for inferring a work-connection
(Delegente v. Employees' Compensation Commission, 118 SCRA 67; and Cristobal v.
Employees' Compensation Commission, supra). Probability not certainty is the
touchstone (San Valentin v. Employees' Compensation Commission, supra).
In this case, we find sufficient evidence on record to sustain the petitioner's view. The records
disclose that in resisting the petitioner's claim, the respondent Commission cited the following
medical authorities:
Uremia refers to the toxic clinical condition associated with renal insufficiency and
retention in the blood of nitrogenous urinary waste products (azotemia). Renal
insufficiency may be due to (1) nephritis, bilateral pyelonephritis, polycystic kidney
disease, uretral or bladder obstruction, SLE, polyarteritis, amyloid disease, or bilateral
cortical necrosis; (2) acute tubular necrosis resulting from transfusion reaction, shock,
burns, crushing injuries, or poisons; (3) sulfonamides precipitated in the kidneys or
ureters; (4) nephrocalcinosis resulting from extreme alkalosis, diabetic acidosis,
dehydration, or congestive heart failure may result in azotemia, or may predipitate (sic)
severe uremia in the presence of already damages kidneys.

Reference: Lyght, Charles E.: The Merck Manual of Diagnosis and Therapy; M.S. & D.
Research Lab.; 11th Edition, 1966, pp. 257-258.
Portal Cirrhosis: A chronic disease characterized by incresed connective tissue that
spreads from the portal spaces, distorting liver architecture and impairing liver
functions. Etiology, Incidence and pathology: Portal cirrhosis occurs chiefly in males in
late middle life. Malnutrition is believed to be a predisposing if not a primary etiology
factor. The role of alcohol is not clearly established. Alcohol probably exerts a direct
toxic effect on the liver, and also increases malnutrition by providing calories without
essential nutrients. Cirrhosis has been produced in animals by diets low in protein and
specifically low in choline. The addition of choline to these diets prevents cirrhosis.
Chronic poisoning with carbon tetrachloride or phosphorus produces changes similar to
those from portal cirrhosis. The liver is diffusely nodular, scarred and dense.
Microscopic section shows parenchymal degeneration cellular infiltration, proliferation
or scar tissue and areas of regeneration. Fatty changes are present in the early states.
Reference: Lyght, C.E.: The Merck Manual of Diagnosis and Therapy: M.S. & D. N.J. 11th
Edition, 1966, p. 928.
Hepatoma (Liver cancer) refers to malignant primary tumor of the liver destroying the
parenchyma arise (sic) from both liver cell and bile duct elements. It develops most
frequently in the previous cirrhosis liver. A higher fraction of patients with post necrotic
cirrhosis develop hepatoma than those with portal alcoholic cirrhosis. This may reflect
the more active necrotic and regenerative processes in the post necrotic cirrhosis liver.
Most large series indicate that 60% or more of hepatomas develop in a previously
cirrhotic liver. The cirrhosis of hemochromatosis seems particularly liable to hepatomas
as high a fraction as 20% of patients with hemochromatosis die from this cause.
Reference: Harrison, T.R.: Principles of Internal Medicine; McGraw Hill; N.Y., 5th Ed.;
1966, p. 1072.
Leprosy is a chronic, mildly contagious, infectious disease characterized by both
cutaneous and constitutional symptoms and the production of various deformities and
mutilations. The causative organism is an acid fast rod. Mycobacterium leprae, first
described by Hansen in 1874. The mode of transmission is obscure, although infection
by direct contact appears likely. The disease is found predominantly in tropical and subtropical Asia, Africa, and South America. It is endemic in the Gulf States of the USA,
Hawaii, the Philippines and Puerto Rico.
Reference: Lyght, C.E.: The Merk Manuel of Diagnosis and Therapy; " M.S. & D.; 11th
Ed.; 1966, p. 847.
The nature of nephritis, however, was discussed by Mr. Daniel Mijares, GSIS Manager,
Employees' Compensation Department, in his letter dated February 4, 1977, denying
petitioner's claim, as follows:
Nephritis is an acute, diffuse inflammation of the glomeruli or kidneys. It usually follows
previous streptoccocal infection mostly in the upper respiratory tract. Because of this, it
is always thought that nephritis is the result of an auto-immune or allergic reaction to
infection, usually streptococcal. (Rollo, p. 20)

The foregoing discussions support rather than negate the theory of increased risk. We note
that the major ailments of the deceased, i.e. nephritis, leprosy, etc., could be traced from
bacterial and viral infections. In the case of leprosy, it is known that the source of infection is
the discharge from lesions of persons with active cases. It is believed that the bacillus enters
the body through the skin or through the mucous membrane of the nose and throat (Miller
and Keane, Encyclopedia and Dictionary of Medicine and Nursing, (1972), p. 530).
On the other hand, infectious diseases which give rise to nephritis are believed to be as
follows:
Table 294-1
Causes of acute glomerulonephritis
Infectious diseases
A. Post streptococcal glumerulonephritis
B. Non-Post streptococcal glumerulonephritis
1. Bacterial: Infective endocarditis, "Shunt nephritis," sepsis,
pneumococcal pneumonia, typhoid fever, secondary syphilis,
meningococcemia
2. Viral: Hepatitis B, infectious menoneucleosis, mumps, measles,
varicella, vaccinia, echovirus, and coxsackievirus
3. Parasitic: Malaria, taxoplasmosis
(Harrison's Principles of Internal Medicine, 10th edition, p. 1633)
The husband of the petitioner worked in a skin clinic. As janitor of the Ilocos Norte Skin Clinic,
Mr. Clemente was exposed to different carriers of viral and bacterial diseases. He had to clean
the clinic itself where patients with different illnesses come and go. He had to put in order the
hospital equipments that had been used. He had to dispose of garbage and wastes that
accumulated in the course of each working day. He was the employee most exposed to the
dangerous concentration of infected materials, and not being a medical practitioner, least
likely to know how to avoid infection. It is, therefore, not unreasonable to conclude that Mr.
Clemente's working conditions definitely increased the risk of his contracting the
aforementioned ailments. This Court has held in appropriate cases that the conservative
posture of the respondents is not consistent with the liberal interpretation of the Labor Code
and the social justice guarantee embodied in the Constitution in favor of the workers
(Cabanes v. Employees' Compensation Commission, et al., L-50255, January 30, 1982; and
Cristobal v. Employees' Compensation Commission, et al., supra). It clashes with the
injunction in the Labor Code (Article 4, New Labor Code) that, as a rule, doubts should be
resolved in favor of the claimant-employee (Mercado, Jr., v. Employees' Compensation
Commission, 139 SCRA 270, 277).
The respondents admit there may have been aggravation of an existing ailment but point out
that aggravating is no longer a ground for compensation under the present law. They contend
that the compensable factor of increased risks of contracting the disease is not present in this
case.

The fallacy in this theory lies in the failure to explain how a sick person was able to enter the
government service more than ten years before he became too ill to work and at a time when
aggravation of a disease was compensable. There is no evidence to show that Mr. Clemente
was hired inspite of having an existing disease liable to become worse.
The petitioner's arguments of recurrence of an already cured disease or the contracting of the
disease due to increased risks become more plausible. When there are two or more possible
explanations regarding an issue of compensability that which favors the claimant must be
chosen.1avvphi1
We also do not find merit in the respondent GSIS' contention that it should be dropped as a
party in this case. This Court has passed upon this issue on several occasions. Thus, in the
case of Cabanero v. Employees' Compensation Commission (111 SCRA 413, 419), this Court
citing Lao v. Employees' Compensation Commission (97 SCRA 782), held:
xxx

xxx

xxx

... This Court is of the opinion that respondent System, as the ultimate implementing
agency of the ECC's decision, is a proper party in this case. The fact that this Court
chose to require respondent GSIS to comment is an indication that it is a necessary
party. It must be noted that the law and the rules refer to the said System in all aspects
of employee compensation (including enforcement of decisions (Article 182 of
Implementing Rules.) (at p. 793).
WHEREFORE, in view of the foregoing, the decision appealed from is hereby SET ASIDE and
the respondent Government Service Insurance System is hereby ordered to pay the petitioner:
1) The sum of TWELVE THOUSAND PESOS (P12,000.00) as death benefits; and
2) The sum of ONE THOUSAND TWO HUNDRED PESOS (P1,200.00) as attorney's fees.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 73681 June 30, 1988
COLGATE PALMOLIVE PHILIPPINES, Inc., petitioners,
vs.
HON. BLAS F. OPLE, COLGATE PALMOLIVE SALES UNION, respondents.

PARAS, J.:
Before Us is a Petition for certiorari seeking to set aside and annul the Order of respondent
Minister of Labor and Employment (MOLE) directly certifying private respondent as the
recognized and duly-authorized collective bargaining agent for petitioner's sales force and
ordering the reinstatement of three employees of petitioner.
Acting on the petition for certiorari with prayer for temporary restraining order, this Court
issued a Temporary Restraining Order enjoining respondents from enforcing and/or carrying
out the assailed order.
The antecedent facts are as follows:
On March 1, 1985, the respondent Union filed a Notice of Strike with the Bureau of Labor
Relations (BLR) on ground of unfair labor practice consisting of alleged refusal to bargain,
dismissal of union officers/members; and coercing employees to retract their membership
with the union and restraining non-union members from joining the union.
After efforts at amicable settlement proved unavailing, the Office of the MOLE, upon petition
of petitioner assumed jurisdiction over the dispute pursuant to Article 264 (g) of the Labor
Code, Thereafter the case was captioned AJML-3-142-85, BLR-3-86-85 "In Re: Assumption of
Jurisdiction over the Labor Dispute at Colgate Palmolive Philippines, Inc." In its position paper,
petitioner pointed out that
(a) There is no legal basis for the charge that the company refused to bargain
collectively with the union considering that the alleged union is not the certified
agent of the company salesmen;
(b) The union's status as a legitimate labor organization is still under question
because on 6 March 1985, a certain Monchito Rosales informed the BLR that an
overwhelming majority of the salesmen are not in favor of the Notice of Strike
allegedly filed by the Union (Annex "C");
(c) Upon verification of the records of the Ministry of Labor and Employment, it
appeared that a petition for cancellation of the registration of the alleged union
was filed by Monchito Rosales on behalf of certain salesmen of the company who
are obviously against the formation of the Colgate Palmolive Sales Labor Union
which is supposed to represent them;

(d) The preventive suspensions of salesmen Peregrino Sayson, Salvador

Reynante and Cornelio Mejia, and their eventual dismissal from the employ of the
company were carried out pursuant to the inherent right and prerogative of
management to discipline erring employees; that based on the preliminary
investigation conducted by the company, there appeared substantial grounds to
believe that Sayson, Reynante and Mejia violated company rules and regulations
necessitating their suspension pending further investigation of their respective
cases;
(e) It was also ascertained that the company sustained damages resulting from
the infractions committed by the three salesmen, and that the final results of the
investigation fully convinced the company of the existence of just causes for the
dismissal of the three salesmen;
(f) The formation of the union and the membership therein of Sayson, Reynante
and Mejia were not in any manner connected with the company's decision to
dismiss the three; that the fact that their dismissal came at a time when the
alleged union was being formed was purely coincidental;
(g) The union's charge therefore, that the membership in the union and refusal to
retract precipitated their dismissal was totally false and amounted to a malicious
imputation of union busting;
(h) The company never coerced or attempted to coerce employees, much less
interferred in the exercise of their right to self-organization; the company never
thwarted nor tried to defeat or frustrate the employees' right to form their union
in pursuit of their collective interest, as long as that right is exercised within the
limits prescribed by law; in fact, there are at present two unions representing the
rank and file employees of the company-the factory workers who are covered by
a CBA which expired on 31 October 1985 (which was renewed on May 31, 1985)
and are represented by Colgate Palmolive Employees Union (PAFLU); whereas,
the salaried employees are covered by a CBA which will expire on 31 May 1986
represented by Philippine Association of Free Labor Union (PAFLU)-CPPI Office
Chapter. (pp. 4-6, Rollo)
The respondent Union, on the other hand, in its position paper, reiterated the issue in its
Notice to Strike, alleging that it was duly registered with the Bureau of Labor Relations under
Registry No. 10312-LC with a total membership of 87 regular salesmen (nationwide) out of
117 regular salesmen presently employed by the company as of November 30, 1985 and that
since the registration of the Union up to the present, more than 2/3 of the total salesmen
employed are already members of the Union, leaving no doubt that the true sentiment of the
salesmen was to form and organize the Colgate-Palmolive Salesmen Union. The Union further
alleged that the company is unreasonably delaying the recognition of the union because when
it was informed of the organization of the union, and when presented with a set of proposals
for a collective bargaining agreement, the company took an adversarial stance by secretly
distributing a "survey sheet on union membership" to newly hired salesmen from the Visayas,
Mindanao and Metro Manila areas, purposely avoiding regular salesmen who are now
members of the union; that in the accomplishment of the form, District Sales Managers, and
Sales Supervisors coerced salesmen from the Visayas and Mindanao by requiring them to fill
up and/or accomplish said form by checking answers which were adverse to the union; that
with a handful of the survey sheets secured by management through coercion, it now would

like to claim that all salesmen are not in favor of the organization of the union, which acts are
clear manifestations of unfair labor practices.
On August 9,1985, respondent Minister rendered a decision which:
(a) found no merit in the Union's Complaint for unfair labor practice allegedly
committed by petitioner as regards the alleged refusal of petitioner to negotiate
with the Union, and the secret distribution of survey sheets allegedly intended to
discourage unionism,
(b) found the three salesmen, Peregrino Sayson, Salvador Reynante & Cornelio
Mejia "not without fault" and that "the company 1 has grounds to dismiss above
named salesmen"
and at the same time respondent Minister directly certified the respondent Union as the
collective bargaining agent for the sales force in petitioner company and ordered the
reinstatement of the three salesmen to the company on the ground that the employees were
first offenders.
Petitioner filed a Motion for Reconsideration which was denied by respondent Minister in his
assailed Order, dated December 27, 1985. Petitioner now comes to Us with the following:
Assignment of Errors
I
Respondent Minister committed a grave abuse of discretion when he directly
certified the Union solely on the basis of the latter's self-serving assertion that it
enjoys the support of the majority of the sales force in petitioner's company.
II
Respondent Minister committed a grave abuse of discretion when,
notwithstanding his very own finding that there was just cause for the dismissal
of the three (3) salesmen, he nevertheless ordered their reinstatement. (pp. 7-8,
Rollo)
Petitioner concedes that respondent Minister has the power to decide a labor dispute in a case
assumed by him under Art. 264 (g) of the Labor Code but this power was exceeded when he
certified respondent Union as the exclusive bargaining agent of the company's salesmen since
this is not a representation proceeding as described under the Labor Code. Moreover the
Union did not pray for certification but merely for a finding of unfair labor practice imputed to
petitioner-company.
The petition merits our consideration. The procedure for a representation case is outlined in
Arts. 257-260 of the Labor Code, in relation to the provisions on cancellation of a Union
registration under Arts. 239-240 thereof, the main purpose of which is to aid in ascertaining
majority representation. The requirements under the law, specifically Secs. 2, 5, and 6 of Rule
V, Book V, of the Rules Implementing the Labor Code are all calculated to ensure that the
certified bargaining representative is the true choice of the employees against all contenders.
The Constitutional mandate that the State shall "assure the rights of the workers to selforganization, collective bargaining, security of tenure and just and humane conditions of
work," should be achieved under a system of law such as the aforementioned provisions of

the pertinent statutes. When an overzealous official by-passes the law on the pretext of
retaining a laudable objective, the intendment or purpose of the law will lose its meaning as
the law itself is disregarded. When respondent Minister directly certified the Union, he in fact
disregarded this procedure and its legal requirements. There was therefore failure to
determine with legal certainty whether the Union indeed enjoyed majority representation.
Contrary to the respondent Minister's observation, the holding of a certification election at the
proper time is not necessarily a mere formality as there was a compelling legal reason not to
directly and unilaterally certify a union whose legitimacy is precisely the object of litigation in
a pending cancellation case filed by certain "concerned salesmen," who also claim majority
status. Even in a case where a union has filed a petition for certification elections, the mere
fact that no opposition is made does not warrant a direct certification. More so as in the case
at bar, when the records of the suit show that the required proof was not presented in an
appropriate proceeding and that the basis of the direct certification was the Union's mere
allegation in its position paper that it has 87 out of 117 regular salesmen. In other words,
respondent Minister merely relied on the self-serving assertion of the respondent Union that it
enjoyed the support of the majority of the salesmen, without subjecting such assertion to the
test of competing claims. As pointed out by petitioner in its petition, what the respondent
Minister achieved in rendering the assailed orders was to make a mockery of the procedure
provided under the law for representation cases because:
(a) He has created havoc by impliedly establishing a procedural short-cut to
obtaining a direct certification-by merely filing a notice of strike.
(b) By creating such a short-cut, he has officially encouraged disrespect for the
law.
(c) By directly certifying a Union without sufficient proof of majority
representation, he has in effect arrogated unto himself the right, vested naturally
in the employees, to choose their collective bargaining representative.
(d) He has in effect imposed upon the petitioner the obligation to negotiate with
a union whose majority representation is under serious question. This is highly
irregular because while the Union enjoys the blessing of the Minister, it does not
enjoy the blessing of the employees. Petitioner is therefore under threat of being
held liable for refusing to negotiate with a union whose right to bargaining status
has not been legally established. (pp. 9-10, Rollo)
The order of the respondent Minister to reinstate the employees despite a clear finding of guilt
on their part is not in conformity with law. Reinstatement is simply incompatible with a finding
of guilt. Where the totality of the evidence was sufficient to warrant the dismissal of the
employees the law warrants their dismissal without making any distinction between a first
offender and a habitual delinquent. Under the law, respondent Minister is duly mandated to
equally protect and respect not only the labor or workers' side but also the management
and/or employers' side. The law, in protecting the rights of the laborer, authorizes neither
oppression nor self-destruction of the employer. To order the reinstatement of the erring
employees namely, Mejia, Sayson and Reynante would in effect encourage unequal protection
of the laws as a managerial employee of petitioner company involved in the same incident
was already dismissed and was not ordered to be reinstated. As stated by Us in the case of
San Miguel Brewery vs. National Labor Union, 2 "an employer cannot legally be compelled to
continue with the employment of a person who admittedly was guilty of misfeasance or
malfeasance towards his employer, and whose continuance in the service of the latter is
patently inimical to his interest."

In the subject order, respondent Minister cited a cases 3 implying that "the proximity of the
dismissal of the employees to the assumption order created a doubt as to whether their
dismissal was really for just cause or due to their activities." 4
This is of no moment for the following reasons:
(a) Respondent Minister has still maintained in his assailed order that a just cause existed to
justify the dismissal of the employees.
(b) Respondent Minister has not made any finding substantiated by evidence that the
employees were dismissed because of their union activities.
WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the Order of the
respondent Minister, dated December 27, 1985 for grave abuse of discretion. However, in
view of the fact that the dismissed employees are first offenders, petitioner is hereby ordered
to give them separation pay. The temporary restraining order is hereby made permanent.
SO ORDERED.

THIRD DIVISION

[G.R. No. 125340. September 17, 1998]

EMELITA NICARIO, petitioner, vs. NATIONAL LABOR

MANCAO
SUPERMARKET
INC.,
AND/OR
MANCAO, respondents.

RELATIONS COMMISSION,
MANAGER,
ANTONIO

DECISION
ROMERO, J.:
For resolution before this Court is a special civil action for certiorari under Ruled 65 of the
Rules of Court which seeks to set aside the resolution of the National Labor Relations
Commission (Fifth Division, Cagayan de Oro City) dated December 21, 1995 in NLRC CA No. M002047-94 entitled Emelita Nicario v. Mancao Supermarket Inc. and/or Manager which ruled
that petitioner, Emelita Nicario, is not entitled to overtime pay. Nor is private respondent,
Antonio Mancao jointly and severally liable with the respondent company for thirteenth month
pay, service incentive leave pay, and rest day pay. [1]
Petitioner, Emelita Nicario, was employed with respondent company Mancao Supermarket,
on June 6, 1986 as a salesgirl and was later on promoted as sales supervisor. However,
private respondent terminated her services on February 7, 1989.
A complaint for illegal dismissal with prayer for backwages, wage differential, service
incentive leave pay, overtime pay, 13 th month pay and unpaid wages was filed by petitioner
before the National Labor Relations Commission, Sub-Regional Arbitration Branch X in Butuan
City.
On July 25, 1989, Labor Arbiter Amado M. Solamo dismissed the complaint for lack of
merit. Petitioner appealed to the National Labor Relations Commission (NLRC), Fifth Division,
Cagayan de Oro City. In a resolution dated July 25, 1989, the NLRC set aside the labor arbiters
decision for lack of due process. It ruled that since petitioner assailed her supposed signatures
appearing on the payrolls presented by the company as a forgery, the labor arbiter should not
have merely depended on the xerox copies of the payrolls, as submitted in evidence by the
private respondent but ordered a formal hearing on the issue. Thus, the Commission ordered
the case remanded to the arbitration branch for appropriate proceedings. The case was
assigned to Labor Arbiter Marissa Macaraig-Guillen. [2]
In a decision dated May 23, 1994, Labor Arbiter Macaraig-Guillen awarded petitioners
claims for unpaid service incentive leave pay, 13 th month pay, overtime pay and rest day pay
for the entire period of her employment, but dismissed her claims for holiday premium pay
and unpaid salaries from February 3 to 5, 1989. The dispositive portion of the decision read as
follows:
WHEREFORE, in view of the foregoing, judgment is rendered directing respondent
Mancao Supermarket, Inc., and/or Mr. Antonio Mancao to pay complainant Emelita
Nicario the sum of forty thousand three hundred ninety pesos and fifteen
centavos (P40,393.15) representing unpaid services incentive leave pay, thirteenth
month pay, overtime pay, and rest day for the entire period of employment.
All other claims are dismissed for lack of merit.

SO ORDERED.[3]
Not satisfied with the decision, private respondent appealed to the NLRC, and in a
resolution dated August 16, 1995,[4] the Commission affirmed in toto Labor Arbiter MacaraigGuillens decision. Private respondent then filed a motion for reconsideration. In a resolution
dated December 21, 1995, public respondent NLRC modified its earlier resolution by deleting
the award for overtime pay and ruling that private respondent Antonio Mancao is not jointly
and severally liable with Mancao Supermarket to pay petitioner the monetary award
adjudged.
Petitioner now comes before this Court alleging grave abuse of discretion on the part of
the public respondent NLRC in ruling that (a) she is not entitled to overtime pay and (b)
private respondent, Antonio Mancao cannot be held jointly and severally liable with
respondent supermarket as to the monetary award.
The Solicitor General, in a manifestation and motion in lieu of comment [5] stated that
public respondent NLRC acted with grave abuse of discretion in modifying its earlier resolution
(dated August 16, 1995) and thus recommends that the December 21, 1995 resolution be set
aside, and its August 16, 1995 resolution be reinstated.
Public respondent NLRC, on the other hand, filed its own comment [6] praying for the
dismissal of the petition and for the December 21, 1995 resolution to be affirmed with finality.
The petition is partly impressed with merit.
In her claim for payment of overtime pay, petitioner alleged that during her period of
employment, she worked twelve (12) hours a day from 7:30 a.m. to 7:30 p.m., thus rendering
overtime work for four hours each day. Labor Arbiter Macaraig-Guillen, in her decision dated
May 23, 1994, awarded overtime pay to petitioner by taking judicial notice of the fact that all
Mancao establishments open at 8:00 a.m. and close at 8:00 p.m.. Upon appeal, this particular
finding was affirmed by the Commission. However, when private respondent filed a motion for
reconsideration from the resolution dated August 16, 1995, the NLRC modified its earlier
ruling and deleted the award for overtime pay. Public respondent NLRC instead gave credence
to the daily time records (DTRs) presented by respondent corporation showing that petitioner
throughout her employment from June 6, 1986 to February 1989, worked only for eight hours
a day from 9:00 a.m. to 12:00 p.m. and 2:00 p.m. to 7:00 p.m., and did not render work on
her rest days.
Public respondents reliance on the daily time records submitted by private respondent is
misplaced. As aptly stated by the Solicitor General in lieu of comment, the DTRs presented by
respondent company are unreliable based on the following observations:
a) the originals thereof were not presented in evidence; petitioners allegation of
forgery should have prompted respondent to submit the same for inspection;
evidence wilfully suppressed would be adverse if produced (Sec. 3(e), Rule
131, Rules of Court)
xxx xxx xxx
e) they would make it appear that petitioner has a two-hour rest period from 12:00
to 2:00 p.m., this is highly unusual for a store establishment because
employees should attend to customers almost every minute as well as
contrary to the judicial notice that no noon break is observed.
f) petitioner never reported earlier or later than 9:00 a.m., likewise she never went
home earlier or later than 8:00 pm; all entries are suspiciously consistent.[7]

Labor Arbiter Macaraig-Guillen, in taking judicial cognizance of the fact that private
respondent company opens twelve (12) hours a day, the same number of hours worked by
petitioner everyday, applied Rule 129, Section 2 of the Rules of Court which provides that a
court may take judicial notice of matters which are of public knowledge, or are capable of
unquestionable demonstration, or ought to be known because of their judicial functions. In
awarding overtime pay to petitioner, the labor arbiter ruled:
However, it is of judicial notice that all Mancao establishments open at eight a.m. and
close at eight p.m. with no noon break, so it is believable that employees rendered 41/2 hours of overtime everyday, 7 days a week. [8]
Generally, findings of facts of quasi-judicial agencies like the NLRC are accorded great
respect and at times even finality if supported by substantial evidence. [9] Substantial evidence
is such amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion. However in cases where there is a conflict between the factual findings of
the NLRC and the labor arbiter, a review of such factual findings is necessitated. [10]
While private respondent company submitted the daily time records of the petitioner to
show that she rendered work for only eight (8) hours a day, it did not refute nor seek to
disprove the judicial notice taken by Labor Arbiter Macaraig-Guillen that Mancao
establishments, including the establishment where petitioner worked, opens twelve hours a
day, opening at 8:00 a.m. and closing at 8:00 p.m.
This Court, in previously evaluating the evidentiary value of daily time records, especially
those which show uniform entries with regard to the hours of work rendered by an employee,
has ruled that such unvarying recording of a daily time record is improbable and contrary to
human experience. It is impossible for an employee to arrive at the workplace and leave at
exactly the same time, day in day out. The uniformity and regularity of the entries are badges
of untruthfulness and as such indices of dubiety. [11] The observations made by the Solicitor
General regarding the unreliability of the daily time records would therefore seem more
convincing. On the other hand, respondent company failed to present substantial evidence,
other than the disputed DTRs, to prove that petitioner indeed worked for only eight hours a
day.
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.[12] 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. [13]This rule should be
applied in the case at bar, especially since the evidence presented by the private respondent
company is not convincing. Accordingly, we uphold the finding that petitioner rendered
overtime work, entitling her to overtime pay.
As to the liability of private respondent Antonio Mancao, petitioner contends that as
manager of Mancao establishment, he should be jointly and severally liable with respondent
corporation as to the monetary award adjudged.
The general rule is that officers of a corporation are not personally liable for their official
acts unless it is shown that they have exceeded their authority. However, the legal fiction that
a corporation has a personality separate and distinct from stockholders and members may be
disregarded if it is used as a means to perpetuate fraud or an illegal act or as a vehicle for the
evasion of an existing obligation, the circumvention of statutes, or to confuse legitimate
issues.[14]

In this case, there is no showing that Antonio Mancao, as manager of respondent

company, deliberately and maliciously evaded the respondent's company financial obligation
to the petitioner. Hence, there appearing to be no evidence on record that Antonio Mancao
acted maliciously or deliberately in the non-payment of benefits to petitioner, he cannot be
held jointly and severally liable with Mancao supermarket.
WHEREFORE, in view of the foregoing, the instant petition is hereby PARTIALLY
GRANTED. Accordingly, the resolution of the NLRC dated December 21, 1995 in NLRC NCR CA
No. M-002047-94 is hereby MODIFIED by awarding petitioner, Emelita Nicario her overtime
pay and relieving private respondent, Antonio Mancao, of any liability as manager of Mancao
Supermarket and further holding Mancao Supermarket solely liable. No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Kapunan, and Purisima, JJ., concur.

SECOND DIVISION

[G.R. No. 153660. June 10, 2003]

PRUDENCIO BANTOLINO, NESTOR ROMERO, NILO ESPINA, EDDIE LADICA, ARMAN

QUELING, ROLANDO NIETO, RICARDO BARTOLOME, ELUVER GARCIA, EDUARDO
GARCIA and NELSON MANALASTAS, petitioners, vs. COCA-COLA BOTTLERS
PHILS., INC., respondent.
DECISION
BELLOSILLO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision of the Court of Appeals[1] dated 21 December 2001 which affirmed with modification
the decision of the National Labor Relations Commission promulgated 30 March 2001. [2]
On 15 February 1995 sixty-two (62) employees of respondent Coca-Cola Bottlers, Inc., and
its officers, Lipercon Services, Inc., Peoples Specialist Services, Inc., and Interim Services, Inc.,
filed a complaint against respondents for unfair labor practice through illegal dismissal,
violation of their security of tenure and the perpetuation of the Cabo System. They thus
prayed for reinstatement with full back wages, and the declaration of their regular
employment status.
For failure to prosecute as they failed to either attend the scheduled mandatory
conferences or submit their respective affidavits, the claims of fifty-two (52) complainantemployees were dismissed. Thereafter, Labor Arbiter Jose De Vera conducted clarificatory
hearings to elicit information from the ten (10) remaining complainants (petitioners herein)
relative to their alleged employment with respondent firm.
In substance, the complainants averred that in the performance of their duties as route
helpers, bottle segregators, and others, they were employees of respondent Coca-Cola
Bottlers, Inc. They further maintained that when respondent company replaced them and
prevented them from entering the company premises, they were deemed to have been
illegally dismissed.
In lieu of a position paper, respondent company filed a motion to dismiss complaint for
lack of jurisdiction and cause of action, there being no employer-employee relationship
between complainants and Coca-Cola Bottlers, Inc., and that respondents Lipercon Services,
Peoples Specialist Services and Interim Services being bona fide independent contractors,
were the real employers of the complainants. [3] As regards the corporate officers, respondent
insisted that they could not be faulted and be held liable for damages as they only acted in
their official capacities while performing their respective duties.
On 29 May 1998 Labor Arbiter Jose De Vera rendered a decision
company to reinstate complainants to their former positions with all the
benefits due regular employees, and to pay their full back wages which,
Prudencio Bantolino whose back wages must be computed upon proof of
May 1998, already amounted to an aggregate of P1,810,244.00. [4]

ordering respondent
rights, privileges and
with the exception of
his dismissal as of 31

In finding for the complainants, the Labor Arbiter ruled that in contrast with the negative
declarations of respondent companys witnesses who, as district sales supervisors of

respondent company denied knowing the complainants personally, the testimonies of the
complainants were more credible as they sufficiently supplied every detail of their
employment, specifically identifying who their salesmen/drivers were, their places of
assignment, aside from their dates of engagement and dismissal.
On appeal, the NLRC sustained the finding of the Labor Arbiter that there was indeed an
employer-employee relationship between the complainants and respondent company when it
affirmed in toto the latters decision.
In a resolution dated 17 July 2001 the NLRC subsequently denied for lack of merit
respondents motion for consideration.
Respondent Coca-Cola Bottlers appealed to the Court of Appeals which, although affirming
the finding of the NLRC that an employer-employee relationship existed between the
contending parties, nonetheless agreed with respondent that the affidavits of some of the
complainants, namely, Prudencio Bantolino, Nestor Romero, Nilo Espina, Ricardo Bartolome,
Eluver Garcia, Eduardo Garcia and Nelson Manalastas, should not have been given probative
value for their failure to affirm the contents thereof and to undergo cross-examination. As a
consequence, the appellate court dismissed their complaints for lack of sufficient evidence. In
the same Decision however, complainants Eddie Ladica, Arman Queling and Rolando Nieto
were declared regular employees since they were the only ones subjected to crossexamination.[5] Thus x x x (T)he labor arbiter conducted clarificatory hearings to ferret out the truth between the
opposing claims of the parties thereto. He did not submit the case based on position papers
and their accompanying documentary evidence as a full-blown trial was imperative to
establish the parties claims. As their allegations were poles apart, it was necessary to give
them ample opportunity to rebut each others statements through cross-examination. In fact,
private respondents Ladica, Quelling and Nieto were subjected to rigid cross-examination by
petitioners counsel. However, the testimonies of private respondents Romero, Espina, and
Bantolino were not subjected to cross-examination, as should have been the case, and no
explanation was offered by them or by the labor arbiter as to why this was dispensed with.
Since they were represented by counsel, the latter should have taken steps so as not to
squander their testimonies. But nothing was done by their counsel to that effect. [6]
Petitioners now pray for relief from the adverse Decision of the Court of Appeals; that,
instead, the favorable judgment of the NLRC be reinstated.
In essence, petitioners argue that the Court of Appeals should not have given weight to
respondents claim of failure to cross-examine them. They insist that, unlike regular courts,
labor cases are decided based merely on the parties position papers and affidavits in support
of their allegations and subsequent pleadings that may be filed thereto. As such, according to
petitioners, the Rules of Court should not be strictly applied in this case specifically by putting
them on the witness stand to be cross-examined because the NLRC has its own rules of
procedure which were applied by the Labor Arbiter in coming up with a decision in their favor.
In its disavowal of liability, respondent commented that since the other alleged affiants
were not presented in court to affirm their statements, much less to be cross-examined, their
affidavits should, as the Court of Appeals rightly held, be stricken off the records for being
self-serving, hearsay and inadmissible in evidence. With respect to Nestor Romero,
respondent points out that he should not have been impleaded in the instant petition since he
already voluntarily executed a Compromise Agreement, Waiver and Quitclaim in consideration
of P450,000.00. Finally, respondent argues that the instant petition should be dismissed in
view of the failure of petitioners[7] to sign the petition as well as the verification and

certification of non-forum shopping, in clear violation of the principle laid down in Loquias v.
Office of the Ombudsman.[8]
The crux of the controversy revolves around the propriety of giving evidentiary value to
the affidavits despite the failure of the affiants to affirm their contents and undergo the test of
cross-examination.
The petition is impressed with merit. The issue confronting the Court is not without
precedent in jurisprudence. The oft-cited case of Rabago v. NLRC[9] squarely grapples a similar
challenge involving the propriety of the use of affidavits without the presentation of affiants
for cross-examination. In that case, we held that the argument that the affidavit is hearsay
because the affiants were not presented for cross-examination is not persuasive because the
rules of evidence are not strictly observed in proceedings before administrative bodies like the
NLRC where decisions may be reached on the basis of position papers only.
In Rase v. NLRC,[10] this Court likewise sidelined a similar challenge when it ruled that it
was not necessary for the affiants to appear and testify and be cross-examined by counsel for
the adverse party. To require otherwise would be to negate the rationale and purpose of the
summary nature of the proceedings mandated by the Rules and to make mandatory the
application of the technical rules of evidence.
Southern Cotabato Dev. and Construction Co. v. NLRC [11] succinctly states that under Art.
221 of the Labor Code, the rules of evidence prevailing in courts of law do not control
proceedings before the Labor Arbiter and the NLRC. Further, it notes that the Labor Arbiter
and the NLRC are authorized to adopt reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law and procedure, all in the
interest of due process. We find no compelling reason to deviate therefrom.
To reiterate, administrative bodies like the NLRC are not bound by the technical niceties of
law and procedure and the rules obtaining in courts of law. Indeed, the Revised Rules of Court
and prevailing jurisprudence may be given only stringent application, i.e., by analogy or in a
suppletory character and effect. The submission by respondent, citing People v. Sorrel,[12]that
an affidavit not testified to in a trial, is mere hearsay evidence and has no real evidentiary
value, cannot find relevance in the present case considering that a criminal prosecution
requires a quantum of evidence different from that of an administrative proceeding. Under the
Rules of the Commission, the Labor Arbiter is given the discretion to determine the necessity
of a formal trial or hearing. Hence, trial-type hearings are not even required as the cases may
be decided based on verified position papers, with supporting documents and their affidavits.
As to whether petitioner Nestor Romero should be properly impleaded in the instant case,
we only need to follow the doctrinal guidance set by Periquet v. NLRC[13] which outlines the
parameters for valid compromise agreements, waivers and quitclaims 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.
In closely examining the subject agreements, we find that on their face the Compromise
Agreement[14] and Release, Waiver and Quitclaim[15] are devoid of any palpable inequity as the

terms of settlement therein are fair and just. Neither can we glean from the records any
attempt by the parties to renege on their contractual agreements, or to disavow or disown
their due execution. Consequently, the same must be recognized as valid and binding
transactions and, accordingly, the instant case should be dismissed and finally terminated
insofar as concerns petitioner Nestor Romero.
We cannot likewise accommodate respondents contention that the failure of all the
petitioners to sign the petition as well as the Verification and Certification of Non-Forum
Shopping in contravention of Sec. 5, Rule 7, of the Rules of Court will cause the dismissal of
the present appeal. While the Loquias case requires the strict observance of the Rules, it
however provides an escape hatch for the transgressor to avoid the harsh consequences of
non-observance. Thus x x x x We find that substantial compliance will not suffice in a matter involving strict
observance of the rules. The attestation contained in the certification on non-forum shopping
requires personal knowledge by the party who executed the same. Petitioners must show
reasonable cause for failure to personally sign the certification. Utter disregard of the rules
cannot justly be rationalized by harking on the policy of liberal construction (underscoring
supplied).
In their Ex Parte Motion to Litigate as Pauper Litigants, petitioners made a request for a
fifteen (15)-day extension, i.e., from 24 April 2002 to 8 May 2002, within which to file their
petition for review in view of the absence of a counsel to represent them. [16] The records also
reveal that it was only on 10 July 2002 that Atty. Arnold Cacho, through the UST Legal Aid
Clinic, made his formal entry of appearance as counsel for herein petitioners. Clearly, at the
time the instant petition was filed on 7 May 2002 petitioners were not yet represented by
counsel. Surely, petitioners who are non-lawyers could not be faulted for the procedural lapse
since they could not be expected to be conversant with the nuances of the law, much less
knowledgeable with the esoteric technicalities of procedure. For this reason alone, the
procedural infirmity in the filing of the present petition may be overlooked and should not be
taken against petitioners.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is REVERSED
and SET ASIDE and the decision of the NLRC dated 30 March 2001 which affirmed in toto the
decision of the Labor Arbiter dated 29 May 1998 ordering respondent Coca-Cola Bottlers
Phils., Inc., to reinstate Prudencio Bantolino, Nilo Espina, Eddie Ladica, Arman Queling,
Rolando Nieto, Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and Nelson Manalastas to
their former positions as regular employees, and to pay them their full back wages, with the
exception of Prudencio Bantolino whose back wages are yet to be computed upon proof of his
dismissal, is REINSTATED, with the MODIFICATION that herein petition is DENIED insofar as it
concerns Nestor Romero who entered into a valid and binding Compromise
Agreement and Release, Waiver and Quitclaim with respondent company.
SO ORDERED.

FIRST DIVISION
[G.R. No. 143389. May 25, 2001]
PFIZER INC., MA. ANGELICA B. LLEANDER and SANDRA WEBB, petitioners, vs.
EDWIN V. GALAN, respondent.
DECISION
DAVIDE, JR., C.J.:
In this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioners assail the dismissal by the Court of Appeals of their petition for certiorari for
having been filed beyond the sixty-day reglementary period.
Respondent Edwin V. Galan was an employee of petitioner Pfizer, Inc., a drug
manufacturer. He was initially hired in August 1982 as a professional sales representative,
commonly known as a medical representative. He was a recipient of several company awards,
which eventually resulted in his promotion as District Manager for Mindanao in 1996. He
continued to reap more awards as he exceeded sales targets.
In September 1997, respondent was recalled to Manila to meet with his superiors. In the
meeting, the sales manager of Pfizer, Inc., issued a memorandum requiring him to explain his
alleged unauthorized use of, and questionable expense claims made on, the company vehicle,
as well as the doubtful liquidation of his cash advance of US$5,000 for a recent official trip to
Indonesia. After the submission of his explanation, a formal hearing on the charges was set. In
the meantime, respondent was placed under preventive suspension and was advised to seek
legal assistance. On October 1998, after the conclusion of the hearing, respondent received a
notice of termination signed by Pfizers co-petitioner Ma. Angelica B. Lleander. The cause for
his dismissal was loss of trust and confidence.
Respondent then filed a complaint for illegal dismissal against petitioners before the
National Labor Relations Commission (NLRC) Regional Arbitration Branch No. 9 in Zamboanga
City. He demanded his reinstatement or separation pay; the payment of back wages,
thirteenth-month pay, and bonuses; the reimbursement of expenses and incentives; and the
payment of moral and exemplary damages and attorneys fees. Sandra Webb and Ma.
Angelica Lleander were impleaded as respondents in their capacities as Country Manager and
Employee Resources Director, respectively, of Pfizer, Inc. The case was docketed as NLRC
Case No. RAB-09-02-00048-98.
In a Decision[1] rendered on 14 August 1998, Labor Arbiter Rhett Julius Plagata declared
that respondent was illegally dismissed and ordered Pfizer, Inc., to pay him back wages,
separation pay, thirteenth month pay, incentives and bonuses, reimbursement of expenses
and attorneys fees. Respondents monetary award totalled P2,052,013.50.
Petitioners appealed from the decision to the NLRC in Cagayan de Oro City. In its
Resolution[2]of 17 December 1998, the NLRC affirmed the decision of the Labor Arbiter. A copy
of the Resolution was received by petitioners on 29 December 1998. On 8 January 1999,
petitioners filed a motion for reconsideration, which was denied by the NLRC in its
Resolution[3] of 29 April 1999. Petitioners received a copy of the latter Resolution on 13 May
1999.
On 5 July 1999, the NLRC decreed the entry of judgment [4] of the case, and upon
respondents motion, issued a writ of execution [5] on 3 August 1999.
Meanwhile, on 12 July 1999, or prior to the issuance of a writ of execution, petitioners filed
with the Court of Appeals a petition for certiorari assailing the aforementioned NLRC
Resolutions. In its Resolution[6] of 11 August 1999 the Court of Appeals required the NLRC and

respondent Galan to comment on the petition. However, on 11 November 1999 it issued the
challenged resolution,[7] which reads as follows:
We made a second look at the records. It is obvious to Us that the Petition for Certiorari was
filed beyond the 60-day reglementary period, and is hereby DISMISSED. Consider these:
1) The December 17, 1998 contested Resolution was received on December 29,
1998. On January 8, 1999, the Motion for Reconsideration was filed, meaning, after
a period of ten (10) days.
2) The Order dated April 29, 1999, denying the Motion for Reconsideration was
received on May 13, 1999. Herein petition, in turn, was received by the Court
already on July 12, 1999.
3) From May 13, 1999, up to and until July 12, 1999, computation wise, is already a
period of 60 days. Adding ten (10) days would mean a total of seventy (70) days.
Aside from that, the Verification that was executed by Ma. Cleofe R. Legaspi, supposedly an
Employment Specialist of Pfizer, Inc., was not properly executed. While she alleges being one
of the petitioners (Rollo, p. 41) actually she is not. As a matter of fact, the parties (Ibid., p. 4),
as petitioners, were only Pfizer, Inc., Ma. Angeles Lleander, and Sandra Webb. Miss Cleofe
Legaspi certainly cannot be treated as one of the petitioners.
Petitioners moved to reconsider the Resolution. However, in its Resolution[8]of 25 May
2000, the Court of Appeals denied the motion for reconsideration.
Petitioners then filed the herein petition invoking Rule 1, Section 6, of the 1997 Rules of
Civil Procedure, which provides for the liberal construction of procedural rules. They also cite
cases where we allowed the suspension of procedural rules to adhere to substantial
justice. They claim that Section 4, Rule 65 of the 1997 Rules of Civil Procedure originally
provided:
SEC. 4. Where and when petition to be filed. The petition may be filed not later than sixty (60)
days from notice of the judgment, order or resolution sought to be assailed in the Supreme
Court or, if it relates to the acts or omissions of a lower court or of a corporation, board, officer
or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined
by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is
in aid of its jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves
the acts or omissions of a quasi-judicial agency, and unless otherwise provided by law or
these Rules, the petition shall be filed in and cognizable only by the Court of Appeals.
In the Courts En Banc Resolution of 21 July 1998 in Bar Matter No. 803, the section was
amended by adding the following paragraph:
If the petitioner had filed a motion for new trial or reconsideration in due time after notice of
said judgment, order or resolution the period herein fixed shall be interrupted. If the motion is
denied, the aggrieved party may file the petition within the remaining period, but which shall
not be less than five (5) days in any event, reckoned from notice of such denial. No extension
of time to file the petition shall be granted except for the most compelling reason and in no
case to exceed fifteen (15) days.
The amendment took effect on 1 September 1998. It was published in the 26 July 1998 issues
of the Manila Bulletin, Philippine Daily Inquirer and Philippine Star.

Petitioners assert that the publication of the amendment was not accorded wide
dissemination unlike previous amendments of the rules on procedure, such as the 1997 Rules
of Civil Procedure. When their petition for certiorari was filed before the Court of Appeals, their
counsel relied on the original provision of Section 4, Rule 65 of the 1997 Rules of Civil
Procedure. Such an honest mistake is excusable and should not prejudice the merit of their
case.
Petitioners also call our attention to the implementation of Section 11, Rule 13 of the 1997
Rules of Civil Procedure, which allows a party to explain the failure to effect a personal filing of
a pleading in court or personal service thereof to an adverse party. The said Rules took effect
on 1 July 1997, but because of the failure of many parties and counsel to comply with it due to
ignorance, we declared in Solar Team Entertainment, Inc. v. Ricafort [9] that strict compliance
with the said provision should be required after one month from the promulgation of our
decision, or two years from the time the Rules actually took effect. Petitioners then urge us to
accord their case with the consideration we conceded in Solar Team.
In his comment respondent Galan seeks the dismissal of the petition. He maintains that
the Court of Appeals was correct in dismissing the petition for certiorari for having been filed
out of time in light of the amendment of Section 4, Rule 65 of the Rules of Court. The
ignorance of petitioners counsel should not be used to prevent the execution of the judgment
of the NLRC. While respondent agrees that procedural rules should be liberally construed, he,
nonetheless, contends that provisions on reglementary periods should be strictly applied
since they are indispensable in preventing needless delays and are necessary to ensure
orderly and speedy discharge of judicial business. He also cites jurisprudence where we
declared strict compliance with those provisions, especially those involving the manner and
period for perfecting appeals. Respondent further notes that petitioners conveniently ignored
the Court of Appeals observation that the verification of its petition was fatally defective.
In their reply to the respondents comment, petitioners underscore that in the entire
proceedings from the Labor Arbiter up to the NLRC, they had seasonably filed their
pleadings. Moreover, if the original provision of Section 4, Rule 65 of the 1997 Rules of Civil
Procedure would be observed, they could be deemed to have complied with the mandated
period for the filing a petition for certiorari. They reaffirm our pronouncements that in labor
cases the rules on technicality must yield to the broader interest of substantial justice,
especially in this case where there is an unwarranted monetary award to respondent. They
also fault the NLRC in failing to appreciate the overwhelming evidence in their favor.
Finally, petitioners cite the Courts En Banc Resolution in Administrative Matter No. 00-203-SC, which took effect on 1 September 2000. The resolution amends Section 4 of Rule 65 of
the 1997 Rules of Civil Procedure, and as amended it reads:
Sec. 4. When and where petition filed. - The petition shall be filed not later than sixty (60)
days from notice of judgment, order or resolution. In case a motion for reconsideration or new
trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be
counted from notice of the denial of said motion. [Emphasis supplied]
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a
lower court or of a corporation, board, officer, or person, in the Regional Trial Court exercising
jurisdiction over the territory as defined by the Supreme Court. It may also be filed in the
Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the
Sandiganbayan, if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of
a quasi-judicial agency, unless otherwise provided by these rules, the petition shall be filed in
and cognizable only by the Court of Appeals.

No extension of time to file the petition shall be granted except for compelling reason and in
no case exceeding fifteen (15) days.
We gave due course to the petition, and the parties submitted their respective
Memoranda as required.
In Systems Factors Corporation v. NLRC [10] we declared that the amendment introduced
under A.M. No. 00-2-03-SC is procedural or remedial in character, as it does not create new or
remove vested rights, but only operates in furtherance of the remedy or confirmation of rights
already existing. It is settled that procedural laws may be given retroactive effect to actions
pending and undetermined at the time of their passage, there being no vested rights in the
rules of procedure. Thus, the said amendment may be given a retroactive effect. We
reiterated this ruling in Unity Fishing Development Corporation v. Court of Appeals.[11]
Thus, by virtue of the retroactive effect of the amendment of Section 4, Rule 65 of the
1997 Rules of Civil Procedure introduced by our Resolution in A.M. No. 00-2-03-SC, which
allows the filing of a petition for certiorari within sixty days from notice of the denial of a
motion for reconsideration, the filing of petitioners petition before the Court of Appeals was on
time. Indeed, there is no dispute that their petition was filed on the sixtieth day from notice of
the denial of their motion for reconsideration.
The Court of Appeals dismissed the petition also on the ground that the Verification in the
petition was not properly executed; thus:
Aside from that, the Verification that was executed by Ma. Cleofe R. Legaspi, supposedly an
Employment Specialist of Pfizer, Inc., was not properly executed. While she alleges being one
of the petitioners (Rollo, p. 41) actually she is not. As a matter of fact, the parties (Ibid., p. 4)
as petitioners, were only Pfizer, Inc., Ma. Angeles Lleander and Sandra Webb. Miss Cleofe
Legaspi certainly cannot be treated as one of the petitioners.
A petition for review filed pursuant to Rule 65 of the 1997 Rules of Civil Procedure must be
verified.[12] Section 4, Rule 7 of said Rules, which provides for verification, pertinently reads as
follows:
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct his knowledge and belief.
Verification is intended to assure that the allegations in the pleading have been prepared
in good faith or are true and correct, not mere speculations. [13] Generally, lack of verification is
merely a formal defect that is neither jurisdictional nor fatal. The court may order the
correction of the pleading or act on the unverified pleading if the attending circumstances are
such that strict compliance with the rule may be dispensed with in order to serve the ends of
justice.[14]
We firmly believe that the purpose of verification was served in the instant case wherein
the verification of the petition filed with the Court of Appeals was done by Ms. Cleofe R.
Legaspi. It remains undisputed that Ms. Legaspi was an Employment Specialist of petitioner
Pfizer, Inc., who coordinated and actually took part in the investigation of the administrative
charges against respondent Galan. As such, she was in a position to verify the truthfulness
and correctness of the allegations in the petition. Besides, as pointed out by petitioners,
Pfizer, being a corporate entity, can only act through an officer. Ms. Legaspi, who was an
officer having personal knowledge of the case, was, therefore, merely acting for and in behalf
of petitioner Pfizer when she signed the verification. Thus, the disputed verification is in
compliance with the Rules.

It may not be amiss to state that, contrary to the finding of the Court of Appeals, Ms.
Legaspi never represented herself as one of the petitioners in the petition before the Court of
Appeals. Her declaration in number 1 of the verification reads:
I am an Employment Specialist of Pfizer, Inc., one of the petitioners in the instant case.
If we take this statement together with that in number 4, which reads: Our company has
not commenced any action or proceeding involving the same issues in the Supreme Court, it
is clear that the phrase one of the petitioners refers to Pfizer, Inc., and not to Ms.
Legaspi. Hence, the finding of misrepresentation on Legaspis part is without basis.
WHEREFORE, the Resolutions of 11 November 1999 and 25 May 2000 of the Court of
Appeals in CA-G.R. SP No. 53671 are hereby SET ASIDE, and the case is REMANDED to the
Court of Appeals for further proceedings.
No pronouncement as to costs.
SO ORDERED.

FIRST DIVISION

[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION
CARPIO, J.:

The Case
Before this Court is a petition for review on certiorari[1] assailing the 26 March
1999 Decision[2] of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed
by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the National Labor
Relations Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for lack
of jurisdiction.

The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed an
Agreement (Agreement) with the Mel and Jay Management and Development Corporation
(MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by
SONZA, as President and General Manager, and Carmela Tiangco (TIANGCO), as EVP and
Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to provide SONZAs services
exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first
year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which
reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the

station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of
Labor and Employment, National Capital Region in Quezon City. SONZA complained that ABSCBN did not pay his salaries, separation pay, service incentive leave pay, 13 th month pay,
signing bonus, travel allowance and amounts due under the Employees Stock Option Plan
(ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employeremployee relationship existed between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account
at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new
account with the same bank where ABS-CBN deposited SONZAs talent fees and other
payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter [5] denied the motion to dismiss and
directed the parties to file their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of
respondent company until April 15, 1996 and that he was not paid certain claims, it is
sufficient enough as to confer jurisdiction over the instant case in this Office. And as to
whether or not such claim would entitle complainant to recover upon the causes of action
asserted is a matter to be resolved only after and as a result of a hearing. Thus, the
respondents plea of lack of employer-employee relationship may be pleaded only as a matter
of defense. It behooves upon it the duty to prove that there really is no employer-employee
relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to
Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits
of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their
affidavits that the prevailing practice in the television and broadcast industry is to treat
talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for
lack of jurisdiction.[6] The pertinent parts of the decision read as follows:
xxx

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

The Rulings of the NLRC and Court of Appeals

The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship
existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court
quoted the following findings of the NLRC:

x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely
as an agent of complainant Sonza, the principal. By all indication and as the law puts it, the
act of the agent is the act of the principal itself. This fact is made particularly true in this case,
as admittedly MJMDC is a management company devoted exclusively to managing the careers
of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to
Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and
MJMDC, and not between ABS-CBN and MJMDC. This is clear from the provisions of the May
1994 Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when
complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which
issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his
capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically,
the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994
Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that
MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such
that there exist[s] employer-employee relationship between the latter and Mr. Sonza. On the
contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to
the regular courts, the same being in the nature of an action for alleged breach of contractual
obligation on the part of respondent-appellee. As squarely apparent from complainantappellants Position Paper, his claims for compensation for services, 13 th month pay, signing
bonus and travel allowance against respondent-appellee are not based on the Labor Code but
rather on the provisions of the May 1994 Agreement, while his claims for proceeds under
Stock Purchase Agreement are based on the latter. A portion of the Position Paper of
complainant-appellant bears perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound
itself to pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED
THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13 th month pay based on an amount not
lower than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable
travel benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per
year.
Thus, it is precisely because of complainant-appellants own recognition of the fact that his
contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor
Code, that instead of merely resigning from ABS-CBN, complainant-appellant served upon the
latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996,
which asserted that instead of referring to unpaid employee benefits, he is waiving and
renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but

reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of
the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or
the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his
complaint.Complainant-appellants claims being anchored on the alleged breach of contract on
the part of respondent-appellee, the same can be resolved by reference to civil law and not to
labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular
courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA
267, 21 November 1994, an action for breach of contractual obligation is intrinsically
a civil dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship
between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC
to resolve.[10] A special civil action for certiorari extends only to issues of want or excess of
jurisdiction of the NLRC.[11] Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRCs conclusion. [12] The Court of
Appeals added that it could not re-examine the parties evidence and substitute the factual
findings of the NLRC with its own.[13]

The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING
TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABSCBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.[14]

The Courts Ruling

We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals
affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the
first time that the Court will resolve the nature of the relationship between a television and
radio station and one of its talents. There is no case law stating that a radio and television
program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay Sonza, a
known television and radio personality, and ABS-CBN, one of the biggest television and radio
networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an
employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.

Employee or Independent Contractor?

The existence of an employer-employee relationship is a question of fact. Appellate courts
accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality
when supported by substantial evidence. [15] Substantial evidence means such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion. [16] A party
cannot prove the absence of substantial evidence by simply pointing out that there is contrary
evidence on record, direct or circumstantial. The Court does not substitute its own judgment
for that of the tribunal in determining where the weight of evidence lies or what evidence is
credible.[17]
SONZA maintains that all essential elements of an employer-employee relationship are
present in this case. Case law has consistently held that the elements of an employeremployee relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employers power to control the
employee on the means and methods by which the work is accomplished. [18] The last element,
the so-called control test, is the most important element.[19]

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because
of SONZAs peculiar skills, talent and celebrity status. SONZA contends that the discretion
used by respondent in specifically selecting and hiring complainant over other broadcasters of
possibly similar experience and qualification as complainant belies respondents claim of
independent contractorship.
Independent contractors often present themselves to possess unique skills, expertise or
talent to distinguish them from ordinary employees. The specific selection and hiring of
SONZA,because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent
contractual relationship. If SONZA did not possess such unique skills, talent and celebrity
status, ABS-CBN would not have entered into the Agreement with SONZA but would have
hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship, with the
control test being the most important element.

B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to
MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABSCBN. SONZA also points out that ABS-CBN granted him benefits and privileges which he would
not have enjoyed if he were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to
the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to
stipulate on benefits such as SSS, Medicare, x x x and 13 th month pay[20] which the law
automatically incorporates into every employer-employee contract. [21] Whatever benefits
SONZA enjoyed arose from contract and not because of an employer-employee relationship. [22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so
huge and out of the ordinary that they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge
talent fees precisely because of SONZAs unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power to
bargain talent fees way above the salary scales of ordinary employees is a circumstance
indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the
status of SONZA as an independent contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have
to turn over any talent fee accruing under the Agreement.

C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds
other than breach of contract, such as retrenchment to prevent losses as provided under labor
laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as
AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement.[24] Even if it suffered severe business losses, ABS-CBN could not retrench SONZA
because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still
paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life of the Agreement even if ABSCBN cancelled SONZAs programs through no fault of SONZA. [25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an
admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that if it were true
that complainant was really an employee, he would merely resign, instead. SONZA did
actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement.SONZAs letter clearly bears this out. [26] However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the
Agreement or resigned from work does not determine his status as employee or independent
contractor.

D. Power of Control
Since there is no local precedent on whether a radio and television program host is an
employee or an independent contractor, we refer to foreign case law in analyzing the present
case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v.
Corporacin De Puerto Rico Para La Difusin Pblica (WIPR) [27] that a television program
host is an independent contractor. We quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television

actress is a skilled position requiring talent and training not available on-the-job. x
x x In this regard, Alberty possesses a masters degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the drama department at
the University of Puerto Rico; and acted in several theater and television productions prior to
her affiliation with Desde Mi Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent contractor
status because WIPR provided the equipment necessary to tape the show. Albertys argument
is misplaced. The equipment necessary for Alberty to conduct her job as host of Desde Mi
Pueblo related to her appearance on the show.Others provided equipment for filming and
producing the show, but these were not the primary tools that Alberty used to perform her
particular function. If we accepted this argument, independent contractors could never work
on collaborative projects because other individuals often provide the equipment required for
different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi
Pueblo. Albertys contracts with WIPR specifically provided that WIPR hired her professional
services as Hostess for the Program Desde Mi Pueblo. There is no evidence that WIPR
assigned Alberty tasks in addition to work related to these tapings. x x x[28] (Emphasis
supplied)
Applying the control test to the present case, we find that SONZA is not an employee
but an independent contractor. The control test is the most important test our courts apply
in distinguishing an employee from an independent contractor. [29] This test is based on the
extent of control the hirer exercises over a worker. The greater the supervision and control the
hirer exercises, the more likely the worker is deemed an employee. The converse holds true
as well the less control the hirer exercises, the more likely the worker is considered an
independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over the means and methods of his
work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to cohost the Mel & Jay programs. ABS-CBN did not assign any other work to SONZA. To perform his
work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on
television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to
render eight hours of work per day. The Agreement required SONZA to attend only rehearsals
and tapings of the shows, as well as pre- and post-production staff meetings. [31] ABS-CBN
could not dictate the contents of SONZAs script. However, the Agreement prohibited SONZA
from criticizing in his shows ABS-CBN or its interests. [32] The clear implication is that SONZA
had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or
its interests.
We find that ABS-CBN was not involved in the actual performance that produced the
finished product of SONZAs work.[33] ABS-CBN did not instruct SONZA how to perform his
job.ABS-CBN merely reserved the right to modify the program format and airtime schedule for
more effective programming.[34] ABS-CBNs sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power
over the means and methods of the performance of his work. Although ABS-CBN did have the

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

Further, not every form of control that a party reserves to himself over the conduct of the
other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely with the
case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create
no employer-employee relationship unlike the second, which address both the result and the
means used to achieve it.[44]
The Vaughan case also held that one could still be an independent contractor although
the hirer reserved certain supervision to insure the attainment of the desired result. The hirer,
however, must not deprive the one hired from performing his services according to his own
initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most extreme
form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the
same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment
industry.[46] This practice is not designed to control the means and methods of work of the
talent, but simply to protect the investment of the broadcast station. The broadcast station
normally spends substantial amounts of money, time and effort in building up its talents as
well as the programs they appear in and thus expects that said talents remain exclusive with
the station for a commensurate period of time. [47] Normally, a much higher fee is paid to
talents who agree to work exclusively for a particular radio or television station. In short, the
huge talent fees partially compensates for exclusivity, as in the present case.

MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted
out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not
an employee of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor and ABS-CBN is
his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2)
the employee who is ostensibly under the employ of the labor-only contractor; and (3) the
principal who is deemed the real employer. Under this scheme, the labor-only contractor is
the agent of the principal. The law makes the principal responsible to the employees of the
labor-only contractor as if the principal itself directly hired or employed the employees.
[48]
These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and
ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC
acted as the AGENT of SONZA. The records do not show that MJMDC acted as ABS-CBNs
agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a
corporation organized and owned by SONZA and TIANGCO. The President and General

Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned,
controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the
Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the
agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing
the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other function apart from acting
as agent of SONZA or TIANGCO to promote their careers in the broadcast and television
industry.[49]

Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople
on 8 January 1979 finally settled the status of workers in the broadcast industry. Under this
policy, the types of employees in the broadcast industry are the station and program
employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and
effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs
status. A mere executive issuance cannot exclude independent contractors from the class of
service providers to the broadcast industry. The classification of workers in the broadcast
industry into only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.

Affidavits of ABS-CBNs Witnesses

SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and
Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses.SONZA brands these witnesses as incompetent to attest on the prevailing practice
in the radio and television industry. SONZA views the affidavits of these witnesses as
misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from
denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion
whether to conduct a formal (trial-type) hearing after the submission of the position papers of
the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the
complaint excluding those that may have been amicably settled, and shall be accompanied by
all supporting documents including the affidavits of their respective witnesses which shall take
the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the
parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine
whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and
for the purpose of making such determination, ask clarificatory questions to further elicit facts

or information, including but not limited to the subpoena of relevant documentary evidence, if
any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial. [51] The holding of a formal hearing or trial is
something that the parties cannot demand as a matter of right. [52] If the Labor Arbiter is
confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in
nature. Subject to the requirements of due process, the technicalities of law and the rules
obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment
industries to treat talents like SONZA as independent contractors. SONZA argues that if such
practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if
there is an employer-employee relationship under labor laws. Not every performance of
services for a fee creates an employer-employee relationship. To hold that every person who
renders services to another for a fee is an employee - to give meaning to the security of
tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services
as independent contractors. The right to life and livelihood guarantees this freedom to
contract as independent contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent, of his right to
contract as an independent contractor. An individual like an artist or talent has a right to
render his services without any one controlling the means and methods by which he performs
his art or craft. This Court will not interpret the right of labor to security of tenure to compel
artists and talents to render their services only as employees. If radio and television program
hosts can render their services only as employees, the station owners and managers can
dictate to the radio and television hosts what they say in their shows. This is not conducive to
freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716,[55] as
amended by Republic Act No. 8241,[56] treats talents, television and radio broadcasters
differently. Under the NIRC, these professionals are subject to the 10% value-added tax (VAT)
on services they render. Exempted from the VAT are those under an employer-employee
relationship.[57] This different tax treatment accorded to talents and broadcasters bolters our
conclusion that they are independent contractors, provided all the basic elements of a
contractual relationship are present as in this case.

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay, separation pay,
service incentive leave, signing bonus, travel allowance, and amounts due under the
Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of
Appeals that SONZAs claims are all based on the May 1994 Agreement and stock
option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the May
1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is
intrinsically a civil dispute cognizable by the regular courts. [58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-69870 November 29, 1988
NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION,
MINISTRY OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C.
CREDO, respondents.
G.R. No. 70295 November 29,1988
EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION
AND ARTURO L. PEREZ, respondents.
The Chief Legal Counsel for respondents NASECO and Arturo L. Perez.
Melchor R. Flores for petitioner Eugenia C. Credo.

PADILLA, J.:
Consolidated special civil actions for certiorari seeking to review the decision * of the Third
Division, National Labor Relations Commission in Case No. 11-4944-83 dated 28 November
1984 and its resolution dated 16 January 1985 denying motions for reconsideration of said
decision.
Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a domestic
corporation which provides security guards as well as messengerial, janitorial and other
similar manpower services to the Philippine National Bank (PNB) and its agencies. She was
first employed with NASECO as a lady guard on 18 July 1975. Through the years, she was
promoted to Clerk Typist, then Personnel Clerk until she became Chief of Property and
Records, on 10 March 1980. 1
Sometime before 7 November 1983, Credo was administratively charged by Sisinio S. Lloren,
Manager of Finance and Special Project and Evaluation Department of NASECO, stemming
from her non-compliance with Lloren's memorandum, dated 11 October 1983, regarding
certain entry procedures in the company's Statement of Billings Adjustment. Said charges
alleged that Credo "did not comply with Lloren's instructions to place some
corrections/additional remarks in the Statement of Billings Adjustment; and when [Credo] was
called by Lloren to his office to explain further the said instructions, [Credo] showed
resentment and behaved in a scandalous manner by shouting and uttering remarks of
disrespect in the presence of her co-employees." 2
On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General Manager
of NASECO, to explain her side before Perez and NASECO's Committee on Personnel Affairs in

connection with the administrative charges filed against her. After said meeting, on the same
date, Credo was placed on "Forced Leave" status for 1 5 days, effective 8 November 1983. 3
Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a complaint,
docketed as Case No. 114944-83, with the Arbitration Branch, National Capital Region,
Ministry of Labor and Employment, Manila, against NASECO for placing her on forced leave,
without due process. 4
Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's Committee on
Personnel Affairs deliberated and evaluated a number of past acts of misconduct or
infractions attributed to her. 5 As a result of this deliberation, said committee resolved:
1. That, respondent [Credo] committed the following offenses in the Code of
Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer and employee of client
company or officer of the Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course of official duties or use of
profane or insulting language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any instructions of a superior
officer.
2. That, Management has already given due consideration to respondent's
[Credo] scandalous actuations for several times in the past. Records also show
that she was reprimanded for some offense and did not question it. Management
at this juncture, has already met its maximum tolerance point so it has decided
to put an end to respondent's [Credo] being an undesirable employee. 6
The committee recommended Credo's termination, with forfeiture of benefits.

On 1 December 1983, Credo was called age to the office of Perez to be informed that she was
being charged with certain offenses. Notably, these offenses were those which NASECO's
Committee on Personnel Affairs already resolved, on 22 November 1983 to have been
committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo was
made to explain her side in connection with the charges filed against her; however, due to her
failure to do so, 8 she was handed a Notice of Termination, dated 24 November 1983, and
made effective 1 December 1983. 9 Hence, on 6 December 1983, Credo filed a supplemental
complaint for illegal dismissal in Case No. 11-4944-83, alleging absence of just or authorized
cause for her dismissal and lack of opportunity to be heard. 10
After both parties had submitted their respective position papers, affidavits and other
documentary evidence in support of their claims and defenses, on 9 May 1984, the labor

arbiter rendered a decision: 1) dismissing Credo's complaint, and 2) directing NASECO to pay
Credo separation pay equivalent to one half month's pay for every year of service. 11
Both parties appealed to respondent National Labor Relations Commission (NLRC) which, on
28 November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to her former
position, or substantially equivalent position, with six (6) months' backwages and without loss
of seniority rights and other privileges appertaining thereto, and 2) dismissing Credo's claim
for attorney's fees, moral and exemplary damages. As a consequence, both parties filed their
respective motions for reconsideration, 12 which the NLRC denied in a resolution of 16 January
1985. 13
Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as grave
abuse of discretion the dispositive portion of the 28 November 1984 decision which ordered
Credo's reinstatement with backwages. 14 Petitioners contend that in arriving at said
questioned order, the NLRC acted with grave abuse of discretion in finding that: 1) petitioners
violated the requirements mandated by law on termination, 2) petitioners failed in the burden
of proving that the termination of Credo was for a valid or authorized cause, 3) the alleged
infractions committed by Credo were not proven or, even if proved, could be considered to
have been condoned by petitioners, and 4) the termination of Credo was not for a valid or
authorized cause. 15
On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of discretion
the dispositive portion of the 28 November 1984 decision which dismissed her claim for
attorney's fees, moral and exemplary damages and limited her right to backwages to only six
(6) months. 16
As guidelines for employers in the exercise of their power to dismiss employees for just
causes, the law provides that:
Section 2. Notice of dismissal. Any employer who seeks to dismiss a worker
shall furnish him a written notice stating the particular acts or omission
constituting the grounds for his dismissal.
xxx xxx xxx
Section 5. Answer and Hearing. The worker may answer the allegations stated
against him in the notice of dismissal within a reasonable period from receipt of
such notice. The employer shall afford the worker ample opportunity to be heard
and to defend himself with the assistance of his representative, if he so desires.
Section 6. Decision to dismiss. The employer shall immediately notify a worker
in writing of a decision to dismiss him stating clearly the reasons therefor. 17
These guidelines mandate that the employer furnish an employee sought to be dismissed two
(2) written notices of dismissal before a termination of employment can be legally effected.
These are the notice which apprises the employee of the particular acts or omissions for
which his dismissal is sought and the subsequent notice which informs the employee of the
employer's decision to dismiss him.
Likewise, a reading of the guidelines in consonance with the express provisions of law on
protection to labor 18(which encompasses the right to security of tenure) and the broader
dictates of procedural due process necessarily mandate that notice of the employer's decision

to dismiss an employee, with reasons therefor, can only be issued after the employer has
afforded the employee concerned ample opportunity to be heard and to defend himself.
In the case at bar, NASECO did not comply with these guidelines in effecting Credo's
dismissal. Although she was apprised and "given the chance to explain her side" of the
charges filed against her, this chance was given so perfunctorily, thus rendering illusory
Credo's right to security of tenure. That Credo was not given ample opportunity to be heard
and to defend herself is evident from the fact that the compliance with the injunction to
apprise her of the charges filed against her and to afford her a chance to prepare for her
defense was dispensed in only a day. This is not effective compliance with the legal
requirements aforementioned.
The fact also that the Notice of Termination of Credo's employment (or the decision to dismiss
her) was dated 24 November 1983 and made effective 1 December 1983 shows that NASECO
was already bent on terminating her services when she was informed on 1 December 1983 of
the charges against her, and that any hearing which NASECO thought of affording her after 24
November 1983 would merely be pro forma or an exercise in futility.
Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry
procedures in the company's Statement of Billings Adjustment did not warrant the severe
penalty of dismissal of the NLRC correctly held that:
... on the charge of gross discourtesy, the CPA found in its Report, dated 22
November 1983 that, "In the process of her testimony/explanations she again
exhibited a conduct unbecoming in front of NASECO Officers and argued to Mr. S.
S. Lloren in a sarcastic and discourteous manner, notwithstanding, the fact that
she was inside the office of the Acctg. General Manager." Let it be noted,
however, that the Report did not even describe how the so called "conduct
unbecoming" or "discourteous manner" was done by complainant. Anent the
"sarcastic" argument of complainant, the purported transcript 19 of the meeting
held on 7 November 1983 does not indicate any sarcasm on the part of
complainant. At the most, complainant may have sounded insistent or emphatic
about her work being more complete than the work of Ms. de Castro, yet, the
complaining officer signed the work of Ms. de Castro and did not sign hers.
As to the charge of insubordination, it may be conceded, albeit unclear, that
complainant failed to place same corrections/additional remarks in the
Statement of Billings Adjustments as instructed. However, under the
circumstances obtaining, where complainant strongly felt that she was being
discriminated against by her superior in relation to other employees, we are of
the considered view and so hold, that a reprimand would have sufficed for the
infraction, but certainly not termination from services. 20
As this Court has ruled:
... where a penalty less punitive would suffice, whatever missteps may be
committed by labor ought not to be visited with a consequence so severe. It is
not only because of the law's concern for the working man. There is, in addition,
his family to consider. Unemployment brings untold hardships and sorrows on
those dependent on the wage-earner. 21

Of course, in justifying Credo's termination of employment, NASECO claims as additional

lawful causes for dismissal Credo's previous and repeated acts of insubordination, discourtesy
and sarcasm towards her superior officers, alleged to have been committed from 1980 to July
1983. 22
If such acts of misconduct were indeed committed by Credo, they are deemed to have been
condoned by NASECO. For instance, sometime in 1980, when Credo allegedly "reacted in a
scandalous manner and raised her voice" in a discussion with NASECO's Acting head of the
Personnel Administration 23 no disciplinary measure was taken or meted against her. Nor was
she even reprimanded when she allegedly talked 'in a shouting or yelling manner" with the
Acting Manager of NASECO's Building Maintenance and Services Department in 1980 24 or
when she allegedly "shouted" at NASECO's Corporate Auditor "in front of his subordinates
displaying arrogance and unruly behavior" in 1980, or when she allegedly shouted at
NASECO's Internal Control Consultant in 1981. 25 But then, in sharp contrast to NASECO's
penchant for ignoring the aforesaid acts of misconduct, when Credo committed frequent
tardiness in August and September 1983, she was reprimanded. 26
Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily
proven, NASECO's condonation thereof is gleaned from the fact that on 4 October 1983, Credo
was given a salary adjustment for having performed in the job "at least [satisfactorily]" 27 and
she was then rated "Very Satisfactory" 28as regards job performance, particularly in terms of
quality of work, quantity of work, dependability, cooperation, resourcefulness and attendance.
Considering that the acts or omissions for which Credo's employment was sought to be legally
terminated were insufficiently proved, as to justify dismissal, reinstatement is proper. For
"absent the reason which gave rise to [the employee's] separation from employment, there is
no intention on the part of the employer to dismiss the employee concerned." 29 And, as a
result of having been wrongfully dismissed, Credo is entitled to three (3) years of backwages
without deduction and qualification. 30
However, while Credo's dismissal was effected without procedural fairness, an award of
exemplary damages in her favor can only be justified if her dismissal was effected in a
wanton, fraudulent, oppressive or malevolent manner. 31 A judicious examination of the record
manifests no such conduct on the part of management. However, in view of the attendant
circumstances in the case, i.e., lack of due process in effecting her dismissal, it is reasonable
to award her moral damages. And, for having been compelled to litigate because of the
unlawful actuations of NASECO, a reasonable award for attorney's fees in her favor is in order.
In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no
jurisdiction to order Credo's reinstatement. NASECO claims that, as a government corporation
(by virtue of its being a subsidiary of the National Investment and Development Corporation
(NIDC), a subsidiary wholly owned by the Philippine National Bank (PNB), which in turn is a
government owned corporation), the terms and conditions of employment of its employees
are governed by the Civil Service Law, rules and regulations. In support of this argument,
NASECO cites National Housing Corporation vs. JUCO, 33 where this Court held that "There
should no longer be any question at this time that employees of government-owned or
controlled corporations are governed by the civil service law and civil service rifles and
regulations."
It would appear that, in the interest of justice, the holding in said case should not be given
retroactive effect, that is, to cases that arose before its promulgation on 17 January 1985. To
do otherwise would be oppressive to Credo and other employees similarly situated, because

under the same 1973 Constitution ,but prior to the ruling in National Housing Corporation vs.
Juco, this Court had recognized the applicability of the Labor Code to, and the authority of the
NLRC to exercise jurisdiction over, disputes involving terms and conditions of employment in
government owned or controlled corporations, among them, the National Service Corporation
(NASECO).<re||an1w> 34
Furthermore, in the matter of coverage by the civil service of government-owned or controlled
corporations, the 1987 Constitution starkly varies from the 1973 Constitution, upon
which National Housing Corporation vs. Juco is based. Under the 1973 Constitution, it was
provided that:
The civil service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-owned or
controlled corporation. ... 35
On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled
corporations with original charter. 36(Emphasis supplied)
Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the
Court in the National Housing . Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a circumvention or
emasculation of Section 1, Article XII-B of the constitution. It would be possible
for a regular ministry of government to create a host of subsidiary corporations
under the Corporation Code funded by a willing legislature. A government-owned
corporation could create several subsidiary corporations. These subsidiary
corporations would enjoy the best of two worlds. Their officials and employees
would be privileged individuals, free from the strict accountability required by the
Civil Service Decree and the regulations of the Commission on Audit. Their
incomes would not be subject to the competitive restrains of the open market
nor to the terms and conditions of civil service employment. Conceivably, all
government-owned or controlled corporations could be created, no longer by
special charters, but through incorporations under the general law. The
Constitutional amendment including such corporations in the embrace of the civil
service would cease to have application. Certainly, such a situation cannot be
allowed to exist. 37
appear relegated to relative insignificance by the 1987 Constitutional provision that the Civil
Service embraces government-owned or controlled corporations with original charter; and,
therefore, by clear implication, the Civil Service does not include government-owned or
controlled corporations which are organized as subsidiaries of government-owned or
controlled corporations under the general corporation law.
The proceedings in the 1986 Constitutional Commission also shed light on the Constitutional
intent and meaning in the use of the phrase "with original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is
recognized.

MR. ROMULO. I beg the indulgence of the Committee. I was reading

the wrong provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government-owned or controlled
corporations.
My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the
Commissioner please state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1, subparagraph 1,
under the Civil Service Commission, says: "including governmentowned or controlled corporations.' Does that include a corporation,
like the Philippine Airlines which is government-owned or
controlled?
MR. FOZ. I would like to throw a question to the Commissioner. Is
the Philippine Airlines controlled by the government in the sense
that the majority of stocks are owned by the government?
MR. ROMULO. It is owned by the GSIS. So, this is what we might call
a tertiary corporation. The GSIS is owned by the government. Would
this be covered because the provision says "including governmentowned or controlled corporations."
MR. FOZ. The Philippine Airlines was established as a private
corporation. Later on, the government, through the GSIS, acquired
the controlling stocks. Is that not the correct situation?
MR. ROMULO. That is true as Commissioner Ople is about to explain.
There was apparently a Supreme Court decision that destroyed that
distinction between a government-owned corporation created under
the Corporation Law and a government-owned corporation created
by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the case of
NHA vs. Juco to the effect that all government corporations
irrespective of the manner of creation, whether by special charter or
by the private Corporation Law, are deemed to be covered by the
civil service because of the wide-embracing definition made in this
section of the existing 1973 Constitution. But we recall the response
to the question of Commissioner Ople that our intendment in this
provision is just to give a general description of the civil service. We
are not here to make any declaration as to whether employees of
government-owned or controlled corporations are barred from the
operation of laws, such as the Labor Code of the Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding Officer, since my name
has been mentioned by both sides.

MR. ROMULO. I yield part of my time.

THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is
recognized.
MR. OPLE. In connection with the coverage of the Civil Service Law
in Section 1 (1), may I volunteer some information that may be
helpful both to the interpellator and to the Committee. Following the
proclamation of martial law on September 21, 1972, this issue of
the coverage of the Labor Code of the Philippines and of the Civil
Service Law almost immediately arose. I am, in particular, referring
to the period following the coming into force and effect of the
Constitution of 1973, where the Article on the Civil Service was
supposed to take immediate force and effect. In the case of
LUZTEVECO, there was a strike at the time. This was a governmentcontrolled and government-owned corporation. I think it was owned
by the PNOC with just the minuscule private shares left. So, the
Secretary of Justice at that time, Secretary Abad Santos, and myself
sat down, and the result of that meeting was an opinion of the
Secretary of Justice which 9 became binding immediately on the
government that government corporations with original charters,
such as the GSIS, were covered by the Civil Service Law and
corporations spun off from the GSIS, which we called second
generation corporations functioning as private subsidiaries, were
covered by the Labor Code. Samples of such second generation
corporations were the Philippine Airlines, the Manila
Hotel and the Hyatt. And that demarcation worked very well. In fact, all of these
companies I have mentioned as examples, except for the Manila Hotel, had
collective bargaining agreements. In the Philippine Airlines, there were, in fact,
three collective bargaining agreements; one, for the ground people or the PALIA
one, for the flight attendants or the PASAC and one for the pilots of the ALPAC
How then could a corporation like that be covered by the Civil Service law? But,
as the Chairman of the Committee pointed out, the Supreme Court decision in
the case of NHA vs. Juco unrobed the whole thing. Accordingly, the Philippine
Airlines, the Manila Hotel and the Hyatt are now considered under that decision
covered by the Civil Service Law. I also recall that in the emergency meeting of
the Cabinet convened for this purpose at the initiative of the Chairman of the
Reorganization Commission, Armand Fabella, they agreed to allow the CBA's to
lapse before applying the full force and effect of the Supreme Court decision. So,
we were in the awkward situation when the new government took over. I can
agree with Commissioner Romulo when he said that this is a problem which I am
not exactly sure we should address in the deliberations on the Civil Service Law
or whether we should be content with what the Chairman said that Section 1 (1)
of the Article on the Civil Service is just a general description of the coverage of
the Civil Service and no more.
Thank you, Mr. Presiding Officer.
MR. ROMULO. Mr. Presiding Officer, for the moment, I would be
satisfied if the Committee puts on records that it is not their intent
by this provision and the phrase "including government-owned or

controlled corporations" to cover such companies as the Philippine

Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact, when this
draft was made, my proposal was really to eliminate, to drop from
the provision, the phrase "including government- owned or
controlled corporations."
MR. ROMULO. Would the Committee indicate that is the intent of
this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the Committee
can make such a statement in the face of an absolute exclusion of
government-owned or controlled corporations. However, this does
not preclude the Civil Service Law to prescribe different rules and
procedures, including emoluments for employees of proprietary
corporations, taking into consideration the nature of their
operations. So, it is a general coverage but it does not preclude a
distinction of the rules between the two types of enterprises.
MR. FOZ. In other words, it is something that should be left to the
legislature to decide. As I said before, this is just a general
description and we are not making any declaration whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like a
definitive understanding of the coverage and the Gentleman wants
to exclude government-owned or controlled corporations like
Philippine Airlines, then the recourse is to offer an amendment as to
the coverage, if the Commissioner does not accept the explanation
that there could be a distinction of the rules, including salaries and
emoluments.
MR. ROMULO. So as not to delay the proceedings, I will reserve my
right to submit such an amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. On page 2, line 5, I suggest the following amendment
after "corporations": Add a comma (,) and the phrase EXCEPT
THOSE EXERCISING PROPRIETARY FUNCTIONS.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee
say?
SUSPENSION OF SESSION
MR. MONSOD. May we have a suspension of the session?
THE PRESIDING OFFICER (Mr. Trenas). The session is suspended.

It was 7:16 p.m.

RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed
amendment to now read as follows: "including government-owned or controlled
corporations WITH ORIGINAL CHARTERS." The purpose of this amendment is to
indicate that government corporations such as the GSIS and SSS, which have
original charters, fall within the ambit of the civil service. However, corporations
which are subsidiaries of these chartered agencies such as the Philippine
Airlines, Manila Hotel and Hyatt are excluded from the coverage of the civil
service.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee
say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term
"original charters," what exactly do we mean?
MR. ROMULO. We mean that they were created by law, by an act of
Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification, the Committee
accepts the amendment.
MR. NATIVIDAD. Mr. Presiding officer, so those created by the
general corporation law are out.
MR. ROMULO. That is correct:

38

On the premise that it is the 1987 Constitution that governs the instant case because it is the
Constitution in place at the time of decision thereof, the NLRC has jurisdiction to accord relief
to the parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of the PNB, the
NASECO is a government-owned or controlled corporation without original charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring opinion
in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No. 8, pp. 2687,
2694; also published in 78 Phil. 221) on the effectivity of the principle of social justice
embodied in the 1935 Constitution, said:
Certainly, this principle of social justice in our Constitution as generously
conceived and so tersely phrased, was not included in the fundamental law as a
mere popular gesture. It was meant to (be) a vital, articulate, compelling

principle of public policy. It should be observed in the interpretation not only of

future legislation, but also of all laws already existing on November 15, 1935. It
was intended to change the spirit of our laws, present and future. Thus, all the
laws which on the great historic event when the Commonwealth of the
Philippines was born, were susceptible of two interpretations strict or liberal,
against or in favor of social justice, now have to be construed broadly in order to
promote and achieve social justice. This may seem novel to our friends, the
advocates of legalism but it is the only way to give life and significance to the
above-quoted principle of the Constitution. If it was not designed to apply to
these existing laws, then it would be necessary to wait for generations until all
our codes and all our statutes shall have been completely charred by removing
every provision inimical to social justice, before the policy of social justice can
become really effective. That would be an absurd conclusion. It is more
reasonable to hold that this constitutional principle applies to all legislation in
force on November 15, 1935, and all laws thereafter passed.
WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED with
modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R. No.
70295, are ordered to: 1) reinstate Eugenia C. Credo to her former position at the time of her
termination, or if such reinstatement is not possible, to place her in a substantially equivalent
position, with three (3) years backwages, from 1 December 1983, without qualification or
deduction, and without loss of seniority rights and other privileges appertaining thereto, and
2) pay Eugenia C. Credo P5,000.00 for moral damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible because of supervening events, petitioners
in G.R. No. 69870, who are the private respondents in G.R. No. 70295 are ordered to pay
Eugenia C. Credo, in addition to her backwages and damages as above described, separation
pay equivalent to one-half month's salary for every year of service, to be computed on her
monthly salary at the time of her termination on 1 December 1983.
SO ORDERED.

FIRST DIVISION

[G.R. No. 98107. August 18, 1997]

BENJAMIN C. JUCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and

NATIONAL HOUSING CORPORATION, respondents.
DECISION
HERMOSISIMA, JR., J.:
This is a petition for certiorari to set aside the Decision of the National Labor Relations
Commission (NLRC) dated March 14, 1991, which reversed the Decision dated May 21, 1990
of Labor Arbiter Manuel R. Caday, on the ground of lack of jurisdiction.
Petitioner Benjamin C. Juco was hired as a project engineer of respondent National
Housing Corporation (NHC) from November 16, 1970 to May 14, 1975. On May 14, 1975, he
was separated from the service for having been implicated in a crime of theft and/or
malversation of public funds.
On March 25, 1977, petitioner filed a complaint for illegal dismissal against the NHC with
the Department of Labor.
On September 17, 1977, the Labor Arbiter rendered a decision dismissing the complaint
on the ground that the NLRC had no jurisdiction over the case. [1]
Petitioner then elevated the case to the NLRC which rendered a decision on December 28,
1982, reversing the decision of the Labor Arbiter. [2]
Dissatisfied with the decision of the NLRC, respondent NHC appealed before this Court and
on January 17, 1985, we rendered a decision, the dispositive portion thereof reads as follows:
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent
National Labor Relations Commission is SET ASIDE. The decision of the Labor Arbiter
dismissing the case before it for lack of jurisdiction is REINSTATED. [3]
On January 6, 1989, petitioner filed with the Civil Service Commission a complaint for
illegal dismissal, with preliminary mandatory injunction. [4]
On February 6, 1989, respondent NHC moved for the dismissal of the complaint on the
ground that the Civil Service Commission has no jurisdiction over the case. [5]
On April 11, 1989, the Civil Service Commission issued an order dismissing the complaint
for lack of jurisdiction. It ratiocinated that:
The Board finds the comment and/or motion to dismiss meritorious. It was not disputed that
NHC is a government corporation without an original charter but organized/created under the
Corporate Code.
Article IX, Section 2 (1) of the 1987 Constitution provides:

The civil service embraces all branches, subdivisions, instrumentalities and agencies of the
government, including government owned and controlled corporations with original charters.
(underscoring supplied)
From the aforequoted constitutional provision, it is clear that respondent NHC is not within the
scope of the civil service and is therefore beyond the jurisdiction of this board. Moreover, it is
pertinent to state that the 1987 Constitution was ratified and became effective on February 2,
1987.
WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed. [6]
On April 28, 1989, petitioner filed with respondent NLRC a complaint for illegal dismissal
with preliminary mandatory injunction against respondent NHC. [7]
On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday ruled that
petitioner was illegally dismissed from his employment by respondent as there was evidence
in the record that the criminal case against him was purely fabricated, prompting the trial
court to dismiss the charges against him. Hence, he concluded that the dismissal was illegal
as it was devoid of basis, legal or factual.
He further ruled that the complaint is not barred by prescription considering that the
period from which to reckon the reglementary period of four years should be from the date of
the receipt of the decision of the Civil Service Commission promulgated on April 11, 1989. He
also ratiocinated that:
It appears x x x complainant filed the complaint for illegal dismissal with the Civil Service
Commission on January 6, 1989 and the same was dismissed on April 11, 1989 after which on
April 28, 1989, this case was filed by the complainant. Prior to that, this case was ruled upon
by the Supreme Court on January 17, 1985 which enjoined the complainant to go to the Civil
Service Commission which in fact, complainant did. Under the circumstances, there is merit
on the contention that the running of the reglementary period of four (4) years was
suspended with the filing of the complaint with the said Commission. Verily, it was not the
fault of the respondent for failing to file the complaint as alleged by the respondent but due
to, in the words of the complainant, a legal knot that has to be untangled. [8]
Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of which reads:
"Premises considered, judgment is hereby rendered declaring the dismissal of the
complainant as illegal and ordering the respondent to immediately reinstate him to his former
position without loss of seniority rights with full back wages inclusive of allowance and to his
other benefits or equivalent computed from the time it is withheld from him when he was
dismissed on March 27, 1977, until actually reinstated. [9]
On June 1, 1990, respondent NHC filed its appeal before the NLRC and on March 14, 1991,
the NLRC promulgated a decision which reversed the decision of Labor Arbiter Manuel R.
Caday on the ground of lack of jurisdiction. [10]
The primordial issue that confronts us is whether or not public respondent committed
grave abuse of discretion in holding that petitioner is not governed by the Labor Code.
Under the laws then in force, employees of government-owned and /or controlled
corporations were governed by the Civil Service Law and not by the Labor Code. Hence,
Article 277 of the Labor Code (PD 442) then provided:

"The terms and conditions of employment of all government employees, including employees
of government-owned and controlled corporations shall be governed by the Civil Service Law,
rules and regulations x x x.
The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:
The Civil Service embraces every branch, agency, subdivision and instrumentality of the
government, including government-owned or controlled corporations.
Although we had earlier ruled in National Housing Corporation v. Juco,[11] that employees
of government-owned and/or controlled corporations, whether created by special law or
formed as subsidiaries under the general Corporation Law, are governed by the Civil Service
Law and not by the Labor Code, this ruling has been supplanted by the 1987
Constitution.Thus, the said Constitution now provides:
The civil service embraces all branches, subdivision, instrumentalities, and agencies of the
Government, including government owned or controlled corporations with original charter.
(Article IX-B, Section 2[1])
In National Service Corporation (NASECO) v. National Labor Relations Commission, [12] we
had the occasion to apply the present Constitution in deciding whether or not the employees
of NASECO are covered by the Civil Service Law or the Labor Code notwithstanding that the
case arose at the time when the 1973 Constitution was still in effect. We ruled that the NLRC
has jurisdiction over the employees of NASECO on the ground that it is the 1987 Constitution
that governs because it is the Constitution in place at the time of the decision. Furthermore,
we ruled that the new phrase with original charter means that government-owned and
controlled corporations refer to corporations chartered by special law as distinguished from
corporations organized under the Corporation Code. Thus, NASECO which had been organized
under the general incorporation stature and a subsidiary of the National Investment
Development Corporation, which in turn was a subsidiary of the Philippine National Bank, is
excluded from the purview of the Civil Service Commission.
We see no cogent reason to depart from the ruling in the aforesaid case.
In the case at bench, the National Housing Corporation is a government owned
corporation organized in 1959 in accordance with Executive Order No. 399, otherwise known
as the Uniform Charter of Government Corporation, dated January 1, 1959. Its shares of stock
are and have been one hundred percent (100%) owned by the Government from its
incorporation under Act 1459, the former corporation law. The government entities that own
its shares of stock are the Government Service Insurance System, the Social Security System,
the Development Bank of the Philippines, the National Investment and Development
Corporation and the Peoples Homesite and Housing Corporation. [13] Considering the fact that
the NHA had been incorporated under act 1459, the former corporation law, it is but correct to
say that it is a government-owned or controlled corporation whose employees are subject to
the provisions of the Labor Code. This observation is reiterated in recent case of Trade Union
of the Philippines and Allied Services (TUPAS) v. National Housing Corporation,[14] where we
held that the NHA is now within the jurisdiction of the Department of Labor and Employment,
it being a government-owned and/or controlled corporation without an original
charter. Furthermore, we also held that the workers or employees of the NHC (now NHA)
undoubtedly have the right to form unions or employees organization and that there is no
impediment to the holding of a certification election among them as they are covered by the
Labor Code.

Thus, the NLRC erred in dismissing petitioners complaint for lack of jurisdiction because
the rule now is that the Civil Service now covers only government-owned or controlled
corporations with original charters. [15] Having been incorporated under the Corporation Law,
its relations with its personnel are governed by the Labor Code and come under the
jurisdiction of the National Labor Relations Commission.
One final point. Petitioners have been tossed from one forum to another for a simple
illegal dismissal case. It is but apt that we put an end to his dilemma in the interest of justice.
WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089 dated March 14, 1991
is hereby REVERSED and the Decision of the Labor Arbiter dated May 21, 1990 is REINSTATED.
SO ORDERED.