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following factors:
(a) whether the covenant protects a legitimate business interest of the employer;
(b) whether the covenant creates an undue burden on the employee;
(c) whether the covenant is injurious to the public welfare;
(d) whether the time and territorial limitations contained in the covenant are
reasonable; and
(e) whether the restraint is reasonable from the standpoint of public policy.
At first glance, the post-retirement competitive employment ban is unreasonable
because it has no
geographical limits; respondent is barred from accepting any kind of employment in
any competitive
bank within the proscribed period. Although the period of one year may appear
reasonable, the
matter of whether the restriction is reasonable or unreasonable cannot be
ascertained with finality
solely from the terms and conditions of the Undertaking, or even in tandem with the
Release, Waiver
and Quitclaim.
However, a distinction must be made between restrictive covenants barring an
employee to accept a
post-employment competitive employment (restraint on trade) and restraints on
post-retirement
competitive employment in pension and retirement plans. A restriction in the
contract which does
not preclude the employee from engaging in competitive activity, but simply
provides for the loss of
rights or privileges if he does so is not in restraint of trade.
The strong weight of authority is that forfeitures for engaging in subsequent
competitive
employment included in pension and retirement plans are valid even though
unrestricted in time or
geography. The reasoning behind this conclusion is that the forfeiture, unlike the
restraint included in
the employment contract, is not a prohibition on the employees engaging in
competitive work but is
enjoined her from engaging in pre-need business akin to respondents within two
years from her separation from respondent. She had not been prohibited from
marketing other service plans. In brushing aside respondents contention, the SC
Held: As early as 1916, the validity of a non-involvement clause has already been
discussed. In Ferazzini v. Gsell, 34 Phil. 697 (1916), it was held that such clause was
unreasonable restraint of trade and therefore against public policy. In Ferrazzini, the
employee was prohibited from engaging in any business or occupation in the
Philippines for a period of five years after the termination of his employment
contract and must first get the written permission of his employer if her were to do
so. The Court ruled that while the stipulation was indeed limited as to time and
space, it was not limited as to trade. Such prohibition, in effect, forced an employee
to leave the Philippines to work should his employer refuse to give a written
permission.
In G. Martini, Ltd. v. Glaiserman, 39 Phil. 120 (1918), a similar stipulation was
declared as void for being unreasonable restraint of trade. There, the employee was
prohibited from engaging in any business similar to that of his employer for a period
of one year. Since the employee was employed only in connection with the purchase
and export of abaca, among the many business of the employer, the restraint was
considered too broad since it effectively prevented the employee from working in
any other business similar to his employer even if his employment was limited only
to one of its multifarious business activities.
However, in Del Castillo v. Richmond, 45 Phil. 679 (1974), a similar stipulation was
upheld as legal, reasonable, and not contrary to public policy. In the said case, the
employee was restricted from opening, owning or having any connection with any
other drugstore within a radius of four miles from the employers place of business
during the time the employer was operating his drugstore. A contract in restraint of
trade is valid provided there is a limitation upon either time or place and the
restraint upon one party is not greater than the protection the other party requires.
Finally, in Consulta v. Court of Appeals, G.R. No. 145443, March 18, 2005, 453 SCRA
732, a non-involvement clause was held in accordance with Article 1306 of the Civil
Code. While the complainant in that case was an independent agent and not an
employee, she was prohibited for one year from engaging directly or indirectly in
activities of other companies that compete with the business of her principal. The
restriction did not prohibit the agent from engaging in any other business, or from
being connected with any other company, for as long as the business or company
did not compete with the principals business. Further, the prohibition applied only
for one year after the termination of the agents contract and was therefore a
reasonable restriction designed to prevent acts prejudicial to the employer.
Conformably with the aforementioned pronouncements, a non-involvement clause is
not necessarily void for being in restraint of trade as long as there are reasonable
limitations as to time, trade, and place.
In this case, the non-involvement clause has a time limit: two years from the time
petitioners employment with respondent ends. It is also limited as to trade, since it
only prohibits petitioner from engaging in any pre-need business akin to
respondents.
In this case what makes the non-involvement clause valid is that, she had been
privy to confidential and highly sensitive marketing strategies of respondents
business. To allow her to engage in a rival business soon after she leaves would
make respondents trade secrets vulnerable especially in a highly competitive
marketing environment. In sum, the non-involvement clause is not contrary to
public welfare and not greater than is necessary to afford a fair and reasonable
protection to respondent. (Ollendorff v. Abrahamsom, 38 Phil. 585 (1918)).
In any event, Article 1306 of the Civil Code provides that parties to a contract may
establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy.
Article 1159 of the same Code also provides that obligations arising from contracts
have the force of law between the contracting parties and should be complied with
in good faith. Courts cannot stipulate for the parties nor amend their agreement
where the same does not contravene law, morals, good customs, public order or
public policy, for to do so would be to alter the real intent of the parties, and would
run contrary to the function of the courts to give force and effect thereto. (Phil.
Communications Satellite Corp. v. Telecom, Inc., G.R. Nos. 147324 and 147334, May
25, 2004, 429 SCRA 153).
CASE DIGEST
FACTS:
Accused-appellant, together with Amelia de la Cruz and Clodualdo de la
Cruz, were charged with violation of Article 38 (b) of the Labor Code[1] illegal
recruitment in large scale and the accused were also charged with three counts of
estafa.
ISSUE:
Whether or not ROMULO SAULO is guilty of the act of Illegal Recruitment
and estafa.
HELD:
Yes. The Court finds that the trial court was justified in holding that
accused-appellant was engaged in unlawful recruitment and placement activities.
The prosecution clearly established that accused-appellant promised the three
complainants - Benny Maligaya, Angeles Javier and Leodigario Maullon employment
in Taiwan as factory workers and that he asked them for money in order to process
their papers and procure their passports. It is not disputed that accused-appellant is
not authorized nor licensedby the Department of Labor and Employment to engage
in recruitment and placement activities. The absence of the necessary license or
authority renders all of accused-appellants recruitment activities criminal.
It is also well established in jurisprudence that a person may be charged
and convicted for both illegal recruitment and estafa. The reason for this is that
illegal recruitment is a malum prohibitum, whereas estafa is malum in se, meaning
that the criminal intent of the accused is not necessary for conviction in the former,
but is required in the latter.
Japanese employer through her local manager, Jaz Talents Promotion, decreasing
her
salary to $750, with a managerial commission agreement of $250.
On December 16, 1988, petitioner left for Osaka, Japan, where she worked for six
(6)
months, until June 10, 1989. She came back to the Philippines on June 14, 1989.
Petitioner instituted the case at bench for underpayment of wages with the POEA on
February 21, 1991. She prayed for the payment of Six Thousand U.S.
Dollars
(US$6,000.00), representing the unpaid portion of her basic salary for six months.
ISSUE: WON the side agreement which reduced petitioners basic wage valid.
HELD: NO, null and void for violating the POEAs minimum employment standards,
and
for not having been approved by the POEA.
RATIO: Firstly, we hold that the managerial commission agreement
executed by
petitioner to authorize her Japanese Employer to deduct Two Hundred Fifty U.S.
Dollars
(US$250.00) from her monthly basic salary is void because it is against our existing
laws, morals and public policy. It cannot supersede the standard employment
contract
of December 1, 1988 approved by the POEA with the following stipulation appended
thereto:
It is understood that the terms and conditions stated in this Employment Contract
are in conformance with the Standard Employment Contract for Entertainers
prescribed by the POEA under Memorandum Circular No. 2, Series of 1986. Any
alterations or changes made in any part of this contract without prior approval by
the POEA shall be null and void;
Clearly, the basic salary of $1,500.00 guaranteed to petitioner under
the parties
standard employment contract is in accordance with the minimum
employment
standards with respect to wages set by the POEA.
In the instant case, respondent filed his claim within the three-year prescriptive period for the filing of
money claims set forth in Article 291 of the Labor Code from the time the cause of action accrued.
Thus, we find that the doctrine of laches finds no application in this case.
ANTONIO M. SERRANO
VS.
GALLANT MARITIME SERVICES, INC.
FACTS:
Petitioner Antonio Serrano was hired by respondents Gallant Maritime Services, Inc.
and Marlow Navigation Co., Inc., under a POEA-approved contract of employment
for 12 months, as Chief Officer, with the basic monthly salary of US$1,400, plus
$700/month overtime pay, and 7 days paid vacation leave per month.
On the date of his departure, Serrano was constrained to accept a downgraded
employment contract upon the assurance and representation of respondents that
he would be Chief Officer by the end of April 1998.
Respondents did not deliver on their promise to make Serrano Chief Officer.
Hence, Serrano refused to stay on as second Officer and was repatriated to the
Philippines, serving only two months and 7 days, leaving an unexpired portion of
nine months and twenty-three days.
Upon complaint filed by Serrano before the Labor Arbiter (LA), the dismissal was
declared illegal.
On appeal, the NLRC modified the LA decision based on the provision of RA 8042.
Serrano filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the last clause in the 5th paragraph of Section 10 of RA 8042.
ISSUES:
1. Whether or not the subject clause violates Section 10, Article III of the
Constitution on non-impairment of contracts;
2. Whether or not the subject clause violate Section 1, Article III of the Constitution,
and Section 18, Article II and Section 3, Article XIII on labor as a protected sector.
HELD:
On the first issue.
The answer is in the negative. Petitioners claim that the subject clause unduly
interferes with the stipulations in his contract on the term of his employment and
the fixed salary package he will receive is not tenable.
The subject clause may not be declared unconstitutional on the ground that it
impinges on the impairment clause, for the law was enacted in the exercise of the