G.R. No.

78763 July 12,1989

MANILA ELECTRIC COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, and APOLINARIO M. SIGNO, respondents.
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the resolution of the
respondent National Labor Relations Commission dated March 12, 1987 (p. 28, Rollo) in NLRC Case No. NCR-8-3808-83,
entitled, "Apolinario M. Signo, Complainant, versus Manila Electric Company, Respondents", affirming the decision of
the Labor Arbiter which ordered the reinstatement of private respondent herein, Apolinario Signo, to his former
position without backwages.
The antecedent facts are as follows:
Private respondent Signo was employed in petitioner company as supervisor-leadman since January 1963 up to the
time when his services were terminated on May 18, 1983.
In 1981, a certain Fernando de Lara filed an application with the petitioner company for electrical services at his
residence at Peafrancia Subdivision, Marcos Highway, Antipolo, Rizal. Private respondent Signo facilitated the
processing of the said application as well as the required documentation for said application at the Municipality of
Antipolo, Rizal. In consideration thereof, private respondent received from Fernando de Lara the amount of P7,000.00.
Signo thereafter filed the application for electric services with the Power Sales Division of the company.
It was established that the area where the residence of de Lara was located is not yet within the serviceable point of
Meralco, because the place was beyond the 30-meter distance from the nearest existing Meralco facilities. In order to
expedite the electrical connections at de Lara's residence, certain employees of the company, including respondent
Signo, made it appear in the application that the sari-sari store at the corner of Marcos Highway, an entrance to the
subdivision, is applicant de Lara's establishment, which, in reality is not owned by the latter.
As a result of this scheme, the electrical connections to de Lara's residence were installed and made possible.
However, due to the fault of the Power Sales Division of petitioner company, Fernando de Lara was not billed for more
than a year.
Petitioner company conducted an investigation of the matter and found respondent Signo responsible for the said
irregularities in the installation. Thus, the services of the latter were terminated on May 18, 1983.
On August 10 1983, respondent Signo filed a complaint for illegal dismissal, unpaid wages, and separation pay.
After the parties had submitted their position papers, the Labor Arbiter rendered a decision (p. 79, Rollo) on April 29,
1985, which stated, inter alia:
Verily, complainant's act of inducing the Meralco employees to effectuate the installation on Engr. de
Lara's residence prejudiced the respondent, and therefore, complainant himself had indeed became a
participant in the transactions, although not directly, which turned out to be illegal, not to mention that
some of the materials used therein belongs to Meralco, some of which were inferior quality. . . .
While complainant may deny the violation, he cannot do away with company's Code on Employee
Discipline, more particularly Section 7, par. 8 and Section 6, par. 24 thereof However, as admitted by
the respondent, the infraction of the above cited Code is punishable by reprimand to dismissal."
... . And in this case, while considering that complainant indeed committed the above-cited infractions
of company Code of Employee Discipline, We shall also consider his records of uninterrupted twenty
(20) years of service coupled with two (2) commendations for honesty. Likewise, We shall take note
that subject offense is his first, and therefore, to impose the extreme penalty of dismissal is certainly
too drastic. A penalty short of dismissal is more in keeping with justice, and adherence to
compassionate society.

WHEREFORE, respondent Meralco is hereby directed to reinstate complainant Apolinario M. Signo to his
former position as Supervisor Leadman without backwages, considering that he is not at all faultless.
He is however, here warned, that commission of similar offense in the future, shall be dealt with more
severely.
SO ORDERED.
Both parties appealed from the decision to the respondent Commission. On March 12, 1987, the respondent
Commission dismissed both appeals for lack of merit and affirmed in toto the decision of the Labor Arbiter.
On June 23, 1987, the instant petition was filed with the petitioner contending that the respondent Commission
committed grave abuse of discretion in affirming the decision of the Labor Arbiter. A temporary restraining order was
issued by this Court on August 3, 1987, enjoining the respondents from enforcing the questioned resolution of the
respondent Commission.
The issue to resolve in the instant case is whether or not respondent Signo should be dismissed from petitioner
company on grounds of serious misconduct and loss of trust and confidence.
Petitioner contends that respondent Signo violated Sections 6 and 7 of the company's Code on Employee Discipline,
which provide:
Section 6, Par. 24Encouraging, inducing or threatening another employee to perform an act
constituting a violation of this Code or of company work, rules or an offense in connection with the
official duties of the latter, or allowing himself to be persuaded, induced or influenced to commit such
offense.
PenaltyReprimand to dismissal, depending upon the gravity of the offense.
Section 7, Par. 8Soliciting or receiving money, gift, share, percentage or benefits from any person,
personally or through the mediation of another, to perform an act prejudicial to the Company.
PenaltyDismissal. (pp. 13-14, Rollo)
Petitioner further argues that the acts of private respondent constituted breach of trust and caused the petitioner
company economic losses resulting from the unbilled electric consumption of de Lara; that in view thereof, the
dismissal of private respondent Signo is proper considering the circumstances of the case.
The power to dismiss is the normal prerogative of the employer. An employer, generally, can dismiss or lay-off an
employee for just and authorized causes enumerated under Articles 282 and 283 of the Labor Code. However, the
right of an employer to freely discharge his employees is subject to regulation by the State, basically in the exercise of
its paramount police power. This is so because the preservation of the lives of the citizens is a basic duty of the State,
more vital than the preservation of corporate profits (Euro-Linea, Phil. Inc. v. NLRC, G.R. No. 75782, December 1,
1987,156 SCRA 78).
There is no question that herein respondent Signo is guilty of breach of trust and violation of company rules, the
penalty for which ranges from reprimand to dismissal depending on the gravity of the offense. However, as earlier
stated, the respondent Commission and the Labor Arbiter found that dismissal should not be meted to respondent
Signo considering his twenty (20) years of service in the employ of petitioner, without any previous derogatory record,
in addition to the fact that petitioner company had awarded him in the past, two (2) commendations for honesty. If
ever the petitioner suffered losses resulting from the unlisted electric consumption of de Lara, this was found to be the
fault of petitioner's Power Sales Division.
We find no reason to disturb these findings. Well-established is the principle that findings of administrative agencies
which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only
respect but even finality. Judicial review by this Court on labor cases does not go so far as to evaluate the sufficiency of
the evidence upon which the proper labor officer or office based his or its determination but is limited to issues of

jurisdiction or grave abuse of discretion (Special Events and Central Shipping Office Workers Union v. San Miguel
Corporation, G.R. Nos. L-51002-06, May 30,1983,122 SCRA 557).
This Court has held time and again, in a number of decisions, that notwithstanding the existence of a valid cause for
dismissal, such as breach of trust by an employee, nevertheless, dismissal should not be imposed, as it is too severe a
penalty if the latter has been employed for a considerable length of time in the service of his employer. (Itogon-Suyoc
Mines, Inc. v. NLRC, et al., G.R. No. L- 54280, September 30,1982,117 SCRA 523; Meracap v. International Ceramics
Manufacturing Co., Inc., et al., G.R. Nos. L-48235-36, July 30,1979, 92 SCRA 412; Sampang v. Inciong, G.R. No. 50992,
June 19,1985,137 SCRA 56; De Leon v. NLRC, G.R. No. L-52056, October 30,1980, 100 SCRA 691; Philippine Airlines,
Inc. v. PALEA, G.R. No. L-24626, June 28, 1974, 57 SCRA 489).
In a similar case, this Court ruled:
As repeatedly been held by this Court, an employer cannot legally be compelled to continue with the
employment of a person who admittedly was guilty of breach of trust towards his employer and whose
continuance in the service of the latter is patently inimical to its interest. The law in protecting the
rights of the laborers, authorized neither oppression nor self- destruction of the employer.
However, taking into account private respondent's 'twenty-three (23) years of service which
undisputedly is unblemished by any previous derogatory record' as found by the respondent
Commission itself, and since he has been under preventive suspension during the pendency of this
case, in the absence of a showing that the continued employment of private respondent would result
in petitioner's oppression or self-destruction, We are of the considered view that his dismissal is a
drastic punishment. ... .
xxx xxx xxx
The ends of social and compassionate justice would therefore be served if private respondent is
reinstated but without backwages in view of petitioner's obvious good faith. (Itogon- Suyoc Mines, Inc.
v. NLRC, et al., 11 7 SCRA 528)
Further, in carrying out and interpreting the Labor Code's provisions and its implementing regulations, the
workingman's welfare should be the primordial and paramount consideration. This kind of interpretation 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 the Labor Code including its
implementing rules and regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July
30,1987,152 SCRA 140).
In view of the foregoing, reinstatement of respondent Signo is proper in the instant case, but without the award of
backwages, considering the good faith of the employer in dismissing the respondent.
ACCORDINGLY, premises considered, the petition is hereby DISMISSED and the assailed decision of the National Labor
Relations Commission dated March 12, 1987 is AFFIRMED. The temporary restraining order issued on August 3, 1987 is
lifted.
SO ORDERED.
[G.R. No. 112630. September 5, 1997]
CORAZON JAMER and CRISTINA AMORTIZADO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
ISETANN DEPARTMENT STORE and/or JOHN GO,respondents.
The decision[1] of public respondent National Labor Relations Commission (NLRC) [2] in NLRC NCR CA 002074-91,
[3]
promulgated on November 12 1993, is herein sought to be annulled for having been rendered with grave abuse of
discretion, it having reversed and set aside the decision[4] of Labor Arbiter Pablo C. Espiritu, Jr. by dismissing the
petitioners complaint for illegal dismissal against private respondent Isetann Department Store (Isetann, for brevity).
The decretal part of the NLRC decision reads:

WHEREFORE, premises considered, the appealed decision is hereby set aside and new one promulgated declaring that
the dismissal from the service of complainants Corazon Jamer and Cristina Amortizado was valid and for cause.
Consequently, the order of reinstatement with backwages and attorneys fees are likewise vacated and set aside. [5]
Although the Labor Arbiter[6] and the NLRC reached contrary conclusions, both agree on the following facts:
Complainant, Corazon Jamer was employed on February 10, 1976 as a Cashier at Joy Mart, a sister company of
Isetann. After two (2) years, she was later on promoted to the position of counter supervisor. She was transferred to
Isetann, Carriedo Branch, as a money changer. In 1982 she was transferred to the Cubao Branch of Isetann, as a
money changer, till her dismissal on August 31, 1990.
Complainant Cristina Amortizado, on the other hand, was employed also at Joy Mart in May, 1977 as a sales clerk. In
1980 she was promoted to the position as counter cashier. Thereafter, she was transferred to Young Un Department
Store as an assistant to the money changer. Later on, or in 1985, she transferred to Isetann, Cubao Branch where she
worked as a Store Cashier till her dismissal on August 31, 1990.
Both complainants were receiving a salary of P4,182.00 for eight (8) hours work at the time of their dismissal.
Respondent Isetann Department Store on the other hand, is a corporation duly organized and existing under laws of
the Philippines and is engaged in retail trade and the department store business. Individual respondent, John Go is the
President/General (Manager) of respondent Department Store.
This complaint arose from the dismissal of the complainants by the respondents. They were both dismissed on August
31, 1990 on the alleged ground of dishonesty in their work as Store Cashiers.
Complainants (sic) function as Store Cashiers is to accumulate, at the end of daily operations, the cash sales receipts
of the selling floor cash register clerks. At the close of business hours, all the cash sales of the floor cash register clerks
are turned over by them to the Store Cashiers, complainants herein, together with the tally sheets prepared by the
cash register clerks. Thereafter, complainants will reconcile the cash sales with the tally sheets to determine shortages
or coverages(sic) and deposit the same with the bank depositor(sic) of respondents company. Thereafter, the recorded
transactions are forwarded to the main branch of respondents company at Carriedo for counter-checking.
On July 16, 1990, complainants discovered a shortage of P15,353.78. It was complainant Corazon Jamer who first
discovered the shortage. In fact at first, she thought that it was merely a P1,000.00 shortage but when she reconciled
the cash receipts, from the cash register counters, with the tally sheets and the actual money on hand, the shortage
amounted to P15,353.78. She informed her co-store cashier, complainant Cristina Amortizado, about the shortage.
Cristina Amortizado also reconciled and re-counted the sale previous to July 16, 1990 and she also confirmed that
there was a discrepancy or a shortage of P15,353.78.. They did not, (sic) immediately report the shortage to
management hoping to find the cause of the shortage but to no avail they failed to reconcile the same. Hence, they
had no other alternative but to report the same to the management on July 17, 1990.
Complainants, together with another Store Cashier, Lutgarda Inducta, were asked to explain and they submitted their
respective written explanations for the shortage of P15,353.78. and the P450.00 under deposit last July 14, 1990.
Respondents placed both complainants and their co-store cashier Lutgarda Inducta under preventive suspension for
the alleged shortages. Thereafter, respondents conducted an administrative investigation. Finding the explanation of
the complainants to be unsatisfactory, respondent dismissed the complainants from the service on August 31, 1990.
Aggrieved and not satisfied with the decision of management terminating their services, complainant instituted this
present action on September 26, 1990 for illegal dismissal praying for reinstatement with payment of backwages and
other benefits. [7]
In justifying complainants dismissal from their employment, respondents alleged:
When the transactions for July 15, 1990 were being reconciled, a shortage of P15,353.78 was discovered. Also
uncovered was an under-deposit of P450.00 of cash receipts for July 14, 1990.

Considering that the foregoing deficits were attributable to herein appellees and to another store cashier, Mrs.
Lutgarda Inducta, who were the ones on duty those days respondent Isetanns Human Resources Division Manager,
Teresita A. Villanueva, issued letters (Exh. 1 and 5) individually addressed to herein appellees and Mrs. Inducta
requiring them to submit written explanations in regard to their above malfeasance within 48 hours from receipt
thereof. Pursuant to said letters, they were likewise placed under preventive suspension.
Thereafter, the Committee o Discipline of appellant Isetann conducted a series of investigations probing appellees and
Mrs. Inductas aforestated shortages. In addition to the shortage of P15,353.78(sic) and underdeposit of P450.00, said
investigation also included the following sums which appellees failed to turnover or account for:
a) P1,000.00- amount borrowed by Lutgarda Inducta from Corazon Jamer;
b) P 70.00- over replenishment of petty cash expenses incurred by Cristina Amortizado.
After the administrative investigation, the Committee on Discipline rendered its decision (Exhs. 3, 3-A, to 3-D) dated
August 23, 1990 duly approved by the General Manager of respondent Isetann, finding the appellees and Mrs. Inducta
responsible for said shortages and consequently requiring them to restitute the same to respondent Isetann. This
Decision and the notices of termination were sent by respondent Isetann to the appellees, and which the latter
admittedly received.
On the other hand, the complainants account of the factual antecedents that let (sic) to their dismissal is as follows:
Aside from the foregoing persons, Alex Mejia had and was allowed by management to have uncontrolled access to the
said room including the vault. Ostensibly, the purpose was to assist in the bringing in or taking out of coin bags,
monies, etc.
There were therefore, at a minimum at least six (6) persons who could have had access to the company funds. To
ascribe liability to the store cashiers alone, in the absence of a clear proof of any wrongdoing is not only unfair and
discriminatory but is likewise illegal.
Parenthetically, and within the parameters of their assigned tasks, herein complainants could not be faulted in any way
for the said shortage as there is no showing that the loss occurred at the time they were in control of the funds
concerned.
Complainants do not dispute the fact that there appeared to be a shortage of P15.373.78(sic) for the July 15, 1990 (a
Sunday) sales and which were tallied and the loss discovered on the following day, July 16, 1990. They however
vehemently deny any culpability or participation in any kind, directly or indirectly, in regard to the said loss or
shortage. Given the kind of trust reposed upon them by respondents for fourteen and thirteen years respectively they
were not about, although they could have done so before given the negligence and laxity of management in regard to
the control and handling of funds of the store, to break said trust.
At the time the persons who had access either to the vault the money and/or the keys aside from herein complainants,
were: 1) Lutgarda Inducta, also a store cashier on duty at the time; 2) the SOM Mrs. Samonte, the supervisor in charge;
3) Alex Mejia, an employee assigned as utility man; and 4) Boy Cabatuando.
There were (sic) three (3) keys to the money changers room, and these keys were assigned and distributed to: a)
master key is or was with the SOMs (Mrs. Samonte) room at the 3 rd floor of the building; b) another key is or was in the
possession of the keeper of the keys, i.e. Boy Cabatuando; and c) the third and last key is any of the store cashiers
depending on who is on duty at the time.
Likewise, there were four (4) persons who were aware and knew of the vault combination. These were the three store
cashiers, i.e. herein complainants, Lutgarda Inducta and their SOM, Mrs. Samonte. [8]
On July 23, 1991, Labor Arbiter Nieves V. de Castro, to whom the instant contoversy was originally assigned,
rendered a decision[9] in favor of herein petitioners, finding that petitioners had been illegally dismissed, the dispositive
portion of which reads:

WHEREFORE, respondents are hereby directed to reinstate complainants to service effective August 1, 1991 with full
backwages and without loss of seniority rights.
SO ORDERED.[10]
Expectedly, respondents Isetann and John Go appealed the aforesaid decision to the NLRC. On January 31, 1992,
the NLRC issued a resolution [11] remanding this case to the NLRC National Capital Region Arbitrattion Branch for further
proceedings in the following manner:
WHEREFORE, premises considered, the challenged decision is hereby SET ASIDE and VACATED.
The entire records of this case is hereby remanded to the NLRC National Capital Region Arbitration Branch for further
proceedings.
Considering that the Labor Arbiter a quo rendered a decision in this case and in order to dispel any suspicion of prejudgment of this case, the Executive Labor Arbiter is hereby directed to have this case re-raffled to another Labor
Arbiter.
SO ORDERED.[12]
Consequently, the present case was then re-raffled to Labor Arbiter Pablo C. Espiritu, Jr. After a full-blown trial, the
said Labor Arbiter found for the petitioners and declared that there was no justification, whether in fact or in law, for
their dismissal. The decretal part of the decision [13] dated March 31, 1993, states:
WHEREFORE, above premises considered, judgement(sic) is hereby rendered finding the dismissal of complainants,
Cristina Amortizado and Corazon Jamer to be illegal and concomitantly, (r)espondents are hereby ordered to pay
complainants, Corazon Jamer the amount of P125,460.00 and Cristina Amortizado the amount of P125,460.00,
representing full backwages from the time of their dismissal (August 31, 1990) till actual or payroll reinstatement at
the option of the respondent (computed until promulgation only). Respondents are also hereby further ordered to
reinstate the complainants to their former position as Store Cashiers without loss of seniority rights, privileges and
benefits, failure to do so backwages shall continue to run but in no case to exceed three (3) years.
Respondents are also ordered to pay complainants the amount of P25,092.00 representing 10% attorneys fees based
in the total judgement(sic) award of P250,920.00.
SO ORDERED.[14]
Dissatisfied over the decision of the Labor Arbiter which struck private respondents as grossly contrary to the
evidence presented, the herein private respondents once again appealed to the NLRC. And, as earlier stated, the NLRC
rendered the challenged decision[15] on November 12, 1993, vacating the decision of the Labor Arbiter and entering a
new one dismissing the petitioners complaint.
Hence, this petition wherein the main issue to be resolved is whether NLRC committed grave abuse of discretion
in finding that petitioners were validly dismissed on the ground of loss of trust and confidence.
At the outset, the Court notes petitioners inexcusable failure to move for the reconsideration of respondent NLRCs
decision. Thus, the present petition suffers from a procedural defect that warrants its outright dismissal. While in some
exceptional cases we allowed the immediate recourse to this Court, we find nothing herein that could warrant an
exceptional treatment to this petition which will justify the omission. This premature action of petitioners constitutes a
fatal infirmity as ruled in a long line of decisions, [16] most recently in the case of Building Care Corporation vs. National
Labor Relations Commission, et al.:[17]
the filing of such a motion is intended to afford public respondent an opportunity to correct any actual or fancied error
attributed to it by way of a re-examination of the legal and factual aspects of the case. Petitioners inaction or
negligence under the circumstances is tantamount to a deprivation of the right and opportunity of the respondent
Commission to cleanse itself of an error unwittingly committed or to vindicate itself of an act unfairly imputed. xxx

xxx And for failure to avail of the correct remedy expressly provided by law, petitioner has permitted the subject
Resolution to become final and executory after the lapse of the ten day period within which to file such motion for
reconsideration.
Likewise, a motion for reconsideration is an adequate remedy; hence certiorari proceedings,as in this case, will
not prosper.[18] Rule 65, Section 1 of the Rules of Civil Procedure, as amended, clearly provides that:
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or
his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or
any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or officer, xxx
The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of law against the acts of respondent. [19] In the case at bench, the
plain and adequate remedy referred to in Rule 65, Section 1, is a motion for reconsideration of the challenged decision
and the resolution thereof, which was expected to provide an adequate and a more speedy remedy than the present
petition for certiorari.
Petitioners asseverate that respondent NLRC committed a grave abuse of discretion when it reversed the findings
of facts of the Labor Arbiter.
We find said submissions untenable.
In asserting that there was a grave abuse of discretion, petitioners advert to alleged variances in the factual
findings of the Labor Arbiter and the respondent NLRC. This is inept and erroneous. Firstly, errors of judgment, as
distinguished from errors of jurisdiction, are not within the province of a special civil action for certiorari.[20] Secondly, a
careful reading of the records of this case would readily show that there is any error by public respondent in its
analysis of the facts and its evaluation of the evidence, it is not of such a degree as may be stigmatized as a grave
abuse of discretion does not necessarily follow just because there is a reversal by the NLRC of the decision of the Labor
Arbiter. Neither does the mere variance in the evidentiary assessment of the NLRC and that of the Labor Arbiter would,
as a matter of course, so warrant another full review of the facts. The NLRCs decision, so long as it is not bereft of
support from the records, deserves respect from the Court. [21]
We must once more reiterate our much repeated but not well-heeded rule that the special civil action
for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment. The rationale
for this rule is simple. When a court exercises its jurisdiction being exercised when the error is committed. If it did,
every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void
judgment. This cannot be allowed. The administration of justice would not countenance such a rule. Consequently, an
error of judgment that the court may commit in the exercise of its jurisdiction is not correctible through the original
special civil action of certiorari.[22]
On the merits, we find and so hold that substantial evidence exists to warrant the finding that petitioners were
validly dismissed for just cause and after observance of due process.
Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee by his employer are
two-fold: the substantive and the procedural. Not only must the dismissal be for a valid or authorized cause as
provided by law (Articles 282, 283 and 284, of the Labor Code, as amended), but the rudimentary requirements of due
process, basic of which are the opportunity to be heard and to defend himself, must be observed before an employee
may be dismissed.[23]
With respect to the first requisite, Article 282 of the Labor Code, as amended, provides:
ART. 282. Termination by Employer.- An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member
of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing. (Italics supplied)
In the instant case, we find no difficulty in agreeing with the findings of the public respondent that the herein
petitioners were guilty of acts of dishonesty by incurring several occurrences of shortages in the amounts
ofP15,353.78, P1,000.00, P450.00 and P70.00 which they failed to turnover and account for/and in behalf of
respondent Isetann. Fittingly, the findings of the NLRC are worth stressing at this point, to wit:
With regard to the several occurrences of shortages of the amounts of P15,353.78, P1,000.00, P450.00 and P70.00 ,
the Labor Arbiter has failed to consider the fact that complainants-appellees were accorded the chance to explain their
side as to the shortages and that they have utterly failed to do so providing basis for their valid dismissal. This fact has
been established by the respondents-appellants in the findings of the Committee on Discipline on Exhibits 3, 3-A to 3D, as follows:
a) On the Shortage of P15,353.78:
The 3 respondents, Lutgarda Inducta, Cristy Amortizado and Corazon Jamer denied any involvement in the loss
of P15,353.78. Although the money, is under their responsibility, not one of them gave any explanation about the
shortage or loss.
b) On the amount of P1,000.00 borrowed by Inducta from Jamer:
On July 18, 1990, Lutgarda Inducta borrowed money from respondents (sic) Jamer amounting to P1,000.00 to cover her
shortage.
Ms. Jamer said that Ms. Inducta paid the amount on that day. But Ms. Jamer did not report the shortage.
c) On the Underdeposit of Cash = P450.00.
The computation of Ms. Amortizado s sales collections last July 14, 1990 resulted to an overage of P350.00. Amortizado
turned over the amount of P350.00, to cover up a shortage incurred by her and Mrs. Inducta.
Jamer used the money given to her by Amortizado (P350.00), and borrowed (P150.00) from the change fund to cover
the total shortage amounting to P500.00 which she had then.
Jamer cannot trace how the shortage came about. Inducta and Jamer shouldered the total shortage amounting
to P500.00, P330.00 for Jamer and P200.00 for Inducta. Jamer claimed that she returned the P350.00 in the box.
However, the claim of respondent was further verified from the payroll section which revealed that a value slip was
issued last July 1990. Jamer and Inducta were charged for P200.00 each. A value slip was issued last August 10, 1990
charging P100.00 to Amortizado.
Jamer admitted that she failed to inform the Audit Staff regarding the P350.00 overage which she received from
Amortizado. A(s) per report of Ms. Agnes Gonzales dated 26 July 1990, there was a total under deposit of cash
amounting to P450.00.
Total cash admitted P65,428.05
(cash in drawer)

Total cash remitted P64,978.05

(per tally sheet) _________
Overage P 450.00
d) On the P70.00 Replenishment of Petty Cash Expenses:
During the 3rd Administrative hearing, the Committee informed Ms. Amortizado regarding the over replenishment of
petty cash expenses as revealed by the Finance Manager last August 10, 1990.
Mrs. Amortizado readily admitted and explained that she forgot to inform Mrs. Inducta regarding the P70.00. She
admitted her failure to correct the amount from P100.00 to P30.00 (total expenses spent for the taxi fair).
She added that she previously incurred a shortage amounting to P100.00. Then she used the P70.00 to cover for the
shortage. The remaining balance of P30.00 was paid by Amortizado.
Amortizado informed the Committee that she is willing to refund the P70.00 shortage. (Underscoring supplied).[24]
From the foregoing premises, it is crystal clear that the failure of petitioners to report the aforequoted shortages
and overages to management as soon as they arose resulted in the breach of the fiduciary trust reposed in them by
respondent company, thereby causing the latter to lose confidence in them. This warrants their dismissal. Moreover, it
must be pointed out that herein petitioners have in fact admitted the underpayment of P450.00 not only in their
Sinumpaang Salaysay but also during the hearing conducted before Labor Arbiter Pablo C. Espiritu. [25] And, the record
shows that the petitioners in fact made a last ditch effort to conceal the same. Were it not for its timely discovery by
private respondents trusted employees, the incident could not have been discovered at all. Furthermore, it is worth
stressing at this juncture that the petitioners have also expressly admitted the shortage ofP15,353.78a substantial
amountin their respective sworn statements, and they were not able to satisfactorily explain such shortage. [26] The
Court is convinced that these particular acts or omissions provided Isetann with enough basis to forfeit its trust and
confidence over herein petitioners.
The NLRC, therefore, did not act with grave abuse of discretion in declaring that petitioners were legally dismissed
from employment. The failure of petitioners to report to management the aforementioned irregularities constitute
fraud or willful breach of the trust reposed in them by their employer or duly authorized representative one of the just
causes in terminating employment as provided for by paragraph (c), Article 282 of the Labor Code, as amended.
In other words, petitioners admissions in their sworn statements, together with the other documentary evidences
on record, constituted breach of trust on their part which justifies their dismissal. Private respondents Isetann
Department Store and Mr. John Go cannot be compelled to retain employees who are clearly guilty of malfeasance as
their continued employment will be prejudicial to the formers best interest. [27] The law, I protecting the rights of the
employees, authorizes neither oppression nor self-destruction of the employer. [28]
The cause of social justice is not served by upholding the interest of petitioners in disregard of the right of private
respondents. Social justice ceases to be an effective instrument for the equalization of the social and economic forces
by the State when it is used to shield wrongdoing. [29] While it is true that compassion and human consideration should
guide the disposition of cases involving termination of employment since it affects ones source or means of livelihood,
it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the
services of an employee who has been shown to be a gross liability to the employer. It should be made clear that when
the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between
labor and management. The intent is to balance the scale of justice; to put up the two parties on relatively equal
positions. There may be cases where the circumstances warrant favoring labor over the interests of management but
never should the scale be so tilted if the result is an injustice to the employer, Justicia remini regarda est (Justice is to
be denied to none).[30]
Thus, this Court has held time and again, in a number of decisions, [31] that:

Loss of confidence is a valid ground for dismissing an employee and proof beyond reasonable doubt of the employees
misconduct is not required to dismiss him on this charge. It is sufficient if there is some basis for such loss of
confidence or if the employer has reasonable ground to believe or to entertain the moral conviction that the employee
concerned is responsible for the misconduct and that the nature of his participation therein rendered him absolutely
unworthy of the trust and confidence demanded by his position. [32]
Parenthetically, the fact that petitioners Jamer and Amortizado had worked for respondent company for fourteen
(14) and thirteen (13) years, respectively, should be taken against them. The infractions that they committed,
notwithstanding their long years of service with the company, reflects a regrettable lack of loyaltyloyalty that they
should have shouldered instead of betrayed. If the petitioners length of service is to be regarded as a justifying
circumstance in moderating the dismissal, it will actually become a prize for disloyalty, perverting the meaning of
social justice and undermining the efforts of labor to cleanse its ranks of all undesirables. [33]
Petitioners also maintain that the NLRC acted with grave abuse of discretion when it failed to consider the fact
that, other than petitioners themselves, there were four (4) other persons who had access to the company vaults, and
hence, could have been responsible for the aforesaid cash shortages imputed to them. They aver therefore, that there
was a serious flaw and laxity in the supervision and handling of company funds by respondent Isetann.[34]
We also find this contention devoid of merit.
First, it must pointed out that the petitioners remark that there was laxity in the accounting procedures of the
company is a matter addressed to the respondent employer. However, this does not excuse dishonesty of employees
and should not in any case hamper the right of the employer to terminate the employment of petitioners on the
ground of loss of confidence or breach of trust. Precisely, the accounting procedure which called for improvements was
based primarily on trust and confidence.[35]
Secondly, it must be noted that the herein petitioners were store cashiers and as such, a special and unique
employment relationship exists between them and the respondent company. More than most key positions, that of
cashier calls for the utmost trust and confidence because their primary function involves basically the handling of a
highly essential property of the respondent employer --- the sales and revenues of the store. Employers are
consequently given wider latitude of discretion in terminating the employment of managerial employees or other
personnel occupying positions of responsibility, such as in the instant case, than in the case of ordinary rank-and-file
employees, whose termination on the basis of these same grounds requires proof of involvement in the malfeasance in
question. Mere uncorroborated assertions and accusations by the employer will not suffice. [36] In that respect , we
quote with approval the observations of the NLRC:
To expound further, for the position of a cashier, the honesty and integrity of the persons assuming said position are
the primary considerations for the nature of her work requires that her actuations should be beyond suspicion as they
are accorded the responsibility of handling money and whatever they would do to such property of the employer
largely depend on their trustworthiness. Hence, the right of the employer to dismiss a cashier guilty of breach and
trust and confidence should be recognized. In a case decided by the Supreme Court it has been ruled that:
Honesty and integrity are the primary considerations in petitioners position. The nature of his work requires that the
actuations should be beyond suspicion, our empathy with the cause of labor should not blind us to the rights of
management. As we have held, this Court should help stamp out, rather than tolerate, the commission of irregular acts
whenever these are noted. Malpractices should not be allowed to continue but should be rebuked. (Del Carmen vs.
NLRC, 203 SCRA 245)[37]
Finally, we are convinced that the NLRC did not commit grave abuse of discretion in evaluating the evidence.
Petitioners merely denied the charges against them. Denials are weak forms of defenses, particularly when they are
not substantiated by clear and convincing evidence. [38] The petitioners failure to satisfactorily explain the cash
shortages, for which sums they are responsible, given their respective positions in respondent company, is enough
reason to warrant their dismissal on the ground of loss of confidence. They cannot place the burden on somebody else
given the factual circumstances of this case. As succinctly put by the NLRC:
That there were other persons who had access to the vaults of the appellant company implying that these other
persons could have been responsible for the loss of the P15,353.78 is of no moment inasmuch as the appellees were
the ones who took first custody of the possession of said collections. As store cashiers, it is expected of them to

exercise ordinary prudence to count the collection and record the same in the tally sheet before depositing to said
vault to avoid a slightest suspicion of having pocketed part of it should a shortage arise. They did not exert efforts to
exercise such prudence demanded of their positions hence, appellants should not be blamed when they were called for
an investigation when said shortage was discovered.
xxx xxx xxx
That the occurrence of shortages is merely an isolated one and therefore should not be taken against the complainantappellees as a ground for loss of trust and confidence that would cause their termination cannot be given any
credence. The shortages having been established and admitted has provided the employer sufficient basis for loss of
confidence and whether such occurrence is merely an isolated one or has been repeatedly committed is no longer
material. The bone of contention here is whether there is some basis for such loss of trust and confidence and if the
employer has reasonable ground to believe or to entertain the moral conviction that the employee concerned is
responsible for the misconduct which in the instant case has been established. [39]
We reiterate the rule that in cases of dismissal for breach of trust and confidence, proof beyond reasonable doubt
of the employees misconduct is not required. It is sufficient that the employer had reasonable ground to believe that
the employees are responsible for the misconduct which renders him unworthy of the trust and confidence demanded
by their position.[40] In the case at hand, it cannot be doubted that respondents succeeded in discharging its burden of
proof.
As regards to the second requisite, the law requires that the employer must furnish the worker sought to be
dismissed with two (2) written notices before termination may be validly effected: first, a notice apprising the
employee of the particular acts or omission for which his dismissal is sought and, second, a subsequent notice
informing the employee of the decision to dismiss him. [41]
In accordance with this requirement, petitioners were given the required notices, on August 2, 1990 and then on
August 23, 1990. The Court finds that petitioners were accorded due process before they were dismissed on August
31, 1990. It is a well-established rule that the essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration
of the action or ruling complained of.[42] It is evident from the records , that herein petitioners were given all the
opportunities to defend themselves and air their side before the Committee on Discipline, having been notified by
respondent Isetanns Human Resources Division Manager, Teresita A. Villanueva, on August 2, 1990 through letters
individually sent to them. However, offered no explanation or theory which could account for money lost in their
possession. Hence, the company had no other alternative but to terminate their employment. As we elucidated in the
case of Philippine Savings Bank vs. National Labor Relations Commission, [43] to wit:
xxx the requirement of due process is satisfied when a fair and reasonable opportunity to explain his side of the
controversy is afforded the party. A formal or trial-type hearing is not at all times and in all circumstances essential,
especially when the employee chooses not to speak,
WHEREFORE, the assailed decision of the National Labor Relations Commission in NLRC NCR CA 002074-91 is
hereby AFFIRMED. The petition is DISMISSED for lack of merit.
SO ORDERED.
[G.R. No. 112630. September 5, 1997]
CORAZON JAMER and CRISTINA AMORTIZADO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
ISETANN DEPARTMENT STORE and/or JOHN GO,respondents.

The decision[1] of public respondent National Labor Relations Commission (NLRC) [2] in NLRC NCR CA 002074-91,
promulgated on November 12 1993, is herein sought to be annulled for having been rendered with grave abuse of
discretion, it having reversed and set aside the decision [4] of Labor Arbiter Pablo C. Espiritu, Jr. by dismissing the
[3]

petitioners complaint for illegal dismissal against private respondent Isetann Department Store (Isetann, for brevity).
The decretal part of the NLRC decision reads:
WHEREFORE, premises considered, the appealed decision is hereby set aside and new one promulgated declaring that
the dismissal from the service of complainants Corazon Jamer and Cristina Amortizado was valid and for cause.
Consequently, the order of reinstatement with backwages and attorneys fees are likewise vacated and set aside. [5]
Although the Labor Arbiter[6] and the NLRC reached contrary conclusions, both agree on the following facts:
Complainant, Corazon Jamer was employed on February 10, 1976 as a Cashier at Joy Mart, a sister company of
Isetann. After two (2) years, she was later on promoted to the position of counter supervisor. She was transferred to
Isetann, Carriedo Branch, as a money changer. In 1982 she was transferred to the Cubao Branch of Isetann, as a
money changer, till her dismissal on August 31, 1990.
Complainant Cristina Amortizado, on the other hand, was employed also at Joy Mart in May, 1977 as a sales clerk. In
1980 she was promoted to the position as counter cashier. Thereafter, she was transferred to Young Un Department
Store as an assistant to the money changer. Later on, or in 1985, she transferred to Isetann, Cubao Branch where she
worked as a Store Cashier till her dismissal on August 31, 1990.
Both complainants were receiving a salary of P4,182.00 for eight (8) hours work at the time of their dismissal.
Respondent Isetann Department Store on the other hand, is a corporation duly organized and existing under laws of
the Philippines and is engaged in retail trade and the department store business. Individual respondent, John Go is the
President/General (Manager) of respondent Department Store.
This complaint arose from the dismissal of the complainants by the respondents. They were both dismissed on August
31, 1990 on the alleged ground of dishonesty in their work as Store Cashiers.
Complainants (sic) function as Store Cashiers is to accumulate, at the end of daily operations, the cash sales receipts
of the selling floor cash register clerks. At the close of business hours, all the cash sales of the floor cash register clerks
are turned over by them to the Store Cashiers, complainants herein, together with the tally sheets prepared by the
cash register clerks. Thereafter, complainants will reconcile the cash sales with the tally sheets to determine shortages
or coverages(sic) and deposit the same with the bank depositor(sic) of respondents company. Thereafter, the recorded
transactions are forwarded to the main branch of respondents company at Carriedo for counter-checking.
On July 16, 1990, complainants discovered a shortage of P15,353.78. It was complainant Corazon Jamer who first
discovered the shortage. In fact at first, she thought that it was merely a P1,000.00 shortage but when she reconciled
the cash receipts, from the cash register counters, with the tally sheets and the actual money on hand, the shortage
amounted to P15,353.78. She informed her co-store cashier, complainant Cristina Amortizado, about the shortage.
Cristina Amortizado also reconciled and re-counted the sale previous to July 16, 1990 and she also confirmed that
there was a discrepancy or a shortage of P15,353.78.. They did not, (sic) immediately report the shortage to
management hoping to find the cause of the shortage but to no avail they failed to reconcile the same. Hence, they
had no other alternative but to report the same to the management on July 17, 1990.
Complainants, together with another Store Cashier, Lutgarda Inducta, were asked to explain and they submitted their
respective written explanations for the shortage of P15,353.78. and the P450.00 under deposit last July 14, 1990.
Respondents placed both complainants and their co-store cashier Lutgarda Inducta under preventive suspension for
the alleged shortages. Thereafter, respondents conducted an administrative investigation. Finding the explanation of
the complainants to be unsatisfactory, respondent dismissed the complainants from the service on August 31, 1990.
Aggrieved and not satisfied with the decision of management terminating their services, complainant instituted this
present action on September 26, 1990 for illegal dismissal praying for reinstatement with payment of backwages and
other benefits. [7]
In justifying complainants dismissal from their employment, respondents alleged:

When the transactions for July 15, 1990 were being reconciled, a shortage of P15,353.78 was discovered. Also
uncovered was an under-deposit of P450.00 of cash receipts for July 14, 1990.
Considering that the foregoing deficits were attributable to herein appellees and to another store cashier, Mrs.
Lutgarda Inducta, who were the ones on duty those days respondent Isetanns Human Resources Division Manager,
Teresita A. Villanueva, issued letters (Exh. 1 and 5) individually addressed to herein appellees and Mrs. Inducta
requiring them to submit written explanations in regard to their above malfeasance within 48 hours from receipt
thereof. Pursuant to said letters, they were likewise placed under preventive suspension.
Thereafter, the Committee o Discipline of appellant Isetann conducted a series of investigations probing appellees and
Mrs. Inductas aforestated shortages. In addition to the shortage of P15,353.78(sic) and underdeposit of P450.00, said
investigation also included the following sums which appellees failed to turnover or account for:
a) P1,000.00- amount borrowed by Lutgarda Inducta from Corazon Jamer;
b) P 70.00- over replenishment of petty cash expenses incurred by Cristina Amortizado.
After the administrative investigation, the Committee on Discipline rendered its decision (Exhs. 3, 3-A, to 3-D) dated
August 23, 1990 duly approved by the General Manager of respondent Isetann, finding the appellees and Mrs. Inducta
responsible for said shortages and consequently requiring them to restitute the same to respondent Isetann. This
Decision and the notices of termination were sent by respondent Isetann to the appellees, and which the latter
admittedly received.
On the other hand, the complainants account of the factual antecedents that let (sic) to their dismissal is as follows:
Aside from the foregoing persons, Alex Mejia had and was allowed by management to have uncontrolled access to the
said room including the vault. Ostensibly, the purpose was to assist in the bringing in or taking out of coin bags,
monies, etc.
There were therefore, at a minimum at least six (6) persons who could have had access to the company funds. To
ascribe liability to the store cashiers alone, in the absence of a clear proof of any wrongdoing is not only unfair and
discriminatory but is likewise illegal.
Parenthetically, and within the parameters of their assigned tasks, herein complainants could not be faulted in any way
for the said shortage as there is no showing that the loss occurred at the time they were in control of the funds
concerned.
Complainants do not dispute the fact that there appeared to be a shortage of P15.373.78(sic) for the July 15, 1990 (a
Sunday) sales and which were tallied and the loss discovered on the following day, July 16, 1990. They however
vehemently deny any culpability or participation in any kind, directly or indirectly, in regard to the said loss or
shortage. Given the kind of trust reposed upon them by respondents for fourteen and thirteen years respectively they
were not about, although they could have done so before given the negligence and laxity of management in regard to
the control and handling of funds of the store, to break said trust.
At the time the persons who had access either to the vault the money and/or the keys aside from herein complainants,
were: 1) Lutgarda Inducta, also a store cashier on duty at the time; 2) the SOM Mrs. Samonte, the supervisor in charge;
3) Alex Mejia, an employee assigned as utility man; and 4) Boy Cabatuando.
There were (sic) three (3) keys to the money changers room, and these keys were assigned and distributed to: a)
master key is or was with the SOMs (Mrs. Samonte) room at the 3 rd floor of the building; b) another key is or was in the
possession of the keeper of the keys, i.e. Boy Cabatuando; and c) the third and last key is any of the store cashiers
depending on who is on duty at the time.
Likewise, there were four (4) persons who were aware and knew of the vault combination. These were the three store
cashiers, i.e. herein complainants, Lutgarda Inducta and their SOM, Mrs. Samonte. [8]

On July 23, 1991, Labor Arbiter Nieves V. de Castro, to whom the instant contoversy was originally assigned,
rendered a decision[9] in favor of herein petitioners, finding that petitioners had been illegally dismissed, the dispositive
portion of which reads:
WHEREFORE, respondents are hereby directed to reinstate complainants to service effective August 1, 1991 with full
backwages and without loss of seniority rights.
SO ORDERED.[10]
Expectedly, respondents Isetann and John Go appealed the aforesaid decision to the NLRC. On January 31, 1992,
the NLRC issued a resolution [11] remanding this case to the NLRC National Capital Region Arbitrattion Branch for further
proceedings in the following manner:
WHEREFORE, premises considered, the challenged decision is hereby SET ASIDE and VACATED.
The entire records of this case is hereby remanded to the NLRC National Capital Region Arbitration Branch for further
proceedings.
Considering that the Labor Arbiter a quo rendered a decision in this case and in order to dispel any suspicion of prejudgment of this case, the Executive Labor Arbiter is hereby directed to have this case re-raffled to another Labor
Arbiter.
SO ORDERED.[12]
Consequently, the present case was then re-raffled to Labor Arbiter Pablo C. Espiritu, Jr. After a full-blown trial, the
said Labor Arbiter found for the petitioners and declared that there was no justification, whether in fact or in law, for
their dismissal. The decretal part of the decision [13] dated March 31, 1993, states:
WHEREFORE, above premises considered, judgement(sic) is hereby rendered finding the dismissal of complainants,
Cristina Amortizado and Corazon Jamer to be illegal and concomitantly, (r)espondents are hereby ordered to pay
complainants, Corazon Jamer the amount of P125,460.00 and Cristina Amortizado the amount of P125,460.00,
representing full backwages from the time of their dismissal (August 31, 1990) till actual or payroll reinstatement at
the option of the respondent (computed until promulgation only). Respondents are also hereby further ordered to
reinstate the complainants to their former position as Store Cashiers without loss of seniority rights, privileges and
benefits, failure to do so backwages shall continue to run but in no case to exceed three (3) years.
Respondents are also ordered to pay complainants the amount of P25,092.00 representing 10% attorneys fees based
in the total judgement(sic) award of P250,920.00.
SO ORDERED.[14]
Dissatisfied over the decision of the Labor Arbiter which struck private respondents as grossly contrary to the
evidence presented, the herein private respondents once again appealed to the NLRC. And, as earlier stated, the NLRC
rendered the challenged decision[15] on November 12, 1993, vacating the decision of the Labor Arbiter and entering a
new one dismissing the petitioners complaint.
Hence, this petition wherein the main issue to be resolved is whether NLRC committed grave abuse of discretion
in finding that petitioners were validly dismissed on the ground of loss of trust and confidence.
At the outset, the Court notes petitioners inexcusable failure to move for the reconsideration of respondent NLRCs
decision. Thus, the present petition suffers from a procedural defect that warrants its outright dismissal. While in some
exceptional cases we allowed the immediate recourse to this Court, we find nothing herein that could warrant an
exceptional treatment to this petition which will justify the omission. This premature action of petitioners constitutes a
fatal infirmity as ruled in a long line of decisions, [16] most recently in the case of Building Care Corporation vs. National
Labor Relations Commission, et al.:[17]

the filing of such a motion is intended to afford public respondent an opportunity to correct any actual or fancied error
attributed to it by way of a re-examination of the legal and factual aspects of the case. Petitioners inaction or
negligence under the circumstances is tantamount to a deprivation of the right and opportunity of the respondent
Commission to cleanse itself of an error unwittingly committed or to vindicate itself of an act unfairly imputed. xxx
xxx And for failure to avail of the correct remedy expressly provided by law, petitioner has permitted the subject
Resolution to become final and executory after the lapse of the ten day period within which to file such motion for
reconsideration.
Likewise, a motion for reconsideration is an adequate remedy; hence certiorari proceedings,as in this case, will
not prosper.[18] Rule 65, Section 1 of the Rules of Civil Procedure, as amended, clearly provides that:
When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or
his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or
any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or officer, xxx
The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain,
speedy and adequate remedy in the ordinary course of law against the acts of respondent. [19] In the case at bench, the
plain and adequate remedy referred to in Rule 65, Section 1, is a motion for reconsideration of the challenged decision
and the resolution thereof, which was expected to provide an adequate and a more speedy remedy than the present
petition for certiorari.
Petitioners asseverate that respondent NLRC committed a grave abuse of discretion when it reversed the findings
of facts of the Labor Arbiter.
We find said submissions untenable.
In asserting that there was a grave abuse of discretion, petitioners advert to alleged variances in the factual
findings of the Labor Arbiter and the respondent NLRC. This is inept and erroneous. Firstly, errors of judgment, as
distinguished from errors of jurisdiction, are not within the province of a special civil action for certiorari.[20] Secondly, a
careful reading of the records of this case would readily show that there is any error by public respondent in its
analysis of the facts and its evaluation of the evidence, it is not of such a degree as may be stigmatized as a grave
abuse of discretion does not necessarily follow just because there is a reversal by the NLRC of the decision of the Labor
Arbiter. Neither does the mere variance in the evidentiary assessment of the NLRC and that of the Labor Arbiter would,
as a matter of course, so warrant another full review of the facts. The NLRCs decision, so long as it is not bereft of
support from the records, deserves respect from the Court. [21]
We must once more reiterate our much repeated but not well-heeded rule that the special civil action
for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment. The rationale
for this rule is simple. When a court exercises its jurisdiction being exercised when the error is committed. If it did,
every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void
judgment. This cannot be allowed. The administration of justice would not countenance such a rule. Consequently, an
error of judgment that the court may commit in the exercise of its jurisdiction is not correctible through the original
special civil action of certiorari.[22]
On the merits, we find and so hold that substantial evidence exists to warrant the finding that petitioners were
validly dismissed for just cause and after observance of due process.
Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee by his employer are
two-fold: the substantive and the procedural. Not only must the dismissal be for a valid or authorized cause as
provided by law (Articles 282, 283 and 284, of the Labor Code, as amended), but the rudimentary requirements of due
process, basic of which are the opportunity to be heard and to defend himself, must be observed before an employee
may be dismissed.[23]
With respect to the first requisite, Article 282 of the Labor Code, as amended, provides:

ART. 282. Termination by Employer.- An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member
of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing. (Italics supplied)
In the instant case, we find no difficulty in agreeing with the findings of the public respondent that the herein
petitioners were guilty of acts of dishonesty by incurring several occurrences of shortages in the amounts
ofP15,353.78, P1,000.00, P450.00 and P70.00 which they failed to turnover and account for/and in behalf of
respondent Isetann. Fittingly, the findings of the NLRC are worth stressing at this point, to wit:
With regard to the several occurrences of shortages of the amounts of P15,353.78, P1,000.00, P450.00 and P70.00 ,
the Labor Arbiter has failed to consider the fact that complainants-appellees were accorded the chance to explain their
side as to the shortages and that they have utterly failed to do so providing basis for their valid dismissal. This fact has
been established by the respondents-appellants in the findings of the Committee on Discipline on Exhibits 3, 3-A to 3D, as follows:
a) On the Shortage of P15,353.78:
The 3 respondents, Lutgarda Inducta, Cristy Amortizado and Corazon Jamer denied any involvement in the loss
of P15,353.78. Although the money, is under their responsibility, not one of them gave any explanation about the
shortage or loss.
b) On the amount of P1,000.00 borrowed by Inducta from Jamer:
On July 18, 1990, Lutgarda Inducta borrowed money from respondents (sic) Jamer amounting to P1,000.00 to cover her
shortage.
Ms. Jamer said that Ms. Inducta paid the amount on that day. But Ms. Jamer did not report the shortage.
c) On the Underdeposit of Cash = P450.00.
The computation of Ms. Amortizado s sales collections last July 14, 1990 resulted to an overage of P350.00. Amortizado
turned over the amount of P350.00, to cover up a shortage incurred by her and Mrs. Inducta.
Jamer used the money given to her by Amortizado (P350.00), and borrowed (P150.00) from the change fund to cover
the total shortage amounting to P500.00 which she had then.
Jamer cannot trace how the shortage came about. Inducta and Jamer shouldered the total shortage amounting
to P500.00, P330.00 for Jamer and P200.00 for Inducta. Jamer claimed that she returned the P350.00 in the box.
However, the claim of respondent was further verified from the payroll section which revealed that a value slip was
issued last July 1990. Jamer and Inducta were charged for P200.00 each. A value slip was issued last August 10, 1990
charging P100.00 to Amortizado.
Jamer admitted that she failed to inform the Audit Staff regarding the P350.00 overage which she received from
Amortizado. A(s) per report of Ms. Agnes Gonzales dated 26 July 1990, there was a total under deposit of cash
amounting to P450.00.

Total cash admitted P65,428.05

(cash in drawer)
Total cash remitted P64,978.05
(per tally sheet) _________
Overage P 450.00
d) On the P70.00 Replenishment of Petty Cash Expenses:
During the 3rd Administrative hearing, the Committee informed Ms. Amortizado regarding the over replenishment of
petty cash expenses as revealed by the Finance Manager last August 10, 1990.
Mrs. Amortizado readily admitted and explained that she forgot to inform Mrs. Inducta regarding the P70.00. She
admitted her failure to correct the amount from P100.00 to P30.00 (total expenses spent for the taxi fair).
She added that she previously incurred a shortage amounting to P100.00. Then she used the P70.00 to cover for the
shortage. The remaining balance of P30.00 was paid by Amortizado.
Amortizado informed the Committee that she is willing to refund the P70.00 shortage. (Underscoring supplied).[24]
From the foregoing premises, it is crystal clear that the failure of petitioners to report the aforequoted shortages
and overages to management as soon as they arose resulted in the breach of the fiduciary trust reposed in them by
respondent company, thereby causing the latter to lose confidence in them. This warrants their dismissal. Moreover, it
must be pointed out that herein petitioners have in fact admitted the underpayment of P450.00 not only in their
Sinumpaang Salaysay but also during the hearing conducted before Labor Arbiter Pablo C. Espiritu. [25] And, the record
shows that the petitioners in fact made a last ditch effort to conceal the same. Were it not for its timely discovery by
private respondents trusted employees, the incident could not have been discovered at all. Furthermore, it is worth
stressing at this juncture that the petitioners have also expressly admitted the shortage ofP15,353.78a substantial
amountin their respective sworn statements, and they were not able to satisfactorily explain such shortage. [26] The
Court is convinced that these particular acts or omissions provided Isetann with enough basis to forfeit its trust and
confidence over herein petitioners.
The NLRC, therefore, did not act with grave abuse of discretion in declaring that petitioners were legally dismissed
from employment. The failure of petitioners to report to management the aforementioned irregularities constitute
fraud or willful breach of the trust reposed in them by their employer or duly authorized representative one of the just
causes in terminating employment as provided for by paragraph (c), Article 282 of the Labor Code, as amended.
In other words, petitioners admissions in their sworn statements, together with the other documentary evidences
on record, constituted breach of trust on their part which justifies their dismissal. Private respondents Isetann
Department Store and Mr. John Go cannot be compelled to retain employees who are clearly guilty of malfeasance as
their continued employment will be prejudicial to the formers best interest. [27] The law, I protecting the rights of the
employees, authorizes neither oppression nor self-destruction of the employer. [28]
The cause of social justice is not served by upholding the interest of petitioners in disregard of the right of private
respondents. Social justice ceases to be an effective instrument for the equalization of the social and economic forces
by the State when it is used to shield wrongdoing. [29] While it is true that compassion and human consideration should
guide the disposition of cases involving termination of employment since it affects ones source or means of livelihood,
it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the
services of an employee who has been shown to be a gross liability to the employer. It should be made clear that when
the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between
labor and management. The intent is to balance the scale of justice; to put up the two parties on relatively equal
positions. There may be cases where the circumstances warrant favoring labor over the interests of management but
never should the scale be so tilted if the result is an injustice to the employer, Justicia remini regarda est (Justice is to
be denied to none).[30]

Thus, this Court has held time and again, in a number of decisions, [31] that:
Loss of confidence is a valid ground for dismissing an employee and proof beyond reasonable doubt of the employees
misconduct is not required to dismiss him on this charge. It is sufficient if there is some basis for such loss of
confidence or if the employer has reasonable ground to believe or to entertain the moral conviction that the employee
concerned is responsible for the misconduct and that the nature of his participation therein rendered him absolutely
unworthy of the trust and confidence demanded by his position. [32]
Parenthetically, the fact that petitioners Jamer and Amortizado had worked for respondent company for fourteen
(14) and thirteen (13) years, respectively, should be taken against them. The infractions that they committed,
notwithstanding their long years of service with the company, reflects a regrettable lack of loyaltyloyalty that they
should have shouldered instead of betrayed. If the petitioners length of service is to be regarded as a justifying
circumstance in moderating the dismissal, it will actually become a prize for disloyalty, perverting the meaning of
social justice and undermining the efforts of labor to cleanse its ranks of all undesirables. [33]
Petitioners also maintain that the NLRC acted with grave abuse of discretion when it failed to consider the fact
that, other than petitioners themselves, there were four (4) other persons who had access to the company vaults, and
hence, could have been responsible for the aforesaid cash shortages imputed to them. They aver therefore, that there
was a serious flaw and laxity in the supervision and handling of company funds by respondent Isetann.[34]
We also find this contention devoid of merit.
First, it must pointed out that the petitioners remark that there was laxity in the accounting procedures of the
company is a matter addressed to the respondent employer. However, this does not excuse dishonesty of employees
and should not in any case hamper the right of the employer to terminate the employment of petitioners on the
ground of loss of confidence or breach of trust. Precisely, the accounting procedure which called for improvements was
based primarily on trust and confidence.[35]
Secondly, it must be noted that the herein petitioners were store cashiers and as such, a special and unique
employment relationship exists between them and the respondent company. More than most key positions, that of
cashier calls for the utmost trust and confidence because their primary function involves basically the handling of a
highly essential property of the respondent employer --- the sales and revenues of the store. Employers are
consequently given wider latitude of discretion in terminating the employment of managerial employees or other
personnel occupying positions of responsibility, such as in the instant case, than in the case of ordinary rank-and-file
employees, whose termination on the basis of these same grounds requires proof of involvement in the malfeasance in
question. Mere uncorroborated assertions and accusations by the employer will not suffice. [36] In that respect , we
quote with approval the observations of the NLRC:
To expound further, for the position of a cashier, the honesty and integrity of the persons assuming said position are
the primary considerations for the nature of her work requires that her actuations should be beyond suspicion as they
are accorded the responsibility of handling money and whatever they would do to such property of the employer
largely depend on their trustworthiness. Hence, the right of the employer to dismiss a cashier guilty of breach and
trust and confidence should be recognized. In a case decided by the Supreme Court it has been ruled that:
Honesty and integrity are the primary considerations in petitioners position. The nature of his work requires that the
actuations should be beyond suspicion, our empathy with the cause of labor should not blind us to the rights of
management. As we have held, this Court should help stamp out, rather than tolerate, the commission of irregular acts
whenever these are noted. Malpractices should not be allowed to continue but should be rebuked. (Del Carmen vs.
NLRC, 203 SCRA 245)[37]
Finally, we are convinced that the NLRC did not commit grave abuse of discretion in evaluating the evidence.
Petitioners merely denied the charges against them. Denials are weak forms of defenses, particularly when they are
not substantiated by clear and convincing evidence. [38] The petitioners failure to satisfactorily explain the cash
shortages, for which sums they are responsible, given their respective positions in respondent company, is enough
reason to warrant their dismissal on the ground of loss of confidence. They cannot place the burden on somebody else
given the factual circumstances of this case. As succinctly put by the NLRC:

That there were other persons who had access to the vaults of the appellant company implying that these other
persons could have been responsible for the loss of the P15,353.78 is of no moment inasmuch as the appellees were
the ones who took first custody of the possession of said collections. As store cashiers, it is expected of them to
exercise ordinary prudence to count the collection and record the same in the tally sheet before depositing to said
vault to avoid a slightest suspicion of having pocketed part of it should a shortage arise. They did not exert efforts to
exercise such prudence demanded of their positions hence, appellants should not be blamed when they were called for
an investigation when said shortage was discovered.
xxx xxx xxx
That the occurrence of shortages is merely an isolated one and therefore should not be taken against the complainantappellees as a ground for loss of trust and confidence that would cause their termination cannot be given any
credence. The shortages having been established and admitted has provided the employer sufficient basis for loss of
confidence and whether such occurrence is merely an isolated one or has been repeatedly committed is no longer
material. The bone of contention here is whether there is some basis for such loss of trust and confidence and if the
employer has reasonable ground to believe or to entertain the moral conviction that the employee concerned is
responsible for the misconduct which in the instant case has been established. [39]
We reiterate the rule that in cases of dismissal for breach of trust and confidence, proof beyond reasonable doubt
of the employees misconduct is not required. It is sufficient that the employer had reasonable ground to believe that
the employees are responsible for the misconduct which renders him unworthy of the trust and confidence demanded
by their position.[40] In the case at hand, it cannot be doubted that respondents succeeded in discharging its burden of
proof.
As regards to the second requisite, the law requires that the employer must furnish the worker sought to be
dismissed with two (2) written notices before termination may be validly effected: first, a notice apprising the
employee of the particular acts or omission for which his dismissal is sought and, second, a subsequent notice
informing the employee of the decision to dismiss him. [41]
In accordance with this requirement, petitioners were given the required notices, on August 2, 1990 and then on
August 23, 1990. The Court finds that petitioners were accorded due process before they were dismissed on August
31, 1990. It is a well-established rule that the essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration
of the action or ruling complained of.[42] It is evident from the records , that herein petitioners were given all the
opportunities to defend themselves and air their side before the Committee on Discipline, having been notified by
respondent Isetanns Human Resources Division Manager, Teresita A. Villanueva, on August 2, 1990 through letters
individually sent to them. However, offered no explanation or theory which could account for money lost in their
possession. Hence, the company had no other alternative but to terminate their employment. As we elucidated in the
case of Philippine Savings Bank vs. National Labor Relations Commission, [43] to wit:
xxx the requirement of due process is satisfied when a fair and reasonable opportunity to explain his side of the
controversy is afforded the party. A formal or trial-type hearing is not at all times and in all circumstances essential,
especially when the employee chooses not to speak,
WHEREFORE, the assailed decision of the National Labor Relations Commission in NLRC NCR CA 002074-91 is
hereby AFFIRMED. The petition is DISMISSED for lack of merit.
SO ORDERED.
[G.R. No. 98107. August 18, 1997]
BENJAMIN C. JUCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL HOUSING
CORPORATION, respondents.

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.

G.R. No. 120319 October 6, 1995

LUZON DEVELOPMENT BANK, petitioner,
vs.
ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA in her capacity as
VOLUNTARY ARBITRATOR, respondents.

ROMERO, J.:
From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development Bank
Employees (ALDBE) arose an arbitration case to resolve the following issue:
Whether or not the company has violated the Collective Bargaining Agreement provision and the
Memorandum of Agreement dated April 1994, on promotion.
At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994.
Atty. Ester S. Garcia, in her capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995. LDB,
on the other hand, failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding them to
do so. As of May 23, 1995 no Position Paper had been filed by LDB.
On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows:
WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining
Agreement provision nor the Memorandum of Agreement on promotion.
Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to
prohibit her from enforcing the same.

In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the
basis of evidence and arguments presented by such parties who have bound themselves to accept the decision of the
arbitrator as final and binding.
Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary.
Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their
right to strike and are compelled to accept the resolution of their dispute through arbitration by a third party. 1The
essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested third party whose
decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally appointed by
the government.
Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary
arbitration clause in their collective agreement, to an impartial third person for a final and binding resolution. 2Ideally,
arbitration awards are supposed to be complied with by both parties without delay, such that once an award has been
rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they are
presumed to have freely chosen arbitration as the mode of settlement for that particular dispute. Pursuant thereto,
they have chosen a mutually acceptable arbitrator who shall hear and decide their case. Above all, they have mutually
agreed to de bound by said arbitrator's decision.
In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein
provisions for a machinery for the resolution of grievances arising from the interpretation or implementation of the
CBA or company personnel policies. 3 For this purpose, parties to a CBA shall name and designate therein a voluntary
arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those accredited by the
National Conciliation and Mediation Board (NCMB). Article 261 of the Labor Code accordingly provides for exclusive
original jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the interpretation or implementation of
the CBA and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but
only upon agreement of the parties, to exercise jurisdiction over other labor disputes.
On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following enumerated
cases:
. . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality
of strikes and lockouts;
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
xxx xxx xxx

It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is
quite limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National
Labor Relations Commission (NLRC) for that matter. 4 The state of our present law relating to voluntary arbitration
provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10)
calendar days from receipt of the copy of the award or decision by the parties," 5 while the "(d)ecision, 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." 6 Hence, while there is an express mode of
appeal from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the decision
of a voluntary arbitrator.
Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the
Supreme Court itself on a petition for certiorari, 7 in effect equating the voluntary arbitrator with the NLRC or the Court
of Appeals. In the view of the Court, this is illogical and imposes an unnecessary burden upon it.
In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts and awards of
quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary
arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court.
In Oceanic Bic Division (FFW), et al. v. Romero, et al., 9 this Court ruled that "a voluntary arbitrator by the nature of her
functions acts in a quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator, whether acting
solely or in a panel, enjoys in law the status of a quasi-judicial agency but independent of, and apart from, the NLRC
since his decisions are not appealable to the latter. 10
Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise:
xxx xxx xxx
(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including
the Securities and Exchange Commission, the Employees Compensation Commission and the Civil
Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442,
as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
xxx xxx xxx
Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as
a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a
"quasi-judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasijudicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating
under the Construction Industry Arbitration Commission, 11 that the broader term "instrumentalities" was purposely
included in the above-quoted provision.
An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency" or
"instrumentality" are synonymous in the sense that either of them is a means by which a government acts, or by
which a certain government act or function is performed. 13 The word "instrumentality," with respect to a state,
contemplates an authority to which the state delegates governmental power for the performance of a state
function. 14 An individual person, like an administrator or executor, is a judicial instrumentality in the settling of an
estate, 15 in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the
court, 16 and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state. 17
The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under
the provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality"
in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does
not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein.
It will be noted that, although the Employees Compensation Commission is also provided for in the Labor Code,
Circular No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid down the

procedure for the appealability of its decisions to the Court of Appeals under the foregoing rationalization, and this was
later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the
Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of the
quasi-judicial agencies, boards and commissions enumerated therein.
This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform
procedure for the appellate review of adjudications of all quasi-judicial entities 18 not expressly excepted from the
coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative
intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within
the adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor
arbiter.
In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration
Law, arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none
be specified, the Regional Trial Court for the province or city in which one of the parties resides or is doing business, or
in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1)
month after an award is made, apply to the court having jurisdiction for an order confirming the award and the court
must grant such order unless the award is vacated, modified or corrected. 19
In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court.
Consequently, in a petition for certiorari from that award or decision, the Court of Appeals must be deemed to have
concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the Court
of Appeals petitions of this nature for proper disposition.
ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals.
SO ORDERED.

G.R. No. 85279 July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T. BAYLON, RAMON MODESTO,
JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE ALDAY, SERGIO ARANETA, PLACIDO AGUSTIN, VIRGILIO
MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C. PERALEJO, RTC, BRANCH 98,
QUEZON CITY, respondents.
Vicente T. Ocampo & Associates for petitioners.

CORTES, J:
Primarily, the issue raised in this petition is whether or not the Regional Trial Court can enjoin the Social Security
System Employees Association (SSSEA) from striking and order the striking employees to return to work. Collaterally, it
is whether or not employees of the Social Security System (SSS) have the right to strike.
The antecedents are as follows:
On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a complaint for damages with a prayer for
a writ of preliminary injunction against petitioners, alleging that on June 9, 1987, the officers and members of SSSEA
staged an illegal strike and baricaded the entrances to the SSS Building, preventing non-striking employees from
reporting for work and SSS members from transacting business with the SSS; that the strike was reported to the Public

Sector Labor - Management Council, which ordered the strikers to return to work; that the strikers refused to return to
work; and that the SSS suffered damages as a result of the strike. The complaint prayed that a writ of preliminary
injunction be issued to enjoin the strike and that the strikers be ordered to return to work; that the defendants
(petitioners herein) be ordered to pay damages; and that the strike be declared illegal.
It appears that the SSSEA went on strike after the SSS failed to act on the union's demands, which included:
implementation of the provisions of the old SSS-SSSEA collective bargaining agreement (CBA) on check-off of union
dues; payment of accrued overtime pay, night differential pay and holiday pay; conversion of temporary or contractual
employees with six (6) months or more of service into regular and permanent employees and their entitlement to the
same salaries, allowances and benefits given to other regular employees of the SSS; and payment of the children's
allowance of P30.00, and after the SSS deducted certain amounts from the salaries of the employees and allegedly
committed acts of discrimination and unfair labor practices [Rollo, pp. 21-241].
The court a quo, on June 11, 1987, issued a temporary restraining order pending resolution of the application for a writ
of preliminary injunction [Rollo, p. 71.] In the meantime, petitioners filed a motion to dismiss alleging the trial court's
lack of jurisdiction over the subject matter [Rollo, pp. 72-82.] To this motion, the SSS filed an opposition, reiterating its
prayer for the issuance of a writ of injunction [Rollo, pp. 209-222]. On July 22,1987, in a four-page order, the court a
quo denied the motion to dismiss and converted the restraining order into an injunction upon posting of a bond, after
finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners' motion for the reconsideration of the aforesaid
order was also denied on August 14, 1988 [Rollo, p. 94], petitioners filed a petition for certiorari and prohibition with
preliminary injunction before this Court. Their petition was docketed as G.R. No. 79577. In a resolution dated October
21, 1987, the Court, through the Third Division, resolved to refer the case to the Court of Appeals. Petitioners filed a
motion for reconsideration thereof, but during its pendency the Court of Appeals on March 9,1988 promulgated its
decision on the referred case [Rollo, pp. 130-137]. Petitioners moved to recall the Court of Appeals' decision. In the
meantime, the Court on June 29,1988 denied the motion for reconsideration in G.R. No. 97577 for being moot and
academic. Petitioners' motion to recall the decision of the Court of Appeals was also denied in view of this Court's
denial of the motion for reconsideration [Rollo, pp. 141- 143]. Hence, the instant petition to review the decision of the
Court of Appeals [Rollo, pp. 12-37].
Upon motion of the SSS on February 6,1989, the Court issued a temporary restraining order enjoining the petitioners
from staging another strike or from pursuing the notice of strike they filed with the Department of Labor and
Employment on January 25, 1989 and to maintain the status quo [Rollo, pp. 151-152].
The Court, taking the comment as answer, and noting the reply and supplemental reply filed by petitioners, considered
the issues joined and the case submitted for decision.
The position of the petitioners is that the Regional Trial Court had no jurisdiction to hear the case initiated by the SSS
and to issue the restraining order and the writ of preliminary injunction, as jurisdiction lay with the Department of
Labor and Employment or the National Labor Relations Commission, since the case involves a labor dispute.
On the other hand, the SSS advances the contrary view, on the ground that the employees of the SSS are covered by
civil service laws and rules and regulations, not the Labor Code, therefore they do not have the right to strike. Since
neither the DOLE nor the NLRC has jurisdiction over the dispute, the Regional Trial Court may enjoin the employees
from striking.
In dismissing the petition for certiorari and prohibition with preliminary injunction filed by petitioners, the Court of
Appeals held that since the employees of the SSS, are government employees, they are not allowed to strike, and may
be enjoined by the Regional Trial Court, which had jurisdiction over the SSS' complaint for damages, from continuing
with their strike.
Thus, the sequential questions to be resolved by the Court in deciding whether or not the Court of Appeals erred in
finding that the Regional Trial Court did not act without or in excess of jurisdiction when it took cognizance of the case
and enjoined the strike are as follows:
1. Do the employees of the SSS have the right to strike?
2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the SSS and to enjoin the strikers from
continuing with the strike and to order them to return to work?

These shall be discussed and resolved seriatim

I
The 1987 Constitution, in the Article on Social Justice and Human Rights, provides that the State "shall guarantee the
rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities,
including the right to strike in accordance with law" [Art. XIII, Sec. 31].
By itself, this provision would seem to recognize the right of all workers and employees, including those in the public
sector, to strike. But the Constitution itself fails to expressly confirm this impression, for in the Sub-Article on the Civil
Service Commission, it provides, after defining the scope of the civil service as "all branches, subdivisions,
instrumentalities, and agencies of the Government, including government-owned or controlled corporations with
original charters," that "[t]he right to self-organization shall not be denied to government employees" [Art. IX(B), Sec.
2(l) and (50)]. Parenthetically, the Bill of Rights also provides that "[tlhe right of the people, including those employed
in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not
abridged" [Art. III, Sec. 8]. Thus, while there is no question that the Constitution recognizes the right of government
employees to organize, it is silent as to whether such recognition also includes the right to strike.
Resort to the intent of the framers of the organic law becomes helpful in understanding the meaning of these
provisions. A reading of the proceedings of the Constitutional Commission that drafted the 1987 Constitution would
show that in recognizing the right of government employees to organize, the commissioners intended to limit the right
to the formation of unions or associations only, without including the right to strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that "[tlhe right to self-organization shall
not be denied to government employees" [Art. IX(B), Sec. 2(5)], in answer to the apprehensions expressed by
Commissioner Ambrosio B. Padilla, Vice-President of the Commission, explained:
MR. LERUM. I think what I will try to say will not take that long. When we proposed this amendment
providing for self-organization of government employees, it does not mean that because they have the
right to organize, they also have the right to strike. That is a different matter. We are only talking about
organizing, uniting as a union. With regard to the right to strike, everyone will remember that in the Bill
of Rights, there is a provision that the right to form associations or societies whose purpose is not
contrary to law shall not be abridged. Now then, if the purpose of the state is to prohibit the strikes
coming from employees exercising government functions, that could be done because the moment
that is prohibited, then the union which will go on strike will be an illegal union. And that provision is
carried in Republic Act 875. In Republic Act 875, workers, including those from the government-owned
and controlled, are allowed to organize but they are prohibited from striking. So, the fear of our
honorable Vice- President is unfounded. It does not mean that because we approve this resolution, it
carries with it the right to strike. That is a different matter. As a matter of fact, that subject is now
being discussed in the Committee on Social Justice because we are trying to find a solution to this
problem. We know that this problem exist; that the moment we allow anybody in the government to
strike, then what will happen if the members of the Armed Forces will go on strike? What will happen to
those people trying to protect us? So that is a matter of discussion in the Committee on Social Justice.
But, I repeat, the right to form an organization does not carry with it the right to strike. [Record of the
Constitutional Commission, vol. 1, p. 569].
It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by the Labor Code (P.D. 442) in 1974,
expressly banned strikes by employees in the Government, including instrumentalities exercising governmental
functions, but excluding entities entrusted with proprietary functions:
.Sec. 11. Prohibition Against Strikes in the Government. The terms and conditions of employment in
the Government, including any political subdivision or instrumentality thereof, are governed by law
and it is declared to be the policy of this Act that employees therein shall not strike for the purpose of
securing changes or modification in their terms and conditions of employment. Such employees may
belong to any labor organization which does not impose the obligation to strike or to join in
strike:Provided, however, That this section shall apply only to employees employed in governmental
functions and not those employed in proprietary functions of the Government including but not limited
to governmental corporations.

No similar provision is found in the Labor Code, although at one time it recognized the right of employees of
government corporations established under the Corporation Code to organize and bargain collectively and those in the
civil service to "form organizations for purposes not contrary to law" [Art. 244, before its amendment by B.P. Blg. 70 in
1980], in the same breath it provided that "[t]he 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" [now Art. 276]. Understandably, the Labor Code is silent as to whether or not government
employees may strike, for such are excluded from its coverage [Ibid]. But then the Civil Service Decree [P.D. No. 807],
is equally silent on the matter.
On June 1, 1987, to implement the constitutional guarantee of the right of government employees to organize, the
President issued E.O. No. 180 which provides guidelines for the exercise of the right to organize of government
employees. In Section 14 thereof, it is provided that "[t]he Civil Service law and rules governing concerted activities
and strikes in the government service shall be observed, subject to any legislation that may be enacted by Congress."
The President was apparently referring to Memorandum Circular No. 6, s. 1987 of the Civil Service Commission under
date April 21, 1987 which, "prior to the enactment by Congress of applicable laws concerning strike by government
employees ... enjoins under pain of administrative sanctions, all government officers and employees from staging
strikes, demonstrations, mass leaves, walk-outs and other forms of mass action which will result in temporary
stoppage or disruption of public service." The air was thus cleared of the confusion. At present, in the absence of any
legislation allowing government employees to strike, recognizing their right to do so, or regulating the exercise of the
right, they are prohibited from striking, by express provision of Memorandum Circular No. 6 and as implied in E.O. No.
180. [At this juncture, it must be stated that the validity of Memorandum Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition against strikes?
The Court is of the considered view that they are. Considering that under the 1987 Constitution "[t]he civil service
embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned
or controlled corporations with original charters" [Art. IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the
employees in the civil service are denominated as "government employees"] and that the SSS is one such
government-controlled corporation with an original charter, having been created under R.A. No. 1161, its employees
are part of the civil service [NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and are covered by the
Civil Service Commission's memorandum prohibiting strikes. This being the case, the strike staged by the employees
of the SSS was illegal.
The statement of the Court in Alliance of Government Workers v. Minister of Labor and Employment [G.R. No. 60403,
August 3, 1:983, 124 SCRA 11 is relevant as it furnishes the rationale for distinguishing between workers in the private
sector and government employees with regard to the right to strike:
The general rule in the past and up to the present is that 'the terms and conditions of employment in
the Government, including any political subdivision or instrumentality thereof are governed by law"
(Section 11, the Industrial Peace Act, R.A. No. 875, as amended and Article 277, the Labor Code, P.D.
No. 442, as amended). Since the terms and conditions of government employment are fixed by law,
government workers cannot use the same weapons employed by workers in the private sector to
secure concessions from their employers. The principle behind labor unionism in private industry is
that industrial peace cannot be secured through compulsion by law. Relations between private
employers and their employees rest on an essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process of collective bargaining. In
government employment, however, it is the legislature and, where properly given delegated power,
the administrative heads of government which fix the terms and conditions of employment. And this is
effected through statutes or administrative circulars, rules, and regulations, not through collective
bargaining agreements. [At p. 13; Emphasis supplied].
Apropos is the observation of the Acting Commissioner of Civil Service, in his position paper submitted to the 1971
Constitutional Convention, and quoted with approval by the Court in Alliance, to wit:
It is the stand, therefore, of this Commission that by reason of the nature of the public employer and
the peculiar character of the public service, it must necessarily regard the right to strike given to
unions in private industry as not applying to public employees and civil service employees. It has been

stated that the Government, in contrast to the private employer, protects the interest of all people in
the public service, and that accordingly, such conflicting interests as are present in private labor
relations could not exist in the relations between government and those whom they employ. [At pp. 1617; also quoted in National Housing Corporation v. Juco, G.R. No. 64313, January 17,1985,134 SCRA
172,178-179].
E.O. No. 180, which provides guidelines for the exercise of the right to organize of government employees, while
clinging to the same philosophy, has, however, relaxed the rule to allow negotiation where the terms and conditions of
employment involved are not among those fixed by law. Thus:
.SECTION 13. Terms and conditions of employment or improvements thereof, except those that are
fixed by law, may be the subject of negotiations between duly recognized employees' organizations
and appropriate government authorities.
The same executive order has also provided for the general mechanism for the settlement of labor disputes in the
public sector to wit:
.SECTION 16. The Civil Service and labor laws and procedures, whenever applicable, shall be followed
in the resolution of complaints, grievances and cases involving government employees. In case any
dispute remains unresolved after exhausting all the available remedies under existing laws and
procedures, the parties may jointly refer the dispute to the [Public Sector Labor- Management] Council
for appropriate action.
Government employees may, therefore, through their unions or associations, either petition the Congress for the
betterment of the terms and conditions of employment which are within the ambit of legislation or negotiate with the
appropriate government agencies for the improvement of those which are not fixed by law. If there be any unresolved
grievances, the dispute may be referred to the Public Sector Labor - Management Council for appropriate action. But
employees in the civil service may not resort to strikes, walk-outs and other temporary work stoppages, like workers in
the private sector, to pressure the Govemment to accede to their demands. As now provided under Sec. 4, Rule III of
the Rules and Regulations to Govern the Exercise of the Right of Government- Employees to Self- Organization, which
took effect after the instant dispute arose, "[t]he terms and conditions of employment in the government, including
any political subdivision or instrumentality thereof and government- owned and controlled corporations with original
charters are governed by law and employees therein shall not strike for the purpose of securing changes thereof."
II
The strike staged by the employees of the SSS belonging to petitioner union being prohibited by law, an injunction
may be issued to restrain it.
It is futile for the petitioners to assert that the subject labor dispute falls within the exclusive jurisdiction of the NLRC
and, hence, the Regional Trial Court had no jurisdiction to issue a writ of injunction enjoining the continuance of the
strike. The Labor Code itself provides that terms and conditions of employment of government employees shall be
governed by the Civil Service Law, rules and regulations [Art. 276]. More importantly, E.O. No. 180 vests the Public
Sector Labor - Management Council with jurisdiction over unresolved labor disputes involving government employees
[Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the exercise of its general jurisdiction under B.P. Blg.
129, as amended, from assuming jurisdiction over the SSS's complaint for damages and issuing the injunctive writ
prayed for therein. Unlike the NLRC, the Public Sector Labor - Management Council has not been granted by law
authority to issue writs of injunction in labor disputes within its jurisdiction. Thus, since it is the Council, and not the
NLRC, that has jurisdiction over the instant labor dispute, resort to the general courts of law for the issuance of a writ
of injunction to enjoin the strike is appropriate.
Neither could the court a quo be accused of imprudence or overzealousness, for in fact it had proceeded with caution.
Thus, after issuing a writ of injunction enjoining the continuance of the strike to prevent any further disruption of public
service, the respondent judge, in the same order, admonished the parties to refer the unresolved controversies
emanating from their employer- employee relationship to the Public Sector Labor - Management Council for
appropriate action [Rollo, p. 86].

III
In their "Petition/Application for Preliminary and Mandatory Injunction," and reiterated in their reply and supplemental
reply, petitioners allege that the SSS unlawfully withheld bonuses and benefits due the individual petitioners and they
pray that the Court issue a writ of preliminary prohibitive and mandatory injunction to restrain the SSS and its agents
from withholding payment thereof and to compel the SSS to pay them. In their supplemental reply, petitioners
annexed an order of the Civil Service Commission, dated May 5, 1989, which ruled that the officers of the SSSEA who
are not preventively suspended and who are reporting for work pending the resolution of the administrative cases
against them are entitled to their salaries, year-end bonuses and other fringe benefits and affirmed the previous order
of the Merit Systems Promotion Board.
The matter being extraneous to the issues elevated to this Court, it is Our view that petitioners' remedy is not to
petition this Court to issue an injunction, but to cause the execution of the aforesaid order, if it has already become
final.
WHEREFORE, no reversible error having been committed by the Court of Appeals, the instant petition for review is
hereby DENIED and the decision of the appellate court dated March 9, 1988 in CA-G.R. SP No. 13192 is AFFIRMED.
Petitioners' "Petition/Application for Preliminary and Mandatory Injunction" dated December 13,1988 is DENIED.
SO ORDERED.
G.R. Nos. L-58674-77 July 11, 1990
PEOPLE OF THE PHILIPPINES, petitioner,
vs.
HON. DOMINGO PANIS, Presiding Judge of the Court of First Instance of Zambales & Olongapo City,
Branch III and SERAPIO ABUG, respondents.

CRUZ, J:
The basic issue in this case is the correct interpretation of Article 13(b) of P.D. 442, otherwise known as the Labor
Code, reading as follows:
(b) Recruitment and placement' refers to any act of canvassing, enlisting, contracting, transporting,
hiring, or procuring workers, and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not: Provided, That any person or entity which, in
any manner, offers or promises for a fee employment to two or more persons shall be deemed
engaged in recruitment and placement.
Four informations were filed on January 9, 1981, in the Court of First Instance of Zambales and Olongapo City alleging
that Serapio Abug, private respondent herein, "without first securing a license from the Ministry of Labor as a holder of
authority to operate a fee-charging employment agency, did then and there wilfully, unlawfully and criminally operate
a private fee charging employment agency by charging fees and expenses (from) and promising employment in Saudi
Arabia" to four separate individuals named therein, in violation of Article 16 in relation to Article 39 of the Labor
Code. 1
Abug filed a motion to quash on the ground that the informations did not charge an offense because he was accused of
illegally recruiting only one person in each of the four informations. Under the proviso in Article 13(b), he claimed,
there would be illegal recruitment only "whenever two or more persons are in any manner promised or offered any
employment for a fee. " 2
Denied at first, the motion was reconsidered and finally granted in the Orders of the trial court dated June 24 and
September 17, 1981. The prosecution is now before us on certiorari. 3

The posture of the petitioner is that the private respondent is being prosecuted under Article 39 in relation to Article 16
of the Labor Code; hence, Article 13(b) is not applicable. However, as the first two cited articles penalize acts of
recruitment and placement without proper authority, which is the charge embodied in the informations, application of
the definition of recruitment and placement in Article 13(b) is unavoidable.
The view of the private respondents is that to constitute recruitment and placement, all the acts mentioned in this
article should involve dealings with two or mre persons as an indispensable requirement. On the other hand, the
petitioner argues that the requirement of two or more persons is imposed only where the recruitment and placement
consists of an offer or promise of employment to such persons and always in consideration of a fee. The other acts
mentioned in the body of the article may involve even only one person and are not necessarily for profit.
Neither interpretation is acceptable. We fail to see why the proviso should speak only of an offer or promise of
employment if the purpose was to apply the requirement of two or more persons to all the acts mentioned in the basic
rule. For its part, the petitioner does not explain why dealings with two or more persons are needed where the
recruitment and placement consists of an offer or promise of employment but not when it is done through "canvassing,
enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers.
As we see it, the proviso was intended neither to impose a condition on the basic rule nor to provide an exception
thereto but merely to create a presumption. The presumption is that the individual or entity is engaged in recruitment
and placement whenever he or it is dealing with two or more persons to whom, in consideration of a fee, an offer or
promise of employment is made in the course of the "canvassing, enlisting, contracting, transporting, utilizing, hiring
or procuring (of) workers. "
The number of persons dealt with is not an essential ingredient of the act of recruitment and placement of workers.
Any of the acts mentioned in the basic rule in Article 13(b) win constitute recruitment and placement even if only one
prospective worker is involved. The proviso merely lays down a rule of evidence that where a fee is collected in
consideration of a promise or offer of employment to two or more prospective workers, the individual or entity dealing
with them shall be deemed to be engaged in the act of recruitment and placement. The words "shall be deemed"
create that presumption.
This is not unlike the presumption in article 217 of the Revised Penal Code, for example, regarding the failure of a
public officer to produce upon lawful demand funds or property entrusted to his custody. Such failure shall beprima
facie evidence that he has put them to personal use; in other words, he shall be deemed to have malversed such funds
or property. In the instant case, the word "shall be deemed" should by the same token be given the force of a
disputable presumption or of prima facie evidence of engaging in recruitment and placement. (Klepp vs. Odin Tp.,
McHenry County 40 ND N.W. 313, 314.)
It is unfortunate that we can only speculate on the meaning of the questioned provision for lack of records of debates
and deliberations that would otherwise have been available if the Labor Code had been enacted as a statute rather
than a presidential decree. The trouble with presidential decrees is that they could be, and sometimes were, issued
without previous public discussion or consultation, the promulgator heeding only his own counsel or those of his close
advisers in their lofty pinnacle of power. The not infrequent results are rejection, intentional or not, of the interest of
the greater number and, as in the instant case, certain esoteric provisions that one cannot read against the
background facts usually reported in the legislative journals.
At any rate, the interpretation here adopted should give more force to the campaign against illegal recruitment and
placement, which has victimized many Filipino workers seeking a better life in a foreign land, and investing hardearned savings or even borrowed funds in pursuit of their dream, only to be awakened to the reality of a cynical
deception at the hands of theirown countrymen.
WHEREFORE, the Orders of June 24, 1981, and September 17, 1981, are set aside and the four informations against
the private respondent reinstated. No costs.
SO ORDERED.
G.R. No. 167614

March 24, 2009

ANTONIO M. SERRANO, Petitioner,

vs.
Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their earnings
have built houses, provided health care, equipped schools and planted the seeds of businesses. They have woven
together the world by transmitting ideas and knowledge from country to country. They have provided the dynamic
human link between cultures, societies and economies. Yet, only recently have we begun to understand not only how
much international migration impacts development, but how smart public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 20071
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, Republic Act
(R.A.) No. 8042,2 to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas employment without just, valid or authorized cause
as defined by law or contract, the workers shall be entitled to the full reimbursement of his placement fee with interest
of twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for
three (3) months for every year of the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates the
hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to their lump-sum salary either
for the unexpired portion of their employment contract "or for three months for every year of the unexpired term,
whichever is less" (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional rights in that
it impairs the terms of their contract, deprives them of equal protection and denies them due process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004
Decision3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject clause, entreating this
Court to declare the subject clause unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a
Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following terms
and conditions:
Duration of contract

12 months

Position

Chief Officer

Basic monthly salary

US$1,400.00

Hours of work

48.0 hours per week

Overtime

US$700.00 per month

Vacation leave with pay

7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment
contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and
representation of respondents that he would be made Chief Officer by the end of April 1998. 6
Respondents did not deliver on their promise to make petitioner Chief Officer. 7 Hence, petitioner refused to stay on as
Second Officer and was repatriated to the Philippines on May 26, 1998. 8
Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at
the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract,
leaving an unexpired portion of nine (9) months and twenty-three (23) days.

Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal and for payment
of his money claims in the total amount of US$26,442.73, broken down as follows:
May
27/31,
1998 (5
days)
incl.
Leave
pay

US$ 413.90

June
01/30,
1998

2,590.00

July
01/31,
1998

2,590.00

August
01/31,
1998

2,590.00

Sept.
01/30,
1998

2,590.00

Oct.
01/31,
1998

2,590.00

Nov.
01/30,
1998

2,590.00

Dec.
01/31,
1998

2,590.00

Jan.
01/31,
1999

2,590.00

Feb.
01/28,
1999

2,590.00

Mar.
1,640.00
1/19,
1999 (19
days)
incl.
leave
pay
-------------------------------------------------------------------------------25,382.23
Amount
adjusted
to chief
mate's
salary
(March
19/31,
1998 to
April
1/30,
1998) +

1,060.5010

--------------------------------------------------------------------------------------------TOTAL
CLAIM

US$ 26,442.7311

as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding him
monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the
complainant (petitioner) by the respondents in the above-entitled case was illegal and the respondents are
hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the
rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND SEVEN HUNDRED
SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for three (3)
months of the unexpired portion of the aforesaid contract of employment.1avvphi1
The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine
Currency, based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S.
DOLLARS (US$ 45.00),12 representing the complainants claim for a salary differential. In addition, the
respondents are hereby ordered to pay the complainant, jointly and severally, in Philippine Currency, at the
exchange rate prevailing at the time of payment, the complainants (petitioner's) claim for attorneys fees
equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee under this Decision.
The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.
SO ORDERED.13 (Emphasis supplied)
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of
three months only -- rather than the entire unexpired portion of nine months and 23 days of petitioner's
employment contract - applying the subject clause. However, the LA applied the salary rate of US$2,590.00,
consisting of petitioner's "[b]asic salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, +
US$490.00/month, vacation leave pay = US$2,590.00/compensation per month." 14
Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA
that petitioner was illegally dismissed.
Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court
in Triple Integrated Services, Inc. v. National Labor Relations Commission 17 that in case of illegal dismissal,
OFWs are entitled to their salaries for the unexpired portion of their contracts. 18
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay
complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of
payment the following:
1. Three (3) months salary
$1,400 x 3

US$4,2

2. Salary differential
US$4,245.00
3. 10% Attorneys fees

4
TOTAL

The other findings are affirmed.

US$4,6

SO ORDERED.19
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by reducing the applicable
salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 "does not provide for the award of overtime pay,
which should be proven to have been actually performed, and for vacation leave pay." 20
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject
clause.21 The NLRC denied the motion.22
Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the subject
clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed by
this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No.
151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary rate;
however, the CA skirted the constitutional issue raised by petitioner. 25
His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on the
following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable decision of
the Supreme Court involving similar issue of granting unto the migrant worker back wages equal to the unexpired
portion of his contract of employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation of Section
10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law when it failed to discharge
its judicial duty to decide questions of substance not theretofore determined by the Honorable Supreme Court,
particularly, the constitutional issues raised by the petitioner on the constitutionality of said law, which unreasonably,
unfairly and arbitrarily limits payment of the award for back wages of overseas workers to three (3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of Appeals
gravely erred in law in excluding from petitioners award the overtime pay and vacation pay provided in his contract
since under the contract they form part of his salary. 28
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he
intends to make use of the monetary award for his medical treatment and medication. 29 Required to comment, counsel
for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award and, at the
same time, praying that the constitutional question be resolved. 30
Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the
petition mindful of the extreme importance of the constitutional question raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise not
disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains disputed is only the
computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate of
US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his
employment contract or a total of US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00 awarded
by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries for
the entire nine months and 23 days left of his employment contract, computed at the monthly rate of US$2,590.00. 31

The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to
negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed
salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino
workers (local workers) by putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of
illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared
illegal; that the disparate treatment is not reasonable as there is no substantial distinction between the two
groups;33 and that it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights
and welfare of all Filipino workers, whether deployed locally or overseas. 35
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing
jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this,
petitioner urges the Court to sort them out for the guidance of affected OFWs. 36
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but to
benefit local placement agencies. He marks the statement made by the Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the
acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino
migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37(Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the wellbeing of OFWs. Not only that, the provision makes foreign employers better off than local employers because in cases
involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of only three
months of the unexpired employment contract while local employers are liable for the full lump-sum salaries of their
employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the amount of backwages they have to give
their employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence on the matter.
On the other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the
maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more
than three (3) months.38
Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries and
other emoluments he is entitled to under his fixed-period employment contract. 39
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained, for
this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which was
when he filed an appeal before the NLRC.40
The Arguments of the Solicitor General
The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not have
impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract, the
provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of
money claims, as this was not stipulated upon by the parties. 42
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such
that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential
elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine
territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction,
or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor Relations
Commission43 and Millares v. National Labor Relations Commission, 44 OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can become regular employees. Hence, the OSG
posits that there are rights and privileges exclusive to local workers, but not available to OFWs; that these peculiarities
make for a reasonable and valid basis for the differentiated treatment under the subject clause of the money claims of
OFWs who are illegally dismissed. Thus, the provision does not violate the equal protection clause nor Section 18,
Article II of the Constitution.45

Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the
solidary liability of placement agencies for this "redounds to the benefit of the migrant workers whose welfare the
government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that
migrant workers are properly deployed and are employed under decent and humane conditions." 46
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the Congress,
it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a conflict of
rights susceptible of judicial determination; 47 (2) that the constitutional question is raised by a proper party48 and at
the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the case, 50otherwise the Court
will dismiss the case or decide the same on some other ground. 51
Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally
aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three
months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue
be raised at the earliest opportunity entails the interposition of the issue in the pleadings before acompetent court,
such that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial
and, if not considered in the trial, it cannot be considered on appeal. 52 Records disclose that the issue on the
constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for
Partial Reconsideration with said labor tribunal,53 and reiterated in his Petition forCertiorari before the
CA.54 Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial
function its function in the present case is limited to determining questions of fact to which the legislative policy of
R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid down by the law
itself;55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its
provisions. The CA, on the other hand, is vested with the power of judicial review or the power to declare
unconstitutional a law or a provision thereof, such as the subject clause. 56Petitioner's interposition of the constitutional
issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its
decision.
The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the
monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment
contract, and not just for a period of three months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,
Article III of the Constitution on non-impairment
of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his
employment and the fixed salary package he will receive 57 is not tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation, 58and
cannot affect acts or contracts already perfected;59 however, as to laws already in existence, their provisions are read
into contracts and deemed a part thereof.60 Thus, the non-impairment clause under Section 10, Article II is limited in
application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging,
abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment
contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the

subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998
employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the
ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the
State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the
noble end in view of ensuring respect for the dignity and well-being of OFWs wherever they may be employed. 61 Police
power legislations adopted by the State to promote the health, morals, peace, education, good order, safety, and
general welfare of the people are generally applicable not only to future contracts but even to those already in
existence, for all private contracts must yield to the superior and legitimate measures taken by the State to promote
public welfare.62
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the
equal protection of the law.
Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction as to place
of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic security
and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary
obligations should be borne by them in equal degree; none should be denied the protection of the laws which is
enjoyed by, or spared the burden imposed on, others in like circumstances. 65
Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system of
classification into its legislation; however, to be valid, the classification must comply with these requirements: 1) it is
based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions
only; and 4) it applies equally to all members of the class. 66
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a law:
a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be rationally
related to serving a legitimate state interest; 67 b) the middle-tier or intermediate scrutiny in which the government
must show that the challenged classification serves an important state interest and that the classification is at least
substantially related to serving that interest;68 and c) strict judicial scrutiny69 in which a legislative classification which
impermissibly interferes with the exercise of a fundamental right 70 or operates to the peculiar disadvantage of a
suspect class71 is presumed unconstitutional, and the burden is upon the government to prove that the classification is
necessary to achieve a compelling state interest and that it is the least restrictive means to protect such
interest.72
Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications 73 based on race74 or
gender75 but not when the classification is drawn along income categories. 76
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v.
Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas (BSP),
a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been exempted from the SSL by
their respective charters. Finding that the disputed provision contained a suspect classification based on salary grade,
the Court deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said
provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to
wit:
Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded
recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference stops
where the classification violates a fundamental right, or prejudices persons accorded special protection by the
Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of constitutional

guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational basis should not
suffice.
Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter
judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and
authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support
many of our decisions. We should not place undue and fawning reliance upon them and regard them as indispensable
mental crutches without which we cannot come to our own decisions through the employment of our own
endowments. We live in a different ambience and must decide our own problems in the light of our own interests and
needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice.
Our laws must be construed in accordance with the intention of our own lawmakers and such intent may be deduced
from the language of each law and the context of other local legislation related thereto. More importantly, they must
be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be
stressed that our public interest is distinct and different from others.
xxxx
Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective judicial
intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims
"equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to promote
social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are
clear commands to the State to take affirmative action in the direction of greater equality. x x x [T]here is thus in the
Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable
measure of equality.
Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of
society, including labor. Under the policy of social justice, the law bends over backward to accommodate the interests
of the working class on the humane justification that those with less privilege in life should have more in law. And the
obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the
judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws and the
equalization of social and economic forces by the State so that justice in its rational and objectively secular conception
may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality,
recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be based
on the "rational basis" test, and the legislative discretion would be given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of
prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to
be more strict. A weak and watered down view would call for the abdication of this Courts solemn duty to strike
down any law repugnant to the Constitution and the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will be
struck down regardless of the character or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is
akin to a distinction based on economic class and status, with the higher grades as recipients of a benefit specifically
withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are competitive
with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The
implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while
employees higher in rank - possessing higher and better education and opportunities for career advancement - are
given higher compensation packages to entice them to stay. Considering that majority, if not all, the rank-and-file
employees consist of people whose status and rank in life are less and limited, especially in terms of job marketability,
it is they - and not the officers - who have the real economic and financial need for the adjustment . This is in accord
with the policy of the Constitution "to free the people from poverty, provide adequate social services, extend to them a
decent standard of living, and improve the quality of life for all." Any act of Congress that runs counter to this
constitutional desideratum deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied)

Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case also employs
the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs. However, a closer
examination reveals that the subject clause has a discriminatory intent against, and an invidious impact on, OFWs at
two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts ofone
year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one
year or more
As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission79 (Second Division, 1999) that the Court laid down the following rules on the application of the periods
prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed
overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract
or three (3) months salary for every year of the unexpired term, whichever is less, comes into play only
when the employment contract concerned has a term of at least one (1) year or more. This is evident
from the words "for every year of the unexpired term" which follows the words "salaries x x x for three
months."To follow petitioners thinking that private respondent is entitled to three (3) months salary only simply
because it is the lesser amount is to completely disregard and overlook some words used in the statute while giving
effect to some. This is contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care
should be taken that every part or word thereof be given effect since the law-making body is presumed to know the
meaning of the words employed in the statue and to have used them advisedly. Ut res magis valeat quam
pereat.80 (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded his
salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5). One
was Asian Center for Career and Employment System and Services v. National Labor Relations Commission(Second
Division, October 1998),81 which involved an OFW who was awarded a two-year employment contract,but was
dismissed after working for one year and two months. The LA declared his dismissal illegal and awarded him
SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court
reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized
cause is entitled to his salary for the unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private
respondent should therefore be paid his basic salary corresponding to three (3) months or a total of SR3,600. 82
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division, December
1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12-month contract,
which was deemed renewed for another 12 months. After serving for one year and seven-and-a-half months,
respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion of four
and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in
the Computation
of the Monetary
Award

Skippers v.
Maguad84

6 months

2 months

4 months

4 months

Bahia Shipping
v. Reynaldo
Chua 85

9 months

8 months

4 months

4 months

Centennial
Transmarine v.
dela Cruz l86

9 months

4 months

5 months

5 months

Talidano v.
Falcon87

12 months

3 months

9 months

3 months

Univan v. CA88

12 months

3 months

9 months

3 months

Oriental v. CA89

12 months

more than 2
months

10 months

3 months

PCL v. NLRC90

12 months

more than 2
months

more or less 9
months

3 months

Olarte v.
Nayona91

12 months

21 days

11 months and 9
days

3 months

JSS v.Ferrer92

12 months

16 days

11 months and
24 days

3 months

9 months and
7 days

2 months and 23
days

2 months and 23
days

Pentagon v.
Adelantar93

12 months

Phil. Employ v.
Paramio, et al.94

12 months

10 months

2 months

Unexpired portion

Flourish
Maritime v.
Almanzor 95

2 years

26 days

23 months and 4
days

6 months or 3
months for each
year of contract

Athenna
Manpower v.
Villanos 96

1 year, 10
months and
28 days

1 month

1 year, 9 months
and 28 days

6 months or 3
months for each
year of contract

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

employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix
below speaks for itself:
Case Title

Contract
Period

Period of
Service

Unexpired
Period

Period Applied in
the Computation of
the Monetary Award

ATCI v. CA, et
al.98

2 years

2 months

22 months

22 months

Phil. Integrated
v. NLRC99

2 years

7 days

23 months
and 23 days

23 months and 23 days

JGB v. NLC100

2 years

9 months

15 months

15 months

Agoy v. NLRC101

2 years

2 months

22 months

22 months

EDI v. NLRC, et
al.102

2 years

5 months

19 months

19 months

Barros v. NLRC,
et al.103

12 months

4 months

8 months

8 months

Philippine
Transmarine v.
Carilla104

12 months

6 months
and 22 days

5 months and
18 days

5 months and 18 days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof, were
treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims were
subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of their
employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of computation of the money
claims of illegally dismissed OFWs based on their employment periods, in the process singling out one category
whose contracts have an unexpired portion of one year or more and subjecting them to the peculiar disadvantage of
having their monetary awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is
less, but all the while sparing the other category from such prejudice, simply because the latter's unexpired contracts
fall short of one year.
Among OFWs With Employment Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the
accuracy of the Marsaman interpretation.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired term, whichever is
less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary meaning, the word "term"
means a limited or definite extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is
significant in many ways: first, the unexpired term must be at least one year, for if it were any shorter, there would be
no occasion for such unexpired term to be measured by every year; and second, the original term must be more than
one year, for otherwise, whatever would be the unexpired term thereof will not reach even a year. Consequently, the
more decisive factor in the determination of when the subject clause "for three (3) months forevery year of the
unexpired term, whichever is less" shall apply is not the length of the original contract period as held
in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause applies in cases
when the unexpired portion of the contract period is at least one year, which arithmetically requires that the original
contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are
for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled
to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more
remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their
salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes
hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month. OFW-

C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least 12
months remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's
monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months
unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of
the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject
clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00,
which is equivalent to his/her total salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally
dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term
employment.107
The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce
(1888),108 to wit:
Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of a
fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfillment of
said contract until the termination of the period agreed upon.
Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the
provisions contained in the following articles.
In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the liability of a shipping
company for the illegal discharge of its managers prior to the expiration of their fixed-term employment. The Court
therein held the shipping company liable for the salaries of its managers for the remainder of their fixed-term
employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or
voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in
serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or
manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie, 110 in
which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally dismissed
employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present, 111 Article 299 of the Code of Commerce was replaced by
Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work cannot
leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive "and" so as to
apply the provision to local workers who are employed for a time certain although for no particular skill. This
interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company. 113 And in both Lemoine and
Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on Article 1586, local
workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by the terms of
their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay 114 held:
The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the
contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to seek other
employment of the same kind in the same community, for the purpose of reducing the damages resulting from such
wrongful discharge. However, while this is the general rule, the burden of showing that he failed to make an effort to
secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged under a contract of employment his prima facie damage is the
amount which he would be entitled to had he continued in such employment until the termination of the period.

(Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich.,
43.)115 (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2
(Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of Work),
Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do
not expressly provide for the remedies available to a fixed-term worker who is illegally discharged. However, it is noted
that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on the payment of damages
underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving the illegal discharge of a
local worker whose fixed-period employment contract was entered into in 1952, when the new Civil Code was already
in effect.118
More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term
employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v.
Ople,119involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor
Relations Commission,120 an OFW who was illegally dismissed prior to the expiration of her fixed-period employment
contract as a baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The Court
arrived at the same ruling in Anderson v. National Labor Relations Commission, 121 which involved a foreman hired in
1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine months on the job -the Court awarded him salaries corresponding to 15 months, the unexpired portion of his contract. In Asia World
Recruitment, Inc. v. National Labor Relations Commission, 122 a Filipino working as a security officer in 1989 in Angola
was awarded his salaries for the remaining period of his 12-month contract after he was wrongfully discharged. Finally,
in Vinta Maritime Co., Inc. v. National Labor Relations Commission, 123 an OFW whose 12-month contract was illegally
cut short in the second month was declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged
were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for
the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of
the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment
contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no such
limitation is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the computation
of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap
on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the
claims of other OFWs or local workers with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now subjects
the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest through the
least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution
and calibrated by history.124 It is akin to the paramount interest of the state125 for which some individual liberties must
give way, such as the public interest in safeguarding health or maintaining medical standards, 126 or in maintaining
access to information on matters of public concern. 127
In the present case, the Court dug deep into the records but found no compelling state interest that the subject clause
may possibly serve.
The OSG defends the subject clause as a police power measure "designed to protect the employment of Filipino
seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of getting
hired by foreign employers." The limitation also protects the interest of local placement agencies, which otherwise may
be made to shoulder millions of pesos in "termination pay." 128
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that
jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the
acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino
migrant workers, liability for money are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The
survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed
and are employed under decent and humane conditions.129 (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state
interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill No.
14314 (HB 14314), from which the law originated; 130 but the speech makes no reference to the underlying reason for
the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314 resembles the subject
clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue
of the complaint, the claim arising out of an employer-employee relationship or by virtue of any law or contract
involving Filipino workers for overseas employment including claims for actual, moral, exemplary and other forms of
damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be
joint and several.
Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this
Section shall not be less than fifty percent (50%) of such money claims: Provided, That any installment payments, if
applicable, to satisfy any such compromise or voluntary settlement shall not be more than two (2) months. Any
compromise/voluntary agreement in violation of this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the
responsible officials to any or all of the following penalties:
(1) The salary of any such official who fails to render his decision or resolution within the prescribed period
shall be, or caused to be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any appointive public office for five (5) years.
Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such official
may have incurred under other existing laws or rules and regulations as a consequence of violating the provisions of
this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims.
A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as the
5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the transcripts
of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing
Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no discernible state interest, let
alone a compelling one, that is sought to be protected or advanced by the adoption of the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that
would justify the perpetuation of the discrimination against OFWs under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs by
mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected.
There can never be a justification for any form of government action that alleviates the burden of one sector, but
imposes the same burden on another sector, especially when the favored sector is composed of private businesses
such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the
Constitution commands. The idea that private business interest can be elevated to the level of a compelling state
interest is odious.

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

Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to
substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid
governmental purpose.136
The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of OFWs
to their three-month salary in case of illegal dismissal, is to give them a better chance of getting hired by foreign
employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the records of the
deliberations leading to its enactment or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is for that precise reason that
the clause violates not just petitioner's right to equal protection, but also her right to substantive due process under
Section 1,137 Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire unexpired period of nine
months and 23 days of his employment contract, pursuant to law and jurisprudence prior to the enactment of R.A. No.
8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his
monetary award, because these are fixed benefits that have been stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE
Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is
understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is
compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any
work "performed" on designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the
computation of petitioner's monetary award, unless there is evidence that he performed work during those periods. As
the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v.
National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions
to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of
the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to
such benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the
same is given during the actual service of the seamen.
WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the unexpired
term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042
is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of
Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his
employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.

CLAUDIO S. YAP,
Petitioner,

G.R. No. 179532

Present:
CARPIO, J.,
Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

- versus -

THENAMARIS SHIPS MANAGEMENT

and INTERMARE MARITIME AGENCIES, INC.,
Respondents.

Promulgated:
May 30, 2011

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

DECISION
NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Civil Procedure, seeking
the reversal of the Court of Appeals (CA) Decision [2] dated February 28, 2007, which affirmed with modification the
National Labor Relations Commission (NLRC) resolution [3] dated April 20, 2005.
The undisputed facts, as found by the CA, are as follows:
[Petitioner] Claudio S. Yap was employed as electrician of the vessel, M/T SEASCOUT on 14 August
2001 by Intermare Maritime Agencies, Inc. in behalf of its principal, Vulture Shipping Limited. The
contract of employment entered into byYap and Capt. Francisco B. Adviento, the General Manager of
Intermare, was for a duration of 12 months. On 23 August 2001, Yap boarded M/T SEASCOUT and
commenced his job as electrician. However, on or about 08 November 2001, the vessel was sold. The
Philippine Overseas Employment Administration (POEA) was informed about the sale on 06 December
2001 in a letter signed by Capt. Adviento. Yap, along with the other crewmembers, was informed by
the Master of their vessel that the same was sold and will be scrapped. They were also informed about
the Advisory sent by Capt. Constatinou, which states, among others:
PLEASE ASK YR OFFICERS AND RATINGS IF THEY WISH TO BE TRANSFERRED TO OTHER VESSELS AFTER
VESSEL S DELIVERY (GREEK VIA ATHENS-PHILIPINOS VIA MANILA
FOR CREW NOT WISH TRANSFER TO DECLARE THEIR PROSPECTED TIME FOR REEMBARKATION IN
ORDER TO SCHEDULE THEM ACCLY
Yap received his seniority bonus, vacation bonus, extra bonus along with the scrapping
bonus. However, with respect to the payment of his wage, he refused to accept the payment of onemonth basic wage. He insisted that he was entitled to the payment of the unexpired portion of his
contract since he was illegally dismissed from employment. He alleged that he opted for immediate
transfer but none was made.
[Respondents], for their part, contended that Yap was not illegally dismissed. They alleged that following the
sale of the M/T SEASCOUT, Yap signed off from the vessel on 10 November 2001 and was paid his
wages corresponding to the months he worked or until 10 November 2001 plus his seniority bonus,
vacation bonus and extra bonus. They further alleged that Yaps employment contract was validly
terminated due to the sale of the vessel and no arrangement was made for Yaps transfer to
Thenamaris other vessels.[4]

Thus, Claudio S. Yap (petitioner) filed a complaint for Illegal Dismissal with Damages and Attorneys Fees before
the Labor Arbiter (LA). Petitioner claimed that he was entitled to the salaries corresponding to the unexpired portion of
his contract. Subsequently, he filed an amended complaint, impleading Captain Francisco Adviento of respondents
Intermare Maritime Agencies, Inc. (Intermare) and Thenamaris Ships Management (respondents), together with C.J.
Martionos, Interseas Trading and Financing Corporation, and Vulture Shipping Limited/Stejo Shipping Limited.

On July 26, 2004, the LA rendered a decision [5] in favor of petitioner, finding the latter to have been constructively and
illegally dismissed by respondents. Moreover, the LA found that respondents acted in bad faith when they assured
petitioner of re-embarkation and required him to produce an electrician certificate during the period of his contract,
but actually he was not able to board one despite of respondents numerous vessels. Petitioner made several followups for his re-embarkation but respondents failed to heed his plea; thus, petitioner was forced to litigate in order to
vindicate his rights. Lastly, the LA opined that since the unexpired portion of petitioners contract was less than one
year, petitioner was entitled to his salaries for the unexpired portion of his contract for a period of nine months. The LA
disposed, as follows:
WHEREFORE, in view of the foregoing, a decision is hereby rendered declaring complainant to
have been constructively dismissed. Accordingly, respondents Intermare Maritime Agency
Incorporated, Thenamaris Ships Mgt., and Vulture Shipping Limited are ordered to pay jointly and
severally complainant Claudio S. Yap the sum of $12,870.00 or its peso equivalent at the time of
payment. In addition, moral damages of ONE HUNDRED THOUSAND PESOS (P100,000.00) and
exemplary damages of FIFTY THOUSAND PESOS (P50,000.00) are awarded plus ten percent
(10%) of the total award as attorneys fees.
Other money claims are DISMISSED for lack of merit.
SO ORDERED.[6]

Aggrieved, respondents sought recourse from the NLRC.

In its decision[7] dated January 14, 2005, the NLRC affirmed the LAs findings that petitioner was indeed
constructively and illegally dismissed; that respondents bad faith was evident on their wilful failure to transfer
petitioner to another vessel; and that the award of attorneys fees was warranted. However, the NLRC held that instead
of an award of salaries corresponding to nine months, petitioner was only entitled to salaries for three months as
provided under Section 10[8] of Republic Act (R.A.) No. 8042, [9] as enunciated in our ruling in Marsaman Manning
Agency, Inc. v. National Labor Relations Commission.[10]Hence, the NLRC ruled in this wise:
WHEREFORE, premises considered, the decision of the Labor Arbiter finding the termination of
complainant illegal is hereby AFFIRMED with a MODIFICATION. Complainant[s] salary for the unexpired
portion of his contract should only be limited to three (3) months basic salary.
Respondents Intermare Maritime Agency, Inc.[,] Vulture Shipping Limited and Thenamaris Ship
Management are hereby ordered to jointly and severally pay complainant, the following:
1.
2.
3.
4.

Three (3) months basic salary US$4,290.00 or its peso equivalent at the time of actual
payment.
Moral damages P100,000.00
Exemplary damages P50,000.00
Attorneys fees equivalent to 10% of the total monetary award.

SO ORDERED.[11]

Respondents filed a Motion for Partial Reconsideration, [12] praying for the reversal and setting aside of the NLRC
decision, and that a new one be rendered dismissing the complaint. Petitioner, on the other hand, filed his own Motion
for Partial Reconsideration,[13] praying that he be paid the nine (9)-month basic salary, as awarded by the LA.

On April 20, 2005, a resolution[14] was rendered by the NLRC, affirming the findings of Illegal Dismissal and respondents
failure to transfer petitioner to another vessel. However, finding merit in petitioners arguments, the NLRC reversed its
earlier Decision, holding that there can be no choice to grant only three (3) months salary for every year of the
unexpired term because there is no full year of unexpired term which this can be applied. Hence
WHEREFORE, premises considered, complainants Motion for Partial Reconsideration is hereby
granted. The award of three (3) months basic salary in the sum of US$4,290.00 is hereby modified in
that complainant is entitled to his salary for the unexpired portion of employment contract in the sum
of US$12,870.00 or its peso equivalent at the time of actual payment.
All aspect of our January 14, 2005 Decision STANDS.
SO ORDERED.[15]
Respondents filed a Motion for Reconsideration, which the NLRC denied.

Undaunted, respondents filed a petition for certiorari[16] under Rule 65 of the Rules of Civil Procedure before the
CA. On February 28, 2007, the CA affirmed the findings and ruling of the LA and the NLRC that petitioner was
constructively and illegally dismissed. The CA held that respondents failed to show that the NLRC acted without
statutory authority and that its findings were not supported by law, jurisprudence, and evidence on record. Likewise,
the CA affirmed the lower agencies findings that the advisory of Captain Constantinou, taken together with the other
documents and additional requirements imposed on petitioner, only meant that the latter should have been reembarked. In the same token, the CA upheld the lower agencies unanimous finding of bad faith, warranting the
imposition of moral and exemplary damages and attorneys fees. However, the CA ruled that the NLRC erred in
sustaining the LAs interpretation of Section 10 of R.A. No. 8042. In this regard, the CA relied on the clause or for three
months for every year of the unexpired term, whichever is less provided in the 5th paragraph of Section 10 of R.A. No.
8042 and held:
In the present case, the employment contract concerned has a term of one year or 12 months
which commenced on August 14, 2001. However, it was preterminated without a valid cause.
[Petitioner] was paid his wages for the corresponding months he worked until the 10 th of November.
Pursuant to the provisions of Sec. 10, [R.A. No.] 8042, therefore, the option of three months for every
year of the unexpired term is applicable.[17]

Thus, the CA provided, to wit:

WHEREFORE, premises considered, this Petition for Certiorari is DENIED. The Decision dated
January 14, 2005, and Resolutions, dated April 20, 2005 and July 29, 2005, respectively, of public
respondent National Labor Relations Commission-Fourth Division, Cebu City, in NLRC No. V-000038-04
(RAB VIII (OFW)-04-01-0006) are hereby AFFIRMED with the MODIFICATION that private
respondent is entitled to three (3) months of basic salary computed at US$4,290.00 or its peso
equivalent at the time of actual payment.
Costs against Petitioners.[18]

Both parties filed their respective motions for reconsideration, which the CA, however, denied in its
Resolution[19] dated August 30, 2007.

Unyielding, petitioner filed this petition, raising the following issues:

1)

Whether or not Section 10 of R.A. [No.] 8042, to the extent that it affords
an illegally dismissed migrant worker the lesser benefit of salaries for [the] unexpired portion of
his employment contract or for three (3) months for every yearof the unexpired
term, whichever is less is constitutional; and

2)

Assuming that it is, whether or not the Court of Appeals gravely erred in granting petitioner
only three (3) months backwages when his unexpired term of 9 months is far short of the every
year of the unexpired term threshold.[20]

In the meantime, while this case was pending before this Court, we declared as unconstitutional the clause or
for three months for every year of the unexpired term, whichever is less provided in the 5thparagraph of Section 10 of
R.A. No. 8042 in the case of Serrano v. Gallant Maritime Services, Inc.[21] on March 24, 2009.

Apparently, unaware of our ruling in Serrano, petitioner claims that the 5th paragraph of Section 10, R.A. No.
8042, is violative of Section 1, [22] Article III and Section 3, [23] Article XIII of the Constitution to the extent that it gives an
erring employer the option to pay an illegally dismissed migrant worker only three months for every year of the
unexpired term of his contract; that said provision of law has long been a source of abuse by callous employers against
migrant workers; and that said provision violates the equal protection clause under the Constitution because, while
illegally dismissed local workers are guaranteed under the Labor Code of reinstatement with full backwages computed
from the time compensation was withheld from them up to their actual reinstatement, migrant workers, by virtue of
Section 10 of R.A. No. 8042, have to waive nine months of their collectible backwages every time they have a year of
unexpired term of contract to reckon with. Finally, petitioner posits that, assuming said provision of law is
constitutional, the CA gravely abused its discretion when it reduced petitioners backwages from nine months to three
months as his nine-month unexpired term cannot accommodate the lesser relief of three months for every year of the
unexpired term.[24]

On the other hand, respondents, aware of our ruling in Serrano, aver that our pronouncement of
unconstitutionality of the clause or for three months for every year of the unexpired term, whichever is lessprovided in
the 5th paragraph of Section 10 of R.A. No. 8042 in Serrano should not apply in this case because Section 10 of R.A. No.
8042 is a substantive law that deals with the rights and obligations of the parties in case of Illegal Dismissal of a
migrant worker and is not merely procedural in character. Thus, pursuant to the Civil Code, there should be no
retroactive application of the law in this case. Moreover, respondents asseverate that petitioners tanker allowance of
US$130.00 should not be included in the computation of the award as petitioners basic salary, as provided under his
contract, was only US$1,300.00. Respondents submit that the CA erred in its computation since it included the said
tanker allowance. Respondents opine that petitioner should be entitled only to US$3,900.00 and not to US$4,290.00,
as granted by the CA. Invoking Serrano, respondents claim that the tanker allowance should be excluded from the
definition of the term salary. Also, respondents manifest that the full sum of P878,914.47 in Intermares bank account

was garnished and subsequently withdrawn and deposited with the NLRC Cashier of Tacloban City on February 14,
2007. On February 16, 2007, while this case was pending before the CA, the LA issued an Order releasing the amount
of P781,870.03 to petitioner as his award, together with the sum of P86,744.44 to petitioners former lawyer as
attorneys fees, and the amount of P3,570.00 as execution and deposit fees. Thus, respondents pray that the instant
petition be denied and that petitioner be directed to return to Intermare the sum of US$8,970.00 or its peso
equivalent.[25]

On this note, petitioner counters that this new issue as to the inclusion of the tanker allowance in the
computation of the award was not raised by respondents before the LA, the NLRC and the CA, nor was it raised in
respondents pleadings other than in their Memorandum before this Court, which should not be allowed under the
circumstances.[26]
The petition is impressed with merit.

Prefatorily, it bears emphasis that the unanimous finding of the LA, the NLRC and the CA that the dismissal of
petitioner was illegal is not disputed. Likewise not disputed is the tribunals unanimous finding of bad faith on the part
of respondents, thus, warranting the award of moral and exemplary damages and attorneys fees. What remains in
issue, therefore, is the constitutionality of the 5 th paragraph of Section 10 of R.A. No. 8042 and, necessarily, the proper
computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.

Verily, we have already declared in Serrano that the clause or for three months for every year of the unexpired
term, whichever is less provided in the 5th paragraph of Section 10 of R.A. No. 8042 is unconstitutional for being
violative of the rights of Overseas Filipino Workers (OFWs) to equal protection of the laws. In an exhaustive discussion
of the intricacies and ramifications of the said clause, this Court, in Serrano, pertinently held:
The Court concludes that the subject clause contains a suspect classification in
that, in the computation of the monetary benefits of fixed-term employees who are
illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired
portion of one year or more in their contracts, but none on the claims of other OFWs or
local workers with fixed-term employment. The subject clause singles out one classification
of OFWs and burdens it with a peculiar disadvantage.[27]
Moreover, this Court held therein that the subject clause does not state or imply any definitive governmental
purpose; hence, the same violates not just therein petitioners right to equal protection, but also his right to
substantive due process under Section 1, Article III of the Constitution. [28] Consequently, petitioner therein was
accorded his salaries for the entire unexpired period of nine months and 23 days of his employment contract, pursuant
to law and jurisprudence prior to the enactment of R.A. No. 8042.

We have already spoken. Thus, this case should not be different from Serrano.

As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no
protection; it creates no office; it is inoperative as if it has not been passed at all. The general rule is supported by
Article 7 of the Civil Code, which provides:

Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall
not be excused by disuse or custom or practice to the contrary.

The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters Products,
Inc. v. Fertiphil Corporation,[29] we held:
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of
equity and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence
of a statute prior to a determination of unconstitutionality is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be erased by a new judicial
declaration.
The doctrine is applicable when a declaration of unconstitutionality will impose an undue
burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a
declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the
acts done by a municipality in reliance upon a law creating it. [30]

Following Serrano, we hold that this case should not be included in the aforementioned exception. After all, it
was not the fault of petitioner that he lost his job due to an act of illegal dismissal committed by respondents. To rule
otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that
principals/employers and recruitment/manning agencies may violate an OFWs security of tenure which an employment
contract embodies and actually profit from such violation based on an unconstitutional provision of law.

In the same vein, we cannot subscribe to respondents postulation that the tanker allowance of US$130.00
should not be included in the computation of the lump-sum salary to be awarded to petitioner.

First. It is only at this late stage, more particularly in their Memorandum, that respondents are raising this
issue. It was not raised before the LA, the NLRC, and the CA. They did not even assail the award accorded by the CA,
which computed the lump-sum salary of petitioner at the basic salary of US$1,430.00, and which clearly included the
US$130.00 tanker allowance. Hence, fair play, justice, and due process dictate that this Court cannot now, for the first
time on appeal, pass upon this question. Matters not taken up below cannot be raised for the first time on appeal.
They must be raised seasonably in the proceedings before the lower tribunals. Questions raised on appeal must be
within the issues framed by the parties; consequently, issues not raised before the lower tribunals cannot be raised for
the first time on appeal.[31]

Second. Respondents invocation of Serrano is unavailing. Indeed, we made the following pronouncements
in Serrano, to wit:
The word salaries in Section 10(5) does not include overtime and leave pay. For
seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard
Employment Contract of Seafarers, in which salary is understood as the basic wage, exclusive of
overtime, leave pay and other bonuses; whereas overtime pay is compensation for all work
performed in excess of the regular eight hours, and holiday pay is compensation for any work
performed on designated rest days and holidays.[32]

A close perusal of the contract reveals that the tanker allowance of US$130.00 was not categorized as a bonus
but was rather encapsulated in the basic salary clause, hence, forming part of the basic salary of petitioner.
Respondents themselves in their petition for certiorari before the CA averred that petitioners basic salary, pursuant to
the contract, was US$1,300.00 + US$130.00 tanker allowance.[33] If respondents intended it differently, the
contract per se should have indicated that said allowance does not form part of the basic salary or, simply, the
contract should have separated it from the basic salary clause.

A final note.

We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte v. Nayona,[34] this Court held that:

Our overseas workers belong to a disadvantaged class. Most of them come from the poorest
sector of our society. Their profile shows they live in suffocating slums, trapped in an environment of
crimes. Hardly literate and in ill health, their only hope lies in jobs they find with difficulty in our
country. Their unfortunate circumstance makes them easy prey to avaricious employers. They will
climb mountains, cross the seas, endure slave treatment in foreign lands just to survive. Out of
despondence, they will work under sub-human conditions and accept salaries below the minimum. The
least we can do is to protect them with our laws.

WHEREFORE, the Petition is GRANTED. The Court of Appeals Decision dated February 28, 2007 and
Resolution dated August 30, 2007 are hereby MODIFIED to the effect that petitioner isAWARDED his salaries for the
entire unexpired portion of his employment contract consisting of nine months computed at the rate of US$1,430.00
per month. All other awards are hereby AFFIRMED. No costs.
SO ORDERED.

VINTA MARITIME CO., INC. and ELKANO SHIP MANAGEMENT, INC., petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION and LEONIDES C. BASCONCILLO,respondents.
DECISION
PANGANIBAN, J.:
To justify an employees dismissal, the employer has the burden of proving the presence of just cause and due
process. An illegally dismissed worker whose employment is for a fixed period is entitled to payment of his salaries
corresponding to the unexpired portion of his contract.
The Case
These rules of long standing are invoked by the Court in resolving this special civil action for certiorari under Rule
65 of the Rules of Court seeking the reversal of the Decision dated September 13, 1993 and the Resolution dated
November 23, 1993 of the National Labor Relations Commission in NLRC CA No. 000309 [POEA Case No. (M) 87-05327].
On April 20, 1987, Leonides C. Basconcillo, herein private respondent, filed a complaint [1] with the Philippine
Overseas Employment Administration (POEA) Workers Assistance and Adjudication Office for illegal dismissal against
Vinta Maritime Co., Inc. and Elkano Ship Management, Inc., herein petitioners. In their answer,[2] petitioners alleged
that private respondent was dismissed for his gross negligence and incompetent performance as chief engineer of
the M/V Boracay, as exemplified by the following recorded incidents:

3.1.a. During a maneuver of the Vessel, [private respondent] closed off the operating air valve to the bridge control
system despite the large sign on the valve itself-DO NOT CLOSE.
3.1.b. During a standby period, there was a loss of the main sea water pressure because the suction strainer was
blocked by ice. [Private respondents] failure to change over the sea suctions resulted in the overheating of the main
engine and the auxiliaries, which forced the Vessel to stop.
3.1.c. In another instance, complainant assured that the fuel situation of the Vessel was in order. But when the fuel
figures were verified, it was discovered that there were only five (5) tons of fuel left before the next bunkering, leaving
thus, no margin for safety. Because of this, an unscheduled bunkering operation in Oslo had to be done, contrary to
instructions.
3.1.d. As part of the safety procedures in the Vessel, it is necessary that all items of safety equipment be tested every
week and a report entered in the engine room logbook. [Private respondent] was instructed and under duty to test the
engine room fire alarms by activating each one individually with a heat or smoke source depending on its type. It was,
however, discovered later that [private respondent] miserably failed to do this xxx.
3.1.e. [Private respondent] as [c]hief [e]ngineer miserably failed to instill discipline among the engine room personnel
who are under his direct supervision, causing unrest among them and lack of respect for him and resulting in the
disruption of the smooth operations of the Vessel.
3.2. Contrary to [private respondents] allegations, he was given fair warning and enough opportunity to explain his
side in the foregoing incidents, not to mention all the chances given to him to improve his substandard work
performance before he was dismissed. Because of his gross negligence and his failure to perform the duties for which
he was hired, [petitioners] had no other choice than to terminate his services for cause pursuant to managements
prerogative to terminate an employee because of gross and habitual neglectof his duties (Article 283, Labor Code).
Private respondent rebutted these allegations in his position paper, stating: (1) it would be childish for an
experienced chief engineer to close the operating air valve to the bridge; a low level of starting air is caused by
excessive and continuous use thereof during maneuvering, and such malfunction is due to the pilots error; (2) the loss
of main water pressure due to the formation of ice on the suction strainer occurred because the sea water inlet was
clogged; private respondent, who was at the engine room, contacted the master of the vessel, who was then asleep, to
stop the engine and change the sea valve to activate the sea water pressure; during the same incident, it was also
found that the other valve did not fully open by remote control; (3) private respondent denied that the fuel figures
reached only five tons as demonstrated by the low-level alarm which, while set at ten cubic meters, did not set off
even until the next bunkering of the ship; it was Peter Robinson, the ship superintendent, who panicked and caused
the unscheduled bunkering operation in Oslo; (4) private respondent conducted safety equipment-testing religiously,
but admitted that in one instance he did not test the equipment with a heat or smoke source, upon Robinsons advice
that the alarm would upset the pilot and the crew who were then resting; (5) private respondent denied that there was
unrest among the engine personnel, averring that on the contrary, they cooperated and signed the guidelines which
the former issued to them; and (6) he denied having been given a chance to explain his side regarding the mentioned
incidents, the truth being that he was surprised when he was told of his dismissal. [3] Petitioners filed their position
paper and supporting documents which however failed to rebut private respondents allegations. [4]
Despite an unopposed motion for hearing[5] filed by private respondent, the POEA considered the case submitted
for resolution by mutual agreement of the parties after submission of their respective position papers and supporting
documents. In his decision dated March 9, 1990, POEA Administrator Tomas D. Achacoso ruled that private respondent
was illegally dismissed. The dispositive portion of the decision reads as follows:[6]
WHEREFORE, in view of the foregoing, respondents are hereby ordered to pay, jointly and severally, herein
complainant the amount of SEVENTEEN THOUSAND EIGHT HUNDRED SEVENTY FIVE US DOLLARS (US$17,875.00) or its
peso equivalent at the time of actual payment, representing his salaries for the unexpired portion of his employment
contract at US$1,787.50 per month.
All other claims are hereby DISMISSED.
On appeal, the National Labor Relations Commission[7] (Respondent Commission, for brevity) affirmed the POEA:[8]

Accordingly, the decision of the POEA Administrator is hereby AFFIRMED en toto.

Respondent Commission denied the motion for reconsideration in the challenged Resolution: [9]
After due consideration of the Motion for Reconsideration filed by respondents-appellants Vinta Maritime Co., Inc/
Elkano Ship Management, Inc. on October 22, 1993, from the Decision of September 13, 1993, the Commission
(Second Division) RESOLVED to deny the same for lack of merit.
Hence, this petition.[10]
The Facts
The facts of this case are undisputed. The solicitor general relates the following circumstances leading to the
complaint:[11]
This case arose from a complaint for illegal dismissal by private respondent herein, Leonides O. Basconcillo, against
petitioner companies, xxx Vinta Maritime Company, Incorporation and the El Kano Ship Management Incorporated,
before the POEA Adjudication Office.
On February 13, 1987, private respondent, a licensed Marine Engineer since 1970, was hired as Chief Engineer for M.V.
Boracay by the shipping company, xxx Vinta Maritime Company, Incorporated, thru its accredited manning agent, the
Elkano Ship Management, Inc.
The crew contract for his employment was effective for a fixed duration of one (1) year, with a stipulated monthly
basic pay of $1,375.00 U.S. Dollars, and fixed overtime pay of $402.50 U.S. Dollars a month, or a total of $1,787.50
U.S. Dollars per month, with an additional 2 days leave a month. So on February 18, 1987, private respondent joined
the vessel at the port of Rotterdam, the Netherlands, and assumed his duties and responsibilities as Chief Engineer.
On April 2, 1987, or barely three (3) months after boarding the vessel, private respondent was informed by Captain
Jose B. Orquinaza, the ships Master, that he was relieved of his duties per recommendation of the Marine
Superintendent, Mr. Peter Robinson, due to his poor performance (Annex G, Petition). He was in effect terminated from
the service. This came after private respondent had a verbal altercation with Robinson, a British national, regarding the
discipline or lack thereof of the Filipino crew under private respondents supervision. No inquiry or investigation,
however, regarding his supposed incompetence or negligence was ever conducted; neither was private respondent
furnished with a notice or memorandum regarding the cause of his dismissal.
Private respondent was made to disembark at the port of Oslo, Norway, and immediately repatriated to the
country. Contrary to his perceived incompetence, private respondents Seamens Book contained the following entries:
Conduct - Very good
Ability - Very good
Remarks - Highly Recommended
(Annex F, p. 5, Petition)
Assignment of Errors
In their memorandum, petitioners submit that Respondent Commission gravely abused its discretion by: [12]
a. Rendering the assailed resolution and decisions without a full-blown trial on the merits, and
b. Disregarding the evidence for the petitioners and ruling that the company illegally dismissed Basconcillo.
The Courts Ruling

The petition is bereft of merit. The petitioners failed to prove the elements of a valid dismissal, namely: (1) just
cause and (2) due process.
First Issue: Trial is Not Indispensable in Administrative Due Process
Petitioners claim that Respondent Commission gravely abused its discretion in upholding the POEAs decision,
which was based on the position papers and documents submitted by the parties in view of a motion for trial which
remained unacted upon. They insist that a hearing was an indispensable condition before a judgment could be
rendered in this case. We do not agree. Although bound by law and practice to observe due process, administrative
agencies exercising quasi-judicial powers are nonetheless free from the rigidity of certain procedural requirements. As
applied to these proceedings, due process requires only an opportunity to explain ones side. [13]
In labor cases, this Court has consistently held that due process does not necessarily mean or require a hearing,
but simply an opportunity or a right to be heard. The requirements of due process are deemed to have been satisfied
when parties are given the opportunity to submit position papers. [14] The holding of an adversarial trial is discretionary
on the labor arbiter and the parties cannot demand it as a matter of right. [15] More often than not, a litigant may be
heard more creditably through pleadings than through oral arguments. In administrative proceedings, technical rules
of procedure and evidence are not strictly applied; administrative due process cannot be fully equated with due
process in its strict judicial sense. [16] Due process was designed to afford an opportunity to be heard, and an actual
verbal hearing need not always be held. [17] The necessity of conducting a hearing is addressed to the sound discretion
of the labor arbiter.
These rules equally apply to cases filed with the Philippine Overseas Employment Administration Adjudication
Office. Section 6 of Rule III, Book VII of the POEA Rules and Regulations of 1991 [18] categorically states that proceedings
before a POEA hearing officer is non-litigious, although they are still subject to the requirements of due process.
[19]
Under the POEA Rules in force [20] at the time the complaint was filed, summary judgments in which the pleadings,
affidavits and evidence submitted are sufficient to render a decision -- are allowed under Section 4. [21] Where the
parties fail to agree on an amicable settlement and summary judgment is not appropriate, a judgment based on
position papers may be resorted to under Section 5. [22] Where there are complicated factual issues involved which
cannot be resolved through such means, the hearing officer may direct the parties to submit suggested written
clarificatory questions to be propounded to the party concerned. [23]
Applied to this particular case, it is undeniable that petitioners were given their chance to be heard. Their answer,
position paper and supporting documents had become parts of the records and were considered accordingly by the
POEA administrator and by the Respondent Commission in rendering their respective decisions.
Furthermore, petitioners did not deem it necessary to ask the POEA Adjudication Office to conduct a hearing. It
was the private respondent who moved for a full-blown trial. Although they did not oppose the motion, they did not
concur with it either. Their silence was not an assent to the motion or an argument showing its necessity. Rather, it was
an eloquent statement that the position paper they submitted sufficiently covered all the issues. On the other hand,
private respondents Motion for Decision, dated November 10, 1989, indubitably shows his waiver of his earlier
requested hearing.[24] This motion was similarly unopposed by petitioners. So too, petitioners present insistence on the
necessity of a hearing is weakened by the fact that their memorandum before this Court failed to specify the matters
which would have required a hearing.
In all, the Court concurs with the POEA administrator and Respondent Commission that a verbal hearing was
dispensable. Petitioners belated insistence is a veiled attempt to reopen an otherwise decided case. Aside from being
late, this attempt is purely dilatory, designed to unnecessarily prolong the resolution of the case. The Court holds that
petitioners were not denied due process. No grave abuse of discretion was committed by Respondent Commission.
Second Issue: Private Respondent Was Illegally Dismissed
Where there is no showing of a clear, valid, and legal cause for the termination of employment, the law considers
the matter a case of illegal dismissal. Verily, the burden is on the employer to prove that the termination was for a
valid or authorized cause.[25] For an employees dismissal to be valid, (1) the dismissal must be for a valid cause and (2)
the employee must be afforded due process. [26] Article 282 of the Labor Code lists the following causes for termination
of employment by the employer: (1) serious misconduct or willful disobedience of lawful orders in connection with his
or her work, (2) gross and habitual neglect of duties, (3) fraud or willful breach of trust, (4) commission of a crime or an

offense against the person of the employer or his immediate family member or representative, and (5) analogous
cases.[27]
The absence of a valid cause for termination in this case is patent. Petitioners allege that private respondent was
dismissed because of his incompetence, enumerating incidents in proof thereof. However, this is contradicted by
private respondents seamans book which states that his discharge was due to an emergency leave. Moreover, his
alleged incompetence is belied by the remarks made by petitioners in the same book that private respondents
services were highly recommended and that his conduct and ability were rated very good. Petitioners allegation that
such remark and ratings were given to private respondent as an accommodation for future employment fails to
persuade. The Court cannot consent to such an accommodation, even if the allegation were true, as it is a blatant
misrepresentation. It cannot exculpate petitioners based on such (mis)representation. When petitioners issued the
accommodation, they must have known its possible repercussions. They cannot be allowed to turn against their
representation.
As correctly argued by the solicitor general in his comment, it was incumbent upon the petitioners to clearly
establish that the discharge was for a just cause before they could legitimately terminate the private respondents
services. However, they miserably failed in this respect. [28] The alleged incidents of incompetence were unsupported by
relevant and convincing evidence. The affidavits of Robinson and Capt. Jose B. Orquinaza, who caused private
respondents dismissal and recommendation, are highly suspicious and do not in any way prove that the alleged
incidents showing private respondents incompetence were ever investigated and proven, [29] as they were sufficiently
rebutted by the entries in the seamans book.[30] Mere allegations are not synonymous with proof.
Further, the POEA administrator and the Respondent Commission have cleared the private respondent of such
charges, noting that he sufficiently rebutted them. Petitioners, on the other hand, presented no adequate evidence or
argument to tilt the weight of the evidence in their favor. Without factual basis are their contentions which are as
follows: (1) private respondent had been inactive and unemployed for five years prior to his employment with
petitioners; and (2) developments in ship technology, equipment and damage control measures, during the five years
he was unemployed, gravely affected his expertise. Petitioners failed to specify these alleged advanced equipment and
measures. Neither did they explain that the instances where private respondent allegedly endangered the ship and its
crew involved any of these advanced equipment and measures. The Court sees no justification to depart from the wellsettled rule that the factual findings of quasi-judicial agencies like the Respondent Commission, which have acquired
expertise in the matters entrusted to their jurisdiction, are accorded by the Supreme Court not only respect but even
finality if they are supported by substantial evidence, or that amount of relevant evidence which a reasonable mind
would accept as adequate to justify a conclusion. [31]
Petitioners, in our view, failed to rebut the following observations of the Respondent Commission: [32]
After perusing the records of this case, we arrived at the conclusion that the Honorable POEA Administrator committed
no reversible error in finding that the dismissal of the complainant herein was illegal and violative of the contract of
employment. [Petitioners] allegation that [private respondent] was validly terminated because of inefficiency on the
basis of their consultants report would not merit [o]ur judicial approval because of the following reasons:
First, it was [petitioners] themselves who hired and contracted the services of [private respondent], presumably after
considering his years of experience and records of performance, otherwise, it would not have entered into a one year
contract of employment with [private respondent]. It is highly unthinkable that [a] company like them would be so
naive as to be hoodwink[ed] into hiring somebody who is not an expert and does not know anything. Not if [w]e are to
consider that they ply international routes and capable of offering such princely benefits as they did to [private
respondent].
Second, the report of their British consultant is suspect to being one made out of vengeance, what with the altercation
that transpired between them immediately prior to the preparation of the report. xxxx But more importantly, the
detailed report (See, p. 125 of Rollo), said consultant[s report] was to [o]ur mind substantially rebutted by complainant
one after the other in his position paper dated October 2, 1987 (See, pp. 109 to 112 of Rollo). As such, the same could
not have carried much weight. There is no question therefore that complainant was dismissed without any justifiable
cause.
Due process, the second element for a valid dismissal, requires notice and hearing. [33] Before the employee can be
dismissed under Article 282, the Code requires the service of a written notice containing a statement of the cause(s) of

termination and giving said employee ample opportunity to be heard and to defend himself. A notice of termination in
writing is further required if the employees dismissal is decided upon. [34] The employer must furnish the worker with
two written notices before termination of employment can be legally effected: (1) notice which apprises the employee
of the particular acts or omissions for which his dismissal is sought and (2) subsequent notice which informs the
employee of the employers decision to dismiss him. The twin requirements of notice and hearing constitute the
essential elements of due process, and neither of these elements can be eliminated without running afoul of the
constitutional guaranty.[35]
Using these legal criteria, we hold that private respondent was illegally dismissed. No notice was ever given to
him prior to his dismissal. This fact alone disproves petitioners allegation that private respondent was given fair
warning and enough opportunity to explain his side [regarding] the incidents that led to his dismissal. These requisites
cannot be replaced as they are not mere technicalities, but requirements of due process to which every employee is
entitled to ensure that the employers prerogative to dismiss is not exercised arbitrarily. [36]
Illegally dismissed workers are entitled to the payment of their salaries corresponding to the unexpired portion of
their employment where the employment is for a definite period. [37] Conformably, the administrator and the
Respondent Commission properly awarded private respondent salaries for the period beginning April 9, 1987, the date
of his illegal dismissal, until February 18, 1988, the expiration of his contract.
WHEREFORE, the petition is hereby DISMISSED. The challenged Decision and Resolution are AFFIRMED. Costs
against petitioners.
SO ORDERED.