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LOPEZ SUGAR CORPORATION, petitioner, vs. LEONITO G. FRANCO, ROGELIO R.

PABALAN,
ROMEO T. PERRIN and EDUARDO T. CANDELARIO, respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R.
SP No. 49964, which affirmed the decision of the National Labor Relations Commission (NLRC) in NLRC
Case No. V-0138-97, which, in turn, reversed the decision of the Labor Arbiter in RAB Case Nos. 06-01-
10047-96, 06-64-10164-96 and 06-07-10292-96.

The Antecedents

Private respondents Leonito G. Franco, Rogelio R. Pabalan, Romeo T. Perrin and Eduardo T.
Candelario were supervisory employees of the Lopez Sugar Corporation (the Corporation, for brevity).
Franco was barely 20 years old when he was employed in 1974 as Fuel-in-Charge. His co-employee,
Pabalan, was about 28 years old when he was hired by the Corporation as Shift Supervisor in the Sugar
Storage Department in 1975.[2] On the other hand, Perrin and Candelario were employed in 1975 and
1976, respectively, as Planter Service Representatives (PSRs), who rose from the ranks and, by 1994,
occupied supervisory positions in the Corporations Cane Marketing Section. [3]
Franco supervised the fuel tenders, monitored fuel and lubricant requirements of the central, as
well as those of the planters who ordered their requirements from the central. He also ensured the
adequate supply of oil products. For his part, Pabalan supervised the delivery of sugar and molasses to
and from the storage during his shift; he likewise supervised the regular, contractual and casual
employees who were engaged in handling sugar. Perrin and Candelario, on the other hand, were
tasked to convince planters to mill their canes using the services of the Corporation, provide technical
assistance to planters, and attend to their various needs. [4]
By 1994, the supervisory employees of the Corporation, spearheaded by Franco, Pabalan, Perrin
and Candelario, decided to form a labor union called Lopez Sugar Corporation Supervisors Association.
On December 29, 1994, the Department of Labor and Employment (DOLE) in Iloilo City, Regional Office
No. VI, issued a Certificate of Registration[5] to the union. During its organizational meeting, Franco was
elected president and Pabalan as treasurer. Perrin and Candelario, on the other hand, were among its
active members. Out of the 108 members, 105 had agreed to authorize the check-of [6] of union dues
against their salaries even before any Collective Bargaining Agreement (CBA) had been executed by
the union and management.
In January 1995, the officers of the union and the management held a meeting, which led to the
submission of the unions proposals for a CBA on July 24, 1995. [7]
Meantime, on August 8, 1995, the Corporations president issued a Memorandum [8] to the vice-
president and department heads for the adoption of a special retirement program for supervisory and
middle level managers. He emphasized that the management shall have the final say on who would be
covered, and that the program would be irrevocable once approved.
In a Letter[9] dated August 14, 1995, the Corporation requested for more time to study the unions
proposals for a CBA. The union was made to understand that the managements counter-proposals
would be presented during their conference on August 30, 1995.
Perrin and Candelario were on leave when they were invited by Juan Masa, Jr., the head of the
Cane Marketing Section, to the Northeast Beach Resort in Escalante, Negros Occidental. The latter
informed them that they were all included in the special retirement program and would receive their
respective notices of dismissal shortly.[10]
True enough, Masa, Pabalan, Franco, Perrin and Candelario received copies of the Memorandum
dated August 25, 1995 from the Corporations Vice-President for Administration and Finance, informing
them that they were included in the special retirement program for supervisors and middle level
managers; hence, their employment with the Corporation was to be terminated efective September
29, 1995, and they would be paid their salaries until September 27, 1995, thus:

In line with the memorandum of the President dated August 8, 1995, announcing the adoption of a
special retirement program for the supervisors and the middle level managers, and our earlier
discussion with you, we wish to formalize our advice that you are one of the employees who will be
covered by the Program. Your inclusion in the Program is primarily due to the fact that our study of our
current organizational set-up reveals that the organization is presently over-staf[ed]. There are
actually duplication of functions and responsibilities, and some duties could actually be performed by
just one person. Management therefore had no choice but to reduce the present number of employees
and you were selected as among those who will be separated from the service.

As stated in the memorandum, you will be entitled to a separation package equivalent to two months
pay for every year of service, in addition to the conversion of your unused/earned sick leave and
vacation leave credits and pro-rated 13th month pay. This generous non-precedent setting separation
package, which is twice what the law provides, is being ofered in consideration of your acceptance of
your separation, thereby relieving the company from the trouble of any court litigation. [11]

The private respondents received their respective separation pays and executed their respective
Release Waiver and Quitclaim[12] after receiving their clearances from the Corporation.
On August 31, 1995, the management wrote the union that its proposals for a CBA had been
referred to its counsel.
Thereafter, the private respondents filed separate complaints against the corporation with the
NLRC for illegal dismissal, unfair labor practice, reinstatement and damages. [13]
In their position paper, the private respondents claimed that they were made to understand that
their employment was terminated on the ground of redundancy; however, they were not informed of
the criteria, guidelines or standard in the implementation of the special retirement program. They were
thus led to conclude that their dismissal was capricious. They pointed out that Perrin and Candelario,
who had been with the corporation for already 20 years, were included in the special program, while
others who had been employed with the corporation for only one to six years had been retained.
Moreover, one year before the program was implemented, the Corporation hired two more PSRs, thus
increasing their number; and even after the termination of Perrin and Candelarios employment, the
Corporation hired two more on a contractual basis. Candelario was then rehired on a contractual basis
only until January 1996 when the complaint was filed against the Corporation. Franco, on the other
hand, had rejected a similar ofer to work on a contractual basis.
The private respondents also alleged that their inclusion in the said program was resorted to in
order to intimidate the union and its members from pursuing their objective of institutionalizing a
collective bargaining mechanism for supervisory employees in the company, thus, aborting the birth of
a labor organization capable of bargaining with the management on the terms and conditions of
employment. The complainants averred that for all intents and purposes, the collective bargaining
process [was] over, having failed to progress beyond the proposal stage, a pathetic end for an
enterprise that started with such great enthusiasm from 105 of the 108 supervisors. [14]
They further averred that the connection between the untimely demise of the negotiations and
the dismissal of 32 employees, who were officers and members of the union, was too obvious to be
ignored considering further that the claim of redundancy was untenable. The complainants also
averred that they were all in their late 40s, and had served the petitioner for about 20 years; although
still in their productive years, their prospects for other employment were very slim. [15]
In its position paper, the Corporation maintained that the termination of the employment of the
complainants was in response to the challenges brought about by the General Agreement on Tarif and
Trade (GATT), the AFTA and other international trade agreements, which greatly afected the local
sugar industry. The respondent summarized its position, thus:

12.0 Complainants separation from employment was made pursuant to a legitimate exercise by the
Company of its prerogatives to adopt measures to cut cost and to maintain its profitability and
competitiveness.

13.0 The inclusion of the complainants in the special retirement or right sizing program has nothing to
do with their exercise of their right to self-organization; hence, there is no unfair labor practice being
committed by the Company.

14.0 Complainants separation from service was done in good faith and in complete compliance with
procedural and substantive legal requirements; hence, legal and justified.

15.0 Complainants are barred by the release waiver and quitclaim that they have executed in favor of
the Company from further contesting the validity of their separation from service. [16]

The Corporation also averred that in July 1995, it commissioned Sycip, Gorres, Velayo and
Company (SGV) to conduct a study of the Corporation and its operations to identify changes that could
be implemented to achieve cost efectiveness and global competitiveness.
In their Reply-Affidavit, the complainants averred that they signed their respective Release Waiver
and Quitclaim because their employer had driven them to the wall, and found themselves in no
position to resist, as they were no longer employed. They insisted that it was a case of adherence, not
of choice. They averred that they did not relent on their claim, nor did they waive any of their rights.
They further emphasized that nowhere in the SGV study was it recommended that they be
dismissed from employment, or that their positions be abolished. In the case of the Sugar and
Molasses Storage Department (SMSD), for instance, the recommendation to save cost was not
implemented; instead Pabalan and another shift supervisor who was also a union officer (Bitera), were
dismissed, and replacements were hired on December 1, 1996. As to the Cane Marketing Department
where Perrin and Candelario were assigned as PSRs, the study, in fact, recommended the
strengthening of the said unit; the respondent dismissed such employees who had been employed
from 13 to 25 years. The private respondents pointed out that this was an evidence of the
Corporations intention to contract out the work of the PSRs, considering further that those who had
been employed for only one to six years were retained.[17]
On February 26, 1997, the Labor Arbiter rendered judgment in favor of the Corporation and
ordered the dismissal of the complainants. According to the Labor Arbiter, there was a real and factual
basis to declare redundancy, thus:

Based on this study, the position and functions of fuel-in-charge, held by complainant Franco, are
basically the same as that of Fuel Tenders and therefore his activities could well be done by existing
Fuel Tenders who would be directly under the General Warehouse Supervisor. In the case of
complainant Pabalan, whose position was Shift-in-Charge/Supervisor, it was observed that his tasks
could be merged in the functions of the Property Warehouse Supervisor. With respect to complainants
Perrin and Candelario, who were Planters Service Representatives, it was observed that the job was
more complementary to the marketing aspect, wherein they are tasked to maintain good and
harmonious relations with the companys sugar planters, to ensure continued patronage of the mills
services. It was found that these PSR functions could well be handled by agents or consultants, who
would be paid on commission basis.[18]

The Labor Arbiter noted that the complainants received their separation pay and other monetary
benefits from the Corporation, and thereafter, voluntarily executed their respective Deeds of Release
Waiver and Quitclaim[19] in its favor.
The complainants appealed to the NLRC which rendered judgment on December 9, 1997 granting
their appeal and reversing the decision of the Labor Arbiter. The NLRC ruled that there was no factual
and legal basis for the termination of the employment of the private respondents based on
retrenchment or redundancy, and that the Deeds of Release Waiver and Quitclaim executed by the
complainants were inefective. The Corporation filed a motion for reconsideration of the decision,
which was denied by the NLRC.
Unsatisfied, the Corporation filed a petition for certiorari with the CA, insisting that:

PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT SET ASIDE AND OVERRULED
THE DECISION OF THE LABOR ARBITER ON THE BASIS OF COINCIDENCES AND BASELESS ACCUSATION
OF BAD FAITH, COMPLETELY MISAPPRECIATING THE SUBSTANTIAL EVIDENCE WHICH SUPPORTED THE
LABOR ARBITERS DECISION.

PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN OVERRIDING THE LEGITIMATE


EXERCISE BY THE PETITIONER OF ITS MANAGEMENT PREROGATIVE OF REDUCING ITS WORK FORCE TO
ADDRESS CURRENT BUSINESS AND ECONOMIC REALITIES.

PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN DISREGARDING BASIC PRINCIPLES


OF LAW AND JURISPRUDENCE LAID DOWN BY THE SUPREME COURT TO THE EFFECT THAT:

i. The matter of evaluating the merits of the issues presented in a labor case is primarily addressed to
the sound discretion of the Labor Arbiter. Thus, when the decision of the Labor Arbiter is amply
supported by substantial evidence, his findings and conclusions should not be disturbed but must be
accorded with respect by the NLRC and even by the Supreme Court.

ii. The determination that a position is redundant and therefore legally terminable, is basically an
exercise of management prerogative, and for as long as it is done in good faith, the wisdom or
soundness thereof is beyond the review power of the Labor Arbiter nor of the NLRC, which by law and
jurisprudence are not vested with managerial functions.

Iii Termination on ground of redundancy is anchored on the superfluity of a position and not on the fact
that actual loss is incurred by a company.

iv. A waiver and quitclaim, when voluntarily and intelligently executed, is binding upon the employee,
more so if he is not just an ordinary employee.[20]

On April 28, 2000, the CA rendered judgment dismissing the petition, on the ground that the NLRC
did not commit grave abuse of discretion in rendering judgment against the Corporation. The
Corporations motion for reconsideration thereof was, likewise, denied by the CA.
The Corporation, now the petitioner, assails the ruling of the CA, contending that the decision of
the Labor Arbiter should prevail, as it is supported by substantial evidence and the law. The petitioner,
thus, maintains that the Labor Arbiter correctly ruled that

(1) the separation of the Respondents from employment was for a valid and authorized cause;

(2) the positions of the Respondents were redundant;

(3) there was a real and factual basis to declare redundancy;

(4) there is no evidence to show that the right sizing program was deliberately intended to stifle union
activities;

(5) the confluence of events was just a coincidence;

(6) there is no evidence of deviousness in the right sizing program;

(7) the Respondents received their individual separation benefits, and there is no evidence that either
moral or physical compulsion or both made them accept the benefits ofered; and

(8) Petitioner Company has complied with the legal requisites of terminating the employment of the
Respondents.[21]

The petitioner further argues that the decision of the NLRC is essentially flawed because the
private respondents were terminated on the ground of redundancy, and not retrenchment which is an
entirely diferent concept. There is absolutely no evidence on record, save the bare allegations of the
private respondents that they were singled out as victims of retrenchment. The other redundant
positions were, likewise, eliminated. It insists that unlike retrenchment, redundancy does not require
business losses to be an authorized cause for dismissal. Moreover, the law does not give any criteria,
guidelines or standard for the selection of employees who are to be dismissed on the ground of
redundancy. It insists that Article 283 of the Labor Code merely requires that in case of termination due
to the installation of labor-saving devices or redundancy, the worker afected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to, at least, one (1) month pay for
every year of service, whichever is higher.
The petitioner further posits that the law does not require a corporation to adopt radical cost-
cutting measures prior to a termination on the ground of redundancy. It avers that the mere fact that
the termination took place at a time when the private respondents had just organized the union does
not automatically render their termination invalid. It theorizes that the union could have been
organized as leverage to the implementation of the redundancy program which the supervisory
employees knew was forthcoming. It further claims that it is clearly not within the discretion of the
NLRC to say that the termination was prematurely resorted to, as such determination was clearly
within the business discretion of the petitioner corporation. It adds that, as evidenced by the generous
separation packages given to the private respondents, their welfare was amply considered by it.
Thus, the petitioner concludes, there was patent partiality and bias on the part of the NLRC when
it sweepingly declared that the dismissal of the private respondents was illegal and without valid and
authorized cause.[22]

The Ruling of the Court

The petition is denied for lack of merit.


In the main, the issues in this case are factual. Under Rule 45 of the Rules of Court, only questions
of law may be raised in this Court; such factual issues may be considered and resolved only when the
findings of facts and the conclusions of the Labor Arbiter are inconsistent with those of the NLRC and
the CA.
Nevertheless, we have meticulously reviewed the records in this case and find that the NLRC did
not commit any grave abuse of its discretion amounting to lack or excess of jurisdiction in rendering its
decision in favor of the private respondents. The CA acted in accord with the evidence on record and
case law when it dismissed the petitioners petition for certiorari and affirmed the assailed decision and
resolution of the NLRC.
We reiterate that it is the burden of the petitioner, as employer, to prove the factual and legal
basis for the dismissal of its employees on the ground of redundancy.
In Asian Alcohol Corporation v. National Labor Relations Commission,[23] the Court ruled that
redundancy exists when the service capability of the work force is in excess of what is reasonably
needed to meet the demands on the enterprise. The Court proceeded to expound, as follows:

A redundant position is one rendered superfluous by any number of factors, such as over-hiring of
workers, decreased volume of business, dropping of a particular product line previously manufactured
by the company or phasing out of a service activity priorly undertaken by the business. Under these
conditions, the employer has no legal obligation to keep in its payroll more employees than are
necessary for the operation of its business.[24]

Contrary to the petitioners claim, the employer must comply with the following requisites to
ensure the validity of the implementation of a redundancy program: (1) a written notice served on both
the employees and the Department of Labor and Employment at least one month prior to the intended
date of retrenchment; (2) payment of separation pay equivalent to at least one month pay or at least
one month pay for every year of service, whichever is higher; (3) good faith in abolishing the
redundant positions; and (4) fair and reasonable criteria in ascertaining what positions are to be
declared redundant and accordingly abolished.[25]
The Court emphasized in the earlier case of Panlilio v. National Labor Relations Commission [26] that
it is imperative for the employer to have fair and reasonable criteria in implementing its redundancy
program, such as but not limited to (a) preferred status; (b) efficiency; and (c) seniority. [27]
The general rule is that the characterization by an employer of an employees services as no
longer necessary or sustainable is an exercise of business judgment on the part of the employer. The
wisdom or soundness of such characterization or decision is not, as a general rule, subject to
discretionary review on the part of the Labor Arbiter, the NLRC and the CA. [28] Such characterization
may, however, be rejected if the same is found to be in violation of the law or is arbitrary or malicious.
[29]

In Dangan v. National Labor Relations Commission,[30] the Court ruled that the hiring, firing or
demotion of employees is a management prerogative, but is subject to limitations stated in the
collective bargaining agreement, if any, or general principles of fair play and justice. Indeed, the Court
will not hesitate to strike down a redundancy program structured by a corporation to downsize its
personnel, solely for the purpose of weakening the union leadership, thereby preventing it from
securing reasonable terms and conditions of employment in their CBA with the employer.
In this case, we agree with the ruling of the CA that the petitioner illegally dismissed the private
respondents from their employment by including them in its special retirement program, thus,
debilitating the union, rendering it pliant by decapacitating its leadership. As such, the so-called
downsizing of the Cane Marketing Department and SMSD based on the SGV Study Report was a farce
capricious and arbitrary.
The Court agrees with the private respondents averments in their position paper, as follows:
Complainants are not in a position to anticipate how respondent will present its case for redundancy
particular[ly] because no standard, criteria or guidelines for the selection of dismissed employees was
made known to them, and all that they were told was that you were selected as among those who will
be separated from the service; nonetheless, this early, it is possible to point out certain facts which
throw light on the plausibility or want of it, of the ground relied upon.

1. No contingency has occurred, of the kind mentioned by the Supreme Court in the Wiltshire case,
(over-hiring of workers, decreased volume of business or dropping of a particular service line) which
would explain the dismissal on the ground of redundancy; over-hiring of workers cannot conceivably
occur in the level of the supervisors; on the other hand, it would have required an event of cataclysmic
proportion to justify the dismissal for redundancy of a full one-third of the supervisors in an
establishment, and if such an event were to occur it would have resulted in tremendous losses which is
not true here because the dismissal is not on account of or to prevent losses;

2. In no other category of employees did positions suddenly become redundant except among the
supervisors who have just organized themselves into a labor union and were working for their first-ever
CBA in the establishment;

3. The dismissal came at the precise time when the Lopez Sugar Central Supervisors Association
(LSCA) had presented its CBA proposals and was expecting the companys reply as mandated by law; in
fact, the reply was overdue, being required to be submitted by management within ten (10) days from
receipt of the union proposal; there is no better proof that the dismissals have served their hidden
purpose than that the CBA negotiation has ended to all intents and purpose, before management could
even present its counterproposal. Certainly, it would be farfetched to say that the remaining union
officers and members have abandoned its objective of having a CBA for reasons other than the fear of
sufering the fate of those who had been dismissed.

The absence of criteria, guidelines, or standard for selection of dismissed employees renders the
dismissals whimsical, capricious and vindictive; in the case of the complainants Franco and Pabalan,
who are the Union President and Treasurer, respectively, the reason for their inclusion is obvious.
Additionally, it must be mentioned that in the case of Pabalan, there were three shift supervisors, one
for each 8-hour shift before the program was implemented, namely, Pabalan, Bitera and Lopez;
Pabalan and Bitera (a union director) were terminated, leaving Lopez alone, who worked on 12-hour
shift duty with Henry Villa, department head who was forced to perform the work of shift supervisor;
Pabalan was ofered to be rehired as an employee of BUGLAS, a labor-only contractor but he refused;
an employee, Eugenio Bolanos was assigned from another department to do the work of shift
supervisor and three of them (Lopez, Villa and Bolanos) now divide shift duties among themselves.
There is no explanation why among the shift supervisors it was Pabalan and Bitera who were included
in the program.

In the case of complainants [P]errin and Candelario, both Planter Service Representatives, the
manipulation is even more apparent; one year before the program was instituted, two new PSRs were
hired (Labrador and Cambate) bringing to six the total number of PSRs; after the termination of [P]errin
and Candelario, who have served for nearly 20 years, two new PSRs were hired (Oropel and Jeres) on
contractual basis and whose compensation is based on pakiao; additionally, Candelario was hired after
his dismissal under the same arrangement as Oropel and Jeres, which lasted only up to January 1996
when management learned of the filing of the first of these cases; [P]errin, on his part, was ofered the
same arrangement but he refused.

4. The rehiring of dismissed employees through a labor-only contractor exposes the program as a
circumvention of the law. This is true in the case of the following supervisors who were terminated with
complainant but were subsequently employed to do exactly the same work, but as employees of
BUGLAS, a labor-only contractor which supplies laborers to respondent LSC:

A. Juanito Lanos, Supervisor, Electrical Department.

B. Raymundo Llenos, Community Development Officer.

C. Joseph Nicolas, Supervisor, Refrigeration and Air Conditioning.

The above re-hiring in addition to other circumstances earlier mentioned, such as the hiring of 2 men
PSRs after Candelario and [P]errin were terminated; the short-lived rehiring of the former and the ofer
to hire the latter which he refused, all indicate that there was no redundancy.

None of the work has been phased out or rendered obsolete by any event that took place. As to
duplication of functions, it must be mentioned that the positions of complainants have existed for a
long time judging from their years of service with respondent; the observation of the Supreme Court in
the Wiltshire case to the efect that in a well-organized establishment, duplication of functions is hardly
to be expected is pertinent.[31]

Foremost, the petitioner failed to formulate fair and reasonable criteria in ascertaining what
positions were declared redundant and accordingly obsolete, such as preferred status, efficiency or
seniority. It, likewise, failed to formulate fair and reasonable parameters to determine who among the
supervisors and middle-level managers should be retired for redundancy. Using the SGV report as
anchor, the petitioner came out with a special retirement program for its 108 supervisors and middle-
level managers, making it clear that its decision to eliminate them was final and irrevocable. Moreover,
the private respondents were not properly apprised of the existence of the special retirement program,
as well as the criteria for the selection of the supervisors to be retired, and those to be retained or
transferred or demoted.
Contrary to its submissions, the petitioner downsized the Cane Marketing Department by
eliminating private respondents Perrin and Candelario; and Franco and Candelario from the Sugar and
Molasses Storage Department, respectively, without due regard to the SGV report. The following
recommendations relating to the Sugar and Molasses Storage Department were made:

RECOMMENDATIONS

=================

2.4 Sugar and Molasses Storage

2.4.1 Renovate old bulk warehouse to improve ventilation, lighting and raw
sugar handling

2.4.2 Install a conveyor/scale before bag sewing of refined sugar to check


weight conformity

2.4.3 Renovate bagging room of refined sugar to enforce strict


hygiene/sanitation

2.4.4 Install a marking mechanism that would indicate production date on


bagged refined sugar

2.4.5 Conduct weekly checks and adjustment on the bag sewing and conveyor
equipment [32]

The downsizing of personnel was not among the foregoing recommendations, and yet this was
what the petitioner did, through its special retirement program, by including private respondents
Franco and Pabalan, thereby terminating their employment. It is too much of a coincidence that the
two private respondents were active members of the union.
On the other hand, the following recommendations were made relating to the Cane Marketing
Department:

CANE MARKETING AND TRANSPORT

1.0 Cane Marketing

1.1.1 Expand SCs farm leasing operations (by 6,292 hectares)

1.1.2 Establish cane supply planning system

1.1.3 Beef up SCs cane marketing eforts by hiring more efective PSRs to replace inefective
PSRs

1.1.4 Acquire 6 motorcycles instead of second-hand jeeps

1.1.5 Apply marketing techniques used by other companies/industries. [33]

As can be gleaned from the above, the report recommended the beefing up of the petitioners
planter service representative force, while eliminating those who were inefective. There is no showing
in the record that respondents Perrin and Candelario were eliminated solely because they were
inefficient. Neither is there any substantial evidence on record that the private respondents
performance had been deteriorating; on the contrary, they had been so far so efficient that they had
been given promotions from time to time during their employment. Yet, the petitioner eliminated
private respondents Perrin and Candelario and retained three PSRs, namely, Danilo Villanueva, Roberto
Combate and Danilo Labrador, who were employed with the petitioner from one to three years and
transferred Raymundo de la Rosa, who had been working there for only six years. [34] Again, it is too
much of a coincidence that Franco and Pabalan, the President and Treasurer, respectively, of the union,
were included in the special retirement program.
We agree with the findings of the CA that the private respondents were unilaterally included in the
said program for the following reasons:
As evidenced by various documents attached to the affidavit of Leonito Franco and Rogelio Pabalan, as
well as supporting affidavits of complainants, the supervisory employees of LSC organized a labor
union called Lopez Sugar Corporation Supervisors Associations which was issued a certificate of
registration by the DOLE Regional Office No. VI, Iloilo City on December 29, 1994. Complainant Franco
was elected President and complainant, Pabalan, Treasurer, during the organizational meeting.
Complainants [P]errin and Candelario are active union members. Management was duly informed
about this fact and in January 1995 a conference was conducted between the union and management
where the status of the union was clarified and some problems in the workplace were discussed. The
management was also informed subsequently that 105 out of 108 supervisory employees have joined
the union and authorized check-of of the union dues starting March 1995. The check-of was efected.

On July 24, 1995, the union formally submitted its CBA proposal to respondent with request for a reply
in ten (10) days pursuant to the Labor Code. The management in a letter expressed willingness to
meet the union panel on August 30, 1995, which the latter understood to mean that the management
would present its counter-proposal during the said conference.

To the surprise of the complainants, they received instead on August 26, 1995 a letter of termination
stating that, in accordance with the special retirement program of respondent, their services will be
terminated efective September 27, 1995. The letter also stated that according to a study conducted
by the respondent of its organizational set-up, it is over-stafed and there are duplications of functions
which left it no choice but to reduce personnel.

As to the CBA counter-proposal, the management wrote the union on August 31, 1995 that the matter
was referred to its external counsel for appropriate disposition in the light of the recent development in
this company.

The special retirement program afected 32 employees or roughly one-third of the supervisory
personnel. They included the union President and Treasurer and majority of the Board of Directors and
active union members. No clarification was made as to how the terminated employees were chosen,
and no guidelines, criteria or standard was shown to lend coherence to the program.

As may be expected, the dismissals generated a general perception that management was sending a
strong message that all employees hold their position at its pleasure, and that it was within its power
to dismiss anyone anytime. With the dismissal of the union officers and with the membership now
efectively threatened, the union virtually collapsed as an organization. Out of fear, no one would even
assume the position of union President. An indication of this sad state of afairs into which the union
has fallen is that nothing came out of its CBA proposal. It has been a year and three months as of this
writing since the respondent informed the union that its proposal had been referred to the companys
external counsel, but no counter-proposal has been submitted and no single conference has been held
since then.[35]

While it may be true that the private respondents signed separate Deeds of Release Waiver and
Quitclaim and received separation pay, nonetheless, we find and so hold that the NLRC did not err in
nullifying the decision of the Labor Arbiter, thus:

The Release Waiver and Quitclaim were not verified by the complainants. Under prevailing
jurisprudence, the fact that an employee has signed a satisfaction receipt of his claims does not
necessarily result in the waiver thereof. The law does not consider as valid any agreement whereby a
worker agrees to receive less compensation than what he is entitled to recover. A deed of release or
quitclaim cannot bar an employee from demanding benefits to which he is legally entitled. We have
herefore (sic) explained that the reason why quitclaims are commonly frowned upon as contrary to
public policy and why they are held to be inefective to bar claims for the full measures of the workers
legal rights is the fact the employer and the employee obviously do not stand on the same footing. The
employer drove the employees to the wall. The latter must have to get hold of the money. Because out
of job, they had to face the harsh necessities of life. x x x (Marcos vs. NLRC, G.R. No. 111744,
September 8, 1995)[36]

Private respondents Franco and Pabalan protested the termination of their employment. Private
respondents Candelario and Perrin were shocked when, although they were on leave, they were invited
to the Northeast Beach Resort by Juan Masa, Jr., the head of the Cane Marketing Department, on
August 25, 1996, only to be told that, after spending a considerable number of years under the
petitioners employ, they were suddenly out of jobs. The private respondents had no other recourse but
to execute the said Release Waiver and Quitclaim because the petitioner made it clear in its
Memorandum dated August 8, 1995 that it had the final say on who would be included in its special
retirement program. Their dismissal from the petitioner corporation was a fait accompli, solely because
they organized a union that would bargain for reasonable terms and conditions of employment sought
to be included in a CBA. In fine, the private respondents were left to fend for themselves, with no
source of income from then on; prospects for new jobs were dim. Their backs against the wall, the
private respondents were forced to sign the said documents and receive their separation pay.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit.
SO ORDERED.
PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, SUPREME
PACKAGING, INC. and ALVIN LEE, Plant Manager, respondents.

DECISION

CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari of the Resolution[1] dated December 15, 2000
of the Court of Appeals (CA) reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485. The
assailed resolution reinstated the Decision dated July 10, 1998 of the National Labor Relations
Commission (NLRC), dismissing the complaint for illegal dismissal filed by herein petitioner Pedro
Chavez. The said NLRC decision similarly reversed its earlier Decision dated January 27, 1998 which,
affirming that of the Labor Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.

The case stemmed from the following facts:

The respondent company, Supreme Packaging, Inc., is in the business of manufacturing cartons and
other packaging materials for export and distribution. It engaged the services of the petitioner, Pedro
Chavez, as truck driver on October 25, 1984. As such, the petitioner was tasked to deliver the
respondent companys products from its factory in Mariveles, Bataan, to its various customers, mostly
in Metro Manila. The respondent company furnished the petitioner with a truck. Most of the petitioners
delivery trips were made at nighttime, commencing at 6:00 p.m. from Mariveles, and returning thereto
in the afternoon two or three days after. The deliveries were made in accordance with the routing slips
issued by respondent company indicating the order, time and urgency of delivery. Initially, the
petitioner was paid the sum of P350.00 per trip. This was later adjusted to P480.00 per trip and, at the
time of his alleged dismissal, the petitioner was receiving P900.00 per trip.

Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent companys plant
manager, his (the petitioners) desire to avail himself of the benefits that the regular employees were
receiving such as overtime pay, nightshift diferential pay, and 13th month pay, among others.
Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do
so.

On February 20, 1995, the petitioner filed a complaint for regularization with the Regional Arbitration
Branch No. III of the NLRC in San Fernando, Pampanga. Before the case could be heard, respondent
company terminated the services of the petitioner. Consequently, on May 25, 1995, the petitioner filed
an amended complaint against the respondents for illegal dismissal, unfair labor practice and non-
payment of overtime pay, nightshift diferential pay, 13th month pay, among others. The case was
docketed as NLRC Case No. RAB-III-02-6181-95.

The respondents, for their part, denied the existence of an employer-employee relationship between
the respondent company and the petitioner. They averred that the petitioner was an independent
contractor as evidenced by the contract of service which he and the respondent company entered into.
The said contract provided as follows:

That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees to hire and the
Contractor [referring to Pedro Chavez], by nature of their specialized line or service jobs, accepts the
services to be rendered to the Principal, under the following terms and covenants heretofore
mentioned:

1. That the inland transport delivery/hauling activities to be performed by the contractor to the
principal, shall only cover travel route from Mariveles to Metro Manila. Otherwise, any change to this
travel route shall be subject to further agreement by the parties concerned.

2. That the payment to be made by the Principal for any hauling or delivery transport services fully
rendered by the Contractor shall be on a per trip basis depending on the size or classification of the
truck being used in the transport service, to wit:

a) If the hauling or delivery service shall require a truck of six wheeler, the payment on a per trip basis
from Mariveles to Metro Manila shall be THREE HUNDRED PESOS (P300.00) and EFFECTIVE December
15, 1984.

b) If the hauling or delivery service require a truck of ten wheeler, the payment on a per trip basis,
following the same route mentioned, shall be THREE HUNDRED FIFTY (P350.00) Pesos and Efective
December 15, 1984.

3. That for the amount involved, the Contractor will be to [sic] provide for [sic] at least two (2) helpers;

4. The Contractor shall exercise direct control and shall be responsible to the Principal for the cost of
any damage to, loss of any goods, cargoes, finished products or the like, while the same are in transit,
or due to reckless [sic] of its men utilized for the purpose above mentioned;

5. That the Contractor shall have absolute control and disciplinary power over its men working for him
subject to this agreement, and that the Contractor shall hold the Principal free and harmless from any
liability or claim that may arise by virtue of the Contractors non-compliance to the existing provisions
of the Minimum Wage Law, the Employees Compensation Act, the Social Security System Act, or any
other such law or decree that may hereafter be enacted, it being clearly understood that any truck
drivers, helpers or men working with and for the Contractor, are not employees who will be
indemnified by the Principal for any such claim, including damages incurred in connection therewith;

6. This contract shall take efect immediately upon the signing by the parties, subject to renewal on a
year-to-year basis.

This contract of service was dated December 12, 1984. It was subsequently renewed twice, on July 10,
1989 and September 28, 1992. Except for the rates to be paid to the petitioner, the terms of the
contracts were substantially the same. The relationship of the respondent company and the petitioner
was allegedly governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by
which his work was accomplished. He paid the wages of his helpers and exercised control over them.
As such, the petitioner was not entitled to regularization because he was not an employee of the
respondent company. The respondents, likewise, maintained that they did not dismiss the petitioner.
Rather, the severance of his contractual relation with the respondent company was due to his violation
of the terms and conditions of their contract. The petitioner allegedly failed to observe the minimum
degree of diligence in the proper maintenance of the truck he was using, thereby exposing respondent
company to unnecessary significant expenses of overhauling the said truck.

After the parties had filed their respective pleadings, the Labor Arbiter rendered the Decision dated
February 3, 1997, finding the respondents guilty of illegal dismissal. The Labor Arbiter declared that
the petitioner was a regular employee of the respondent company as he was performing a service that
was necessary and desirable to the latters business. Moreover, it was noted that the petitioner had
discharged his duties as truck driver for the respondent company for a continuous and uninterrupted
period of more than ten years.

The contract of service invoked by the respondents was declared null and void as it constituted a
circumvention of the constitutional provision afording full protection to labor and security of tenure.
The Labor Arbiter found that the petitioners dismissal was anchored on his insistent demand to be
regularized. Hence, for lack of a valid and just cause therefor and for their failure to observe the due
process requirements, the respondents were found guilty of illegal dismissal. The dispositive portion of
the Labor Arbiters decision states:

WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring respondent
SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager, with business address at BEPZ,
Mariveles, Bataan guilty of illegal dismissal, ordering said respondent to pay complainant his
separation pay equivalent to one (1) month pay per year of service based on the average monthly pay
of P10,800.00 in lieu of reinstatement as his reinstatement back to work will not do any good between
the parties as the employment relationship has already become strained and full backwages from the
time his compensation was withheld on February 23, 1995 up to January 31, 1997 (cut-of date) until
compliance, otherwise, his backwages shall continue to run. Also to pay complainant his 13th month
pay, night shift diferential pay and service incentive leave pay hereunder computed as follows:

a) Backwages .. P248,400.00

b) Separation Pay .... P140,400.00

c) 13th month pay .P 10,800.00

d) Service Incentive Leave Pay .. 2,040.00

TOTAL P401,640.00

Respondent is also ordered to pay ten (10%) of the amount due the complainant as attorneys fees. SO
ORDERED.[3]

The respondents seasonably interposed an appeal with the NLRC. However, the appeal was dismissed
by the NLRC in its Decision[4] dated January 27, 1998, as it affirmed in toto the decision of the Labor
Arbiter. In the said decision, the NLRC characterized the contract of service between the respondent
company and the petitioner as a scheme that was resorted to by the respondents who, taking
advantage of the petitioners unfamiliarity with the English language and/or legal niceties, wanted to
evade the efects and implications of his becoming a regularized employee.[5]

The respondents sought reconsideration of the January 27, 1998 Decision of the NLRC. Acting thereon,
the NLRC rendered another Decision[6] dated July 10, 1998, reversing its earlier decision and, this
time, holding that no employer-employee relationship existed between the respondent company and
the petitioner. In reconsidering its earlier decision, the NLRC stated that the respondents did not
exercise control over the means and methods by which the petitioner accomplished his delivery
services. It upheld the validity of the contract of service as it pointed out that said contract was silent
as to the time by which the petitioner was to make the deliveries and that the petitioner could hire his
own helpers whose wages would be paid from his own account. These factors indicated that the
petitioner was an independent contractor, not an employee of the respondent company.

The NLRC ruled that the contract of service was not intended to circumvent Article 280 of the Labor
Code on the regularization of employees. Said contract, including the fixed period of employment
contained therein, having been knowingly and voluntarily entered into by the parties thereto was
declared valid citing Brent School, Inc. v. Zamora.The NLRC, thus, dismissed the petitioners complaint
for illegal dismissal.

The petitioner sought reconsideration of the July 10, 1998 Decision but it was denied by the NLRC in its
Resolution dated September 7, 1998. He then filed with this Court a petition for certiorari, which was
referred to the CA following the ruling in St. Martin Funeral Home v. NLRC.

The appellate court rendered the Decision dated April 28, 2000, reversing the July 10, 1998 Decision of
the NLRC and reinstating the decision of the Labor Arbiter. In the said decision, the CA ruled that the
petitioner was a regular employee of the respondent company because as its truck driver, he
performed a service that was indispensable to the latters business. Further, he had been the
respondent companys truck driver for ten continuous years. The CA also reasoned that the petitioner
could not be considered an independent contractor since he had no substantial capital in the form of
tools and machinery. In fact, the truck that he drove belonged to the respondent company. The CA also
observed that the routing slips that the respondent company issued to the petitioner showed that it
exercised control over the latter. The routing slips indicated the chronological order and priority of
delivery, the urgency of certain deliveries and the time when the goods were to be delivered to the
customers.

The CA, likewise, disbelieved the respondents claim that the petitioner abandoned his job noting that
he just filed a complaint for regularization. This actuation of the petitioner negated the respondents
allegation that he abandoned his job. The CA held that the respondents failed to discharge their
burden to show that the petitioners dismissal was for a valid and just cause. Accordingly, the
respondents were declared guilty of illegal dismissal and the decision of the Labor Arbiter was
reinstated.

In its April 28, 2000 Decision, the CA denounced the contract of service between the respondent
company and the petitioner in this wise:

In summation, we rule that with the proliferation of contracts seeking to prevent workers from
attaining the status of regular employment, it is but necessary for the courts to scrutinize with extreme
caution their legality and justness. Where from the circumstances it is apparent that a contract has
been entered into to preclude acquisition of tenurial security by the employee, they should be struck
down and disregarded as contrary to public policy and morals. In this case, the contract of service is
just another attempt to exploit the unwitting employee and deprive him of the protection of the Labor
Code by making it appear that the stipulations of the parties were governed by the Civil Code as in
ordinary transactions.[9]

However, on motion for reconsideration by the respondents, the CA made a complete turn around as it
rendered the assailed Resolution dated December 15, 2000 upholding the contract of service between
the petitioner and the respondent company. In reconsidering its decision, the CA explained that the
extent of control exercised by the respondents over the petitioner was only with respect to the result
but not to the means and methods used by him. The CA cited the following circumstances: (1) the
respondents had no say on how the goods were to be delivered to the customers; (2) the petitioner
had the right to employ workers who would be under his direct control; and (3) the petitioner had no
working time.

The fact that the petitioner had been with the respondent company for more than ten years was,
according to the CA, of no moment because his status was determined not by the length of service but
by the contract of service. This contract, not being contrary to morals, good customs, public order or
public policy, should be given the force and efect of law as between the respondent company and the
petitioner. Consequently, the CA reinstated the July 10, 1998 Decision of the NLRC dismissing the
petitioners complaint for illegal dismissal.

Hence, the recourse to this Court by the petitioner. He assails the December 15, 2000 Resolution of the
appellate court alleging that:

(A) THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS
OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE CONTRACT OF SERVICE ENTERED
INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE OF
THE PHILIPPINES WHICH CATEGORICALLY DEFINES A REGULAR EMPLOYMENT
NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE CONTRARY AND REGARDLESS OF THE
ORAL AGREEMENT OF THE PARTIES;

(B) THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS
OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A REGULAR EMPLOYEE
AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN
PRIVATE RESPONDENT AND PETITIONER IN AS MUCH AS THE CONTROL TEST WHICH IS
CONSIDERED THE MOST ESSENTIAL CRITERION IN DETERMINING THE EXISTENCE OF SAID
RELATIONSHIP IS NOT PRESENT.[10]

The threshold issue that needs to be resolved is whether there existed an employer-employee
relationship between the respondent company and the petitioner. We rule in the affirmative.

The elements to determine the existence of an employment relationship are: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employers power to control the employees conduct.[11] The most important element is the employers
control of the employees conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.[12] All the four elements are present in this case.

First. Undeniably, it was the respondents who engaged the services of the petitioner without the
intervention of a third party.

Second. Wages are defined as remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece or commission basis,
or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for service rendered or to
be rendered.[13] That the petitioner was paid on a per trip basis is not significant. This is merely a
method of computing compensation and not a basis for determining the existence or absence of
employer-employee relationship. One may be paid on the basis of results or time expended on the
work, and may or may not acquire an employment status, depending on whether the elements of an
employer-employee relationship are present or not.[14] In this case, it cannot be gainsaid that the
petitioner received compensation from the respondent company for the services that he rendered to
the latter.

Moreover, under the Rules Implementing the Labor Code, every employer is required to pay his
employees by means of payroll.The payroll should show, among other things, the employees rate of
pay, deductions made, and the amount actually paid to the employee. Interestingly, the respondents
did not present the payroll to support their claim that the petitioner was not their employee, raising
speculations whether this omission proves that its presentation would be adverse to their case.

Third. The respondents power to dismiss the petitioner was inherent in the fact that they engaged the
services of the petitioner as truck driver. They exercised this power by terminating the petitioners
services albeit in the guise of severance of contractual relation due allegedly to the latters breach of
his contractual obligation.

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test
is the most important. Compared to an employee, an independent contractor is one who carries on a
distinct and independent business and undertakes to perform the job, work, or service on its own
account and under its own responsibility according to its own manner and method, free from the
control and direction of the principal in all matters connected with the performance of the work except
as to the results thereof.[17] Hence, while an independent contractor enjoys independence and
freedom from the control and supervision of his principal, an employee is subject to the employers
power to control the means and methods by which the employees work is to be performed and
accomplished.

Although the respondents denied that they exercised control over the manner and methods by which
the petitioner accomplished his work, a careful review of the records shows that the latter performed
his work as truck driver under the respondents supervision and control. Their right of control was
manifested by the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively to
deliver respondent companys goods; [19]

3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of
two specific places only, to wit: at its office in Metro Manila at 2320 Osmea Street, Makati City or at
BEPZ, Mariveles, Bataan;[20] and

4. Respondents determined how, where and when the petitioner would perform his task by issuing to
him gate passes and routing slips. [21]

a. The routing slips indicated on the column REMARKS, the chronological order and priority of delivery
such as 1st drop, 2nd drop, 3rd drop, etc. This meant that the petitioner had to deliver the same
according to the order of priority indicated therein.

b. The routing slips, likewise, showed whether the goods were to be delivered urgently or not by the
word RUSH printed thereon.

c. The routing slips also indicated the exact time as to when the goods were to be delivered to the
customers as, for example, the words tomorrow morning was written on slip no. 2776.

These circumstances, to the Courts mind, prove that the respondents exercised control over the means
and methods by which the petitioner accomplished his work as truck driver of the respondent
company. On the other hand, the Court is hard put to believe the respondents allegation that the
petitioner was an independent contractor engaged in providing delivery or hauling services when he
did not even own the truck used for such services. Evidently, he did not possess substantial
capitalization or investment in the form of tools, machinery and work premises. Moreover, the
petitioner performed the delivery services exclusively for the respondent company for a continuous
and uninterrupted period of ten years.

The contract of service to the contrary notwithstanding, the factual circumstances earlier discussed
indubitably establish the existence of an employer-employee relationship between the respondent
company and the petitioner. It bears stressing that the existence of an employer-employee relationship
cannot be negated by expressly repudiating it in a contract and providing therein that the employee is
an independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the
employment status of a person is defined and prescribed by law and not by what the parties say it
should be.[22]
Having established that there existed an employer-employee relationship between the respondent
company and the petitioner, the Court shall now determine whether the respondents validly dismissed
the petitioner.

As a rule, the employer bears the burden to prove that the dismissal was for a valid and just cause.[23]
In this case, the respondents failed to prove any such cause for the petitioners dismissal. They
insinuated that the petitioner abandoned his job. To constitute abandonment, these two factors must
concur: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear
intention to sever employer-employee relationship.[24] Obviously, the petitioner did not intend to
sever his relationship with the respondent company for at the time that he allegedly abandoned his
job, the petitioner just filed a complaint for regularization, which was forthwith amended to one for
illegal dismissal. A charge of abandonment is totally inconsistent with the immediate filing of a
complaint for illegal dismissal, more so when it includes a prayer for reinstatement.[25]

Neither can the respondents claim that the petitioner was guilty of gross negligence in the proper
maintenance of the truck constitute a valid and just cause for his dismissal. Gross negligence implies a
want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It
evinces a thoughtless disregard of consequences without exerting any efort to avoid them.[26] The
negligence, to warrant removal from service, should not merely be gross but also habitual.[27] The
single and isolated act of the petitioners negligence in the proper maintenance of the truck alleged by
the respondents does not amount to gross and habitual neglect warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:

As against the gratuitous allegation of the respondent that complainant was not dismissed from the
service but due to complainants breach of their contractual relation, i.e., his violation of the terms and
conditions of the contract, we are very much inclined to believe complainants story that his dismissal
from the service was anchored on his insistent demand that he be considered a regular employee.
Because complainant in his right senses will not just abandon for that reason alone his work especially
so that it is only his job where he depends chiefly his existence and support for his family if he was not
aggrieved by the respondent when he was told that his services as driver will be terminated on
February 23, 1995.[28]

Thus, the lack of a valid and just cause in terminating the services of the petitioner renders his
dismissal illegal. Under Article 279 of the Labor Code, an employee who is unjustly dismissed is
entitled to reinstatement, without loss of seniority rights and other privileges, and to the payment of
full backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed
from the time his compensation was withheld from him up to the time of his actual reinstatement.[29]
However, as found by the Labor Arbiter, the circumstances obtaining in this case do not warrant the
petitioners reinstatement. A more equitable disposition, as held by the Labor Arbiter, would be an
award of separation pay equivalent to one month for every year of service from the time of his illegal
dismissal up to the finality of this judgment in addition to his full backwages, allowances and other
benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15, 2000 of the Court
of Appeals reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485 is REVERSED and SET
ASIDE. The Decision dated February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5,
finding the respondents guilty of illegally terminating the employment of petitioner Pedro Chavez, is
REINSTATED.

SO ORDERED.

G.R. No. 114250 April 5, 1995

DOMINICO C. CONGSON, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, NOE BARGO, ROGER HIMENO, RAYMUNDO BADAGOS,
PATRICIO SALVADOR, SR., NEHIL BARGO, JOEL MENDOZA, and EMMANUEL CALIXIHAN, respondents.

PADILLA, J.:
Petitioner Dominico C. Congson seeks the nullification of the decision rendered by the National Labor Relations
Commission in Case No. NLRC CA M-000681-92 1 dated 28 May 1993 and its resolution dated 28 January 1994,
denying petitioner's motion for reconsideration..

In the challenged decision*, the NLRC affirmed in toto Labor Arbiter Arturo Aponesto's decision dated 27 September
1991, holding thus:

WHEREFORE, the appealed decision is hereby AFFIRMED IN TOTO and the instant appeal is
DISMISSED for lack of merit.

SO ORDERED. 2

Petitioner is the registered owner of Southern Fishing Industry. Private respondents were hired on various dates 3by
petition'er as regular piece-rate workers. They were uniformly paid at a rate of P1.00 per tuna weighing thirty (30) to
eighty (80) kilos per movement, that is from the fishing boats down to petitioner's storage plant at a load/unload
cycle of work until the tuna catch reached its final shipment/destination. They did the work of unloading tuna from
fishing boats to truck haulers; unloading them again at petitioner's cold storage plant for filing, storing, cleaning, and
maintenance; and finally loading the processed tuna for shipment. They worked seven (7) days a week.

During the first week of June 1990, petitioner notified his workers of his proposal to reduce the rate-per-tuna
movement due to the scarcity of tuna. Private respondents resisted petitioner's proposed rate reduction. When they
reported for work the next day, they were informed that they had been replaced by a new set of workers, When they
requested for a dialogue with the management, they were instructed to wait for further notice. They waited for the
notice of dialogue for a full week but in vain.

On 15 June 1990, private respondents filed a case against petitioner before the NLRC Sub-Regional Arbitration
Branch No. XI in General Santos City, docketed as Case No. RAB-11-06-50165-90 for underpayment of wages (non-
compliance with Rep. Act Nos. 6640 and 6727) and non-payment of overtime pay, 13th month pay, holiday pay, rest
day pay, and five (5)-day service incentive leave pay; and for constructive dismissal. With respect to their monetary
claims, private respondents charged petitioner with violation of the minimum wage law, alleging that with petitioner's
rates and the scarcity of tuna catches, private respondents' average monthly earnings each did not exceed ONE
THOUSAND PESOS (P1,000.00).

Accusing petitioner of constructive dismissal, private respondents claimed that petitioner refused to give them work
assignments and replaced them with new workers when they showed resistance to the petitioner's proposed
reduction of the rate-per-tuna movement.

On 2 July 1990, private respondents filed another case against petitioner, docketed as Case No. RAB; 11-07-50179-
90 containing an additional claim for separation pay should their complaint for constructive dismissal be upheld.

The two (2) cases were consolidated. Conciliation conferences were scheduled. On 24 July 1990, however, Labor
Arbiter Aponesto directed the parties to submit their respective position papers within twenty (20) days from receipt of
the directive, since no amicable settlement was reached in conciliation between the parties.

On 22 August 1990, private respondents filed their position paper reiterating the charges in their complaint for
constructive dismissal, attaching thereto a Bill of Particulars containing the computations of their monetary claims.
Petitioner, instead of filing his position paper, sought, through counsel, an extension of time within which to file his
position paper.

On 20 September 1991, petitioner filed his position paper wherein he claimed that the only issue for resolution was
private respondents' monetary claims, and that there was no constructive dismissal. Petitioner further argued that
private respondents were not dismissed but rather, they abandoned their work after learning of petitioner's proposal
to reduce tuna movement rates because of the scarcity of tuna, and that, it took private respondents one (1) month to
return to work, but they could no longer be accommodated as petitioner had already hired their replacements after
private respondents failed to heed petitioner's repeated demands for them to return to work. Upon said premises,
petitioner contended that private respondents were not entitled to separation pay.

On 27 September. 1991, Labor Arbiter Aponesto rendered a decision, with the following disposition:

WHEREFORE, finding that complainants Noe Bargo, Roger Himeno, Raymundo Badagos, Patricio
Salvador; Sr., Negil Barge, Joel Mendoza and Emmanuel Calixihan were (constructively) dismissed
from employment without just or unauthorized cause hence illegal, respondents Southern Fishing
Industry and Mr. Dominico Congson are hereby directed to pay, jointly and severally, their
respective separation pay and monetary claims for salary differentials, 13th month pay and service
incentive leave pay, as computed above, in the total sum of FIVE HUNDRED TWO THOUSAND
EIGHT HUNDRED SIXTY FIVE (P502,865.00) PESOS.

The claims for overtime pay, holiday pay and rest day pay are, however, dismissed for lack of
factual basis and for reasons aforecited.

SO ORDERED. 4

In holding petitioner guilty of constructive dismissal, Labor Arbiter Aponesto made the following findings:

After a careful evaluation of the foregoing facts, proofs, evidence, arguments and counter-
arguments adduced by the parties we find that complainants were summarily dismissed from
employment t on the first week of June, 1990, when respondent Dominico Congson arbitrarily
replaced them with another group of laborers to do the work of complainants. This was brought
about by their reluctance or resistance to accept a new lower rate proposed by respondent the day
before. The advise to wait for further notice' was indeed a confirmation that complainants were
dismissed as underscored by the fact that such notice never came even until this date. Having
been constructively and illegally dismissed complainants are therefore entitled to their prayer for
separation pay. Their length of service 10 years and 6 years, respectively(supra), which respondent
dismally failed to controvert or refute, shall be the basis of our computation, thus:

1 N. Bargo (P2,670 x 10) P26,700

2 R. Himeno (P2,670 x 10) 26,700

3 R. Badayos (P2,670 x 10) 26,700

4 P. Salvador, Jr. (P2,670 x 6) 16,020

5 Negil Bargo (P2,670 x 10) 26,700

6 J. Mendoza (P2,670 x 6) 16,020

7 E. Calixihan (P2,670 x 6) 16,020

Total P154,860 5

Except for private respondents' claim for overtime pay, holiday pay, and rest day pay which were dismissed, Labor
Arbiter Aponesto granted the monetary claims of private respondents, in this wise:

We likewise grant the monetary claims of complainants for wage differentials, 13th month pay and
service incentive leave pay payment of or exemption from which respondents failed to show.
Hence, given the 3-year period covered by their monetary claims, i.e. from June, 1987 to June,
1990 the monetary awards due complainants are as follows:

Name Wage 13th SIL Total

Diff'l. Mon. Pay

Noe Bargo 42,120 6,510.00 1,085 P49,715.00

R. Himeno 42,120 6,510.00 1,085 49,715.00

R. Badagos 42,120 6,510.00 1,085 49,715.00

P. Salvador 42,120 6,510.00 1,085 49,715.00

N. Bargo 42,120 6,510.00 1,085 49,715.00


J. Mendoza 42,120 6,510.00 1,085 49,715.00

Calixihan. 42,120 6,510.00 1,085 49,715.00

Total P348,005.00

xxx xxx xxx

Pertaining to salary differentials respondent failed to adduce any evidence or document at all to
show that under their peculiar arrangements complainants were receiving compensation at par or
above the then existing minimum wage; this, despite more than sufficient time afforded.
Consequently, we have no other alternative but to give credence to complainants' assertion that
their average income (each) did not exceed P1,000.00 a month (Annex "B") complainants' position
paper), thus the differentials. 6

On the other hand, Labor Arbiter Aponesto made short shrift of petitioner's defense by ruling that:

We cannot give credence to the allegations or defenses put up by respondents: As stated, one of
the principal claims of complainants is the payment of their separation pay which was specifically
prayed by complainants when they filed the second case on July 2, 1990; this claim is likewise
included in their Bill of particulars (Annex "C" complainants' position paper). We cannot sustain
respondents' theory of abandonment. Record shows that shortly after complainants were
constructively dismissed on the first week of June, 1990 they immediately filed the instant case for
constructive dismissal on June 15,1990. There is also no showing of a deliberate refusal on their
part to resume work. Moreover, respondents dismally failed to substantiate their general allegation
that "repeated demands" were made upon complainants to return to work. 7

On appeal by petitioner, respondent NLRC found petitioner guilty of illegal dismissal. Holding that petitioner failed to
substantiate his contention that private respondents abandoned their work, respondent NLRC ruled that petitioner
replaced private respondents with a new set of workers without just cause and the required notice and hearing.
Respondent NLRC therefore affirmed Labor Arbiter Aponesto's findings and monetary awards. Petitioner's motion for
reconsideration and supplemental motion for reconsideration were denied for lack of merit in the challenged
resolution dated 28 January 1994.

Hence, the present recourse by petitioner.

Petitioner imputes grave abuse of discretion to respondent NLRC in completely disregarding his motion for
reconsideration and supplemental motion for reconsideration. He contends that said motions for reconsideration
raised substantial issues which respondent NLRC failed to consider and resolve.

Petitioner's motion for reconsideration and supplemental motion for reconsideration raised only two (2) issues: a) the
accuracy of Labor Arbiter Aponesto's computations in arriving at the monetary awards representing salary
differentials; and b) the propriety or correctness of Labor Arbiter Aponesto's grant of separation pay to private
respondents.

Petitioner takes issue with the manner Labor Arbiter Aponesto computed private respondents wage differentials. In
his supplemental motion for reconsideration, petitioner argued, thus:

In the Decision rendered, the Arbiter awarded wage differential on the premise that complainants
monthly average income is only P1, 000.00 as alleged in their position paper. This is erroneous.
Here is why:

Herein complainants were employed by respondents on a load-unload cycle of hauling "bariles"


from the fishing boats to the truck hauler of the respondents; then from the truck hauler down to the
cold storage; the herein complainants were paid P 1.00 per movement t; that is, from the fishing
boat to the cold storage, the herein complainants actually received the amount of P2.00, one (1)
peso per movement; that there are two (2) movements from the fishing boat to the cold storage,
hence complainants are actually receiving P2.00 per piece of tuna. The Arbiter must have been on
the impression that there is only one (1) movement from the fishing boat to the cold storage. This is
erroneous.

That finally, when the tuna is ready for export, the same is to be transferred from the cold storage to
the ocean going vessel berthed at respondents wharf at Talisay, General Santos City, this time
herein complainants are paid P3.00 per piece of tuna from the cold storage to the ocean going
vessel as shown in the herewith attached Annexes.
In fine, all in all, there are three (3)movements from the time the tuna is unloaded from the fishing
boat to the fish car then to the cold storage; and, finally from the cold storage to the vessel.

In addition to the amount of P1.00 per 'bariles' per movement herein complainants get the
intestines and liver of the tuna as part of their salary. That for every tuna delivered, herein
complainants extract at least three (3) kilos of intestines and liver. That the minimum prevailing
price of tuna intestine and liver in 1986 to 1990 range from P15.00 to P20.00/kilo. The value of the
tuna intestine and liver should be computed in arriving at the daily wage of herein complainants
because the very essence of the agreement between complainants and respondent is:
complainants shall be paid only P1.00 per tuna per movement BUT the intestines and liver of the
tuna delivered shall go to the herein complainants. It should be noted that tuna intestines and liver
are easily disposed of in any public market. Complainants themselves would not have agreed and
would not have served respondent that long period of time if they are only paid P1.00 per tuna
movement. What they are after, in truth and in fact is the tuna intestines and liver which they can
easily convert into cash. 8

Quite clearly, petitioner admits that the P1.00-per-tuna movement is the actual wage rate applied to private
respondents as expressly agreed upon by both parties. Petitioner further admits that private respondents, per their
request, were entitled to retrieve the tuna intestines and liver as part of their compensation. Finally, petitioner does
not refute Labor Arbiter Aponesto when the latter fixed private respondents' individual monthly wage at P2,670
computed at the mandatory daily wage of P89.00.

However, it is the contention of petitioner that notwithstanding the fact that private respondents' actual cash wage fell
below the minimum wage fixed by law, respondent NLRC should have considered as forming a substantial part of
private respondents' total wages the cash value of the tuna liver and intestines private respondents were entitled to
retrieve. Petitioner therefore argues that the combined value of private respondents' cash wage and the monetary
value of the tuna liver and intestines clearly exceeded the minimum wage fixed by law.

Petitioner's foregoing arguments do not impress us.

The Labor Code expressly provides:

Article 102. Forms of Payment. No. employer shall pay the wages of an employee by means of,
promissory notes, vouchers, coupons, tokens tickets, chits, or any object other than legal
tender, even when expressly requested by the employee.

Payment of wages by check or money order shall be allowed when such manner of payment is
customary on the date of effectivity of this Code, or is necessary as specified in appropriate
regulations to be issued by the Secretary of Labor or as stipulated in a collective bargaining
agreement. (Emphasis supplied)

Undoubtedly, petitioner's practice of paying the private respondents the minimum wage by means of legal tender
combined with tuna liver and intestines runs counter to the above cited provision of the Labor Code. The fact that said
method of paying the minimum wage was not only agreed upon by both parties in the employment agreement but
even expressly requested by private respondents, does not shield petitioner. Article 102 of the Labor Code is clear.
Wages shall be paid only by means of legal tender. The only instance when an employer is permitted to pay wages
informs other than legal tender, that is, by checks or money order, is when the circumstances prescribed in the
second paragraph of Article 102 are present.

We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter Aponesto's
award of salary differentials.

With respect to the issue concerning the propriety or correctness of the grant of separation pay to private
respondents, petitioner contends that; assuming arguendo that Labor Arbiter Aponesto's findings were proper as to
private respondents' illegal dismissal, his decision did not state the reason why instead of reinstatement, separation
pay has to be awarded to private respondents. Petitioner submits that under existing laws and jurisprudence,
whenever there is a finding of illegal dismissal, the available and logical remedy is reinstatement. As a permissible
exception to the general rule, separation pay may be awarded to the employee in lieu of reinstatement, by reason of
strained relationship between the employer and employee. Since there was no finding or even allegation of strained
relationship between .petitioner and private respondents, respondent NLRC should have deleted, according to
petitioner, the award of separation pay in Labor Arbiter Aponesto's decision.

We find petitioner's ratiocination on the impropriety of the award of separation pay to private respondents to be
specious. Petitioner seeks to defeat the award of separation pay, in lieu of reinstatement, on the pretext that
inasmuch as the existence of strained relationship as a permissible exception to an axiomatic order of
reinstatement in cases of illegal dismissal was not adequately established, Labor Arbiter Aponesto should not have
entertained at all private respondents' claim for separation pay.

A careful scrutiny of the records of the case at bench, however, readily discloses the existence of strained relationship
between the petitioner and private respondents.

Firstly, petitioner consistently refused to re-admit private respondents in his establishment. Petitioner even replaced
private respondents with a new set of workers to perform the tasks of private respondents; Moreover, although
petitioner ostensibly argued in his supplemental motion for reconsideration that reinstatement should have been the
proper remedy in the case at bench on his premise that the existence of strained relationship was not adequately
established, yet petitioner never sincerely intended to effect the actual reinstatement of private respondents. For if
petitioner were to pursue further the entire logic of his argument, the prayer in his supplemental motion for
reconsideration should have contained not just the mere deletion of the award of separation pay, but precisely, the
reinstatement of private respondents. Quite obviously then, notwithstanding petitioner's argument for reinstatement
he was only interested in the deletion of the award of separation pay to private respondents.

In the case of Felix Esmalin vs. National Labor Relations Commission (3rd Division) and CARE Philippines, 9 we held
that strained relationship is fairly established if the records of the case showed consistent refusal of the employer to
accept the dismissed employee, to wit:

From the records of the case it can be discerned that reinstatement is no longer viable in view of
the strained relations between petitioner-employee (Felix Esmalin) and private respondent
employer (CARE Philippines). This is very evident from the vehement and consistent stand of
CARE Philippines in refusing to accept back petitioner Esmalin. Instead, petitioner should be
awarded separation pay as an alternative for reinstatement.

And secondly, private respondents themselves, from the very start, had already indicated their aversion to their
continued employment in petitioner's establishment. The very filing of their second case before Labor.

Arbiter Aponesto (RAB-1 1-07-90179-90) specifically for separation pay is conclusive of private respondents' intention
to sever their working ties with petitioner.

In the case of Arturo Lagniton, Sr. vs. National Labor Relations Commission, et a1., 10 we ruled that the refusal of the
dismissed employee to be re-admitted is constitutive of strained relations, thus:

It appears that relations between the petitioner and the complainants have been so strained that
the complainants are no longer willing to be reinstated. As such reinstatement would only
exacerbate the animosities that have developed between the parties, the public respondents were
correct in ordering instead the grant of separation pay to the dismissed employees in the interest of
industrial peace.

We therefore find no grave abuse of discretion on the part of respondent NLRC in upholding Labor Arbiter
Aponesto,'s grant of private respondents' prayer for separation pay in lieu of reinstatement.

WHEREFORE, premises considered, the petition is hereby DISMISSED. The challenged decision of respondent
NLRC dated 28 May 1993 is hereby AFFIRMED.

G.R. No. 77959 January 9, 1989

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner,


vs.
THE SECRETARY OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR OF THE NATIONAL CAPITAL
REGION, DEPARTMENT OF LABOR AND EMPLOYMENT and UNITED RCPI COMMUNICATIONS LABOR
ASSOCIATION (URCPICLA)-FUR, respondents.

Ermitao, Asuncion, Manzano & Associates for petitioner.

The Solicitor General for public respondent.

Abad, Leano & Associates for respondent URCPICLA.

REGALADO, J.:

This petition for certiorari seeks the annulment of the orders issued by public respondents in NWC Ref. No. W01-13,
viz: (1) the order of May 7, 1986 of respondent Regional Director requiring petitioner Radio Communications of the
Philippines, Inc. (hereinafter, RCPI) and its employees represented by Buklod ng Manggagawa sa RCPI-NFL
(BMRCPI-NFL, for brevity) to pay private respondent United RCPI Communications Labor Association (URCPICLA-
FUR for short) its 15% union service fee of P427,845.60, jointly and severally, and accordingly directing the issuance
of a writ of execution and garnishment of RCPI's bank account for the satisfaction of said fee; (2) the order of August
16, 1986 of respondent Secretary of Labor and Employment modifying the foregoing order by reducing the union
service fee to 10% of the awarded amounts and holding petitioner solely liable for the payment of such fee; and (3)
the order, dated March 20, 1987, of respondent Secretary denying petitioner's motion for reconsideration.

The records 1 show that on May 4, 1981, petitioner, a domestic corporation engaged in the telecommunications
business, filed with the National Wages Council an application for exemption from the coverage of Wage Order No.
1. 2 The application was opposed by respondent URCPICLA-FUR, a labor organization affiliated with the Federation
of Unions of Rizal (FUR). On May 22, 1981, the National Wages Council, through its Chairman, rendered a letter-
decision 3 disapproving said application and ordering the petitioner to pay its covered employees the mandatory living
allowance of P2.00 daily effective March 22, 1981. Said letter-decision was affirmed by the Office of the President in
O.P. Case No. 1882 and, subsequently, this Court in its resolution of July 15, 1985 in G.R. No. 70148 dismissed
RCPI's petition for certiorari for lack of merit. Entry of final judgment was issued by the Court on July 15, 1985. 4

Furthermore, it is not denied that as early as March 13, 1985, before the aforesaid case was elevated to this Court,
respondent union filed a motion for the issuance of a writ of execution, asserting therein its claim to 15% of the total
backpay due to all its members as "union service fee" for having successfully prosecuted the latter's claim for
payment of wages and for reimbursement of expenses incurred by FUR and prayed for the segregation and
remittance of said amount to FUR thru its National President. 5

In a subsequent "Motion for Immediate Issuance of Writ of Execution", dated September 9, 1985, respondent union
reiterated its claim for said union service fee but this time in an amount equivalent to 20% of the total backpay due its
members, to be remitted to the institution previously adverted to. 6

On September 24, 1985, petitioner filed its opposition to said motion, asserting, among others, that "there is no legal
basis for respondent Union to have the sum equivalent to 20% union service fee deducted from the amount due to
every recipient member". 7 An alias writ of execution was issued on September 26, 1985. 8

On October 24, 1985, without the knowledge and consent of respondent union, petitioner entered into a compromise
agreements 9 with BMRCPI-NFL as the new bargaining agent of oppositors RCPI employees, the pertinent provisions
whereof are hereunder reproduced:

WHEREAS, there are now pending with the National Labor Relations Commission Case No.
NLRC-NCR- 11-5265-83 (NFL, et al. vs. RCPI) relative to RCPI's alleged liabilities under P.D. 1713
and Wage Orders 1, 2 and 3 and NLRC Certified Case No. 0356, with the National Wages Council
and the Office of the Regional Director, Ministry of Labor and Employment, National Capital Region
NWC Case Ref. No. WO-1-13 (O.P. Case No. 1882, S.C. G.R. No. 70148) relative to RCPI's
alleged liabilities under Wage Order No. 1; and with the Office of the Regional Director, MOLE-
NCR, a similar case (NCR-FSD-10-118- 83);

'WHEREAS, RCPI is one of the parties in the above cases and is herein represented by its duly
authorized representative/s while the complainant/employees of RCPI are the other real parties in
interest in the said cases and are represented herein by BMRCPI-NFL, the duly certified bargaining
agent of the said complainant/employees;

WHEREAS, it is to the actual interest and benefit of the parties mentioned in the preceding
WHEREAS (the herein parties) that this Compromise Agreement be entered into by and between
them for the purpose of novating the above mentioned cases, particularly any and all decisions
therein, with the view of re-defining the parties' rights and obligations under the various Presidential
Decrees and/or Wage Orders subjects of the above mentioned cases.

NOW, THEREFORE, for and in consideration of the foregoing premises and the terms and
conditions herein stated, the parties have agreed and bound themselves as follows: THAT

1. RCPI by way of a compromise settlement acknowledges its alleged liability under PD 1713
(mandatory third year) and Wage Order 1 (first and third year) subject of the cases mentioned in
the first WHEREAS hereof;

2. As consideration for the dismissal with prejudice of the above-captioned cases and the novation
thereof and of all decisions in said cases, the parties hereby further agree that:

a) On November 30, 1985, RCPI shall pay to each of its employees/complainants 30% of whatever
is due him/her under PD 1713 (mandatory third year) and Wage Order 1 (first and third year)
subject of the cases mentioned in the first WHEREAS hereof;

b) The balance of 70% due to each employee/complainant under PD 1713 (mandatory third year)
and Wage Order 1 (first and third year) subject of the cases mentioned in the first WHEREAS
hereof shall be the subject of re-opening and/or negotiation by the parties on July 31, 1986 for the
purpose of reaching a compromise settlement thereon on terms mutually acceptable. Against this
30% shall be deducted in full all personal cash advances of every covered employee;

c) Of and from the aforesaid total amount due every employee, 10% thereof shall be considered as
attorney's fee due Atty. Rodolfo Capocyan, the same to be deducted from the remaining 70% and
distributed to Atty. R. Capocyan at the time of the distribution of the remaining 70%. In this
connection, Atty. Rodolfo Capocyan manifest (sic) that he is authorized by the covered employee
(sic) to collect 10% of whatever is/are due them as attorney's fees and undertakes and binds
himself to submit to RCPI the required individual check-off authorization with respect to the 30%.
He and the herein union assume sole responsibility for and shall hold RCPI free and harmless from
any claim, suit or complaint arising from the deduction of this 10% attorney's fee,'

xxx
What transpired thereafter is more completely and undisputedly narrated by the Solicitor General in behalf of public
respondent, thus:

Thereupon, the parties to the compromise agreement filed a joint Motion to Dismiss with Prejudice
praying for the dismissal of the same with prejudice on the ground that the decision of the National
Wages Council dated May 22, 1981 had already been novated by the Compromise Agreement re-
defining the rights and obligations of the parties. Respondent Union on November 7, 1985
countered by opposing the motion and alleging that one of the signatories thereof-Buklod ng
Manggagawa sa RCPI is not a party in interest in the case but that it was respondent Union which
represented oppositors RCPI employees all the way from the level of the National Wages Council
up the Supreme Court. Respondent Union therefore claimed that the Compromise Agreement is
irregular and invalid, apart from the fact that there was nothing to compromise in the face of a final
and executory decision.

On November 22, 1985, respondent Union filed an Urgent Motion for Lien (15% Union Service Fee)
calling attention to a Resolution passed and approved by the URCPICLA-FUR Legislative Board on
June 4, 1984 declaring respondent union entitled to a sum equivalent to 15% of the total backpay
received by each RCPI employee from RCPI as union service fee and reimbursement of expenses
incurred in successfully handling the instant case. Respondent Union prayed that RCPI be required
to deposit with the Cashier of the National Capital Region, Ministry of Labor and Employment an
amount equivalent to 15% of the total amount due to the covered employees as union service fee.
Copy of this motion was received by the Office of the President, RCPI on November 28, 1985.

xxx

'Acting on the Urgent Motion for Lien, Director Severo M. Pucan issued an Order dated November
25, 1985 awarding to URCPICLA-FUR and FUR 15% of the total backpay of RCPI employees as
their union service fees, and directing RCPI to deposit said amount with the cashier of the Regional
Office for proper disposition to said awardees.

Despite notice of the Order of November 25, 1985, and its accompanying letter requesting the
management of RCPI to withhold the 15% union service fee from each employee affected,
petitioner paid in full the covered employees on November 29, 1985, without deducting the union
service fee of 15%. In its motion for reconsideration and to set aside the Order of November 25,
1985, petitioner argued that said Order has been rendered moot and academic by the fact that it
had already paid in full the award under the decision of the National Wages Council. It proposed
instead that URCPICLA and/or FUR re-direct their efforts at collection to the rank and file
employees of RCPI. It also attacked the questioned order as null and void ab anitio for lack of
jurisdiction and due process.

On December 16, 1985, respondent Union filed a petition praying for garnishment of petitioner's
funds in its depository banks to effect remittance of its 15% union service fee in view of the
payment in full by the latter of the wages due its covered employees. Petitioner moved to dismiss
the petition for garnishment as illegal, irregular and highly anomalous. This was opposed by
respondent Union. 10

At this juncture, the record shows that on December 19, 1985, said Regional Director issued an order declaring the
decision fully satisfied and lifting all the garnishments effected pursuant thereto "(C)onsidering that the Alias Writ of
Execution dated 26 September 1985 in this case had already been fully satisfied. 11

However, it appears that thereafter, in an order dated May 7, 1986, NCR officer-in-charge Romeo A. Young found
petitioner RCPI and its employees jointly and severally liable for the payment of the 15% union service fee amounting
to P427,845.60 to private respondent URCPICLA-FUR and consequently ordered the garnishment of petitioner's
bank account to enforce said claim. It was his position that although the decision of the National Wages Council did
not categorically require payment of the 15% service fee directly to URCPICLA-FUR it had acted as the counsel of
record of petitioner's employees, hence said payment could be authorized by applying suppletorily the provisions of
Section 37, Rule 138 of the Rules of Court on attorney's lien. Said order further noted that the transaction entered
into by petitioner in favor of BMRCPI-NFL in the guise of a compromise agreement, was made without the consent of
URCPICLA-FUR in clear defraudation of the latter's right to the 15% union service fee justly due it. 12

Acting on petitioners "Omnibus Motion" seeking, among others, a reconsideration of said order of May 7, 1986, which
motion was treated as an appeal, respondent Secretary of Labor and Employment issued an order on August 18,
1986 modifying the order appealed from by holding petitioner solely liable to respondent union for 10% of the
awarded amounts as attorney's fees, on the rationale that:

... oppositor's claim for attorney's fee was the ultimate consequence of the non-compliance of RCPI
with Wage Order No. 1. The RCPI employees were forced to avail of the services of oppositor as
counsel, RCPI having continuously withheld payment of said benefit. They were forced to litigate up
to the Supreme Court for the protection of their interest. In the case of Cristobal vs. ECC, I,49280
promulgated February 26, 1981, 103 SCRA 339, the Supreme Court ruled that 'the defaulting
employer or government agency remains liable for attorney's fees because it compelled the
complainant to employ the services of counsel by unjustly refusing to recognize the validity of the
claim.' Attorney's fee due the oppositor is, thus, chargeable against RCPI. 13

Hence, the instant petition, basically on the sole issue of whether the public respondents acted with grave abuse of
discretion amounting to lack of jurisdiction in holding the petitioner solely liable for "union service fee' to respondent
URCPICLA-FUR.

We hold in the negative.

The contention of petitioner that the challenged order of May 7, 1986 was issued with grave abuse of discretion, for
supposedly imposing an additional obligation in the form of attorney's fees not contemplated in the decision of the
National Wages Council, is bereft of merit.

While it is true that the original decision of said Council; did not expressly provide for payment of attorney's fees, that
particular aspect or deficiency is deemed to have been supplied, if not modified pro tanto, by the compromise
agreement subsequently executed between the parties. A cursory perusal of said agreement shows an unqualified
admission by petitioner that "from the aforesaid total amount due every employee, 10% thereof shall be considered
as attorney's fee, 14 although, as hereinafter discussed, it sought to withhold it from respondent union. Considering,
however, that respondent union was categorically found by the Labor Secretary to have been responsible for the
successful prosecution of the case to its ultimate conclusion in behalf of its member, employees of herein petitioner,
its right to fees for services rendered, or what it termed as "union service fee," is indubitable.

The further pretension of petitioner that respondent union is not entitled to attorney's fee or union service fee because
it is not a member of the Bar is both untenable and in disregard of the liberalized scheme and theory of
representation for labor adopted in the Labor Code.

As explained by the order of the Deputy Minister of August 18, 1986 hereinbefore adverted to

... The appearance of labor federations and local unions as counsel in labor proceedings has been
given legal sanction and we need only cite Art. 222 of the Labor Code which allows non-lawyers to
represent their organization or members thereof.

It is undisputed that oppositor (private respondent herein) was the counsel on record of the RCPI
employees in their claim for EC0LA under Wage Order No. 1 since the inception of the proceedings
at the National Wages Council up to the Supreme Court. It had therefore a valid claim for attorney's
fee which it called union service fee'. .. 15 (Emphasis supplied).

As affirmed and further clarified by respondent Secretary of Labor and Employment in his order of March 20, 1987

'While the claim for union service fee was initially directed against the union members, there is no
dispute that the claim was basically for attorney's fee. As a matter of fact, RCPI admitted that the
union service fee is 'for Compensation for services rendered by the union. ... 16

We also cannot but look askance and take a quizzical view of the aforequoted compromise agreement on which
petitioner anchors its main arguments.

Aside from the fact that, as already stated, the same was concluded behind the back of private respondent, so to
speak, and with another labor union and a lawyer neither of whom prior thereto had a hand in the recovery of benefits
for the RCPI employees concerned, there are certain indicia which cast serious doubts on the motives and actuations
therein of petitioner.

As already stated, as early as March 13, 1985, private respondent had moved for the deduction of said fee from the
total backpay awarded in the decision of the Council. It reiterated such claim in its motion for a writ of execution filed
on September 10, 1985 after this Court had dismissed the petition for certiorari filed by petitioner in G.R. No. 70148.
Petitioner was fully aware of these proceedings since it even filed its opposition thereto on September 23, 1985, but
in the aforestated order of November 25, 1985, private respondent was awarded 15% of the total backpay of the
RCPI employees as its union service fee, with petitioner being directed to deposit said amount with the NCR office.
Yet, on November 29, 1985, petitioner, despite timely notice of said order and in total disregard thereof, directly paid
its employees the full amount of their backpay, without deducting the union service fee. 17

Again, as is evident in the aforequoted provisions of the compromise agreement, petitioner was bound to pay only
30% of the amount due each employee on November 30, 1985, while the balance of 70% would still be the subject of
renegotiation by the parties on July 31, 1986. Yet, despite such conditions beneficial to it, petitioner paid in full the
backpay of its employees on November 29, 1985, ignoring the service fee due the private respondent.

Worse, petitioner supposedly paid to one Atty. Rodolfo M. Capocyan the 10% fee that properly pertained to herein
private respondent, an unjustified and baffling diversion of funds. It tried to explain away such obvious tergiversation
by claiming that said 10% fee corresponded to the other claims embraced in the compromise agreement but not the
liability under Wage Order No. 1, an apocryphal contradiction of its contrary admission in Paragraph 7 of its
Reply 18 and the provisions of Paragraph 2(c) of the compromise agreement.

On top of that, the records do not show any rejoinder or explanation by petitioner of this grave revelation and
accusation of the Solicitor General:

But the spurious and fraudulent character of such disposition made by petitioner is clearly inferable
from the circumstances that: ... (2) there is no such Atty. Rodolfo Capocyan in the Attorney's Rollo
of this Court (See Communication from the Office of the Bar Confidant of the Supreme Court dated
March 17, 1986 found on page 459 of the record). Atty. Capocyan, being a mere fictitious character,
his 'attorney's fees' which included the claim of private respondent, necessarily devolved upon
petitioner.

'It would now appear that petitioner had a secret interest over the 10% fees due and owing to
private respondent and thru the manipulations of petitioner's agents were given the appearance of
attorney's fees' to a certain Atty. Rodolfo Capocyan. It cannot be denied that by such fraudulent
method, private respondent was deprived of its just and lawful fees. 19

Even the employment of the term "novation" in the compromise agreement appears to have been dictated by the
dubious motive to secure dismissal with prejudice of the decision of the National Wages Council. For, despite the
express, albeit improper use of such term, there could have been no valid novation of the prior judgment for the
simple reason that the pre-existing obligation thereunder and the new one sought to be created are not absolutely
incompatible. On the contrary, the compromise agreement expressly recognizes the respective obligations of the
parties in said judgment and precisely provides a method by which the same shall be extinguished, which method is,
as expressly stated in said contract, by installment payments. The contract, instead of containing provisions
incompatible with the obligations in the judgment, expressly ratifies such obligations and contains provisions for
satisfying them. The said agreement simply gave the petitioner a method and more time for the satisfaction of said
judgment. It did not extinguish the obligations contained in the judgment, until the terms of said agreement had been
fully complied with. Had the petitioner continued to comply with the conditions of said agreement, it could have
successfully invoked its provisions against the issuance of a writ of execution upon said judgment. The contract and
the punctual compliance with its terms only delayed the right of the respondent union to the execution of the
judgment. The judgment was not satisfied and the obligations existing thereunder still subsisted until the terms of the
agreement had been fully complied with. 20

Finally, petitioner cannot invoke the lack of an individual written authorization from the employees as a shield for its
fraudulent refusal to pay the service fee of private respondent. Prior to the payment made to its employees, petitioner
was ordered by the Regional Director to deduct the 15% attorney's fee from the total amount due its employees and
to deposit the same with the Regional Labor Office. Petitioner failed to do so allegedly because of the absence of
individual written authorizations. Be that as it may, the lack thereof was remedied and supplied by the execution of
the compromise agreement whereby the employees, expressly approved the 10% deduction and held petitioner RCPI
free from any claim, suit or complaint arising from the deduction thereof. When petitioner was thereafter again
ordered to pay the 10% fees to respondent union, it no longer had any legal basis or subterfuge for refusing to pay
the latter.

We agree that Article 222 of the Labor Code requiring an individual written authorization as a prerequisite to wage
deductions seeks to protect the employee against unwarranted practices that would diminish his compensation
without his knowledge and consent. 21 However, for all intents and purposes, the deductions required of the petitioner
and the employees do not run counter to the express mandate of the law since the same are not unwarranted or
without their knowledge and consent. Also, the deductions for the union service fee in question are authorized by law
and do not require individual check-off authorizations. 22

On the foregoing considerations, We find no cogent reason to disturb the order of the Secretary of Labor and
Employment finding petitioner liable for the union service fee of private respondent.

WHEREFORE, the order of the Secretary of Labor of August 16, 1986 is hereby AFFIRMED and the petition at bar is
DISMISSED, with double costs against petitioner. The temporary restraining order issued pursuant to the Resolution
of the Court of June 22, 1987 is LIFTED and declared of no further force and effect.

SO ORDERED.

G.R. No. L-5062 April 29, 1953


MANILA TRADING & SUPPLY CO., petitioner,
vs.
MANILA TRADING LABOR ASSOCIATION, respondent.

Ross, Selph, Carrascoso & Janda for petitioner.


Cipriano Cid for respondent.

REYES, J.:

On October 10, 1950, the Manila Trading Labor Association, composed of workers of Manila Trading and Supply Co.,
made a demand upon said company for increase of personnel, Christmas bonus, and other gratuities and privileges.
As the demand was refused and the Department of Labor whose intervention had been sought by the association
failed to effect an amicable settlement, the Head of the Department certified the dispute to the Court of Industrial
Relations on October 25 and there it was docketed as case No. 521-V. The company, on its part, on that same day
applied to the Court of Industrial Relations for authority to lay off 50 laborers due to "poor business," the application
being docketed as Case No. 415-V (4).

To resolve the disputes involved in the two cases the Court of Industrial Relations conducted various hearings
between October 26, 1950, and January 18, 1951. Of their own volition the president and vice-president of the
association attended themselves from work for that reason they afterwards claimed that they were entitled to their
wages. The Court of Industrial Relations found merit in the claim, and at their instance, ordered the company to pay
them their wages corresponding to the days they were absent from work while in attendance at the hearings.

Contending that the industrial court had no authority to issue an order, the company asks this Court to have it
annuled. Opposing the petition, the association, on its part, contends that the order comes within the broad powers of
the industrial court in the settlement of disputes between capital and labor.

The question presented is whether the Court of Industrial Relations may require an employer to pay the wages of
officers of its employees' labor union while attending the hearing of cases between the employer and the union. The
question, it appears, is no different from that decided early in the case of J.P. Heilbronn Co. vs. National Labor
Union,* G.R. No. L-5121. In that case the plaintiff company questioned the validity of an order the Court of Industrial
Relations requiring it to pay the president and the secretary of the labor union their salaries corresponding to the days
they attending the conferences and hearings before that court. Setting aside the said order, we there said:

When in case of strikes, and according to the CIR even if the strike is legal, strikers may not collect their
wages during the days they did not go to work, for the same reasons if not more, laborers who voluntarily
absent themselves from work to attend the hearing of a case in which they seek to prove and establish their
demands against the company, the legality and propriety of which demands is not yet known, should lose
their pay during the period of such absence from work. The age-old rule governing the relation between
labor and capital or management and employee is that of a "fair day's wage for a fair day's labor." If there is
no work performed by the employee there can be no wage or pay, unless of course, the laborer was able,
willing and ready to work but was illegally locked out, dismissed or suspended. it is hardly fair or just for an
employee or laborer to fight or litigate against his employer on the employer's time.

In a case where a laborer absents himself from work because of a strike or to attend a conference or
hearing in a case or incident between him and his employer, he might seek reimbursement of his wages
from his union which had declared the strike or filed the case in the industrial court. Or, in the present case,
he might have his absence from his work charged against his vacation leave. Three of the Justices who sign
the present decision believe that the deductions made from the wage of Armando Ocampo and Protacio Ty
might possibly be charge as damages in the case in the event that the said case in CIR prosecuted in behalf
of their union is finally decided in their favor and against the company.

The respondent association, however, claims that it was not the one that brought the cases to the Court of Industrial
Relations, and the point is made that " if the laborer who is dragged to court is deprived of his wages while attending
court hearings, he would in effect be denied the opportunity to defend himself and protect his interests and those of
his fellow workers." But while it is true that it was the Secretary of Labor who certified the dispute involved in case No.
521-V to the Court of Industrial Relations, the fact remains that the dispute was initiated by a demand from the labor
association. The truth, therefore, is that while one of the cases was filed by the employer, the other was initiated by
the employees. It may be conceded that the employer is in most cases in a better position to bear the burdens of
litigation than the employees. But as was said in the case of J. P. Heilbronn Co. vs. National Labor Union, supra, "It is
hardly fair for an employee or laborer to fight or litigate against his employer on the employer's time." The most that
can be conceded in favor of the claimants herein is to have the absences occasioned by their attendance at the
hearings charged against their vacation leave if they have any, or as suggested by three of the Justices who signed
the decision in the case just cited, to have the wages they failed to earn charged as damages in the event the cases
whose hearings they attended are decided in favor of the association. But the majority of the Justices make no
commitment on this latter point.

In view of the foregoing, the petition for certiorari is granted and the order complained of set aside. Without
pronouncement as to costs.
G.R. No. 111474 August 22, 1994

FIVE J TAXI and/or JUAN S. ARMAMENTO, petitioners,


vs.
NATIONAL LABOR RELATIONS COMMISSION, DOMINGO MALDIGAN and GILBERTO
SABSALON, respondents.

Edgardo G. Fernandez for petitioners.

R E SO L U T I O N

REGALADO, J.:

Petitioners Five J Taxi and/or Juan S. Armamento filed this special civil action for certiorari to annul the decision 1 of
respondent National Labor Relations Commission (NLRC) ordering petitioners to pay private respondents Domingo
Maldigan and Gilberto Sabsalon their accumulated deposits and car wash payments, plus interest thereon at the
legal rate from the date of promulgation of judgment to the date of actual payment, and 10% of the total amount as
and for attorney's fees.

We have given due course to this petition for, while to the cynical the de minimis amounts involved should not impose
upon the valuable time of this Court, we find therein a need to clarify some issues the resolution of which are
important to small wage earners such as taxicab drivers. As we have heretofore repeatedly demonstrated, this Court
does not exist only for the rich or the powerful, with their reputed monumental cases of national impact. It is also the
Court of the poor or the underprivileged, with the actual quotidian problems that beset their individual lives.

Private respondents Domingo Maldigan and Gilberto Sabsalon were hired by the petitioners as taxi drivers 2 and, as
such, they worked for 4 days weekly on a 24-hour shifting schedule. Aside from the daily "boundary" of P700.00 for
air-conditioned taxi or P450.00 for non-air-conditioned taxi, they were also required to pay P20.00 for car washing,
and to further make a P15.00 deposit to answer for any deficiency in their "boundary," for every actual working day.

In less than 4 months after Maldigan was hired as an extra driver by the petitioners, he already failed to report for
work for unknown reasons. Later, petitioners learned that he was working for "Mine of Gold" Taxi Company. With
respect to Sabsalon, while driving a taxicab of petitioners on September 6, 1983, he was held up by his armed
passenger who took all his money and thereafter stabbed him. He was hospitalized and after his discharge, he went
to his home province to recuperate.

In January, 1987, Sabsalon was re-admitted by petitioners as a taxi driver under the same terms and conditions as
when he was first employed, but his working schedule was made on an "alternative basis," that is, he drove only
every other day. However, on several occasions, he failed to report for work during his schedule.

On September 22, 1991, Sabsalon failed to remit his "boundary" of P700.00 for the previous day. Also, he abandoned
his taxicab in Makati without fuel refill worth P300.00. Despite repeated requests of petitioners for him to report for
work, he adamantly refused. Afterwards it was revealed that he was driving a taxi for "Bulaklak Company."

Sometime in 1989, Maldigan requested petitioners for the reimbursement of his daily cash deposits for 2 years, but
herein petitioners told him that not a single centavo was left of his deposits as these were not even enough to cover
the amount spent for the repairs of the taxi he was driving. This was allegedly the practice adopted by petitioners to
recoup the expenses incurred in the repair of their taxicab units. When Maldigan insisted on the refund of his deposit,
petitioners terminated his services. Sabsalon, on his part, claimed that his termination from employment was effected
when he refused to pay for the washing of his taxi seat covers.

On November 27, 1991, private respondents filed a complaint with the Manila Arbitration Office of the National Labor
Relations Commission charging petitioners with illegal dismissal and illegal deductions. That complaint was
dismissed, the labor arbiter holding that it took private respondents two years to file the same and such unreasonable
delay was not consistent with the natural reaction of a person who claimed to be unjustly treated, hence the filing of
the case could be interpreted as a mere afterthought.

Respondent NLRC concurred in said findings, with the observation that private respondents failed to controvert the
evidence showing that Maldigan was employed by "Mine of Gold" Taxi Company from February 10, 1987 to
December 10, 1990; that Sabsalon abandoned his taxicab on September 1, 1990; and that they voluntarily left their
jobs for similar employment with other taxi operators. It, accordingly, affirmed the ruling of the labor arbiter that private
respondents' services were not illegally terminated. It, however, modified the decision of the labor arbiter by ordering
petitioners to pay private respondents the awards stated at the beginning of this resolution.

Petitioners' motion for reconsideration having been denied by the NLRC, this petition is now before us imputing grave
abuse of discretion on the part of said public respondent.

This Court has repeatedly declared that the factual findings of quasi-judicial agencies like the NLRC, which have
acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect
but, at times, finality if such findings are supported by substantial evidence. 3 Where, however, such conclusions are
not supported by the evidence, they must be struck down for being whimsical and capricious and, therefore, arrived
at with grave abuse of discretion. 4

Respondent NLRC held that the P15.00 daily deposits made by respondents to defray any shortage in their
"boundary" is covered by the general prohibition in Article 114 of the Labor Code against requiring employees to
make deposits, and that there is no showing that the Secretary of Labor has recognized the same as a "practice" in
the taxi industry. Consequently, the deposits made were illegal and the respondents must be refunded therefor.

Article 114 of the Labor Code provides as follows:

Art. 114. Deposits for loss or damage. No employer shall require his worker to make deposits
from which deductions shall be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer, except when the employer is engaged in such
trades, occupations or business where the practice of making deposits is a recognized one, or is
necessary or desirable as determined by the Secretary of Labor in appropriate rules and
regulations.

It can be deduced therefrom that the said article provides the rule on deposits for loss or damage to tools, materials
or equipments supplied by the employer. Clearly, the same does not apply to or permit deposits to defray any
deficiency which the taxi driver may incur in the remittance of his "boundary." Also, when private respondents stopped
working for petitioners, the alleged purpose for which petitioners required such unauthorized deposits no longer
existed. In other case, any balance due to private respondents after proper accounting must be returned to them with
legal interest.

However, the unrebutted evidence with regard to the claim of Sabsalon is as follows:

YEAR DEPOSITS SHORTAGES VALES

1987 P 1,403.00 P 567.00 P 1,000.00

1988 720.00 760.00 200.00

1989 686.00 130.00 1,500.00

1990 605.00 570.00

1991 165.00 2,300.00

P 3,579.00 P 4,327.00 P 2,700.00

The foregoing accounting shows that from 1987-1991, Sabsalon was able to withdraw his deposits through vales or
he incurred shortages, such that he is even indebted to petitioners in the amount of P3,448.00. With respect to
Maldigan's deposits, nothing was mentioned questioning the same even in the present petition. We accordingly agree
with the recommendation of the Solicitor General that since the evidence shows that he had not withdrawn the same,
he should be reimbursed the amount of his accumulated cash deposits. 5

On the matter of the car wash payments, the labor arbiter had this to say in his decision: "Anent the issue of illegal
deductions, there is no dispute that as a matter of practice in the taxi industry, after a tour of duty, it is incumbent
upon the driver to restore the unit he has driven to the same clean condition when he took it out, and as claimed by
the respondents (petitioners in the present case), complainant(s) (private respondents herein) were made to shoulder
the expenses for washing, the amount doled out was paid directly to the person who washed the unit, thus we find
nothing illegal in this practice, much more (sic) to consider the amount paid by the driver as illegal deduction in the
context of the law." 6 (Words in parentheses added.)

Consequently, private respondents are not entitled to the refund of the P20.00 car wash payments they made. It will
be noted that there was nothing to prevent private respondents from cleaning the taxi units themselves, if they
wanted to save their P20.00. Also, as the Solicitor General correctly noted, car washing after a tour of duty is a
practice in the taxi industry, and is, in fact, dictated by fair play.
On the last issue of attorney's fees or service fees for private respondents' authorized representative, Article 222 of
the Labor Code, as amended by Section 3 of Presidential Decree No. 1691, states that non-lawyers may appear
before the NLRC or any labor arbiter only (1) if they represent themselves, or (2) if they represent their organization
or the members thereof. While it may be true that Guillermo H. Pulia was the authorized representative of private
respondents, he was a non-lawyer who did not fall in either of the foregoing categories. Hence, by clear mandate of
the law, he is not entitled to attorney's fees.

Furthermore, the statutory rule that an attorney shall be entitled to have and recover from his client a reasonable
compensation for his services 7 necessarily imports the existence of an attorney-client relationship as a condition for
the recovery of attorney's fees, and such relationship cannot exist unless the client's representative is a lawyer. 8

WHEREFORE, the questioned judgment of respondent National Labor Relations Commission is hereby MODIFIED
by deleting the awards for reimbursement of car wash expenses and attorney's fees and directing said public
respondent to order and effect the computation and payment by petitioners of the refund for private respondent
Domingo Maldigan's deposits, plus legal interest thereon from the date of finality of this resolution up to the date of
actual payment thereof.

SO ORDERED.

SPECIAL STEEL PRODUCTS, INC., petitioner, vs. LUTGARDO VILLAREAL AND FREDERICK
SO, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

May an employer withhold its employees wages and benefits as lien to protect its interest as a surety in the
latters car loan and for expenses incurred in a training abroad? This is the basic issue for our resolution in the instant
case.

At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
assailing the Decision[1] dated October 29, 1999 and Resolution [2] dated May 8, 2000 of the Court of Appeals in CA-
G.R. SP No. 50957, entitled Special Steel Products, Inc. vs. National Labor Relations Commission, Lutgardo Villareal
and Frederick So.

The factual antecedents as borne by the records are:

Special Steel Products, Inc., petitioner, is a domestic corporation engaged in the principal business of
importation, sale, and marketing of BOHLER steel products. Lutgardo C. Villareal and Frederick G. So, respondents,
worked for petitioner as assistant sales manager and salesman, respectively.

Sometime in May 1993, respondent Villareal obtained a car loan from the Bank of Commerce, with petitioner as
surety, as shown by a continuing suretyship agreement and promissory note wherein they jointly and severally
agreed to pay the bank P786,611.60 in 72 monthly installments. On January 15, 1997, respondent Villareal resigned
and thereafter joined Hi-Grade Industrial and Technical Products, Inc. as executive vice-president.

Sometime in August 1994, petitioner sponsored respondent Frederick So to attend a training course
in Kapfenberg, Austria conducted by BOHLER, petitioners principal company. This training was a reward for
respondent Sos outstanding sales performance. When respondent returned nine months thereafter, petitioner
directed him to sign a memorandum providing that BOHLER requires trainees from Kapfenberg to continue working
with petitioner for a period of three (3) years after the training. Otherwise, each trainee shall refund to BOHLER
$6,000.00 (US dollars) by way of set-off or compensation. On January 16, 1997 or 2 years and 4 months after
attending the training, respondent resigned from petitioner.

Immediately, petitioner ordered respondents to render an accounting of its various Christmas giveaways [3] they
received. These were intended for distribution to petitioners customers.

In protest, respondents demanded from petitioner payment of their separation benefits, commissions, vacation
and sick leave benefits, and proportionate 13th month pay. But petitioner refused and instead, withheld their
13th month pay and other benefits.

On April 16, 1997, respondents filed with the Labor Arbiter a complaint for payment of their monetary benefits
against petitioner and its president, Augusto Pardo, docketed as NLRC NCR Case No. 04-02820-97.

In due course, the Labor Arbiter rendered a Decision dated February 18, 1998, the dispositive portion of which
reads:
WHEREFORE, decision is hereby rendered ordering the respondents, Special Steel Products, Inc. and Mr. Augusto Pardo to pay,
jointly and severally, complainants Frederick G. So and Lutgardo C. Villareal the amounts of Seventy One Thousand Two
Hundred Seventy Nine Pesos and Fifty Eight Centavos (P71,279.58) and One Hundred Sixty Four Thousand Eight Hundred
Seventy Three Pesos (P164,873.00), respectively, representing their commissions, retirement benefit (for Villareal), proportionate
13th month, earned vacation and sick leave benefits, and attorneys fees.

xxx

SO ORDERED.

On appeal, the National Labor Relations Commission (NLRC), in a Decision dated June 29, 1998, affirmed with
modification the Arbiters Decision in the sense that Pardo, petitioners president, was exempted from any liability.

On September 11, 1998, petitioner filed a motion for reconsideration but was denied.

Hence, petitioner filed with the Court of Appeals a petition for certiorari.

On October 29, 1999, the Court of Appeals rendered a Decision dismissing the petition and affirming the
assailed NLRC Decision, thus:

At the outset, the Court notes that despite its Seventh Assignment of Error, petitioner does not question the NLRCs decision
affirming the labor arbiters award to private respondents of commissions, proportionate 13 thmonth pay, earned vacation and sick
leave benefits and retirement benefit (for Villareal). It merely asserts that it was withholding private respondents claims by reason
of their pending obligations.

Petitioner justifies its withholding of Villareals monetary benefits as a lien for the protection of its right as surety in the car loan.
It asserts that it would release Villareals monetary benefits if he would cause its substitution as surety by Hi-Grade. It further
asserts that since Villareals debt to the Bank is now due and demandable, it may, pursuant to Art. 2071 of the New Civil
Code, demand a security that shall protect him from any proceeding by the creditor and from the danger of insolvency of the
debtor.

Petitioners posture is not sanctioned by law. It may only protect its right as surety by instituting an action x x x to demand a
security (Kuenzle and Streiff vs. Tan Sunco, 16 Phil 670). It may not take the law into its own hands. Indeed, it is unlawful for any
person, directly or indirectly, to withhold any amount from the wages of a worker or induce him to give up any part of his wages
by force, stealth, intimidation, threat or by any other means whatsoever without the workers consent (Art. 116, Labor Code).

Moreover, petitioner has made no payment on the car loan. Consequently, Villareal is not indebted to petitioner. On the other
hand, petitioner owes Villareal for the decreed monetary benefits. The withholding of Villareals monetary benefits had effectively
prevented him from settling his arrearages with the Bank.

With regard to Sos money claims. We find no cogent reason to disturb the findings of the NLRC. x x x.

Sos all-expense paid trip to Austria was a bonus for his outstanding sales performance. Before his sojourn to Austria, petitioner
issued him a memorandum (or memo) stating that Bohler is now imposing that trainees coming to Kapfenberg to stay with the
local representative for at least three (3) years after training, otherwise, a lump sum compensation of not less than US $6,000.00
will have to be refunded to them by the trainee. So did not affix his signature on the memo. However, nine (9) months after
coming back from his training, he was made to sign the memo. In his letter to Augusto Pardo dated July 18, 1997, So stated that
his signature was needed only as a formality and that he was left with no choice but to accommodate Augusto Pardos
request. The labor arbiter gave credence to such explanation.

Assuming arguendo that the memo is binding on So, his more than two years post-training stay with petitioner is a substantial
compliance with the condition. Besides, So tendered his resignation effective February 16, 1997. Instead of asking So to defer his
resignation until the expiration of the three-year period, petitioner advanced its effectivity by one month - as of January 16,
1997. This means that petitioner no longer needed Sos services, particularly the skill and expertise acquired by him from the
training. More importantly, the party entitled to claim the US $6,000.00 liquidated damages is BOHLER and not petitioner.
Consequently, petitioner has no right to insist on payment of the liquidated damages, much less to withhold Sos monetary
benefits in order to exact payment thereof.

With regard to the Christmas giveaways. We agree with the findings of the labor arbiter (affirmed by the NLRC) that there is no
existing memorandum requiring the accounting of such giveaways and that no actual accounting has ever been required before,
as in the case of then Sales Manager Benito Sayo whose resignation took effect on December 31, 1996 but was not required to
account for the Christmas giveaways. To make So account now for said items would amount to discrimination. In any event, the
matter of accounting of the giveaways may be ventilated in the proper forum.

Finally, petitioner may not offset its claims against private respondents monetary benefits. With respect to its being the
surety of Villareal, two requisites of compensation are lacking, to wit: that each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the other and that (the two debts) be liquidated and demandable (Art. 1279 (1)
and (4), New Civil Code). And in respect to its claim for liquidated damages against So, there can be no compensation because
his creditor is not petitioner but BOHLER (Art. 1278, New Civil Code).
Consequently, the NLRC committed no grave abuse of discretion.

WHEREFORE, the petition is DISMISSED while the assailed decision of the NLRC is AFFIRMED.

SO ORDERED.

On December 15, 1999, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a
Resolution dated May 8, 2000.

Hence, this petition for review on certiorari. Petitioner contends that as a guarantor, it could legally withhold
respondent Villareals monetary benefits as a preliminary remedy pursuant to Article 2071 of the Civil Code, as
amended.[4] As to respondent So, petitioner, citing Article 113 of the Labor Code, as amended, [5] in relation to Article
1706 of the Civil Code, as amended,[6] maintains that it could withhold his monetary benefits being authorized by the
memorandum he signed.

Article 116 of the Labor Code, as amended, provides:

ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or indirectly, to
withhold any amount from the wages (and benefits) of a worker or induce him to give up any part of his wages by force,
stealth, intimidation, threat or by any other means whatsoever without the workers consent.

The above provision is clear and needs no further elucidation. Indeed, petitioner has no legal authority to
withhold respondents 13th month pay and other benefits. What an employee has worked for, his employer must pay.
[7]
Thus, an employer cannot simply refuse to pay the wages or benefits of its employee because he has either
defaulted in paying a loan guaranteed by his employer; or violated their memorandum of agreement; or failed to
render an accounting of his employers property.[8]

Nonetheless, petitioner, relying on Article 2071 (earlier cited), contends that the right to demand security and
obtain release from the guaranty it executed in favor of respondent Villareal may be exercised even without initiating
a separate and distinct action.

There is no guaranty involved herein and, therefore, the provision of Article 2071 does not apply.

A guaranty is distinguished from a surety in that a guarantor is the insurer of the solvency of the debtor and thus
binds himself to pay if the principal is unable to pay, while a surety is the insurer of the debt, and he obligates
himself to pay if the principal does not pay.[9]

Based on the above distinction, it appears that the contract executed by petitioner and respondent Villareal (in
favor of the Bank of Commerce) is a contract of surety. In fact, it is denominated as a continuing suretyship
agreement. Hence, petitioner could not just unilaterally withhold respondents wages or benefits as a preliminary
remedy under Article 2071. It must file an action against respondent Villareal. Thus, the Appellate Court aptly ruled
that petitioner may only protect its right as surety by instituting an action to demand a security.

As to respondent So, petitioner maintains that there can be a set-off or legal compensation between
them. Consequently, it can withhold his 13th month pay and other benefits.

For legal compensation to take place, the requirements set forth in Articles 1278 and 1279 of the Civil Code,
quoted below, must be present.

"ARTICLE 1278. Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

"ARTICLE 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time
to the debtor."

In the present case, set-off or legal compensation cannot take place between petitioner and respondent So
because they are not mutually creditor and debtor of each other.
A careful reading of the Memorandum[10] dated August 22, 1994 reveals that the lump sum compensation of not
less than US $6,000.00 will have to be refunded by each trainee to BOHLER, not to petitioner.

In fine, we rule that petitioner has no legal right to withhold respondents 13 th month pay and other benefits to
recompense for whatever amount it paid as security for respondent Villareals car loan; and for the expenses incurred
by respondent So in his training abroad.

WHEREFORE, the petition is DENIED. The Decision dated October 29, 1999 and Resolution dated May 8,
2000 of the Court of Appeals in CA-G.R. SP No. 50957 are hereby AFFIRMED.

SO ORDERED.

G.R. No. 87449 January 23, 1990

SOUTH MOTORISTS ENTERPRISES, petitioner,


vs.
ROQUE TOSOC, ET AL., and HON. SECRETARY OF LABOR AND EMPLOYMENT, respondents.

Manuel M. Parades for petitioner.

Henry V. Briguera for private respondents.

MELENCIO-HERRERA, J.:
At issue in this special civil action for Certiorari is the jurisdiction of the Regional Directors of the Department of Labor
and Employment to act on money claims. Petitioner South Motorists Enterprises (SOUTH MOTORISTS) maintains
that said officials are bereft of authority to act on such claims as this falls under the original and exclusive jurisdiction
of Labor Arbiters. Respondents maintain otherwise.

The facts are as follows:

Sometime in January of 1983, complaints for non-payment of emergency cost of living allowances were filed by 46
workers, Tosoc, et als., against SOUTH MOTORISTS before the Naga City District Office of Regional Office No. 5 of
the then Ministry of Labor. On 10 January 1983 a Special Order was issued by the District Labor Officer directing its
Labor Regulation Officers to conduct an inspection and verification of SOUTH MOTORISTS' employment records.

On the date of the inspection and verification, SOUTH MOTORISTS was unable to present its employment records
on the allegation that they had been sent to the main office in Manila. The case was then set for conference on 25
January 1983 but had to be reset to 8 February 1983 upon the request of SOUTH MOTORISTS to enable it to
present all the employment records on such date. However, on 7 February 1983 SOUTH MOTORISTS asked for
another deferment to 16 February 1983 due to its lawyer's tight schedule. On 16 February 1983, SOUTH
MOTORISTS again requested for a resetting to 3 March 1983 because of the alleged voluminous records it had to
locate and its desire to submit a memorandum regarding complainants' claims. On 2 March 1983, SOUTH
MOTORISTS once again requested an extension of 30 days on the ground that the documents were still being
prepared and collated and that a formal manifestation or motion would follow. Nothing did.

On 7 March 1983, the assigned Labor Regulation Officers submitted an Inspection Report on the basis of which an
Order dated 14 April 1983 was issued by Labor Officer Domingo Reyes directing SOUTH MOTORISTS to pay Tosoc,
et als., the total amount of One Hundred Eighty Four Thousand Six Hundred Eighty Nine and 12/100 Pesos
(P184,689.12) representing the latter's corresponding emergency cost of living allowances.

SOUTH MOTORISTS moved for reconsideration of the Order, which was denied. On 11 July 1988, the Secretary of
Labor and Employment affirmed the appealed Order. On 28 July 1988, SOUTH MOTORISTS moved for
reconsideration but this proved unsuccessful. A Second Motion for Reconsideration was filed, which was likewise
denied in an Order dated 7 March 1989.

Hence, this certiorari Petition questioning the monetary award by the Regional Director and, in general, his
jurisdiction to validly award money claims.

The Court resolved to give due course to the Petition and to decide the case.

SOUTH MOTORISTS contends that only the Labor Arbiter, who is a trier of facts, may determine after hearing such
questions as whether or not an employer-employee relationship exists; whether or not the workers were project
workers; whether or not the employees worked continuously or whether or not they should receive emergency cost of
living allowances and if entitled, how much each should receive. Thus, SOUTH MOTORISTS submits that this case
should be referred to the Labor Arbiter for proper proceedings.

Two provisions of law are crucial to the issueArticle 129 and Article 217 of the Labor Code, as recently amended by
Republic Act No. 6715, approved on 2 March 1989. Said amendments, being curative in nature, have retroactive
effect and, thus, should apply in this case (BRIAD AGRO vs. DE LA CERNA, G.R. No. 82805, and CAMUS
ENGINEERING vs. DE LA CERNA, G.R. No. 83225, 9 November 1989). At this juncture, it should be pointed out in
the light of these Briad-Agro cases, including the modificatory Resolution thereon of 9 November 1989, petitioner's
invocations of the rulings in Zambales Base Metals, L-73184-88, 26 November 1986, and kindred cases, is now out-
dated.

The aforesaid Articles, as amended, respectively read as follows:

Art. 129. Recovery of wages, simple money claims and other benefits. Upon complaint of any
interested party, the Regional Director of the Department of Labor and Employment or any of the
duly authorized hearing officers of the Department is empowered, through summary proceeding
and after due notice, to hear and decide cases involving the recovery of wages and other monetary
claims and benefits, including legal interest, owing to an employee or person employed in domestic
or household service and househelper under this Code, arising from employer-employee
relations: Provided, That such complaint does not include a claim for
reinstatement: Provided, further, That the aggregate claim of each employee or househelper does
not exceed five thousand pesos (P5,000.00). . . .

and

Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
xxx xxx xxx

(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), whether or not accompanied with a
claim for reinstatement.

xxx xxx xxx

Clearly, Regional Directors are empowered to hear and decide, in a summary proceeding, claims for recovery of
wages and other monetary claims and benefits, including legal interest, subject to the concurrence of the following
requisites:

1) the claim is presented by an employee or person employed in domestic or household service, or


househelper under the Code;

2) the claim arises from employer-employee relations;

3) the claimant no longer being employed, does not seek reinstatement; and

4) the aggregate money claim of each employee or househelper does not exceed P5,000.00 (Art.
129, Labor Code, as amended by R.A. 6715).

But where these requisites do not concur, the Labor Arbiters shall have exclusive original jurisdiction over claims
arising from employer-employee relationship except claims for employees' compensation, social security, medicare
and maternity benefits (parag. 6, Art. 217, Labor Code as amended by R.A. 6715).

The records of this case show that the award of One Hundred Eighty Four Thousand Six Hundred Eighty Nine and
12/100 Pesos (P l84,689.12) given by the District Labor Officer on 14 April 1983 is itemized as follows:

1. Anatalio Cado P 3,203.20


2. Macario Gavino 6,332.48
3. Vito T. Euste 6,073.76
4. Domingo Ricafort 3,843.84
5. Roger Paulo 4,176.48
6. Elias Clarianes 4,201.12
7. Ernesto Brequillo 4,176.48
8. Santiago Asares 4,114.88
9. Marcelito Verdadero 4,127.20
10. Elias Pascua 4,348.96
11. Francisco Herrera 3,991.68
12. Efren San Joaquin 3,979.36
13. Dominador Payo 4,201.12
14. Jesus Militante 4,201.12
15. Ubaldo Osoc, Jr. 2,156.00
16. Salvador Clarianes 3,843.84
17. Vicente Lovendino 1,416.80
18. Jose Brequillo 6,049.12
19. Domingo Cis 7,884.80
20. Alberto Agreda 5,396.16
21. Amancio Galona 6,418.72
22. Eduardo Brequillo 2,858.24
23. Luis Clarianes 4,127.20
24. Roque Tosoc 6,418.72
25. Hilarion P. Guinoo 6,086.08
26. Carlos Plegino 1,478.40
27. Felipe Cea 6,024.48
28. Salvador Calamba 4,040.96
29. Ramon Marco 4,669.28
30. Eddie del Castillo 4,201.12
31. Lope Guinoo 3,868.48
32. Marcelino Habla 1,096.48
33. Roberto Guinoo 5,938.24
34. Efren Andalis 4,114.88
35. Solomon Tosoc 2,722.72
36. Cornelio Ballares 3,006.08
37. Ernesto Osoc 6,024.48
38. Bernardo Gabrillo 1,490.72
39. Romeo Abarro 2,722.72
40. Rogelio Usinar 2,722.72
41. Fortunate Sola 1,453.76
42. Romeo Calpi 2,821.28
43. Rogelio Villamor 2,772.00
44. Jose Banday 4,817.12
45. Alberto Cornelio 2,882.88
46. Pablo Olarte 2,192.96

TOTAL P 184,689.12

In accordance with Articles 129 and 217 of the Labor Code, as amended, supra, those awards in excess of
P5,000.00, particularly those given to Macario Gavino, Vito T. Euste, Jose Brequillo, Domingo Cis, Alberto Agreda,
Amancio Galona, Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto Guinoo, and Ernesto Osoc, each of which
exceeds P5,000.00, should be ventilated in a proceeding before the Labor Arbiters. The other awards, or those not in
excess of P5,000.00 and having no issue of reinstatement set forth, should be affirmed.

As to the matter that the respondent Secretary of Labor and Employment erred in affirming the award based on a
mere Inspection Report, we see no reason for SOUTH MOTORISTS to complain as it was afforded ample
opportunity to present its side. It failed to present employment records giving as an excuse that they were sent to the
main office in Manila, in violation of Section 11 of Rule X, Book II of the Omnibus Rules Implementing the Labor Code
providing that:

All employment records of the employees of the employer shall be kept and maintained in or about
the premises of the workplace. The premises of a workplace shall be understood to mean the main
or branch office or establishment, if any, depending., upon where the employees are regularly
assigned. The keeping of the employee's records in another place is prohibited.

SOUTH MOTORISTS also caused the resettings of all subsequent hearingsfrom 25 January 1983 to 8 February
1983, then to 16 February 1983, then to 3 March and finally, again requested for another 30-day-extension on the
ground that the documents, were still being prepared and collated. Having been given the opportunity to put forth its
case, SOUTH MOTORISTS has only itself to blame for having failed to avail of the same (Adamson and Adamson,
Inc. vs. Judge Amores, G.R. No. 58292, 23 July 1987,152 SCRA 237). What is more, its repeated failure to attend the
hearings, and to submit any motion as manifested may be construed as a waiver of its right to adduce evidence to
controvert the worker's claims.

WHEREFORE, the award of One Hundred Eighty Four Thousand Six Hundred Eighty Nine and 12/100 (P l84,689.12)
is hereby MODIFIED. The individual claims of Macario Gavino, Vito T. Euste Jose, Brequillo, Domingo Cis, Alberto
Agreda, Amancio Galona, Roque Tosoc, Hilarion P. Guinoo, Felipe Cea, Roberto Guinoo, and Ernesto Osoc, each of
which exceeds P5,000.00, are hereby remanded to the Labor Arbiter for proper disposition. All other individual
awards not in excess of P5,000.00 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.
[G.R. No. 123880. February 23, 1999]

MARANAW HOTELS AND RESORT CORPORATION, (Owner of Century Park Sheraton Manila), petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and EDDIE DAMALERIO, respondents.

DECISION

PURISIMA, J.:

This special civil action for certiorari under Rule 65 of the Revised Rules of Court seeks to annul and set aside the
Decision, dated September 18, 1995, of the National Labor Relations Commission (NLRC) [1], and the Order[2], dated January 30,
1996, denying petitioner's motion for reconsideration in NLRC-NCR-CA No. 005642-93, on the ground of lack or excess of
jurisdiction or grave abuse of discretion.

On April 2, 1992, Eddie Damalerio (Damalerio), a room attendant of the Century Park Sheraton Hotel, operated by
Maranaw Hotel and Resort Corporation, was seen by hotel guest Jamie Glaser (Glaser) with left hand inside the latter's
suitcase. Confronted with what he was doing, Damalerio explained that he was trying to tidy up the room. Not satisfied with the
explanation of Damalerio, Glaser lodged a written complaint before William D. Despuig, shift-in-charge of security of the
hotel. Glaser also reported that Damalerio had previously asked from him souvenirs, cassettes, and other giveaways. The
complaint was later brought by Despuig to the attention of Major Eddie Buluran, chief of Security of the hotel.

On April 3, 1992, Damalerio was given a Disciplinary Action Notice (DAN). The next day, an administrative hearing was
conducted on the matter. Among those present at the hearing were: 1) Lourdes Ricardo (room attendant), 2) Angelito
Torres (floor supervisor), 3) Major Eddie Buluran (chief of security), 4) Susan Dino (Personnel representative), 5) Alfredo San
Gabriel (senior floor supervisor) and 6) Ben Hur Amador (union representative).

Taking the witness stand on his own behalf, Damalerio denied the accusation against him, theorizing that when he found
the room of Glaser in disarray, and was about to make the bed, he noticed some belongings, such as socks and T-shirts of the said
hotel guest scattered around, so much so that he thought of placing the same in his luggage. While doing so, Glaser
arrived. When asked by the latter if something was wrong, he (Damalerio) said "I'm just cleaning your room," and Glaser
remarked, "Good work," and then, the two of them chatted about Glaser's concert at the Araneta Coliseum.

On April 13, 1992, Damalerio received a memorandum [3] issued by Alfredo San Gabriel, Sr., Floor Supervisor, bearing the
approval of Nicolas R. Kirit, Executive Housekeeper, stating that he (Damalerio) was found to have committed qualified theft in
violation of House Rule No. 1, Section 3 of Hotel Rules and Regulations. The same memorandum served as a notice of
termination of his employment.

On May 19,1992, Damalerio filed with the Labor Arbiter a Complaint for illegal dismissal against the petitioner.

On August 20, 1993, after the parties had sent in their position papers, Labor Arbiter Ceferina J. Diosana decided the case;
disposing, thus:

"WHEREFORE, judgment is hereby rendered finding the dismissal of complainant to be illegal and ordering the respondents to
reinstate him to his former or equivalent position without loss of seniority rights and withbackwages from April 15, 1992 when he
was preventively suspended up to actual reinstatement and other benefits, including but not limited to his share in the charges
and/or tips which he failed to receive, and all other CBA benefits that have accrued since his dismissal.

SO ORDERED.

From the aforesaid Labor Arbiter's disposition, the petitioner appealed to the NLRC, which modified the appealed decision
by giving petitioner the option of paying Damalerio a separation pay equivalent to one (1) month pay for every year of service,
instead of reinstating him.

On November 22, 1995, petitioner interposed a motion for reconsideration but to no avail. NLRC denied the same on
January 30, 1996.

Undaunted, petitioner has come to this Court via the present petition; posing the questions:

1. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING


TO LACK OF JURISDICTION IN HOLDING THAT PETITIONER FAILED TO ADDUCE CONCLUSIVE
EVIDENCE IN SUPPORT OF ITS VERSION OF THE INCIDENT, CONSIDERING THE FACT THAT THE
EVIDENCE ON RECORD INELUCTABLY SHOWS THAT PRIVATE RESPONDENT WAS CAUGHT
IN FLAGRANTE DELICTO; and
2. WHETHER OR NOT RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OF JURISDICTION IN NOT REVERSING THAT PORTION OF THE DECISION OF THE LABOR
ARBITER ORDERING HEREIN PETITIONER TO PAY PRIVATE RESPONDENT HIS SHARE IN THE
SERVICE CHARGE WHICH WAS COLLECTED DURING THE TIME HE WAS NOT WORKING IN THE
HOTEL.

The petition is barren of merit.

Petitioner's theory that Damalerio was caught committing qualified theft in flagrante delicto is anemic of evidentiary
support. Records disclose petitioner's failure to substantiate such imputation against him. During the investigation presided over
by the Labor Arbiter, Damalerio narrated a plausible and satisfactory explanation for his behavior complained of. According to
him, he was then cleaning the hotel room of Glaser, and while in the process of placing inside the luggage the personal
belongings of Glaser scattered near the bed, the latter entered the room. Glaser did not bother to testify as all his things were
intact.

Although it was not completely proper for Damalerio to be touching the things of a hotel guest while cleaning the hotel
rooms, personal belongings of hotel guests being off-limits to roomboys, under the attendant facts and circumstances, we believe
that the dismissal of Damalerio was unwarranted. To be sure, the investigation held by the hotel security people did not unearth
enough evidence of culpability. It bears repeating that subject hotel guest lost nothing. Albeit petitioner may have reasons to
doubt the honesty and trustworthiness of Damalerio, as a result of what happened, absent sufficient proof of guilt, he
(Damalerio), who is a rank-and-file employee, cannot be legally dismissed. [4] Unsubstantiated suspicions and baseless
conclusions by employers are not legal justification for dismissing employees. The burden of proving the existence of a valid and
authorized cause of termination is on the employer. [5] Any doubt should be resolved in favor of the employee, in keeping with the
principle of social justice enshrined in the Constitution. [6]

All things studiedly considered and viewed in proper perspective, the dismissal of Damalerio, under the premises, cannot
be countenanced.

As regards the share of Damalerio in the service charges collected during the period of his preventive suspension, the same
form part of his earnings, and his dismissal having been adjudged to be illegal, he is entitled not only to full backwages but also
to other benefits, including a just share in the service charges, to be computed from the start of his preventive suspension until his
reinstatement.

However, mindful of the animosity and strained relations between the parties, emanating from this litigation, we uphold the
ruling a quo that in lieu of reinstatement, separation pay may be given to the private respondent, at the rate of one (1) month pay
for every year of service. Should petitioner opt in favor of separation pay, the private respondent shall no longer be entitled to
share in the service charges collected during his preventive suspension.

WHEREFORE, the petition is hereby DISMISSED and the Court affirms the questioned Decision of the National Labor
Relations Commission, to be implemented according to law and this disposition. No pronouncement as to costs.

SO ORDERED.
ACE NAVIGATION CO., INC. and/or CONNING SHIPPING LTD., petitioners, vs. COURT OF
APPEALS (THIRTEENTH DIVISION), NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION) and ORLANDO ALONSAGAY, respondents.

DECISION

PUNO, J.:

This is a petition for review of the resolutions [1] of the Court of Appeals[2] that dismissed the petition
for certiorari filed by petitioners and which denied their motion for reconsideration, respectively.

First, the facts.

In June 1994, Ace Navigation Co., Inc. (Ace Nav) recruited private respondent Orlando Alonsagay to
work as a bartender on board the vessel M/V "Orient Express" owned by its principal, Conning Shipping
Ltd. (Conning). Under their POEA approved contract of employment, Orlando shall receive a monthly basic
salary of four hundred fifty U.S. dollars (U.S. $450.00), flat rate, including overtime pay for 12 hours of
work daily plus tips of two U.S. dollars (U.S. $2.00) per passenger per day. He, was also entitled to 2.5
days of vacation leave with pay each month. The contract was to last for one (1) year.

Petitioners alleged that on June 13, 1994, Orlando was deployed and boarded M/V "Orient Express"
at the seaport of Hong Kong. After the expiration of the contract on June 13, 1995, Orlando returned to the
Philippines and demanded from Ace Nav his vacation leave pay. Ace Nav did not pay him immediately. It
told him that he should have been paid prior to his disembarkation and repatriation to the Philippines.
Moreover, Conning did not remit any amount for his vacation leave pay. Ace Nav, however, promised to
verify the matter and asked Orlando to return after a few days. Orlando never returned.

On November 25, 1995, Orlando filed a complaint[3] before the labor arbiter for vacation leave pay of
four hundred fifty U.S. dollars (U.S. $450.00) and unpaid tips amounting to thirty six, thousand U.S. dollars
(U.S. $36,000.00).[4] On November 15, 1996, Labor Arbiter Felipe P. Pati ordered Ace Nav and Conning to
pay jointly and severally Orlando his vacation leave pay of US$450.00. The claim for tips of Orlando was
dismissed for lack of merit.[5]

Orlando appealed[6] to the National Labor Relations Commission (NLRC) on February 3, 1997. In a
decision[7] promulgated on November 26, 1997, the NLRC ordered Ace Nav and Conning to pay the unpaid
tips of Orlando which amounted to US$36,000.00 in addition to his vacation leave pay. Ace Nav and
Conning filed a motion for reconsideration on February 2, 1998 which was denied on May 20, 1999.[8]

On July 2, 1999, Ace Nav and Conning filed a petition for certiorari before the Court of Appeals to
annul the decision of the NLRC. On July 28, 1999, the Court of Appeals promulgated a three-page
resolution[9] dismissing the petition. Their motion for reconsideration filed on September 8, 1999 was
denied on October 8, 1999. Hence this appeal.

In assailing the dismissal of their petition on technical grounds, petitioners argued that the Court of
Appeals erred in rigidly and technically applying Section 13, Rule 13 [10] and Section 1, Rule 65[11] of the
1997 Rules of Civil Procedure.[12] They also contend that the respondent court erred in ruling that they are
the ones liable to pay tips to Orlando. They point out that if tips will be considered as part of the salary of
Orlando, it will make him the highest paid employee on M/V "Orient Express." The ship captain, the
highest ranking officer, receives U.S.$3,000.00 per month without tips. Orlando, who is a bartender, will
receive U.S.$3,450.00 per month. Allegedly, this will compel foreign ship owners to desist from hiring
Filipino bartenders. It will create an unfavorable precedent detrimental to the future recruitment, hiring and
deployment of Filipino overseas workers specially in service oriented businesses. It will also be a case of
double compensation that will unjustly enrich Orlando at the expense of petitioners. They also stress that
Orlando never complained that they should pay him the said tips.

Respondent filed a two-page comment to the petition adopting the resolution of the Court of Appeals
dated July 28, 1999.

We find merit in the petition.

Rules of procedure are used to help secure and not override substantial justice. [13] Even the Rules of
Court mandates a liberal construction in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. [14] Since rules of procedure are mere tools
designed to facilitate the attainment of justice, their strict and rigid application which would result in
technicalities that tend to frustrate rather than promote substantial justice must always be avoided. [15] Thus,
the dismissal of an appeal on purely technical ground is frowned upon especially if it will result to
unfairness.

We apply these sound rules in the case at bar. Petitioners' petition for certiorari before the Court of
Appeals contained the certified true copy of the NLRC's decision dated November 26, 1997, [16] its order
dated May 2, 1999[17] and the sworn certification of non-forum shopping. [18] Petitioners also explained that
their counsel executed an affidavit of proof of service and explanation in the afternoon of July 1, 1999.
However, he forgot to attach it when he filed their petition the following day because of the volume and
pressure of work and lack of office personnel. However, the Registry Receipt, [19] which is the proof
of mailing to Orlando's counsel, issued by the Central Post Office was attached on the original petition they
filed with the respondent court. It was also stamped[20] by the NLRC which is proof of receipt of the petition
by the latter. The affidavit of service, which was originally omitted, was attached on their motion for
reconsideration.[21]Significantly, it was dated July 1, 1999. In view of the surrounding circumstances, the
subsequent filing of the affidavit of service may be considered as substantial compliance with the rules.

We now come to the merits of the case. The issue is whether petitioners are liable to pay the tips to
Orlando.

The word [tip] has several meanings, with origins more or less obscure, connected with "tap" and
with "top." In the sense of a sum of money given for good service, other languages are more specific, e.g.,
Fr. pourboire, for drink. It is suggested that [the word] is formed from the practice, in early 18th c. London
coffeehouses, of having a box in which persons in a hurry would drop a small coin, to gain immediate
attention. The box was labelled To Insure Promptness; then just with the initials T.I.P.[22]

It is more frequently used to indicate additional compensation, and in this sense "tip" is defined as
meaning a gratuity; a gift; a present; a fee; money given, as to a servant to secure better or more prompt
service. A tip may range from pure gift out of benevolence or friendship, to a compensation for a service
measured by its supposed value but not fixed by an agreement, although usually the word is applied to
what is paid to a servant in addition to the regular compensation for his service in order to secure better
service or in recognition of it. It has been said that a tip denotes a voluntary act, but it also has been said
that from the very beginning of the practice of tipping it was evident that, whether considered from the
standpoint of the giver or the recipient, a tip lacked the essential element of a gift, namely, the free
bestowing of a gratuity without a consideration, and that, despite its apparent voluntariness, there is an
element of compulsion in tipping.[23]

Tipping is done to get the attention and secure the immediate services of a waiter, porter or others for
their services. Since a tip is considered a pure gift out of benevolence or friendship, it can not be
demanded from the customer. Whether or not tips will be given is dependent on the will and generosity of
the giver. Although a customer may give a tip as a consideration for services rendered, its value still
depends on the giver. They are given in addition to the compensation by the employer. A gratuity given by
an employer in order to inspire the employee to exert more effort in his work is more appropriately called a
bonus.

The NLRC and the Court of Appeals held that petitioners were liable to pay tips to Orlando because
of the contract of employment. Thus:

"The contract of employment entered into by and between the complainant and Ace Navigation Co., Inc. (p. 82,
Record) clearly provides xxx:

'That the employee shall be employed on board under the following terms and conditions:
1.1 Duration of Contract: (12 months) 10 months remaining duration of contract

1.2 Position: Bartender

1.3 Basic Monthly Salary: U.S.$450.00 Flat rate including overtime pay for

1.4 Hours of Work: 12 hrs. work daily.

1.5 Overtime: Plus tips of U.S.$2.00 per passenger per day.

1.6 Vacation Leave with Pay: 2.5 days/mo.' (record, p. 82)

"The record of this case shows that the respondent, in the Contract of Employment xxx undertook to pay to
complainant 'tips of U.S.$2.00 per passenger per day.' Yet, there is no showing that the said undertaking was
complied with by the respondents.

"It was thus a serious error on the part of the Labor Arbiter to rule that the tips were already paid, much less to rule
that said tips were directly paid to the crew of M/V "ORIENT PRINCESS." With Article 4 of the Labor Code reminding
us that doubts should be resolved in favor of labor, we all the more find it compelling to rule that the complainant is
still entitled to the contractually covenanted sum of US$36,000.00. xxx."

We disagree. The contract of employment between petitioners and Orlando is categorical that the
monthly salary of Orlando is US$450.00 flat rate. This already included his overtime pay which is
integrated in his 12 hours of work. The words "plus tips of US$2.00 per passenger per day" were written at
the line for overtime. Since payment for overtime was included in the monthly salary of Orlando, the
supposed tips mentioned in the contract should be deemed included thereat.

The actuations of Orlando during his employment also show that he was aware his monthly salary is
only US$450.00, no more no less. He did not raise any complaint about the non-payment of his tips during
the entire duration of his employment. After the expiration of his contract, he demanded payment only of
his vacation leave pay. He did not immediately seek the payment of tips. He only asked for the payment of
tips when he filed this case before the labor arbiter. This shows that the alleged non-payment of tips was a
mere afterthought to bloat up his claim. The records of the case do not show that Orlando was deprived of
any monthly salary. It will now be unjust to impose a burden on the employer who performed the contract
in good faith.

Furthermore, it is presumed that the parties were aware of the plain, ordinary and common meaning
of the word "tip." As a bartender, Orlando can not feign ignorance on the practice of tipping and that tips
are normally paid by customers and not by the employer.

It is also absurd that petitioners intended to give Orlando a salary higher than that of the ship captain.
As petitioners point out, the captain of M/V "Orient Princess" receives US$3,000.00 per month while
Orlando will receive US$3,450.00 per month if the tip of US$2.00 per passenger per day will be given in
addition to his US$450.00 monthly salary. It will be against common sense for an employer to give a lower
ranked employee a higher compensation than an employee who holds the highest position in an
enterprise.

However, Orlando should be paid his vacation leave pay. Petitioners denied this liability by raising the
defense that the usual practice is that vacation leave pay is given before repatriation. But as the labor
arbiter correctly observed, petitioners did not present any evidence to prove that they already paid the
amount. The burden of proving payment was not discharged by the petitioners.

IN VIEW WHEREOF, the resolutions of the Court of Appeals in CA G.R. SP No. 53508 are reversed
and set aside. The decision of the labor arbiter ordering petitioners to pay jointly and severally the unpaid
vacation leave pay of private respondent, Orlando Alonsagay, in the amount of US$450.00 and dismissing
his other claim for lack of merit is reinstated.

SO ORDERED.