LABSTAN CASES SET 2 (CREDITS TO
ALL OWNERS/AUTHORS)
SONGCO, ET AL. VS. NATIONAL LABOR
RELATIONS COMMISSION G.R. NOS.
50999-51000 (MARCH 23, 1990)
FACTS: Zuelig filed an application for
clearance to terminate the services of
Songco, and others, on the ground of
retrenchment due to financial losses.
During the hearing, the parties agreed
that the sole issue to be resolved was the
basis of the separation pay due. The
salesmen received monthly salaries of at
least P400.00 and commission for every
sale they made.
The Collective Bargaining Agreements
between Zuelig and the union of which
Songco, et al. were members contained
the following provision: "Any employee
who is separated from employment due to
old age, sickness, death or permanent lay-
off, not due to the fault of said employee,
shall receive from the company a
retirement gratuity in an amount
equivalent to one (1) month's salary per
year of service."
The Labor Arbiter ordered Zuelig to pay
Songco et al., separation pay equivalent to
their one month salary (exclusive of
commissions, allowances, etc.) for every
year of service with the company.
1
The National Labor Relations Commission
sustained the Arbiter.
ISSUE: Whether or not earned sales
commissions and allowances should be
included in the monthly salary of Songco,
et al. for the purpose of computing their
separation pay.
RULING: In the computation of backwages
and separation pay, account must be
taken not only of the basic salary of the
employee, but also of the transportation
and emergency living allowances.
Even if the commissions were in the form
of incentives or encouragement, so that
the salesman would be inspired to put a
little more industry on jobs particularly
assigned to them, still these commissions
are direct remunerations for services
rendered which contributed to the
increase of income of the employee.
Commission is the recompense
compensation or reward of an agent,
salesman, executor, trustee, receiver,
factor, broker or bailee, when the same is
calculated as a percentage on the amount
of his transactions or on the profit to the
principal. The nature of the work of a
salesman and the reason for such type of
remuneration for services rendered
demonstrate that commissions are part of
Songco, et al's wage or salary.
The Court takes judicial notice of the fact
that some salesmen do not receive any
basic salary, but depend on commissions
and allowances or commissions alone,
although an employer-employee
relationships exists.
If the opposite view is adopted, i.e., that
commissions do not form part of the wage
or salary, then in effect, we will be saying
that this kind of salesmen do not receive
any salary and, therefore, not entitled to
separation pay in the event of discharge
from employment. This narrow
interpretation is not in accord with the
liberal spirit of the labor laws, and
considering the purpose of separation pay
which is, to alleviate the difficulties which
confront a dismissed employee thrown to
the streets to face the harsh necessities of
life.
In Soriano vs. NLRC (155 SCRA 124), we
held that the commissions also claimed by
the employee (override commission plus
net deposit incentive) are not properly
includible in such base figure since such
commissions must be earned by actual
market transactions attributable to the
petitioner [salesman]. Since the
commissions in the present case were
earned by actual transactions attributable
to Song, et al., these should be included in
their separation pay. In the computation
thereof, what should be taken into account
is the average commission earned during
their last year of employment.
MILLARES VS. NATIONAL LABOR
RELATIONS COMMISSION, 305 SCRA
500 (1999)
FACTS: Article 97, par. (f), of the Labor
Code defined wage as the remuneration
or earnings, however designated, capable
of being expressed in terms of money,
whether fixed or ascertained on a time,
task, piece, or commission basis, or other
method of calculating the same, which is
payable by an employer to an employee
under a written or unwritten contract of
employment for work done or to be done,
or for services rendered or to be rendered
and includes the fair and reasonable
value, as determined by the Secretary of
Labor, of board, lodging, or other facilities
customarily furnished by the employer to
the employee.
116 employees of Paper Industries
Corporation of the Philippines (PICOP) in
Bislig, Surigao del Sur were terminated
under a retrenchment program as a
solution to a major financial setback. Aside
from their one month basic pay,
petitioners believe that the allowances
they allegedly regularly received on a
monthly basis should have also been
included in the computation of their
separation.
PICOP grants the following allowances:
Staff allowance/managers allowance
to those who live in rented houses
2
near the mill site which ceases
whenever a vacancy occurs in the
companys free housing facilities.
Transportation allowance in the form
of advances for actual transportation
expenses subject to liquidation is
given to key officers and managers
who use their own vehicles in the
performance of their duties. This
privilege is discontinued when the
conditions no longer obtain.
Bislig allowance is given to managers
and officers on account of the hostile
environment prevailing therein. Once
the recipient is transferred elsewhere,
the allowance ceases.
Applying Art. 97, par (f) of the Labor Code
which defines wage, the Executive Labor
Arbiter opined that the subject allowances,
being customarily furnished by respondent
PICOP and regularly received by
petitioners, formed part of the latters
wage.
However, the NLRC decreed that the
allowances did not form part of the salary
base used in computing separation pay
since the same were contingency-based.
ISSUE: Whether or not the allowances in
question are considered facilities
customarily furnished.
HELD: NO. Customary is founded on long
established and constant practice
connoting regularity. The receipt of
allowance on a monthly basis does not
ipso facto characterize it as regular and
forming part of salary because the nature
of the grant is a factor worth considering.
The subject allowances were temporarily,
not regularly received by petitioners
because once the conditions for the
availment ceased to exist, the allowance
reached the cutoff point. The petitioners
continuous enjoyment of the disputed
allowances was based on contingencies
the occurrence of which wrote finis to such
enjoyment.
SLL INTERNATIONAL CABLES
SPECIALIST and SONNY L. LAGON,
Petitioner, v. NLRC, ROLDAN LOPEZ,
ET AL., Respondents. G.R. No.
172161: March 2, 2011.
FACTS: Respondents were supposedly
employed by petitioner as project
employees in 11996, 1997, 1998, and
1999. They were paid less than the
minimum wage for the four periods of
their employment. During their 4th
employment, Lagon, the employer, due to
economic constraints, had to cut down on
the overtime work of the employees. Thus,
when respondent-employees asked for
overtime work, Lagon had to refuse them,
and told them that if they insist, they
would have to go home at their own
expense and that they would not be given
any more time nor be allowed to stay in
their quarters. The case was brought
before the Labor Arbiter, on a complaint
for illegal dismissal, non-payment of
wages, non-payment of 13th month pay,
among other things, against the employer.
The employer reasoned that the
employees were project employees, since
they were employed for a specific
undertaking, and thus were not regular
employees entitled to minimum wage.
Further, the employer reasoned that the
employees were actually paid above the
minimum wage, since the allowances for
snacks, lodging house, electricity, water,
and transportation should be included in
the wages.
The LA opined that private respondents
were regular employees because they
were repeatedly hired by petitioners and
they performed activities which were
usual, necessary and desirable in the
business or trade of the employer. With
regard to the underpayment of wages, the
LA found that private respondents were
underpaid. It ruled that the free board and
lodging, electricity, water, and food
enjoyed by them could not be included in
the computation of their wages because
these were given without their written
consent. The LA, however, found that
petitioners were not liable for illegal
dismissal. The LA viewed private
respondent's act of going home as an act
of indifference when petitioners decided to
3
prohibit overtime work. The NLRC and CA
affirmed and ruled against the employer.
ISSUE:
1. Whether or not the employees
were entitled to minimum wage
2. Whether or not the free board
and lodging, electricity, water, and
food enjoyed by the employees
should be included in the
computation of the wages
HELD: The petition is denied.
(LABOR LAW: Allowable deductions from
employees wages.) Preliminarily, the Court
noted that the case involves factual
disputes decided by the trial courts, whose
decisions the Court cannot disturb. Settled
is the fact that decisions by labor arbiters,
due to their expertise, cannot be disturbed
and are accorded respect and finality
when supported by substantial evidence.
Thus it cannot decide on the issue of
whether the employees are project or
regular employees, and must affirm the
ruling that they are regular employees. In
any case, project employees are entitled
to the minimum wage, since they are not
among the exclusions enumerated in the
Labor Code Implementing Rules.
On the issue of whether the facilities
should be included as wages, a four-
pronged test must be completed: proof
must be shown that such facilities are
customarily furnished by the trade;
second, the provision of deductible
facilities must be voluntarily accepted in
writing by the employee; and finally,
facilities must be charged at reasonable
value. Mere availment is not sufficient to
allow deductions from employees wages.
These requirements, however, have not
been met in this case. SLL failed to
present any company policy or guideline
showing that provisions for meals and
lodging were part of the employees
salaries. It also failed to provide proof of
the employees written authorization, much
less show how they arrived at their
valuations. At any rate, it is not even clear
whether private respondents actually
enjoyed said facilities.
AMERICAN WIRE AND CABLE DAILY
RATED EMPLOYEES UNION vs.
AMERICAN WIREAND CABLE CO., INC.
and THE COURT OF APPEALS G.R. No.
155059 (2D) April 29, 2005
FACTS: American Wire and Cable Co., Inc.,
is a corporation engaged in the
manufacture of wires and cables. There
are two unions in this company, the
American Wire and Cable Monthly-Rated
Employees Union and the American Wire
and Cable Daily-Rated Employees. An
original action was filed before the NCMB
of the Department of Labor and
Employment (DOLE) by the two unions for
voluntary arbitration. The petitioner
submits that the withdrawal of the private
respondent of the 35%premium pay for
selected days during the Holy Week and
Christmas season, the holding of the
Christmas Party and its incidental benefits,
and the giving of service awards, which
they have long enjoyed, violated Article
100 of the Labor Code. A decision was
rendered by the Voluntary Arbitrator in
favor of the private respondent. On
appeal, CA affirmed and upheld the
Arbitrators decision.
ISSUE: Whether or not private respondent
is guilty of violating Article 100 of the
Labor Code, as amended, when the
benefits/entitlements given to the
members of petitioner union were
withdrawn.
HELD: The Court ruled that respondent is
not guilty of violating Art. 100 of the Labor
Code.
ART. 100. PROHIBITION AGAINST
ELIMINATION OR DIMINUTION OF
BENEFITS. Nothing in this Book shall be
construed to eliminate or in any way
diminish supplements, or other employee
benefits being enjoyed at the time of
promulgation of this Code.
The benefits and entitlements mentioned
in the instant case are all considered
4
bonuses which were given by the private
respondent out of its generosity and
munificence. A bonus is an amount
granted and paid to an employee for his
industry and loyalty which contributed to
the success of the employers business
and made possible the realization of
profits. The granting of a bonus is a
management prerogative, something
given in addition to what is ordinarily
received by or strictly due the recipient.
Thus, a bonus is not a demandable and
enforceable obligation, except when it is
made part of the wage, salary or
compensation of the employee.
For a bonus to be enforceable, it must
have been promised by the employer and
expressly agreed upon by the parties or it
must have had a fixed amount and had
been a long and regular practice on the
part of the employer. The assailed benefits
were never subjects of any agreement
between the union and the company. It
was never incorporated in the CBA. To be
considered a regular practice, the giving
of the bonus should have been done over
a long period of time, and must be shown
to have been consistent and deliberate.
The downtrend in the grant of these two
bonuses over the years demonstrates that
there is nothing consistent about it. To
hold that an employer should be forced to
distribute bonuses which it granted out of
kindness is to penalize him for his past
generosity.
TSPI, INCORPORATION VS. TSPIC
EMPLOYEES UNION G.R NO. 163419.
FEBRUARY 13, 2008
FACTS: TSPI Corporation entered into a
Collective Bargaining Agreement with the
corporation Union for the increase of
salary for the latters members for the
year 2000 to 2002 starting from January
2000. thus, the increased in salary was
materialized on January 1, 2000. However,
on October 6, 2000, the Regional Tripartite
Wage and production Board raised daily
minimum wage from P 223.50 to P 250.00
starting November 1, 2000. Conformably,
the wages of the 17 probationary
employees were increased to P250.00 and
became regular employees therefore
receiving another 10% increase in salary.
In January 2001, TSPIC implemented the
new wage rates as mandated by the CBA.
As a result, the nine employees who were
senior to the 17 recently regularized
employees, received less wages. On
January 19, 2001, TSPICs HRD notified the
24 employees who are private
respondents, that due to an error in the
automated payroll system, they were
overpaid and the overpayment would be
deducted from their salaries starting
February 2001. The Union on the other
hand, asserted that there was no error and
the deduction of the alleged overpayment
constituted diminution of pay.
ISSUE: Whether the alleged overpayment
constitutes diminution of pay as alleged by
the Union.
RULING: Yes, because it is considered that
Collective Bargaining Agreement entered
into by unions and their employers are
binding upon the parties and be acted in
strict compliance therewith. Thus, the CBA
in this case is the law between the
employers and their employees.
Therefore, there was no overpayment
when there was an increase of salary for
the members of the union simultaneous
with the increasing of minimum wage for
workers in the National Capital Region. The
CBA should be followed thus, the senior
employees who were first promoted as
regular employees shall be entitled for the
increase in their salaries and the same
with lower rank workers.
LEPANTO CERAMICS, INC.,
PETITIONER, V. LEPANTO CERAMICS
EMPLOYEES ASSOCIATION,
RESPONDENT. G.R. NO. 180866 :
MARCH 2, 2010
FACTS: Respondent Lepanto Ceramics
Employees Association (respondent
Association) is a legitimate labor
organization duly registered with the
Department of Labor and Employment. It
is the sole and exclusive bargaining agent
5
in the establishment of petitioner. In
December 1998, petitioner gave a
Php3000 bonus to its employees,
members of the respondent Association.
Subsequently, in September 1999,
petitioner and respondent Association
entered into a Collective Bargaining
Agreement (CBA) which provides for,
among others, the grant of a Christmas
gift package/bonus to the members of the
respondent Association.
The Christmas bonus was one of the
enumerated existing benefit, practice of
traditional rights which shall remain in full
force and effect. In the succeeding years,
1999, 2000 and 2001, the bonus was not
in cash. Instead, petitioner gave each of
the members of respondent Association
Tile Redemption Certificates equivalent to
Php3000. The bonus for the year 2002 is
the root of the present dispute. Petitioner
gave a year-end cash benefit of Six
Hundred Pesos (Php600) and offered a
cash advance to interested employees
equivalent to one (1) month salary
payable in one year. The respondent
Association objected to the Php600 cash
benefit and argued that this was in
violation of the CBA it executed with the
petitioner. The parties failed to amicably
settle the dispute. The respondent
Association filed a Notice of Strike with the
National Conciliation Mediation Board. The
efforts to conciliate failed.
The case was then referred to the
Voluntary Arbitrator for resolution where
the Complaint was docketed as Case No.
LAG-PM-12-095-02.The Voluntary
Arbitrator rendered a Decision declaring
that petitioner is bound to grant each of its
workers a Christmas bonus of Php3000 for
the reason that the bonus was given prior
to the effectivity of the CBA between the
parties and that the financial losses of the
company is not a sufficient reason to
exempt it from granting the same. It
stressed that the CBA is a binding contract
and constitutes the law between the
parties. The Voluntary Arbitrator further
expounded that since the employees had
already been given P600.00 cash bonus,
the same should be deducted from the
claimed amount of Php3000, thus leaving
a balance of Php2400. Petitioner elevated
the case to the Court of Appeals which
affirmed in toto the decision of the
Voluntary Arbitrator.
ISSUE: Whether or not the petitioner is
obliged to give the members of the
respondent Association a Christmas bonus.
HELD: Court of Appeals decision is
affirmed.
(LABOR LAW) By definition, a bonus is a
gratuity or act of liberality of the giver. It is
something given in addition to what is
ordinarily received by or strictly due the
recipient. A bonus is granted and paid to
an employee for his industry and loyalty
which contributed to the success of the
employer's business and made possible
the realization of profits. A bonus is also
granted by an enlightened employer to
spur the employee to greater efforts for
the success of the business and realization
of bigger profits. Generally, a bonus is not
a demandable and enforceable obligation.
For a bonus to be enforceable, it must
have been promised by the employer and
expressly agreed upon by the parties.
Given that the bonus in this case is
integrated in the CBA, the same partakes
the nature of a demandable obligation.
Verily, by virtue of its incorporation in the
CBA, the Christmas bonus due to
respondent Association has become more
than just an act of generosity on the part
of the petitioner but a contractual
obligation it has undertaken.
A CBA refers to a negotiated contract
between a legitimate labor organization
and the employer, concerning wages,
hours of work and all other terms and
conditions of employment in a bargaining
unit. As in all other contracts, the parties
to a CBA may establish such stipulations,
clauses, terms and conditions as they may
deem convenient, provided these are not
contrary to law, morals, good customs,
public order or public policy. It is a familiar
and fundamental doctrine in labor law that
the CBA is the law between the parties
and they are obliged to comply with its
provisions. This principle stands strong
6
and true in the case at bar. A reading of
the provision of the CBA reveals that the
same provides for the giving of a
Christmas gift package/bonus without
qualification. Terse and clear, the said
provision did not state that the Christmas
package shall be made to depend on the
petitioner's financial standing. The records
are also bereft of any showing that the
petitioner made it clear during CBA
negotiations that the bonus was
dependent on any condition. Indeed, if the
petitioner and respondent Association
intended that the Php3000 bonus would
be dependent on the company's earnings,
such intention should have been
expressed in the CBA.
All given, business losses are a feeble
ground for petitioner to repudiate its
obligation under the CBA. The rule is
settled that any benefit and supplement
being enjoyed by the employees cannot
be reduced, diminished, discontinued or
eliminated by the employer. The principle
of non-diminution of benefits is founded on
the constitutional mandate to protect the
rights of workers and to promote their
welfare and to afford labor full protection.
Hence, absent any proof that petitioners
consent was vitiated by fraud, mistake or
duress, it is presumed that it entered into
the CBA voluntarily and had full knowledge
of the contents thereof and was aware of
its commitments under the contract.
EASTERN TELECOM PHILIPPINES, INC.
VS EASTERN TELECOM EMPLOYEES
UNION G.R. No. 185665 FEBRUARY 8,
2011
FACTS: Eastern Telecom Philippines, Inc.
(ETPI) plans to defer payment of the 2003
14th, 15th and 16th month bonuses
sometime in April 2004. The company's
main ground in postponing the payment of
bonuses is due to allege continuing
deterioration of company's financial
position which started in the year 2000.
However, ETPI while postponing payment
of bonuses sometime in April 2004, such
payment would also be subject to
availability of funds.
The union strongly opposed the deferment
in payment of the bonuses by filing a
preventive mediation complaint with the
NCMB on July 3, 2003, the purpose of
which complaint is to determine the date
when the bonus should be paid.
In the conference held at the NCMB, ETPI
reiterated its stand that payment of the
bonuses would only be made in April 2004
to which date of payment, the union
agreed. Subsequently, the company made
a sudden turnaround in its position by
declaring that they will no longer pay the
bonuses until the issue is resolved through
compulsory arbitration.
Thus, on April 26, 2004, the union filed a
Notice of Strike on the ground of unfair
labor practice for failure of ETPI to pay the
bonuses in gross violation of the economic
provision of the existing CBA.
On May 19, 2004, the Secretary of Labor
and Employment, finding that the
company is engaged in an industry
considered vital to the economy and any
work disruption thereat will adversely
affect not only its operation but also that
of the other business relying on its
services, certified the labor dispute for
compulsory arbitration.
Acting on the certified labor dispute, a
hearing was called on July 16, 2004
wherein the parties have submitted that
the issues for resolution. Thereafter, they
were directed to submit their respective
position papers and evidence in support
thereof after which submission, they
agreed to have the case considered
submitted for decision.
On April 28, 2005, the NLRC issued its
Resolution dismissing ETEU's complaint
and held that ETPI could not be forced to
pay the union members the bonuses for
the year 2003 and the 14th month bonus
for the year 2004 inasmuch as the
payment of these additional benefits was
basically a management prerogative,
being an act of generosity and
munificence on the part of the company
7
and contingent upon the realization of
profits.
The CA declared that the Side Agreements
of the 1998 and 2001 CBA created a
contractual obligation on ETPI to confer
the subject bonuses to its employees
without qualification or condition. It also
found that the grant of said bonuses has
already ripened into a company practice
and their denial would amount to
diminution of the employees' benefits.
ISSUE: Whether or not ETPI is liable to pay
14th, 15th and 16th month bonuses for
the year 2003 and 14th month bonus for
the year 2004 to the members of
respondent union.
DECISION: From a legal point of view, a
bonus is a gratuity or act of liberality of
the giver which the recipient cannot
demand as a matter of right. The grant of
a bonus is basically a management
prerogative which cannot be forced upon
the employer who may not be obliged to
assume the onerous burden of granting
bonuses. However, a bonus becomes a
demandable or enforceable obligation if
the additional compensation is granted
without any conditions imposed for its
payment. In such case, the bonus is
treated as part of the wage, salary or
compensation of the employee.
In this case, there is no dispute that
Eastern Telecommunications Phils., Inc.
and Eastern Telecoms Employees Union
agreed on the inclusion of a provision for
the grant of 14th, 15th and 16th month
bonuses in the 1998-2001 CBA Side
Agreement, as well as in their 2001-2004
CBA Side Agreement, which contained no
qualification for its payment. There were
no conditions specified in the CBA Side
Agreements for the grant of the bonus.
There was nothing in the relevant
provisions of the CBA which made the
grant of the bonus dependent on the
company's financial standing or contingent
upon the realization of profits. There was
also no statement that if the company
derives no profits, no bonus will be given
to the employees. In fine, the payment of
these bonuses was not related to the
profitability of business operations.
Consequently, the giving of the subject
bonuses cannot be peremptorily
withdrawn by Eastern Telecommunications
Phils., Inc. without violating Article 100 of
the Labor Code, which prohibits the
unilateral elimination or diminution of
benefits by the employer. The rule is
settled that any benefit and supplement
being enjoyed by the employees cannot
be reduced, diminished, discontinued or
eliminated by the employer.
GOVERNMENT SERVICE INSURANCE
SYSTEM (GSIS) V. NATIONAL LABOR
RELATIONS COMMISSION (NLRC), G.R.
NO. 180045: NOVEMBER 17, 2010
FACTS: Private respondents were security
guards hired by DNL Security, and they
were assigned to Petitioners Tacloban
office. In July 1989, GSIS voluntarily
increased their salaries from 1400 to 3000
php. In February 1993, DNL Security
informed respondents that its service
contract with petitioner was terminated.
This notwithstanding, DNL Security
instructed respondents to continue
reporting for work to petitioner.
Respondents worked as instructed until
April 20, 1993, but without receiving their
wages; after which, they were terminated
from employment.
Respondents filed before the NLRC a
complaint against GSIS and DNL Security
for illegal dismissal, which they won. The
LA found that respondents were not
illegally terminated from employment
because the employment of security
guards is dependent on the service
contract between the security agency and
its client. However, considering that
respondents had been out of work for a
long period, and consonant with the
principle of social justice, the LA awarded
respondents with separation pay
equivalent to one (1) month salary for
every year of service, to be paid by DNL
Security. DNL Security filed a motion for
8
reconsideration, while petitioner appealed Petitioners liability covers the payment of
to the NLRC. respondents salary differential and
13thmonth pay during the time they
The NLRC treated DNL Securitys motion worked for petitioner. In addition,
for reconsideration as an appeal, but petitioner is solidarily liable with DNL
dismissed the same, as it was not legally Security for respondents unpaid wages
perfected. It likewise dismissed petitioners from February 1993 until April 20, 1993.
appeal, having been filed beyond the While it is true that respondents continued
reglementary period. The CA likewise working for petitioner after the expiration
affirmed the decision of the NLRC upon of their contract, based on the instruction
petition for certiorari, and GSIS institutes of DNL Security, petitioner did not object
the instant action. to such assignment and allowed
respondents to render service. Thus,
ISSUES: Whether or not GSIS is liable as an
indirect employer. petitioner impliedly approved the
extension of respondents services.
HELD: Petition partly granted. GSIS is Accordingly, petitioner is bound by the
solidarily liable with DNL Security. provisions of the Labor Code on indirect
employment.
(LABOR LAW: Indirect employment)
However, GSIS is exempt from paying
The fact that there is no actual and direct separation pay because it is punitive in
employer-employee relationship between character, and an indirect employer
petitioner and respondents does not cannot be held liable for this unless it
absolve the former from liability for the conspired with the dismissal.
latters monetary claims. When petitioner
contracted DNL Security's services,
petitioner became an indirect employer of
respondents, pursuant to Article 107 of the JOEB M. ALIVIADO, et al., Petitioners,
Labor Code which states: The provisions of v. PROCTER & GAMBLE PHILS., INC.,
the immediately preceding Article shall and PROMM-GEM INC., Respondents.
likewise apply to any person, partnership, G.R. No. 160506 : March 9, 2010
association or corporation which, not being FACTS: Petitioners worked as
an employer, contracts with an merchandisers of P&G from various dates,
independent contractor for the allegedly starting as early as 1982 or as
performance of any work, task, job or late as June 1991, to either May 5, 1992 or
project. March 11, 1993.
They all individually signed employment
contracts with either Promm-Gem or SAPS
for periods of more or less five months at
a time. They were assigned at different
outlets, supermarkets and stores where
they handled all the products of P&G. They
received their wages from Promm-Gem or
SAPS.
SAPS and Promm-Gem imposed
disciplinary measures on erring
merchandisers for reasons such as
habitual absenteeism, dishonesty or
changing day-off without prior notice.
P&G is principally engaged in the
manufacture and production of different
consumer and health products, which it
sells on a wholesale basis to various
supermarkets and distributors. To enhance
consumer awareness and acceptance of
the products, P&G entered into contracts
with Promm-Gem and SAPS for the
promotion and merchandising of its
products.
In December 1991, petitioners filed a
complaint against P&G for regularization,
service incentive leave pay and other
benefits with damages. The complaint was
later amended to include the matter of
their subsequent dismissal.
On November 29, 1996, the Labor Arbiter
dismissed the complaint for lack of merit
and ruled that there was no employer-
employee relationship between petitioners
9
and P&G. He found that the selection and
engagement of the petitioners, the
payment of their wages, the power of
dismissal and control with respect to the
means and methods by which their work
was accomplished, were all done and
exercised by Promm-Gem/SAPS. He further
found that Promm-Gem and SAPS were
legitimate independent job contractors. On
appeal, the NLRC dismissed the same.
Petitioners filed a motion for
reconsideration but the motion was denied
in the November 19, 1998 Resolution.
Petitioners likewise failed to have a
favorable decision in the CA hence, this
petition.
ISSUE: Whether or not Promm-Gem and
SAPS are labor-only contractors or
legitimate job contractors?
HELD: The petition is granted.
(LABOR LAW) Article 106 of the Labor
Code and its implementing rules allow
contracting arrangements for the
performance of specific jobs, works or
services. Indeed, it is management
prerogative to farm out any of its
activities, regardless of whether such
activity is peripheral or core in nature.
However, in order for such outsourcing to
be valid, it must be made to an
independent contractor because the
current labor rules expressly prohibit labor-
only contracting.
To emphasize, there is labor-only
contracting when the contractor or sub-
contractor merely recruits, supplies or
places workers to perform a job, work or
service for a principal and any of the
following elements are present:
(i) The contractor or subcontractor
does not have substantial capital
or investment which relates to
the job, work or service to be
performed and the employees
recruited, supplied or placed by
such contractor or subcontractor
are performing activities which
are directly related to the main
business of the principal; or
(ii) (ii) The contractor does not
exercise the right to control over
the performance of the work of
the contractual employee.
In the instant case, the financial
statements of Promm-Gem show that it
has authorized capital stock ofP1 million
and a paid-in capital, or capital available
for operations, ofP500,000.00 as of 1990.
It also has long term assets worth
Php432895.28 and current assets
ofP719,042.32. Promm-Gem has also
proven that it maintained its own
warehouse and office space with a floor
area of 870 square meters. It also had
under its name three registered vehicles
which were used for its
promotional/merchandising business.
Promm-Gem also has other clients aside
from P&G. Under the circumstances,
Promm-Gem has substantial investment
which relates to the work to be performed.
These factors negate the existence of the
element specified in Section 5(i) of DOLE
Department Order No. 18-02.
The records also show that Promm-Gem
supplied its complainant-workers with the
relevant materials, such as markers,
tapes, liners and cutters, necessary for
them to perform their work. Promm-Gem
also issued uniforms to them. It is also
relevant to mention that Promm-Gem
already considered the complainants
working under it as its regular, not merely
contractual or project, employees. This
circumstance negates the existence of
element (ii) as stated in Section 5 of DOLE
Department Order No. 18-02, which
speaks of contractual employees. This,
furthermore, negates on the part of
Promm-Gem bad faith and intent to
circumvent labor laws which factors have
often been tipping points that lead the
Court to strike down the employment
practice or agreement concerned as
contrary to public policy, morals, good
customs or public order.
Under the circumstances, Promm-Gem
cannot be considered as a labor-only
contractor. Thus, it is a legitimate
independent contractor.
10
On the other hand, the Articles of
Incorporation of SAPS shows that it has a
paid-in capital of only Php31250. There is
no other evidence presented to show how
much its working capital and assets are.
Furthermore, there is no showing of
substantial investment in tools, equipment
or other assets.
It is clear that SAPS having a paid-in
capital of only Php31250 - has no
substantial capital. SAPS lack of
substantial capital is underlined by the
records which show that its payroll for its
merchandisers alone for one month would
already total Php44561. It had 6-month
contracts with P&G. Yet SAPS failed to
show that it could complete the 6-month
contracts using its own capital and
investment. Its capital is not even
sufficient for one months payroll. SAPS
failed to show that its paid-in capital
ofP31,250.00 is sufficient for the period
required for it to generate its needed
revenue to sustain its operations
independently. Substantial capital refers to
capitalization used in the performance or
completion of the job, work or service
contracted out. In the present case, SAPS
has failed to show substantial capital.
Furthermore, the petitioners have been
charged with the merchandising and
promotion of the products of P&G, an
activity that has already been considered
by the Court as doubtlessly directly related
to the manufacturing business, which is
the principal business of P&G. Considering
that SAPS has no substantial capital or
investment and the workers it recruited
are performing activities which are directly
related to the principal business of P&G,
we find that the former is engaged in
labor-only contracting.
Where labor-only contracting exists, the
Labor Code itself establishes an employer-
employee relationship between the
employer and the employees of the labor-
only contractor. The statute establishes
this relationship for a comprehensive
purpose: to prevent a circumvention of
labor laws. The contractor is considered
merely an agent of the principal employer
and the latter is responsible to the
employees of the labor-only contractor as
if such employees had been directly
employed by the principal employer.
(LABOR LAW) In cases of regular
employment, the employer shall not
terminate the services of an employee
except for a just or authorized cause.
In the instant case, the termination letters
given by Promm-Gem to its employees
uniformly specified the cause of dismissal
as grave misconduct and breach of trust.
Misconduct has been defined as improper
or wrong conduct; the transgression of
some established and definite rule of
action, a forbidden act, a dereliction of
duty, unlawful in character implying
wrongful intent and not mere error of
judgment. The misconduct to be serious
must be of such grave and aggravated
character and not merely trivial and
unimportant. To be a just cause for
dismissal, such misconduct
(a) must be serious;
(b) must relate to the performance of the
employees duties; and
(c) must show that the employee has
become unfit to continue working for the
employer.
In the instant case, petitioners-employees
of Promm-Gem may have committed an
error of judgment in claiming to be
employees of P&G, but it cannot be said
that they were motivated by any wrongful
intent in doing so. As such, they are only
found them guilty of only simple
misconduct for assailing the integrity of
Promm-Gem as a legitimate and
independent promotion firm. A misconduct
which is not serious or grave, as that
existing in the instant case, cannot be a
valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as
a ground for dismissal, must be based on
the willful breach of the trust reposed in
the employee by his employer. Ordinary
breach will not suffice. A breach of trust is
willful if it is done intentionally, knowingly
11
and purposely, without justifiable excuse,
as distinguished from an act done
carelessly, thoughtlessly, heedlessly or
inadvertently.
Loss of trust and confidence, as a cause
for termination of employment, is
premised on the fact that the employee
concerned holds a position of
responsibility or of trust and confidence.
As such, he must be invested with
confidence on delicate matters, such as
custody, handling or care and protection of
the property and assets of the employer.
And, in order to constitute a just cause for
dismissal, the act complained of must be
work-related and must show that the
employee is unfit to continue to work for
the employer. In the instant case, the
petitioners-employees of Promm-Gem
have not been shown to be occupying
positions of responsibility or of trust and
confidence. Neither is there any evidence
to show that they are unfit to continue to
work as merchandisers for Promm-Gem.
Thus, there was no valid cause for the
dismissal of petitioners-employees of
Promm-Gem.
While Promm-Gem had complied with the
procedural aspect of due process in
terminating the employment of
petitioners-employees,i.e., giving two
notices and in between such notices, an
opportunity for the employees to answer
and rebut the charges against them, it
failed to comply with the substantive
aspect of due process as the acts
complained of neither constitute serious
misconduct nor breach of trust. Hence, the
dismissal is illegal.
With regard to the petitioners placed with
P&G by SAPS, they were given no written
notice of dismissal. The records show that
upon receipt by SAPS of P&Gs letter
terminating their Merchandising Services
Contact effective March 11, 1993, they in
turn verbally informed the concerned
petitioners not to report for work anymore.
Neither SAPS nor P&G dispute the
existence of these circumstances.
Parenthetically, unlike Promm-Gem which
dismissed its employees for grave
misconduct and breach of trust due to
disloyalty, SAPS dismissed its employees
upon the initiation of P&G. It is evident
that SAPS does not carry on its own
business because the termination of its
contract with P&G automatically meant for
it also the termination of its employees
services. It is obvious from its act that
SAPS had no other clients and had no
intention of seeking other clients in order
to further its merchandising business.
From all indications SAPS, existed to cater
solely to the need of P&G for the supply of
employees in the latters merchandising
concerns only. Under the circumstances
prevailing in the instant case, we cannot
consider SAPS as an independent
contractor.
In termination cases, the burden of proof
rests upon the employer to show that the
dismissal is for just and valid cause. In the
instant case, P&G failed to discharge the
burden of proving the legality and validity
of the dismissals of those petitioners who
are considered its employees. Hence, the
dismissals necessarily were not justified
and are therefore illegal.
(CIVIL LAW) Moral and exemplary damages
are recoverable where the dismissal of an
employee was attended by bad faith or
fraud or constituted an act oppressive to
labor or were done in a manner contrary to
morals, good customs or public policy.
With regard to the employees of Promm-
Gem, there being no evidence of bad faith,
fraud or any oppressive act on the part of
the latter, we find no support for the
award of damages.
As for P&G, the records show that it
dismissed its employees through SAPS in a
manner oppressive to labor. The sudden
and peremptory barring of the concerned
petitioners from work, and from admission
to the work place, after just a one-day
verbal notice, and for no valid cause
bellows oppression and utter disregard of
the right to due process of the concerned
petitioners. Hence, an award of moral
damages is called for.
12
Attorneys fees may likewise be awarded
to the concerned petitioners who
wereillegallydismissedinbadfaithandwerec
ompelledtolitigateorincur expenses to
protect their rights by reason of the
oppressive act of P&G.
(LABOR LAW) Lastly, under Article 279 of
the Labor Code, an employee who is
unjustly dismissed from work shall be
entitled to reinstatement without loss of
seniority rights and other privileges,
inclusive of allowances, and other benefits
or their monetary equivalent from the time
the compensation was withheld up to the
time of actual reinstatement. Hence, all
the petitioners, having been illegally
dismissed are entitled to reinstatement
without loss of seniority rights and with full
back wages and other benefits from the
time of their illegal dismissal up to the
time of their actual reinstatement.
The decision and resolution of the Court of
Appeals are reversed and set aside. The
case is remanded to the NLRC.
MANDAUE GALLEON TRADE INC. V.
VICENTE ANDALES
Vicente Andales is one of the 260 workers
laid off due to the termination of their
contracts by MGTI. MGTI claims that due to
the dwindling demand for rattan products,
they retrenched some of their employees
and the 260 envied the substantial
separation pay of the regular employees.
The court held that the 260 independent
contractors did not have substantial
capital and tools and that their work is
directly related to MGTIs business. This
proves a labor only contraction and thus,
equivalent to declaring that there is an ER-
EE relationship between the principal and
the employees of the supposed contractor.
They are entitled to separation pay of
month for every year of service.
EXECPTIONS to the GR:
- When the findings are grounded
entirely on speculation
- When the inference made is
manifestly mistaken
- Where there is grave abuse of
discretion
- Judgment is made from
misapprehension of facts
- Findings of fact are conflicting
- (in making its findings) CA went
beyond issue
- Findings are contrary to the trial
court
- Conclusions without citation
- Facts set forth not disputed by
respondent
 - Findings premised on absence of
evidence
- CA overlooked relevant facts
disputed by parties.
*The first 2 par. Of article 106 set the
general rule that a principal is permitted
by law to engage the services of a
contractor for the performance of a
particular job, but the principal,
nevertheless, becomes SOLIDARILY liable
with the contractor.
SPIC N SPAN SERVICES
CORPORATION VS. GLORIA PAJE ET
AL., AUGUST 25, 2010
FACTS: In February 1998, Gloria Paje and
10 others were dismissed as promo girlsof
Swift Corporation. Paje et al were provided
to Swift by Spic N Span Services
Corporation. Paje et al, through their non-
lawyer representative, Florencio Peralta,
filed a labor case for illegal dismissal
against Swift and Spic N Span. Paje et al
won. Swift and Spic N Span appealed the
case to the NLRC. The NLRC affirmed the
Labor Arbiter. The Court of Appeals
likewise ruled in favor of Paje et al. Spic N
Span and Swift further appealed to the SC
where they alleged that there are two
procedural infirmities on the part of Paje et
al.
13
First was the fact that not all of them (Paje
et al) signed the pleadings signed before
the NLRC, and second, that Paje et al were
represented by a non-lawyer (Peralta);
that under the law, in labor cases, there
are only two instances where a non-lawyer
may appear or represent a litigant before
the labor arbiter or the NLRC, to wit: (1) If
they represent themselves; or (2) If they
represent their organization or members
thereof. Neither can be said of Peralta.
ISSUE: Whether or not such procedural
lapse on the part of Paje et al is sufficient
for the dismissal of their complaint against
Spic N Span and Swift.
HELD: No. In the hierarchy observed in the
dispensation of justice, rules of procedure
can be disregarded in order to serve the
ends of justice. Certain labor rights
assume preferred positions in our legal
hierarchy. Under the Constitution and the
Labor Code, the State is bound to protect
labor and assure the rights of workers to
security of tenure. The State is bound to
protect the rights of workers and promote
their welfare, and the workers are
entitled to security of tenure, humane
conditions of work, and a living wage.
Under these fundamental guidelines, Paje
et als right to security of tenure is a
preferred constitutional right that technical
infirmities in labor pleadings cannot
defeat. The Supreme Court also noted that
even if not all of the complainants signed
the pleadings, it is sufficient that some of
them have signed it. The lack of a
verification in a pleading is only a formal
defect, not a jurisdictional defect, and is
not necessarily fatal to a case. The
primary reason for requiring a verification
is simply to ensure that the allegations in
the pleading are done in good faith, are
true and correct, and are not mere
speculations.
We should remember, too, that certain
labor rights assume preferred positions in
our legal hierarchy. Under the Constitution
and the Labor Code, the State is bound to
protect labor and assure the rights of
workers to security of tenure.
Article 4 of the Labor Code provides that
all doubts in the implementation and
interpretation of its provisions (including
its implementing rules and regulations)
shall be resolved in favor of labor. The
Constitution, on the other hand,
characterizes labor as a primary social
economic force. The State is bound to
protect the rights of workers and promote
their welfare, and the workers are entitled
to security of tenure, humane conditions
of work, and a living wage. Under these
fundamental guidelines, respondents right
to security of tenure is a preferred
constitutional right that technical
infirmities in labor pleadings cannot
defeat.
W.M. MANUFACTURING, INC., v.
RICHARD R. DALAG AND GOLDEN
ROCK MANPOWER SERVICES G.R. No.
209418, December 07, 2015
FACTS: On April 26, 2010, Golden Rock
contracted the services of Dalag as a side
machine operator to be assigned at
petitioners factory. This is pursuant to a
Service Agreement between petitioner and
Golden Rock wherein the latter agreed to
employ the necessary number of workers
as petitioner may need.
While the contract between Golden Rock
and Dalag was for a duration of 5 months,
the latter alleged that on August 7, 2010
he was prevented by security guards from
going to his work station and was
accompanied to the locker room where his
activity was limited only to the withdrawal
his belongings.
Thus, Dalag filed a case for illegal
dismissal and alleged that WM MFG and
Golden Rock engaged in the illegal act of
labor-only contracting based on the
following circumstances: that all the
equipment, machine and tools that he
needed to perform his job were furnished
by WM MFG; that the jobs are to be
performed at WM MFCs workplace; and
that he was under the supervision of WM
MFCs team leaders and supervisors.
14
ISSUE: WON WM Manufacturing Inc. and
Golden Rock Manpower Services engaged
in labor-only contracting?
RULING: YES. Section 5 of DO 18-02 laid
down the criteria in determining whether
or not labor-only contracting exists
between two parties, as follows:
equipment that WM MFG supplied. He also
1. The contractor or subcontractor
does not have substantial capital or
investment which relates to the job,
work or service to be performed and
the employees recruited, supplied
or placed by such contractor or
subcontractor are performing
activities which are directly related
to the main business of the
principal; or
2. The contractor does not exercise
the right to control over the
performance of the work of the
contractual employee.
Golden Rock lacked substantial capital
DO 18-02 defines "substantial capital or
investment" in the context of labor-only
contracting as referring not only to a
contractor's financial capability, but also
encompasses the tools, equipment,
implements, machineries and work
premises, actually and directly used by the
contractor or subcontractor in the
performance or completion of the job,
work or service contracted out.
Here, the Certificate of Registration may
have prevented the presumption of labor-
only contracting from arising, but the
evidence Dalag adduced was sufficient to
overcome the disputable presumption that
Golden Rock is an independent contractor.
To be sure, in performing his tasks, Dalag
made use of the raw materials and
operated the side-seal machine in the
workplace of WM MFG, not of Golden Rock.
With these attendant circumstances, the
Court rules that the first confirmatory
element indubitably exists.
WM MFG exercised control over the
employees supplied by Golden Rock
Under the same DO 18-02, the "right to
control" refers to the right to determine
not only the end to be achieved, but also
the manner and means to be used in
reaching that end. Here, notwithstanding
the contract stipulation leaving Golden
Rock the exclusive right to control the
working warm bodies it provides WM MFG,
evidence irresistibly suggests that it was
WM MFG who actually exercised
supervision over Dalag's work
performance. As culled from the records,
Dalag was supervised by WM MFG's
employees. Petitioner WM MFG even went
as far as furnishing Dalag with not less
than seven (7) memos directing him to
explain within twenty-four (24) hours his
alleged work infractions. The company
likewise took pains in issuing investigation
reports detailing its findings on Dalag's
culpability. Clearly, WM MFG took it upon
itself to discipline Dalag for violation of
company rules, regulations, and policies,
validating the presence of the second
confirmatory element.
VICMAR DEVELOPMENT
CORPORATION, ET. AL. VS. CAMILO
ELARCOSA, ET. AL., G.R. NO. 202215,
DECEMBER 09, 2015
FACTS: Respondent Camilo Elarcosa, and
35 others filed a complaint for illegal
dismissal and money claims against
petitioner Vicmar Development Corp.
(Vicmar) and/or Robert Kua and Engr.
Juanito C. Pagcaliwagan. They alleged that
Vicmar, a domestic corporation engaged in
manufacturing of plywood for export and
for local sale, employed them in various
capacities - as boiler tenders, block board
receivers, waste feeders, plywood
checkers, plywood sander, conveyor
operator, ripsaw operator, lumber grader,
pallet repair, glue mixer, boiler fireman,
steel strap repair, debarker operator,
plywood repair and reprocessor, civil
workers and plant maintenance. They
further alleged that Vicmar employed a
number of them as early as 1990 and as
late as 2003 through petitioner
Pagcaliwagan; that Vicmar made them
perform tasks necessary and desirable to
15
its usual business; and that Vicmar paid
their wages and controlled the means and
methods of their work to meet the
standard of its products. Thus, they are
regular employees. Vicmar invoked the
defense that it employed respondents as
additional workforce when there was high
demand for plywood thus, they were
merely seasonal employees. They argued
that Vicmar engaged independent
contractors as a cost-saving measure; and
these contractors exercised direct control
and supervision over respondents.
ISSUE: Does this defense find merit?
RULING: No. Similarly, we cannot fault the
CA in the instant case for giving credence
to the assertions and documentary
evidence adduced by respondents.
Petitioners had the opportunity to discredit
them had they presented material
evidence, including payrolls and daily time
records, which are within their custody, to
prove that respondents were mere
additional workforce engaged when there
are extraordinary situations, such as high
demands for plywood products or
unexpected absences of regular
employees; and that respondents were not
assigned for more than one year to the
same section or activity. Moreover,
respondents were shown to have
performed activities necessary in the usual
business of Vicmar. Most of them were
assigned to activities essential for plywood
production, the central business of Vicmar.
In the list above, more than half of the
respondents were assigned to the boiler,
where pieces of plywood were cooked to
perfection. While the other respondents
appeared to have been assigned to other
sections in the company, the presumption
of regular employment should be granted
in their favor pursuant to Article 280 of the
Labor Code since they had been
performing the same activity for at least
one year, as they were assigned to the
same sections, and there is no indication
that their respective activities ceased. The
test to determine whether an employee is
regular is the reasonable connection
between the activity he performs and its
relation to the employers business or
trade, as in the case of respondents
assigned to the boiler section.
Nonetheless, the continuous re-
engagement of all respondents to perform
the same kind of tasks proved the
necessity and desirability of their services
in the business of Vicmar. Likewise,
considering that respondents appeared to
have been performing their duties for at
least one year is sufficient proof of the
necessity, if not the indispensability of
their activities in Vicmars business.
DEVELOPMENT BANK OF THE
PHILIPPINES vs. NATIONAL LABOR
RELATIONS COMMISSION and LEONOR
A. ANG G.R. No. 108031 March 1,
1995
FACTS: On 21 March 1977 private
respondent Leonor A. Ang started
employment as Executive Secretary with
Tropical Philippines Wood Industries, Inc.
(TPWII). In 1982 she was promoted to the
position of Personnel Officer. In September
1983 petitioner Development Bank of the
Philippines (DBP), as mortgagee of TPWII,
foreclosed its plant facilities and
equipment. Nevertheless TPWII continued
its business operations interrupted only by
brief shutdowns for the purpose of
servicing its plant facilities and equipment.
In January 1986 DBP took possession of
the foreclosed properties. From then on
the company ceased its operations. As a
consequence private respondent was on
15 April 1986 verbally terminated from the
service. On 14 December 1987, private
respondent filed with the Labor Arbiter a
complaint for separation pay, 13th month
pay, vacation and sick leave pay, salaries
and allowances against TPWII, its General
Manager, and petitioner. After hearing the
Labor Arbiter found TPWII primarily liable
to private respondent but only for her
separation pay and vacation and sick
leave pay because her claims for unpaid
wages and 13th month pay were later paid
after the complaint was filed.
The General Manager was absolved of any
liability. DBP was held subsidiarily liable in
16
the event the company failed to satisfy the
judgment. The Labor Arbiter rationalized
that the right of an employee to be paid
benefits due him from the properties of his
employer is superior to the right of the
latter's mortgage. The National Labor
Relations Commission affirmed the ruling
of the Labor Arbiter.
ISSUE: Whether or not the NLRC
committed grave abuse of discretion in
holding that Art. 110 of the Labor Code, as
amended, which refers to worker
preference in case of bankruptcy or
liquidation of an employer's business is
applicable to the present case
notwithstanding the absence of any formal
declaration of bankruptcy or judicial
liquidation of TPWII.
RULING: SC held that NLRC gravely abused
its discretion in affirming the decision of
the Labor Arbiter. Art. 110 should not be
treated apart from other laws but applied
in conjunction with the pertinent
provisions of the Civil Code and the
Insolvency Law to the extent that piece-
meal distribution of the assets of the
debtor is avoided.
Worker preference will find application
when, in proceedings such as insolvency,
such unpaid wages shall be paid in full
before the "claims of the Government and
other creditors" may be paid. All creditors
must be convened, their claims
ascertained and inventoried, and
thereafter the preferences determined. In
the course of judicial proceedings which
have for their object the subjection of the
property of the debtor to the payment of
his debts or other lawful obligations.
Thereby, an orderly determination of
preference of creditors' claims is assured;
the adjudication made will be binding on
all parties-in-interest since those
proceedings are proceedings in rem; and
the legal scheme of classification,
concurrence and preference of credits in
the Civil Code, the Insolvency Law, and the
Labor Code is preserved in harmony.
In the present case, there is as yet no
declaration of bankruptcy nor judicial
liquidation of TPWII. Hence, it would be
premature to enforce the worker's
preference. The additional ratiocination of
public respondent that "under Article 110
of the Labor Code complainant enjoys a
preference of credit over the properties of
TPWII being held in possession by DBP," is
a dismal misconception of the nature of
preference of credit
A preference applies only to claims which
do not attach to specific properties. A lien
creates a charge on a particular property.
The right of first preference as regards
unpaid wages recognized by Article 110
does not constitute a lien on the property
of the insolvent debtor in favor of workers.
It is but a preference of credit in their
favor, a preference in application. It is a
method adopted to determine and specify
the order in which credits should be paid
in the final distribution of the proceeds of
the insolvent's assets. It is a right to a first
preference in the discharge of the funds of
the judgment debtor
Article 110 of the Labor Code does not
purport to create a lien in favor of workers
or employees for unpaid wages either
upon all of the properties or upon any
particular property owned by their
employer. Claims for unpaid wages do not
therefore fall at all within the category of
specially preferred claims established
under Articles 2241 and 2242 of the Civil
Code, except to the extent that such
claims for unpaid wages are already
covered by Article 2241, number 6:
"claims for laborers: wages, on the goods
manufactured or the work done;" or by
Article 2242, number 3, "claims of laborers
and other workers engaged in the
construction reconstruction or repair of
buildings, canals and other works, upon
said buildings, canals and other
works . . . . To the extent that claims for
unpaid wages fall outside the scope of
Article 2241, number 6, and 22421
number 3, they would come within the
ambit of the category of ordinary preferred
credits under Article 2244.
17
The DBP anchors its claim on a mortgage
credit. A mortgage directly and
immediately subjects the property upon
which it is imposed, whoever the
possessor may be, to the fulfillment of the
obligation for whose security it was
constituted (Article 2176, Civil Code). It
creates a real right which is enforceable
against the whole world. It is a lien on an
identified immovable property, which a
preference is not.
A recorded mortgage credit is a special
preferred credit under Article 2242 (5) of
the Civil Code on classification of credits.
The preference given by Article 110, when
not falling within Article 2241 (6) and
Article 2242 (3), of the Civil Code and not
attached to any specific property, is all
ordinary preferred credit although its
impact is to move it from second priority
to first priority in the order of preference
established by Article 2244 of the Civil
Code.
SHS PERFORATED MATERIALS, INC.,
ET AL., Petitioners, v. MANUEL F.
DIAZ, Respondent. G.R. No. 185814:
October 13, 2010
FACTS: Petitioner SHS Perforated Materials,
Inc.(SHS)is a start-up corporation
organized and existing under the laws of
the Republic of the Philippines and
registered with the Philippine Economic
Zone Authority. Petitioner Winfried
Hartmannshenn (Hartmannshenn), a
German national, is its president, in which
capacity he determines the administration
and direction of the day-to-day business
affairs of SHS. Petitioner Hinrich Johann
Schumacher (Schumacher), also a German
national, is the treasurer and one of the
board directors. As such, he is authorized
to pay all bills, payrolls, and other just
debts of SHS of whatever nature upon
maturity. Schumacher is also the Executive
Vice-President of the European Chamber of
Commerce of the Philippines (ECCP) which
is a separate entity from SHS. Both entities
have an arrangement where ECCP handles
the payroll requirements of SHS to simplify
business operations and minimize
operational expenses. Thus, the wages of
SHS employees are paid out by ECCP,
through its Accounting Services
Department headed by Juliet Taguiang
(Taguiang).
Manuel F. Diaz (respondent) was hired by
petitioner SHS as Manager for Business
Development on probationary status from
July 18, 2005toJanuary 18, 2006, with a
monthly salary ofP100,000.00.
Respondents duties, responsibilities, and
work hours were described in the Contract
of Probationary Employment.
Respondent was also instructed by
Hartmannshenn to report to the SHS office
and plant at least two (2) days every work
week to observe technical processes
involved in the manufacturing of
perforated materials, and to learn about
the products of the company, which
respondent was hired to market and sell.
During respondents employment,
Hartmannshenn was often abroad and,
because of business exigencies, his
instructions to respondent were either
sent by electronic mail or relayed through
telephone or mobile phone. When he
would be in the Philippines, he and the
respondent held meetings. As to
respondents work, there was no close
supervision by him.
During meetings with the respondent,
Hartmannshenn expressed his
dissatisfaction over respondents poor
performance. Respondent allegedly failed
to make any concrete business proposal or
implement any specific measure to
improve the productivity of the SHS office
and plant or deliver sales except for a
meagreP2,500.00 for a sample product. In
numerous electronic mail messages,
respondent acknowledged his poor
performance and offered to resign from
the company.
Respondent, however, denied sending
such messages but admitted that he had
reported to the SHS office and plant only
eight (8) times from July 18, 2005 to
November 30, 2005.
18
On November 16, 2005, in preparation for informed of this, respondent never picked
his trip to the Philippines, Hartmannshenn up the check.
tried to call respondent on his mobile
phone, but the latter failed to answer. On Respondent countered that his counsel
November 18, 2005, Hartmannshenn received petitioners formal reply letter
arrived in the Philippines from Germany, only on December 20, 2005, stating that
and on November 22 and 24, 2005, his salary would be released subsequent
notified respondent of his arrival through to the turn-over of all materials owned by
electronic mail messages and advised him the company in his possession.
to get in touch with him. Respondent Respondent claimed that the only thing in
claimed that he never received the his possession was a sample panels folder
messages. which he had already returned and which
was duly received by Taguiang
On November 29, 2005, Hartmannshenn onNovember 30, 2005.
instructed Taguiang not to release
respondents salary. Later that afternoon,
respondent called and inquired about his On December 9, 2005,respondent filed a
salary. Taguiang informed him that it was
Complaint against the petitioners for
being withheld and that he had to illegal dismissal; non-payment of
immediately communicate with
salaries/wages and 13thmonth pay with
Hartmannshenn. Again, respondent denied prayer for reinstatement and full
having received such directive.
backwages; exemplary damages, and
The next day, on November 30, 2005, attorneys fees, costs of suit, and legal
respondent served on SHS a demand letter interest.
and a resignation letter. On June 15, 2006, the LA rendered his
decision declaring complainant as having
To settle the issue amicably, petitioners
counsel advised respondents counsel by been illegally dismissed and further
ordering his immediate reinstatement
telephone that a check had been prepared
in the amount ofP50,000.00, and was without loss of seniority rights and
ready for pick-up onDecember 5, 2005. On benefits. It is also ordered that
the same date, a copy of the formal reply complainant be deemed as a regular
letter relating to the prepared payment employee.
was sent to the respondents counsel by
facsimile transmission. Despite being
On appeal, the NLRC reversed the decision
of the LA in its December 29, 2006
Resolution.
On January 25, 2007, respondent filed a
motion for reconsideration but the NLRC
subsequently denied it for lack of merit in
its May 23, 2007 Resolution.
The CA reversed the NLRC resolutions in
its December 23, 2008 Decision.
Aggrieved, the petitioners come to this
Court praying for the reversal and setting
aside of the subject CA decision.
ISSUES: Whether or not respondent was
constructively dismissed by petitioners,
which determination is, in turn, hinged on
finding out:
[1] Whether or not the temporary
withholding of respondents
salary/wages by petitioners was a
valid exercise of management
prerogative; and
[2] Whether or not respondent
voluntarily resigned.
HELD: As a rule, the factual findings of the
courts below are conclusive in a petition
for review on certiorari where only errors
of law should be reviewed. The case,
however, is an exception because the
factual findings of the CA and the LA are
contradictory to that of the NLRC. Thus, a
review of the records is necessary to
19
resolve the factual issues involved and
render substantial justice to the parties.
Petitioners contend that withholding
respondents salary from November 16 to
November 30, 2005, was justified because
respondent was absent and did not show
up for work during that period. He also
failed to account for his whereabouts and
work accomplishments during said period.
When there is an issue as to whether an
employee has, in fact, worked and is
entitled to his salary, it is within
management prerogative to temporarily
withhold an employees salary/wages
pending determination of whether or not
such employee did indeed work.
We disagree with petitioners.
(LABOR LAW) Management prerogative
refers to the right of an employer to
regulate all aspects of employment, such
as the freedom to prescribe work
assignments, working methods, processes
to be followed, regulation regarding
transfer of employees, supervision of their
work, lay-off and discipline, and dismissal
and recall of work. Although management
prerogative refers to the right to regulate
all aspects of employment, it cannot be
understood to include the right to
temporarily withhold salary/wages without
the consent of the employee. To sanction
such an interpretation would be contrary
to Article 116 of the Labor Code, which
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 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.
Any withholding of an employees wages
by an employer may only be allowed in
the form of wage deductions under the
circumstances provided in Article 113 of
the Labor Code, as set forth below:
ART. 113. Wage Deduction. No employer,
in his own behalf or in behalf of any
person, shall make any deduction from the
wages of his employees, except:
(a)In cases where the worker is insured
with his consent by the employer, and the
deduction is to recompense the employer
for the amount paid by him as premium
on the insurance;
(b)For union dues, in cases where the right
of the worker or his union to check-off has
been recognized by the employer or
authorized in writing by the individual
worker concerned; and
(c)In cases where the employer is
authorized by law or regulations issued by
the Secretary of Labor.
As correctly pointed out by the LA, absent
a showing that the withholding of
complainants wages falls under the
exceptions provided in Article 113, the
withholding thereof is thus unlawful.
The Court finds petitioners evidence
insufficient to prove that respondent did
not work from November 16 to November
30, 2005. As can be gleaned from
respondents Contract of Probationary
Employment and the exchanges of
electronic mail messages between
Hartmannshenn and respondent, the
latters duties as manager for business
development entailed cultivating business
ties, connections, and clients in order to
make sales. Such duties called for
meetings with prospective clients outside
the office rather than reporting for work on
a regular schedule. In other words, the
nature of respondents job did not allow
close supervision and monitoring by
petitioners. Neither was there any
prescribed daily monitoring procedure
established by petitioners to ensure that
respondent was doing his job. Therefore,
granting that respondent failed to answer
Hartmannshenns mobile calls and to reply
to two electronic mail messages and given
the fact that he admittedly failed to report
to work at the SHS plant twice each week
during the subject period, such cannot be
taken to signify that he did not work from
November 16 to November 30, 2005.
20
Furthermore, the electronic mail reports
sent to Hartmannshenn and the receipt
presented by respondent as evidence of
his having worked during the subject
period were not controverted by
petitioners. The eight notarized letters of
prospective clients vouching for meetings
they had with respondent during the
subject period may also be given
credence. Although respondent only
presented such letters in support of his
Motion for Reconsideration filed with the
NLRC, they may be considered by this
Court in light of Section 10, Rule VII, of the
2005 New Rules of Procedure of the NLRC,
which provides in part that the rules of
procedure and evidence prevailing in
courts of law and equity shall not be
controlling and the Commission shall use
every and all reasonable means to
ascertain the facts in each case speedily
and objectively, without regard to
technicalities of law or procedure, all in the
interest of due process. While
administrative tribunals exercising quasi-
judicial functions are free from the rigidity
of certain procedural requirements, they
are bound by law and practice to observe
the fundamental and essential
requirements of due process in justiciable
cases presented before them. In this case,
due process was afforded petitioners as
respondent filed with the NLRC a Motion to
Set Case for Reception of Additional
Evidence as regards the said letters, which
petitioners had the opportunity to, and
did, oppose.
Although it cannot be determined with
certainty whether respondent worked for
the entire period from November 16 to
November 30, 2005, the consistent rule is
that if doubt exists between the evidence
presented by the employer and that by the
employee, the scales of justice must be
tilted in favor of the latter in line with the
policy mandated by Articles 2 and 3 of the
Labor Code to afford protection to labor
and construe doubts in favor of labor.For
petitioners failure to satisfy their burden of
proof, respondent is presumed to have
worked during the period in question and
is, accordingly, entitled to his salary.
Therefore, the withholding of respondents
salary by petitioners is contrary to Article
116 of the Labor Code and, thus, unlawful.
(LABOR LAW) The Court, however, agrees
with the LA and the CA that respondent
was forced to resign and was, thus,
constructively dismissed. In Duldulao v.
Court of Appeals, it was written:
There is constructive dismissal if an act of
clear discrimination, insensibility, or
disdain by an employer becomes so
unbearable on the part of the employee
that it would foreclose any choice by him
except to forego his continued
employment .It exists where there is
cessation of work because continued
employment is rendered impossible,
unreasonable or unlikely, as an offer
involving a demotion in rank and a
diminution in pay.
What made it impossible, unreasonable or
unlikely for respondent to continue
working for SHS was the unlawful
withholding of his salary. For said reason,
he was forced to resign. It is of no moment
that he served his resignation letter on
November 30, 2005, the last day of the
payroll period and a non-working holiday,
since his salary was already due him on
November 29, 2005, being the last
working day of said period. In fact, he was
then informed that the wages of all the
other SHS employees were already
released, and only his was being withheld.
What is significant is that the respondent
prepared and served his resignation letter
right after he was informed that his salary
was being withheld. It would be absurd to
require respondent to tolerate the unlawful
withholding of his salary for a longer
period before his employment can be
considered as so impossible, unreasonable
or unlikely as to constitute constructive
dismissal. Even granting that the
withholding of respondents salary on
November 30, 2005, would not constitute
an unlawful act, the continued refusal to
release his salary after the payroll period
was clearly unlawful. The petitioners claim
that they prepared the check ready for
pick-up cannot undo the unlawful
withholding.
21
It is worthy to note that in his resignation
letter, respondent cited petitioners illegal
and unfair labor practice as his cause for
resignation. As correctly noted by the CA,
respondent lost no time in submitting his
resignation letter and eventually filing a
complaint for illegal dismissal just a few
days after his salary was withheld. These
circumstances are inconsistent with
voluntary resignation and bolster the
finding of constructive dismissal.
In this case, the withholding of
respondents salary does not fall under any
of the circumstances provided under
Article 113. Neither was it established with
certainty that respondent did not work
from November 16 to November 30,
2005.Hence, the Court agrees with the LA
and the CA that the unlawful withholding
of respondents salary amounts to
constructive dismissal.
Respondent was constructively dismissed
and, therefore, illegally dismissed.
Although respondent was a probationary
employee, he was still entitled to security
of tenure. Section 3 (2) Article 13 of the
Constitution guarantees the right of all
workers to security of tenure. In using the
expression all workers, the Constitution
puts no distinction between a probationary
and a permanent or regular employee.
This means that probationary employees
cannot be dismissed except for cause or
for failure to qualify as regular employees.
This Court has held that probationary
employees who are unjustly dismissed
during the probationary period are entitled
to reinstatement and payment of full
backwages and other benefits and
privileges from the time they were
dismissed up to their actual reinstatement.
Respondent is, thus, entitled to
reinstatement without loss of seniority
rights and other privileges as well as to full
backwages, inclusive of allowances, and
other benefits or their monetary
equivalent computed from the time his
compensation was withheld up to the time
of actual reinstatement. Respondent,
however, is not entitled to the additional
amount for 13thmonth pay, as it is clearly
provided in respondents Probationary
Contract of Employment that such is
deemed included in his salary. Thus:
Employee will be paid a net salary of One
Hundred Thousand (Php100,000.00) Pesos
per month payable every 15th day and
end of the month.
The compensation package defined in this
paragraph shall represent all that is due
and demandable under this Contract and
includes all benefits required by law such
as the 13thmonth pay. No other benefits,
bonus or allowance shall be due the
employee.
Respondents reinstatement, however, is
no longer feasible as antagonism has
caused a severe strain in their working
relationship. Under the doctrine of strained
relations, the payment of separation pay is
considered an acceptable alternative to
reinstatement when the latter option is no
longer desirable or viable. Payment
liberates the employee from what could be
a highly oppressive work environment, and
at the same time releases the employer
from the obligation of keeping in its
employ a worker it no longer trusts.
Therefore, a more equitable disposition
would be an award of separation pay
equivalent to at least one month pay, in
addition to his full backwages, allowances
and other benefits.
With respect to the personal liability of
Hartmannshenn and Schumacher, this
Court has held that corporate directors
and officers are only solidarily liable with
the corporation for termination of
employment of corporate employees if
effected with malice or in bad faith. Bad
faith does not connote bad judgment or
negligence; it imports dishonest purpose
or some moral obliquity and conscious
doing of wrong; it means breach of
unknown duty through some motive or
interest or ill will; it partakes of the nature
of fraud. To sustain such a finding, there
should be evidence on record that an
officer or director acted maliciously or in
bad faith in terminating the employee.
Petitioners withheld respondents salary in
the sincere belief that respondent did not
22
work for the period in question and was,
therefore, not entitled to it. There was no
dishonest purpose or ill will involved as
they believed there was a justifiable
reason to withhold his salary. Thus,
although they unlawfully withheld
respondents salary, it cannot be
concluded that such was made in bad
faith. Accordingly, corporate officers,
Hartmannshenn and Schumacher, cannot
be held personally liable for the corporate
obligations of SHS. CA AFFIRMED.
EMER MILAN, ET. AL. VS. NLRC, ET.
AL., G.R. NO. 202961, FEBRUARY 4,
2015
FACTS: Petitioners are employees of
respondent Solid Mills, Inc. They are
represented by the National Federation of
Labor Unions (NAFLU), their collective
bargaining agent. As Solid Mills
employees, they and their families were
allowed to occupy SMI Village, a property
owned by Solid Mills. In September 2003,
petitioners were informed that effective
Oct. 10, 2003, Solid Mills would cease its
operations due to serious business losses.
NAFLU recognized Solid Mills closure due
to serious business losses in the
memorandum of agreement dated Sept. 1,
2003. The memorandum of agreement
provided for Solid Mills grant of separation
pay less accountabilities, accrued sick
leave benefits, vacation leave benefits,
and 13th month pay to the employees.
Later, Solid Mills sent petitioners individual
notices to vacate SMI Village. They were
made to sign a memorandum of
agreement with release and quitclaim
before their benefits would be released.
Petitioners refused to sign the documents
and instead filed complaints before the
Labor Arbiter alleging non-payment of
their benefits. In defense, Solid Mills
argued that petitioners complaint was
premature because they had not vacated
its property.
ISSUE: Does this defense find merit?
HELD: Yes. Accountability, in its ordinary
sense, means obligation or debt. The
ordinary meaning of the term
accountability does not limit the
definition of accountability to those
incurred in the worksite. As long as the
debt or obligation was incurred by virtue
of the employer-employee relationship,
generally, it shall be included in the
employees accountabilities that are
subject to clearance procedures. It may be
true that not all employees enjoyed the
privilege of staying in respondent Solid
Mills property. However, this alone does
not imply that this privilege when enjoyed
was not a result of the employer-employee
relationship. Those who did avail of the
privilege were employees of respondent
Solid Mills. Petitioners possession should,
therefore, be included in the term
accountability. Accountabilities of
employees are personal. They need not be
uniform among all employees in order to
be included in accountabilities incurred by
virtue of an employer-employee
relationship. Petitioners do not
categorically deny respondent Solid Mills
ownership of the property, and they do not
claim superior right to it. What can be
gathered from the findings of the Labor
Arbiter, National Labor Relations
Commission, and the Court of Appeals is
that respondent Solid Mills allowed the use
of its property for the benefit of petitioners
as its employees. Petitioners were merely
allowed to possess and use it out of
respondent Solid Mills liberality. The
employer may, therefore, demand the
property at will. The return of the
propertys possession became an
obligation or liability on the part of the
employees when the employer-employee
relationship ceased. Thus, respondent
Solid Mills has the right to withhold
petitioners wages and benefits because of
this existing debt or liability. The law does
not sanction a situation where employees
who do not even assert any claim over the
employers property are allowed to take all
the benefits out of their employment while
they simultaneously withhold possession
of their employers property for no rightful
reason.
xxx
23
Withholding of payment by the employer
does not mean that the employer may
renege on its obligation to pay employees
their wages, termination payments, and
due benefits. The employees benefits are
also not being reduced. It is only subjected
to the condition that the employees return
properties properly belonging to the
employer. This is only consistent with the
equitable principle that no one shall be
unjustly enriched or benefited at the
expense of another.
P.I. MANUFACTURING,
INCORPORATED, Petitioner, vs. P.I.
MANUFACTURING SUPERVISORS AND
FOREMAN ASSOCIATION and the
NATIONAL LABOR UNION,
Respondents. G.R. No. 167217,
February 04, 2008
FACTS: Petitioner P.I. Manufacturing,
Incorporated is a domestic corporation
engaged in the manufacture and sale of
household appliances. Respondent P.I.
Manufacturing Supervisors and Foremen
Association (PIMASUFA) is an organization
of petitioners supervisors and foremen,
joined in this case by its federation, the
National Labor Union (NLU).
December 10, 1987, R.A. No. 6640 was
passed providing an increase in the
statutory minimum wage and salary rates
of employees and workers in the private
sector, to which it is increased by P10.00
per day, except non-agricultural workers
and employees outside Metro Manila who
shall receive an increase of P11.00 per
day: Provided, That those already
receiving above the minimum wage up to
P100.00 shall receive an increase of
P10.00 per day. Excepted from the
provisions of this Act are domestic helpers
and persons employed in the personal
service of another.
December 18, 1987, petitioner and
respondent PIMASUFA entered into a new
CBA (1987 CBA) whereby the supervisors
were granted an increase of P625.00 per
month and the foremen, P475.00 per
month. The increases were made
retroactive to May 12, 1987, or prior to the
passage of R.A. No. 6640, and every year
thereafter until July 26, 1989.
January 26, 1989, respondents PIMASUFA
and NLU filed a complaint with NLRC
charging petitioner with violation of R.A.
No. 6640. Respondents attached to their
complaint a numerical illustration of wage
distortion resulting from the
implementation of R.A. No. 6640.
LA favored respondents ordering Petitioner
to give members of respondent PIMASUFA
wage increases equivalent to 13.5% of
their basic pay they were receiving prior to
December 14, 1987. On appeal by
petitioner, the NLRC affirmed LAs
judgment. Petitioner filed a petition for
certiorari with SCourt. However, SC
referred the petition to CA. CA affirmed the
Decision of the NLRC with modification by
raising the 13.5% wage increase to 18.5%.
M.R. was denied. Petitioner went to SC but
it favored respondents. Hence this MR.
ISSUES:
Whether the implementation of R.A.
No. 6640 resulted in a wage
distortion
Whether such distortion was cured
or remedied by the 1987 CBA.
RULING:
I.) Yes. R.A. No. 6727, otherwise known as
the Wage Rationalization Act, explicitly
defineswage distortionas: a situation wage increases almost doubled that of the
where an increase in prescribed wage
rates results in the elimination or severe
contraction of intentional quantitative
differences in wage or salary rates
between and among employee groups in
an establishment as to effectively
obliterate the distinctions embodied in
such wage structure based on skills,
length of service, or other logical bases of
differentiation.
Otherwise stated, wage distortion means
the disappearance or virtual
disappearance of pay differentials
between lower and higher positions in an
enterprise because of compliance with a
wage order. The increase in the wage rates
24
by virtue of R.A. No. 6640 resulted in wage
distortion or the elimination of the
intentional quantitative differences in the
wage rates of the supervisor employees of
petitioner.
II.) Yes. Wage distortions were cured or
remedied when respondent PIMASUFA
entered into the 1987 CBA with petitioner
after the effectivity of R.A. No. 6640. The
1987 CBA increased the monthly salaries
of the supervisors by P625.00 and the
foremen, by P475.00, effective May 12,
1987. These increases re-established and
broadened the gap, not only between the
supervisors and the foremen, but also
between them and the rank-and-file
employees. Significantly, the 1987 CBA
To compel employers simply to add on
P10.00 increase under R.A. No. 6640.
The P625.00/month means P24.03
increase per day for the supervisors, while
the P475.00/month means P18.26 increase
per day for the foremen. Such gap as re-
established by virtue of the CBA is more
than a substantial compliance with R.A.
No. 6640. CA erred in not taking into
account the provisions of the CBA. The
provisions of the CBA should be read in
harmony with the wage orders, whose
benefits should be given only to those
employees covered thereby.
To require petitioner to pay all the
members of respondent PIMASUFA a wage
increase of 18.5%, over and above the
negotiated wage increases provided under
the 1987 CBA, is highly unfair and
oppressive to the former. It was not the
intention of R.A. No. 6640 to grant an
across-the-board increase in pay to all the
employees of petitioner. Only those
receiving wages P100.00 and below are
entitled to the P10.00 wage increase. The
apparent intention of the law is only to
upgrade the salaries or wages of the
employees specified therein. Almost all of
the members of respondent PIMASUFA
have been receiving wage rates above
P100.00 and, therefore, not entitled to the
P10.00 increase. Only 3 of them are
receiving wage rates below P100.00, thus,
entitled to such increase.
legislative increases in salaries or
allowances without regard to what is
already being paid, would be to penalize
employers who grant their workers more
than the statutory prescribed minimum
rates of increases. Clearly, this would be
counter-productive so far as securing the
interests of labor is concerned.
It must be stressed that a CBA constitutes
the law between the parties when freely
and voluntarily entered into. Iit has not
been shown that respondent PIMASUFA
was coerced or forced by petitioner to sign
the 1987 CBA. All of its 13 officers signed
the CBA with the assistance of respondent
NLU. They signed it fully aware of the
passage of R.A. No. 6640. The duty to
bargain requires that the parties deal with
each other with open and fair minds.
Respondents cannot invoke the beneficial
provisions of the 1987 CBA but disregard
the concessions it voluntary extended to
petitioner. The goal of collective
bargaining is the making of agreements
that will stabilize business conditions and
fix fair standards of working conditions.
Respondents posture contravenes this
goal. WHEREFORE, we GRANT petitioners
MR.
BANKARD EMPLOYEES UNION-
WORKERS ALLIANCE TRADE UNIONS,
petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and
BANKARD, INC., respondents. G.R.
No. 140689 February 17, 2004
FACTS: Bankard, Inc. classifies its
employees according to level: Level I,
Level II, Level III, Level IV and Level V. On
May 28, 1993, the directors of respondent
Bankard, Inc. approved a new salary scale
for the purpose of making its hiring rate
competitive in the labor market. The new
salary scale increased the hiring rates of
new employees, to wit: Levels I and V were
increased by P1,000.00 while Levels II, III
and IV were increased by P900.00. The
salaries of employees who fell below the
new minimum rates were also adjusted
accordingly to reach such rates under their
25
levels. As a result, Bankard Employees
Union-Workers Alliance Trade Unions
(Bankard Union) demanded for salary
increase of its old, regular employees.
Bankard refused on the ground that it had
no obligation to grant all its employees the
same increase. Bankard Union filed a
Notice of Strike on the ground of
discrimination and other acts of Unfair
Labor Practice. This was initially treated as
a preventive mediation case on the ground
that the issues raised were not strikeable.
Upon the second notice of strike, the
dispute was certified for compulsory
arbitration. The NLRC dismissed the case
for lack of merit, finding no wage
distortion. The CA denied the same for
lack of merit. Hence, this petition.
ISSUE: Whether the unilateral adoption by
an employer of an upgraded salary scale
that increased the hiring rates of new
employees without increasing the salary
rates of old employees resulted in wage
distortion within the contemplation of
Article 124 of the Labor Code.
RULING: No. The Court held that wage
distortion does not exist in this case as all
the elements were not met. There are four
elements of wage distortion, namely:
(1) An existing hierarchy of positions with
corresponding salary rates,
(2) A significant change in the salary rate
of a lower pay class without a concomitant
increase in the salary rate of a higher one,
(3) The elimination of the distinction
between the two levels, and
(4) The existence of the distortion in the
same region of the country.
In a problem dealing with "wage
distortion," the basic assumption is that
there exists a grouping or classification of
employees that establishes distinctions
among them on some relevant or
legitimate bases. Various factors such as
the degrees of responsibility, the skills and
knowledge required, the complexity of the
job, or other logical basis of differentiation
are involved in such classifications.
According to the NLRC, to determine the
existence of wage distortion, the
"historical" classification of the employees
prior to the wage increase must be
established. In this case, the employees of
Bankard have been historically classified
into levels (I-V), and not on the basis of
their length of service. New employees are
automatically placed under any of these
levels upon their entry. This is the wage
structure formulated by Bankard, a
recognized management prerogative
which Bankard Union may not encroach
upon by creating their own independent
classification (ie, based on newly hired and
old employees) to use as a basis for
demanding an across-the-board salary
increase. According to established
jurisprudence, the formulation of a wage
structure through the classification of
employees is a matter of management
judgment and discretion.
Based on the wage structure, there is no
hierarchy of positions between the newly
hired and regular employees of Bankard
since it is a structure which is based on
level, not seniority. The first element of
wage distortion is therefore lacking.
Second, the third element of wage
distortion (ie the elimination of the
distinction between the two levels) is also
missing. Even if there was indeed a
resulting decrease in the wage gap
between the salary of the old and new
employees, the gap was held to be
insignificant as to result in severe
contraction of the intentional quantitave
differences in the salary rates between the
employee group as the classification under
the wage structure is based on rank, and
not seniority.
Third, pursuant to Article 124 of the Labor
Code, Bankard cannot be legally obligated
to correct the alleged wage distortion,
should it have existed in this case,
because the increase in the wages and
salaries of the newly-hired was not due to
a prescribed law or wage order. The fixing
of hiring rates which resulted to wage
increases was a voluntary and unilateral
26
increase made by Bankard. The Court held
that Article 124 is to be construed in
relation to minimum wage fixing, the
intention of the law being that in case of
an increase in minimum wage, the
distinctions in the wage structure will be
preserved. The case of Metro Transit
Organization Inc. v. NLRC is not applicable
in this case as in the former, there was no
CBA but instead, an existing company
practice "that whenever rank-and-file
employees were paid a statutorily
mandated salary increase, supervisory
employees were, as a matter of practice,
also paid the same amount plus an added
premium. The mere existence of a wage
distortion does not ipso facto result to an
obligation to rectify it, absent a law or
other source of obligation which requires
its rectification. Furthermore, Bankards
right to increase its hiring rate, to
establish minimum salaries for specific
jobs, and to adjust the rates of employees
affected thereby is embodied under the
parties CBA. The CBA is a valid and legally
enforceable source of rights between the
parties and as such, will not be interfered
with by the Courts absent any bad faith on
the part of the employer.
the employees total earnings during the
CENTRAL AZUCARERA DE TARLAC, vs.
CENTRAL AZUCARERA DE TARLAC
LABOR UNION-NLU, G.R. No. 188949,
July 26, 2010
FACTS: The formula used by petitioner in
computing the 13th-month pay was: Total
Basic Annual Salary divided by twelve
(12). Included in petitioners computation
of the Total Basic Annual Salary were the
following: basic monthly salary; first eight
(8) hours overtime pay on Sunday and
legal/special holiday; night premium pay;
and vacation and sick leaves for each year.
Throughout the years, petitioner used this
computation until 2006 from 1975.
After the strike and temporary cessation of
operations in 2005, all the striking union
was allowed to return to work.
Subsequently, petitioner declared another
temporary cessation of operations for the
months of April and May 2006. After the
suspension was lifted on June 2006, the
workers were allowed to report for work on
a fifteen day-per-month rotation basis until
September 2005. In December 2006,
petitioner gave the employees their 13th-
month pay based on the employees total
earnings during the year divided by 12. In
December 2006, petitioner gave the
employees their 13th-month pay based on
year divided by 12.
Respondent objected to this computation.
It claimed that the divisor should have
been eight (8) instead of 12, because the
employees worked for only 8 months in
2006.
Petitioner and respondent tried to thresh
out their differences in accordance with
the grievance procedure as provided in
their collective bargaining agreement.
Despite four (4) conciliatory meetings, the
parties still failed to settle the dispute,
hence a complaint by for money claims
based on the alleged diminution/erroneous
computation of 13th month pay before
the Labor arbiter (LA).
The LA dismissed the complaint. NLRC
reversed. MR denied. Petitioner then filed
a petition for certiorari under Rule 65 of
the Rules of Court before the CA. CA
dismissed the petition and affirm the
NLRC. Hence petition before the SC (R45)
ISSUE: Whether the computation of 13th
month pay by the petitioner is correct.
HELD: YES. "Thirteenth-month pay" shall
mean one twelfth (1/12) of the basic salary
of an employee within a calendar year; the
term "basic salary" of an employee for the
purpose of computing the 13th-month pay
was interpreted to include all
remuneration or earnings paid by the
employer for services rendered, but does
not include allowances and monetary
benefits which are not integrated as part
of the regular or basic salary, such as the
cash equivalent of unused vacation and
sick leave credits, overtime, premium,
27
night differential and holiday pay, and
cost-of-living allowances. However, these
salary-related benefits should be included
as part of the basic salary in the
computation of the 13th-month pay if, by
individual or collective agreement,
company practice or policy, the same are
treated as part of the basic salary of the
employees.
As correctly ruled by the CA, the practice
of petitioner in giving 13th-month pay
based on the employees gross annual
earnings which included the basic monthly
salary, premium pay for work on rest days
and special holidays, night shift differential
pay and holiday pay continued for almost
thirty (30) years and has ripened into a
company policy or practice which cannot
be unilaterally withdrawn. Article 100 of
the Labor Code, otherwise known as the
Non-Diminution Rule, mandates that
benefits given to employees cannot be
taken back or reduced unilaterally by the
employer because the benefit has become
part of the employment contract, written
or unwritten.
MRS. ALBERTA YANSON v. SECRETARY
OF LABOR AND EMPLOYMENT G.R. No.
159026 February 11, 2008
DOCTRINE: The posting of the proper
amount of the appeal bond under Article
128 (b) is mandatory for the perfection of
an appeal from a monetary award in labor
standard cases.
FACTS: In 1998, Mardy Cabigo and 40
other workers filed with DOLE Bacolod a
request for payroll inspection of Hacienda
Valentin Balabag owned by Alberta
Yanson. DOLE Bacolod conducted an
inspection of the establishment and issued
a Notice of Inspection Report, finding
Yanson liable for the following violations of
labor standard laws:
1. Underpayment of salaries and
wages (workers being paid a daily
rate of P90.00 since 1997 and
P75.00 prior to such year);
2. Non-payment of 13th month pay
for two (2) years;
3. Non-payment of Social
Amelioration Bonus (SAB) for two
(2) years;
4. Non-payment of employers 1/3
carabao share.
In addition, DOLE Bacolod scheduled a
summary investigation. Yanson did not
appear in any of the scheduled hearings,
or present any pleading or document.
In a Compliance Order, DOLE Bacolod
directed Yanson to pay a total of P372,444
and to correct existing violations of
occupational safety and health standards.
It then issued a Writ of Execution. Yanson
filed with public respondent a Verified
Appeal and posted a bond.
SECRETARY OF LABOR RULING: dismissed
the appeal.
CA RULING: Petition for Certiorari was
denied due course and dismissed. Hence,
the present recourse.
ISSUE:
1. Whether the compliance order by DOLE
Bacolod, in the exercise of its visitorial and
enforcement power, was proper. YES
2. Whether the appeal was perfected. NO.
SC RULING: For its perfection, the appeal
was subject to the requirements
prescribed under Article 128 of the Labor
Code, as amended by Republic Act No.
7730, viz.:
Art. 128. Visitorial and Enforcement Power.
- x x x (b) Notwithstanding the provisions
of Articles 129 and 217 of this Code to the
contrary, and in cases where the
relationship of employer-employee still
exists, the Secretary of Labor and
Employment or his duly authorized
representatives shall have the power to
issue compliance orders to give effect to
the labor standards provisions of this Code
and other labor legislation based on the
findings of labor employment and
enforcement officers or industrial safety
engineers made in the course of
28
inspection. The Secretary or his duly
authorized representatives shall issue
writs of execution to the appropriate
authority for the enforcement of their
orders, except in cases where the
employer contests the findings of the
labor employment and enforcement
officer and raises issues supported by
documentary proofs which were not
considered in the course of inspection.
An order issued by the duly authorized
representative of the Secretary of Labor
and Employment under this article may be
appealed to the latter. In case said order
involves a monetary award, an appeal by
the employer may be perfected only upon
the posting of a cash or surety bond issued
by a reputable bonding company duly
accredited by the Secretary of Labor and
Employment in the amount equivalent to
the monetary award in the order appealed
from.
When Yanson filed her Verified Appeal and
Supplement to the Verified Appeal, Public
respondent rejected said appeal for
insufficiency of the appeal bond. The
posting of the proper amount of the
appeal bond under Article 128 (b) is
mandatory for the perfection of an appeal
from a monetary award in labor standard
cases. Also applying the Implementing
Rules, there is one other reason for holding
that Yanson failed to perfect her appeal.
It is of record that she received
Compliance Order issued by DOLE-
Bacolod. She was put on actual notice not
only of the existence of the Compliance
Order but also of the summary
investigation of her establishment. It
behooves her to file a timely appeal to
public respondent or object to the conduct
of the investigation. Yanson did neither,
opting instead to sit idle and wait until the
following year to question the
investigation and resultant order, in
theguise of opposing the writ of execution.
In fine, the CA was correct in holding that
public respondent did not commit grave
abuse of discretion in rejecting the appeal
due to the insufficiency of her appeal
bond. Even on its substance, her appeal
would still not prosper. The determination
made by DOLE-Bacolod on this matter
binds the Court, especially as it was not
reversed by public respondent and the CA.
BALLADARES ET. AL. v. PEAK
VENTURES CORPORATION G.R. No.
161794 June 16, 2009
FACTS: Petitioners Nestor J. Balladares et
al., were employed by respondent Peak
Ventures Corp as security guards and were
assigned at the premises of respondent
YMOAA. They filed a complaint for
underpayment of wages against their
employer, Peak Ventures, with the DOLE.
Acting on the complaint, DOLE conducted
an inspection of Peak Ventures and the
following violations were noted:
underpayment of the minimum wage and
other auxiliary benefits; pertinent
employment records were not available at
the time of inspection.
A Notice of Inspection Result was issued to
Peak Ventures instructing them to effect
restitution and/or file its objections within
five working days from receipt thereof.
Respondent failed to correct the violations
or contest the findings as required; hence,
the parties were summoned for hearing.
Peak Ventures moved to implead its client
YMOAA, claiming that any underpayment
of wages arose from the failure of YMOAA
to pay Peak Ventures the amount due
petitioners as prescribed by various wage
orders. After the hearing, DOLE Regional
Director Maximo Lim rendered judgment in
favor of petitioners and ruled that the
contractor was jointly and severally liable
with the principal. Lim averred that
because Peak Ventures failed to controvert
the complaint and its repeated denial to
give access to records, it is deemed to
have waived its constitutional right to due
process. Petitioners were awarded
P1,106,298. Peak Ventures filed a motion
for reconsideration, but the same was
denied prompting them to appeal to the
CA.
29
CA RULING: The CA granted the petition,
ruling that the Regional Director had no
jurisdiction to hear and decide the case,
because the claims of each of the
petitioners exceeded P5,000.00, and the
power to adjudicate such claims belonged
to the Labor Arbiter, pursuant to
Servandos, Inc. v. Secretary of Labor. The
appellate court ratiocinated that this
exclusive jurisdiction of the Labor Arbiters
was confirmed by Article 129 of the Labor
Code, which excludes from the jurisdiction
of the Regional Directors or any hearing
officer of the DOLE the power to hear and
decide claims of employees arising from
employer-employee relations exceeding
the amount of P5,000.00 for each
employee.
ISSUE: Does DOLE Regional Director has
jurisdiction to even though the claims of
the complainants exceeded P5,000?
SC RULING: YES. The Supreme Court ruled
that the visitorial and enforcement powers
of the DOLE Regional Director to order and
enforce compliance with labor standard
laws can be exercised even when the
individual claim exceeds P5,000. However,
if the labor standards case is covered by
the exception clause in Article 128 (b) of
the Labor Code, then the Regional Director
will have to endorse the case to the
appropriate Arbitration Branch of the
NLRC.
In order to divest the Regional Director or
his representatives of jurisdiction, the
following elements must be present:
(a) that the employer contests the findings
of the labor regulations officer and raises
issues thereon;
(b) that in order to resolve such issues,
there is a need to examine evidentiary
matters; and
(c) that such matters are not verifiable in
the normal course of inspection. The rules
also provide that the employer shall raise
such objections during the hearing of the
case or at any time after receipt of the
notice of inspection results.
In the case at bar, Peak Ventures did not
contest the findings of the labor
regulations officer during the hearing or
after receipt of notice of the inspection
results. Accordingly, we find no sufficient
reason to warrant the certification of the
instant case to the LA and divest the
Regional Director of jurisdiction.
Respondent did not contest the findings of
the labor regulations officer. Even during
the hearing, respondent never denied that
petitioners were not paid correct wages
and benefits.
ALLIED INVESTIGATION BUREAU, INC.,
v. SECRETARY OF LABOR GR No.
122006 November 24, 1999
FACTS: Petitioner Allied Investigation
Bureau is a security agency which entered
into a security contract with Novelty
Philippines Inc (NPI). Private respondents
Melvin Pelayo and Samuel Sucanel, two of
the security guards assigned by petitioner
to NPI, filed a complaint with the Office of
respondent Regional Director Romeo
Young, charging petitioner with non-
compliance with a wage order increasing
the minimum daily pay of workers.
Regional Director Young conducted
inspection visits at petitioners
establishment and found that Petitioner
failed to implement the wage increase.
Petitioner was required to effect restitution
and/or correction of the foregoing within
five calendar days, or challenge the
findings within five working days.
Thereafter, a series of conferences and
hearings were scheduled by the Regional
Director to facilitate amicable settlement.
However, despite due notice, petitioner
failed to appear in any of said hearings. As
a result, the Regional Director ruled in
favor of private respondents and awarded
them P807,570.
Petitioners appealed the Order to
respondent Secretary of Labor, without
posting a cash or surety bond, as such the
appeal was dismissed. Petitioner argues
30
that the power to adjudicate money claims
belongs to the Labor Arbiter who has
exclusive jurisdiction over employees
claims where the aggregate amount of the
claims of each employee exceeds P5,000.
ISSUE: Whether or not the DOLE Regional
Director acted without jurisdiction in
adjudicating the private respondents
claims which were in excess of P5,000.
SC RULING: Yes. While it is true that under
Articles 129 and 217of the Labor Code, the
Labor Arbiter has jurisdiction to hear and
decide cases where the aggregate money
claims of each employee
exceedsP5,000.00, said provisions of law
do not contemplate nor cover the visitorial
and enforcement powers of the Secretary
of Labor or his duly authorized
representatives. Said powers are defined
and set forth in Art. 128 of the Labor Code.
Art. 128. Visitorial and enforcement power.
officer and raises issues supported by
(a) The Secretary of Labor or his duly
authorized representatives, including
labor regulation officers, shall have access
to employers records and premises at any
time of the day or night whenever work is
being undertaken therein, and the right to
copy therefrom, to question any employee
and investigate any fact, condition or
matter which may be necessary to
determine violations or which may aid in
the enforcement of this Code and of any
labor law, wage order or rules and
regulations issued pursuant thereto.
(b) Notwithstanding the provisions of
Articles 129 and 217 of this Code to the
contrary, and in cases where the
relationship of employer-employee exists,
the Secretary of Labor and Employment or
his duly authorized representatives shall
have the power to issue compliance
orders to give effect to the labor
standards provisions of this Code and
other labor legislation based on the
findings of labor employment and
enforcement officers or industrial safety
engineers made in the course of
inspection. The Secretary or his duly
authorized representatives shall issue
writs of execution to the appropriate
authority for the enforcement of their
orders, except in cases where the
employer contests the findings of the
labor employment and enforcement
documentary proofs which were not
considered in the course of inspection.
An order issued by the duly authorized
representatives of the Secretary of Labor
and Employment under this article may be
appealed to the latter. In case said order
involves a monetary award, an appeal by
the employer may be perfected only upon
the posting of a cash or surety bond issued
by a reputable bonding company duly
accredited by the Secretary of Labor and
Employment in the amount equivalent to
the monetary award in the order appealed
from.
In the case at bar, the Office of respondent
Regional Director conducted inspection
visits at petitioners establishment on
February 9 and 14, 1995 in accordance
with the above-mentioned provision of law.
In the course of said inspection, several
violations of the labor standard provisions
of the Labor Code were discovered and
reported by Senior Labor Enforcement
Officer Eduvigis A. Acero in his Notice of
Inspection Results. It was on the bases of
the aforesaid findings (which petitioner did
not contest), that respondent Regional
Director issued the assailed Order for
petitioner to pay private respondents the
respective wage differentials due them.
Clearly, as the duly authorized
representative of respondent Secretary of
Labor, and in the lawful exercise of the
Secretarys visitorial and enforcement
powers under Article 128 of the Labor
Code, respondent Regional Director had
jurisdiction to issue his impugned Order.
URBANES v. SECRETARY OF LABOR GR
No. 122791 February 19, 2003
DOCTRINE: It is well settled in law and
jurisprudence that where no employer-
31
employee relationship exists between the
parties and no issue is involved which may
be resolved by reference to the Labor
Code, other labor statutes or any
collective bargaining agreement, it is the
Regional Trial Court that has jurisdiction. In
its complaint, private respondent is not
seeking any relief under the Labor Code
but seeks payment of a sum of money and
damages on account of petitioner's
alleged breach of its obligation under their
Guard Service Contract. The action is
within the realm of civil law hence
jurisdiction over the case belongs to the
regular courts. While the resolution of the
issue involves the application of labor
laws, reference to the labor code was only
for the determination of the solidary
liability of the petitioner to the respondent
where no employer-employee relation
exists.
FACTS: Petitioner Placido O. Urbanes, Jr.,
doing business under the name and style
of Catalina Security Agency, entered into
an agreement to provide security services
to respondent Social Security System
(SSS). During the effectivity of the
agreement, petitioner, by letter of May 16,
1994, requested the SSS for the upward
adjustment of their contract rate in view of
Wage Order No. NCR-03. As SSS refused to
comply, on June 29, 1994, petitioner filed
a complaint with the DOLE-NCR against
the SSS, seeking the implementation of
Wage Order No. NCR-03.
In its position paper, the SSS prayed for
the dismissal of the complaint on the
ground that petitioner is not the real party
in interest and has no legal capacity to file
the same. In any event, it argued that if it
had any obligation, it was to the security
guards. On the other hand, petitioner in
his position paper, citing Eagle Security
Agency, Inc. v. NLRC, contended that the
security guards assigned to the SSS do not
have any legal basis to file a complaint
against it for lack of contractual privity.
Finding for petitioner, the Regional
Director of the DOLE-NCR issued an Order
for SSS to pay petitioner P1.6 million. SSS
appealed to the Secretary of Labor,
claiming that the Regional Director has no
jurisdiction to issue the assailed order. The
Secretary set aside the order and
remanded the case.
Petitioner filed the present petition for
certiorari with the Supreme Court
asserting that the Secretary of Labor does
not have jurisdiction to review appeals
from decisions of the Regional Directors in
complaints filed under Art. 129 of the
Labor Code. They claim that appeals from
orders of Regional directors should be
made with the NLRC.
ISSUE: Whether or not the Secretary of
Labor has jurisdiction to review appeals
from decisions of the Regional Directors in
complaints filed under Art. 129.
SC RULING: No. Neither the petitioners
contention nor the SSSs is impressed with
merit, rather, it is the RTC that has
jurisdiction over the subject matter of the
present case. It is well settled in law and
jurisprudence that where
no employer-employee relationship exists
between the parties and no issue is
involved which may be resolved by
reference to the Labor Code, other labor
statutes or any collective bargaining
agreement, it is the Regional Trial Court
that has jurisdiction. In its complaint,
private respondent is not seeking any
relief under the Labor Code but seeks
payment of a sum of money and damages
on account of petitioner's alleged breach
of its obligation under their Guard Service
Contract. The action is within the realm of
civil law hence jurisdiction over the case
belongs to the regular courts. While the
resolution of the issue involves the
application of labor laws, reference to the
labor code was only for the determination
of the solidary liability of the petitioner to
the respondent where no employer-
employee relation exists.
In the case at bar, even if petitioner filed
the complaint on his and also on behalf of
the security guards, the relief sought has
to do with the enforcement of the contract
between him and the SSS which was
deemed amended by virtue of Wage Order
No. NCR-03. The controversy subject of the
32
case at bar is thus a civil dispute, the
proper forum for the resolution of which is
the civil courts.
Even if the petition was filed with the
proper forum, it must still be dismissed for
lack of cause of action. Under Art. 106 of
the Labor Code: In the event that the
contractor or subcontractor fails to pay the
wage of his employees in accordance with
this Code, the employer shall be jointly
and severally liable with his
contractor or subcontractor to such
employees to the extent of the work
performed under the contract, in the same
manner and extent that he is liable to
employees directly employed by him.
It is only when [the] contractor pays the
increases mandated that it can claim an
adjustment from the principal to cover the
increases payable to the security guards.
The conclusion that the right of the
contractor (as principal debtor) to recover
from the principal (as solidary co-debtor)
arises only if he has paid the amounts for
which both of them are jointly and
severally liable is in line with Article 1217
of the Civil Code.
In fine, the liability of the SSS to reimburse
petitioner arises only if and when
petitioner pays his employee-security
guards the increases mandated by Wage
Order No. NCR-03.
EX-BATAAN VETERANS SECURITY
AGENCY VS. SECRETARY OF LABOR
[G.R. No. 152396. Nov 20, 2007]
FACTS: EBVSAIs employees were assigned
to the National Power Corporation at
Ambuklao Hydro Electric Plant in Benguet.
The Regional Office conducted a complaint
inspection at the Ambuklao Plant where
violations of labor standard laws were
observed. On the same date, the Regional
Office issued a notice of hearing. The
Regional Director then issued a
compliance order. The Secretary of Labor
affirmed.
ISSUES:
1) Did RD acquire jurisdiction considering
that notice was served at the plant and
not at its main office and that it was
addressed to its Vice President?
2) Whether the Secretary of Labor or his
duly authorized representatives have
jurisdiction over the money claims of
private respondents which exceed P5,000?
3) Whether the case falls under the
exception in Art 128(b), that is, the RD
should have certified the case to the LA for
full-blown hearing
HELD:
1) The Rules on the Disposition of Labor
Standards Cases in the Regional Offices
state that notices and copies of orders
shall be served on the parties or their duly
authorized representatives at their last
known address or, if they are represented
by counsel, through the latter. The rules
shall be liberally construed and only in the
absence of any applicable provision will
the Rules of Court apply in a suppletory
character.
In this case, EBVSAI does not deny having
received the notices of hearing. EBVSAI
can no longer question the jurisdiction of
the Regional Director after receiving the
notices of hearing and after appearing
before the Regional Director.
2) Citing Cirineo Bowling Plaza, Inc. v.
Sensing, the visitorial and enforcement
powers of the DOLE Regional Director to
order and enforce compliance with labor
standard laws can be exercised even
where the individual claim exceeds
P5,000.
3) If the labor standards case is covered
by the exception clause in Article 128(b) of
the Labor Code, then the Regional Director
will have to endorse the case to the
appropriate Arbitration Branch of the
NLRC. In order to divest the Regional
Director or his representatives of
jurisdiction, the following elements must
be present:
33
(a) that the employer contests the findings
of the labor regulations officer and raises
issues thereon;
(b) that in order to resolve such issues,
there is a need to examine evidentiary
matters; and
(c) that such matters are not verifiable in
the normal course of inspection.
The rules also provide that the employer
shall raise such objections during the
hearing of the case or at any time after
receipt of the notice of inspection results.
But in this case, EBVSAI did not contest
the findings of the labor regulations officer
during the hearing or after receipt of the
notice of inspection results. It was only in
its supplemental motion for
reconsideration before the Regional
Director that EBVSAI questioned the
findings of the labor regulations officer and
presented documentary evidence to
controvert the claims of private
respondents.
ZIALCITA, ET AL. v. PAL RO4-3-398-76.
February 20, 1977 (ART. 136 OF THE
LABOR CODE)
FACTS: Complainant Zialcita, an
international flight stewardess of PAL, was
discharged from the service on account of
her marriage. In separating Zialcita, PAL
invoked its policy which stated that flight
attendants must be single, and shall be
automatically separated from employment
in the event they subsequently get
married. They claimed that this policy was
in accordance with Article 132 of the Labor
Code. On the other hand, Zialcita
questioned her termination on account of
her marriage, invoking Article 136 of the
same law.
ISSUE: Was Zialcita validly terminated on
account of her marriage?
SC RULING: NO. When Presidential Decree
No. 148, otherwise known as the Women
and Child Labor Law, was promulgated in
13 March 1973, PALs policy had met its
doom. However, since no one challenged
its validity, the said policy was able to
obtain a momentary reprieve. Section 8 of
PD148 is exactly the same provision
reproduced verbatim in Article 136 of the
Labor Code, which was promulgated on 1
May 1974 and took effect six months later.
Although Article 132 enjoins the Secretary
of Labor to establish standards that will
ensure the safety and health of women
employees and in appropriate cases shall
by regulation require employers to
determine appropriate minimum standards
for termination in special occupations,
such as those of flight attendants, it is
logical to presume that, in the absence of
said standards or regulations which are yet
to be established, the policy of PAL against
marriage is patently illegal.
Article 136 is not intended to apply only to
women employed in ordinary occupations,
or it should have categorically expressed
so. The sweeping intendment of the law,
be it on special or ordinary occupations, is
reflected in the whole text and supported
by Article 135 that speaks of non-
discrimination on the employment of
women.
STAR PAPER CORPORATION v. SIMBOL
GR No. 164774 April 12, 2006
DOCTRINE: The questioned policy may not
facially violate Article 136 of the Labor
Code but it creates a disproportionate
effect and under the disparate impact
theory, the only way it could pass judicial
scrutiny is a showing that it is reasonable
despite the discriminatory, albeit
disproportionate, effect. The failure of
petitioners to prove a legitimate business
concern in imposing the questioned policy
cannot prejudice the employees right to
be free from arbitrary discrimination based
upon stereotypes of married persons
working together in one company.
FACTS: Petitioner Star Paper Corporation
promulgated a company policy which
states:
34
1. New applicants will not be allowed to be
hired if in case he/she has [a] relative, up
to [the] 3rd degree of relationship, already
employed by the company.
2. In case of two of our employees (both
singles [sic], one male and another
female) developed a friendly relationship
during the course of their employment and
then decided to get married, one of them
should resign to preserve the policy stated
above.
Respondents Ronaldo Simbol, and Wilfreda
Comia are employees of Star Paper who
claim that they were compelled to resign
in view of an illegal company policy, after
they married fellow co-workers. They filed
a complaint for unfair labor practice and
constructive dismissal against Star Paper
Corp.
Respondents submit that their dismissal
violates the above provision. Petitioners
allege that its policy "may appear to be
contrary to Article 136 of the Labor Code"
but it assumes a new meaning if read
together with the first paragraph of the
rule. The rule does not require the woman
employee to resign. The employee
spouses have the right to choose who
between them should resign. Further, they
are free to marry persons other than co-
employees.
Hence, it is not the marital status of the
employee, per se, that is being
discriminated. It is only intended to carry
out its no-employment-for-relatives-within-
the-third-degree-policy which is within the
ambit of the prerogatives of management.
LA RULING: The LA dismissed the
complaint ruling that the policy against
marriage between employees was a valid
management prerogative. The ruling was
affirmed by the NLRC.
CA RULING: The CA reversed the above
rulings and held that the dismissal of the
respondents was illegal and ordering their
reinstatement.
ISSUE: Whether or not the policy of Star
Paper requiring the resignation of either
spouse-employee is in violation of Art. 136
of the Labor Code.
SC RULING: Yes. The Supreme Court ruled
that Petitioners sole contention that "the
company did not just want to have two (2)
or more of its employees related between
the third degree by affinity and/or
consanguinity is lame. That the second
paragraph was meant to give teeth to the
first paragraph of the questioned rule is
evidently not the valid reasonable
business necessity required by the law.
It is significant to note that in the case at
bar, respondents were hired after they
were found fit for the job, but were asked
to resign when they married a co-
employee. Petitioners failed to show how
the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an
employee of the Repacking Section, could
be detrimental to its business operations.
Neither did petitioners explain how this
detriment will happen in the case of
Wilfreda Comia, then a Production Helper
in the Selecting Department, who married
Howard Comia, then a helper in the cutter-
machine. The policy is premised on the
mere fear that employees married to each
other will be less efficient.
If we uphold the questioned rule without
valid justification, the employer can create
policies based on an unproven
presumption of a perceived danger at the
expense of an employees right to security
of tenure.
Petitioners contend that their policy will
apply only when one employee marries a
co-employee, but they are free to marry
persons other than co-employees. The
questioned policy may not facially violate
Article 136 of the Labor Code but it
creates a disproportionate effect and
under the disparate impact theory, the
only way it could pass judicial scrutiny is a
showing that it is reasonable despite the
discriminatory, albeit disproportionate,
effect. The failure of petitioners to prove a
legitimate business concern in imposing
the questioned policy cannot prejudice the
employees right to be free from arbitrary
discrimination based upon stereotypes of
35
married persons working together in one
company.
DOMINGO VS. RAYALA 546 SCRA 90
FACTS: Ma. Lourdes T. Domingo
(Domingo), then Stenographic Reporter III
at the NLRC, filed a Complaint for sexual
harassment against Rogelio Rayala, the
chairman of NLRC.
She alleged that Rayala called her in his
office and touched her shoulder, part of
her neck then tickled her ears. Rayala
argued that his acts does not constitute
sexual harassment because for it to exist,
there must be a demand, request or
requirement of sexual favor.
ISSUE: Whether or not Rayala commit
sexual harassment.
HELD: Yes. The law penalizing sexual
harassment in our jurisdiction is RA 7877.
Section 3 thereof defines work-related
sexual harassment in this wise:
Sec. 3. Work, Education or Training-related
Sexual Harassment Defined. Work,
education or training-related sexual
harassment is committed by an employer,
manager, supervisor, agent of the
employer, teacher, instructor, professor,
coach, trainor, or any other person who,
having authority, influence or moral
ascendancy over another in a work or
training or education environment,
demands, requests or otherwise requires
any sexual favor from the other,
regardless of whether the demand,
request or requirement for submission is
accepted by the object of said Act.
(a) In a work-related or employment
environment, sexual harassment is
committed when:
(1) The sexual favor is made as a
condition in the hiring or in the
employment, re-employment or continued
employment of said individual, or in
granting said individual favorable
compensation, terms, conditions,
promotions, or privileges; or the refusal to
grant the sexual favor results in limiting,
segregating or classifying the employee
which in a way would discriminate,
deprive or diminish employment
opportunities or otherwise adversely
affect said employee;
(2) The above acts would impair the
employees rights or privileges under
existing labor laws; or
(3) The above acts would result in an
intimidating, hostile, or offensive
environment for the employee.
Even if we were to test Rayalas acts
strictly by the standards set in Section 3,
RA 7877, he would still be administratively
liable. It is true that this provision calls for
a demand, request or requirement of a
sexual favor. But it is not necessary that
the demand, request or requirement of a
sexual favor be articulated in a categorical
oral or written statement. It may be
discerned, with equal certitude, from the
acts of the offender. Holding and
squeezing Domingos shoulders, running
his fingers across her neck and tickling her
ear, having inappropriate conversations
with her, giving her money allegedly for
school expenses with a promise of future
privileges, and making statements with
unmistakable sexual overtones all these
acts of Rayala resound with deafening
clarity the unspoken request for a sexual
favor.
PHILIPPINE AEOLUS AUTOMOTIVE
UNITED CORPORATION V. NLRC G.R.
No. 124617; April 28, 2000
FACTS: Private respondent Rosalinda
Cortez was a company nurse for the
petitioner Philippine Aelous United
Corporation. A memorandum was issued
by the personnel manager of petitioner
corporation to respondent, asking her to
explain why no action should be taken
against her for (a) throwing a stapler at
plant manager William Chua; (b) for losing
the amount of Php 1,488 entrusted to her;
(c) for asking a co-employee to punch in
36
her time card one morning when she was
not there. Private respondent was then
placed on preventive suspension. Another
memorandum was sent to her asking her
to explain why she failed to process the
ATM applications of her co-employees. In
response to the memorandums, submitted
a written explanation as to the loss of Php
1,488 and the punching in of her time
card. A third memorandum was sent to her
informing her of her termination from
service for gross and habitual neglect of
duties, serious misconduct, and fraud or
willful breach of trust.
ISSUES:
1. Whether or not petitioner was illegally
dismissed.
2. If such dismissal was illegal, whether or
not petitioner should be entitled to
damages.
HELD: SC affirms on the first issue. The
grounds by which an employer may validly
terminate the services of an employee
must be strictly construed. As to the first
charge, respondent claims that plant
manager Chua had been making sexual
advances on her since her first year of
employment and that when she would not
accede to his requests, he threatened that
he would cause her termination from
service. As to the second charge, the
money entrusted to her was not lost, but
given to the personnel-in-charge for
proper transmittal, as evidenced by a
receipt signed by the latter. As to the third
charge, private respondent explains that
she asked someone to punch in her card
as she was doing an errand for one of the
companys officers and with the
permission of the plant manager. As to the
fourth charge, she asserts that she had no
knowledge thereof. To constitute serious
misconduct to justify dismissal, the acts
must be done in relation to the
performance of her duties as would show
her to be unfit to continue working for her
employer. In the case at bar, her acts of
did not pertain to her duties as a nurse nor
did they constitute serious misconduct.
SC also affirms on the second issue.
Private respondent admittedly allowed
four years to pass before complaining of
her employers sexual advances; but the
time to do such varies depending upon the
needs, circumstances and emotional
threshold of the employee. It is clear in the
case at bar that respondent has suffered
anxiety, sleepless nights and besmirched
reputation by reason of the act
complained of. Thus, she should be
entitled to moral and exemplary damages
for the oppressive manner with which
petitioners affected her dismissal and to
serve as a warning to officers who take
advantage of their ascendancy over their
employees.

APEX MINING CO., INC. v. NLRC April
22, 1991
FACTS: Private respondent Sinclita Candida
was employed by petitioner Apex Mining
Company to perform laundry services at
its staff house. On December 18, 1987,
while she was hanging the laundry, she
accidentally slipped and hit her back on a
stone. She was not able to continue with
her work as a result of the accident and
was permitted to go on leave for
medication and recuperation. Private
respondents immediate supervisor Mila
De la Rosa offered her the amount of Php
2,000.00 which was eventually increased
to Php 5,000.00 to persuade her to quit
her job, but private respondent refused
the offer and preferred to return to work.
37
Petitioner did not allow her to return to
work and eventually dismissed her on
February 4, 1988. Consequently, private
respondent filed a request for assistance
with the Department of Labor and
Employment, which the latter rendered its
decision by ordering the Apex Mining Co.
to pay private respondent the total
amount of Php 55,161.42 for salary
differential, emergency living allowance,
13th month pay differential and separation
pay. Petitioner appealed the case before
the NLRC, which was subsequently
dismissed for lack of merit.
ISSUE: Whether or not the private
respondent should be treated as house
helper or a regular employee.
business, as in its staff houses for its guest
HELD: Supreme Court holds that private
respondent is a regular employee. Under
Rule XIII, Section l (b), Book 3 of the Labor
Code, as amended, the term "house
helper" as used herein is synonymous to
the term "domestic servant" and shall
refer to any person, whether male or
female, who renders services in and about
the employer's home and which services
are usually necessary or desirable for the
maintenance and enjoyment thereof, and
ministers exclusively to the personal
comfort and enjoyment of the employer's
family. The definition under the law cannot
be interpreted to include house helper
working in staff houses of a company, like
the private respondent, who attends to the
needs of the company's guest and other
persons availing of said facilities. The
mere fact that the house helper or
domestic servant is working within the
premises of the business of the employer
and in relation to or in connection with its
or even for its officers and employees,
warrants the conclusion that such house
helper is and should be considered as a
regular employee.