FIRST DIVISION

[G.R. No. 170087. August 31, 2006.]

ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,

KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, respondents.

DECISION

YNARES-SANTIAGO, J p:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and
Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No.
78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate
court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15,
2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated
July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive
dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant
and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other
licenses for the initial operation of the company. 5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither
did she attend any board meeting nor required to do so. She never prepared any legal document and never
represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign
documentation for the company. 6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of
petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings with government agencies, especially
with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei
Corporation. 7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was
P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to
sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation
and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as
Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for
a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because
the company was not earning well. On October 2001, petitioner did not receive her salary from the company. She
made repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed
that she is no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive
dismissal before the labor arbiter. EHASaD

Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner
was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she
wanted. The company never interfered with her work except that from time to time, the management would ask her
opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of
employees, but her services were engaged through a Board Resolution designating her as technical consultant. The
money received by petitioner from the corporation was her professional fee subject to the 10% expanded
withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the
company's employees. 12

Petitioner's designation as technical consultant depended solely upon the will of management. As such, her
consultancy may be terminated any time considering that her services were only temporary in nature and dependent
on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees
for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported
to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records
were also submitted showing that petitioner's latest employer was Seiji Corporation. 13

The Labor Arbiter found that petitioner was illegally dismissed, thus:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. finding complainant an employee of respondent corporation;

2. declaring complainant's dismissal as illegal;

3. ordering respondents to reinstate complainant to her former position without loss of

seniority rights and jointly and severally pay complainant her money claims in accordance with
the following computation:

a. Backwages 10/2001 07/2002 275,000.00

(27,500 x 10 mos.)

b. Salary Differentials (01/2001 09/2001) 22,500.00

c. Housing Allowance (01/2001 07/2002) 57,000.00

d. Midyear Bonus 2001 27,500.00

e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei

Corp. from 1996-2001 361,175.00

g. Moral and exemplary damages 100,000.00

h. 10% Attorney's fees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation

pay with additional backwages that would accrue up to actual payment of separation pay.

SO ORDERED. 14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of
which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
 1) Respondents are directed to pay complainant separation pay computed at one month per
year of service in addition to full backwages from October 2001 to July 31, 2002;

2) The awards representing moral and exemplary damages and 10% share in profit in the
respective accounts of P100,000.00 and P361,175.00 are deleted;

3) The award of 10% attorney's fees shall be based on salary differential award only;

4) The awards representing salary differentials, housing allowance, mid year bonus and 13th
month pay are AFFIRMED.

SO ORDERED. 15

On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision of

the National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET
ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondent
against Kasei Corporation, et al. for constructive dismissal.

SO ORDERED. 16

The appellate court denied petitioner's motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between
petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand,
and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the
propositions espoused by the contending parties is supported by substantial evidence. 17

We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the
existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not only the end to be achieved but also
the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic
conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining
the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the
parties, owing to the complexity of such a relationship where several positions have been held by the worker. There
are instances when, aside from the employer's power to control the employee with respect to the means and
methods by which the work is to be accomplished, economic realities of the employment relations help provide a
comprehensive analysis of the true classification of the individual, whether as employee, independent contractor,
corporate officer or some other capacity. caIEAD

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer's power to
control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality
of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in
this case where there is no written agreement or terms of reference to base the relationship on; and due to the
complexity of the relationship based on the various positions and responsibilities given to the worker over the period
of the latter's employment.

The control test initially found application in the case of Viaa v. Al-Lagadan and Piga, 19 and lately in Leonardo v.
Court of Appeals, 20where we held that there is an employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end achieved but also the manner and means used
to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls,
to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of
the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of
the whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the
employer's business; (2) the extent of the worker's investment in equipment and facilities; (3) the nature and degree
of control exercised by the employer; (4) the worker's opportunity for profit and loss; (5) the amount of initiative,
skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and
duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker
upon the employer for his continued employment in that line of business. 23

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business. 24 In the United States, the touchstone of economic reality in
analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25 By
analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of
the Labor Code ought to be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was
under the direct control and supervision of Seiji Kamura, the corporation's Technical Consultant. She reported for
work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager
and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to
the company and performing functions necessary and desirable for the proper operation of the corporation such as
securing business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent
corporation because she had served the company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social
Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General
Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioner's membership in
the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei
Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent corporation. 27

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued
employment in the latter's line of business.

In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card
is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm
that issues it. Together with the cash vouchers covering petitioner's salaries for the months stated therein, these matters
constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the
latter were the former's employees. The coverage of Social Security Law is predicated on the existence of an
employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never
acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of
petitioner's job was as Kamura's direct assistant with the duty of acting as Liaison Officer in representing the
company to secure construction permits, license to operate and other requirements imposed by government
agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any document for the corporation, although
once in a while she was required to sign prepared documentation for the company. 30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been
allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced
that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor
on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth
and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous
witnesses. 32 A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same
is subject to the test of credibility and should be received with caution. 33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei
Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job function involved accounting and tax
services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent
corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More
importantly, respondent corporation had the power to control petitioner with the means and methods by which the
work is to be accomplished. aHTEIA

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is
an involuntary resignation resulting in cessation of work resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom,
Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a diminution
of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for
such employee to continue working for her employer. Hence, her severance from the company was not of her own
making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed.
Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers,
we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees.
This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional
mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social
economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29,
2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commissiondated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The
case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Francisco's full backwages
from the time she was illegally terminated until the date of finality of this decision, and separation pay representing
one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole
year.

SO ORDERED.

Panganiban, C.J., Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

SECOND DIVISION

[G.R. No. 195190. July 28, 2014.]

ROYALE HOMES MARKETING CORPORATION, petitioner, vs. FIDEL P. ALCANTARA

[deceased], substituted by his heirs, respondent.

DECISION
DEL CASTILLO, J p:

Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer
relationship. Rules and regulations that merely serve as guidelines towards the achievement of a mutually desired
result without dictating the means and methods of accomplishing it do not establish employer-employee
relationship. 1

This Petition for Review on Certiorari 2 assails the June 23, 2010 Decision 3 of the Court of Appeals (CA) in CA-G.R. SP
No. 109998 which (i) reversed and set aside the February 23, 2009 Decision 4 of the National Labor Relations
Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay respondent
Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) remanded the case to the Labor Arbiter for the
proper determination and computation of said monetary awards.

Also assailed in this Petition is the January 18, 2011 Resolution 5 of the CA denying Royale Homes' Motion for
Reconsideration, 6 as well as its Supplemental 7 thereto.

Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara as its Marketing
Director for a fixed period of one year. His work consisted mainly of marketing Royale Homes' real estate inventories
on an exclusive basis. Royale Homes reappointed him for several consecutive years, the last of which covered the
period January 1 to December 31, 2003 where he held the position of Division 5 Vice-President-Sales. 8

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal 9 against Royale Homes and its President
Matilde Robles, Executive Vice-President for Administration and Finance Ma. Melinda Bernardino, and Executive
Vice-President for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale Homes since he is
performing tasks that are necessary and desirable to its business; that in 2003 the company gave him P1.2 million for
the services he rendered to it; that in the first week of November 2003, however, the executive officers of Royale
Homes told him that they were wondering why he still had the gall to come to office and sit at his table; 10 and that
the acts of the executive officers of Royale Homes amounted to his dismissal from work without any valid or just
cause and in gross disregard of the proper procedure for dismissing employees. Thus, he also impleaded the
corporate officers who, he averred, effected his dismissal in bad faith and in an oppressive manner. cACHSE

Alcantara prayed to be reinstated to his former position without loss of seniority rights and other privileges, as well
as to be paid backwages, moral and exemplary damages, and attorney's fees. He further sought that the ownership
of the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.

Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment
paper of Alcantara is clear that it engaged his services as an independent sales contractor for a fixed term of one year
only. He never received any salary, 13th month pay, overtime pay or holiday pay from Royale Homes as he was paid
purely on commission basis. In addition, Royale Homes had no control on how Alcantara would accomplish his tasks
and responsibilities as he was free to solicit sales at any time and by any manner which he may deem appropriate and
necessary. He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.

According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connected with it
as a sales agent, had formed a brokerage company that directly competed with its business, and even recruited some
of its sales agents. Although this was against the exclusivity clause of the contract, Royale Homes still offered to
accept Alcantara's wife back so she could continue to engage in real estate brokerage, albeit exclusively for Royale
Homes. In a special management committee meeting on October 8, 2003, however, Alcantara announced publicly
and openly that he would leave the company by the end of October 2003 and that he would no longer finish the
unexpired term of his contract. He has decided to join his wife and pursue their own brokerage business. Royale
Homes accepted Alcantara's decision. It then threw a despedida party in his honor and, subsequently, appointed a
new independent contractor.

Two months after he relinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter
claiming that he was illegally dismissed.

Ruling of the Labor Arbiter

On September 7, 2005, the Labor Arbiter rendered a Decision 11 holding that Alcantara is an employee of Royale
Homes with a fixed-term employment period from January 1 to December 31, 2003 and that the pre-termination of
his contract was against the law. Hence, Alcantara is entitled to an amount which he may have earned on the
average for the unexpired portion of the contract. With regard to the impleaded corporate officers, the Labor Arbiter
absolved them from any liability.

The dispositive portion of the Labor Arbiter's Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent

Royale Homes Marketing Corp. to pay the complainant the total amount of TWO HUNDRED
SEVENTY SEVEN THOUSAND PESOS (P277,000.00) representing his
compensation/commission for the unexpired term of his contract.

All other claims are dismissed for lack of merit.

SO ORDERED. 12

Both parties appealed the Labor Arbiter's Decision to the NLRC. Royale Homes claimed that the Labor Arbiter
grievously erred in ruling that there exists an employer-employee relationship between the parties. It insisted that
the contract between them expressly states that Alcantara is an independent contractor and not an ordinary
employee. It had no control over the means and methods by which he performed his work. Royale Homes likewise
assailed the award of P277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who
chose not to finish the contract.

Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and
that he is not entitled to backwages, reinstatement, unpaid commissions, and damages. EcICDT

Ruling of the National Labor Relations Commission

On February 23, 2009, the NLRC rendered its Decision, 13 ruling that Alcantara is not an employee but a mere
independent contractor of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara
to observe regular working hours. He was also free to adopt the selling methods he deemed most effective and can
even recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC also considered the
fact that Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in the
contract. Being an independent contractor, the NLRC concluded that Alcantara's Complaint is cognizable by the
regular courts.

The fallo of the NLRC Decision reads:

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated
September 5, 2005 is REVERSED and SET ASIDE and a NEW ONE rendered dismissing the
complaint for lack of jurisdiction.

SO ORDERED. 14

Alcantara moved for reconsideration. 15 In a Resolution 16 dated May 29, 2009, however, the NLRC denied his
motion.

Alcantara thus filed a Petition for Certiorari 17 with the CA imputing grave abuse of discretion on the part of the
NLRC in ruling that he is not an employee of Royale Homes and that it is the regular courts which have jurisdiction
over the issue of whether the pre-termination of the contract is valid.

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision 18 granting Alcantara's Petition and reversing the NLRC's
Decision. Applying the four-fold and economic reality tests, it held that Alcantara is an employee of Royale Homes.
Royale Homes exercised some degree of control over Alcantara since his job, as observed by the CA, is subject to
company rules, regulations, and periodic evaluations. He was also bound by the company code of ethics. Moreover,
the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the
theory that he is an employee of said company.

The CA further held that Alcantara's termination from employment was without any valid or just cause, and it was
carried out in violation of his right to procedural due process. Thus, the CA ruled that he is entitled to backwages and
separation pay, in lieu of reinstatement. Considering, however, that the CA was not satisfied with the proof adduced
to establish the amount of Alcantara's annual salary, it remanded the case to the Labor Arbiter to determine the
same and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from
any liability for want of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith
or gross negligence. Thus:

WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed
decision of the National Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03
NLRC CA NO. 046104-05 dated February 23, 2009 as well as the Resolution dated May 29,
2009 are hereby SET ASIDE and a new one is entered ordering the respondent company to pay
petitioner backwages which shall be computed from the time of his illegal termination in
October 2003 up to the finality of this decision, plus separation pay equivalent to one month
salary for every year of service. This case is REMANDED to the Labor Arbiter for the proper
determination and computation of back wages, separation pay and other monetary benefits
that petitioner is entitled to.

SO ORDERED. 19

Royale Homes filed a Motion for Reconsideration 20 and a Supplemental Motion for Reconsideration. 21 In a
Resolution 22 dated January 18, 2011, however, the CA denied said motions.

Issues
Hence, this Petition where Royale Homes submits before this Court the following issues for resolution: CHIEDS

A.

WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN
ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF RESPONDENT
FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN FINDING THAT RESPONDENT
WAS ILLEGALLY DISMISSED[.]

B.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN

DISREGARDING THE EN BANC RULING OF THIS HONORABLE COURT IN THE CASE
OF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS
OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]

C.

WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN

DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER AND IN REFUSING TO
CORRECT ITSELF[.] 23

Royale Homes contends that its contract with Alcantara is clear and unambiguous it engaged his services as an
independent contractor. This can be readily seen from the contract stating that no employer-employee relationship
exists between the parties; that Alcantara was free to solicit sales at any time and by any manner he may deem
appropriate; that he may recruit sales personnel to assist him in marketing Royale Homes' inventories; and, that his
remunerations are dependent on his sales performance.

Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based on
a shallow ground that his performance is subject to company rules and regulations, code of ethics, periodic
evaluation, and exclusivity clause of contract. Royale Homes maintains that it is expected to exercise some degree of
control over its independent contractors, but that does not automatically result in the existence of employer-
employee relationship. For control to be considered as a proof tending to establish employer-employee relationship,
the same must pertain to the means and method of performing the work; not on the relationship of the independent
contractors among themselves or their persons or their source of living.

Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who
openly and publicly declared that he was pre-terminating his fixed-term contract.

The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or an employee of
Royale Homes.

Our Ruling
The Petition is impressed with merit.

The determination of whether a party who renders services to another is an employee or an independent contractor
involves an evaluation of factual matters which, ordinarily, is not within the province of this Court. In view of the
conflicting findings of the tribunals below, however, this Court is constrained to go over the factual matters involved
in this case. 24

The juridical relationship of the parties

based on their written contract
The primary evidence of the nature of the parties' relationship in this case is the written contract that they signed
and executed in pursuance of their mutual agreement. While the existence of employer-employee relationship is a
matter of law, the characterization made by the parties in their contract as to the nature of their juridical relationship
cannot be simply ignored, particularly in this case where the parties' written contract unequivocally states their
intention at the time they entered into it. In Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., 25 it was
held that:

To be sure, the Agreement's legal characterization of the nature of the relationship cannot
be conclusive and binding on the courts; . . . the characterization of the juridical relationship
the Agreement embodied is a matter of law that is for the courts to determine. At the same
time, though, the characterization the parties gave to their relationship in the Agreement
cannot simply be brushed aside because it embodies their intent at the time they entered
the Agreement, and they were governed by this understanding throughout their
relationship. At the very least, the provision on the absence of employer-employee
relationship between the parties can be an aid in considering the Agreement and its
implementation, and in appreciating the other evidence on record. 26 DISHEA

In this case, the contract, 27 duly signed and not disputed by the parties, conspicuously provides that "no employer-
employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they
did not want to be bound by employer-employee relationship at the time of the signing of the contract. Thus:

January 24, 2003

MR. FIDEL P. ALCANTARA

13 Rancho I
Marikina City

Dear Mr. Alcantara,

This will confirm your appointment as Division 5 VICE[-]PRESIDENT-SALES of ROYALE

HOMES MARKETING CORPORATION effective January 1, 2003 to December 31, 2003.

Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under
such price, terms and condition to be provided to you from time to time.

As such, you can solicit sales at any time and by any manner which you deem appropriate and
necessary to market our real estate inventories subject to rules, regulations and code of ethics
promulgated by the company. Further, you are free to recruit sales personnel/agents to assist
you in marketing of our inventories provided that your personnel/agents shall first attend the
required seminars and briefing to be conducted by us from time to time for the purpose of
familiarizing them of terms and conditions of sale, the nature of property sold, etc.,
attendance of which shall be a condition precedent for their accreditation by us.

That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:

1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked
by your sales agents.

2. Budget allocation depending on your division's sale performance as per our budget
guidelines.

3. Sales incentive and other forms of company support which may be granted from
time to time.
 It is understood, however, that no employer-employee relationship exists between us, that
of your sales personnel/agents, and that you shall hold our company . . ., its officers and
directors, free and harmless from any and all claims of liability and damages arising from
and/or incident to the marketing of our real estate inventories.

We reserve, however, our right to terminate this agreement in case of violation of any
company rules and regulations, policies and code of ethics upon notice for justifiable reason.

Your performance shall be subject to periodic evaluation based on factors which shall be
determined by the management.

If you are amenable to the foregoing terms and conditions, please indicate your conformity by
signing on the space provided below and return [to] us a duplicate copy of this letter, duly
accomplished, to constitute as our agreement on the matter. (Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations should control." 28 No construction is even needed as they already expressly state their
intention. Also, this Court adopts the observation of the NLRC that it is rather strange on the part of Alcantara, an
educated man and a veteran sales broker who claimed to be receiving P1.2 million as his annual salary, not to have
contested the portion of the contract expressly indicating that he is not an employee of Royale Homes if their true
intention were otherwise. ICDSca

The juridical relationship of the parties

based on Control Test
In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold
test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the employer's power to control the employee with respect to the means and methods by which the work is
to be accomplished. 29 Among the four, the most determinative factor in ascertaining the existence of employer-
employee relationship is the "right of control test". 30 "It is deemed to be such an important factor that the other
requisites may even be disregarded." 31 This holds true where the issues to be resolved is whether a person who
performs work for another is the latter's employee or is an independent contractor, 32 as in this case. For where the
person for whom the services are performed reserves the right to control not only the end to be achieved, but also
the means by which such end is reached, employer-employee relationship is deemed to exist. 33

In concluding that Alcantara is an employee of Royale Homes, the CA ratiocinated that since the performance of his
tasks is subject to company rules, regulations, code of ethics, and periodic evaluation, the element of control is
present.

The Court disagrees.

Not every form of control is indicative of employer-employee relationship. A person who performs work for another
and is subjected to its rules, regulations, and code of ethics does not necessarily become an employee. 34 As long as
the level of control does not interfere with the means and methods of accomplishing the assigned tasks, the rules
imposed by the hiring party on the hired party do not amount to the labor law concept of control that is indicative of
employer-employee relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission 35 it was
pronounced that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the result and the
means used to achieve it. . . . 36

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation
alluded to by Alcantara do not involve control over the means and methods by which he was to perform his job.
Understandably, Royale Homes has to fix the price, impose requirements on prospective buyers, and lay down the
terms and conditions of the sale, including the mode of payment, which the independent contractors must follow. It
is also necessary for Royale Homes to allocate its inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined criteria, and regularly monitor
the result of their marketing and sales efforts. But to the mind of this Court, these do not pertain to the means and
methods of how Alcantara was to perform and accomplish his task of soliciting sales. They do not dictate upon him
the details of how he would solicit sales or the manner as to how he would transact business with prospective clients.
In Tongko, this Court held that guidelines or rules and regulations that do not pertain to the means or methods to be
employed in attaining the result are not indicative of control as understood in labor law Thus:

From jurisprudence, an important lesson that the first Insular Life case teaches us is that a
commitment to abide by the rules and regulations of an insurance company does not ipso
facto make the insurance agent an employee. Neither do guidelines somehow restrictive of the
insurance agent's conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells
us, should not merely relate to the mutually desirable result intended by the contractual
relationship; they must have the nature of dictating the means or methods to be
employed in attaining the result, or of fixing the methodology and of binding or restricting
the party hired to the use of these means. In fact, results-wise, the principal can impose
production quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the company's objectives. These are management policy decisions that
the labor law element of control cannot reach. Our ruling in these respects in the first Insular
Life case was practically reiterated in Carungcong. Thus, as will be shown more fully below,
Manulife's codes of conduct, all of which do not intrude into the insurance agents' means and
manner of conducting their sales and only control them as to the desired results and Insurance
Code norms, cannot be used as basis for a finding that the labor law concept of control existed
between Manulife and Tongko. 37 (Emphases in the original) IDCHTE

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the
elements thereof, particularly Royale Homes' power of control over the means and methods of accomplishing
the work. 38 He, however, failed to cite specific rules, regulations or codes of ethics that supposedly imposed
control on his means and methods of soliciting sales and dealing with prospective clients. On the other hand,
this case is replete with instances that negate the element of control and the existence of employer-employee
relationship. Notably, Alcantara was not required to observe definite working hours. 39Except for soliciting
sales, Royale Homes did not assign other tasks to him. He had full control over the means and methods of
accomplishing his tasks as he can "solicit sales at any time and by any manner which [he may] deem appropriate
and necessary." He performed his tasks on his own account free from the control and direction of Royale Homes
in all matters connected therewith, except as to the results thereof. 40
Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship. 41 As
discussed above, the absence of control over the means and methods disproves employer-employee relationship.
The continuous rehiring of Alcantara simply signifies the renewal of his contract with Royale Homes, and highlights
his satisfactory services warranting the renewal of such contract. Nor does the exclusivity clause of contract establish
the existence of the labor law concept of control. In Consulta v. Court of Appeals, 42 it was held that exclusivity of
contract does not necessarily result in employer-employee relationship, viz.:

. . . However, the fact that the appointment required Consulta to solicit business exclusively
for Pamana did not mean that Pamana exercised control over the means and methods of
Consulta's work as the term control is understood in labor jurisprudence. Neither did it make
Consulta an employee of Pamana. Pamana did not prohibit Consulta from engaging in any
other business, or from being connected with any other company, for as long as the business
[of the] company did not compete with Pamana's business. 43

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long as
he does not sell projects of Royale Homes' competitors. He can engage in selling various other products or engage in
unrelated businesses.

Payment of Wages
The element of payment of wages is also absent in this case. As provided in the contract, Alcantara's remunerations
consist only of commission override of 0.5%, budget allocation, sales incentive and other forms of company support.
There is no proof that he received fixed monthly salary. No payslip or payroll was ever presented and there is no
proof that Royale Homes deducted from his supposed salary withholding tax or that it registered him with the Social
Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a
ballpark figure of his alleged salary of P100,000.00, more or less. All of these indicate an independent contractual
relationship. 44 Besides, if Alcantara indeed considered himself an employee of Royale Homes, then he, an
experienced and professional broker, would have complained that he was being denied statutorily mandated
benefits. But for nine consecutive years, he kept mum about it, signifying that he has agreed, consented, and
accepted the fact that he is not entitled to those employee benefits because he is an independent contractor.

This Court is, therefore, convinced that Alcantara is not an employee of Royale Homes, but a mere independent
contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and
that the same is cognizable by the regular courts.

WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-
G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor Relations
Commission is REINSTATED and AFFIRMED.

SO ORDERED. IHCSTE

Carpio, Brion, Perez and Perlas-Bernabe, JJ., concur.

SECOND DIVISION

[G.R. No. 172161. March 2, 2011.]

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, petitioners, vs.

NATIONAL LABOR RELATIONS COMMISSION, 4TH DIVISION, ROLDAN LOPEZ,
EDGARDO ZUIGA and DANILO CAETE, respondents.

DECISION

MENDOZA, J p:

Assailed in this petition for review on certiorari are the January 11, 2006 Decision 1 and the March 31,
2006 Resolution 2 of the Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with modification the
March 31, 2004 Decision 3 and December 15, 2004 Resolution 4 of the National Labor Relations
Commission (NLRC). The NLRC Decision found the petitioners, SLL International Cables Specialist (SLL) and its
manager, Sonny L. Lagon (petitioners), not liable for the illegal dismissal of Roldan Lopez, Danilo Caete and
Edgardo Zuiga (private respondents) but held them jointly and severally liable for payment of certain monetary
claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity)
and Danilo Caete (Caete for brevity), and Edgardo Zuiga (Zuiga for brevity) respectively,
were hired by petitioner Lagon as apprentice or trainee cable/lineman. The three were paid the
full minimum wage and other benefits but since they were only trainees, they did not report for
work regularly but came in as substitutes to the regular workers or in undertakings that needed
extra workers to expedite completion of work. After their training, Zuiga, Caete and Lopez
were engaged as project employees by the petitioners in their Islacom project in Bohol. Private
respondents started on March 15, 1997 until December 1997. Upon the completion of their
project, their employment was also terminated. Private respondents received the amount of
P145.00, the minimum prescribed daily wage for Region VII. In July 1997, the amount of P145
was increased to P150.00 by the Regional Wage Board (RWB) and in October of the same year,
the latter was increased to P155.00. Sometime in March 1998, Zuiga and Caete were
engaged again by Lagon as project employees for its PLDT Antipolo, Rizal project, which
ended sometime in (sic) the late September 1998. As a consequence, Zuiga and Caete's
employment was terminated. For this project, Zuiga and Caete received only the wage of
P145.00 daily. The minimum prescribed wage for Rizal at that time was P160.00. HDacIT
 Sometime in late November 1998, private respondents re-applied in the Racitelcom project of
Lagon in Bulacan. Zuiga and Caete were re-employed. Lopez was also hired for the said
specific project. For this, private respondents received the wage of P145.00. Again, after the
completion of their project in March 1999, private respondents went home to Cebu City.

On May 21, 1999, private respondents for the 4th time worked with Lagon's project in
Camarin, Caloocan City with Furukawa Corporation as the general contractor. Their contract
would expire on February 28, 2000, the period of completion of the project. From May 21,
1997-December 1999, private respondents received the wage of P145.00. At this time, the
minimum prescribed rate for Manila was P198.00. In January to February 28, the three received
the wage of P165.00. The existing rate at that time was P213.00.

For reasons of delay on the delivery of imported materials from Furukawa Corporation, the
Camarin project was not completed on the scheduled date of completion. Face[d] with
economic problem[s], Lagon was constrained to cut down the overtime work of its worker[s][,]
including private respondents. Thus, when requested by private respondents on February 28,
2000 to work overtime, Lagon refused and told private respondents that if they insist, they
would have to go home at their own expense and that they would not be given anymore time
nor allowed to stay in the quarters. This prompted private respondents to leave their work and
went home to Cebu. On March 3, 2000, private respondents filed a complaint for illegal
dismissal, non-payment of wages, holiday pay, 13th month pay for 1997 and 1998 and service
incentive leave pay as well as damages and attorney's fees.

In their answers, petitioners admit employment of private respondents but claimed that the
latter were only project employees[,] for their services were merely engaged for a specific
project or undertaking and the same were covered by contracts duly signed by private
respondents. Petitioners further alleged that the food allowance of P63.00 per day as well as
private respondents allowance for lodging house, transportation, electricity, water and snacks
allowance should be added to their basic pay. With these, petitioners claimed that private
respondents received higher wage rate than that prescribed in Rizal and Manila.

Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila,
the complaint should be filed there. Thus, petitioners prayed for the dismissal of the complaint
for lack of jurisdiction and utter lack of merit. (Citations omitted.)

On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision 5 declaring that his
office had jurisdiction to hear and decide the complaint filed by private respondents. Referring to Rule IV, Sec. 1
(a) of the NLRC Rules of Procedureprevailing at that time, 6 the LA ruled that it had jurisdiction because the
"workplace," as defined in the said rule, included the place where the employee was supposed to report back
after a temporary detail, assignment or travel, which in this case was Cebu. AIDTSE
As to the status of their employment, 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
respondents' act of going home as an act of indifference when petitioners decided to prohibit overtime work. 7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC noted
that not a single report of project completion was filed with the nearest Public Employment Office as required
by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of 1993. 8 The
NLRC later denied 9the motion for reconsideration 10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the
private respondents were regular employees. It considered the fact that they performed functions which were
the regular and usual business of petitioners. According to the CA, they were clearly members of a work pool
from which petitioners drew their project employees.
 The CA also stated that the failure of petitioners to comply with the simple but compulsory
requirement to submit a report of termination to the nearest Public Employment Office every time private
respondents' employment was terminated was proof that the latter were not project employees but regular
employees.
The CA likewise found that the private respondents were underpaid. It ruled that the board and
lodging, electricity, water, and food enjoyed by the private respondents could not be included in the
computation of their wages because these were given without their written consent. The CA added that the
private respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the
petitioners' prerogative to grant or deny any request for overtime work and that the private respondents' act of
leaving the workplace after their request was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez
did not work in the Antipolo project and, thus, was not entitled to wage differentials. Also, in computing the
differentials for the period January and February 2000, the CA disagreed in the award of differentials based on
the minimum daily wage of P223.00, as the prevailing minimum daily wage then was only P213.00. Petitioners
sought reconsideration but the CA denied it in its March 31, 2006 Resolution. 11 CHDaAE
In this petition for review on certiorari, 12 petitioners seek the reversal and setting aside of the CA
decision anchored on this lone:
GROUND/
ASSIGNMENT OF ERROR

THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN

AWARDING WAGE DIFFERENTIALS TO THE PRIVATE COMPLAINANTS ON THE BASES
OF MERE TECHNICALITIES, THAT IS, FOR LACK OF WRITTEN CONFORMITY . . . AND
LACK OF NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)[,] AND
THUS, THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION
THE NLRC DECISION IN THE LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON
and VIRGILIO AGABON vs. NLRC, ET AL., G.R. NO. 158963, NOVEMBER 17, 2004, 442
SCRA 573, [AND SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES,
INC. VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW-DFA), ET AL., G.R.
NO. 149349, 11 MARCH 2005], WHICH FINDS APPLICATION IN THE INSTANT CASE BY
ANALOGY. 13

Petitioners reiterated their position that the value of the facilities that the private respondents
enjoyed should be included in the computation of the "wages" received by them. They argued that the rulings
in Agabon v. NLRC 14 and Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-
DFA 15 should be applied by analogy, in the sense that the lack of written acceptance of the employees of the
facilities enjoyed by them should not mean that the value of the facilities could not be included in the
computation of the private respondents' "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining
the public respondent from enforcing the NLRC and CA decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in the petition.
This petition generally involves factual issues, such as, whether or not there is evidence on record to
support the findings of the LA, the NLRC and the CA that private respondents were project or regular
employees and that their salary differentials had been paid. This calls for a re-examination of the evidence,
which the Court cannot entertain. Settled is the rule that factual findings of labor officials, who are deemed to
have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect
but even finality, and bind the Court when supported by substantial evidence. It is not the Court's function to
assess and evaluate the evidence all over again, particularly where the findings of both the Labor tribunals and
the CA concur. 16 aHIDAE
As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of
proving it. 17Specifically with respect to labor cases, the burden of proving payment of monetary claims rests
on the employer, the rationale being that the pertinent personnel files, payrolls, records, remittances and other
similar documents which will show that overtime, differentials, service incentive leave and other claims of
 workers have been paid are not in the possession of the worker but in the custody and absolute control of the
employer. 18
In this case, petitioners, aside from bare allegations that private respondents received wages higher
than the prescribed minimum, failed to present any evidence, such as payroll or payslips, to support their
defense of payment. Thus, petitioners utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are
regular or non-regular employees.
Section 3, Rule VII of the Rules to Implement the Labor Code 19 specifically enumerates those who are
not covered by the payment of minimum wage. Project employees are not among them.
On whether the value of the facilities should be included in the computation of the "wages" received
by private respondents, Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide
subsidized meals and snacks to his employees provided that the subsidy shall not be less that 30% of the fair
and reasonable value of such facilities. In such cases, the employer may deduct from the wages of the
employees not more than 70% of the value of the meals and snacks enjoyed by the latter, provided that such
deduction is with the written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from the employees' wages, the following
requisites must all be attendant: first, 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. 20 Mere availment is not sufficient to allow deductions
from employees' wages. 21
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 employee's 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. cCaEDA
The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view
that the food and lodging, or the electricity and water allegedly consumed by private respondents in this case
were not facilities but supplements. In the case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., 22 the two terms
were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges or benefits given
to or received by the laborers over and above their ordinary earnings or wages. "Facilities," on
the other hand, are items of expense necessary for the laborer's and his family's existence and
subsistence so that by express provision of law (Sec. 2[g]), they form part of the wage and
when furnished by the employer are deductible therefrom, since if they are not so furnished,
the laborer would spend and pay for them just the same.

In short, the benefit or privilege given to the employee which constitutes an extra remuneration above
and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of the
laborers' basic wages, it is a facility. The distinction lies not so much in the kind of benefit or item (food, lodging,
bonus or sick leave) given, but in the purpose for which it is given. 23 In the case at bench, the items provided
were given freely by SLL for the purpose of maintaining the efficiency and health of its workers while they were
working at their respective projects.
For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these were
cases of dismissal with just and authorized causes. The present case involves the matter of the failure of the
petitioners to comply with the payment of the prescribed minimum wage.
The Court sustains the deletion of the award of differentials with respect to respondent Roldan Lopez.
As correctly pointed out by the CA, he did not work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on
November 29, 2006 is deemed, as it is hereby ordered, DISSOLVED.
SO ORDERED.

Carpio Velasco, Jr., * Del Castillo ** and Abad, JJ., concur.

SECOND DIVISION

[G.R. No. 192105. December 9, 2013.]

ANTONIO LOCSIN II, petitioner, vs. MEKENI FOOD CORPORATION, respondent.

DECISION

DEL CASTILLO, J p:

In the absence of specific terms and conditions governing a car plan agreement between the employer and
employee, the former may not retain the installment payments made by the latter on the car plan and treat them as
rents for the use of the service vehicle, in the event that the employee ceases his employment and is unable to
complete the installment payments on the vehicle. The underlying reason is that the service vehicle was precisely
used in the former's business; any personal benefit obtained by the employee from its use is merely incidental.

This Petition for Review on Certiorari 1 assails the January 27, 2010 Decision 2 of the Court of Appeals (CA) in CA-G.R.
SP No. 109550, as well as its April 23, 2010 Resolution 3 denying Petitioner's Motion for Partial Reconsideration. 4

Factual Antecedents
In February 2004, respondent Mekeni Food Corporation (Mekeni) a Philippine company engaged in food
manufacturing and meat processing offered petitioner Antonio Locsin II the position of Regional Sales Manager to
oversee Mekeni's National Capital Region Supermarket/Food Service and South Luzon operations. In addition to a
compensation and benefit package, Mekeni offered petitioner a car plan, under which one-half of the cost of the
vehicle is to be paid by the company and the other half to be deducted from petitioner's salary. Mekeni's offer was
contained in an Offer Sheet 5 which was presented to petitioner. EHCcIT

Petitioner began his stint as Mekeni Regional Sales Manager on March 17, 2004. To be able to effectively cover his
appointed sales territory, Mekeni furnished petitioner with a used Honda Civic car valued at P280,000.00, which used
to be the service vehicle of petitioner's immediate supervisor. Petitioner paid for his 50% share through salary
deductions of P5,000.00 each month.

Subsequently, Locsin resigned effective February 25, 2006. By then, a total of P112,500.00 had been deducted from
his monthly salary and applied as part of the employee's share in the car plan. Mekeni supposedly put in an
equivalent amount as its share under the car plan. In his resignation letter, petitioner made an offer to purchase his
service vehicle by paying the outstanding balance thereon. The parties negotiated, but could not agree on the terms
of the proposed purchase. Petitioner thus returned the vehicle to Mekeni on May 2, 2006.

Petitioner made personal and written follow-ups regarding his unpaid salaries, commissions, benefits, and offer to
purchase his service vehicle. Mekeni replied that the company car plan benefit applied only to employees who have
been with the company for five years; for this reason, the balance that petitioner should pay on his service vehicle
stood at P116,380.00 if he opts to purchase the same.

On May 3, 2007, petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, a Complaint 6 for the
recovery of monetary claims consisting of unpaid salaries, commissions, sick/vacation leave benefits, and recovery of
monthly salary deductions which were earmarked for his cost-sharing in the car plan. The case was docketed in the
National Labor Relations Commission (NLRC), National Capital Region (NCR), Quezon City as NLRC NCR CASE NO.
00-05-04139-07.

On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a Decision, 7 decreeing as follows:

WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered directing
respondents to turn-over to complainant . . . the subject vehicle upon the said complainant's
payment to them of the sum of P100,435.84.

SO ORDERED. 8
 Ruling of the National Labor Relations Commission
On appeal, 9 the Labor Arbiter's Decision was reversed in a February 27, 2009 Decision 10 of the NLRC, thus:

WHEREFORE, premises considered, the appeal is hereby Granted. The assailed Decision dated
October 30, 2007 is hereby REVERSED and SET ASIDE and a new one entered ordering
respondent-appellee Mekeni Food Corporation to pay complainant-appellee the following:

1. Unpaid Salary in the amount of P12,511.45; TaCDAH

2. Unpaid sick leave/vacation leave pay in the amount of P14,789.15;

3. Unpaid commission in the amount of P9,780.00; and

4. Reimbursement of complainant's payment under the car plan agreement in the amount of
P112,500.00; and

5. The equivalent share of the company as part of the complainant's benefit under the car plan
50/50 sharing amounting to P112,500.00.

Respondent-Appellee Mekeni Food Corporation is hereby authorized to deduct the sum of

P4,736.50 representing complainant-appellant's cash advance from his total monetary award.

All other claims are dismissed for lack of merit.

SO ORDERED. 11

The NLRC held that petitioner's amortization payments on his service vehicle amounting to P112,500.00 should be
reimbursed; if not, unjust enrichment would result, as the vehicle remained in the possession and ownership of
Mekeni. In addition, the employer's share in the monthly car plan payments should likewise be awarded to petitioner
because it forms part of the latter's benefits under the car plan. It held further that Mekeni's claim that the company
car plan benefit applied only to employees who have been with the company for five years has not been
substantiated by its evidence, in which case the car plan agreement should be construed in petitioner's favor.

Mekeni moved to reconsider, but in an April 30, 2009 Resolution, 12 the NLRC sustained its original findings.

Ruling of the Court of Appeals

Mekeni filed a Petition for Certiorari 13 with the CA assailing the NLRC's February 27, 2009 Decision, saying that the
NLRC committed grave abuse of discretion in holding it liable to petitioner as it had no jurisdiction to resolve
petitioner's claims, which are civil in nature. AIcECS

On January 27, 2010, the CA issued the assailed Decision, decreeing as follows:

WHEREFORE, the petition for certiorari is GRANTED. The Decision of the National Labor
Relations Commission dated 27 February 2009, in NLRC NCR Case No. 00-05-04139-07, and
its Resolution dated 30 April 2009 denying reconsideration thereof, are MODIFIED in that the
reimbursement of Locsin's payment under the car plan in the amount of P112,500.00, and the
payment to him of Mekeni's 50% share in the amount of P112,500.00 are DELETED. The rest of
the decision is AFFIRMED.

SO ORDERED. 14

In arriving at the above conclusion, the CA held that the NLRC possessed jurisdiction over petitioner's claims,
including the amounts he paid under the car plan, since his Complaint against Mekeni is one for the payment of
salaries and employee benefits. With regard to the car plan arrangement, the CA applied the ruling in Elisco Tool
Manufacturing Corporation v. Court of Appeals, 15 where it was held that

First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in
question under a car plan for executives of the Elizalde group of companies. Under a typical car
plan, the company advances the purchase price of a car to be paid back by the employee
through monthly deductions from his salary. The company retains ownership of the motor
vehicle until it shall have been fully paid for. However, retention of registration of the car in the
company's name is only a form of a lien on the vehicle in the event that the employee would
abscond before he has fully paid for it, There are also stipulations in car plan agreements to the
 effect that should the employment of the employee concerned be terminated before all
installments are fully paid, the vehicle will be taken by the employer and all installments paid
shall be considered rentals per agreement. 16 cSITDa

In the absence of evidence as to the stipulations of the car plan arrangement between Mekeni and petitioner, the CA
treated petitioner's monthly contributions in the total amount of P112,500.00 as rentals for the use of his service
vehicle for the duration of his employment with Mekeni. The appellate court applied Articles 1484-1486 of the Civil
Code,17 and added that the installments paid by petitioner should not be returned to him inasmuch as the amounts
are not unconscionable. It made the following pronouncement:

Having used the car in question for the duration of his employment, it is but fair that all of
Locsin's payments be considered as rentals therefor which may be forfeited by Mekeni.
Therefore, Mekeni has no obligation to return these payments to Locsin. Conversely, Mekeni
has no right to demand the payment of the balance of the purchase price from Locsin since the
latter has already surrendered possession of the vehicle. 18

Moreover, the CA held that petitioner cannot recover Mekeni's corresponding share in the purchase price of the
service vehicle, as this would constitute unjust enrichment on the part of petitioner at Mekeni's expense.

The CA affirmed the NLRC judgment in all other respects. Petitioner filed his Motion for Partial
Reconsideration, 19 but the CA denied the same in its April 23, 2010 Resolution.

Thus, petitioner filed the instant Petition; Mekeni, on the other hand, took no further action.

Issue
Petitioner raises the following solitary issue:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN NOT
CONSIDERING THE CAR PLAN PRIVILEGE AS PART OF THE COMPENSATION
PACKAGE OFFERED TO PETITIONER AT THE INCEPTION OF HIS EMPLOYMENT AND
INSTEAD LIKENED IT TO A CAR LOAN ON INSTALLMENT, IN SPITE OF THE ABSENCE
OF EVIDENCE ON RECORD. 20 HTASIa

Petitioner's Arguments
In his Petition and Reply, 21 petitioner mainly argues that the CA erred in treating his monthly contributions to the
car plan, totaling P112,500.00, as rentals for the use of his service vehicle during his employment; the car plan which
he availed of was a benefit and it formed part of the package of economic benefits granted to him when he was hired
as Regional Sales Manager. Petitioner submits that this is shown by the Offer Sheet which was shown to him and
which became the basis for his decision to accept the offer and work for Mekeni.

Petitioner adds that the absence of documentary or other evidence showing the terms and conditions of the Mekeni
company car plan cannot justify a reliance on Mekeni's self-serving claims that the full terms thereof applied only to
employees who have been with the company for at least five years; in the absence of evidence, doubts should be
resolved in his favor pursuant to the policy of the law that affords protection to labor, as well as the principle that all
doubts should be construed to its benefit.

Finally, petitioner submits that the ruling in the Elisco Tool case cannot apply to his case because the car plan subject
of the said case involved a car loan, which his car plan benefit was not; it was part of his compensation package, and
the vehicle was an important component of his work which required constant and uninterrupted mobility. Petitioner
claims that the car plan was in fact more beneficial to Mekeni than to him; besides, he did not choose to avail of it, as
it was simply imposed upon him. He concludes that it is only just that his payments should be refunded and returned
to him.

Petitioner thus prays for the reversal of the assailed CA Decision and Resolution, and that the Court reinstate the
NLRC's February 27, 2009 Decision.

Respondent's Arguments
In its Comment, 22 Mekeni argues that the Petition does not raise questions of law, but merely of fact, which thus
requires the Court to review anew issues already passed upon by the CA an unauthorized exercise given that the
Supreme Court is not a trier of facts, nor is it its function to analyze or weigh the evidence of the parties all over
again. 23 It adds that the issue regarding the car plan and the conclusions of the CA drawn from the evidence on
record are questions of fact.

Mekeni asserts further that the service vehicle was merely a loan which had to be paid through the monthly salary
deductions. If it is not allowed to recover on the loan, this would constitute unjust enrichment on the part of
petitioner.

Our Ruling
The Petition is partially granted. ECaITc

To begin with, the Court notes that Mekeni did not file a similar petition questioning the CA Decision; thus, it is
deemed to have accepted what was decreed. The only issue that must be resolved in this Petition, then, is whether
petitioner is entitled to a refund of all the amounts applied to the cost of the service vehicle under the car plan.

When the conclusions of the CA are grounded entirely on speculation, surmises and conjectures, or when the
inferences made by it are manifestly mistaken or absurd, its findings are subject to review by this Court. 24

From the evidence on record, it is seen that the Mekeni car plan offered to petitioner was subject to no other term or
condition than that Mekeni shall cover one-half of its value, and petitioner shall in turn pay the other half through
deductions from his monthly salary. Mekeni has not shown, by documentary evidence or otherwise, that there are
other terms and conditions governing its car plan agreement with petitioner. There is no evidence to suggest that if
petitioner failed to completely cover one-half of the cost of the vehicle, then all the deductions from his salary going
to the cost of the vehicle will be treated as rentals for his use thereof while working with Mekeni, and shall not be
refunded. Indeed, there is no such stipulation or arrangement between them. Thus, the CA's reliance on Elisco Tool is
without basis, and its conclusions arrived at in the questioned decision are manifestly mistaken. To repeat what was
said in Elisco Tool

First. Petitioner does not deny that private respondent Rolando Lantan acquired the vehicle in
question under a car plan for executives of the Elizalde group of companies. Under a typical car
plan, the company advances the purchase price of a car to be paid back by the employee
through monthly deductions from his salary. The company retains ownership of the motor
vehicle until it shall have been fully paid for. However, retention of registration of the car in the
company's name is only a form of a lien on the vehicle in the event that the employee would
abscond before he has fully paid for it. There are also stipulations in car plan agreements to
the effect that should the employment of the employee concerned be terminated before
all installments are fully paid, the vehicle will be taken by the employer and all
installments paid shall be considered rentals per agreement. 25 (Emphasis supplied)

It was made clear in the above pronouncement that installments made on the car plan may be treated as rentals
only when there is an express stipulation in the car plan agreement to such effect. It was therefore patent error
for the appellate court to assume that, even in the absence of express stipulation, petitioner's payments on the
car plan may be considered as rentals which need not be returned.
Indeed, the Court cannot allow that payments made on the car plan should be forfeited by Mekeni and treated
simply as rentals for petitioner's use of the company service vehicle. Nor may they be retained by it as purported loan
payments, as it would have this Court believe. In the first place, there is precisely no stipulation to such effect in their
agreement. Secondly, it may not be said that the car plan arrangement between the parties was a benefit that the
petitioner enjoyed; on the contrary, it was an absolute necessity in Mekeni's business operations, which benefited it
to the fullest extent: without the service vehicle, petitioner would have been unable to rapidly cover the vast sales
territory assigned to him, and sales or marketing of Mekeni's products could not have been booked or made fast
enough to move Mekeni's inventory. Poor sales, inability to market Mekeni's products, a high rate of product
spoilage resulting from stagnant inventory, and poor monitoring of the sales territory are the necessary
consequences of lack of mobility. Without a service vehicle, petitioner would have been placed at the mercy of
inefficient and unreliable public transportation; his official schedule would have been dependent on the arrival and
departure times of buses or jeeps, not to mention the availability of seats in them. Clearly, without a service vehicle,
Mekeni's business could only prosper at a snail's pace, if not completely paralyzed. Its cost of doing business would
be higher as well. The Court expressed just such a view in the past. Thus

In the case at bar, the disallowance of the subject car plan benefits would hamper the
officials in the performance of their functions to promote and develop trade which requires
mobility in the performance of official business. Indeed, the car plan benefits are
 supportive of the implementation of the objectives and mission of the agency relative to
the nature of its operation and responsive to the exigencies of the service. 26 (Emphasis
supplied)

Any benefit or privilege enjoyed by petitioner from using the service vehicle was merely incidental and insignificant,
because for the most part the vehicle was under Mekeni's control and supervision. Free and complete disposal is
given to the petitioner only after the vehicle's cost is covered or paid in full. Until then, the vehicle remains at the
beck and call of Mekeni. Given the vast territory petitioner had to cover to be able to perform his work effectively
and generate business for his employer, the service vehicle was an absolute necessity, or else Mekeni's business
would suffer adversely. Thus, it is clear that while petitioner was paying for half of the vehicle's value, Mekeni was
reaping the full benefits from the use thereof.

In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to the car plan. Under Article 22
of the Civil Code,"[e]very person who through an act of performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall return the same to
him." Article 2142 27 of the same Code likewise clarifies that there are certain lawful, voluntary and unilateral acts
which give rise to the juridical relation of quasi-contract, to the end that no one shall be unjustly enriched or
benefited at the expense of another. In the absence of specific terms and conditions governing the car plan
arrangement between the petitioner and Mekeni, a quasi-contractual relation was created between them.
Consequently, Mekeni may not enrich itself by charging petitioner for the use of its vehicle which is otherwise
absolutely necessary to the full and effective promotion of its business. It may not, under the claim that petitioner's
payments constitute rents for the use of the company vehicle, refuse to refund what petitioner had paid, for the
reasons that the car plan did not carry such a condition; the subject vehicle is an old car that is substantially, if not
fully, depreciated; the car plan arrangement benefited Mekeni for the most part; and any personal benefit obtained
by petitioner from using the vehicle was merely incidental.

Conversely, petitioner cannot recover the monetary value of Mekeni's counterpart contribution to the cost of the
vehicle; that is not property or money that belongs to him, nor was it intended to be given to him in lieu of the car
plan. In other words, Mekeni's share of the vehicle's cost was not part of petitioner's compensation package. To start
with, the vehicle is an asset that belonged to Mekeni. Just as Mekeni is unjustly enriched by failing to refund
petitioner's payments, so should petitioner not be awarded the value of Mekeni's counterpart contribution to the car
plan, as this would unjustly enrich him at Mekeni's expense. CcHDaA

There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or
when a person retains money or property of another against the fundamental principles of
justice, equity and good conscience." The principle of unjust enrichment requires two
conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such
benefit is derived at the expense of another.

The main objective of the principle against unjust enrichment is to prevent one from enriching
himself at the expense of another without just cause or consideration. . . . 28

WHEREFORE, the Petition is GRANTED IN PART. The assailed January 27, 2010 Decision and April 23, 2010
Resolution of the Court of Appeals in CA-G.R. SP No. 109550 are MODIFIED, in that respondent Mekeni Food
Corporation is hereby ordered to REFUNDpetitioner Antonio Locsin II's payments under the car plan agreement in
the total amount of P112,500.00.

Thus, except for the counterpart or equivalent share of Mekeni Food Corporation in the car plan agreement
amounting to P112,500.00, which is DELETED, the February 27, 2009 Decision of the National Labor Relations
Commission is affirmed in all respects.

SO ORDERED.

Carpio, Brion, Perlas-Bernabe and Leonen, * JJ., concur.

SECOND DIVISION

[G.R. No. 132805. February 2, 1999.]

 PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER ROMULUS PROTACIO and DR. HERMINIO A. FABROS, respondents.

PAL Labor Affairs Department for petitioner.

David T. Paradero and Lamberto C. Fabros for Dr. Fabros.

SYNOPSIS

Private respondent was employed as flight surgeon at petitioner company Philippine Air Lines (PAL). He was
assigned at the PAL Medical Clinic at Nichols. On February 17, 1994, at around 7:00 in the evening, private
respondent left the clinic to have his dinner at his residence, which was about five minute-drive away. A few minutes
later, the clinic received an emergency call. The nurse on duty called private respondent at home to inform him of
the emergency. When private respondent reached the clinic around 7:50 in the evening, the nurse on duty had
already left with the patient. The patient died the following day. As a result, the Chief Flight Surgeon required private
respondent to explain why no disciplinary sanction should be taken against him. In his explanation, private
respondent asserted that he is entitled to a thirty-minute meal break; that he immediately left his residence after
being informed by the nurse about the emergency; that the nurse panicked and brought the patient to the hospital
without waiting for him. Finding his explanation unacceptable, the management charged private respondent with
abandonment of post while on duty. In his answer, private respondent denied the charge. He said that he only left his
clinic to have his dinner at home and he returned at 7:51 in the evening upon being informed of the emergency. After
evaluating the charge, as well as the answer of private respondent, petitioner company decided to suspend private
respondent for three months. Private respondent filed a complaint for illegal suspension against petitioner. The
Labor Arbiter rendered a decision finding the suspension illegal. Petitioner appealed to the NLRC. The NLRC
dismissed the appeal after finding that the decision of the Labor Arbiter is supported by the facts on record and the
law on the matter. Hence, the present petition. SIaHDA

The Supreme Court held that public respondent NLRC did not err in nullifying the three-month suspension of private
respondent. The NLRC, however, erred in awarding moral damages to private respondent. The Court ruled that the
facts do not support petitioner's allegation that private respondent abandoned his post on the evening of February
17, 1994. Private respondent left the clinic that night only to have his dinner at his house, only a few minutes drive
away, but his whereabouts were known to the nurse on duty so that he could easily be reached in case of emergency.
Upon being informed of the patient's condition, private respondent immediately left his home and returned to the
clinic. Said facts, according to the Court, belie petitioner's claim of abandonment. The Court also held that
employees are not prohibited from going out of the premises as long as they return to their post on time and that the
eight-hour work period does not include the meal break. The Court said that nowhere in the law may it be inferred
that employees must take their meals within the company premises. The Court deleted the award of moral damages
because of the absence of proof that petitioner was moved by evil motive in suspending private respondent. It
suspended private respondent on an honest, albeit erroneous, belief that private respondent's act constituted
abandonment of post which warrants the penalty of suspension.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; CONDITIONS OF EMPLOYMENT; HOURS OF WORK; THE EIGHT-HOUR
PERIOD DOES NOT INCLUDE THE MEAL BREAK; EMPLOYEES ARE NOT PROHIBITED FROM GOING OUT OF THE
PREMISES AS LONG AS THEY RETURN TO THEIR POST ON TIME. Petitioner argues that being a full-time
employee, private respondent is obliged to stay in the company premises for not less than eight (8) hours. Hence, he
may not leave the company premises during such time, even to take his meals. The eight-hour work period does not
include the meal break. Nowhere in the law may it be inferred that employees must take their meals within the
company premises. Employees are not prohibited from going out of the premises as long as they return to their
posts on time. Private respondent's act, therefore, of going home to take his dinner does not constitute
abandonment. aAHDIc

2. ID.; TERMINATION OF EMPLOYMENT; RIGHTS OF ILLEGALLY DISMISSED EMPLOYEES; AWARD OF MORAL

DAMAGES IN CASE AT BAR DELETED BY THE COURT; THERE IS NO SHOWING THAT PETITIONER COMPANY
WAS MOVED BY SOME EVIL MOTIVE IN SUSPENDING PRIVATE RESPONDENT; THE COMPANY ACTED ON AN
HONEST BELIEF THAT PRIVATE RESPONDENT'S ACT WARRANTS THE PENALTY OF SUSPENSION. Not every
employee who is illegally dismissed or suspended is entitled to damages. As a rule, moral damages are recoverable
only where the dismissal or suspension of the employee was attended by bad faith or fraud, or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. Bad faith does not
simply mean negligence or bad judgment. It involves a state of mind dominated by ill will or motive. It implies
a conscious and intentional design to do a wrongful act for a dishonest purpose or some moral obliquity. The person
claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always
presumes good faith. In the case at bar, there is no showing that the management of petitioner company was moved
by some evil motive in suspending private respondent. It suspended private respondent on an honest, albeit
erroneous, belief that private respondent's act of leaving the company premises to take his meal at home
constituted abandonment of post which warrants the penalty of suspension. Also, it is evident from the facts that
petitioner gave private respondent all the opportunity to refute the charge against him and to defend himself. These
negate the existence of bad faith on the part of petitioner. Under the circumstances, we hold that private respondent
is not entitled to moral damages. aHESCT

DECISION

PUNO, J p:

Petitioner Philippine Airlines, Inc. assails the decision of the National Labor Relations Commission dismissing its
appeal from the decision of Labor Arbiter Romulus S. Protacio which declared the suspension of private respondent
Dr. Herminio A. Fabros illegal and ordered petitioner to pay private respondent the amount equivalent to all the
benefits he should have received during his period of suspension plus P500,000.00 moral damages.

The facts are as follow:

Private respondent was employed as flight surgeon at petitioner company. He was assigned at the PAL Medical
Clinic at Nichols and was on duty from 4:00 in the afternoon until 12:00 midnight.

On February 17, 1994, at around 7:00 in the evening, private respondent left the clinic to have his dinner at his
residence, which was about five-minute drive away. A few minutes later, the clinic received an emergency call from
the PAL Cargo Services. One of its employees, Mr. Manuel Acosta, had suffered a heart attack. The nurse on duty,
Mr. Merlino Eusebio, called private respondent at home to inform him of the emergency. The patient arrived at the
clinic at 7:50 in the evening and Mr. Eusebio immediately rushed him to the hospital. When private respondent
reached the clinic at around 7:51 in the evening, Mr. Eusebio had already left with the patient. Mr. Acosta died the
following day.

Upon learning about the incident, PAL Medical Director Dr. Godofredo B. Banzon ordered the Chief Flight Surgeon
to conduct an investigation. The Chief Flight Surgeon, in turn, required private respondent to explain why no
disciplinary sanction should be taken against him.

In his explanation, private respondent asserted that he was entitled to a thirty-minute meal break; that he
immediately left his residence upon being informed by Mr. Eusebio about the emergency and he arrived at the clinic
a few minutes later; that Mr. Eusebio panicked and brought the patient to the hospital without waiting for him.

Finding private respondent's explanation unacceptable, the management charged private respondent with
abandonment of post while on duty. He was given ten days to submit a written answer to the administrative charge.

In his answer, private respondent reiterated the assertions in his previous explanation. He further denied that he
abandoned his post on February 17, 1994. He said that he only left the clinic to have his dinner at home. In fact, he
returned to the clinic at 7:51 in the evening upon being informed of the emergency.

After evaluating the charge as well as the answer of private respondent, petitioner company decided to suspend
private respondent for three months effective December 16, 1994.

Private respondent filed a complaint for illegal suspension against petitioner.

On July 16, 1996, Labor Arbiter Romulus A. Protasio rendered a decision 1 declaring the suspension of private
respondent illegal. It also ordered petitioner to pay private respondent the amount equivalent to all the benefits he
should have received during his period of suspension plus P500,000.00 moral damages. The dispositive portion of the
decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered declaring the
suspension of complainant as illegal, and ordering the respondents the restitution to the
complainant of all employment benefits equivalent to his period of suspension, and the
payment to the complainant of P500,000.00 by way of moral damages. 2

Petitioner appealed to the NLRC. The NLRC, however, dismissed the appeal after finding that the decision of the
Labor Arbiter is supported by the facts on record and the law on the matter. 3 The NLRC likewise denied petitioner's
motion for reconsideration. 4

Hence, this petition raising the following arguments:

1. The public respondents acted without or in excess of their jurisdiction and with grave abuse
of discretion in nullifying the 3-month suspension of private respondent despite the
fact that the private respondent has committed an offense that warranted the
imposition of disciplinary action.

2. The public respondents acted without or in excess of their jurisdiction and with grave abuse
of discretion in holding the petitioner liable for moral damages:

(a) Despite the fact that no formal hearing whatsoever was conducted for
complainant to substantiate his claim;

(b) Despite the absence of proof that the petitioner acted in bad faith in imposing the
3-month suspension; and

(c) Despite the fact that the Labor Arbiter's award of moral damages is highly
irregular, considering that it was more than what the private respondent
prayed for. 5

We find that public respondents did not err in nullifying the three-month suspension of private respondent. They,
however, erred in awarding moral damages to private respondent.

First, as regards the legality of private respondent's suspension. The facts do not support petitioner's allegation that
private respondent abandoned his post on the evening of February 17, 1994. Private respondent left the clinic that
night only to have his dinner at his house, which was only a few minutes' drive away from the clinic. His whereabouts
were known to the nurse on duty so that he could be easily reached in case of emergency. Upon being informed of
Mr. Acosta's condition, private respondent immediately left his home and returned to the clinic. These facts belie
petitioner's claim of abandonment.

Petitioner argues that being a full-time employee, private respondent is obliged to stay in the company premises for
not less than eight (8) hours. Hence, he may not leave the company premises during such time, even to take his
meals.

We are not impressed.

Articles 83 and 85 of the Labor Code read:

ARTICLE 83. Normal hours of work. The normal hours of work of any employee shall not
exceed eight (8) hours a day.

Health personnel in cities and municipalities with a population of at least one million
(1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred (100) shall
hold regular office hours for eight (8) hours a day, for five (5) days a week, exclusive of time for
meals, except where the exigencies of the service require that such personnel work for six (6)
days or forty-eight (48) hours, in which case they shall be entitled to an additional
compensation of at least thirty per cent (30%) of their regular wage for work on the sixth day.
For purposes of this Article, "health personnel" shall include: resident physicians, nurses,
 nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical
technicians, psychologists, midwives, attendants and all other hospital or clinic personnel.
(emphasis supplied)

ARTICLE 85. Meal periods. Subject to such regulations as the Secretary of Labor may
prescribe, it shall be the duty of every employer to give his employees not less than sixty (60)
minutes time-off for their regular meals.

Section 7, Rule I, Book III of the Omnibus Rules Implementing the Labor Code further states:

SECTION 7. Meal and Rest Periods. Every employer shall give his employees, regardless of
sex, not less than one (1) hour time-off for regular meals, except in the following cases when a
meal period of not less than twenty (20) minutes may be given by the employer provided that
such shorter meal period is credited as compensable hours worked of the employee;

(a) Where the work is non-manual work in nature or does not involve strenuous physical
exertion;

(b) Where the establishment regularly operates not less than sixteen hours a day;

(c) In cases of actual or impending emergencies or there is urgent work to be performed on

machineries, equipment or installations to avoid serious loss which the employer would
otherwise suffer; and

(d) Where the work is necessary to prevent serious loss of perishable goods.

Rest periods or coffee breaks running from five (5) to twenty (20) minutes shall be considered
as compensable working time.

Thus, the eight-hour work period does not include the meal break. Nowhere in the law may it be inferred that
employees must take their meals within the company premises. Employees are not prohibited from going out of the
premises as long as they return to their posts on time. Private respondent's act, therefore, of going home to take his
dinner does not constitute abandonment.

We now go to the award of moral damages to private respondent.

Not every employee who is illegally dismissed or suspended is entitled to damages. As a rule, moral damages are
recoverable only where the dismissal or suspension of the employee was attended by bad faith or fraud, or
constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public
policy. 6 Bad faith does not simply mean negligence or bad judgment. It involves a state of mind dominated by ill will
or motive. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or some moral
obliquity. 7 The person claiming moral damages must prove the existence of bad faith by clear and convincing
evidence for the law always presumes good faith. 8

In the case at bar, there is no showing that the management of petitioner company was moved by some evil motive
in suspending private respondent. It suspended private respondent on an honest, albeit erroneous, belief that private
respondent's act of leaving the company premises to take his meal at home constituted abandonment of post which
warrants the penalty of suspension. Also, it is evident from the facts that petitioner gave private respondent all the
opportunity to refute the charge against him and to defend himself. These negate the existence of bad faith on the
part of petitioner. Under the circumstances, we hold that private respondent is not entitled to moral damages.

IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The portion of the assailed decision awarding moral
damages to private respondent is DELETED. All other aspects of the decision are AFFIRMED.

SO ORDERED.

Bellosillo, Mendoza, Quisumbing and Buena, JJ., concur.

FIRST DIVISION

[G.R. No. 159577. May 3, 2006.]

 CHARLITO PEARANDA, petitioner, vs. BAGANGA PLYWOOD CORPORATION and
HUDSON CHUA, respondents.

DECISION

PANGANIBAN, C.J p:

Managerial employees and members of the managerial staff are exempted from the provisions of the Labor Code on
labor standards. Since petitioner belongs to this class of employees, he is not entitled to overtime pay and premium
pay for working on rest days.

The Case
Before us is a. Petition for Review 1 under Rule 45 of the Rules of Court, assailing the January 27, 2003 2 and July 4,
2003 3 Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 74358. The earlier Resolution disposed as follows:

"WHEREFORE, premises considered, the instant petition is hereby DISMISSED." 4

The latter Resolution denied reconsideration.

On the other hand, the Decision of the National Labor Relations Commission (NLRC) challenged in the CA disposed
as follows:

"WHEREFORE, premises con considered, the decision of the Labor Arbiter below awarding
overtime pay and premium pay for rest day to complainant is hereby REVERSED and SET
ASIDE, and the complaint in the above-entitled case, dismissed for lack of merit. 5

The Facts
Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of Baganga Plywood Corporation
(BPC) to take charge of the operations and maintenance of its steam plant boiler. 6 In May 2001, Pearanda filed a
Complaint for illegal dismissal with money claims against BPC and its general manager, Hudson Chua, before the
NLRC. 7

After the parties failed to settle amicably, the labor arbiter 8 directed the parties to file their position papers and
submit supporting documents. 9 Their respective allegations are summarized by the labor arbiter as follows:

"[Pearanda] through counsel in his position paper alleges that he was employed by
respondent [Banganga] on March 15, 1999 with a monthly salary of P5,000.00 as
Foreman/Boiler Head/Shift Engineer until he was illegally terminated on December 19, 2000.
Further, [he] alleges that his services [were] terminated without the benefit of due process and
valid grounds in accordance with law. Furthermore, he was not paid his overtime pay, premium
pay for working during holidays/rest days, night shift differentials and finally claimed for
payment of damages and attorney's fees having been forced to litigate the present
complaint. SITCEA

"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing
under Philippine laws and is represented herein by its General Manager HUDSON CHUA, [the]
individual respondent. Respondents thru counsel allege that complainant's separation from
service was done pursuant to Art. 283 of the Labor Code. The respondent [BPC] was on
temporary closure due to repair and general maintenance and it applied for clearance with the
Department of Labor and Employment, Regional Office No. XI to shut down and to dismiss
employees (par. 2 position paper). And due to the insistence of herein complainant he was paid
his separation benefits (Annexes C and D, ibid). Consequently, when respondent [BPC] partially
reopened in January 2001, [Pearanda] failed to reapply. Hence, he was, not terminated from
employment much less illegally. He opted to severe employment when he insisted payment of
his separation benefits. Furthermore, being a managerial employee he is not entitled to
overtime pay and if ever he rendered services beyond the normal hours of work, [there] was no
office order/or authorization for him to do so. Finally, respondents allege that the claim for
 damages has no legal and factual basis and that they instant complaint must necessarily fail for
lack of merit.'' 10

The labor arbiter ruled that there was no illegal dismissal and that petitioner's Complaint was premature because he
was still employed by BPC. 11 The temporary closure of BPC's plant did not terminate his employment, hence, he
need not reapply when the plant reopened.

According to the labor arbiter, petitioner's money claims for illegal dismissal was also weakened by his quitclaim and
admission during the clarificatory conference that he accepted separation benefits, sick and vacation leave
conversions and thirteenth month pay. 12

Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on rest days, and
attorney's fees in the total amount of P21,257.98. 13

Ruling of the NLRC

Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium pay for working on
rest days. According to the Commission, petitioner was not entitled to these awards because he was a managerial
employee. 14

Ruling of the Court of Appeals

In its Resolution dated January 27, 2003, the CA dismissed Pearanda's Petition for Certiorari. The appellate court
held that he failed to: 1) attach copies of the pleading submitted before the labor arbiter and NLRC; and 2) explain
why the filing and service of the Petition was not done by personal service. 15

In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that petitioner still failed to
submit the pleadings filed before the NLRC. 16

Hence this Petition. 17

The Issues
Petitioner states the issues in this wise:

"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction
when it entertained the APPEAL of the respondent[s] despite the lapse of the mandatory
period of TEN DAYS.

"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of

jurisdiction when it rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST 16,
2002 REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor
arbiter] with respect to the following:

"I. The finding of the [labor arbiter] that [Pearanda] is a regular, common employee
entitled to monetary benefits under Art. 82 [of the Labor Code].

"II. The finding that [Pearanda] is entitled to the payment of OVERTIME PAY and
OTHER MONETARY BENEFITS." 18

The Court's Ruling

The Petition is not meritorious.

Preliminary Issue:
Resolution on the Merits
The CA dismissed Pearanda's Petition on purely technical grounds particularly with regard to the failure to submit
supporting documents. CHATcE

In Atillo v. Bombay, 19 the Court held that the crucial issue is whether the documents accompanying the petition
before the CA sufficiently supported the allegations therein. Citing this case, Piglas Kamao v. NLRC 20 stayed the
dismissal of an appeal in the exercise of its equity jurisdiction to order the adjudication on the merits.

The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to challenge the finding that
he was a managerial employee. 21 IN his Motion for Reconsideration, petitioner also submitted the pleadings before
the labor arbiter in an attempt to comply with the CA rules. 22 Evidently, the CA could have ruled on the Petition on
the basis of these attachments. Petitioner should be deemed in substantial compliance with the procedural
requirements.

Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of petitioner and to
tackle his substantive arguments in the present case. Rules of procedure must be adopted to help promote, not
frustrate, substantial justice. 23 The Court frowns upon the practice of dismissing cases purely on procedural
grounds. 24 Considering that there was substantial compliance, 25 a liberal interpretation of procedural rules in this
labor case is more in keeping with the constitutional mandate to secure social justice. 26

First Issue:
Timeliness of Appeal
Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should he filed within 10
days from receipt thereof. 27

Petitioner's claim that respondents filed their appeal beyond the required period is not substantiated. In the
pleadings before us, petitioner fails to indicate when respondents received the Decision of the labor arbiter. Neither
did the petitioner attach a copy of the challenged appeal. Thus, this Court has no means to determine from the
records when the 10-day period commenced and terminated. Since petitioner utterly failed to support his claim that
respondents' appeal was filed out of time, we need not belabor that point. The parties alleging have the burden of
substantiating their allegations. 28

Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and therefore, entitled to the award granted by the labor
arbiter.

Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards. Labor standards
provide the working conditions of employees, including entitlement to overtime pay and premium pay for working
on rest days. 29 Under this provision, managerial employees are "those whose primary duty consists of the
management of the establishment in which they are employed or of a department or subdivision." 30

The Implementing Rules of the Labor Code state that managerial employees are those who meet the following
conditions:

"(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof;

"(2) They customarily and regularly direct the work of two or more employees therein;

"(3) They have the authority to hire or fire other employees of lower rank; or their suggestions
and recommendations as to the hiring and firing and as to the promotion or any other change
of status of other employees are given particular weight." 31

The Court disagrees with the NLRC's finding that petitioner was a managerial employee. However, petitioner was a
member of the managerial staff, which also takes him out of the coverage of labor standards. Like managerial
employees, officers and member of the managerial staff are not entitled to the provisions of law on labor
standards. 32 The Implementing Rules of the Labor Code define members of a managerial staff as those with the
following duties and responsibilities:

"(1) The primary duty consists of the performance of work directly related to management
policies of the employer; TSacID

"(2) Customarily and regularly exercise discretion and independent judgment;

"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary duty
consists of the management of the establishment in which he is employed or subdivision
thereof; or (ii) execute under general supervision work along specialized or technical lines
requiring special training, experience, or knowledge; or (iii) execute under general supervision
special assignments and tasks; and
 "(4) who do not devote more than 20 percent of their hours worked in a workweek to activities
which are not directly and closely related to the performance of the work described in
paragraphs (1), (2), and (3) above." 33

"1. To supply the required and continuous steam to all consuming units at minimum cost.

"2. To supervise, check and monitor manpower workmanship as well as operation of boiler and
accessories.

"3. To evaluate performance of machinery and manpower.

"4. To follow-up supply of waste and other materials for fuel.

"5. To train new employees for effective and safety white working.

"6. Recommend parts and suppliers purchases.

"7. To recommend personnel actions such as: promotion, or disciplinary action.

"8. To check water from the boiler, feedwater and softener, regenerate softener if beyond
hardness limit.

"9. Implement Chemical Dosing.

"10. Perform other task as required by the superior from time to time." 34

The foregoing enumeration, particularly items, 1, 2, 3, 5 and 7 illustrates that petitioner was a member of the
managerial staff. His duties and responsibilities conform to the definition of a member of a managerial staff under
the Implementing Rules.

Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the operation
of the machines and the performance of the workers in the engineering section. This work necessarily required the
use of discretion and independent judgment to ensure the proper functioning of the steam plant boiler. As
supervisor, petitioner is deemed a member of the managerial staff. 35

Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that he was the
foreman responsible for the operation of the boiler. 36 The term foreman implies that he was the representative of
management over the workers and the operation of the department. 37 Petitioner's evidence also showed that he
was the supervisor of the steam plant. 38 His classification as supervisors is further evident from the manner his
salary was paid. He belonged to the 10% of respondent's 354 employees who were paid on a monthly basis; the
others were paid only on a daily basis. 39

On the basis of the foregoing, the Court finds no justification to award overtime pay and premium pay for rest days
to petitioner.

WHEREFORE, the Petition is DENIED. Costs against petitioner.

SO ORDERED.

Ynares-Santiago, Austria-Martinez and Callejo, Sr., JJ., concur.

Chico-Nazario, J., is on official leave.

SECOND DIVISION

[G.R. No. 177845. August 20, 2014.]

GRACE CHRISTIAN HIGH SCHOOL, represented by its Principal, DR. JAMES

TAN, petitioner, vs. FILIPINAS A. LAVANDERA, respondent.
DECISION

PERLAS-BERNABE, J p:

Assailed in this petition for review on certiorari 1 is the Decision 2 dated April 30, 2007 of the Court of Appeals (CA) in
CA-G.R. SP. No. 75958 which affirmed with modification the Decision 3 dated August 30, 2002 of the National Labor
Relations Commission (NLRC) in NLRC CA No. 031739-02, applying the 22.5-day multiplier in computing respondent
Filipinas A. Lavandera's (Filipinas) retirement benefits differential, with legal interest reckoned from the filing date of
the latter's illegal dismissal complaint.

The Facts
Filipinas was employed by petitioner Grace Christian High School (GCHS) as high school teacher since June 1977,
with a monthly salary of P18,662.00 as of May 31, 2001. 4

On August 30, 2001, 5 Filipinas filed a complaint for illegal (constructive) dismissal, non-payment of service incentive
leave (SIL) pay, separation pay, service allowance, damages, and attorney's fees against GCHS 6 and/or its
principal, 7 Dr. James Tan. She alleged that on May 11, 2001, she was informed that her services were to be
terminated effective May 31, 2001, pursuant to GCHS' retirement plan which gives the school the option to retire a
teacher who has rendered at least 20 years of service, regardless of age, with a retirement pay of one-half (1/2)
month for every year of service. At that time, Filipinas was only 58 years old and still physically fit to work. She
pleaded with GCHS to allow her to continue teaching but her services were terminated, 8 contrary to the provisions
of Republic Act No. (RA) 7641, 9 otherwise known as the "Retirement Pay Law."

For their part, GCHS denied that they illegally dismissed Filipinas. They asserted that the latter was considered
retired on May 31, 1997 after having rendered 20 years of service pursuant to GCHS' retirement plan and that she was
duly advised that her retirement benefits in the amount of P136,210.00 based on her salary at the time of
retirement, i.e., P13,621.00, had been deposited to the trustee-bank in her name. Nonetheless, her services were
retained on a yearly basis until May 11, 2001 when she was informed that her year-to-year contract would no longer
be renewed. 10

The LA Ruling
In a Decision 11 dated March 26, 2002, the Labor Arbiter (LA) dismissed the illegal dismissal complaint for lack of
merit.

The LA found that GCHS has a retirement plan for its faculty and non-faculty members which pertinently provides:

ARTICLE X

RETIREMENT DATES 12

Section 1. Normal Retirement Date. For qualified members of the Plans, the normal
retirement date shall be the last day of the month during which he attains age sixty (60)
regardless of length of service or upon completion of 20 years of service unless extended at
the option of the School. Such extension is subject to the approval of the School on a case
to case and year to year basis. The School reserves the right to require an employee before it
approves his application for an extension of service beyond the normal retirement date, to
have a licensed physician appointed by the School, certify that the employee concerned has no
physical and/or mental impediments which will prevent the employee from performing the
duties in the School. 13 (Emphasis supplied)

Consequently, the LA ruled that Filipinas was not terminated from employment but was considered retired 14 as of
May 31, 1997 after rendering 20 years of service 15 and was only allowed by GCHS to continue teaching on a year-to-
year basis (until May 31, 2001) in the exercise of its option to do so under the aforementioned retirement plan until
she was informed that her contract would not be renewed. 16

Nonetheless, the LA found the retirement benefits payable under GCHS retirement plan to be deficient vis--vis
those provided under RA 7641, 17 and, accordingly, awarded Filipinas retirement pay differentials based on
her latest salary as follows:
P18,662.00/30 = P622.06/day

P622.06 x 22.5 = P13,996.35 x 20 = P279,927.00

- P136,210.00

P143,717.00 18

===========

The LA, however, denied Filipinas' claims for service allowance, salary increase, and damages for lack of sufficient
bases, but awarded her attorney's fees equivalent to five percent (5%) of the total award, or the amount of
P7,185.85. 19

Dissatisfied, GCHS filed an appeal before the NLRC.

The NLRC Ruling

In a Decision 20 dated August 30, 2002 (August 30, 2002 Decision), the NLRC set aside the LA's award, and ruled that
Filipinas' retirement pay should be computed based on her monthly salary at the time of her retirement on May 31,
1997, i.e., P13,621.00. Moreover, it held that under Article 287 of the Labor Code,as amended by RA 7641, the
retirement package consists of 15 days salary, plus 13th month pay and SIL pay pro-rated to their one-twelfth (1/12)
equivalent. 21

In view of the foregoing, the NLRC awarded Filipinas retirement pay differentials in the amount of P27,057.20
consisting of one-twelfth (1/12) of the 13th month pay and SIL pay based on her salary at the time of her retirement
on May 31, 1997, or P13,621.00 multiplied by 20 years. It, however, deleted the award of attorney's fees for failure of
Filipinas to show that GCHS had unreasonably and in bad faith refused to pay her retirement benefits. 22

Aggrieved, Filipinas filed a petition for certiorari before the CA.

The CA Ruling
In a Decision 23 dated April 30, 2007, the CA affirmed with modification the NLRC's Decision. It held that the Court,
in the case of Capitol Wireless, Inc. v. Sec. Confesor, 24 has simplified the computation of "one-half month salary" by
equating it to "22.5 days" which is "arrived at after adding 15 days plus 2.5 days representing one-twelfth of the 13th
month pay, plus 5 days of [SIL]." 25Accordingly, it computed Filipinas' retirement benefits differential as
follows: EcHTCD

Monthly salary P13,624.00 26

30 days 30 days

Daily rate 454.13 27

x 22.5 days x 22.5 days

1/2 month salary 28 P10,218.00

x 20 years x 20 years

Total amount of retirement benefits P204,360.00

- Amount deposited in trust 136,210.00



Retirement benefits differential P68,150.00 29

==========

The CA further imposed legal interest at the rate of six percent (6%) per annum on the award reckoned from the date
of the filing of the illegal dismissal complaint until actual payment 30 pursuant to the Court's Decision in Manuel L.
Quezon University v. NLRC (MLQU v. NLRC). 31

Unperturbed, GCHS filed the instant petition.

The Issue before the Court

The essential issue in this case is whether or not the CA committed reversible error in using the multiplier "22.5. days"
in computing the retirement pay differentials of Filipinas.

The Court's Ruling

The petition is bereft of merit.

RA 7641, which was enacted on December 9, 1992, amended Article 287 of the Labor Code,providing for the rules on
retirement pay to qualified private sector employees in the absence of any retirement plan in the establishment. The
said law 32 states that "an employee's retirement benefits under any collective bargaining [agreement (CBA)] and
other agreements shall not be less than those provided" under the same that is, at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6) months being considered as one whole year and that
"[u]nless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days
plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service
incentive leaves."

The foregoing provision is applicable where (a) there is no CBA or other applicable agreement providing for
retirement benefits to employees, or (b) there is a CBA or other applicable agreement providing for retirement
benefits but it is below the requirement set by law. 33 Verily, the determining factor in choosing which retirement
scheme to apply is still superiority in terms of benefits provided. 34

In the present case, GCHS has a retirement plan for its faculty and non-faculty members, which gives it the option to
retire a teacher who has rendered at least 20 years of service, regardless of age, with a retirement pay of one-half
(1/2) month for every year of service. Considering, however, that GCHS computed Filipinas' retirement pay without
including one-twelfth (1/12) of her 13th month pay and the cash equivalent of her five (5) days SIL, both the NLRC
and the CA correctly ruled that Filipinas' retirement benefits should be computed in accordance with Article 287 of
the Labor Code,as amended by RA 7641, being the more beneficent retirement scheme. They differ, however, in the
resulting benefit differentials due to divergent interpretations of the term "one-half (1/2) month salary" as used
under the law.

The Court, in the case of Elegir v. Philippine Airlines, Inc., 35 has recently affirmed that "one-half (1/2) month salary
means 22.5 days: 15 days plus 2.5 days representing one-twelfth (1/12) of the 13th month pay and the remaining
5 days for [SIL]." 36 The Court sees no reason to depart from this interpretation. GCHS' argument 37 therefore that
the 5 days SIL should be likewise pro-rated to their 1/12 equivalent must fail. ECcTaH

Section 5.2, Rule II 38 of the Implementing Rules of Book VI of the Labor Code,as amended, promulgated to
implement RA 7641, further clarifies what comprises the "1/2 month salary" due a retiring employee, to wit:

RULE II

Retirement Benefits

xxx xxx xxx

SEC. 5. Retirement Benefits.

xxx xxx xxx

 5.2 Components of One-half (1/2) Month Salary. For the purpose of determining the
minimum retirement pay due an employee under this Rule, the term "one-half month salary"
shall include all the following:

(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein,
the term "salary" includes all remunerations paid by an employer to his employees for services
rendered during normal working days and hours, whether such payments are fixed or
ascertained on a time, task, piece or commission basis, or other method of calculating the
same, and includes the fair and reasonable value, as determined by the Secretary of Labor and
Employment, of food, lodging or other facilities customarily furnished by the employer to his
employees. The term does not include cost of living allowance, profit-sharing payments and
other monetary benefits which are not considered as part of or integrated into the regular
salary of the employees.

(b) The cash equivalent of not more than five (5) days of service incentive leave;

(c) One-twelfth of the 13th month pay due the employee.

(d) All other benefits that the employer and employee may agree upon that should be included
in the computation of the employee's retirement pay.

xxx xxx xxx (Emphases supplied)

The foregoing rules are, thus, clear that the whole 5 days of SIL are included in the computation of a retiring
employees' pay, 39 as correctly ruled by the CA.

Nonetheless, the Court finds that the award of legal interest at the rate of 6% per annum on the amount of
P68,150.00 representing the retirement pay differentials due Filipinas should be reckoned from the rendition of the
LA's Decision on March 26, 2002 and not from the filing of the illegal dismissal complaint as ordered by the
CA, 40 in accordance with the ruling in Eastern Shipping Lines, Inc. v. CA 41 (Eastern Shipping). Unlike in MLQU v.
NLRC, where the retired teachers sued for the payment of the deficiency in their retirement benefits, Filipinas'
complaint was for illegal (constructive) dismissal, and the obligation to provide retirement pay was only
determined upon the rendition of the LA's Decision, which also found the same to be deficient vis--vis those
provided under RA 7641. As such, it is only from the date of the LA's Decision that GCHS' obligation to pay Filipinas
her retirement pay differentials may be deemed to have been reasonably ascertained and its payment legally
adjudged to be due, although the actual base for the computation of legal interest shall be on the amount finally
adjudged. As held in the Eastern Shipping case: 42

When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the
demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged. (Emphases supplied) TcCEDS

WHEREFORE, the petition is DENIED. The Decision dated April 30, 2007 of the Court of Appeals in CA-G.R. SP. No.
75958 is hereby AFFIRMED with MODIFICATION that the legal interest at the rate of six percent (6%) per annum on
the amount of P68,150.00 representing the retirement pay differentials payable by petitioner Grace Christian High
School to respondent Filipinas A. Lavandera shall be reckoned from the promulgation of the Labor Arbiter's Decision
on March 26, 2002 until full payment.

SO ORDERED.

Carpio, Velasco, Jr., * Del Castillo and Perez, JJ., concur.