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Petitioners Ferdinand Palomares and Teodulo Mutia were hired by respondent National Steel Corporation (NSC) by
virtue of contracts of employment for its Five Year Expansion Program or FYEP, Phase I and II-A, for varying lengths of
Petitioners, along with other employees, filed a consolidated petition for regularization, wage differential, CBA coverage
and other benefits.[2] In his decision dated April 29, 1992, Labor Arbiter Nicodemus G. Palangan ordered the dismissal of
the complaint with respect to 26 complainants but ruled in favor of petitioners. Palomares, Mutia and four other
complainants were adjudged as regular employees of respondent corporation. The dispositive portion of his decision
WHEREFORE, premises considered, the petition for regularization as well as the monetary benefits of the above-named
complainants are hereby ordered DISMISSED for lack of merit except six complainants stated below.

For the complainants who were terminated during the pendency of these cases the respondent is hereby ordered to pay
them separation pay equivalent to one month salary for those who have rendered one or two years of service and three
months salary for those who have served the company for at least 5 years.
For complainants Edgardo Pongase, Aquiles Colita, Lolinio Solatorio, Ferdinand Palomares, Teodulo Mutia, and Rodolfo
Leopoldo, this office consider (sic) them as regular employees for reason that the activities they performed are regular,
and necessary in the usual trade or course of business of the company.
Respondent is likewise ordered to pay these regular employees their salary differential to be computed three years back
from the filing of these complaints.
On appeal, the NLRC reversed the findings of the Labor Arbiter in a decision dated November 23, 1994. Respondent
Commission held that petitioners were project employees and that their assumption of regular jobs were mainly due to
peakloads or the absence of regular employees during the latters temporary leave.[4] After their motion for
reconsideration was denied on March 30, 1995,[5] petitioners filed this petition. The Court finds that petitioners failed to
show any grave abuse of discretion on the part of the NLRC in rendering its questioned decision and resolutions of
November 23, 1994 and March 30, 1995, respectively.
ISSUE: WON the employment was on a fixed term basis.
Article 280 of the Labor Code, the law on the subject of regular employment, reads:
The provisions of the written agreement to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service, whether such service is continuous or broken shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such actually exists. (Emphasis added).
The principal test for determining whether an employee is a project employee and not a regular employee is whether he
was assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time
he was engaged for that project.
It is quite evident that petitioners were employed for a specific project or projects undertaken by respondent
corporation. The component projects of the latters Five Year Expansion Program include the setting up of a Cold Rolling
Mill Expansion Project, establishing a Billet Steel-Making Plant, installation of a Five Stand TDM and Cold Mill Peripherals
Project. In the case of ALU-TUCP v. NLRC, we held that the same Five Year Expansion Program (or more precisely, each of
its component projects) constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC,
which is the production and marketing of steel products. Even if, as admitted by the parties, petitioners were repeatedly
and successively re-hired on the basis of a contract of employment for more than one year, they cannot be considered
regularized. Length of service is not the controlling determinant of the employment tenure of a project employee. [16] As
stated earlier, it is based on whether or not the employment has been fixed for a specific project or undertaking, the
completion of which has been determined at the time of the engagement of the employee. Furthermore, the second
paragraph of Article 280, providing that an employee who has rendered service for at least one (1) year, shall be
considered a regular employee, pertains to casual employees and not to project employees such as petitioners.
The petitioner Philips Semiconductors (Phils.), Inc. is a domestic corporation engaged in the production and assembly of
semiconductors such as power devices, RF modules, CATV modules, RF and metal transistors and glass diods. It caters to
domestic and foreign corporations that manufacture computers, telecommunications equipment and cars.
Aside from contractual employees, the petitioner employed 1,029 regular workers. The employees were subjected to
periodic performance appraisal based on output, quality, attendance and work attitude.[2]One was required to obtain a
performance rating of at least 3.0 for the period covered by the performance appraisal to maintain good standing as an
On May 8, 1992, respondent Eloisa Fadriquela executed a Contract of Employment with the petitioner in which she was
hired as a production operator with a daily salary of P118. Her initial contract was for a period of three months up
to August 8, 1992,[3] but was extended for two months when she garnered a performance rating of 3.15.[4] Her contract
was again renewed for two months or up to December 16, 1992,[5] when she received a performance rating of
3.8.[6] After the expiration of her third contract, it was extended anew, for three months,[7] that is, from January 4,
1993 to April 4, 1993.
After garnering a performance rating of 3.4,[8] the respondents contract was extended for another three months, that is,
from April 5, 1993 to June 4, 1993.[9] She, however, incurred five absences in the month of April, three absences in the
month of May and four absences in the month of June.[10] Line supervisor Shirley F. Velayo asked the respondent why
she incurred the said absences, but the latter failed to explain her side. The respondent was warned that if she offered
no valid justification for her absences, Velayo would have no other recourse but to recommend the non-renewal of her
contract. The respondent still failed to respond, as a consequence of which her performance rating declined to
2.8. Velayo recommended to the petitioner that the respondents employment be terminated due to habitual
absenteeism,[11]in accordance with the Company Rules and Regulations.[12] Thus, the respondents contract of
employment was no longer renewed.
The respondent filed a complaint before the National Capital Region Arbitration Branch of the National Labor Relations
Commission (NLRC) for illegal dismissal against the petitioner, docketed as NLRC Case No. NCR-07-04263-93. She
alleged, inter alia, that she was illegally dismissed, as there was no valid cause for the termination of her
employment. She was not notified of any infractions she allegedly committed; neither was she accorded a chance to be
heard. According to the respondent, the petitioner did not conduct any formal investigation before her employment was
terminated. Furthermore, considering that she had rendered more than six months of service to the petitioner, she was
already a regular employee and could not be terminated without any justifiable cause. Moreover, her absences were
covered by the proper authorizations.[13]
On the other hand, the petitioner contended that the respondent had not been dismissed, but that her contract of
employment for the period of April 4, 1993 to June 4, 1993 merely expired and was no longer renewed because of her
low performance rating. Hence, there was no need for a notice or investigation. Furthermore, the respondent had
already accumulated five unauthorized absences which led to the deterioration of her performance, and ultimately
caused the non-renewal of her contract. On June 26, 1997, the Labor Arbiter rendered a decision dismissing the
complaint for lack of merit. On October 11, 1999, the appellate court rendered a decision reversing the decisions of the
NLRC and the Labor Arbiter and granting the respondents petition.
ISSUE: WON the petitioners are still contractual employees whose employment was fixed.
RULING: No, the petitioners became regular employees.
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and
regardless of the oral argument of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.
he two kinds of regular employees under the law are (1) those engaged to perform activities which are necessary or
desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one
year of service, whether continuous or broken, with respect to the activities in which they are employed. [20] The primary
standard to determine a regular employment is the reasonable connection between the particular activity performed by
the employee in relation to the business or trade of the employer. The test is whether the former is usually necessary or
desirable in the usual business or trade of the employer. In this case, the respondent was employed by the petitioner
on May 8, 1992 as production operator. She was assigned to wirebuilding at the transistor division. There is no dispute
that the work of the respondent was necessary or desirable in the business or trade of the petitioner.[24] She remained
under the employ of the petitioner without any interruption since May 8, 1992 to June 4, 1993 or for one (1) year and
twenty-eight (28) days. The original contract of employment had been extended or renewed for four times, to the same
position, with the same chores. Such a continuing need for the services of the respondent is sufficient evidence of the
necessity and indispensability of her services to the petitioners business. While at the start, petitioner was just a mere
contractual employee, she became a regular employee as soon as she had completed one year of service. It is not
difficult to see that to uphold the contractual arrangement between private respondent and petitioner would, in effect,
be to permit employers to avoid the necessity of hiring regular or permanent employees. By hiring employees
indefinitely on a temporary or casual status, employers deny their right to security of tenure. This is not sanctioned by
law. [34]
Even then, the petitioners reliance on the CBA is misplaced. For, as ratiocinated by the appellate court in its assailed
Obviously, it is the express mandate of the CBA not to include contractual employees within its coverage. Such being the
case, we see no reason why an agreement between the representative union and private respondent, delaying the
regularization of contractual employees, should bind petitioner as well as other contractual employees. Indeed, nothing
could be more unjust than to exclude contractual employees from the benefits of the CBA on the premise that the same
contains an exclusionary clause while at the same time invoke a collateral agreement entered into between the parties
to the CBA to prevent a contractual employee from attaining the status of a regular employee.
These refer to the consolidated cases for payment of separation pay lodged by [the] Lubat Group, and for illegal
dismissal and underpayment of separation pay by [the] Luris group, with prayers for damages and attorneys fees against
the above respondents.
The record reveals that all complainants in both cases were former workers of respondent with their respective periods
of employment and latest wages stated in the parties pleadings/[a]nnexes.
On August 1, 1994, due to supposed serious financial reverses and losses suffered by respondent and its desire to
prevent further losses, a notice of permanent closure of its red[r]ying operations at Balintawak, Quezon City and transfer
[of] the same to Candon, Ilocos Sur was served to the DOLE.
On August 3, 1994, complainants were also notified of the said decision to close and transfer.
On August 16, 1994, their separation benefits were given to them but allegedly [based on] wrong computation when
management did not consider 3/4 of their length of service as claimed by complainants (Luris group).
While the Lubat group were not granted xxx separation pay as their previous seasonal service [was] not continuous, and
as of August, 1994, they were not employed ther[e]with as declared by respondent.
Based on the complaint and from the above facts, the issues are as follows:
1) Whether or not the Lubat Group are entitled to the payment of separation pay[;]
2) Whether or not the Luris Group can be legally awarded separation pay differentials[,] or whether or not the
computation adopted by respondent in granting complainants separation pay is erroneous[;] and
3) Whether or not the Luris group can be properly allowed backwages and damages by reason of their alleged illegal
dismissal, and for both groups, attorneys fees[.]
In [its] position paper respondent maintains that [the] Lubat group are not entitled to separation pay for the reason that
they were not among those separated or could not have been separated from employment on August 3, 1994 due to
such closure and transfer as they were not employed or did not report for work at the plant for the 1994 tobacco season
as shown by [the] companys records.
As to the Luris group, although being questioned by this group, respondent considers the following formula in
determining the length of service in years as basis for computing the separation pay of this group to be fair and
reasonable and xxx supported by Article 283 of the Labor Code, as amended, such as the total number of working days
actually worked over total number of working days in a year (303 days), multipl[ied] by the daily rate and further
multipl[ied] by 15 days.
Respondent explains that this is so because complainants nature of work is seasonal as they are employed every year
only during the tobacco season which may fall within the months of February to November but actually work for a
period of less [than] six (6) months for each season. The law qualifies tenure for purposes of separation benefits as
based on service and not employment.
With these considerations, respondent claims that complainants relief for separation pay differentials must fail.
On the charge of illegal dismissal by the Luris group, respondent asserts that complainants were separated from
employment for [a] just cause that is the closure of its REDRYING operations at the Balintawak plant and the transfer of
the same to Candon, Ilocos Sur which was authorized by the law and the parties CBA.
The decision of management to close and transfer its tobacco processing and REDRYING operations was based on the
fact that it had consistently incurred a net loss from these operations, its principal line of business, although its audited
financial statement showed a net profit after tax from 1990 to 1993 based on over-all operations.
Moreover, respondent points out that as the Luris group and the DOLE were served a written notice at least one (1)
month before the intended date of closure effective on Sept. 15, 1994, the due process requirement was met.
Viewed from the above, respondent cannot prosper.
On the other hand, the Lubat group declare that originally there were seven complainants but eight were added.
Being seasonal workers, they were hired by respondent to operate the Balintawak factory from January to September,
averaging 6 to 8 months annually.
As alleged by them, when they reported for their annual shift, respondent refused to extend them assignment for no
apparent reason up to the end of the season in August, 1994. When they ask[ed] for separation pay, respondent told
them that because they were not in the payroll for 1994, no such benefit would be paid to them.
It is their contention that complainants are entitled to separation pay [of] at least one-half month pay for every year of
service[,] as they were illegally dismissed[,] to be computed each season ranging from 6 to 8 months [which] should be
considered as one year, contrary to the respondents basis which is the total no. of days they actually rendered service.
To back up the above, complainants cite a case wherein the Supreme Court held that seasonal employees are not strictly
speaking, separated from the service but merely considered on leave of absence without pay until reemployed. Their
employment relationship is never severed but only suspended.
For the prosecution of this case, complainants were forced to hire the services of counsel for which they claim xxx
attorneys fees.
As far as the Luris group are concerned, they state that they were factory workers of respondents numbering one
hundred (100) whose names, periods of employment and latest salaries are contained in the lists attached to their
position paper.
As claimed by this group, on August 3, 1994, respondents told them that their services were already terminated and all
of them dismissed as the factory would be transferred to Candon, Ilocos Sur.
Letter-notices dated August 3, 1994, (Annexes F, F-1 and F-2 to their position paper) showing that the date when they
were notified of the closure was the same date they were instantly dismissed although it is admitted in the notice that
their decision to transfer was made as early as March 5, 1994.
Furthermore, complainants question the basis of the computations of their separation benefits which should include the
period when there [was] no work to be done in a year. [B]ecause of necessity, they received the short amount as their
separation pay by way of voucher but under protest as shown in Annexes C-C-1 to C-5 to their pleading.
With the sudden transfer of the machiner[y] of respondents without giving them advance notice leaving them with
insufficient separation pay, complainants experienced serious anxiety and wounded feelings for which they p[r]ay for
damages including attorneys fees.
Consequently, complainants also pray for backwages, allowance and other benefits from the date of their illegal
dismissal up to the final disposition of the case.
Furthermore, complainants maintain that since the company is being transferred to the province, the formers
separation may be considered compulsory retirement under R.A. 7641, providing for one-half month pay benefit for
every year of service, and under Section 3, Rule V, Book III of the Labor Code, as amended for which they also demand
payment thereof.
Complainants also submitted the computation of their differential in separation pay (addendum and supplemental
addendum to their position paper) Annex G, G-1 to G-4.
To state the facts simply, there are two groups of employees, namely, the Lubat group and the Luris group. The Lubat
group is composed of petitioners seasonal employees who were not rehired for the 1994 tobacco season. At the start of
that season, they were merely informed that their employment had been terminated at the end of the 1993
season. They claimed that petitioners refusal to allow them to report for work without mention of any just or authorized
cause constituted illegal dismissal. In their Complaint, they prayed for separation pay, back wages, attorneys fees and
moral damages.
On the other hand, the Luris group is made up of seasonal employees who worked during the 1994 season. On August 3,
1994, they received a notice informing them that, due to serious business losses, petitioner planned to close its
Balintawak plant and transfer its tobacco processing and redrying operations to Ilocos Sur. Although the closure was to
be effective September 15, 1994, they were no longer allowed to work starting August 4, 1994. Instead, petitioner
awarded them separation pay computed according to the following formula:
total no. of days actually worked
----------------------------------------------------- x daily rate x 15 days
total no. of working days in one year
In their Complaint, they claimed that the computation should be based not on the above mathematical equation, but on
the actual number of years served. In addition, they contended that they were illegally dismissed, and thus they prayed
for back wages.
Against these factual antecedents, the labor arbiter ordered the petitioner to pay complainants separation pay
differential plus attorneys fees in the total amount of P3,092,896.76. Dissatisfied with said Decision, Philippine Tobacco
and the complainants filed their respective appeals before the NLRC.[5]
As noted earlier, the NLRC affirmed the labor arbiters Decision. Before this Court, only Philippine Tobacco filed the
present recourse, as the complainants did not question the NLRC Decision.
ISSUE: WON the employees being seasonal employees were illegally dismissed.
Yes, these seasonal employees were illegally dismissed.
Petitioner relies upon our ruling in Mercado v. NLRC[11] hat the employment [of seasonal employees] legally ends upon
completion of the x x x season, a statement which was subsequently reiterated in Magcalas v. NLRC.[12] Thus, petitioner
argues that it was not obliged to rehire the members of the Lubat group for the 1994 season, because their employment
had been terminated at the end of the 1993 season. Since they were not employed for the 1994 season when the
Balintawak plant was closed, it follows that petitioner has no obligation to award them separation pay due to the said
We are not persuaded. From the facts, we are convinced that petitioner illegally dismissed the members of the Lubat
group when it refused to allow them to work during the 1994 season.
This Court has previously ruled in Manila Hotel Company v. CIR[13] that seasonal workers who are called to work from
time to time and are temporarily laid off during off-season are not separated from service in said period, but are merely
considered on leave until reemployed, viz.:
The nature of their relationship x x x is such that during off season they are temporarily laid off but during summer
season they are re-employed, or when their services may be needed. They are not strictly speaking separated from the
service but are merely considered as on leave of absence without pay until they are re-employed.
Prescinding from the above, we hold that petitioner is liable for illegal dismissal and should be responsible for the
reinstatement of the Lubat group and the payment of their back wages. However, since reinstatement is no longer
possible as petitioner has already closed its Balintawak plant, respondent members of the said group should instead be
awarded normal separation pay (in lieu of reinstatement) equivalent to at least one month pay, or one month pay for
every year of service, whichever is higher. It must be stressed that the separation pay being awarded to the Lubat group
is due to illegal dismissal; hence, it is different from the amount of separation pay provided for in Article 283 in case of
retrenchment to prevent losses or in case of closure or cessation of the employers business, in either of which the
separation pay is equivalent to at least one (1) month or one-half (1/2) month pay for every year of service, whichever is
However, despite the fact that the respondent members of the Lubat group were entitled to separation pay equivalent
to at least one (1) month pay, or one (1) month pay for every year of service, whichever is higher, they cannot receive
more than the amount awarded to them in the NLRC Decision -- at least one (1) month or one-half (1/2) month pay for
every year of service, whichever is higher -- because they did not appeal from the said Decision.[21] Therefore, no
affirmative award can be given to them. In the same manner, although respondents should have been entitled to back
wages because petitioner illegally deprived them of work during the 1994 season, no such award can be given to them,
since they did not appeal the NLRC Decision. The elementary norms of due process prevent the grant of such awards, as
the employer was not given notice that its filing of its own Petition for Certiorari would put it in jeopardy of such relief.


Hacienda Bino is a 236-hectare sugar plantation located at Barangay Orong, Kabankalan City, Negros Occidental, and
represented in this case by Hortencia L. Starke, owner and operator of the said hacienda.
The 76 individual respondents were part of the workforce of Hacienda Bino consisting of 220 workers, performing
various works, such as cultivation, planting of cane points, fertilization, watering, weeding, harvesting, and loading of
harvested sugarcanes to cargo trucks.[2]
On July 18, 1996, during the off-milling season, petitioner Starke issued an Order or Notice which stated, thus:
To all Hacienda Employees:
Please bear in mind that all those who signed in favor of CARP are expressing their desire to get out of employment on
their own volition.
Wherefore, beginning today, July 18, only those who did not sign for CARP will be given employment by Hda. Bino.
(Sgd.) Hortencia Starke[3]
The respondents regarded such notice as a termination of their employment. As a consequence, they filed a complaint
for illegal dismissal, wage differentials, 13th month pay, holiday pay and premium pay for holiday, service incentive leave
pay, and moral and exemplary damages with the NLRC, Regional Arbitration Branch No. VI, Bacolod City, on September
17, 1996.[4]
In their Joint Sworn Statement, the respondents as complainants alleged inter alia that they are regular and permanent
workers of the hacienda and that they were dismissed without just and lawful cause. They further alleged that they
were dismissed because they applied as beneficiaries under the Comprehensive Agrarian Reform Program (CARP) over
the land owned by petitioner Starke.[5]
For her part, petitioner Starke recounted that the companys Board of Directors petitioned the Sangguniang Bayan of
Kabankalan for authority to re-classify, from agricultural to industrial, commercial and residential, the whole of Hacienda
Bino, except the portion earmarked for the CARP. She asserted that half of the workers supported the re-classification
but the others, which included the herein respondents, opted to become beneficiaries of the land under the CARP.
Petitioner Starke alleged that in July 1996, there was little work in the plantation as it was off-season; and so, on account
of the seasonal nature of the work, she issued the order giving preference to those who supported the re-classification.
She pointed out that when the milling season began in October 1996, the work was plentiful again and she issued
notices to all workers, including the respondents, informing them of the availability of work. However, the respondents
refused to report back to work. With respect to the respondents money claims, petitioner Starke submitted payrolls
evidencing payment thereof.
On October 6, 1997, Labor Arbiter Ray Allan T. Drilon rendered a Decision,[6] finding that petitioner Starkes notice dated
July 18, 1996 was tantamount to a termination of the respondents services, and holding that the petitioner company
was guilty of illegal dismissal. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of the complainants illegal.
Both the petitioners and the respondents appealed the case to the NLRC. On July 24, 1998, the NLRC affirmed with
modification the decision of the Labor Arbiter.
ISSUE: WON the employees are seasonal employees.
No, they are regular emoployees.
Indeed, in a number of cases, the Court has recognized the peculiar facts attendant in the Mercado case. In Abasolo v.
NLRC,[24] and earlier, in Philippine Tobacco Flue-Curing & Redrying Corporation v. NLRC,[25] the Court made the
following observations:
In Mercado, although respondent constantly availed herself of the petitioners services from year to year, it was clear
from the facts therein that they were not in her regular employ. Petitioners therein performed different phases of
agricultural work in a given year. However, during that period, they were free to work for other farm owners, and in fact
they did. In other words, they worked for respondent, but were nevertheless free to contract their services with other
farm owners. The Court was thus emphatic when it ruled that petitioners were mere project employees, who could be
hired by other farm owners.[26]
Recently, the Court reiterated the same observations in Hacienda Fatima v. National Federation of Sugarcane
Workers-Food and General Trade[27] and added that the petitioners in the Mercado case were not hired regularly and
repeatedly for the same phase/s of agricultural work, but on and off for any single phase thereof.
In this case, there is no evidence on record that the same particulars are present. The petitioners did not present any
evidence that the respondents were required to perform certain phases of agricultural work for a definite period of
time. Although the petitioners assert that the respondents made their services available to the neighboring haciendas,
the records do not, however, support such assertion.
The primary standard for determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the employer.[28] There is no doubt that the
respondents were performing work necessary and desirable in the usual trade or business of an employer. Hence, they
can properly be classified as regular employees.
For respondents to be excluded from those classified as regular employees, it is not enough that they perform work or
services that are seasonal in nature. They must have been employed only for the duration of one season.[29] While the
records sufficiently show that the respondents work in the hacienda was seasonal in nature, there was, however, no
proof that they were hired for the duration of one season only. In fact, the payrolls,[30] submitted in evidence by the
petitioners, show that they availed the services of the respondents since 1991. Absent any proof to the contrary, the
general rule of regular employment should, therefore, stand. It bears stressing that the employer has the burden of
proving the lawfulness of his employees dismissal.[31]
On the procedural issue, petitioner Starke avers that the CA should not have denied outright her motion for
reconsideration, considering its timely filing and the huge amount involved. This contention is already moot. Petitioner
Starke has already aired in this petition the arguments in her motion for reconsideration of the CA decision, which have
been adequately addressed by this Court. Assuming arguendo that the CA indeed failed to consider the motion for
reconsideration, petitioner Starke was not left without any other recourse.[32]
Private respondent Philippine American Life and General Insurance Company is a corporation duly organized and
existing under Philippine laws. Individual respondents occupy the following positions, namely: Maurice Greenberg, as
president of the Company; Jose Cuisia, Jr. as Chairman of the Board; Maria Haas and Gardon Watson as Regional
Coordinating Pensions Officers, Reynaldo C. Centeno as Executive Vice-President, Chief Financial Officer and Chief
Actuary; and Anthony Sotelo as the Senior Vice-President and Head of the Human Resources Department.
Petitioner was employed on October 28, 1997 by private respondent as Assistant Vice President and Head of the
Pensions Department and in concurrent capacity as Trust Officer of Philam Savings Bank, a Philam Life subsidiary. She
was to be paid P750,000.00 per annum and is entitled to the benefits given by private respondent to its employees.
Working as Assistant Vice President of Pensions Department of Philamlife, petitioner was offered an additional position
by respondent Cuisia, which was then resolved and approved by Philam Savings Banks Board of Directors, for the
position of Head of Trust Banking Division or AVP-Trust Officer on a concurrent capacity and under a separate
Effective January 1998, however, petitioners marketing manager and marketing officer were immediately transferred to
Group Insurance Division. Petitioner, thereafter, was never given replacements for the marketing manager and
marketing officer, contrary to private respondent Cuisias assurance. Thus, petitioner ran the Pensions Department
single-handedly with only one administrative assistant as her staff. Petitioner did the field work, the desk work
(administrative, legal, finance, marketing), the out of town meetings, the client presentations, aside from her work with
the Philam Savings Bank as fund manager, wherein private respondent Cuisia offered to her for a separate
compensation, but has still remain [sic] unpaid.
Sometime in November, 1998, petitioner availed of her housing and car benefits and applied for a car loan and housing
On November 18, 1998, however, private respondent through Centeno and Sotelo, offered her P250,000.00 for her to
vacate her position by December 1998. Petitioner declined the offer considering that there was no valid reason for her
to leave. Private respondents Centeno and Sotelo admonished her that her filing of suit would prompt respondent Cuisia
to blacklist her in companies where he holds directorships and advised her that Philamlife is big and can stand the long
ordeal of justice system, whereas she may not withstand the phase of the trial. Evidence that this meeting and matter
took place was the formal letter of rejection dated November 25, 1998 sent by petitioner and duly received by the
offices of respondents Cuisia, Centeno and Sotelo.
Pertinent portion of the November 25, 1998 letter is hereby quoted:
[T]his shall summarize the discussion of meeting held at Mr. Centenos Office last November 18, 1998.
Briefly, an offer of Two Hundred Fifty Thousand [Pesos] (P250,000) has been made as Settlement fee so that Philamlife
will not resort to transferring undersigned to another department for reasons only known to management and which
undersigned is still not fully aware in writing. In so doing, it has been emphasized that Mr. Centeno and Mr. Sotelo is (sic)
sparing undersigned of the hardships that undersigned will undergo in the said other department which is intended to
make undersigned inefficient and eventually serve as basis for her termination or as claimed non-election by March
1999. Further, it has been requested and categorically stated by Mr. Sotelo that undersigned forgive Maria Haas for
whatever she has done
On December 6, 1998, respondent Cuisia met with petitioner and cajoled her to reconsider and accept the offer of
settlement. Cuisia even volunteered to help her look for another job. Petitioner declined, and reiterated that the
actuations of respondents clearly intended to harass and humiliate her and have caused her and her family extreme
emotional stress.
On December 8, 1998, two days after the aforesaid December 6 meeting, respondents issued her a memorandum
instructing her to transfer to the Legal Department effective December 14, 1998 and to make proper turnover and
submit the status report not later than December 11, 1998.
By her letter dated December 10, 1998, petitioner protested the sudden unexplained transfer, more so a non-existing
position, and stressed that she was hired because of her marketing, finance, and fund management skills, not her legal
skills. She also made of record that her department surpassed the target fund level volume set by the company, thus:
Undersigned wish to inform you that your directive for the transfer of undersigned to the legal department is being
contested on the ground of outright violation of undersigneds rights.
Undersigned believe that the transfer will not make her efficient in her work. Undersigned was hired primarily because
of her marketing, finance, and fund management skills. Her legal skills are secondary and supplementary in nature. Thus,
transfer to the legal department, which is primarily legal, is not acceptable for it will only make undersigned less efficient
and negates her productivity and contribution to the company.
Let it be on record, that as of today, the Department has surpassed its P15 Million target, which was originally at P12
Million, as set by no less than the president of Philamlife during the budget preparation and as duly reviewed and
approved by the head of the corporation planning department, as fully documented. For the records, we are almost
hitting the P20 Million fund level volume, and we are just waiting for the confirmed P109 Million placement of Adamson
University Retirement Fund.
With the above, by December 14, 1998 undersigned will continue to be the head of the Pensions Department until this
new issue and the other issues raised are fully resolved.
Atty. Angelita S. Gramaje
AVP-Pensions Department
Also, on December 10, 1998, respondent Centeno declined the car loan benefit of petitioner, thus:
This refers to your 9 December 1998 memorandum regarding your request for a car loan. I have earlier discussed your
application for a car loan with both Mr. Anthony B. Sotelo, FVP and Corporate HR Director and Mr. Jose L. Cuisia, Jr.,
President and CEO. Considering your present employment status, which has been the subject of several discussions
between you and Messrs. Jose L. Cuisia, Jr. and Anthony B. Sotelo and myself, we deem it prudent to defer action on
your loan request until such time that the issue is resolved with definitiveness.
On December 16, 1998, petitioner, while on Official Sick Leave, received a message in her pager that the Pensions
Department, which was then holding office at the fifth floor of the Philamlife Building at United Nations Avenue was
assumed to be headed by Corine Moralda as her successor, and the Pensions Department was to be immediately
physically transferred on said date at the Philamlife Gammon Center in Makati City. Though sick and on official sick
leave, petitioner went to the office on December 17, 1998 to verify, and upon seeing the Pensions Department totally
dark, without any staff and with left over fixtures, petitioner, emotionally shattered, opted to just leave the premises.
On December 18, 1998, respondent Cuisia through a memorandum appointed Ms. Corine Moralda as replacement of
petitioner as Head of the Pensions Department effective December 14, 1998. It was only at that time that petitioner
learned that as early as August 23, 1998, respondents had advertised in the Manila Bulletin for her replacement.
Also, although, it is the tradition of Philamlife to give, during the Christmas Season, officers and employees a traditional
Seasons giveaways, i.e., ham and queso de bola, petitioner then, thru her authorized representatives, asked for her
share, but she was not in the list of recipients. Petitioners name was not in the Legal Department, not in the Pensions
Department, and not in the list of employees of Philamlife when verified with the Personnel Department.
Hence, on December 23, 1998, petitioner filed the instant case for illegal or constructive dismissal against herein private
The Labor Arbiter, in his decision[4] dated 01 June 2000, found that respondent was not illegally dismissed.
ISSUE: WON the respondent was constructively dismissed.
Constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so
unbearable to the employee leaving him with no option but to forego with his continued employment.[32] The
circumstances which prevailed in the working environment of the respondent clearly demonstrate this. The failure of
the Labor Arbiter to resolutely consider these prevailing circumstances before respondent was asked to transfer was a
major flaw in his decision. Clearly, had the Labor Arbiter considered them, he would have concluded that the transfer of
respondent from the Pensions Department to the Legal Department was not a legitimate exercise of management
prerogative on the part of petitioner. Before the order to transfer was made, discrimination, bad faith, and disdain
towards respondent were already displayed by petitioner.
Petitioner has repeatedly asserted that the performance of respondent did not meet the expectation of the company
and did not comply with accepted standards for a pension profit center manager, as she lacked the skill, as well as the
willingness, to perform her duties and responsibilities. Allegedly, based on the evaluation of her performance,
respondent proved to be so inept in the performance of her obligations, viz:
a. Failure to prepare and submit a budget plan;
b. Failure to prepare and submit a Pension Production Report on time;
c. Strained relations with clients;
d. Failure to prepare an Operations Manual for the Department;
e. Inability to develop and maintain a good working relationship with her colleagues;
f. Inability to communicate her ideas; and
g. Others.[33]
It is rather peculiar that the alleged ineptness of respondent did not prompt petitioner to issue any Inter-office
Memorandum reprimanding, admonishing, or warning the former about her performance. The solemnity of
respondents alleged non-performance was so immense, considering that the Pensions Department is a profit center,
which was so imperative to the existence of petitioner in terms of raising revenue. The officers of petitioner should have
been very much troubled about this.
This now puts into question the alleged ineptness of respondent as posited by petitioner. As aptly declared by the Court
of Appeals:
. . . We recall that what triggered petitioners transfer was her alleged inefficiency and ineptness in her work in the
Pensions Department. Records, however, reveal otherwise. Petitioner produced a fund level of 1000% over the previous
year (her predecessors year of 1997 with a fund level of about P2 Million generated for two years or an average of P1
Million per year then) in the amount of P19,248,320.31 as a result of a meager 3 months marketing efforts, although
private respondents instructed her to stop marketing sometime in April 1998 for no apparent reason. All these were
never rebutted nor disproved by private respondents. They merely alleged her inefficiency without concrete and
sufficient proof. But allegation is different from proof. Hence, we cannot countenance their allegations.[34] (emphasis
Petitioner maintains that it was respondent who severed her working relationship with it.[35] Per letter, dated 11 January
1999, issued by petitioners Legal Department, respondent was asked to report immediately to her new assignment and
submit to a medical examination, and that the latter took no heed of this.[36] It seems that the point impliedly being
raised by petitioner is that respondent disengaged her employment relationship with petitioner by abandoning her work
and failing to report accordingly. This argument is apocryphal. Respondent, on 23 December 1998, already filed a case
for illegal dismissal against petitioner.[37] For petitioner to anticipate respondent to report for work after the latter
already filed a case for illegal dismissal before the NLRC, would be absurd. We have already laid down the rule that for
abandonment to exist, it is essential (1) that the employee must have failed to report for work or must have been absent
without valid or justifiable reason; and (2) that there must have been a clear intention to sever the employer-employee
relationship manifested by some overt acts.[38]Both these requisites are not present here. There was no abandonment as
the latter is not compatible with constructive dismissal.[


FACTS: Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical
representative on October 24, 1995, after Tecson had undergone training and orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide
by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity
with co-employees or employees of competing drug companies and should management find that such relationship
poses a possible conflict of interest, to resign from the company. Code of Conduct of Glaxo similarly provides these
conditions; that otherwise, the management and the employee will explore the possibility of a transfer to another
department in a non-counterchecking position or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales area. Subsequently,
Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals3(Astra), a competitor of
Glaxo. Bettsy was Astras Branch Coordinator in Albay. She supervised the district managers and medical representatives
of her company and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of
interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September
Tecsons superior reminded him that he and Bettsy should decide which one of them would resign from their jobs.
Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a
competitor company. He explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug
company; and Bettsy was planning to avail of the redundancy package to be offered by Astra.
Tecson again requested for more time resolve the problem. Thereafter, Tecson applied for a transfer in Glaxos milk
division, thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His
application was denied in view of Glaxos least-movement-possible policy.
Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its
decision, but his request was denied. Tecson defied the transfer order and continued acting as medical representative in
the Camarines Sur-Camarines Norte sales area.
DEVELOPMENT OF THE CASE: Because the parties failed to resolve the issue at the grievance machinery level, they
submitted the matter for voluntary arbitration, but Tecson declined the offer. On November 15, 2000, the National
Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships
between its employees and persons employed with competitor companies, and affirming Glaxos right to transfer
Tecson to another sales territory.
CA sustained; MR denied.
Petitioners Contention: that Glaxos policy against employees marrying employees of competitor companies violates
the equal protection clause of the Constitution because it creates invalid distinctions among employees on account only
of marriage. They claim that the policy restricts the employees right to marry; that Tecson was constructively dismissed
GLAXO argues: that the company policy prohibiting its employees from having a relationship with and/or marrying an
employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal
protection clause;
The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies;
that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he
was aware that such policy was stipulated therein.
ISSUE: WON Glaxos policy against its employees marrying employees from competitor companies is valid
HELD: The Court finds no merit in the petition.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential
programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive
pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos
employees is reasonable under the circumstances because relationships of that nature might compromise the interests
of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the
possibility that a competitor company will gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution
recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on
investments and to expansion and growth.
Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it
does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that
management has rights which are also entitled to respect and enforcement in the interest of fair play.21
EQUAL-PROTECTION: Glaxo does not impose an absolute prohibition against relationships between its employees and
those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own
choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that
may arise out of such relationships.
Moreover, records show that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by
his relationship with Bettsy.