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Labor Law I Cases

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G.R. No. L-48645 January 7, 1987 the individual complainants are barred by estoppel from asserting that they are
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, employees of respondent company.
ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, While pending with the Court of Industrial Relations CIR pleadings and testimonial
PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO and documentary evidences were duly presented, although the actual hearing was
PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO delayed by several postponements. The dispute was taken over by the National
MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the
SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. hearing of the case intransferably commenced on September 8, 1975.
MATIAR, ET AL., petitioners, On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was
vs. concurred in by the NLRC in a decision dated June 28, 1976. The amount of
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL backwages awarded, however, was reduced by NLRC to the equivalent of one (1)
AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO G. INCIONG, year salary.
UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO
On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling,
OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑATE, ERNESTO
stressing the absence of an employer-mployee relationship as borne out by the
VILLANUEVA, ANTONIO BOCALING and GODOFREDO
records of the case. ...
CUETO, respondents.
The petitioners strongly argue that there exists an employer-employee relationship
GUTIERREZ, JR., J.:
between them and the respondent company and that they were dismissed for
The elemental question in labor law of whether or not an employer-employee unionism, an act constituting unfair labor practice "for which respondents must be
relationship exists between petitioners-members of the "Brotherhood Labor Unit made to answer."
Movement of the Philippines" (BLUM) and respondent San Miguel Corporation, is the
Unrebutted evidence and testimony on record establish that the petitioners are
main issue in this petition. The disputed decision of public respondent Ronaldo
workers who have been employed at the San Miguel Parola Glass Factory since 1961,
Zamora, Presidential Assistant for legal Affairs, contains a brief summary of the facts
averaging about seven (7) years of service at the time of their termination. They
involved:
worked as "cargadores" or "pahinante" at the SMC Plant loading, unloading, piling
1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now or palleting empty bottles and woosen shells to and from company trucks and
defunct Court of Industrial Relations, charging San Miguel Corporation, and the warehouses. At times, they accompanied the company trucks on their delivery
following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio routes.
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair
The petitioners first reported for work to Superintendent-in-Charge Camahort. They
labor practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act
were issued gate passes signed by Camahort and were provided by the respondent
No. 875 and of Legal dismissal. It was alleged that respondents ordered the
company with the tools, equipment and paraphernalia used in the loading,
individual complainants to disaffiliate from the complainant union; and that
unloading, piling and hauling operation.
management dismissed the individual complainants when they insisted on their
union membership. Job orders emanated from Camahort. The orders are then transmitted to an
assistant-officer-in-charge. In turn, the assistant informs the warehousemen and
On their part, respondents moved for the dismissal of the complaint on the grounds
checkers regarding the same. The latter, thereafter, relays said orders to the
that the complainants are not and have never been employees of respondent
capatazes or group leaders who then give orders to the workers as to where, when
company but employees of the independent contractor; that respondent company
and what to load, unload, pile, pallet or clean.
has never had control over the means and methods followed by the independent
contractor who enjoyed full authority to hire and control said employees; and that Work in the glass factory was neither regular nor continuous, depending wholly on
the volume of bottles manufactured to be loaded and unloaded, as well as the

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business activity of the company. Work did not necessarily mean a full eight (8) hour San Miguel refused to bargain with the petitioner union alleging that the workers
day for the petitioners. However, work,at times, exceeded the eight (8) hour day are not their employees.
and necessitated work on Sundays and holidays. For this, they were neither paid On February 20, 1969, all the petitioners were dismissed from their jobs and,
overtime nor compensation for work on Sundays and holidays. thereafter, denied entrance to respondent company's glass factory despite their
Petitioners were paid every ten (10) days on a piece rate basis, that is, according to regularly reporting for work. A complaint for illegal dismissal and unfair labor practice
the number of cartons and wooden shells they were able to load, unload, or pile. was filed by the petitioners.
The group leader notes down the number or volume of work that each individual The case reaches us now with the same issues to be resolved as when it had begun.
worker has accomplished. This is then made the basis of a report or statement which
The question of whether an employer-employee relationship exists in a certain
is compared with the notes of the checker and warehousemen as to whether or not
situation continues to bedevil the courts. Some businessmen try to avoid the
they tally. Final approval of report is by officer-in-charge Camahort. The pay check
bringing about of an employer-employee relationship in their enterprises because
is given to the group leaders for encashment, distribution, and payment to the
that judicial relation spawns obligations connected with workmen's compensation,
petitioners in accordance with payrolls prepared by said leaders. From the total
social security, medicare, minimum wage, termination pay, and unionism. (Mafinco
earnings of the group, the group leader gets a participation or share of ten (10%)
Trading Corporation v. Ople, 70 SCRA 139).
percent plus an additional amount from the earnings of each individual.
In determining the existence of an employer-employee relationship, the elements
The petitioners worked exclusive at the SMC plant, never having been assigned to
that are generally considered are the following: (a) the selection and engagement
other companies or departments of SMC plant, even when the volume of work was
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
at its minimum. When any of the glass furnaces suffered a breakdown, making a
employer's power to control the employee with respect to the means and methods
shutdown necessary, the petitioners work was temporarily suspended. Thereafter,
by which the work is to be accomplished. It. is the called "control test" that is the
the petitioners would return to work at the glass plant.
most important element (Investment Planning Corp. of the Phils. v. The Social
Sometime in January, 1969, the petitioner workers — numbering one hundred and Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario
forty (140) organized and affiliated themselves with the petitioner union and Brothers, Inc. v. Ople, 131 SCRA 72).
engaged in union activities. Believing themselves entitled to overtime and holiday
Applying the above criteria, the evidence strongly indicates the existence of an
pay, the petitioners pressed management, airing other grievances such as being
employer-employee relationship between petitioner workers and respondent San
paid below the minimum wage law, inhuman treatment, being forced to borrow at
Miguel Corporation. The respondent asserts that the petitioners are employees of
usurious rates of interest and to buy raffle tickets, coerced by withholding their
the Guaranteed Labor Contractor, an independent labor contracting firm.
salaries, and salary deductions made without their consent. However, their gripes
and grievances were not heeded by the respondents. The facts and evidence on record negate respondent SMC's claim.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of The existence of an independent contractor relationship is generally established by
Labor Relations in connection with the dismissal of some of its members who were the following criteria: "whether or not the contractor is carrying on an independent
allegedly castigated for their union membership and warned that should they persist business; the nature and extent of the work; the skill required; the term and duration
in continuing with their union activities they would be dismissed from their jobs. of the relationship; the right to assign the performance of a specified piece of work;
Several conciliation conferences were scheduled in order to thresh out their the control and supervision of the work to another; the employer's power with
differences, On February 12, 1969, union member Rogelio Dipad was dismissed from respect to the hiring, firing and payment of the contractor's workers; the control of
work. At the scheduled conference on February 19, 1969, the complainant union the premises; the duty to supply the premises tools, appliances, materials and labor;
through its officers headed by National President Artemio Portugal Sr., presented a and the mode, manner and terms of payment" (56 CJS Master and Servant, Sec.
letter to the respondent company containing proposals and/or labor demands 3(2), 46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75
together with a request for recognition and collective bargaining. ALR 7260727)

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None of the above criteria exists in the case at bar. Even under the assumption that a contract of employment had indeed been
Highly unusual and suspect is the absence of a written contract to specify the executed between respondent SMC and the alleged labor contractor, respondent's
performance of a specified piece of work, the nature and extent of the work and the case will, nevertheless, fail.
term and duration of the relationship. The records fail to show that a large Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
commercial outfit, such as the San Miguel Corporation, entered into mere oral Job contracting. — There is job contracting permissible under the Code if the
agreements of employment or labor contracting where the same would involve following conditions are met:
considerable expenses and dealings with a large number of workers over a long
(1) The contractor carries on an independent business and undertakes the contract
period of time. Despite respondent company's allegations not an iota of evidence
work on his own account under his own responsibility according to his own manner
was offered to prove the same or its particulars. Such failure makes respondent
and method, free from the control and direction of his employer or principal in all
SMC's stand subject to serious doubts.
matters connected with the performance of the work except as to the results
Uncontroverted is the fact that for an average of seven (7) years, each of the thereof; and
petitioners had worked continuously and exclusively for the respondent company's
(2) The contractor has substantial capital or investment in the form of tools,
shipping and warehousing department. Considering the length of time that the
equipment, machineries, work premises, and other materials which are necessary in
petitioners have worked with the respondent company, there is justification to
the conduct of his business.
conclude that they were engaged to perform activities necessary or desirable in the
usual business or trade of the respondent, and the petitioners are, therefore regular We find that Guaranteed and Reliable Labor contractors have neither substantial
employees (Phil. Fishing Boat Officers and Engineers Union v. Court of Industrial capital nor investment to qualify as an independent contractor under the law. The
Relations, 112 SCRA 159 and RJL Martinez Fishing Corporation v. National Labor premises, tools, equipment and paraphernalia used by the petitioners in their jobs
Relations Commission, 127 SCRA 454). are admittedly all supplied by respondent company. It is only the manpower or labor
force which the alleged contractors supply, suggesting the existence of a "labor only"
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations
contracting scheme prohibited by law (Article 106, 109 of the Labor Code; Section
Commission (supra):
9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code).
... [T]he employer-employee relationship between the parties herein is not In fact, even the alleged contractor's office, which consists of a space at respondent
coterminous with each loading and unloading job. As earlier shown, respondents are company's warehouse, table, chair, typewriter and cabinet, are provided for by
engaged in the business of fishing. For this purpose, they have a fleet of fishing respondent SMC. It is therefore clear that the alleged contractors have no capital
vessels. Under this situation, respondents' activity of catching fish is a continuous outlay involved in the conduct of its business, in the maintenance thereof or in the
process and could hardly be considered as seasonal in nature. So that the activities payment of its workers' salaries.
performed by herein complainants, i.e. unloading the catch of tuna fish from
The payment of the workers' wages is a critical factor in determining the actuality
respondents' vessels and then loading the same to refrigerated vans, are necessary
of an employer-employee relationship whether between respondent company and
or desirable in the business of respondents. This circumstance makes the
petitioners or between the alleged independent contractor and petitioners. It is
employment of complainants a regular one, in the sense that it does not depend on
important to emphasize that in a truly independent contractor-contractee
any specific project or seasonable activity. (NLRC Decision, p. 94, Rollo).lwphl@itç
relationship, the fees are paid directly to the manpower agency in lump sum without
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the indicating or implying that the basis of such lump sum is the salary per worker
glass plant for repairs, the petitioners, thereafter, promptly returned to their jobs, multiplied by the number of workers assigned to the company. This is the rule
never having been replaced, or assigned elsewhere until the present controversy in Social Security System v. Court of Appeals (39 SCRA 629, 635).
arose. The term of the petitioners' employment appears indefinite. The continuity
The alleged independent contractors in the case at bar were paid a lump sum
and habituality of petitioners' work bolsters their claim of employee status vis-a-vis
representing only the salaries the workers were entitled to, arrived at by adding the
respondent company,

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salaries of each worker which depend on the volume of work they. had accomplished discipline of petitioners. Documentary evidence presented by the petitioners
individually. These are based on payrolls, reports or statements prepared by the establish respondent SMC's right to impose disciplinary measures for violations or
workers' group leader, warehousemen and checkers, where they note down the infractions of its rules and regulations as well as its right to recommend transfers
number of cartons, wooden shells and bottles each worker was able to load, unload, and dismissals of the piece workers. The inter-office memoranda submitted in
pile or pallet and see whether they tally. The amount paid by respondent company evidence prove the company's control over the petitioners. That respondent SMC
to the alleged independent contractor considers no business expenses or capital has the power to recommend penalties or dismissal of the piece workers, even as
outlay of the latter. Nor is the profit or gain of the alleged contractor in the conduct to Abner Bungay who is alleged by SMC to be a representative of the alleged labor
of its business provided for as an amount over and above the workers' wages. contractor, is the strongest indication of respondent company's right of control over
Instead, the alleged contractor receives a percentage from the total earnings of all the petitioners as direct employer. There is no evidence to show that the alleged
the workers plus an additional amount corresponding to a percentage of the labor contractor had such right of control or much less had been there to supervise
earnings of each individual worker, which, perhaps, accounts for the petitioners' or deal with the petitioners.
charge of unauthorized deductions from their salaries by the respondents. The petitioners were dismissed allegedly because of the shutdown of the glass
Anent the argument that the petitioners are not employees as they worked on piece manufacturing plant. Respondent company would have us believe that this was a
basis, we merely have to cite our rulings in Dy Keh Beng v. International Labor and case of retrenchment due to the closure or cessation of operations of the
Marine Union of the Philippines (90 SCRA 161), as follows: establishment or undertaking. But such is not the case here. The respondent's
"[C]ircumstances must be construed to determine indeed if payment by the piece is shutdown was merely temporary, one of its furnaces needing repair. Operations
just a method of compensation and does not define the essence of the relation. continued after such repairs, but the petitioners had already been refused entry to
Units of time . . . and units of work are in establishments like respondent (sic) just the premises and dismissed from respondent's service. New workers manned their
yardsticks whereby to determine rate of compensation, to be applied whenever positions. It is apparent that the closure of respondent's warehouse was merely a
agreed upon. We cannot construe payment by the piece where work is done in such ploy to get rid of the petitioners, who were then agitating the respondent company
an establishment so as to put the worker completely at liberty to turn him out and for benefits, reforms and collective bargaining as a union. There is no showing that
take in another at pleasure." petitioners had been remiss in their obligations and inefficient in their jobs to warrant
their separation.
Article 106 of the Labor Code provides the legal effect of a labor only contracting
scheme, to wit: As to the charge of unfair labor practice because of SMC's refusal to bargain with
the petitioners, it is clear that the respondent company had an existing collective
... the person or intermediary shall be considered merely as an agent of the employer
bargaining agreement with the IBM union which is the recognized collective
who shall be responsible to the workers in the same manner and extent as if the
bargaining representative at the respondent's glass plant.
latter were directly employed by him.
There being a recognized bargaining representative of all employees at the
Firmly establishing respondent SMC's role as employer is the control exercised by it
company's glass plant, the petitioners cannot merely form a union and demand
over the petitioners that is, control in the means and methods/manner by which
bargaining. The Labor Code provides the proper procedure for the recognition of
petitioners are to go about their work, as well as in disciplinary measures imposed
unions as sole bargaining representatives. This must be followed.
by it.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San
Because of the nature of the petitioners' work as cargadores or pahinantes,
Miguel Corporation is hereby ordered to REINSTATE petitioners, with three (3) years
supervision as to the means and manner of performing the same is practically nil.
backwages. However, where reinstatement is no longer possible, the respondent
For, how many ways are there to load and unload bottles and wooden shells? The
SMC is ordered to pay the petitioners separation pay equivalent to one (1) month
mere concern of both respondent SMC and the alleged contractor is that the job of
pay for every year of service.
having the bottles and wooden shells brought to and from the warehouse be done.
More evident and pronounced is respondent company's right to control in the SO ORDERED.

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Republic of the Philippines Steel Products, Inc.


SUPREME COURT #2 Cooper St., cor. Benitez
Manila SFDM, Quezon City
THIRD DIVISION Dear Mrs. Margallo:
G.R. No. 181393 July 28, 2009 This is to inform you that our records show the following:
GRANDTEQ INDUSTRIAL STEEL PRODUCTS, INC. and ABELARDO M. 1) That, last December 18, 2003, you instructed our company driver and helper to
GONZALES, Petitioners, load 4 pcs. tool steel to be delivered at circle freight.
vs. 2) That together with Mr. Steve Rivera, on or about 12:00 noon, you went at (sic)
EDNA MARGALLO, Respondent. Eagle Global Logistics at Circle Freight, NAIA, Parañaque City to ship the following
DECISION items to Moog Control Corp. Phils. Branch located at Baguio Ecozone, Baguio City,
CHICO-NAZARIO, J.: using the Sales Invoice of JVM Industrial Supply and Allied Services.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court a) 2 pcs. tool steel 4140 – ¾" x 2’x 3’
assailing the Decision1 dated 21 January 2008 of the Court of Appeals in CA-G.R. b) 2 pcs. tool steel 4140 – 1"x 2’ x 3’
SP No. 100012, which affirmed the Decision2 dated 18 October 2006, as modified 3) That you are working with JVM Industrial Supply and Allied Services concurrent
by the Resolution3 dated 21 May 2007, of the National Labor Relations Commission with your being employed with Grandteq Industrial Steel Products, Inc.
(NLRC) in NLRC NCR CA No. 045888-05. The NLRC effectively reversed the
4) That JVM Industrial Supply and Allied Services are supplying steel products to
Decision4 dated 11 July 2005 of the Labor Arbiter in NLRC NCR Case No. 00-09-
Moog Control Corp. Phils. Branch which is also a client of Grandteq and which you
10803-04, which entirely dismissed the Complaint filed by respondent Edna Margallo
are the authorized salesman of the company.
(Margallo) against petitioners Grandteq Industrial Steel Products, Inc. (Grandteq)
and Abelardo M. Gonzales (Gonzales); and, instead, ordered Grandteq and Gonzales Because of this, you are given a (sic) twenty-four (24) hours upon receipt of this
to refund to Margallo her car loan payments, as well as to pay the latter sales letter to submit a written explanation on why you should not be given a disciplinary
commission and attorney’s fees. action for allegedly violating/committing:
Grandteq is a domestic corporation engaged in the business of selling welding a) Moonlighting
electrodes, alloy steels, aluminum and copper alloys.5 Gonzales is the b) Sabotage
President/Owner of Grandteq.6 Grandteq employed Margallo as Sales Engineer c) Breach of trust and confidence (labor code).
beginning 3 August 1999.7
You are also invited to attend a meeting with regards to the allegations on Jan. 5,
Margallo claimed that on an unstated date, she availed herself of the car loan 2004 at 10:00 a.m. You may bring with you a lawyer or any representative to assist
program offered to her by Grandteq as a reward for being "Salesman of the Year." you on (sic) the said meeting.
She paid the down payment on a brand new Toyota Corolla,8amounting to
Failure on your part to submit a written explanation on the specified period and
₱201,000.00, out of her own pocket. The monthly amortization for the car was
failure to attend the hearing would mean that you are waiving your rights to be
₱10,302.00, of which ₱5,302.00 was to be her share and ₱5,000.00 was to be the
heard and the appropriate action will be taken against you.
share of Grandteq.
Moreover, to protect the evidences and witnesses against you, management has
On 29 December 2003, Margallo received a letter9 signed by Gonzales and Rolando
decided to place you under preventive suspension effective December 29, 2003.
de Leon (De Leon), Vice-President for Administration of Grandteq, which reads:
Very truly yours,
Mrs. Edna E. Margallo
c/o Grandteq Industrial

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(Signed) (Signed) to file before the Labor Arbiter a Complaint13 against Grandteq and Gonzales, for
Abelardo M. Gonzales Ronaldo A. de Leon recovery of sales commission, cash incentive and car loan payment, damages and
President VP - Administration attorney fees, which was docketed as NLRC Case No. 0009-108-03-04.
Grandteq and Gonzales opposed Margallo’s claims. They maintained that Margallo
Responding to the foregoing letter, Margallo wrote the following letter-reply dated
30 December 2003: was not entitled to sales commissions because the computation thereof, according
to company policy, should be based on actual collections within 180 days from
December 30, 2003 invoice date. All of Margallo’s credit sales transactions were unpaid, outstanding,
To: Mr. Abelardo M. Gonzales and past due. Margallo was also not entitled to any sales incentive, because said
President benefit was intended for customers, and not for the sales personnel.14 Grandteq
and Gonzales further insisted that Margallo had no right to the refund of her car loan
Thru: Mr. Ronald A. de Leon payments under the car loan agreement she executed with Grandteq, which
VP – Administration expressly provided that in the event that Margallo resigned or was terminated for
cause during the effectivity of said agreement, her car loan payments would be
Dear Sir, forfeited in favor of Grandteq, and Grandteq would regain possession of the car.
Last December 18, 2003, Mr. Steve D. Rivera instructed me to tell to our delivery The Labor Arbiter rendered a Decision on 11 July 2005, dismissing all of Margallo’s
people to bring the said item to circle freight. Which I did that (sic) I thought it was claims, thus:
ok because it was inside the company. Sir I was just following orders from Mr. D. WHEREFORE, premises considered, judgment is hereby rendered dismissing the
Rivera who is one of my boss (sic). Sir, what I did is the same thing that I’ve been instant case for lack of merit.15
doing with my other bosses. That i[f] they instructed me to do things I immediately
The Labor Arbiter held that Margallo was not able to prove by substantial evidence
follow. Because I am only an employee. Sir never that I work with JVM (sic).
her entitlement to the sales commission:
Sir im (sic) sorry if I did wrong by not asking what to do. Which I think an ordinary
After a careful review of the records, this Office finds that considering [Margallo]
employee like me would do is to follow orders from my superiors.
already receives a basic salary plus allowances, her claim for sales commission is
IM SO SORRY SIR IF I FAIL YOU. therefore an added benefit wholly dependent upon her sales performance based on
(Signed) existing company policy. As such, it is an affirmative allegation or claim that is not
Edna E. Margallo10 normally included in the regular course of business and for which law presumes that
Margallo then averred that in January 2004, De Leon asked her to just resign, an employee is generally not entitled to. Thus, it behooves, upon the employee to
promising that if she did, she would still be paid her commissions and other benefits, prove that he is entitled to said affirmative allegations and the onus is upon him to
as well as be reimbursed her car loan payments. Relying on De Leon’s promise, establish his right thereto (see Eternit Employees and Workers Unions vs. De Veyra,
Margallo tendered on 13 January 2004, her irrevocable resignation, effective 189 SCRA 752 and Nucum vs. Inciong, 204 SCRA 697).
immediately.11 In the instant case, this Office finds [Margallo] to have failed to substantially
Margallo, however, alleged that she was never paid her money claims. Grandteq discharge her burden of proving that she is entitled to the ₱87,508.00 in sales
failed to pay her commissions in the sum of ₱87,508.00, equivalent to 5% of the commissions since other than her bare allegations, [Margallo] did not show any
total sales that she collected as of January 2004, which amounted to ₱1,750,148.84. other proof, including prior payment of said sales commissions, to justify her claim.
Grandteq likewise failed to refund the "sales accommodations" or advances she gave And, quite noteworthy too is that under the [Grandteq]’s policy, rules and regulations
her customers. In addition, after Margallo’s resignation, Grandteq sold her car to on the grant of sales commissions, the computation thereof shall be based on actual
Annaliza Estrella, another employee, for ₱550,000.00.12 These events prompted her collection against all sales on credit and the validity of the said commission shall be

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180 days from invoice dates; otherwise, the salesman shall not be entitled thereto In ordering that Grandteq and Gonzales reimburse the car loan payments made by
and forfeits any right to demand payment of the commission thereon as the sales Margallo, the NLRC reasoned:
are considered bad debts as uncollectible. Since the records of [Grandteq] showed It is unlikely for an employee who has invested his time and industry in a particular
that [Margallo]’s credit sales remain unpaid and outstanding for over 180 days, job to simply give it up after being accused of violating company rules and
[Margallo] is therefore not entitled to sales commissions. regulations. It is more likely that he did so upon the expectation that she would
No denial whatsoever of the above-discussed company policy was made by derive a certain benefit from it. Thus, the claim that the [herein respondent
[Margallo] in her Reply. Margalllo] resigned because she was promised that she would be paid her money
Thus, having failed to establish entitlement to said sales commission, the same is claims if she did, is more credible than the contention that she did so without any
hereby denied.16 prodding from the [herein petitioners Grandteq and Gonzales].
For a similar reason, the Labor Arbiter denied Margallo’s claim for payment of cash It would therefore appear that the provision, in the agreement (records, pp. 32-340)
incentive: executed by the parties, that "in case of resignation of the PERSONNEL from the
COMPANY, all payments made by the PERSONNEL shall be forfeited in favor of the
As regards to cash incentives, once again this Office finds that the same is also an
COMPANY" has been superseded by the above-mentioned subsequent agreement
affirmative allegation and the burden of proving entitlement thereto rests upon the
between the parties.
employee. And having failed to even mention how much of the alleged cash incentive
she is entitled to in Annexes "A" and "2-a" of her position paper, the same is hereby Besides, it is uncontroverted that the car loan program was offered to the
denied.17 complainant as a reward for being the "Salesman of the Year." Moreover, nowhere
in their pleadings did the [petitioners Grandteq and Gonzales] controvert the claim
Finally, the Labor Arbiter found that Margallo had no right to the reimbursement of
that the [respondent Margallo] paid the down payment, entire first amortization,
her car loan payments under her car loan agreement with Grandteq:
insurance, and her share in the monthly amortizations for seventeen months, or the
And as regards of (sic) the car loan, the same should be governed by the undisputed total amount of ₱214,395.90 for the car. It is also uncontroverted that after the
terms and conditions of the Agreement between complainant and respondent [respondent Margallo]’s negotiated resignation, her car was resold to another
company (Annex "A" of respondents’ position paper). And page 2 of said Agreement employee for the original price. Under the circumstances, the above-quoted
clearly stipulates that in case of resignation, all payments made by the personnel contractual provision is null and void for being contrary to morals, good customs,
shall be forfeited in favor of the company. Thus, the claim for refund of the car loan and public policy. The law overrides contracts which are prepared by employers to
should likewise be denied.18 circumvent the rights of their employees (Baguio Country Club vs. NLRC, 206 SCRA
Margallo filed an appeal with the NLRC, docketed as NLRC NCR CA No. 045888-05. 643). Thus, the above-quoted contractual provision does not bar the [respondent
Although the NLRC, in its Decision dated 18 October 2006, stated that it merely Margallo] from recovering her car loan payments from the [petitioners Grandteq and
"modified" the Decision dated 11 July 2005 of the Labor Arbiter, it effectively Gonzales].20
reversed the same by granting Margallo her claims for sales commission, As for Margallo’s other claims, the NLRC affirmed her entitlement to the unpaid sales
reimbursement of her car loan payments, and attorney’s fees. The fallo of the NLRC commission, but not to the cash incentive:
Decision is quoted below:
Insofar as the [respondent Margallo]’s claim for unpaid sales commission is
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners] concerned, it is noteworthy that in the list (records, pp. 16-18) of sales she adduced
Grandteq Industrial Products, Inc. and/or its President/General Manager, in evidence, the column bearing the heading "collected" indicates that, as of January
[petitioner] Abelardo M. Gonzales, are hereby ordered to refund to the [herein 2004, the total collections from her sales amount to only ₱217,815.94. Since it is
respondent Margallo] her car loan payments amounting to ₱217,815.94 and to pay undisputed hat her sales commission are equivalent to 5% of her collections, she
her the amount of ₱10,870.79 representing her unpaid sales commissions plus ten may recover unpaid sales commissions amounting to ₱10,890.79. Finally, since there
percent (10%) of the total monetary award as attorney’s fees.19 is no showing that the [respondent Margallo]’s claim for cash incentive is based on

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a particular contract or company practice, it was correctly dismissed for lack of provides him real and better options. Moreover, in controversies between a laborer
merit.21 and his master, doubts reasonably arising from the evidence, or in the interpretation
Grandteq and Gonzales filed a Motion for Reconsideration,22 while Margallo also of agreements and writing should be resolved in the former’s favor.26
filed an Omnibus Motion for Partial Reconsideration and Issuance of The Court of Appeals likewise affirmed the order of the NLRC that Grandteq and
Subpoena.23 The NLRC denied the Motions for Reconsideration of all parties in a Gonzales pay Margallo her sales commission, placing the burden upon the employer
Resolution dated 21 May 2007, but modified the NLRC Decision dated 18 October to prove that the employee’s money claims had been paid:
2006 by slightly reducing the amount of car loan payments to be refunded to With respect to the unpaid sales commissions of ₱10,870.79 to be paid by petitioners
Margallo: in favor of private respondent, it is incumbent upon petitioner employer to prove
WHEREFORE, the Motions for Reconsideration are hereby DENIED for lack of merit. that said money claim has been paid. This is in tune with the general precept that:
However, the dispositive portion of this Commission’s (2nd Division) October 18, "one who pleads payment has the burden of proving it, and even where the
2006 Decision is hereby corrected to read: employees must allege nonpayment, the general rule is that the burden rests on the
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners] defendant to prove (payment), rather than on the plaintiff to prove non-payment."
Grandteq Industrial Products, Inc. and/or its President/General Manager, The reason for the rule is that the pertinent personnel files, payrolls, records,
[petitioner] Abelardo M. Gonzales, are hereby ordered to refund to [herein remittances and other similar documents – which will show that overtime,
respondent Margallo] her car loan payments amounting to ₱214,395.90 and to pay differentials, service incentive leave and other claims of workers have been paid –
her the amount of ₱10,870.79 representing her unpaid sales commissions plus ten are not in the possession of the worker but in the custody and absolute control of
percent (10%) of the total monetary award as attorney’s fees.24 the employer. In the present case, petitioners [Grandteq and Gonzales] failed to
discharge the burden of proving that the amount of ₱10,870.79 representing [herein
Grandteq and Gonzales elevated the case to the Court of Appeals by way of a Petition
respondent Margallo]’s sales commissions has already been paid to the latter. Thus,
for Certiorari, under Rule 65 of the Rules of Court, which was docketed as CA-G.R.
the NLRC (Second Division) did not commit grave abuse of discretion in awarding
SP No. 100012.lawphil
said money claim in favor of [respondent Margallo].27
In its Decision dated 21 January 2008, the Court of Appeals agreed with the NLRC,
Assiduous, Grandteq and Gonzales are now before this Court via the Petition at bar.
dismissing the therein Petition of Grandteq and Gonzales in this wise:
Grandteq and Gonzales assert that the Court of Appeals erred in declaring the car
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs
loan agreement between Grandteq and Margallo, particularly the provision therein
against petitioners.25
on the forfeiture of car loan payments in favor of Grandteq should Margallo resign
Like the NLRC, the Court of Appeals found that Margallo had a right to be reimbursed from the company, as null and void.28
her car loan payments, and the terms of the car loan agreement between Margallo
The Court, however, is in agreement with the Court of Appeals and the NLRC.
and Grandteq should not be applied for being highly prejudicial to the employee’s
interest: Generally speaking, contracts are respected as the law between the contracting
parties. The contracting parties may establish such stipulations, clauses, terms and
Truly, the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
conditions as they want, and their agreement would have the force of law between
morals, good customs, public order or public policy.29
them. However, those terms and conditions agreed upon must not be contrary to
law, morals, customs, public policy or public order. Precisely, the law overrides such The questionable provision in the car loan agreement between Grandteq and
conditions which are prejudicial to the interest of the worker. The law affords Margallo provides: "In case of resignation, of the personnel from the company, all
protection to an employee, and it will not countenance any attempt to subvert its payments made by the personnel shall be forfeited in favor of the
spirit and intent. The sheer inequality that characterizes employer-employee company."30 Connected thereto is the provision in the same car loan agreement,
relations, where the scales generally tip against the employee, often scarcely which reads:

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1. The COMPANY shall have the right to regain the possession of the car before the This is not a case of equity overruling or supplanting a positive provision of law or
expiration of the term of the loan in the event of any of the following: judicial rule. Rather, equity is exercised in this case "as the complement of legal
a. The PERSONNEL resigns from the COMPANY during the effectivity of this jurisdiction [that] seeks to reach and to complete justice where courts of law,
agreement.31 through the inflexibility of their rules and want of power to adapt their judgments to
the special circumstances of cases, are incompetent to do so."33
Said provisions plainly are contrary to the fundamental principles of justice and
fairness. It must be remembered that Margallo herself paid for the down payment The principle against unjust enrichment obliges Grandteq and Gonzales to refund to
and her share in the monthly amortization of the car. However, she did not get to Margallo the car loan payments she had made, since she has not actually acquired
leave with the car when she resigned from Grandteq. In effect, Margallo parted with the car. To relieve Grandteq and Gonzales of their obligation to reimburse Margallo
her hard-earned money for nothing, being left, as she is, with an empty bag. The would, indeed, be to sanction unjust enrichment in favor of the first two and cause
inequitableness in the conduct of Grandteq and Gonzales is heightened by the fact unjust poverty to the latter.34
that after they regained possession of the car, they resold the same to another The Court rigorously disapproves contracts that demonstrate a clear attempt to
employee under a similar contract bearing the same terms and conditions signed by exploit the employee and deprive him of the protection sanctioned by both the
Margallo. Constitution and the Labor Code.
The principle that no person may unjustly enrich oneself at the expense of another The Constitution and the Labor Code mandate the protection of labor. Hence, as a
(Nemo cum alteris detrimento locupletari potest) is embodied in Article 22 of the matter of judicial policy, this Court has, in a number of instances, leaned backwards
New Civil Code, to wit: to protect labor and the working class against the machinations and incursions of
ART. 22. Every person who through an act of performance by another, or any other their more financially entrenched employers.35
means, acquires or comes into possession of something at the expense of the latter Although not strictly a labor contract, the car loan agreement herein involves a
without just or legal ground, shall return the same to him. benefit extended by the employers, Grandteq and Gonzales, to their employee,
The above-quoted article is part of the chapter of the Civil Code on Human Relations, Margallo. It should benefit, and not unduly burden, Margallo. The Court cannot, in
the provisions of which were formulated as "basic principles to be observed for the any way, uphold a car loan agreement that threatens the employee with the
rightful relationship between human beings and for the stability of the social order; forfeiture of all the car loan payments he/she had previously made, plus loss of the
designed to indicate certain norms that spring from the fountain of good conscience; possession of the car, should the employee wish to resign; otherwise, said
[are] guides for human conduct that should run as golden threads through society agreement can then be used by the employer as an instrument to either hold said
to the end that law may approach its supreme ideal, which is the sway and employee hostage to the job or punish him/her for resigning.
dominance of justice." There is unjust enrichment when a person unjustly retains a The Court further finds no error in the grant by the Court of Appeals and the NLRC
benefit at the loss of another, or when a person retains the money or property of of Margallo’s claim for sales commission.
another against the fundamental principles of justice, equity and good conscience.32 In cases involving money claims of employees, the employer has the burden of
As can be gleaned from the foregoing, there is unjust enrichment when (1) a person proving that the employees did receive their wages and benefits and that the same
is unjustly benefited, and (2) such benefit is derived at the expense of or with were paid in accordance with law.36
damages to another. The main objective of the principle of unjust enrichment is to It is settled that once the employee has set out with particularity in his complaint,
prevent one from enriching oneself at the expense of another. It is commonly position paper, affidavits and other documents the labor standard benefits he is
accepted that this doctrine simply means that a person shall not be allowed to profit entitled to, and which the employer allegedly failed to pay him, it becomes the
or enrich himself inequitably at another’s expense. One condition for invoking this employer’s burden to prove that it has paid these money claims. One who pleads
principle is that the aggrieved party has no other action based on a contract, quasi- payment has the burden of proving it; and even where the employees must allege
contract, crime, quasi-delict, or any other provision of law.

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nonpayment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove nonpayment.37
Under the terms and conditions of Margallo’s employment with Grandteq, it is
provided that she "will do field sales with commission on sales made after a month’s
training."38 On this basis, Margallo’s entitlement to sales commission is unrebutted.
Hence, it was actually the Labor Arbiter who erred in denying Margallo’s claim for
sales commission "for failure to state the particulars to substantiate the same."
Grandteq and Gonzales have the burden of proof to show, by substantial evidence,
their claim that Margallo was not entitled to sales commissions because the sales
made by the latter remained outstanding and unpaid, rendering these sales as bad
debts and thus nullifying Margallo’s right to this monetary benefit. Grandteq and
Gonzales could have presented pertinent company records to prove this claim. It is
a rule that failure of employers to submit the necessary documents that are in their
possession as employers gives rise to the presumption that the presentation thereof
is prejudicial to its cause.39
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The
Decision dated 21 January 2008 of the Court of Appeals in CA-GR SP No. 100012 is
AFFIRMED. Costs against petitioners Grandteq Industrial Steel Products, Inc. and
Abelardo M. Gonzales.
SO ORDERED.

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Republic of the Philippines On 20 April 1990, Javier was advised by Angel Andan not to report for work anymore.
SUPREME COURT This in effect was a notice of dismissal. The manner by which her dismissal was
Manila effected has been correctly described by the Solicitor General, thus:
FIRST DIVISION On April 20, 1990, around 8:30 in the morning, while performing her duties at the
G.R. No. 112877 February 26, 1996 Bank, Javier saw and overhead petitioner Andan summon the Bank's personnel
officer, Mrs. Liberata G. Fajardo, and instruct her to prepare her (Javier's)
SANDIGAN SAVINGS and LOAN BANK, INC., and SANDIGAN REALTY
termination papers. Immediately thereafter, Andan changed his mind and told Mrs.
DEVELOPMENT CORPORATION,petitioners,
Fajardo to prepare instead a resignation letter for Javier, saying, "Ayaw ko na siyang
vs.
makita sa susnod." Turning to private respondent, he said, "Huwag na ninyong
NATIONAL LABOR RELATIONS COMMISSION and ANITA M.
itanong kong anong dahilan, basta't gusto ko, ito ang desisyon ko. Naawa lang ako
JAVIER, respondents.
sa iyo noon kaya kita tinanggap. Ka Anita, huwag mong isipin na may kinalaman
DECISION ang mga pangyayari kay Ditas, wala, wala, hindi iyon, basta't si Alice, iniskandalo
HERMOSISIMA, JR., J.: na naman ako.
This Petition for Certiorari, with prayer for the issuance of a temporary restraining xxx xxx xxx
order, seeks to review, modify and/or set aside the Resolution1 dated 24 September In the afternoon, after she received P50,000.00 from one Mr. Ben Santos as full
1993 and the Resolution2 dated 19 November 1993 of public respondent National payment for a lot sold in Sta. Rita Village, Guiguinto, Bulacan, Andan ordered
Labor Relations Commission (NLRC) in NLRC CAS RAB-III-05-1560-90. The former Reynaldo Bordado, her co-employee, to withdraw her commission of P10,000.00
affirmed, with modification, the Decision3 of the Labor Arbiter of the NLRC Regional from the account of the Realty, saying, "Ibigay mo sa ka Anita" yan para hindi na
Arbitration Branch No. III while the latter denied the motion to reconsider the balikan dito.6
former.
The advice of her termination notwithstanding, Javier reported for work at the bank
Private respondent Anita M. Javier (hereinafter referred to as Javier) worked as a on the next working day or on 23 April 1990. Though she signed the attendance
realty sales agent of the petitioner Sandigan Realty Development Corporation sheet, she left when she could not find her table.
(hereinafter called the Sandigan Realty) from November 2, 1982 (or November 9,
On 18 May 1990, Javier filed a complaint against petitioners and Angel Andan with
1982)4 to November 30, 1986. Their agreement was that Javier would receive a 5%
the NLRC Regional Arbitration Branch No. III at San Fernando, Pampanga, for illegal
commission for every sale, or if no sale was made, she would receive a monthly
dismissal, seeking reinstatement and payment of backwages and moral and
allowance of P500,00.
exemplary damages.
Subsequently, that is, on 1 December 1986, Javier was hired as a marketing collector
On 6 October 1992, the labor arbiter rendered judgment in private respondent's
of petitioner Sandigan Savings and Loan Bank (hereinafter called the Sandigan Bank)
favor, the dispositive portion of which reads:
by Angel Andan, the President of both the Sandigan Bank and Sandigan Realty.
Javier's monthly salary and allowance were initially in the amount of P788.00 and WHEREFORE, considering the foregoing consideration, and for having unjustly
P585.00, respectively. These were adjusted thereafter (the latest adjustment having dismissed Anita Javier from her employment, respondents are hereby directed to
been made on 1 July 1989), to P1,840.00 per month as salary and to P510.00 as reinstate her to her former position as marketing collector of Sandigan Savings and
monthly allowance, per "Notice of Salary Adjustment."5 Loan Bank and sales agent of Sandigan Realty Development Corporation, pay her
full backwages from the time of her dismissal, plus 10% attorney's fee and all her
Meanwhile, respondent Javier continued to be a realty sales agent of Sandigan
monetary award, until her actual reinstatement, and P60,000.00 moral and
Realty oh the side, and while she still received the 5% commission on her sales, she
exemplary damages to compensate for her mental pain and anguish, her social
no longer enjoyed the P500,00 monthly allowance.
humiliation and besmirched reputation. Should reinstatement be rendered

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impossible by virtue of the abolition of her position as marketing collector, grant her, 2. Javier was receiving P2,400.00 a month from the bank and that she is entitled to
in addition to backwages and other benefits, separation pay equivalent to one (1) separation pay for six years.8
month for every year of service until after this decision shall have become final and The records disclose that petitioner Sandigan Bank no longer disputes the finding
executory.7 that Javier was dismissed by it and that she did not abandon her job thereat. In
On appeal, the NLRC affirmed the decision of the Labor Arbiter in its Resolution, fact, it would have paid private respondent the monetary award representing
dated 24 September 1993, but, deleting the award of damages and attorney's fees, backwages and separation pay adjudged against it in the assailed NLRC resolution,
provided the following monetary award of backwages and separation pay: if only it found the same to be in the correct amount.9
"Backwages: Fr: April 20, 1990-April 20, 1993 - 36 months Consequently, the issues in this case are: (1) whether or not the respondent NLRC
abused its discretion in finding that private respondent was a regular employee of
Realty: P500.00 (allowance) x 36 P18,000.00 the petitioner Sandigan Realty, entitled to backwages and separation pay because
of her alleged illegal separation therefrom; and (2) whether the computation of the
Savings Bank: P2,400.00 x 36 P86,400.00 monetary award owing to the private respondent, as contained in the assailed NLRC
TOTAL P104,400.00 resolution, was attended with serious errors as to its bases both in fact and in law.
In determining the existence of an employer-employee relationship, the following
Separation Pay: elements are generally considered: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
Realty: Nov. 2, 1982-April 20, 1993 - 10 years
employer's power to control the employee with respect to the means and methods
P500.00 (allowance) x 10 P5,000.00 by which the work is to be accomplished. 10 This Court has generally relied on the
so called "right of control test" in making such a determination. Where the person
Savings Bank: Dec. 1, 1986-April 20, 1993 - 6 years for whom the services are performed reserves a right to control not only the end to
be achieved but also the means by which such end is reached, 11 the relationship
P2,400.00 x 6 P14,400.00
is deemed to exist. Stated differently, it is the power of control which is the most
GRAND TOTAL P123,800.00" determinative factor. 12 It is deemed to be such an important factor that the other
requisites may even be disregarded. 13 Thus, in the case of Cosmopolitan Funeral
The petitioners' Motion for Reconsideration of the said Resolution, and that of the Homes, Inc. v. Maalat, it was held that "to determine whether a person who
private respondent, were denied by the NLRC in its Resolution, dated 19 November performs work for another is the latter's employee or is all independent contractor,
1993, the dispositive portion of which reads: the prevailing test is 'the right of control test'." In the said case, the petitioner therein
It appearing that the issues raised by both parties in their Motions for failed to prove that the contract with private respondent was that of a mere agency,
Reconsideration were thoroughly discussed and duly passed upon in the questioned an indication that subject person is free to accomplish his work on his own terms
Resolution promulgated on September 24, 1993, the same are hereby denied for and may engage in other means of livelihood. 14
lack of merit with finality. Viewed in the light of the foregoing criteria, the features of the relationship between
No further motion for reconsideration shall be entertained. Javier and the Sandigan Realty, as may be gleaned from the facts described herein
The petitioners, thus, instituted this petition for certiorari, contending that the NLRC below by the Office of the Solicitor General, readily negate the existence of an
gravely and seriously abused its discretion in holding that: employer-employee relationship between them, the element of control being
noticeably absent.
1. Javier is a regular employee of both Sandigan Realty and Sandigan Bank and
entitled to backwages and separation pay from both; Javier was hired in 1982 to sell houses or lots owned by the Realty. She was paid
5% commission for every lot or house sold. From 1982 up to 1986 when she was

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hired as a marketing collector of petitioner bank, she received from the Realty Private respondent Anita Javier is clearly similarly placed as the private respondents
P500.00 monthly allowance if she was unable to make any sale. The P500.00 in the above-cited cases. Hence, she could not have been a regular employee but
allowance ceased when she became a regular employee of the petitioner bank. an independent contractor in relation to the petitioner Sandigan Realty.
Javier sold houses or lots according to the manner or means she chose to. The As we hold that private respondent was not a regular employee of the Sandigan
petitioner realty firm, while interested in the result of her work, had no control with Realty and that she could not, therefore, be entitled to backwages and separation
respect to the details of how the sale of a house or lot was achieved. She was free pay, we will necessarily have to limit our treatment of the alleged errors committed
to adopt her own selling methods or free to sell at her own time. (cf. Insular Life by the NLRC in the computation of the monetary award to that adjudged against
Assurance Co., Ltd. v. NLRC, 179 SCRA 459 [1989]). Her obligation was merely to the petitioner Sandigan Bank. But, first, we have to settle the question as to whether
turn over the proceeds of each sale to the Realty and, in turn, the Realty paid her reinstatement or payment of separation pay in its stead is the proper relief to be
by the job, i.e., her commission, not by the hour. accorded the private respondent, it appearing that neither the labor arbiter nor the
Moreover, selling houses and lots was merely her sideline or extra work for a sister NLRC made a definitive ruling on the matter. This has become especially more
company. 15 significant since private respondent, in her Comment20 and
Memorandum, 21 presses for an order of reinstatement to her former position,
As it appears that Sandigan Realty had no control over the conduct of Javier as a
claiming that there is no sufficient basis for a grant of separation pay in lieu thereof.
realty sales agent since its only concern or interest was in the result of her work and
not in how it was achieved, there cannot now be any doubt that Javier was not an We agree with the private respondent in this respect.
employee, much less a regular employee of the Sandigan Realty. Hence, she cannot Private respondent Anita Javier, by virtue of her employment status, is, under the
be entitled to the right to security of tenure nor to backwages and separation pay law entitled to security of tenure, which means that she has the right to continue in
as a consequence of her separation therefrom. employment until the same is terminated under conditions required by law. Article
Evidently, the legal relation of Javier to the Sandigan Realty can be that of an 279 of the Labor Code, as amended, clearly provides that:
independent contractor, where the control of the contracting party is only with Security of Tenure. - In cases of regular employment, the employer shall not
respect td the result of the work, as distinguished from an employment relationship terminate the services of an employee except for a just cause or when authorized
where the person rendering service is under the control of the hirer with respect to by the Title. An employee who is unjustly dismissed from work shall be entitled to
the details and manner of performance. 16 reinstatement without loss of seniority rights and other privileges and to his full
In the case of Sara v. Agarrado, private respondent who sold palay and rice for the backwages, inclusive of allowances, and to his other benefits or their monetary
petitioners under an arrangement or agreement that the former would be paid P2.00 equivalent computed from the time his compensation was withheld from him up to
commission per sack of milled rice sold as well as a commission of 10% per kilo of the time of his actual reinstatement.
palay purchased, 17 and that she would spend her own money for the undertaking, There being a finding of illegal dismissal of private respondent Anita Javier, her
and where she was shown to have worked for petitioners at her own pleasure, that reinstatement should follow as a matter of course, unless it be shown that the same
she was not subject to definite hours or conditions of work, that she could even is no longer possible, in which case, payment of separation pay will be ordered, in
delegate the task of buying and selling to others, if she so desired, or simultaneously lieu thereof. 22 In this case, we do not find any such showing or basis to preclude
engaged in other means of livelihood while selling and purchasing rice or palay, was private respondent's reinstatement.
held to be an independent contractor. 18 In effect, the petitioner bank is liable to private respondent only for backwages,
By the same token, the private respondent in another case, 19 who earns on a per inclusive of allowances, and other benefits or their monetary equivalent computed
head/talent commission basis and who works as she pleases, on her own schedule, from the time her compensation was withheld from her up to the time of her actual
terms and conditions was also held to be an independent contractor. reinstatement, at the rate of her latest monthly salary and allowance which was in
the total amount of P2,350,00 as shown by Javier's latest "Notice of Salary
Adjustment". However, earnings derived elsewhere by Javier from the date of

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dismissal up to the date of reinstatement, if there be any, should be deducted from


said backwages. 23 In this connection, it must be pointed out that the NLRC applied
the old rule, otherwise known as the "Mercury Drug Rule", and so, as to the rate of
P2,400.00, no-evidence was presented as basis. The rule that should apply in this
case is that provided in Article 279 of the Labor Code, as amended by Section 34,
Republic Act No. 6715, as aforequoted, which took effect on March 21, 1989,
considering that the private respondent's dismissal occurred thereafter, or on April
20, 1990.
WHEREFORE, the petition is GRANTED. The assailed resolutions of the National
Labor Relations Commission, dated 24 September 1993 and 19 November 1993, are
hereby modified to conform both to our finding that private respondent was not a
regular employee of Sandigan Realty Development Corporation but of the Sandigan
Savings and Loan Bank, Inc. and to our determination respecting the monetary
award to which the private respondent is entitled. The petitioner Sandigan Savings
and Loan Bank, Inc. is hereby ordered to reinstate private respondent Anita Javier
and to pay her backwages from April 20, 1990 up to the date of her actual
reinstatement, less earnings derived elsewhere, if any.
SO ORDERED.

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Republic of the Philippines In February 1998, SMART launched an organizational realignment to achieve more
SUPREME COURT efficient operations. This was made known to the employees on February 27,
Manila 1998.6 Part of the reorganization was the outsourcing of the marketing and sales
THIRD DIVISION force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and
formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to
G.R. No. 148132 January 28, 2008
do the sales and marketing work, SMART abolished the CSMG/FSD, Astorga’s
SMART COMMUNICATIONS, INC., petitioner, division.
vs.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel
REGINA M. ASTORGA, respondent.
who would be recommended by SMART. SMART then conducted a performance
x---------------------------------------------------x evaluation of CSMG personnel and those who garnered the highest ratings were
G.R. No. 151079 January 28, 2008 favorably recommended to SNMI. Astorga landed last in the performance evaluation,
SMART COMMUNICATIONS, INC., petitioner, thus, she was not recommended by SMART. SMART, nonetheless, offered her a
vs. supervisory position in the Customer Care Department, but she refused the offer
REGINA M. ASTORGA, respondent. because the position carried lower salary rank and rate.

x---------------------------------------------------x Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But
on March 3, 1998, SMART issued a memorandum advising Astorga of the termination
G.R. No. 151372 January 28, 2008
of her employment on ground of redundancy, effective April 3, 1998. Astorga
REGINA M. ASTORGA, petitioner, received it on March 16, 1998.7
vs.
The termination of her employment prompted Astorga to file a Complaint8 for illegal
SMART COMMUNICATIONS, INC. and ANN MARGARET V.
dismissal, non-payment of salaries and other benefits with prayer for moral and
SANTIAGO, respondents.
exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She
DECISION claimed that abolishing CSMG and, consequently, terminating her employment was
NACHURA, J.: illegal for it violated her right to security of tenure. She also posited that it was illegal
For the resolution of the Court are three consolidated petitions for review for an employer, like SMART, to contract out services which will displace the
on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails the employees, especially if the contractor is an in-house agency.9
February 28, 2000 Decision1 and the May 7, 2001 Resolution2 of the Court of SMART responded that there was valid termination. It argued that Astorga was
Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the dismissed by reason of redundancy, which is an authorized cause for termination of
June 11, 2001 Decision3 and the December 18, 2001 Resolution4 in CA-G.R. SP. No. employment, and the dismissal was effected in accordance with the requirements of
57065. the Labor Code. The redundancy of Astorga’s position was the result of the abolition
Regina M. Astorga (Astorga) was employed by respondent Smart Communications, of CSMG and the creation of a specialized and more technically equipped SNMI,
Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate which is a valid and legitimate exercise of management prerogative.10
Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that
monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional she pay the current market value of the Honda Civic Sedan which was given to her
benefits, namely, annual performance incentive equivalent to 30% of her annual under the company’s car plan program, or to surrender the same to the company
gross salary, a group life and hospitalization insurance coverage, and a car plan in for proper disposition.11 Astorga, however, failed and refused to do either, thus
the amount of P455,000.00.5 prompting SMART to file a suit for replevin with the Regional Trial Court of Makati

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(RTC) on August 10, 1998. The case was docketed as Civil Case No. 98-1936 and CAR MAINTENANCE ALLOWANCE = P 8,000.00
was raffled to Branch 57.12 (P2,000.00 x 4)
Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii)
FUEL ALLOWANCE = P 14,457.83
failure to state a cause of action; (iii) litis pendentia; and (iv) forum-shopping.
(300 liters/mo. x 4 mos.
Astorga posited that the regular courts have no jurisdiction over the complaint
at P12.04/liter)
because the subject thereof pertains to a benefit arising from an employment
contract; hence, jurisdiction over the same is vested in the labor tribunal and not in TOTAL = P211,415.52
regular courts.13
xxxx
Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor
Arbiter rendered a Decision14 dated August 20, 1998, declaring Astorga’s dismissal 3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and
from employment illegal. While recognizing SMART’s right to abolish any of its exemplary damages in the amount of P300,000.00. x x x
departments, the Labor Arbiter held that such right should be exercised in good faith 4. Jointly and severally pay 10% of the amount due as attorney’s fees.
and for causes beyond its control. The Arbiter found the abolition of CSMG done SO ORDERED.15
neither in good faith nor for causes beyond the control of SMART, but a ploy to
Subsequently, on March 29, 1999, the RTC issued an Order16 denying Astorga’s
terminate Astorga’s employment. The Arbiter also ruled that contracting out the
motion to dismiss the replevin case. In so ruling, the RTC ratiocinated that:
functions performed by Astorga to an in-house agency like SNMI was illegal, citing
Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code. Assessing the [submission] of the parties, the Court finds no merit in the motion to
dismiss.
Accordingly, the Labor Arbiter ordered:
As correctly pointed out, this case is to enforce a right of possession over a company
WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to
car assigned to the defendant under a car plan privilege arrangement. The car is
be illegal and unjust. [SMART and Santiago] are hereby ordered to:
registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent by Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the
position, without loss of seniority rights and other privileges, with full backwages, jurisdiction of the Regional Trial Court.
inclusive of allowances and other benefits from the time of [her] dismissal to the
In the Complaint, plaintiff claims to be the owner of the company car and despite
date of reinstatement, which computed as of this date, are as follows:
demand, defendant refused to return said car. This is clearly sufficient statement of
(a) Astorga plaintiff’s cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear
BACKWAGES; (P33,650.00 x 4 = P134,600.00
to exist because the judgment in the labor dispute will not constitute res judicata to
months)
bar the filing of this case.
UNPAID SALARIES (February 15, WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.
1998-April 3, 1998
SO ORDERED.17
February 15-28, 1998 = P 16,823.00 Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.18

March 1-31, [1998] = P 33,650.00 Astorga elevated the denial of her motion via certiorari to the CA, which, in its
February 28, 2000 Decision,19reversed the RTC ruling. Granting the petition and,
April 1-3, 1998 = P 3,882.69 consequently, dismissing the replevin case, the CA held that the case is intertwined
with Astorga’s complaint for illegal dismissal; thus, it is the labor tribunal that has

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rightful jurisdiction over the complaint. SMART’s motion for reconsideration having WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY
been denied,20 it elevated the case to this Court, now docketed as G.R. No. 148132. GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the February 1998 to 06 November 1998. [Smart’s] motion for reconsideration is
illegal dismissal case to the National Labor Relations Commission (NLRC). In its outrightly DENIED.
September 27, 1999 Decision,21 the NLRC sustained Astorga’s dismissal. Reversing SO ORDERED.25
the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI Astorga and SMART came to us with their respective petitions for review assailing
to do the sales and marketing services for SMART a valid organizational action. It the CA ruling, docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this
overruled the Labor Arbiter’s ruling that SNMI is an in-house agency, holding that it Court ordered the consolidation of these petitions with G.R. No. 148132.26
lacked legal basis. It also declared that contracting, subcontracting and streamlining
In her Memorandum, Astorga argues:
of operations for the purpose of increasing efficiency are allowed under the law. The
NLRC further found erroneous the Labor Arbiter’s disquisition that redundancy to be I
valid must be impelled by economic reasons, and upheld the redundancy measures THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S
undertaken by SMART. DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR
The NLRC disposed, thus: VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL.
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside.
[Astorga] is further ordered to immediately return the company vehicle assigned to II
her. [Smart and Santiago] are hereby ordered to pay the final wages of [Astorga] SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE
after [she] had submitted the required supporting papers therefor. APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA
SO ORDERED.22 TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, III
1999.23 THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL
Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR
Decision24 affirming with modification the resolutions of the NLRC. In gist, the CA WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.27
agreed with the NLRC that the reorganization undertaken by SMART resulting in the On the other hand, Smart in its Memoranda raises the following issues:
abolition of CSMG was a legitimate exercise of management prerogative. It rejected I
Astorga’s posturing that her non-absorption into SNMI was tainted with bad faith.
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
However, the CA found that SMART failed to comply with the mandatory one-month
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
notice prior to the intended termination. Accordingly, the CA imposed a penalty
APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR
equivalent to Astorga’s one-month salary for this non-compliance. The CA also set
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
aside the NLRC’s order for the return of the company vehicle holding that this issue
AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED
is not essentially a labor concern, but is civil in nature, and thus, within the
THAT SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO
competence of the regular court to decide. It added that the matter had not been
TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.
fully ventilated before the NLRC, but in the regular court.
II
Astorga filed a motion for reconsideration, while SMART sought partial
reconsideration, of the Decision. On December 18, 2001, the CA resolved the
motions, viz.:

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WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT That the action commenced by SMART against Astorga in the RTC of Makati City
OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE was one for replevin hardly admits of doubt.
REQUIREMENTS BEFORE TERMINATION. In reversing the RTC ruling and consequently dismissing the case for lack of
III jurisdiction, the CA made the following disquisition, viz.:
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS [I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the
COMMISSION FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN employment package. We doubt that [SMART] would extend [to Astorga] the same
THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.28 car plan privilege were it not for her employment as district sales manager of the
IV company. Furthermore, there is no civil contract for a loan between [Astorga] and
[Smart]. Consequently, We find that the car plan privilege is a benefit arising out of
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
employer-employee relationship. Thus, the claim for such falls squarely within the
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
original and exclusive jurisdiction of the labor arbiters and the NLRC.32
APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed
AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED jurisdiction over the suit and acted well within its discretion in denying Astorga’s
THAT THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE motion to dismiss. SMART’s demand for payment of the market value of the car or,
COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It
VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED. involves the relationship of debtor and creditor rather than employee-employer
relations.33 As such, the dispute falls within the jurisdiction of the regular courts.
V
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE
the replevin suit, explained:
THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR
PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR. Replevin is a possessory action, the gist of which is the right of possession in the
plaintiff. The primary relief sought therein is the return of the property in specie
VI
wrongfully detained by another person. It is an ordinary statutory proceeding to
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE adjudicate rights to the title or possession of personal property. The question of
THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART whether or not a party has the right of possession over the property involved and if
UNDER THE LABOR CODE.29 so, whether or not the adverse party has wrongfully taken and detained said
The Court shall first deal with the propriety of dismissing the replevin case filed with property as to require its return to plaintiff, is outside the pale of competence of a
the RTC of Makati City allegedly for lack of jurisdiction, which is the issue raised in labor tribunal and beyond the field of specialization of Labor Arbiters.
G.R. No. 148132. xxxx
Replevin is an action whereby the owner or person entitled to repossession of goods The labor dispute involved is not intertwined with the issue in the Replevin Case.
or chattels may recover those goods or chattels from one who has wrongfully The respective issues raised in each forum can be resolved independently on the
distrained or taken, or who wrongfully detains such goods or chattels. It is designed other. In fact in 18 November 1986, the NLRC in the case before it had issued an
to permit one having right to possession to recover property in specie from one who Injunctive Writ enjoining the petitioners from blocking the free ingress and egress
has wrongfully taken or detained the property.30 The term may refer either to the to the Vessel and ordering the petitioners to disembark and vacate. That aspect of
action itself, for the recovery of personalty, or to the provisional remedy traditionally the controversy is properly settled under the Labor Code. So also with petitioners’
associated with it, by which possession of the property may be obtained by the right to picket. But the determination of the question of who has the better right to
plaintiff and retained during the pendency of the action.31 take possession of the Vessel and whether petitioners can deprive the Charterer, as

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the legal possessor of the Vessel, of that right to possess in addressed to the salary rank and rate. If indeed SMART simply wanted to get rid of her, it would not
competence of Civil Courts. have offered her a position in any department in the enterprise.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of Astorga also states that the justification advanced by SMART is not true because
jurisdiction as laid down by pertinent laws. there was no compelling economic reason for redundancy. But contrary to her claim,
The CA, therefore, committed reversible error when it overturned the RTC ruling and an employer is not precluded from adopting a new policy conducive to a more
ordered the dismissal of the replevin case for lack of jurisdiction. economical and effective management even if it is not experiencing economic
reverses. Neither does the law require that the employer should suffer financial
Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.
losses before he can terminate the services of the employee on the ground of
Astorga was terminated due to redundancy, which is one of the authorized causes redundancy. 37
for the dismissal of an employee. The nature of redundancy as an authorized cause
We agree with the CA that the organizational realignment introduced by SMART,
for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National
which culminated in the abolition of CSMG/FSD and termination of Astorga’s
Labor Relations Commission,35 viz:
employment was an honest effort to make SMART’s sales and marketing
x x x redundancy in an employer’s personnel force necessarily or even ordinarily departments more efficient and competitive. As the CA had taken pains to elucidate:
refers to duplication of work. That no other person was holding the same position
x x x a careful and assiduous review of the records will yield no other conclusion
that private respondent held prior to termination of his services does not show that
than that the reorganization undertaken by SMART is for no purpose other than its
his position had not become redundant. Indeed, in any well organized business
declared objective – as a labor and cost savings device. Indeed, this Court finds no
enterprise, it would be surprising to find duplication of work and two (2) or more
fault in SMART’s decision to outsource the corporate sales market to SNMI in order
people doing the work of one person. We believe that redundancy, for purposes of
to attain greater productivity. [Astorga] belonged to the Sales Marketing Group
the Labor Code, exists where the services of an employee are in excess of what is
under the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in
reasonably demanded by the actual requirements of the enterprise. Succinctly put,
charge of selling SMART’s telecommunications services to the corporate market.
a position is redundant where it is superfluous, and superfluity of a position or
SMART, to ensure it can respond quickly, efficiently and flexibly to its customer’s
positions may be the outcome of a number of factors, such as overhiring of workers,
requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to
decreased volume of business, or dropping of a particular product line or service
newly-created SNMI Multimedia Incorporated, a joint venture company of SMART
activity previously manufactured or undertaken by the enterprise.
and NTT of Japan, for the reason that CSMG/FSD does not have the necessary
The characterization of an employee’s services as superfluous or no longer necessary technical expertise required for the value added services. By transferring the duties
and, therefore, properly terminable, is an exercise of business judgment on the part of CSMG/FSD to SNMI, SMART has created a more competent and specialized
of the employer. The wisdom and soundness of such characterization or decision is organization to perform the work required for corporate accounts. It is also relieved
not subject to discretionary review provided, of course, that a violation of law or SMART of all administrative costs – management, time and money-needed in
arbitrary or malicious action is not shown.36 maintaining the CSMG/FSD. The determination to outsource the duties of the
Astorga claims that the termination of her employment was illegal and tainted with CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on relevant
bad faith. She asserts that the reorganization was done in order to get rid of her. criteria and is therefore a legitimate exercise of management prerogative.
But except for her barefaced allegation, no convincing evidence was offered to prove Indeed, out of our concern for those lesser circumstanced in life, this Court has
it. This Court finds it extremely difficult to believe that SMART would enter into a inclined towards the worker and upheld his cause in most of his conflicts with his
joint venture agreement with NTT, form SNMI and abolish CSMG/FSD simply for the employer. This favored treatment is consonant with the social justice policy of the
sole purpose of easing out a particular employee, such as Astorga. Moreover, Constitution. But while tilting the scales of justice in favor of workers, the
Astorga never denied that SMART offered her a supervisory position in the Customer fundamental law also guarantees the right of the employer to reasonable returns for
Care Department, but she refused the offer because the position carried a lower his investment.38 In this light, we must acknowledge the prerogative of the

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employer to adopt such measures as will promote greater efficiency, reduce The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal
overhead costs and enhance prospects of economic gains, albeit always within the and at the same time, awarding indemnity for violation of Astorga's statutory rights.
framework of existing laws. Accordingly, we sustain the reorganization and However, we find the need to modify, by increasing, the indemnity awarded by the
redundancy program undertaken by SMART. CA to Astorga, as a sanction on SMART for non-compliance with the one-month
However, as aptly found by the CA, SMART failed to comply with the mandated one mandatory notice requirement, in light of our ruling in Jaka Food Processing
(1) month notice prior to termination. The record is clear that Astorga received the Corporation v. Pacot,43 viz.:
notice of termination only on March 16, 199839 or less than a month prior to its [I]f the dismissal is based on a just cause under Article 282 but the employer failed
effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was to comply with the notice requirement, the sanction to be imposed upon him should
notified of the redundancy program only on March 6, 1998.40 be tempered because the dismissal process was, in effect, initiated by an act
Article 283 of the Labor Code clearly provides: imputable to the employee, and (2) if the dismissal is based on an authorized cause
Art. 283. Closure of establishment and reduction of personnel. — The employer may under Article 283 but the employer failed to comply with the notice requirement, the
also terminate the employment of any employee due to the installation of labor sanction should be stiffer because the dismissal process was initiated by the
saving devices, redundancy, retrenchment to prevent losses or the closing or employer’s exercise of his management prerogative.
cessation of operation of the establishment or undertaking unless the closing is for We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
the purpose of circumventing the provisions of this Title, by serving a written notice As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to
on the workers and the Ministry of Labor and Employment at least one (1) month separation pay equivalent to at least one (1) month salary or to at least one (1)
before the intended date thereof x x x. month’s pay for every year of service, whichever is higher. The records show that
SMART’s assertion that Astorga cannot complain of lack of notice because the Astorga’s length of service is less than a year. She is, therefore, also entitled to
organizational realignment was made known to all the employees as early as separation pay equivalent to one (1) month pay.
February 1998 fails to persuade. Astorga’s actual knowledge of the reorganization Finally, we note that Astorga claimed non-payment of wages from February 15,
cannot replace the formal and written notice required by the law. In the written 1998. This assertion was never rebutted by SMART in the proceedings a quo. No
notice, the employees are informed of the specific date of the termination, at least proof of payment was presented by SMART to disprove the allegation. It is settled
a month prior to the effectivity of such termination, to give them sufficient time to that in labor cases, the burden of proving payment of monetary claims rests on the
find other suitable employment or to make whatever arrangements are needed to employer.44 SMART failed to discharge the onus probandi. Accordingly, it must be
cushion the impact of termination. In this case, notwithstanding Astorga’s held liable for Astorga’s salary from February 15, 1998 until the effective date of her
knowledge of the reorganization, she remained uncertain about the status of her termination, on April 3, 1998.
employment until SMART gave her formal notice of termination. But such notice was
However, the award of backwages to Astorga by the CA should be deleted for lack
received by Astorga barely two (2) weeks before the effective date of termination,
of basis. Backwages is a relief given to an illegally dismissed employee. Thus, before
a period very much shorter than that required by law.
backwages may be granted, there must be a finding of unjust or illegal dismissal
Be that as it may, this procedural infirmity would not render the termination of from work.45 The Labor Arbiter ruled that Astorga was illegally dismissed. But on
Astorga’s employment illegal. The validity of termination can exist independently of appeal, the NLRC reversed the Labor Arbiter’s ruling and categorically declared
the procedural infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found Astorga’s dismissal valid. This ruling was affirmed by the CA in its assailed Decision.
the dismissal of the employees therein valid and for authorized cause even if the Since Astorga’s dismissal is for an authorized cause, she is not entitled to backwages.
employer failed to comply with the notice requirement under Article 283 of the Labor The CA’s award of backwages is totally inconsistent with its finding of valid dismissal.
Code. This Court upheld the dismissal, but held the employer liable for non-
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The
compliance with the procedural requirements.
February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals

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in CA-G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of Makati City,
Branch 57 is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and
render its Decision with reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos.
151079 and 151372 are DENIED. The June 11, 2001 Decision and the December
18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION.
Astorga is declared validly dismissed. However, SMART is ordered to pay
Astorga P50,000.00 as indemnity for its non-compliance with procedural due
process, her separation pay equivalent to one (1) month pay, and her salary from
February 15, 1998 until the effective date of her termination on April 3, 1998. The
award of backwages is DELETED for lack of basis.
SO ORDERED.

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FIRST DIVISION For five years, petitioner performed the duties of Acting Manager. As of December
G.R. No. 170087 August 31, 2006 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
ANGELINA FRANCISCO, Petitioner,
vs. In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, alleged that she was required to sign a prepared resolution for her replacement but
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE she was assured that she would still be connected with Kasei Corporation. Timoteo
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents. Acedo, the designated Treasurer, convened a meeting of all employees of Kasei
Corporation and announced that nothing had changed and that petitioner was still
DECISION
connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in
YNARES-SANTIAGO, J.: charge of all BIR matters. 9
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning
annul and set aside the Decision and Resolution of the Court of Appeals dated January up to September 2001 for a total reduction of P22,500.00 as of September
October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515 2001. Petitioner was not paid her mid-year bonus allegedly because the company
dismissing the complaint for constructive dismissal filed by herein petitioner Angelina was not earning well. On October 2001, petitioner did not receive her salary from
Francisco. The appellate court reversed and set aside the Decision of the National the company. She made repeated follow-ups with the company cashier but she was
Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. advised that the company was not earning well. 10
032766-02 which affirmed with modification the decision of the Labor Arbiter dated
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the
July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private
officers but she was informed that she is no longer connected with the company. 11
respondents were liable for constructive dismissal.
Since she was no longer paid her salary, petitioner did not report for work and filed
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage.
an action for constructive dismissal before the labor arbiter.
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 Private respondents averred that petitioner is not an employee of Kasei Corporation.
Officer to the City of Makati to secure business permits, construction permits and They alleged that petitioner was hired in 1995 as one of its technical consultants on
other licenses for the initial operation of the company. 5 accounting matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion without control and
Although she was designated as Corporate Secretary, she was not entrusted with
supervision of Kasei Corporation. Petitioner had no daily time record and she came
the corporate documents; neither did she attend any board meeting nor required to
to the office any time she wanted. The company never interfered with her work
do so. She never prepared any legal document and never represented the company
except that from time to time, the management would ask her opinion on matters
as its Corporate Secretary. However, on some occasions, she was prevailed upon to
relating to her profession. Petitioner did not go through the usual procedure of
sign documentation for the company. 6
selection of employees, but her services were engaged through a Board Resolution
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry designating her as technical consultant. The money received by petitioner from the
Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned corporation was her professional fee subject to the 10% expanded withholding tax
to handle recruitment of all employees and perform management administration on professionals, and that she was not one of those reported to the BIR or SSS as
functions; represent the company in all dealings with government agencies, one of the company’s employees. 12
especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS)
Petitioner’s designation as technical consultant depended solely upon the will of
and in the city government of Makati; and to administer all other matters pertaining
management. As such, her consultancy may be terminated any time considering
to the operation of Kasei Restaurant which is owned and operated by Kasei
that her services were only temporary in nature and dependent on the needs of the
Corporation. 7
corporation.

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To prove that petitioner was not an employee of the corporation, private 1) Respondents are directed to pay complainant separation pay computed at one
respondents submitted a list of employees for the years 1999 and 2000 duly received month per year of service in addition to full backwages from October 2001 to July
by the BIR showing that petitioner was not among the employees reported to the 31, 2002;
BIR, as well as a list of payees subject to expanded withholding tax which included 2) The awards representing moral and exemplary damages and 10% share in profit
petitioner. SSS records were also submitted showing that petitioner’s latest employer in the respective accounts of P100,000.00 and P361,175.00 are deleted;
was Seiji Corporation. 13
3) The award of 10% attorney’s fees shall be based on salary differential award
The Labor Arbiter found that petitioner was illegally dismissed, thus: only;
WHEREFORE, premises considered, judgment is hereby rendered as follows: 4) The awards representing salary differentials, housing allowance, mid year bonus
1. finding complainant an employee of respondent corporation; and 13th month pay are AFFIRMED.
2. declaring complainant’s dismissal as illegal; SO ORDERED. 15
3. ordering respondents to reinstate complainant to her former position without loss On appeal, the Court of Appeals reversed the NLRC decision, thus:
of seniority rights and jointly and severally pay complainant her money claims in WHEREFORE, the instant petition is hereby GRANTED. The decision of the National
accordance with the following computation: Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET
a. Backwages 10/2001 – 07/2002 275,000.00 ASIDE and a new one is hereby rendered dismissing the complaint filed by private
(27,500 x 10 mos.) respondent against Kasei Corporation, et al. for constructive dismissal.
b. Salary Differentials (01/2001 – 09/2001) 22,500.00 SO ORDERED. 16
c. Housing Allowance (01/2001 – 07/2002) 57,000.00 The appellate court denied petitioner’s motion for reconsideration, hence, the
present recourse.
d. Midyear Bonus 2001 27,500.00
The core issues to be resolved in this case are (1) whether there was an employer-
e. 13th Month Pay 27,500.00
employee relationship between petitioner and private respondent Kasei Corporation;
f. 10% share in the profits of Kasei and if in the affirmative, (2) whether petitioner was illegally dismissed.
Corp. from 1996-2001 361,175.00 Considering the conflicting findings by the Labor Arbiter and the National Labor
g. Moral and exemplary damages 100,000.00 Relations Commission on one hand, and the Court of Appeals on the other, there is
h. 10% Attorney’s fees 87,076.50 a need to reexamine the records to determine which of the propositions espoused
by the contending parties is supported by substantial evidence. 17
P957,742.50
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no
If reinstatement is no longer feasible, respondents are ordered to pay complainant
uniform test to determine the existence of an employer-employee relation.
separation pay with additional backwages that would accrue up to actual payment
Generally, courts have relied on the so-called right of control test where the person
of separation pay.
for whom the services are performed reserves a right to control not only the end to
SO ORDERED. 14 be achieved but also the means to be used in reaching such end. In addition to the
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor standard of right-of-control, the existing economic conditions prevailing between the
Arbiter, the dispositive portion of which reads: parties, like the inclusion of the employee in the payrolls, can help in determining
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as the existence of an employer-employee relationship.
follows: 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

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relationship where several positions have been held by the worker. There are The proper standard of economic dependence is whether the worker is dependent
instances when, aside from the employer’s power to control the employee with on the alleged employer for his continued employment in that line of business. 24 In
respect to the means and methods by which the work is to be accomplished, the United States, the touchstone of economic reality in analyzing possible
economic realities of the employment relations help provide a comprehensive employment relationships for purposes of the Federal Labor Standards Act is
analysis of the true classification of the individual, whether as employee, dependency. 25 By analogy, the benchmark of economic reality in analyzing possible
independent contractor, corporate officer or some other capacity. employment relationships for purposes of the Labor Code ought to be the economic
The better approach would therefore be to adopt a two-tiered test involving: (1) the dependence of the worker on his employer.
putative employer’s power to control the employee with respect to the means and By applying the control test, there is no doubt that petitioner is an employee of Kasei
methods by which the work is to be accomplished; and (2) the underlying economic Corporation because she was under the direct control and supervision of Seiji
realities of the activity or relationship. Kamura, the corporation’s Technical Consultant. She reported for work regularly and
This two-tiered test would provide us with a framework of analysis, which would served in various capacities as Accountant, Liaison Officer, Technical Consultant,
take into consideration the totality of circumstances surrounding the true nature of Acting Manager and Corporate Secretary, with substantially the same job functions,
the relationship between the parties. This is especially appropriate in this case where that is, rendering accounting and tax services to the company and performing
there is no written agreement or terms of reference to base the relationship on; and functions necessary and desirable for the proper operation of the corporation such
due to the complexity of the relationship based on the various positions and as securing business permits and other licenses over an indefinite period of
responsibilities given to the worker over the period of the latter’s employment. engagement.
The control test initially found application in the case of Viaña v. Al-Lagadan and Under the broader economic reality test, the petitioner can likewise be said to be an
Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is employee of respondent corporation because she had served the company for six
an employer-employee relationship when the person for whom the services are years before her dismissal, receiving check vouchers indicating her salaries/wages,
performed reserves the right to control not only the end achieved but also the benefits, 13th month pay, bonuses and allowances, as well as deductions and Social
manner and means used to achieve that end. Security contributions from August 1, 1999 to December 18, 2000. 26 When
petitioner was designated General Manager, respondent corporation made a report
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing
to the SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as
economic conditions prevailing between the parties, in addition to the standard of
manifested by a copy of the SSS specimen signature card which was signed by the
right-of-control like the inclusion of the employee in the payrolls, to give a clearer
President of Kasei Corporation and the inclusion of her name in the on-line inquiry
picture in determining the existence of an employer-employee relationship based on
system of the SSS evinces the existence of an employer-employee relationship
an analysis of the totality of economic circumstances of the worker.
between petitioner and respondent corporation. 27
Thus, the determination of the relationship between employer and employee
It is therefore apparent that petitioner is economically dependent on respondent
depends upon the circumstances of the whole economic activity, 22 such as: (1) the
corporation for her continued employment in the latter’s line of business.
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) In Domasig v. National Labor Relations Commission, 28 we held that in a business
the nature and degree of control exercised by the employer; (4) the worker’s establishment, an identification card is provided not only as a security measure but
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or mainly to identify the holder thereof as a bona fide employee of the firm that issues
foresight required for the success of the claimed independent enterprise; (6) the it. Together with the cash vouchers covering petitioner’s salaries for the months
permanency and duration of the relationship between the worker and the employer; stated therein, these matters constitute substantial evidence adequate to support a
and (7) the degree of dependency of the worker upon the employer for his continued conclusion that petitioner was an employee of private respondent.
employment in that line of business. 23 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

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Social Security Law is predicated on the existence of an employer-employee the principle of strained relations, petitioner is further entitled to separation pay, in
relationship. lieu of reinstatement. 34
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly A diminution of pay is prejudicial to the employee and amounts to constructive
established that petitioner never acted as Corporate Secretary and that her dismissal. Constructive dismissal is an involuntary resignation resulting in cessation
designation as such was only for convenience. The actual nature of petitioner’s job of work resorted to when continued employment becomes impossible, unreasonable
was as Kamura’s direct assistant with the duty of acting as Liaison Officer in or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
representing the company to secure construction permits, license to operate and discrimination, insensibility or disdain by an employer becomes unbearable to an
other requirements imposed by government agencies. Petitioner was never employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an
entrusted with corporate documents of the company, nor required to attend the employee ceases to work due to a demotion of rank or a diminution of pay, an
meeting of the corporation. She was never privy to the preparation of any document unreasonable situation arises which creates an adverse working environment
for the corporation, although once in a while she was required to sign prepared rendering it impossible for such employee to continue working for her employer.
documentation for the company. 30 Hence, her severance from the company was not of her own making and therefore
The second affidavit of Kamura dated March 7, 2002 which repudiated the December amounted to an illegal termination of employment.
5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records In affording full protection to labor, this Court must ensure equal work opportunities
of the case. 31 Regardless of this fact, we are convinced that the allegations in the regardless of sex, race or creed. Even as we, in every case, attempt to carefully
first affidavit are sufficient to establish that petitioner is an employee of Kasei balance the fragile relationship between employees and employers, we are mindful
Corporation. of the fact that the policy of the law is to apply the Labor Code to a greater number
Granting arguendo, that the second affidavit validly repudiated the first one, courts of employees. This would enable employees to avail of the benefits accorded to
do not generally look with favor on any retraction or recanted testimony, for it could them by law, in line with the constitutional mandate giving maximum aid and
have been secured by considerations other than to tell the truth and would make protection to labor, promoting their welfare and reaffirming it as a primary social
solemn trials a mockery and place the investigation of the truth at the mercy of economic force in furtherance of social justice and national development.
unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of
declaration, but like any other testimony the same is subject to the test of credibility Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP
and should be received with caution. 33 No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Based on the foregoing, there can be no other conclusion that petitioner is an Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02,
employee of respondent Kasei Corporation. She was selected and engaged by the is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation
company for compensation, and is economically dependent upon respondent for her of petitioner Angelina Francisco’s full backwages from the time she was illegally
continued employment in that line of business. Her main job function involved terminated until the date of finality of this decision, and separation pay representing
accounting and tax services rendered to respondent corporation on a regular basis one-half month pay for every year of service, where a fraction of at least six months
over an indefinite period of engagement. Respondent corporation hired and engaged shall be considered as one whole year.
petitioner for compensation, with the power to dismiss her for cause. More SO ORDERED.
importantly, respondent corporation had the power to control petitioner with the
means and methods by which the work is to be accomplished.
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

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a) Prepare, arrange airing of commercial broadcasting based on the daily operations


log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-
in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement
FIRST DIVISION
and complaints;
G.R. No. 164156 September 26, 2006
e) Assist, anchor program interview, etc; and
ABS-CBN BROADCASTING CORPORATION, petitioner,
f) Record, log clerical reports, man based control radio.4
vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and Their respective working hours were as follows:
JOSEPHINE LERASAN, respondents. Name Time No. of Hours
DECISION 1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
CALLEJO, SR., J.: 8:00 A.M.-12:00 noon
Before us is a petition for review on certiorari of the Decision1 of the Court of 2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for 3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB
Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision 4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, The PAs were under the control and supervision of Assistant Station Manager Dante
Jennifer Deiparine and Josephine Lerasan as regular employees. J. Luzon, and News Manager Leo Lastimosa.
The Antecedents On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the executed a Collective Bargaining Agreement (CBA) to be effective during the period
broadcasting business and owns a network of television and radio stations, whose from December 11, 1996 to December 11, 1999. However, since petitioner refused
operations revolve around the broadcast, transmission, and relay of to recognize PAs as part of the bargaining unit, respondents were not included to
telecommunication signals. It sells and deals in or otherwise utilizes the airtime it the CBA.6
generates from its radio and television operations. It has a franchise as a On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing
broadcasting company, and was likewise issued a license and authority to operate the PAs that effective August 1, 2000, they would be assigned to non-drama
by the National Telecommunications Commission. programs, and that the DYAB studio operations would be handled by the studio
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as technician. Thus, their revised schedule and other assignments would be as follows:
production assistants (PAs) on different dates. They were assigned at the news and Monday – Saturday
public affairs, for various radio programs in the Cebu Broadcasting Station, with a 4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
monthly compensation of P4,000. They were issued ABS-CBN employees’
Miss Nazareno will then be assigned at the Research Dept.
identification cards and were required to work for a minimum of eight hours a day,
including Sundays and holidays. They were made to perform the following tasks and From 8:00 A.M. to 12:00
duties: 4:30 P.M. – 12:00 MN – Jennifer Deiparine

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Sunday Exhibit "D"


5:00 A.M. – 1:00 P.M. – Jennifer Deiparine Exhibit "D-1" &
1:00 P.M. – 10:00 P.M. – Joy Sanchez Exhibit "D-2" - ABS-CBN Salary Voucher from March
Respondent Gerzon was assigned as the full-time PA of the TV News Department 1999 to January 2001 at P4,000.00
reporting directly to Leo Lastimosa. Date employed: September 1, 1995
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Length of service: 5 years & 10 months
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay,
III. Marlene Nazareno
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against
the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their Exhibit "E" - ABS-CBN Employee’s Identification Card
respective position papers. Upon respondents’ failure to file their position papers Exhibit "E" - ABS-CBN Salary Voucher from Nov.
within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order Exhibit "E-1" & 1999 to December 2000
dated April 30, 2001, dismissing the complaint without prejudice for lack of interest
Exhibit :E-2"
to pursue the case. Respondents received a copy of the Order on May 16,
2001.7 Instead of re-filing their complaint with the NLRC within 10 days from May Date employed: April 17, 1996
16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Length of service: 5 years and one (1) month
Motion to Admit Position Paper and Motion to Submit Case For Resolution.8 The IV. Joy Sanchez Lerasan
Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith
Exhibit "F" - ABS-CBN Employee’s Identification Card
admitted the position paper of the complainants. Respondents made the following
allegations: Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
1. Complainants were engaged by respondent ABS-CBN as regular and full-time Exhibit "F-2" & 2000 to Jan. 2001
employees for a continuous period of more than five (5) years with a monthly salary Exhibit "F-3"
rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this Exhibit "F-4" - Certification dated July 6, 2000
complaint on November 20, 2000.
Acknowledging regular status of
Machine copies of complainants’ ABS-CBN Employee’s Identification Card and salary
Complainant Joy Sanchez Lerasan
vouchers are hereto attached as follows, thus:
Signed by ABS-CBN Administrative
I. Jennifer Deiparine:
Officer May Kima Hife
Exhibit "A" - ABS-CBN Employee’s Identification Card
Date employed: April 15, 1998
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Length of service: 3 yrs. and one (1) month9
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Respondents insisted that they belonged to a "work pool" from which petitioner
Exhibit "B-2"
chose persons to be given specific assignments at its discretion, and were thus under
Date employed: September 15, 1995 its direct supervision and control regardless of nomenclature. They prayed that
Length of service: 5 years & nine (9) months judgment be rendered in their favor, thus:
II. Merlou Gerzon - ABS-CBN Employee’s Identification Card WHEREFORE, premises considered, this Honorable Arbiter is most respectfully
Exhibit "C" prayed, to issue an order compelling defendants to pay complainants the following:

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1. One Hundred Thousand Pesos (P100,000.00) each b. Complainant Deiparine assists in the programs:
and by way of moral damages; 1) Unzanith
2. Minimum wage differential; 2) Serbisyo de Arevalo
3. Thirteenth month pay differential; 3) Arangkada (evening edition)
4. Unpaid service incentive leave benefits; 4) Balitang K (local version)
5. Sick leave; 5) Abante Subu
6. Holiday pay; 6) Pangutana Lang
7. Premium pay; c. Complainant Gerzon assists in the program:
8. Overtime pay; 1) On Mondays and Tuesdays:
9. Night shift differential. (a) Unzanith
Complainants further pray of this Arbiter to declare them regular and permanent (b) Serbisyo de Arevalo
employees of respondent ABS-CBN as a condition precedent for their admission into (c) Arangkada (evening edition)
the existing union and collective bargaining unit of respondent company where they
(d) Balitang K (local version)
may as such acquire or otherwise perform their obligations thereto or enjoy the
benefits due therefrom. (e) Abante Sugbu
Complainants pray for such other reliefs as are just and equitable under the (f) Pangutana Lang
premises.10 2) On Thursdays
For its part, petitioner alleged in its position paper that the respondents were PAs Nagbagang Balita
who basically assist in the conduct of a particular program ran by an anchor or 3) On Saturdays
talent. Among their duties include monitoring and receiving incoming calls from
(a) Nagbagang Balita
listeners and field reporters and calls of news sources; generally, they perform leg
work for the anchors during a program or a particular production. They are (b) Info Hayupan
considered in the industry as "program employees" in that, as distinguished from (c) Arangkada (morning edition)
regular or station employees, they are basically engaged by the station for a (d) Nagbagang Balita (mid-day edition)
particular or specific program broadcasted by the radio station. Petitioner asserted
4) On Sundays:
that as PAs, the complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to determine the programs (a) Siesta Serenata
to which they shall later be called on to assist. The program assignments of (b) Sunday Chismisan
complainants were as follows: (c) Timbangan sa Hustisya
a. Complainant Nazareno assists in the programs: (d) Sayri ang Lungsod
1) Nagbagang Balita (early morning edition) (e) Haranahan11
2) Infor Hayupan Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline"
3) Arangkada (morning edition) for other programs they produce, such as drama talents in other productions. As
4) Nagbagang Balita (mid-day edition) program employees, a PA’s engagement is coterminous with the completion of the

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program, and may be extended/renewed provided that the program is on-going; a respondents received theirs on September 8, 2001. Respondents signed and filed
PA may also be assigned to new programs upon the cancellation of one program their Appeal Memorandum on September 18, 2001.
and the commencement of another. As such program employees, their For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter
compensation is computed on a program basis, a fixed amount for performance denied and considered as an appeal, conformably with Section 5, Rule V, of the
services irrespective of the time consumed. At any rate, petitioner claimed, as the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC,
payroll will show, respondents were paid all salaries and benefits due them under while respondents filed a partial appeal.
the law.12
In its appeal, petitioner alleged the following:
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA
1. That the Labor Arbiter erred in reviving or re-opening this case which had long
and interpret the same, especially since respondents were not covered by the
been dismissed without prejudice for more than thirty (30) calendar days;
bargaining unit.
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents,
to due process of law;
and declared that they were regular employees of petitioner; as such, they were
awarded monetary benefits. The fallo of the decision reads: 3. That the Labor Arbiter erred in denying respondent’s Motion for Reconsideration
on an interlocutory order on the ground that the same is a prohibited pleading;
WHEREFORE, the foregoing premises considered, judgment is hereby rendered
declaring the complainants regular employees of the respondent ABS-CBN 4. That the Labor Arbiter erred when he ruled that the complainants are regular
Broadcasting Corporation and directing the same respondent to pay complainants employees of the respondent;
as follows: 5. That the Labor Arbiter erred when he ruled that the complainants are entitled to
I - Merlou A. Gerzon P12,025.00 13th month pay, service incentive leave pay and salary differential; and
II - Marlyn Nazareno 12,025.00 6. That the Labor Arbiter erred when he ruled that complainants are entitled to
attorney’s fees.14
III - Jennifer Deiparine 12,025.00
On November 14, 2002, the NLRC rendered judgment modifying the decision of the
IV - Josephine Sanchez Lerazan 12,025.00
Labor Arbiter. The fallo of the decision reads:
_________
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez
P48,100.00 dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING
plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS: respondent ABS-CBN Broadcasting Corporation, as follows:
FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00). 1. To pay complainants of their wage differentials and other benefits arising from
Respondent Veneranda C. Sy is absolved from any liability. the CBA as of 30 September 2002 in the aggregate amount of Two Million Five
SO ORDERED.13 Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
However, the Labor Arbiter did not award money benefits as provided in the CBA on
his belief that he had no jurisdiction to interpret and apply the agreement, as the a. Deiparine, Jennifer - P 716,113.49
same was within the jurisdiction of the Voluntary Arbitrator as provided in Article b. Gerzon, Merlou - 716,113.49
261 of the Labor Code. c. Nazareno, Marlyn - 716,113.49
Respondents’ counsel received a copy of the decision on August 29, 2001. d. Lerazan, Josephine Sanchez - 413,607.75
Respondent Nazareno received her copy on August 27, 2001, while the other
Total - P 2,561,948.22

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2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as discretion when it awarded monetary benefits to respondents under the CBA
of 30 September 2002 representing their rice subsidy in the CBA, broken down as although they are not members of the appropriate bargaining unit.
follows: On February 10, 2004, the CA rendered judgment dismissing the petition. It held
a. Deiparine, Jennifer - 60 Sacks that the perfection of an appeal shall be upon the expiration of the last day to appeal
b. Gerzon, Merlou - 60 Sacks by all parties, should there be several parties to a case. Since respondents received
their copies of the decision on September 8, 2001 (except respondent Nazareno who
c. Nazareno, Marlyn - 60 Sacks
received her copy of the decision on August 27, 2001), they had until September
d. Lerazan, Josephine Sanchez - 53 Sacks 18, 2001 within which to file their Appeal Memorandum. Moreover, the CA declared
Total 233 Sacks; and that respondents’ failure to submit their position paper on time is not a ground to
3. To grant to the complainants all the benefits of the CBA after 30 September 2002. strike out the paper from the records, much less dismiss a complaint.

SO ORDERED.15 Anent the substantive issues, the appellate court stated that respondents are not
mere project employees, but regular employees who perform tasks necessary and
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code
desirable in the usual trade and business of petitioner and not just its project
when it granted respondents’ motion to refile the complaint and admit their position
employees. Moreover, the CA added, the award of benefits accorded to rank-and-
paper. Although respondents were not parties to the CBA between petitioner and
file employees under the 1996-1999 CBA is a necessary consequence of the NLRC
the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and
ruling that respondents, as PAs, are regular employees.
computed respondents’ monetary benefits based on the 1999 CBA, which was
effective until September 2002. The NLRC also ruled that the Labor Arbiter had Finding no merit in petitioner’s motion for reconsideration, the CA denied the same
jurisdiction over the complaint of respondents because they acted in their individual in a Resolution17 dated June 16, 2004.
capacities and not as members of the union. Their claim for monetary benefits was Petitioner thus filed the instant petition for review on certiorari and raises the
within the context of Article 217(6) of the Labor Code. The validity of respondents’ following assignments of error:
claim does not depend upon the interpretation of the CBA. 1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND
The NLRC ruled that respondents were entitled to the benefits under the CBA GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION
because they were regular employees who contributed to the profits of petitioner NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER’S DECISION AND
through their labor. The NLRC cited the ruling of this Court in New Pacific Timber & RESOLUTION.
Supply Company v. National Labor Relations Commission.16 2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
Petitioner filed a motion for reconsideration, which the NLRC denied. RULING OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court 3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
before the CA, raising both procedural and substantive issues, as follows: (a) RULING OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18
whether the NLRC acted without jurisdiction in admitting the appeal of respondents; Considering that the assignments of error are interrelated, the Court shall resolve
(b) whether the NLRC committed palpable error in scrutinizing the reopening and them simultaneously.
revival of the complaint of respondents with the Labor Arbiter upon due notice
Petitioner asserts that the appellate court committed palpable and serious error of
despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the
law when it affirmed the rulings of the NLRC, and entertained respondents’ appeal
Labor Arbiter; (c) whether respondents were regular employees; (d) whether the
from the decision of the Labor Arbiter despite the admitted lapse of the reglementary
NLRC acted without jurisdiction in entertaining and resolving the claim of the
period within which to perfect the same. Petitioner likewise maintains that the 10-
respondents under the CBA instead of referring the same to the Voluntary Arbitrators
day period to appeal must be reckoned from receipt of a party’s counsel, not from
as provided in the CBA; and (e) whether the NLRC acted with grave abuse of
the time the party learns of the decision, that is, notice to counsel is notice to party

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and not the other way around. Finally, petitioner argues that the reopening of a We find no merit in petitioner’s contention that the Labor Arbiter abused his
complaint which the Labor Arbiter has dismissed without prejudice is a clear violation discretion when he admitted respondents’ position paper which had been belatedly
of Section 1, Rule V of the NLRC Rules; such order of dismissal had already attained filed. It bears stressing that the Labor Arbiter is mandated by law to use every
finality and can no longer be set aside. reasonable means to ascertain the facts in each case speedily and objectively,
Respondents, on the other hand, allege that their late appeal is a non-issue because without technicalities of law or procedure, all in the interest of due
it was petitioner’s own timely appeal that empowered the NLRC to reopen the case. process.25 Indeed, as stressed by the appellate court, respondents’ failure to submit
They assert that although the appeal was filed 10 days late, it may still be given due a position paper on time is not a ground for striking out the paper from the records,
course in the interest of substantial justice as an exception to the general rule that much less for dismissing a complaint.26 Likewise, there is simply no truth to
the negligence of a counsel binds the client. On the issue of the late filing of their petitioner’s assertion that it was denied due process when the Labor Arbiter admitted
position paper, they maintain that this is not a ground to strike it out from the respondents’ position paper without requiring it to file a comment before admitting
records or dismiss the complaint. said position paper. The essence of due process in administrative proceedings is
simply an opportunity to explain one’s side or an opportunity to seek reconsideration
We find no merit in the petition.
of the action or ruling complained of. Obviously, there is nothing in the records that
We agree with petitioner’s contention that the perfection of an appeal within the would suggest that petitioner had absolute lack of opportunity to be
statutory or reglementary period is not only mandatory, but also jurisdictional; heard.27 Petitioner had the right to file a motion for reconsideration of the Labor
failure to do so renders the assailed decision final and executory and deprives the Arbiter’s admission of respondents’ position paper, and even file a Reply thereto. In
appellate court or body of the legal authority to alter the final judgment, much less fact, petitioner filed its position paper on April 2, 2001. It must be stressed that
entertain the appeal. However, this Court has time and again ruled that in Article 280 of the Labor Code was encoded in our statute books to hinder the
exceptional cases, a belated appeal may be given due course if greater injustice may circumvention by unscrupulous employers of the employees’ right to security of
occur if an appeal is not given due course than if the reglementary period to appeal tenure by indiscriminately and absolutely ruling out all written and oral agreements
were strictly followed.19 The Court resorted to this extraordinary measure even at inharmonious with the concept of regular employment defined therein.28
the expense of sacrificing order and efficiency if only to serve the greater principles
We quote with approval the following pronouncement of the NLRC:
of substantial justice and equity.20
The complainants, on the other hand, contend that respondents assailed the Labor
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving
Arbiter’s order dated 18 June 2001 as violative of the NLRC Rules of Procedure and
Article 22321 of the Labor Code a liberal application to prevent the miscarriage of
as such is violative of their right to procedural due process. That while suggesting
justice. Technicality should not be allowed to stand in the way of equitably and
that an Order be instead issued by the Labor Arbiter for complainants to refile this
completely resolving the rights and obligations of the parties.22 We have held in a
case, respondents impliedly submit that there is not any substantial damage or
catena of cases that technical rules are not binding in labor cases and are not to be
prejudice upon the refiling, even so, respondents’ suggestion acknowledges
applied strictly if the result would be detrimental to the workingman.23
complainants right to prosecute this case, albeit with the burden of repeating the
Admittedly, respondents failed to perfect their appeal from the decision of the Labor same procedure, thus, entailing additional time, efforts, litigation cost and precious
Arbiter within the reglementary period therefor. However, petitioner perfected its time for the Arbiter to repeat the same process twice. Respondent’s suggestion,
appeal within the period, and since petitioner had filed a timely appeal, the NLRC betrays its notion of prolonging, rather than promoting the early resolution of the
acquired jurisdiction over the case to give due course to its appeal and render the case.
decision of November 14, 2002. Case law is that the party who failed to appeal from
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-
the decision of the Labor Arbiter to the NLRC can still participate in a separate appeal
opened the dismissed case without prejudice beyond the ten (10) day reglementary
timely filed by the adverse party as the situation is considered to be of greater
period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the
benefit to both parties.24
NLRC which states:

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"A party may file a motion to revive or re-open a case dismissed without prejudice We reject, as barren of factual basis, petitioner’s contention that respondents are
within ten (10) calendar days from receipt of notice of the order dismissing the considered as its talents, hence, not regular employees of the broadcasting
same; otherwise, his only remedy shall be to re-file the case in the arbitration branch company. Petitioner’s claim that the functions performed by the respondents are not
of origin." at all necessary, desirable, or even vital to its trade or business is belied by the
the same is not a serious flaw that had prejudiced the respondents’ right to due evidence on record.
process. The case can still be refiled because it has not yet prescribed. Anyway, Case law is that this Court has always accorded respect and finality to the findings
Article 221 of the Labor Code provides: of fact of the CA, particularly if they coincide with those of the Labor Arbiter and the
"In any proceedings before the Commission or any of the Labor Arbiters, the rules National Labor Relations Commission, when supported by substantial
of evidence prevailing in courts of law or equity shall not be controlling and it is the evidence.30 The question of whether respondents are regular or project employees
spirit and intention of this Code that the Commission and its members and the Labor or independent contractors is essentially factual in nature; nonetheless, the Court is
Arbiters shall use every and all reasonable means to ascertain the facts in each case constrained to resolve it due to its tremendous effects to the legions of production
speedily and objectively and without regard to technicalities of law or procedure, all assistants working in the Philippine broadcasting industry.
in the interest of due process." We agree with respondents’ contention that where a person has rendered at least
The admission by the Labor Arbiter of the complainants’ Position Paper and one year of service, regardless of the nature of the activity performed, or where the
Supplemental Manifestation which were belatedly filed just only shows that he acted work is continuous or intermittent, the employment is considered regular as long as
within his discretion as he is enjoined by law to use every reasonable means to the activity exists, the reason being that a customary appointment is not
ascertain the facts in each case speedily and objectively, without regard to indispensable before one may be formally declared as having attained regular status.
technicalities of law or procedure, all in the interest of due process. Indeed, the Article 280 of the Labor Code provides:
failure to submit a position paper on time is not a ground for striking out the paper ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written
from the records, much less for dismissing a complaint in the case of the agreement to the contrary notwithstanding and regardless of the oral agreement of
complainant. (University of Immaculate Conception vs. UIC Teaching and Non- the parties, an employment shall be deemed to be regular where the employee has
Teaching Personnel Employees, G.R. No. 144702, July 31, 2001). been engaged to perform activities which are usually necessary or desirable in the
"In admitting the respondents’ position paper albeit late, the Labor Arbiter acted usual business or trade of the employer except where the employment has been
within her discretion. In fact, she is enjoined by law to use every reasonable means fixed for a specific project or undertaking the completion or termination of which
to ascertain the facts in each case speedily and objectively, without technicalities of has been determined at the time of the engagement of the employee or where the
law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA work or services to be performed is seasonal in nature and the employment is for
53). the duration of the season.
The respondents were given by the Labor Arbiter the opportunity to submit position In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in
paper. In fact, the respondents had filed their position paper on 2 April 2001. What determining whether one is a regular employee:
is material in the compliance of due process is the fact that the parties are given the The primary standard, therefore, of determining regular employment is the
opportunities to submit position papers. reasonable connection between the particular activity performed by the employee
"Due process requirements are satisfied where the parties are given the in relation to the usual trade or business of the employer. The test is whether the
opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA 737). former is usually necessary or desirable in the usual business or trade of the
employer. The connection can be determined by considering the nature of work
Thus, the respondent was not deprived of its Constitutional right to due process of
performed and its relation to the scheme of the particular business or trade in its
law.29
entirety. Also, if the employee has been performing the job for at least a year, even
if the performance is not continuous and merely intermittent, the law deems

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repeated and continuing need for its performance as sufficient evidence of the regular employees who perform several different duties under the control and
necessity if not indispensability of that activity to the business. Hence, the direction of ABS-CBN executives and supervisors.
employment is considered regular, but only with respect to such activity and while Thus, there are two kinds of regular employees under the law: (1) those engaged
such activity exists.32 to perform activities which are necessary or desirable in the usual business or trade
As elaborated by this Court in Magsalin v. National Organization of Working Men:33 of the employer; and (2) those casual employees who have rendered at least one
Even while the language of law might have been more definitive, the clarity of its year of service, whether continuous or broken, with respect to the activities in which
spirit and intent, i.e., to ensure a "regular" worker’s security of tenure, however, can they are employed.35
hardly be doubted. In determining whether an employment should be considered The law overrides such conditions which are prejudicial to the interest of the worker
regular or non-regular, the applicable test is the reasonable connection between the whose weak bargaining situation necessitates the succor of the State. What
particular activity performed by the employee in relation to the usual business or determines whether a certain employment is regular or otherwise is not the will or
trade of the employer. The standard, supplied by the law itself, is whether the work word of the employer, to which the worker oftentimes acquiesces, much less the
undertaken is necessary or desirable in the usual business or trade of the employer, procedure of hiring the employee or the manner of paying the salary or the actual
a fact that can be assessed by looking into the nature of the services rendered and time spent at work. It is the character of the activities performed in relation to the
its relation to the general scheme under which the business or trade is pursued in particular trade or business taking into account all the circumstances, and in some
the usual course. It is distinguished from a specific undertaking that is divorced from cases the length of time of its performance and its continued existence.36 It is
the normal activities required in carrying on the particular business or trade. But, obvious that one year after they were employed by petitioner, respondents became
although the work to be performed is only for a specific project or seasonal, where regular employees by operation of law.37
a person thus engaged has been performing the job for at least one year, even if Additionally, respondents cannot be considered as project or program employees
the performance is not continuous or is merely intermittent, the law deems the because no evidence was presented to show that the duration and scope of the
repeated and continuing need for its performance as being sufficient to indicate the project were determined or specified at the time of their engagement. Under existing
necessity or desirability of that activity to the business or trade of the employer. The jurisprudence, project could refer to two distinguishable types of activities. First, a
employment of such person is also then deemed to be regular with respect to such project may refer to a particular job or undertaking that is within the regular or usual
activity and while such activity exists.34 business of the employer, but which is distinct and separate, and identifiable as
Not considered regular employees are "project employees," the completion or such, from the other undertakings of the company. Such job or undertaking begins
termination of which is more or less determinable at the time of employment, such and ends at determined or determinable times. Second, the term project may also
as those employed in connection with a particular construction project, and refer to a particular job or undertaking that is not within the regular business of the
"seasonal employees" whose employment by its nature is only desirable for a limited employer. Such a job or undertaking must also be identifiably separate and distinct
period of time. Even then, any employee who has rendered at least one year of from the ordinary or regular business operations of the employer. The job or
service, whether continuous or intermittent, is deemed regular with respect to the undertaking also begins and ends at determined or determinable times.38
activity performed and while such activity actually exists. The principal test is whether or not the project employees were assigned to carry
It is of no moment that petitioner hired respondents as "talents." The fact that out a specific project or undertaking, the duration and scope of which were specified
respondents received pre-agreed "talent fees" instead of salaries, that they did not at the time the employees were engaged for that project.39
observe the required office hours, and that they were permitted to join other In this case, it is undisputed that respondents had continuously performed the same
productions during their free time are not conclusive of the nature of their activities for an average of five years. Their assigned tasks are necessary or desirable
employment. Respondents cannot be considered "talents" because they are not in the usual business or trade of the petitioner. The persisting need for their services
actors or actresses or radio specialists or mere clerks or utility employees. They are is sufficient evidence of the necessity and indispensability of such services to
petitioner’s business or trade.40 While length of time may not be a sole controlling

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test for project employment, it can be a strong factor to determine whether the ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
employee was hired for a specific undertaking or in fact tasked to perform functions to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
which are vital, necessary and indispensable to the usual trade or business of the employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits
employer.41 We note further that petitioner did not report the termination of and privileges "which he would not have enjoyed if he were truly the subject of a
respondents’ employment in the particular "project" to the Department of Labor and valid job contract."
Employment Regional Office having jurisdiction over the workplace within 30 days All the talent fees and benefits paid to SONZA were the result of negotiations that
following the date of their separation from work, using the prescribed form on led to the Agreement. If SONZA were ABS-CBN’s employee, there would be no need
employees’ termination/ dismissals/suspensions.42 for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
As gleaned from the records of this case, petitioner itself is not certain how to pay which the law automatically incorporates into every employer-employee
categorize respondents. In its earlier pleadings, petitioner classified respondents as contract. Whatever benefits SONZA enjoyed arose from contract and not because of
program employees, and in later pleadings, independent contractors. Program an employer-employee relationship.
employees, or project employees, are different from independent contractors SONZA’s talent fees, amounting to P317,000 monthly in the second and third year,
because in the case of the latter, no employer-employee relationship exists. are so huge and out of the ordinary that they indicate more an independent
Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting contractual relationship rather than an employer-employee relationship. ABS-CBN
Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a agreed to pay SONZA such huge talent fees precisely because of SONZA’S unique
well-known television and radio personality, was an independent contractor and not skills, talent and celebrity status not possessed by ordinary employees. Obviously,
a regular employee: SONZA acting alone possessed enough bargaining power to demand and receive
A. Selection and Engagement of Employee such huge talent fees for his services. The power to bargain talent fees way above
the salary scales of ordinary employees is a circumstance indicative, but not
ABS-CBN engaged SONZA’S services to co-host its television and radio programs
conclusive, of an independent contractual relationship.
because of SONZA’S peculiar skills, talent and celebrity status. SONZA contends that
the "discretion used by respondent in specifically selecting and hiring complainant The payment of talent fees directly to SONZA and not to MJMDC does not negate
over other broadcasters of possibly similar experience and qualification as the status of SONZA as an independent contractor. The parties expressly agreed on
complainant belies respondent’s claim of independent contractorship." such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the
Independent contractors often present themselves to possess unique skills,
Agreement.44
expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity In the case at bar, however, the employer-employee relationship between petitioner
status not possessed by ordinary employees, is a circumstance indicative, but not and respondents has been proven.
conclusive, of an independent contractual relationship. If SONZA did not possess First. In the selection and engagement of respondents, no peculiar or unique skill,
such unique skills, talent and celebrity status, ABS-CBN would not have entered into talent or celebrity status was required from them because they were merely hired
the Agreement with SONZA but would have hired him through its personnel through petitioner’s personnel department just like any ordinary employee.
department just like any other employee. Second. The so-called "talent fees" of respondents correspond to wages given as a
In any event, the method of selecting and engaging SONZA does not conclusively result of an employer-employee relationship. Respondents did not have the power
determine his status. We must consider all the circumstances of the relationship, to bargain for huge talent fees, a circumstance negating independent contractual
with the control test being the most important element. relationship.
B. Payment of Wages

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Third. Petitioner could always discharge respondents should it find their work A collective bargaining agreement is a contract entered into by the union
unsatisfactory, and respondents are highly dependent on the petitioner for representing the employees and the employer. However, even the non-member
continued work. employees are entitled to the benefits of the contract. To accord its benefits only to
Fourth. The degree of control and supervision exercised by petitioner over members of the union without any valid reason would constitute undue
respondents through its supervisors negates the allegation that respondents are discrimination against non-members. A collective bargaining agreement is binding
independent contractors. on all employees of the company. Therefore, whatever benefits are given to the
other employees of ABS-CBN must likewise be accorded to private respondents who
The presumption is that when the work done is an integral part of the regular
were regular employees of petitioner.48
business of the employer and when the worker, relative to the employer, does not
furnish an independent business or professional service, such work is a regular Besides, only talent-artists were excluded from the CBA and not production
employment of such employee and not an independent contractor.45 The Court will assistants who are regular employees of the respondents. Moreover, under Article
peruse beyond any such agreement to examine the facts that typify the parties’ 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor
actual relationship.46 contracts shall be construed in favor of the safety and decent living of the laborer."
It follows then that respondents are entitled to the benefits provided for in the IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The
existing CBA between petitioner and its rank-and-file employees. As regular assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 76582
employees, respondents are entitled to the benefits granted to all other regular are AFFIRMED. Costs against petitioner.
employees of petitioner under the CBA.47 We quote with approval the ruling of the SO ORDERED.
appellate court, that the reason why production assistants were excluded from the
CBA is precisely because they were erroneously classified and treated as project
employees by petitioner:
x x x The award in favor of private respondents of the benefits accorded to rank-
and-file employees of ABS-CBN under the 1996-1999 CBA is a necessary
consequence of public respondent’s ruling that private respondents as production
assistants of petitioner are regular employees. The monetary award is not
considered as claims involving the interpretation or implementation of the collective
bargaining agreement. The reason why production assistants were excluded from
the said agreement is precisely because they were classified and treated as project
employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the
nature of employment of an employee but the nature of the activities performed by
such employee in relation to the particular business or trade of the employer.
Considering that We have clearly found that private respondents are regular
employees of petitioner, their exclusion from the said CBA on the misplaced belief
of the parties to the said agreement that they are project employees, is therefore
not proper. Finding said private respondents as regular employees and not as mere
project employees, they must be accorded the benefits due under the said Collective
Bargaining Agreement.

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G.R. No. L-80680 January 26, 1989 legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for
DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8
R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, The petitioners were then made to sign employment contracts with durations of six
FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER months, upon the expiration of which they signed new agreements with the same
ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, period, and so on. Unlike regular California employees, who received not less than
NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners, P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received
vs. P38.56 plus P15.00 in allowance daily.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. The petitioners now allege that they had become regular California employees and
AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON. demand, as a consequence whereof, similar benefits. They likewise claim that
EMERSON C. TUMANON, respondents. pending further proceedings below, they were notified by California that they would
SARMIENTO, J.: not be rehired. As a result, they filed an amended complaint charging California with
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the illegal dismissal.
National Labor Relations Commission for reinstatement and payment of various California admits having refused to accept the petitioners back to work but deny
benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, liability therefor for the reason that it is not, to begin with, the petitioners' employer
and emergency cost of living allowance pay, against the respondent, the California and that the "retrenchment" had been forced by business losses as well as expiration
Manufacturing Company. 1 of contracts.9 It appears that thereafter, Livi re-absorbed them into its labor pool
On October 7, 1986, after the cases had been consolidated, the California on a "wait-in or standby" status. 10
Manufacturing Company (California) filed a motion to dismiss as well as a position Amid these factual antecedents, the Court finds the single most important issue to
paper denying the existence of an employer-employee relation between the be: Whether the petitioners are California's or Livi's employees.
petitioners and the company and, consequently, any liability for payment of money The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the
claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded existence of any employer-employee relation between the petitioners and California
as a party-respondent. ostensibly in the light of the manpower supply contract, supra, and consequently,
It appears that the petitioners were, prior to their stint with California, employees against the latter's liability as and for the money claims demanded. In the same
of Livi Manpower Services, Inc. (Livi), which subsequently assigned them to work as breath, however, the labor arbiter absolved Livi from any obligation because the
"promotional merchandisers" 3 for the former firm pursuant to a manpower supply "retrenchment" in question was allegedly "beyond its control ." 13 He assessed
agreement. Among other things, the agreement provided that California "has no against the firm, nevertheless, separation pay and attorney's fees.
control or supervisions whatsoever over [Livi's] workers with respect to how they We reverse.
accomplish their work or perform [Californias] obligation"; 4 the Livi "is an
The existence of an employer-employees relation is a question of law and being
independent contractor and nothing herein contained shall be construed as creating
such, it cannot be made the subject of agreement. Hence, the fact that the
between [California] and [Livi] . . . the relationship of principal[-]agent or employer[-
manpower supply agreement between Livi and California had specifically designated
]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to
the former as the petitioners' employer and had absolved the latter from any liability
comply with all existing as well as future laws, rules and regulations pertinent to
as an employer, will not erase either party's obligations as an employer, if an
employment of labor" 6 and that "[California] is free and harmless from any liability
employer-employee relation otherwise exists between the workers and either firm.
arising from such laws or from any accident that may befall workers and employees
At any rate, since the agreement was between Livi and California, they alone are
of [Livi] while in the performance of their duties for [California].7
bound by it, and the petitioners cannot be made to suffer from its adverse
It was further expressly stipulated that the assignment of workers to California shall consequences.
be on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10

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This Court has consistently ruled that the determination of whether or not there is of the employer,"17 and liability must be shouldered by either one or shared by
an employer-employee relation depends upon four standards: (1) the manner of both. 18
selection and engagement of the putative employee; (2) the mode of payment of There is no doubt that in the case at bar, Livi performs "manpower
wages; (3) the presence or absence of a power of dismissal; and (4) the presence services", 19 meaning to say, it contracts out labor in favor of clients. We hold that
or absence of a power to control the putative employee's conduct. 14 Of the four, it is one notwithstanding its vehement claims to the contrary, and notwithstanding
the right-of-control test has been held to be the decisive factor. 15 the provision of the contract that it is "an independent contractor." 20 The nature
On the other hand, we have likewise held, based on Article 106 of the Labor Code, of one's business is not determined by self-serving appellations one attaches thereto
hereinbelow reproduced: but by the tests provided by statute and prevailing case law. 21 The bare fact that
ART. 106. Contractor or sub-contractor. — Whenever an employee enters into a Livi maintains a separate line of business does not extinguish the equal fact that it
contract with another person for the performance of the former's work, the has provided California with workers to pursue the latter's own business. In this
employees of the contractor and of the latter's sub-contractor, if any, shall be paid connection, we do not agree that the petitioners had been made to perform activities
in accordance with the provisions of this Code. 'which are not directly related to the general business of
manufacturing," 22California's purported "principal operation activity. " 23 The
In the event that the contractor or sub-contractor fails to pay wages of his
petitioner's had been charged with "merchandizing [sic] promotion or sale of the
employees in accordance with this Code, the employer shall be jointly and severally
products of [California] in the different sales outlets in Metro Manila including task
liable with his contractor or sub-contractor to such employees to the extent of the
and occational [sic] price tagging," 24 an activity that is doubtless, an integral part
work performed under the contract, in the same manner and extent that he is liable
of the manufacturing business. It is not, then, as if Livi had served as its (California's)
to employees directly employed by him.
promotions or sales arm or agent, or otherwise, rendered a piece of work it
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the (California) could not have itself done; Livi, as a placement agency, had simply
contracting out of labor to protect the rights of workers established under this Code. supplied it with the manpower necessary to carry out its (California's) merchandising
In so prohibiting or restricting, he may make appropriate distinctions between labor- activities, using its (California's) premises and equipment. 25
only contracting and job contracting as well as differentiations within these types of
Neither Livi nor California can therefore escape liability, that is, assuming one exists.
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any The fact that the petitioners have allegedly admitted being Livi's "direct
provisions of this Code. employees" 26 in their complaints is nothing conclusive. For one thing, the fact that
the petitioners were (are), will not absolve California since liability has been imposed
There is 'labor-only' contracting where the person supplying workers to an employer
by legal operation. For another, and as we indicated, the relations of parties must
does not have substantial capital or investment in the form of tools, equipment,
be judged from case to case and the decree of law, and not by declarations of
machineries, work premises, among others, and the workers recruited and placed
parties.
by such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be The fact that the petitioners have been hired on a "temporary or seasonal" basis
considered merely as an agent of the employer who shall be responsible to the merely is no argument either. As we held in Philippine Bank of Communications v.
workers in the same manner and extent as if the latter were directly employed by NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code,
him. becomes regular after service of one year, unless he has been contracted for a
specific project. And we cannot say that merchandising is a specific project for the
that notwithstanding the absence of a direct employer-employee relationship
obvious reason that it is an activity related to the day-to-day operations of California.
between the employer in whose favor work had been contracted out by a "labor-
only" contractor, and the employees, the former has the responsibility, together with It would have been different, we believe, had Livi been discretely a promotions firm,
the "labor-only" contractor, for any valid labor claims, 16 by operation of law. The and that California had hired it to perform the latter's merchandising activities. For
reason, so we held, is that the "labor-only" contractor is considered "merely an agent then, Livi would have been truly the employer of its employees, and California, its

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client. The client, in that case, would have been a mere patron, and not an employer. This brings us to the question: What is the liability of either Livi or California?
The employees would not in that event be unlike waiters, who, although at the The records show that the petitioners bad been given an initial six-month contract,
service of customers, are not the latter's employees, but of the restaurant. As we renewed for another six months. Accordingly, under Article 281 of the Code, they
pointed out in the Philippine Bank of Communications case: had become regular employees-of-California-and had acquired a secure tenure.
... The undertaking given by CESI in favor of the bank was not the performance of Hence, they cannot be separated without due process of law.
a specific job for instance, the carriage and delivery of documents and parcels to California resists reinstatement on the ground, first, and as we Id, that the
the addresses thereof. There appear to be many companies today which perform petitioners are not its employees, and second, by reason of financial distress brought
this discrete service, companies with their own personnel who pick up documents about by "unfavorable political and economic atmosphere" 31"coupled by the
and packages from the offices of a client or customer, and who deliver such materials February Revolution." 32 As to the first objection, we reiterate that the petitioners
utilizing their own delivery vans or motorcycles to the addressees. In the present are its employees and who, by virtue of the required one-year length-of-service,
case, the undertaking of CESI was to provide its client the bank with a certain have acquired a regular status. As to the second, we are not convinced that
number of persons able to carry out the work of messengers. Such undertaking of California has shown enough evidence, other than its bare say so, that it had in fact
CESI was complied with when the requisite number of persons were assigned or suffered serious business reverses as a result alone of the prevailing political and
seconded to the petitioner bank. Orpiada utilized the premises and office equipment economic climate. We further find the attribution to the February Revolution as a
of the bank and not those of CESI. Messengerial work the delivery of documents to cause for its alleged losses to be gratuitous and without basis in fact.
designated persons whether within or without the bank premises-is of course directly
California should be warned that retrenchment of workers, unless clearly warranted,
related to the day-to-day operations of the bank. Section 9(2) quoted above does
has serious consequences not only on the State's initiatives to maintain a stable
not require for its applicability that the petitioner must be engaged in the delivery
employment record for the country, but more so, on the workingman himself, amid
of items as a distinct and separate line of business.
an environment that is desperately scarce in jobs. And, the National Labor Relations
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a Commission should have known better than to fall for such unwarranted excuses
recruitment and placement corporation placing bodies, as it were, in different client and nebulous claims.
companies for longer or shorter periods of time, ... 28
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1):
In the case at bar, Livi is admittedly an "independent contractor providing temporary SETTING ASIDE the decision, dated March 20, 1987, and the resolution, dated
services of manpower to its client. " 29 When it thus provided California with August 19, 1987; (2) ORDERING the respondent, the California Manufacturing
manpower, it supplied California with personnel, as if such personnel had been Company, to REINSTATE the petitioners with full status and rights of regular
directly hired by California. Hence, Article 106 of the Code applies. employees; and (3) ORDERING the respondent, the California Manufacturing
The Court need not therefore consider whether it is Livi or California which exercises Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria
control over the petitioner vis-a-vis the four barometers referred to earlier, since by Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and
fiction of law, either or both shoulder responsibility. differential pays effective as and from the time they had acquired a regular status
It is not that by dismissing the terms and conditions of the manpower supply under the second paragraph, of Section 281, of the Labor Code, but not to exceed
agreement, we have, hence, considered it illegal. Under the Labor Code, genuine three (3) years, and (b) all such other and further benefits as may be provided by
job contracts are permissible, provided they are genuine job contracts. But, as we existing collective bargaining agreement(s) or other relations, or by law, beginning
held in Philippine Bank of Communications, supra, when such arrangements are such time; and (4) ORDERING the private respondents to PAY unto the petitioners
resorted to "in anticipation of, and for the very purpose of making possible, the attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded,
secondment" 30 of the employees from the true employer, the Court will be justified in addition to those money claims. The private respondents are likewise ORDERED
in expressing its concern. For then that would compromise the rights of the workers, to PAY the costs of this suit.
especially their right to security of tenure. IT IS SO ORDERED.

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Republic of the Philippines In their answer, respondents contended that no employer-employee relationship
SUPREME COURT ever existed between them and petitioner; that the latter's services rendered within
Manila the premises of Bodega City was by virtue of a concessionaire agreement she
THIRD DIVISION entered into with respondents.
G.R. No. 155731 September 3, 2007 The complaint was dismissed by the Labor Arbiter for lack of merit. However, on
appeal, the NLRC set aside the order of dismissal and remanded the case for further
LOLITA LOPEZ, petitioner,
proceedings. Upon remand, the case was assigned to a different Labor Arbiter.
vs.
Thereafter, hearings were conducted and the parties were required to submit
BODEGA CITY (Video-Disco Kitchen of the Philippines) and/or ANDRES
memoranda and other supporting documents.
C. TORRES-YAP, respondents.
On December 28, 1999, the Labor Arbiter rendered judgment finding that petitioner
DECISION
was an employee of respondents and that the latter illegally dismissed her.3
AUSTRIA-MARTINEZ, J.:
Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC issued a
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Resolution, the dispositive portion of which reads as follows:
Court assailing the July 18, 2002 Decision1 of the Court of Appeals (CA) in CA-G.R.
WHEREFORE, premises duly considered, the Decision appealed from is hereby
SP No. 66861, dismissing the petition for certiorari filed before it and affirming the
ordered SET ASIDE and VACATED, and in its stead, a new one entered DISMISSING
Decision of the National Labor Relations Commission (NLRC) in NLRC-NCR Case No.
the above-entitled case for lack of merit.4
00-03-01729-95; and its Resolution dated October 16, 2002,2 denying petitioner's
Motion for Reconsideration. The NLRC Decision set aside the Decision of the Labor Petitioner filed a motion for reconsideration of the above-quoted NLRC Resolution,
Arbiter finding that Lolita Lopez (petitioner) was illegally dismissed by Bodega City but the NLRC denied the same.
and/or Andres C. Torres-Yap (respondents). Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18, 2002, the
Respondent Bodega City (Bodega City) is a corporation duly registered and existing CA promulgated the presently assailed Decision dismissing her special civil action
under and by virtue of the laws of the Republic of the Philippines, while respondent for certiorari. Petitioner moved for reconsideration but her motion was denied.
Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the "lady keeper" Hence, herein petition based on the following grounds:
of Bodega City tasked with manning its ladies' comfort room. 1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED
In a letter signed by Yap dated February 10, 1995, petitioner was made to explain GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
why the concessionaire agreement between her and respondents should not be JURISDICTION IN RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION
terminated or suspended in view of an incident that happened on February 3, 1995, DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION
wherein petitioner was seen to have acted in a hostile manner against a lady OF THE LABOR ARBITER FINDING PETITIONER TO HAVE BEEN ILLEGALLY
customer of Bodega City who informed the management that she saw petitioner DISMISSED BY PRIVATE RESPONDENTS.
sleeping while on duty. 2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED
In a subsequent letter dated February 25, 1995, Yap informed petitioner that GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
because of the incident that happened on February 3, 1995, respondents had JURISDICTION IN RULING THAT PETITIONER WAS NOT AN EMPLOYEE OF PRIVATE
decided to terminate the concessionaire agreement between them. RESPONDENTS.5
On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC, National Petitioner contends that it was wrong for the CA to conclude that even if she did not
Capital Region, Quezon City, a complaint for illegal dismissal against respondents sign the document evidencing the concessionaire agreement, she impliedly accepted
contending that she was dismissed from her employment without cause and due and thus bound herself to the terms and conditions contained in the said agreement
process. when she continued to perform the task which was allegedly specified therein for a

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considerable length of time. Petitioner claims that the concessionaire agreement was exceptions to this rule, as in this case, when the factual findings of the NLRC as
only offered to her during her tenth year of service and after she organized a union affirmed by the CA contradict those of the Labor Arbiter.8 In that event, it is this
and filed a complaint against respondents. Prior to all these, petitioner asserts that Court's task, in the exercise of its equity jurisdiction, to re-evaluate and review the
her job as a "lady keeper" was a task assigned to her as an employee of respondents. factual issues by looking into the records of the case and re-examining the
Petitioner further argues that her receipt of a special allowance from respondents is questioned findings.9
a clear evidence that she was an employee of the latter, as the amount she received It is a basic rule of evidence that each party must prove his affirmative
was equivalent to the minimum wage at that time. allegation.10 If he claims a right granted by law, he must prove his claim by
Petitioner also contends that her identification card clearly shows that she was not competent evidence, relying on the strength of his own evidence and not upon the
a concessionaire but an employee of respondents; that if respondents really weakness of that of his opponent.11
intended the ID card issued to her to be used simply for having access to the The test for determining on whom the burden of proof lies is found in the result of
premises of Bodega City, then respondents could have clearly indicated such intent an inquiry as to which party would be successful if no evidence of such matters were
on the said ID card. given.12
Moreover, petitioner submits that the fact that she was required to follow rules and In an illegal dismissal case, the onus probandi rests on the employer to prove that
regulations prescribing appropriate conduct while she was in the premises of Bodega its dismissal of an employee was for a valid cause.13 However, before a case for
City is clear evidence of the existence of an employer-employee relationship between illegal dismissal can prosper, an employer-employee relationship must first be
her and petitioners. established.14
On the other hand, respondents contend that the present petition was filed for the In filing a complaint before the Labor Arbiter for illegal dismissal based on the
sole purpose of delaying the proceedings of the case; the grounds relied upon in the premise that she was an employee of respondent, it is incumbent upon petitioner to
instant petition are matters that have been exhaustively discussed by the NLRC and prove the employee-employer relationship by substantial evidence.15
the CA; the present petition raises questions of fact which are not proper in a petition The NLRC and the CA found that petitioner failed to discharge this burden, and the
for review on certiorari under Rule 45 of the Rules of Court; the respective decisions Court finds no cogent reason to depart from their findings.
of the NLRC and the CA are based on evidence presented by both parties;
The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and
petitioner's compliance with the terms and conditions of the proposed concessionaire
Parts Corp.,16 to wit:
contract for a period of three years is evidence of her implied acceptance of such
proposal; petitioner failed to present evidence to prove her allegation that the To ascertain the existence of an employer-employee relationship, jurisprudence has
subject concessionaire agreement was only proposed to her in her 10th year of invariably applied the four-fold test, namely: (1) the manner of selection and
employment with respondent company and after she organized a union and filed a engagement; (2) the payment of wages; (3) the presence or absence of the power
labor complaint against respondents; petitioner failed to present competent of dismissal; and (4) the presence or absence of the power of control. Of these four,
documentary and testimonial evidence to prove her contention that she was an the last one is the most important. The so-called "control test" is commonly regarded
employee of respondents since 1985. as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under the control test, an employer-employee
The main issue to be resolved in the present case is whether or not petitioner is an
relationship exists where the person for whom the services areperformed reserves
employee of respondents.
the right to control not only the end achieved, but also the manner and means to
The issue of whether or not an employer-employee relationship exists in a given be used in reaching that end.17
case is essentially a question of fact.6
To prove the element of payment of wages, petitioner presented a petty cash
While it is a settled rule that only errors of law are generally reviewed by this Court voucher showing that she received an allowance for five (5) days.18 The CA did not
in petitions for review on certiorari of CA decisions,7 there are well-recognized err when it held that a solitary petty cash voucher did not prove that petitioner had

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been receiving salary from respondents or that she had been respondents' employee doing acts that may adversely affect the goodwill and business standing of Bodega
for 10 years. City;
Indeed, if petitioner was really an employee of respondents for that length of time, 4. All remunerations, tips, donations given to you by individuals/persons utilizing
she should have been able to present salary vouchers or pay slips and not just a said comfort rooms and/or guests of Bodega City shall be waived by the latter to
single petty cash voucher. The Court agrees with respondents that petitioner could your benefit provided however, that if concessionaire receives tips or donations per
have easily shown other pieces of evidence such as a contract of employment, SSS day in an amount exceeding 200% the prevailing minimum wage, then, she shall
or Medicare forms, or certificates of withholding tax on compensation income; or remit fifty percent (50%) of said amount to Bodega City by way of royalty or
she could have presented witnesses to prove her contention that she was an concession fees;
employee of respondents. Petitioner failed to do so. 5. This contract shall be for a period of one year and shall be automatically renewed
Anent the element of control, petitioner's contention that she was an employee of on a yearly basis unless notice of termination is given thirty (30) days prior to
respondents because she was subject to their control does not hold water. expiration. Any violation of the terms and conditions of this contract shall be a
Petitioner failed to cite a single instance to prove that she was subject to the control ground for its immediate revocation and/or termination.
of respondents insofar as the manner in which she should perform her job as a "lady 6. It is hereby understood that no employer-employee relationship exists between
keeper" was concerned. Bodega City and/or 1121 FoodService Corporation and your goodself, as you are an
It is true that petitioner was required to follow rules and regulations prescribing independent contractor who has represented to us that you possess the necessary
appropriate conduct while within the premises of Bodega City. However, this was qualification as such including manpower compliment, equipment, facilities, etc. and
imposed upon petitioner as part of the terms and conditions in the concessionaire that any person you may engage or employ to work with or assist you in the
agreement embodied in a 1992 letter of Yap addressed to petitioner, to wit: discharge of your undertaking shall be solely your own employees and/or agents.

January 6, 1992 1121 FoodService Corporation Bodega City


By:
Dear Ms. Lolita Lopez, (Sgd.) ANDRES C. TORRES-YAP
The new owners of Bodega City, 1121 Food Service Corporation offers to your
goodself the concessionaire/contract to provide independently, customer comfort Conforme:
services to assist users of the ladies comfort room of the Club to further enhance its _______________
business, under the following terms and conditions: LOLITA LOPEZ19
1. You will provide at your own expense, all toilet supplies, useful for the purpose, Petitioner does not dispute the existence of the letter; neither does she deny that
such as toilet papers, soap, hair pins, safety pins and other related items or things respondents offered her the subject concessionaire agreement. However, she
which in your opinion is beneficial to the services you will undertake; contends that she could not have entered into the said agreement with respondents
2. For the entire duration of this concessionaire contract, and during the Club's because she did not sign the document evidencing the same.
operating hours, you shall maintain the cleanliness of the ladies comfort room. Settled is the rule that contracts are perfected by mere consent, upon the
Provided, that general cleanliness, sanitation and physical maintenance of said acceptance by the offeree of the offer made by the offeror.20 For a contract, to
comfort rooms shall be undertaken by the owners of Bodega City; arise, the acceptance must be made known to the offeror.21 Moreover, the
3. You shall at all times ensure satisfaction and good services in the discharge of acceptance of the thing and the cause, which are to constitute a contract, may be
your undertaking. More importantly, you shall always observe utmost courtesy in express or implied as can be inferred from the contemporaneous and subsequent
dealing with the persons/individuals using said comfort room and shall refrain from acts of the contracting parties.22 A contract will be upheld as long as there is proof

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of consent, subject matter and cause; it is generally obligatory in whatever form it indicated therein for a considerable length of time. For all intents and purposes, the
may have been entered into.23 concessionaire agreement had been perfected.
In the present case, the Court finds no cogent reason to disregard the findings of Petitioner insists that her ID card is sufficient proof of her employment. In Domasig
both the CA and the NLRC that while petitioner did not affix her signature to the v. National Labor Relations Commission,30 this Court held that the complainant's ID
document evidencing the subject concessionaire agreement, the fact that she card and the cash vouchers covering his salaries for the months indicated therein
performed the tasks indicated in the said agreement for a period of three years were substantial evidence that he was an employee of respondents, especially in
without any complaint or question only goes to show that she has given her implied light of the fact that the latter failed to deny said evidence. This is not the situation
acceptance of or consent to the said agreement. in the present case. The only evidence presented by petitioner as proof of her
Petitioner is likewise estopped from denying the existence of the subject alleged employment are her ID card and one petty cash voucher for a five-day
concessionaire agreement. She should not, after enjoying the benefits of the allowance which were disputed by respondents.
concessionaire agreement with respondents, be allowed to later disown the same As to the ID card, it is true that the words "EMPLOYEE'S NAME" appear printed
through her allegation that she was an employee of the respondents when the said below petitioner's name.31However, she failed to dispute respondents' evidence
agreement was terminated by reason of her violation of the terms and conditions consisting of Habitan's testimony,32 that he and the other "contractors" of Bodega
thereof. City such as the singers and band performers, were also issued the same ID cards
The principle of estoppel in pais applies wherein -- by one's acts, representations or for the purpose of enabling them to enter the premises of Bodega City.
admissions, or silence when one ought to speak out -- intentionally or through The Court quotes, with approval, the ruling of the CA on this matter, to wit:
culpable negligence, induces another to believe certain facts to exist and to rightfully Nor can petitioners identification card improve her cause any better. It is undisputed
rely and act on such belief, so as to be prejudiced if the former is permitted to deny that non-employees, such as Felimon Habitan, an admitted concessionaire,
the existence of those facts.24 musicians, singers and the like at Bodega City are also issued identification cards.
Moreover, petitioner failed to dispute the contents of the affidavit25 as well as the Given this premise, it appears clear to Us that petitioner's I.D. Card is incompetent
testimony26 of Felimon Habitan (Habitan), the concessionaire of the men's comfort proof of an alleged employer-employee relationship between the herein parties.
room of Bodega City, that he had personal knowledge of the fact that petitioner was Viewed in the context of this case, the card is at best a "passport" from management
the concessionaire of the ladies' comfort room of Bodega City. assuring the holder thereof of his unmolested access to the premises of Bodega
Petitioner also claims that the concessionaire agreement was offered to her only in City.33
her 10th year of service, after she organized a union and filed a complaint against With respect to the petty cash voucher, petitioner failed to refute respondent's claim
respondents. However, petitioner's claim remains to be an allegation which is not that it was not given to her for services rendered or on a regular basis, but simply
supported by any evidence. It is a basic rule in evidence that each party must prove granted as financial assistance to help her temporarily meet her family's needs.
his affirmative allegation,27 that mere allegation is not evidence.28 Hence, going back to the element of control, the concessionaire agreement merely
The Court is not persuaded by petitioner's contention that the Labor Arbiter was stated that petitioner shall maintain the cleanliness of the ladies' comfort room and
correct in concluding that there existed an employer-employee relationship between observe courtesy guidelines that would help her obtain the results they wanted to
respondents and petitioner. A perusal of the Decision29 of the Labor Arbiter shows achieve. There is nothing in the agreement which specifies the methods by which
that his only basis for arriving at such a conclusion are the bare assertions of petitioner should achieve these results. Respondents did not indicate the manner in
petitioner and the fact that the latter did not sign the letter of Yap containing the which she should go about in maintaining the cleanliness of the ladies' comfort room.
proposed concessionaire agreement. However, as earlier discussed, this Court finds Neither did respondents determine the means and methods by which petitioner
no error in the findings of the NLRC and the CA that petitioner is deemed as having could ensure the satisfaction of respondent company's customers. In other words,
given her consent to the said proposal when she continuously performed the tasks petitioner was given a free hand as to how she would perform her job as a "lady
keeper." In fact, the last paragraph of the concessionaire agreement even allowed

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petitioner to engage persons to work with or assist her in the discharge of her In fine, the CA did not err in dismissing the petition for certiorari filed before it by
functions.34 petitioner.
Moreover, petitioner was not subjected to definite hours or conditions of work. The WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution
fact that she was expected to maintain the cleanliness of respondent company's of the Court of Appeals are AFFIRMED. Costs against petitioner.
ladies' comfort room during Bodega City's operating hours does not indicate that her SO ORDERED.
performance of her job was subject to the control of respondents as to make her an
employee of the latter. Instead, the requirement that she had to render her services
while Bodega City was open for business was dictated simply by the very nature of
her undertaking, which was to give assistance to the users of the ladies' comfort
room.
In Consulta v. Court of Appeals,35 this Court held:
It should, however, be obvious that not every form of control that the hiring party
reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must
be drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammeled freedom to the party hired and eschews
any intervention whatsoever in his performance of the engagement.
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
Lastly, the Court finds that the elements of selection and engagement as well as the
power of dismissal are not present in the instant case.
It has been established that there has been no employer-employee relationship
between respondents and petitioner. Their contractual relationship was governed by
the concessionaire agreement embodied in the 1992 letter. Thus, petitioner was not
dismissed by respondents. Instead, as shown by the letter of Yap to her dated
February 15, 1995,37 their contractual relationship was terminated by reason of
respondents' termination of the subject concessionaire agreement, which was in
accordance with the provisions of the agreement in case of violation of its terms and
conditions.

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Republic of the Philippines operation, medication and hospital expenses of the respondent in the aforestated
SUPREME COURT hospitals.6
Manila In January 1998, the respondent, still limping heavily, went to the petitioner’s office
THIRD DIVISION to report for work. He was, however, informed by the petitioner that he was
G.R. No. 164820 March 28, 2007 considered resigned from his job. Respondent refused to accede and insisted on
having a dialogue with the petitioner’s officer named Yolanda Montes (Montes).
VICTORY LINER, INC., Petitioner,
During their meeting, Montes told him that he was deemed to have resigned from
vs.
his work and to accept a consideration of ₱50,000.00. Respondent rejected the
PABLO M. RACE, Respondent.
explanation and offer. Thereafter, before Christmas of 1998, he again conversed
DECISION with Montes who reiterated to him that he was regarded as resigned but raised the
CHICO-NAZARIO, J.: consideration therein to ₱100,000.00. Respondent rebuffed the increased offer.7
In this Petition for Review on Certiorari under Rule 45 of the Rules of On 30 June 1999, respondent, through his counsel, sent a letter to the petitioner
Court,1 petitioner Victory Liner Inc. seeks to set aside the Decision of the Court of demanding employment-related money claims. There being no response from the
Appeals dated 26 April 2004 in CA-G.R. SP No. 74010,2 affirming the Decision and petitioner, the respondent filed before the Labor Arbiter on 1 September 1999 a
Resolution of the National Labor Relations Commission (NLRC) dated 30 July 2002 complaint for (1) unfair labor practice; (2) illegal dismissal; (3) underpayment of
and 30 August 2002, respectively, in NLRC-CA-029327-01.3 In its Decision and wages; (4) nonpayment of overtime and holiday premium, service incentive leave
Resolution, the NLRC vacated the Decision4 of Labor Arbiter Salimathar V. Nambi pay, vacation and sick leave benefits, 13th month pay; (5) excessive deduction of
(Labor Arbiter Nambi) dated 31 July 2001 in NLRC-NCR-00-09-08922-99 and ordered withholding tax and SSS premium; and (6) moral and exemplary damages and
the petitioner to reinstate respondent Pablo M. Race to his former position as a bus attorney’s fees. This was docketed as NLRC-NCR-00-09-08922-99.8
driver without loss of seniority rights and other privileges and benefits with full In its Position Paper dated 27 March 2000, petitioner claimed that respondent was
backwages computed from the time of his illegal dismissal in January 1998 up to his paid strictly on commission basis; that respondent was a mere field personnel who
actual reinstatement. performed his duties and functions outside the petitioner’s premises and whose time
Culled from the records are the following facts: of work cannot be determined with reasonable certainty; that petitioner, therefore,
In June 1993, respondent was employed by the petitioner as a bus driver. As a was exempted from paying the respondent overtime compensation, night shift
requisite for his hiring, the respondent deposited a cash bond in the amount of differential, holiday pay and service incentive leave; that notwithstanding the specific
₱10,000.00 to the petitioner. Respondent was assigned to the Alaminos, Pangasinan exemptions provided for in the Labor Code, the petitioner gave the respondent
- Cubao, Quezon City, route on the evening schedule.5 benefits better than those received by the other bus drivers of the petitioner; that
during his employment, respondent was charged with and found guilty of numerous
On the night of 24 August 1994, respondent drove his assigned bus from Alaminos,
offenses which were sufficient bases for his dismissal; that the prescriptive period
Pangasinan, destined to Cubao, Quezon City. While traversing Moncada, Tarlac, the
for the filing of an action or claim for reinstatement and payment of labor standard
bus he was driving was bumped by a Dagupan-bound bus. As a consequence
benefits is four years from the time the cause of action accrued; and that the
thereof, respondent suffered a fractured left leg and was rushed to the Country
respondent’s cause of action against petitioner had already prescribed because when
Medical and Trauma Center in Tarlac City where he was operated on and confined
the former instituted the aforesaid complaint on 1 September 1999, more than five
from 24 August 1994 up to 10 October 1994. One month after his release from the
years had already lapsed from the accrual of his cause of action on 24 August 1994.9
said hospital, the respondent was confined again for further treatment of his
fractured left leg at the Specialist Group Hospital in Dagupan City. His confinement In his Reply dated 30 June 2000, respondent explained that when he stated in his
therein lasted a month. Petitioner shouldered the doctor’s professional fee and the complaint that he was illegally dismissed on 24 August 1994, what he meant and
referred to was the date when he was no longer in a position to drive since he was

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hospitalized from 24 August 1994 up to 10 October 1994. Respondent also admitted did not give the respondent a written notice apprising him of acts or omissions being
that it was only in January 1998 that he informed the petitioner of his intent to complained of and a written notice informing him of the termination of his
report back for work.10 employment. In conclusion, the NLRC stated:
On 31 July 2001, Labor Arbiter Nambi rendered his Decision dismissing the complaint WHEREFORE, in view of all the foregoing, respondent-appellee’s company is hereby
of respondent for lack of merit. He stated that the prescriptive period for filing an ordered to reinstate complainant-appellant to his former position without loss of
illegal dismissal case is four years from the dismissal of the employee concerned. seniority rights and other privileges and benefits with full backwages computed from
Since the respondent stated in his complaint that he was dismissed from work on the time of his illegal dismissal on (sic) January 1988 up to his actual reinstatement.
24 August 1994 and he filed the complaint only on 1 September 1999, Labor Arbiter Except for this modification, the appealed decision is hereby AFFIRMED.12
Nambi concluded that respondent’s cause of action against petitioner had already Petitioner filed a Motion for Reconsideration of the NLRC Decision alleging, among
prescribed. He also noted that respondent committed several labor-related offenses other things, that the award of backwages to the respondent computed from
against the petitioner which may be considered as just causes for the termination of January 1988 up to the promulgation of the NLRC Decision on 30 July 2002 was
his employment under Article 282 of the Labor Code. unlawful and unjust considering that respondent was employed only in June 1993.
Further, Labor Arbiter Nambi opined that respondent was not a regular employee The NLRC, however, denied the same for lack of merit in its Resolution dated 30
but a mere field personnel and, therefore, not entitled to service incentive leave, August 2002.
holiday pay, overtime pay and 13th month pay. He also ruled that respondent failed Petitioner assailed the NLRC Decision and Resolution, dated 30 July 2002 and 30
to present evidence showing that the latter was entitled to the abovestated money August 2002, respectively, via a Petition for Certiorari to the Court of Appeals. On
claims. The fallo of the said decision reads: 26 April 2004, the Court of Appeals dismissed the Petition, and found no grave abuse
WHEREFORE, considering that the causes of action in this case rooted from the of discretion on the part of the NLRC. It ruled that the NLRC committed a simple
purported illegal dismissal of Pablo M. Race on August 24, 1994 when he figured in typographical error when it stated in the fallo that the backwages of respondent
a vehicular accident, or on October 10, 1994 when he was released from the shall be computed from January 1988 instead of January 1998 because in the
hospital, and he filed his complaint only on September 1, 1999 after a lapse of more paragraph prior to the dispositive portion, the NLRC categorically declared that the
than five (5) years, the action has long prescribed, aside from the fact that there is full backwages of the respondent was to be computed from January1998. In
absolutely no evidence that respondent Victory Liner, Inc. is guilty of unfair labor addition, the NLRC has indicated in its Statement of Facts that respondent was hired
practice and unjust dismissal, in addition to its specific exemptions from the letters by the petitioner sometime in June 1993. It also held that the respondent’s filing of
of Article 82 of the Labor Code, as amended, the complaint and money claims are complaint on 1 September 1999 was within the four-year prescriptive period since
hereby DISMISSED by reason of prescription and for utter lack of merit and total the cause of action accrued when the respondent reported for work in January 1998
absence of legal and factual basis in support thereof.11 and was informed that he was considered resigned. It ratiocinated that respondent
Respondent appealed to the NLRC. On 30 July 2002, the NLRC promulgated its did not abandon his work and, instead, continued to be an employee of petitioner
Decision reversing the decision of Labor Arbiter Nambi. It ordered the reinstatement after he was discharged from the hospital, viz:
of the respondent to his former position without loss of seniority rights and other Race did not abandon his work and continued to be an employee of Victory Liner,
privileges and benefits with full back-wages computed from the time of his illegal and their contemporaneous conduct show this. He has his pay slip covering the
dismissal in January 1998 up to his actual reinstatement. It held that the period of August 1-15, 1998 (p. 114, record), he was consulting the company
respondent’s cause of action accrued, not on 24 August 1994, but in January 1998, physician who issued him receipts dated October 28, 1996 and July 21 1997 (p. 115,
when the respondent reported for work but was rejected by the petitioner. Thus, record), and he wrote a letter dated March 18, 1996 addressed to Gerarda Villa,
the respondent’s filing of complaint on 1 September 1999 was well-within the four- Vice-President for Victory Liner, signifying his intention to be a dispatcher or
year prescriptive period. It also ruled that respondent was illegally dismissed by the conductor due to his injured leg (p. 116, Record). Further, annexed to Victory Liner’s
petitioner as the latter failed to accord him due process. It found that the petitioner Consolidated Supplemental Position Paper and Formal Offer of Evidence with

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Erratum is Exhibit "6-A-Race" (p. 56, record) submitted before the Labor Arbiter, it allowed the respondent to have a 120-day sick leave because the latter was a
where Race stated before the investigator that after his release from the hospital he former employee; and that it granted disability leave to the respondent since the
reported to Victory Liner twice a month. He also said that he filed for a sick leave latter was a former employee and that respondent’s application for disability leave
which was approved for the maximum of 120 days. After his sick leave, he filed for implied an admission on the part of the respondent that he was no longer fit to work
disability leave, and this was also approved and ran until sometime in May 1997.13 as a bus driver.17
It also found that the petitioner failed to comply with the requirements of due Petitioner also asseverated that, based on the four-fold tests in determining the
process in terminating the employment of respondent. The decretal portion of the employer-employee relationship which includes the payment of wages and power to
said decision reads: control the conduct of the employees, the respondent was no longer its employee
WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.14 upon the latter’s discharge from the hospital in November 1994 because at such
time, the respondent was no longer fit to work as a bus driver and respondent did
Petitioner filed the instant petition on the following grounds:
not render services to the petitioner. Thus, petitioner reasoned that it had no more
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED CONTRARY TO LAW AND power to control the conduct of, and it no longer paid any wages to, the
JURISPRUDENCE WHEN IT HELD IN THE ASSAILED DECISION THAT: respondent.18
A. Petitioner also argued that the cause of action of respondent had accrued on 10
THE CAUSE OF ACTION OF RESPONDENT FOR ILLEGAL DISMISSAL HAS NOT YET November 1994; that from 10 November 1994 up to November 1998, the
PRESCRIBED DESPITE HAVING BEEN FILED AFTER FOUR (4) YEARS AND NINE (9) respondent did not render any services to nor filed a case or action against the
MONTHS FROM THE ACCRUAL OF THE ALLEGED ACTIONABLE WRONG; petitioner; that the respondent’s filing of a complaint against petitioner on 1
B. September 1999 was clearly beyond the four-year prescriptive period allowed by
law; that if the reckoning period of the accrual of a cause of action would be the
RESPONDENT IS ENTITLED TO REINSTATEMENT WITH FULL BACKWAGES AND
time when the written demand was made by the respondent on the petitioner, then
OTHER BENEFITS CONSIDERING THAT THE TERMINATION OF HIS EMPLOYMENT
the four-year prescriptive period would be interminable as it could be extended to
BY PETITIONER WAS LEGAL AND JUSTIFIED.15
one or more years; that this is not the spirit or intent of the law; that otherwise
Anent the first issue, petitioner insisted that respondent had already abandoned his there is no more need to provide the four-year prescriptive period as any
work and ceased to be its employee since November 1994; that the alleged "pay complainant may simply allow the lapse of four years and file the action thereafter
slip" for the period August 1-15, 1998 was not actually a pay slip but a mere cash and that it would be considered as a compliance by simply making a purported
advance/monetary aid extended to the respondent as the large amount of demand for reinstatement after more than four years.19
₱65,000.00 stated therein was clearly inconsistent and disproportionate to the
These contentions are devoid of merit.
respondent’s low salary of ₱192.00 a day; that the petitioner merely accommodated
the respondent as its former employee when the latter consulted the petitioner’s It should be emphasized at the outset that as a rule, this Court is not a trier of facts
physician on 28 October 1996 and 21 July 1997; that the respondent’s letter dated and this applies with greater force in labor cases. Hence, factual findings of quasi-
18 March 1996 to the petitioner’s Vice-President Gerarda Villa was only an judicial bodies like the NLRC, particularly when they coincide with those of the Labor
application for the position of dispatcher or conductor and that such application was Arbiter and if supported by substantial evidence, are accorded respect and even
not granted; and that the foregoing circumstances cannot be considered as an finality by this Court. But where the findings of the NLRC and the Labor Arbiter are
indication of employer-employee relationship between the petitioner and contradictory, as in the present case, this Court may delve into the records and
respondent.16 examine for itself the questioned findings.20
Moreover, petitioner asserted that although the respondent reported for work twice In illegal dismissal cases, the employee concerned is given a period of four years
a month after he was discharged from the hospital, it does not imply that the from the time of his dismissal within which to institute a complaint. This is based on
respondent was still considered as an employee at that time by the petitioner; that Article 1146 of the New Civil Code which states that actions based upon an injury to

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the rights of the plaintiff must be brought within four years. We explained the through a written notice or hearing. Indeed, it cannot be gainfully said that
rationale in the case of Callanta v. Carnation Philippines, Inc.,21 thus: respondent was unlawfully dismissed on 10 November 1994 and that the cause of
[O]ne’s employment, profession, trade or calling is a "property right," and the action accrued on that date.
wrongful interference therewith is an actionable wrong. The right is considered to As to the alleged abandonment of work by the respondent on 10 November 1994,
be property within the protection of a constitutional guaranty of due process of law. it should be emphasized that two factors must be present in order to constitute an
Clearly then, when one is arbitrarily and unjustly deprived of his job or means of abandonment: (a) the failure to report for work or absence without valid or
livelihood, the action instituted to contest the legality of one’s dismissal from justifiable reason; and (2) a clear intention to sever employer-employee relationship.
employment constitutes, in essence, an action predicated "upon an injury to the The second factor is the more determinative factor and is manifested by overt acts
rights of the plaintiff," as contemplated under Art. 1146 of the New Civil Code, which from which it may be deduced that the employee has no more intention to work.
must be brought within four years. The intent to discontinue the employment must be shown by clear proof that it was
The four-year prescriptive period shall commence to run only upon the accrual of a deliberate and unjustified. Mere absence from work does not imply abandonment.26
cause of action of the worker. It is settled that in illegal dismissal cases, the cause It is apparent that respondent did not abandon his work. His absence from work for
of action accrues from the time the employment of the worker was unjustly a long period of time was obviously due to the fact that he was still recuperating
terminated.22 Thus, the four-year prescriptive period shall be counted and from two operations on his fractured leg. Petitioner knew this very well. In fact,
computed from the date of the employee’s dismissal up to the date of the filing of petitioner shouldered the respondent’s medication and hospital expenses during the
complaint for unlawful termination of employment.23 latter’s confinement and operation in two hospitals.27 Moreover, when the
Proceeding therefrom, we shall now discuss and determine when the respondent’s respondent was able to walk, although limping heavily, he still reported for work to
cause of action accrued in order to ascertain whether the same had already the petitioner and was granted sick and disability leave.28 Clearly then, respondent
prescribed. did not abandon his job on 10 November 1994.
It is error to conclude that the employment of the respondent was unjustly In the same vein, the employer-employee relationship between the petitioner and
terminated on 10 November 1994 because he was, at that time, still confined at the respondent cannot be deemed to have been extinguished on 10 November 1994. It
Specialist Group Hospital, Dagupan City, for further treatment of his fractured left should be borne in mind that there are four tests in determining the existence of
leg. He must be considered as merely on sick leave at such time. Likewise, the employer-employee relationship: (1) the manner of selection and engagement; (2)
respondent cannot also be deemed as illegally dismissed from work upon his release the payment of wages; (3) the presence or absence of the power of dismissal; and
from the said hospital in December 1994 up to December 1997 since the records (4) the presence or absence of the power of control. The so-called "control test" is
show that the respondent still reported for work to the petitioner and was granted commonly regarded as the most crucial and determinative indicator of the presence
sick and disability leave by the petitioner during the same period.24 or absence of an employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for whom the services are
The respondent must be considered as unjustly terminated from work in January
performed reserves the right to control not only the end achieved, but also the
1998 since this was the first time he was informed by the petitioner that he was
manner and means to be used in reaching that end.29
deemed resigned from his work. During that same occasion, the petitioner, in fact,
tried to convince the respondent to accept an amount of ₱50,000.00 as a consolation Applying the aforecited tests, the employer-employee relationship between
for his dismissal but the latter rejected it.25 Thus, it was only at this time that the petitioner and respondent continued even after the latter’s discharge from the
respondent’s cause of action accrued. Consequently, the respondent’s filing of hospital in December 1994 up to 1997. Respondent had reported for work to the
complaint for illegal dismissal on 1 September 1999 was well within the four-year petitioner after his release from the hospital in December 1994. Subsequently,
prescriptive period. respondent was also granted a 120-day sick leave and disability leave by the
petitioner.30 Respondent also availed himself of the services of the petitioner’s
It is also significant to note that from 10 November 1994 up to December 1997, the
physician on two occasions after his release from the hospital in December 1994.31
petitioner never formally informed the respondent of the fact of his dismissal either

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On the other hand, the petitioner failed to establish the fact that the respondent (c) Fraud or willful breach by the employee of the trust reposed in him by his
ceased to be its employee on 10 November 1994. Except for its flimsy reason that employer or duly authorized representative;
the sick leave, disability leave and physician consultations were given to the (d) Commission of a crime or offense by the employee against the person of his
respondent as mere accommodations for a former employee, the petitioner did not employer or any immediate member of his family or his duly authorized
present any evidence showing that its employer-employee relationship with the representative; and
respondent was extinguished on 10 November 1994.
(e) Other causes analogous to the foregoing.
Evidently, these circumstances clearly manifest that petitioner exercised control over
Abandonment of work, or the deliberate and unjustified refusal of an employee to
the respondent and that the latter was still under the employment of the petitioner
resume his employment, may be a just cause for the termination of employment
even after December 1994.
under paragraph (b) of Article 282 of the Labor Code since it is a form of neglect of
Given the foregoing considerations, petitioner’s assertion that the respondent’s duty.
cause of action accrued on 10 November 1994 must fail.
As earlier discussed, the petitioner insisted that respondent had already abandoned
Apropos the second issue, petitioner contended that the order for the reinstatement his work on 10 November 1994 and, thus, the latter’s employment was deemed
of the respondent as bus driver was unconstitutional for being tantamount to terminated as of such date. We, however, found that there was no abandonment of
involuntary servitude; that when the respondent filed his complaint for illegal work on the part of the respondent. Petitioner also alleged that respondent was
dismissal, the latter no longer desired to be reinstated to his former position as bus guilty of insubordination as well as gross and habitual neglect in the performance of
driver; that the respondent’s unwillingness to be reinstated as bus driver was also his duties for reckless driving and for being involved in several vehicular
evident from his letter to the petitioner where the respondent manifested his accidents.34 The records, nonetheless, failed to show that the said charges were
intention to be hired as a dispatcher or conductor; and that to reinstate the proven and that respondent was duly informed and heard with regard to the
respondent as bus driver despite the fact that it is against his will is involuntary accusations. Since the petitioner, as an employer, is burdened to prove just cause
servitude.32 for terminating the employment of respondent with clear and convincing evidence,
Petitioner also argued that the order for the reinstatement was contrary to law; that and that petitioner failed to discharge this burden, we hold that respondent was
as a common carrier, it is obliged under the law to observe extra-ordinary diligence dismissed without just cause by the petitioner.
in the conduct of its business; that it will violate such obligation if it will reinstate It has been established that petitioners failed to comply with the requirement of
the respondent as bus driver; that to allow the respondent to drive a bus, despite substantial due process in terminating the employment of respondent. We will now
the fact that the latter sustained a fractured left leg and was still limping, would determine whether the petitioner had complied with the procedural aspect of a
imperil the lives of the passengers and the property of the petitioner; and that the lawful dismissal.
award of backwages to the respondent was unjustified.33
In the termination of employment, the employer must (a) give the employee a
The Labor Code mandates that before an employer may legally dismiss an employee written notice specifying the ground or grounds of termination, giving to said
from the service, the requirement of substantial and procedural due process must employee reasonable opportunity within which to explain his side; (b) conduct a
be complied with. Under the requirement of substantial due process, the grounds hearing or conference during which the employee concerned, with the assistance of
for termination of employment must be based on just or authorized causes. The counsel if the employee so desires, is given the opportunity to respond to the charge,
following are just causes for the termination of employment under Article 282 of the present his evidence or rebut the evidence presented against him; and (c) give the
Labor Code: employee a written notice of termination indicating that upon due consideration of
(a) Serious misconduct or willful disobedience by the employee of the lawful orders all circumstances, grounds have been established to justify his termination.35
of his employer or representative in connection with his work; Petitioner miserably failed to comply with the foregoing requirements. There was
(b) Gross and habitual neglect by the employee of his duties; nothing in the records which evinces that petitioner had sent a written notice to the

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respondent informing him of the ground or grounds of his termination or the reason the respondent to drive the petitioner’s bus under such uncertain condition would,
why he was deemed resigned. It does not also appear that the petitioner held a undoubtedly, expose to danger the lives of the passengers and the property of the
hearing or conference where the respondent was given the opportunity to answer petitioner. This would place the petitioner in jeopardy of violating its extra-ordinary
the charges of abandonment, insubordination and habitual neglect of duty against diligence obligation and, thus, may be subjected to numerous complaints and court
him. Neither did the petitioner send a written notice to the respondent informing the suits. It is clear therefore that the reinstatement of respondent not only would be
latter that his service is terminated after considering all the circumstances. deleterious to the riding public but would also put unreasonable burden on the
In view of the fact that the petitioner neglected to observe the substantial and business and interest of the petitioner. In this regard, it should be remembered that
procedural due process in terminating the employment of respondent, we rule that an employer may not be compelled to continue to employ such persons whose
the latter was illegally dismissed from work by the petitioner. continuance in the service will patently be inimical to his interests.41
Consequently, the respondent is entitled to reinstatement without loss of seniority Based on the foregoing facts and circumstances, the reinstatement of the
rights, full backwages, inclusive of allowances, and other benefits or their monetary respondent is no longer feasible. Thus, in lieu of reinstatement, payment to
equivalent computed from the time his compensation was withheld from him up to respondent of separation pay equivalent to one month pay for every year of service
the time of his actual reinstatement as provided for under Article 279 of the Labor is in order.42
Code. WHEREFORE, the petition is PARTLY GRANTED insofar as it prays for the non-
It appears, however, that respondent was not seeking reinstatement. In his reinstatement of respondent. The Decision of the Court of Appeals dated 26 April
complaint for illegal dismissal against petitioner, respondent stated: 2004 in CA-G.R. SP No. 74010, is hereby AFFIRMED with the following
MODIFICATIONS: Petitioner is ordered to pay the respondent, in lieu of
RELIEF
reinstatement, separation pay of ONE (1) MONTH PAY for every year of service, and
Complainant/s pray/s for the following: full backwages inclusive of allowances and other benefits or their monetary
Reinstatement: No More.36 equivalent from 1 January 1998 up to the finality of this Decision. No costs.
Respondent also sent to the petitioner a letter applying for the position of a SO ORDERED.
dispatcher or conductor.37 In the said letter, the respondent explained that since
he cannot drive anymore due to his leg injury, he was willing to be hired as a
dispatcher or conductor. The abovestated facts obviously show that respondent was
unwilling to be reinstated as a bus driver.
Even assuming that respondent is willing to be reinstated as petitioner’s bus driver,
the reinstatement is still unwarranted. There is a serious doubt as to whether the
respondent is physically capable of driving a bus based on the following undisputed
facts: (1) respondent was operated on and confined twice in two different hospitals
for a fractured left leg; (2) steel plates were attached to his fractured leg;38 (3)
each confinement lasted for a month; (4) after his discharge from the second
confinement, respondent was still limping heavily; (5) when respondent had
reported for work to the petitioner in January 1998, he was also limping;39 and (6)
respondent does not have a medical certificate which guarantees that his leg injury
has already healed and that he is now physically capable of driving a bus.
It should be stressed that petitioner is a common carrier and, as such, is obliged to
exercise extra-ordinary diligence in transporting its passengers safely.40 To allow

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THIRD DIVISION have been illegally dismissed when the respondent refused without just cause to
give him work assignment. Thus, he prayed for backwages, salary differential,
service incentive leave pay, damages and attorneys fees.[5]
BIENVENIDO D. GOMA, G.R. No. 160905
Petitioner,
On the other hand, respondent denied having hired the petitioner as its regular
Present:
employee. It instead argued that petitioner was hired by a certain Antoy Caaveral,
YNARES-SANTIAGO, J., the manager of the hacienda at the time it was owned by Mr. Bower and leased by
Chairperson, Manuel Gonzales, a jai-alai pelotari known as Ybarra.[6] Respondent added that it
- versus - AUSTRIA-MARTINEZ, was not obliged to absorb the employees of the former owner.

CHICO-NAZARIO,
NACHURA, and In 1995, Pamplona Plantation Leisure Corporation (PPLC) was created for the
operation of tourist resorts, hotels and bars. Petitioner, thus, rendered service in the
REYES, JJ.
construction of the facilities of PPLC. If at all, petitioner was a project but not a
regular employee.[7]
PAMPLONA PLANTATIONINCORPORATED, Promulgated:
Respondent. On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa dismissed the case for
July 4, 2008 lack of merit.[8] The Labor Arbiter concluded that petitioner was hired by the former
owner, hence, was not an employee of the respondent. Consequently, his money
claims were denied.[9]
x----------------------------------------------------------------x
DECISION
On appeal to the National Labor Relations Commission (NLRC), the petitioner
NACHURA, J.:
obtained favorable judgment when the tribunal reversed and set aside the Labor
For review is the Decision[1] of the Court of Appeals (CA) dated August 27, 2003 Arbiters decision. The dispositive portion of the NLRC decision reads:
granting respondent Pamplona Plantation, Inc.s petition for certiorari and its
Resolution[2] dated November 11, 2003 denying petitioner Bienvenido
Gomas motion for reconsideration, in CA-G.R. SP No. 74892. WHEREFORE, the Decision of the Labor Arbiter is hereby SET ASIDE and a new one
is hereby issued ORDERING the respondent, Pamplona Plantation Incorporated, the
following:
Petitioner commenced[3] the instant suit by filing a complaint for illegal dismissal,
underpayment of wages, non-payment of premium pay for holiday and rest day, five
(5) days incentive leave pay, damages and attorneys fees, against the 1) to reinstate the complainant, BIENVENIDO D. GOMA to his former position
respondent. The case was filed with the Sub-Regional Arbitration Branch No. VII immediately without loss of seniority rights and other privileges;
of Dumaguete City. Petitioner claimed that he worked as a carpenter at the
Hacienda Pamplona since 1995; that he worked from 7:30 a.m. to 12:00 noon and 2) to pay the same complainant TWELVE THOUSAND THREE HUNDRED FIFTY-NINE
from 1:00 p.m. to 5:00 p.m. daily with a salary rate of P90.00 a day paid weekly; PESOS (P12,359.00) in salary differentials;
and that he worked continuously until 1997 when he was not given any work
assignment.[4] On a claim that he was a regular employee, petitioner alleged to

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3) to pay to the same complainant ONE HUNDRED ONE THOUSAND SIX HUNDRED WHEREFORE, premises considered, the instant petition is GRANTED. The assailed
SIXTY PESOS (P101,660.00) in backwages to be updated until actual reinstatement; decision of the NLRC dated October 24, 2000, as well as the Resolution
and dated September 9, 2002 in NLRC Case No. V-000882-99, RAB VII-0088-98-D are
hereby ANNULLED and SET ASIDE. The complaint is ordered DISMISSED.
4) to pay attorneys fee in the amount of ELEVEN THOUSAND FOUR HUNDRED TWO
PESOS (P11,402.00) which is equivalent to ten percent (10%) of the total judgment SO ORDERED.[16]
award. Contrary to the NLRCs finding, the CA concluded that there was no employer-
employee relationship. The CA stressed that petitioner having raised a positive
The respondent is further ordered to pay the aggregate amount of ONE HUNDRED averment, had the burden of proving the existence of an employer-employee
FOURTEEN THOUSAND AND NINETEEN PESOS (P114,019.00) to the complainant relationship. Respondent, therefore, had no obligation to prove its negative
through the cashier of this Commission within ten (10) days from receipt hereof. averment.[17] The appellate court further held that while the respondents business
required the performance of occasional repairs and carpentry work, the retention of
a carpenter in its payroll was not necessary or desirable in the conduct of its usual
SO ORDERED.[10] business.[18] Lastly, although the petitioner was an employee of the former owner
of the hacienda, the respondent was not required to absorb such employees because
Respondents motion for reconsideration was denied by the NLRC on September 9, employment contracts are in personam and binding only between the parties.[19]
2002.[11]
Petitioner now comes before this Court raising the sole issue:
The NLRC upheld the existence of an employer-employee relationship, ratiocinating
that it was difficult to believe that a simple carpenter from far away Pamplona would WHETHER OR NOT THE DECISION OF [THE] COURT OF APPEALS DATED AUGUST
go to Dumaguete City to hire a competent lawyer to help him secure justice if he 27, 2003, REVERSING AND SETTING ASIDE THE NLRC (Fourth Division, Cebu City)
did not believe that his right as a laborer had been violated.[12] It added that the RULING THAT THE PETITIONER WAS NOT ILLEGALLY DISMISSED AS HE WAS NOT
creation of the PPLC required the tremendous task of constructing hotels, inns, AN EMPLOYEE OF RESPONDENT, IS CONTRARY TO LAW AND JURISPRUDENCE ON
restaurants, bars, boutiques and service shops, thus involving extensive carpentry WHICH IT WAS BASED, AND NOT IN CONSONANCE WITH THE EVIDENCE ON
work. As an old carpentry hand in the old corporation, the possibility of petitioners RECORD.[20]
employment was great.[13] The NLRC likewise held that the respondent should have
presented its employment records if only to show that petitioner was not included
in its list of employees; its failure to do so was fatal.[14] Considering that petitioner The disposition of this petition rests on the resolution of the following questions: 1)
worked for the respondent for a period of two years, he was a regular employee.[15] Is the petitioner a regular employee of the respondent? 2) If so, was he illegally
dismissed from employment? and 3) Is he entitled to his monetary claims?

Aggrieved, respondent instituted a special civil action for certiorari under Rule 65
before the Court of Appeals which granted the same; and consequently annulled Petitioner insists that he was a regular employee of the respondent corporation. The
and set aside the NLRC decision. The CA disposed, as follows: respondent, on the other hand, counters that it did not hire the petitioner, hence,
he was never an employee, much less a regular one.

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Both the Labor Arbiter and the CA concluded that there was no employer-employee Corporation, their employment was definitely temporary in character and not regular
relationship between the petitioner and respondent. They based their conclusion on employment. Their employment was deemed terminated by operation of law the
the alleged admission of the petitioner that he was previously hired by the former moment they had finished the job or activity under which they were employed.[22]
owner of the hacienda. Thus, they rationalized that since the respondent was not
obliged to absorb all the employees of the former owner, petitioners claim of
Thus, departing from its initial stand that it never hired petitioner, the respondent
employment could not be sustained. The NLRC, on the other hand, upheld
eventually admitted the existence of employer-employee relationship before the
petitioners claim of regular employment because of the respondents failure to
CA. It, however, qualified such admission by claiming that it was PPLC that hired the
present its employment records.
petitioner and that the nature of his employment therein was that of a project and
not regular employee.
The existence of an employer-employee relationship involves a question of fact
which is well within the province of the CA to determine. Nonetheless, given the
Parenthetically, this Court in Pamplona Plantation Company, Inc. v.
reality that the CAs findings are at odds with those of the NLRC, the Court is
Tinghil[23] and Pamplona Plantation Company v. Acosta[24] had pierced the veil of
constrained to probe into the attendant circumstances as appearing on record.[21]
corporate fiction and declared that the two corporations,[25] PPLC and the herein
respondent, are one and the same.
A thorough examination of the records compels this Court to reach a conclusion
different from that of the CA. It is true that petitioner admitted having been
By setting forth these defenses, respondent, in effect, admitted that petitioner
employed by the former owner prior to 1993 or before the respondent took over the
worked for it, albeit in a different capacity. Such an allegation is in the nature of a
ownership and management of the plantation, however, he likewise alleged having
negative pregnant, a denial pregnant with the admission of the substantial facts in
been hired by the respondent as a carpenter in 1995 and having worked as such for
the pleadings responded to which are not squarely denied, and amounts to an
two years until 1997. Notably, at the outset, respondent categorically denied that it
acknowledgment that petitioner was indeed employed by respondent.[26]
hired the petitioner. Yet, in its petition filed before the CA, respondent made this
admission:
The employment relationship having been established, the next question we must
answer is: Is the petitioner a regular or project employee?
Private respondent [petitioner herein] cannot be considered a regular employee
since the nature of his work is merely project in character in relation to the
construction of the facilities of the Pamplona Plantation LeisureCorporation. We find the petitioner to be a regular employee.

He is a project employee as he was hired 1) for a specific project or undertaking, Article 280 of the Labor Code, as amended, provides:
and 2) the completion or termination of such project or undertaking has been
determined at the time of engagement of the employee. x x x.
ART. 280. REGULAR AND CASUAL EMPLOYMENT. - The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of
xxxx 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
In other words, as regards those workers who worked in 1995 specifically in
fixed for a specific project or undertaking, the completion or termination of which
connection with the construction of the facilities of Pamplona Plantation Leisure

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has been determined at the time of the engagement of the employee or where the Respondent argues that, even assuming that petitioner can be considered an
work or service to be performed is seasonal in nature and the employment is for the employee, he cannot be classified as a regular employee, but merely as a project
duration of the season. employee whose services were hired only with respect to a specific job and only
while that specific job existed.
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 A project employee is assigned to carry out a specific project or undertaking the
service, whether such service is continuous or broken, shall be considered a regular duration and scope of which are specified at the time the employee is engaged in
employee with respect to the activity in which he is employed and his employment the project. A project is a job or undertaking which is distinct, separate and
shall continue while such activity exists. identifiable from the usual or regular undertakings of the company. A project
employee is assigned to a project which begins and ends at determined or
determinable times.[30]
As can be gleaned from this provision, there are two kinds of regular employees,
namely: (1) those who are engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the The principal test used to determine whether employees are project employees as
employer; and (2) those who have rendered at least one year of service, whether distinguished from regular employees, is whether or not the employees were
continuous or broken, with respect to the activity in which they are assigned to carry out a specific project or undertaking, the duration or scope of
employed.[27] Simply stated, regular employees are classified into: regular which was specified at the time the employees were engaged for that project.[31] In
employees by nature of work; and regular employees by years of service. The former this case, apart from respondents bare allegation that petitioner was a project
refers to those employees who perform a particular activity which is necessary or employee, it had not shown that petitioner was informed that he would be assigned
desirable in the usual business or trade of the employer, regardless of their length to a specific project or undertaking. Neither was it established that he was informed
of service; while the latter refers to those employees who have been performing the of the duration and scope of such project or undertaking at the time of his
job, regardless of the nature thereof, for at least a year.[28]If the employee has engagement.
been performing the job for at least one year, even if the performance is not Most important of all, based on the records, respondent did not report the
continuous or merely intermittent, the law deems the repeated and continuing need termination of petitioners supposed project employment to the Department of Labor
for its performance as sufficient evidence of the necessity, if not indispensability, of and Employment (DOLE). Department Order No. 19 (as well as the old Policy
that activity to the business.[29] Instructions No. 20) requires employers to submit a report of an employees
termination to the nearest public employment
Respondent is engaged in the management of the Pamplona Plantation as well as office every time the employment is terminated due to a completion of a
in the operation of tourist resorts, hotels, inns, restaurants, etc. Petitioner, on the project. Respondents failure to file termination reports, particularly on the cessation
other hand, was engaged to perform carpentry work. His services were needed for of petitioners employment, was an indication that the petitioner was not a project
a period of two years until such time that the respondent decided not to give him but a regular employee.[32]
work assignment anymore. Owing to his length of service, petitioner became a
regular employee, by operation of law. We stress herein that the law overrides such conditions which are prejudicial to the
interest of the worker whose weak bargaining position necessitates the succor of
the State. What determines whether a certain employment is regular or otherwise
is not the will or word of the employer, to which the worker oftentimes
acquiesces. Neither is it the procedure of hiring the employee nor the manner of

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paying the salary or the actual time spent at work. It is the character of the activities In the instant case, we are prepared to concede the impossibility of the
performed by the employer in relation to the particular trade or business of the reinstatement of petitioner considering that his position or any equivalent position
employer, taking into account all the circumstances, including the length of time of may no longer be available in view of the length of time that this case has been
its performance and its continued existence. Given the attendant circumstances in pending. Moreover, the protracted litigation may have seriously abraded the
the case at bar, it is obvious that one year after he was employed by the respondent, relationship of the parties so as to render reinstatement impractical. Accordingly,
petitioner became a regular employee by operation of law.[33] petitioner may be awarded separation pay in lieu of reinstatement.[41]

As to the question of whether petitioner was illegally dismissed, we answer in the Petitioners separation pay is pegged at the amount equivalent to petitioners one (1)
affirmative. month pay, or one-half (1/2) month pay for every year of service, whichever is
Well-established is the rule that regular employees enjoy security of tenure and they higher, reckoned from his first day of employment up to finality of this decision. Full
can only be dismissed for just cause and with due process, i.e., after notice and backwages, on the other hand, should be computed from the date of his illegal
hearing. In cases involving an employees dismissal, the burden is on the employer dismissal until the finality of this decision.
to prove that the dismissal was legal. This burden was not amply discharged by the
respondent in this case. On petitioners entitlement to attorneys fees, we must take into account the fact that
petitioner was illegally dismissed from his employment and that his wages and other
Obviously, petitioners dismissal was not based on any of the just or authorized benefits were withheld from him without any valid and legal basis. As a
causes enumerated under Articles 282,[34] 283[35] and 284[36] of the Labor Code, consequence, he was compelled to file an action for the recovery of his lawful wages
as amended. After working for the respondent for a period of two years, petitioner and other benefits and, in the process, incurred expenses. On these bases, the Court
was shocked to find out that he was not given any work assignment finds that he is entitled to attorneys fees equivalent to ten percent (10%) of the
anymore. Hence, the requirement of substantive due process was not complied with. monetary award.[42]

Apart from the requirement that the dismissal of an employee be based on any of Lastly, we affirm the NLRCs award of salary differential. In light of our foregoing
the just or authorized causes, the procedure laid down in Book VI, Rule I, Section 2 disquisition on the illegality of petitioners dismissal, and our adoption of the NLRCs
(d) of the Omnibus Rules Implementing the Labor Code, must be findings, suffice it to state that such issue is a question of fact, and we find no cogent
followed.[37] Failure to observe the rules is a violation of the employees right to reason to disturb the findings of the labor tribunal.
procedural due process. WHEREFORE, premises considered, the petition is GRANTED. The Decision of the
In view of the non-observance of both substantive and procedural due process, in Court of Appeals dated August 27, 2003 and its Resolution dated November 11,
accordance with the guidelines outlined by this Court in Agabon v. National Labor 2003 in CA-G.R. SP No. 74892 are REVERSED and SET ASIDE. Petitioner is found to
Relations Commission,[38] we declare that petitioners dismissal from employment have been illegally dismissed from employment and thus, is ENTITLED to: 1) Salary
is illegal.[39] Differential embodied in the NLRC decision dated October 24, 2000 in NLRC Case
No. V-000882-99; 2) Separation Pay; 3) Backwages; and 4) Attorneys fees
Having shown that petitioner is a regular employee and that his dismissal was illegal,
equivalent to ten percent (10%) of the monetary awards. Upon finality of this
we now discuss the propriety of the monetary claims of the petitioner. An illegally
judgment, let the records of the case be remanded to the NLRC for the computation
dismissed employee is entitled to: (1) either reinstatement, if viable, or separation
of the exact amounts due the petitioner.
pay if reinstatement is no longer viable, and (2) backwages.[40]

SO ORDERED.

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Republic of the Philippines this, and to comply with the mandate of the Tourist World Service, the corporate
SUPREME COURT secretary Gabino Canilao went over to the branch office, and, finding the premises
Manila locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June
SECOND DIVISION 4, 1962 to protect the interests of the Tourist World Service. When neither the
appellant Lina Sevilla nor any of her employees could enter the locked premises, a
G.R. No. L-41182-3 April 16, 1988
complaint wall filed by the herein appellants against the appellees with a prayer for
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants, the issuance of mandatory preliminary injunction. Both appellees answered with
vs. counterclaims. For apparent lack of interest of the parties therein, the trial court
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO ordered the dismissal of the case without prejudice.
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.
The appellee Segundina Noguera sought reconsideration of the order dismissing her
SARMIENTO , J.: counterclaim which the court a quo, in an order dated June 8, 1963, granted
The petitioners invoke the provisions on human relations of the Civil Code in this permitting her to present evidence in support of her counterclaim.
appeal by certiorari. The facts are beyond dispute: On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees
xxx xxx xxx and after the issues were joined, the reinstated counterclaim of Segundina Noguera
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees) and the new complaint of appellant Lina Sevilla were jointly heard following which
entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of the court a quo ordered both cases dismiss for lack of merit, on the basis of which
the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as was elevated the instant appeal on the following assignment of errors:
party of the second part, and hereinafter referred to as appellants, the Tourist World I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-
Service, Inc. leased the premises belonging to the party of the first part at Mabini APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
St., Manila for the former-s use as a branch office. In the said contract the party of II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0.
the third part held herself solidarily liable with the party of the part for the prompt SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS
payment of the monthly rental agreed on. When the branch office was opened, the ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT
same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.
Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA
to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE
to have been informed that Lina Sevilla was connected with a rival firm, the LATTER.
Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT
World Service considered closing down its office. This was firmed up by two
TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY
resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2,
TAKING THE LAW INTO THEIR OWN HANDS.
1961 (Exhibits 12 and 13), the first abolishing the office of the manager and vice-
president of the Tourist World Service, Inc., Ermita Branch, and the V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE
second,authorizing the corporate secretary to receive the properties of the Tourist NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE
World Service then located at the said branch office. It further appears that on Jan. DISPOSSESSION OF THE A. MABINI PREMISES.
3, 1962, the contract with the appellees for the use of the Branch Office premises VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS.
was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of

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On the foregoing facts and in the light of the errors asigned the issues to be resolved shouldering the rental and other expenses in consideration for the 3% split in the
are: co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
1. Whether the appellee Tourist World Service unilaterally disco the telephone line 6. It was the understanding between them that appellant Mrs. Sevilla would be given
at the branch office on Ermita; the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee
2. Whether or not the padlocking of the office by the Tourist World Service was Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965-
actionable or not; and testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of
corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)
3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant. Upon the other hand, appellee TWS contend that the appellant was an employee of
the appellee Tourist World Service, Inc. and as such was designated manager.1
In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was
entered into by and between her and appellee TWS with offices at the Ermita branch xxx xxx xxx
office and that she was not an employee of the TWS to the end that her relationship The trial court2 held for the private respondent on the premise that the private
with TWS was one of a joint business venture appellant made declarations showing: respondent, Tourist World Service, Inc., being the true lessee, it was within its
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear prerogative to terminate the lease and padlock the premises. 3 It likewise found the
and nose specialist as well as a imediately columnist had been in the travel business petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc.
prior to the establishment of the joint business venture with appellee Tourist World and as such, she was bound by the acts of her employer. 4 The respondent Court
Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother of Appeal 5 rendered an affirmance.
of one of his children, with her own clientele, coming mostly from her own social The petitioners now claim that the respondent Court, in sustaining the lower court,
circle (pp. 3-6 tsn. February 16,1965). erred. Specifically, they state:
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960 I
(Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY
prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp. TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF
14-15, tsn. Jan. 18,1964). THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE
Service, Inc., which had its own, separate office located at the Trade & Commerce APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT,
Building; nor was she an employee thereof, having no participation in nor connection WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD
with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.). SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
bookings her own business (and not for any of the business of appellee Tourist (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER
World Service, Inc.) obtained from the airline companies. She shared the 7% TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION
commissions given by the airline companies giving appellee Tourist World Service, AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.
Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.) II
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD
expenses, aside from desicion the office furniture and supplying some of fice "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND
furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc.

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COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" In this jurisdiction, there has been no uniform test to determine the evidence of an
P. 8) employer-employee relation. In general, we have relied on the so-called right of
III 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
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
reaching such end." 10Subsequently, however, we have considered, in addition to
ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT
the standard of right-of control, the existing economic conditions prevailing between
SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL
the parties, like the inclusion of the employee in the payrolls, in determining the
CODE ON RELATIONS.
existence of an employer-employee relationship.11
IV
The records will show that the petitioner, Lina Sevilla, was not subject to control by
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED the private respondent Tourist World Service, Inc., either as to the result of the
ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT enterprise or as to the means used in connection therewith. In the first place, under
RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST the contract of lease covering the Tourist Worlds Ermita office, she had bound
WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST herself in solidum as and for rental payments, an arrangement that would be like
WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST claims of a master-servant relationship. True the respondent Court would later
WORLD SERVICE INC.6 minimize her participation in the lease as one of mere guaranty, 12 that does not
As a preliminary inquiry, the Court is asked to declare the true nature of the relation make her an employee of Tourist World, since in any case, a true employee cannot
between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit be made to part with his own money in pursuance of his employer's business, or
to rule on the question, the crucial issue, in its opinion being "whether or not the otherwise, assume any liability thereof. In that event, the parties must be bound by
padlocking of the premises by the Tourist World Service, Inc. without the knowledge some other relation, but certainly not employment.
and consent of the appellant Lina Sevilla entitled the latter to the relief of damages In the second place, and as found by the Appellate Court, '[w]hen the branch office
prayed for and whether or not the evidence for the said appellant supports the was opened, the same was run by the herein appellant Lina O. Sevilla payable to
contention that the appellee Tourist World Service, Inc. unilaterally and without the Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs.
consent of the appellant disconnected the telephone lines of the Ermita branch office Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under
of the appellee Tourist World Service, Inc.7 Tourist World Service, Inc., insists, on the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing
the other hand, that Lina SEVILLA was a mere employee, being "branch manager" the business, obviously relied on her own gifts and capabilities.
of its Ermita "branch" office and that inferentially, she had no say on the lease
It is further admitted that Sevilla was not in the company's payroll. For her efforts,
executed with the private respondent, Segundina Noguera. The petitioners contend,
she retained 4% in commissions from airline bookings, the remaining 3% going to
however, that relation between the between parties was one of joint venture, but
Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned
concede that "whatever might have been the true relationship between Sevilla and
compensation in fluctuating amounts depending on her booking successes.
Tourist World Service," the Rule of Law enjoined Tourist World Service and Canilao
from taking the law into their own hands, 8 in reference to the padlocking now The fact that Sevilla had been designated 'branch manager" does not make her,
questioned. ergo, Tourist World's employee. As we said, employment is determined by the right-
of-control test and certain economic parameters. But titles are weak indicators.
The Court finds the resolution of the issue material, for if, as the private respondent,
Tourist World Service, Inc., maintains, that the relation between the parties was in In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
the character of employer and employee, the courts would have been without consequence, accepting Lina Sevilla's own, that is, that the parties had embarked
jurisdiction to try the case, labor disputes being the exclusive domain of the Court on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did
of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes not recognize the existence of such a relation. In her letter of November 28, 1961,
then in force. 9 she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the

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operation of your branch office 14 in effect, accepting Tourist World Service, Inc.'s not take pains to have them reconnected. Assuming, therefore, that it had no hand
control over the manner in which the business was run. A joint venture, including a in the disconnection now complained of, it had clearly condoned it, and as owner of
partnership, presupposes generally a of standing between the joint co-venturers or the telephone lines, it must shoulder responsibility therefor.
partners, in which each party has an equal proprietary interest in the capital or The Court of Appeals must likewise be held to be in error with respect to the
property contributed 15 and where each party exercises equal rights in the conduct padlocking incident. For the fact that Tourist World Service, Inc. was the lessee
of the business.16 furthermore, the parties did not hold themselves out as partners, named in the lease con-tract did not accord it any authority to terminate that
and the building itself was embellished with the electric sign "Tourist World Service, contract without notice to its actual occupant, and to padlock the premises in such
Inc. 17in lieu of a distinct partnership name. fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to stake in the business itself, and necessarily, in the equipment pertaining thereto.
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she Furthermore, Sevilla was not a stranger to that contract having been explicitly
must have done so pursuant to a contract of agency. It is the essence of this contract named therein as a third party in charge of rental payments (solidarily with Tourist
that the agent renders services "in representation or on behalf of another.18 In the World, Inc.). She could not be ousted from possession as summarily as one would
case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her eject an interloper.
principal, Tourist World Service, Inc. As compensation, she received 4% of the The Court is satisfied that from the chronicle of events, there was indeed some
proceeds in the concept of commissions. And as we said, Sevilla herself based on malevolent design to put the petitioner, Lina Sevilla, in a bad light following
her letter of November 28, 1961, pre-assumed her principal's authority as owner of disclosures that she had worked for a rival firm. To be sure, the respondent court
the business undertaking. We are convinced, considering the circumstances and speaks of alleged business losses to justify the closure '21 but there is no clear
from the respondent Court's recital of facts, that the ties had contemplated a showing that Tourist World Ermita Branch had in fact sustained such reverses, let
principal agent relationship, rather than a joint managament or a partnership.. alone, the fact that Sevilla had moonlit for another company. What the evidence
But unlike simple grants of a power of attorney, the agency that we hereby declare discloses, on the other hand, is that following such an information (that Sevilla was
to be compatible with the intent of the parties, cannot be revoked at will. The reason working for another company), Tourist World's board of directors adopted two
is that it is one coupled with an interest, the agency having been created for mutual resolutions abolishing the office of 'manager" and authorizing the corporate
interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office
fide travel agent herself, and as such, she had acquired an interest in the business properties. On January 3, 1962, the private respondents ended the lease over the
entrusted to her. Moreover, she had assumed a personal obligation for the operation branch office premises, incidentally, without notice to her.
thereof, holding herself solidarily liable for the payment of rentals. She continued It was only on June 4, 1962, and after office hours significantly, that the Ermita
the business, using her own name, after Tourist World had stopped further office was padlocked, personally by the respondent Canilao, on the pretext that it
operations. Her interest, obviously, is not to the commissions she earned as a result was necessary to Protect the interests of the Tourist World Service. " 22It is strange
of her business transactions, but one that extends to the very subject matter of the indeed that Tourist World Service, Inc. did not find such a need when it cancelled
power of management delegated to her. It is an agency that, as we said, cannot be the lease five months earlier. While Tourist World Service, Inc. would not pretend
revoked at the pleasure of the principal. Accordingly, the revocation complained of that it sought to locate Sevilla to inform her of the closure, but surely, it was aware
should entitle the petitioner, Lina Sevilla, to damages. that after office hours, she could not have been anywhere near the premises.
As we have stated, the respondent Court avoided this issue, confining itself to the Capping these series of "offensives," it cut the office's telephone lines, paralyzing
telephone disconnection and padlocking incidents. Anent the disconnection issue, it completely its business operations, and in the process, depriving Sevilla articipation
is the holding of the Court of Appeals that there is 'no evidence showing that the therein.
Tourist World Service, Inc. disconnected the telephone lines at the branch
office. 20 Yet, what cannot be denied is the fact that Tourist World Service, Inc. did

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This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to SO ORDERED.
punish Sevillsa it had perceived to be disloyalty on her part. It is offensive, in any
event, to elementary norms of justice and fair play.
We rule therefore, that for its unwarranted revocation of the contract of agency, the
private respondent, Tourist World Service, Inc., should be sentenced to pay
damages. Under the Civil Code, moral damages may be awarded for "breaches of
contract where the defendant acted ... in bad faith. 23
We likewise condemn Tourist World Service, Inc. to pay further damages for the
moral injury done to Lina Sevilla from its brazen conduct subsequent to the
cancellation of the power of attorney granted to her on the authority of Article 21 of
the Civil Code, in relation to Article 2219 (10) thereof —
ART. 21. Any person who wilfully causes loss or injury to another in a manner that
is contrary to morals, good customs or public policy shall compensate the latter for
the damage.24
ART. 2219. Moral damages25 may be recovered in the following and analogous
cases:
xxx xxx xxx
(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to
respond for the same damages in a solidary capacity.
Insofar, however, as the private respondent, Segundina Noguera is concerned, no
evidence has been shown that she had connived with Tourist World Service, Inc. in
the disconnection and padlocking incidents. She cannot therefore be held liable as
a cotortfeasor.
The Court considers the sums of P25,000.00 as and for moral damages,24
P10,000.00 as exemplary damages, 25and P5,000.00 as nominal 26 and/or
temperate27 damages, to be just, fair, and reasonable under the circumstances.
WHEREFORE, the Decision promulgated on January 23, 1975 as well as the
Resolution issued on July 31, 1975, by the respondent Court of Appeals is hereby
REVERSED and SET ASIDE. The private respondent, Tourist World Service, Inc., and
Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina
Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as
and for exemplary damages, and the sum of P5,000.00, as and for nominal and/or
temperate damages.
Costs against said private respondents.

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Republic of the Philippines Seamen; Emilio Dominico (Dominico) and Benny Nilmao (Nilmao) as Oilers; and Jose
SUPREME COURT Austral (Austral) as 2nd Engineer.
Manila Sometime in January 2000, one of the vessel’s Oilers, Richard Abis (Abis), reported
SECOND DIVISION to GASLI’s Office and Crewing Manager, Elsa Montegrico (Montegrico), an alleged
G.R. No. 178184 January 29, 2014 illegal activity being committed by respondents aboard the vessel. Abis revealed that
after about four to five voyages a week, a substantial volume of fuel oil is
GRAND ASIAN SHIPPING LINES, INC., EDUARDO P. FRANCISCO and
unconsumed and stored in the vessel’s fuel tanks. However, Gruta would misdeclare
WILLIAM HOW, Petitioners,
it as consumed fuel in the Engineer’s Voyage Reports. Then, the saved fuel oil is
vs.
siphoned and sold to other vessels out at sea usually at nighttime. Respondents
WILFREDO GALVEZ, JOEL SALES, CRISTITO GRUTA, DANILO
would then divide among themselves the proceeds of the sale. Abis added that he
ARGUELLES, RENATO BATAYOLA, PATRICIO FRESMILLO,* JOVY NOBLE,
was hesitant at first to report respondents’ illegal activities for fear for his life.
EMILIO DOMINICO, BENNY NILMAO, and JOSE AUSTRAL,Respondents.
An investigation on the alleged pilferage was conducted. After audit and examination
DECISION
of the Engineer’s Voyage Reports, GASLI’s Internal Auditor, Roger de la Rama (De
DEL CASTILLO, J.: la Rama), issued a Certification of Overstatement of Fuel Oil Consumption9 for M/T
The employer has broader discretion in dismissing managerial employees on the Dorothy Uno stating that for the period June 30, 1999 to February 15, 2000 fuel oil
ground of loss of trust and confidence than those occupying ordinary ranks. While consumption was overstated by 6,954.3 liters amounting to ₱74,737.86.10
plain accusations are not sufficient to justify the dismissal of rank and file employees, On February 11, 2000, a formal complaint11 for qualified theft was filed with the
the mere existence of a basis for believing that managerial employees have breached Criminal Investigation and Detection Group (CIDG) at Camp Crame against
the trust reposed on them by their employer would suffice to justify their dismissal.1 respondents, with Montegrico’s Complaint-Affidavit12 attached. On February 14,
Before us is a Petition for Review on Certiorari2 assailing the September 12, 2006 2000, Abis submitted his Sinumpaang Salaysay,13 attesting to the facts surrounding
Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 82379, which annulled the respondents’ pilferage of fuel oil while on board the vessel, which he alleged started
September 10, 2003 Decision4 and January 14, 2004 Resolution5 of the National in August of 1999. On March 22, 2000, GASLI’s Port Captain, Genaro Bernabe
Labor Relations Commission (NLRC), thereby reinstating the August 30, 2001 (Bernabe), and De la Rama submitted a Complaint-Joint Affidavit,14 stating that in
Decision6of the Labor Arbiter for having attained finality as a result of petitioners’ Gruta’s Engineer’s Voyage Reports, particularly for the period June 30, 1999 to
failure to post the correct amount of bond in their appeal before the NLRC. Likewise February 15, 2000, he overstated the number of hours the vessel’s main and
assailed is the May 23, 2007 Resolution7 of the CA which denied petitioners’ Motion auxiliary engines, as well as its generators, were used resulting in the exaggerated
for Reconsideration.8 fuel consumption. They also stated that according to independent surveyor Jade
Factual Antecedents Sea-Land Inspection Services, the normal diesel fuel consumption of M/T Dorothy
Uno for Petron Ugong–Bataan Refinery–Petron Ugong route averaged 1,021 liters
Petitioner Grand Asian Shipping Lines, Inc. (GASLI) is a domestic corporation
only. Thus, comparing this with the declared amount of fuel consumed by the vessel
engaged in transporting liquified petroleum gas (LPG) from Petron Corporation’s
when manned by the respondents, Bernabe and De la Rama concluded that the
refinery in Limay, Bataan to Petron’s Plant in Ugong, Pasig and Petron’s Depot in
pilferage was considerable.15 In her Supplementary Complaint
Rosario, Cavite. Petitioners William How and Eduardo Francisco are its President and
Affidavit,16 Montegrico implicated respondents except Sales, in the illegal activity.
General Manager, respectively. Respondents, on the other hand, are crewmembers
Bernabe, in his Reply-Affidavit,17 further detailed their analysis of the voyage
of one of GASLI’s vessels, M/T Dorothy Uno, with the following designations:
reports vis-a-vis the report of Jade Sea-Land Inspection Services to strengthen the
Wilfredo Galvez (Galvez) as Captain; Joel Sales (Sales) as Chief Mate; Cristito Gruta
accusations.
(Gruta) as Chief Engineer; Danilo Arguelles (Arguelles) as Radio Operator; Renato
Batayola (Batayola), Patricio Fresmillo (Fresmillo) and Jovy Noble (Noble) as Able

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In their Joint Counter-Affidavit18 and Joint Rejoinder-Affidavit,19 respondents specified and that some crewmembers who boarded the vessel during the same
denied the charge. They alleged that the complaint was based on conflicting and period the alleged pilferage transpired were not included in the charge. With regard
erroneous computation/estimates of fuel consumption; that the complaint was to the other complainants, petitioners likewise failed to prove the legality of their
fabricated as borne out by its failure to specify the exact time the alleged pilferage dismissal.
took place; that the allegations that the pilferage has been going on since August The Labor Arbiter ordered petitioners to reinstate complainants with full backwages
1999 and that Austral and Sales acted as lookouts are not true because both and to pay their money claims for unpaid salary, overtime pay, premium pay for
embarked on the vessel only on December 28, 1999 and January of 2000, holidays and rest days, holiday and service incentive leave pay, as indicated in the
respectively; that four other officers who were on board the vessel much longer than Computation of Money Claims. Complainants were likewise awarded damages due
Austral and Sales were not included in the charge; and, that the complaint was to the attending bad faith in effecting their termination, double indemnity prescribed
intended as a mere leverage. by Republic Act (RA) No. 818827 in view of violation of the Minimum Wage Law, as
In a letter20 dated April 14, 2000, the CIDG referred the case to the Office of the well as 10% attorney’s fee. With respect to the claim for tax refund, the same was
City Prosecutor of Manila, which, after finding a prima facie case, filed the referred to the Bureau of Internal Revenue, while the claim for hazard pay was
corresponding Information for Qualified Theft21 dated August 18, 2000 with the dismissed for lack of basis. The Labor Arbiter modified and recomputed the money
Regional Trial Court (RTC) of Manila. claims of respondents, as follows:
Meanwhile, GASLI placed respondents under preventive suspension. After
1. WILFREDO GALVEZ – (Dismissed in
conducting administrative hearings, petitioners decided to terminate respondents
Mar. 2000)
from employment. Respondents (except Sales) were thus served with
Backwages from Mar. 2000 to
notices22 informing them of their termination for serious misconduct, willful breach
May 2001 (₱8,658.74 x 14 mos.) ---------- P 121,225.16
of trust, and commission of a crime or offense against their employer.
It appears that several other employees and crewmembers of GASLI’s two other 13th Month Pay for the period ---------- 8,658.94
vessels were likewise suspended and terminated from employment. Nine seafarers
of M/T Deborah Uno were charged and terminated for insubordination, defying Unpaid Salary from Feb 16 to 29, 2000 ---------- 3,985.38
orders and refusal to take responsibility of cargo products/fuel.23 For vessel M/T
Coral Song, two crewmembers were dismissed for serious act of sabotage and grave Non-payment of Premium Pay for
insubordination.24 Proceedings before the Labor Arbiter Respondents and the other Holiday;
dismissed crewmembers of M/T Deborah Uno and M/T Coral Song (complainants) Restday and Non-payment of Holiday
filed with the NLRC separate complaints25 for illegal suspension and dismissal, Pay;
underpayment/non-payment of salaries/wages, overtime pay, premium pay for (limited to 3 years’ only = ₱7,372.90 x
holiday and rest day, holiday pay, service incentive leave pay, hazard pay, tax 3 yrs.) ---------- 22,188.70
refunds and indemnities for damages and attorney’s fees against petitioners. The
complaints, docketed as NLRC NCR Case Nos. 00-04-02026-00, 00-04-02062-00, 00- Non-payment of (5 days) Service
05-02620-00 and 00-07-03769-00, were consolidated.1âwphi1 Incentive
On August 30, 2001, the Labor Arbiter rendered a Decision26 finding the dismissal Leave Pay (for every year of service, but
of all 21 complainants illegal. As regards the dismissal of herein respondents, the Limited to 3 years only): = ₱1,423.35 x
Labor Arbiter ruled that the filing of a criminal case for qualified theft against them 3 yrs.) ---------- P 4,270.05
did not justify their termination from employment. The Labor Arbiter found it
abstruse that the specific date and time the alleged pilferage took place were not

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Actual Moral Exemplary & Non-payment of (5 days) Service


Compensatory Incentive Leave Pay
Damages ---------- P 100,000.00 (for every year of service = ₱1,360.15 x
2 yrs.) ---------- 2,720.30
(₱260,258.23)
Actual, Moral, Exemplary &
Ten (10%) Percent Attorney’s Fees P 26,025.82 Compensatory Damages ---------- P 100,000.00

TOTAL P 286,284.05 (₱240,926.91)

2. JOEL SALES – (Dismissed in Mar. Ten (10%) Percent Attorney’s Fees ---------- P 24,092.69
2000)
Backwages from Mar. 2000 to May 2001 - P TOTAL P 265,019.60
(₱8,274.14 x 14 mos.) ---------- 115,840.76
4. DANILO ARGUELLES – (Dismissed in
13th Month Pay for the period& ---------- 8,274.34 Feb. 2000)
Backwages from Mar. 2000 to May 2001
Actual, Moral, Exemplary & (₱7,340.62 x 15 mos.) ---------- [P]110,109.30
Compensatory Damages ---------- P 100,000.00
13th Month Pay for the period ---------- 7,340.62
(₱224,115.10)
Unpaid Salary from Feb. 16 to 29, 2000
Ten (10%) Percent Attorney’s Fees P 22,411.51 (₱225.00 x 14 days) ---------- 3,150.00

TOTAL P 246,526.61 Underpayment/Non-payment of Salary/Wages:

3. CRISTITO G. GRUTA – (Dismissed in A. From April 98 to Nov. 98 (7 mos.)


Mar. 2000) Minimum Wage – ₱198 x 391.5 [/] 12 = P 6,459.75
Backwages from Mar. 200[0] to May
2001 Actual Basic Wage for the period 4,320.00
(₱8,274.14 x 14 mos.) ---------- P 115,840.76
Difference P 2,139.75
13th Month Pay for the period ---------- 8,274.34
x 7 mos.
Non-payment of Premium Pay for Holiday; Restday and
Non-payment of Holiday Pay: (₱7,045.57 x 2 yrs.) 14,091.51

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P 14,978.25 B. From Dec. 98 to Mar. 2000 (16 mos.)


30% of Minimum Wage –
Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 29,956.50
(₱7,340.62 x
B. From Dec. 98 to Mar. 2000 (16 mos.) 30%) 2,202.18
Minimum Wage – ₱225 391.5 [/] 12 = P 7,340.62
30% of Salary Actually Paid –
Actual Basic Wage for the period 6,240.00
(₱6,240.00 x 1,872.00
Difference P 1,100.62 30%)

x 16 mos. P 330.18
x 16 mos.
Difference
P 17,609.92
P 5,282.88 P 5,282.88
Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 35,219.84
Non-payment of Premium Pay for Holiday; Restday and P 11,655.00
Underpayment/Non-payment of Overtime Pay:
A. From Apr. 98 to Nov. 98 (7 mos.) Non-payment of Holiday Pay (₱5,872.50 x 2 yrs.)
30% of Minimum Wage – Non-payment of (5 days) Service Incentive Leave Pay
(for every year of service/but limited to 2 yrs. only): 2,250.00
(₱6,459.75 x
30%) P 1,937.92 = P 1,125.00 x 2 yrs.

30% of Salary Actually Paid – Actual, Moral, Exemplary & P 100,000.00


Compensatory Damages
(₱4,320.00 x
30%) 1,872.00 (₱309,457.58)

Difference P 641.92 Ten (10%) Percent Attorney’s Fees P 30,945.75

x 7 mos. TOTAL P 340,403.33

5. RENATO BATAYOLA
P 4,493.44 P 4,493.44 6. PATRICIO FRESNILLO

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7. JOVY NOBLE x 10 mos.


8. EMILIO DOMINICO
9. BENNY NILMAO – (All dismissed in Feb. 2001)
P 23,615.10
Backwages from Mar. 2000 to May 2001
(₱7,340.62 x 15 mos.) P 110,109.30

Double Indemnity prescribed by Rep.


13th Month Pay for the period ---------- 7,340.62
Act 8188, Sec. 4 P 47,230.20
Unpaid Salary from Feb. 16 to 29, 2000
C. From Dec. 98 to Mar. 2000 (16 mos.)
(₱225.00 x 14 days) 3,150.00
Minimum Wage – ₱225 x 391.5 [/] 12 = 7,340.62
Underpayment/Non-payment of
Actual Basic Wage for the period 6,022.00
Salary/Wages:

Difference P 1,318.62
A. From Apr. 97 to Jan. 98 ([9] mos.)
Minimum Wage – ₱185 x 391.5 [/] 12 = P 6,035.62
x 16 mos.
Actual Basic Wage for the period 4,098.24

Difference P 1,932.58 P 21,098.00

x 9 mos. Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 42,196.00

Underpayment/Non-payment of
Overtime Pay:
P 17,436.42

A. From Apr. 97 to Jan. 98 (9 mos.)


30% Minimum Wage –
Double Indemnity prescribed by Rep. Act 8188, Sec. 4 P 34,872.84
(₱6,035.62 x
B. From Feb. 98 to Nov. 98 (10 mos.) P 1,810.68
30%)
Minimum Wage – ₱198 x 391.5 [/] 12 = P 6,459.75
30% of Salary Actually Paid –
Actual Basic Wage for the period 4,098.24
(₱4,098.24 x
Difference P 2,361.51 30%) 1,226.77

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Difference P 583.91 P 6,326.97 - P 6,326.97

x 9 mos.
Non-Payment of Premium Pay for
P 5,255.19 - P 5,255.19 Holiday & Restday; and
Non-Payment of Holiday Pay:
B. From Feb. 98 to Nov. 98 (10 mos.) (₱5,827.50 x 3 yrs.) P 17,482.50

30% Minimum Wage – Non-Payment of (5 days) Service Incentive Leave Pay


(for every year of service/but limited to 3 years only)
(₱6,459.75 x 30%) P 1,937.92 = ₱1,125.00 x 3 yrs.) 3,375.00

30% of Salary Actually Paid – Actual, Moral, Exemplary &


Compensatory Damages ---------- 100,000.00
1,226.72
(₱4,098.24 x 30%) (₱384,450.12)

Difference P 711.15 P 38, 445.01


Ten (10%) Percent Attorney’s Fees
x 10 mos.

₱2,114,475.00)
P 7,111.70 - P 7,111.70 (Total for 5 above-named Complainants

C. From Dec. 98 to Mar. 2000 (16 mos.) 10. JOSE AUSTRAL – (Dismissed in Feb. 2000)
30% Minimum Wage – P 2,202.18 Backwages from Mar. 2000 to May 2001

(₱7,340.62 x 30%) (₱8,900.00 x 15 mos.) P 133.500.00

30% of Salary Actually Paid – P 1,806.75 13th Month Pay for the period 8,900.00

(₱6,022.50 x 30%) Unpaid Salary from Feb. 16 to 29, 2000


(₱8,900.00 x 12 mos. / 365 days =
x 16 mos. (₱292.60 x 14 days) 4,096.40
Difference

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Actual, [M]oral, Exemplary & 12. Elias Facto 259,471.41


Compensatory Damages ---------- P 100,000.00
13. Jeremias Bonlagua 316,683.53
(₱246,496.40)
14. Rannie Canon 391,816.70
Ten (10%) Percent Attorney’s Fees P 24,679.64
15. Fernando Malia 411,355.45
TOTAL P 271, 146.04 28
16. Calixto Flores 411,355.45
The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, premises all considered, judgment is hereby rendered finding the 17. Necito Llanzana 411,355.45
dismissal of all 21 complainants herein as illegal and ordering respondents Grand
Asian Shipping Lines, Inc., Eduardo P. Franscisco and William How to pay, jointly 18. Ramie Barrido 411,355.45
and severally, each complainant the amounts, as follows, to wit:
19. Albert Faulan 265,982.28
A) 1. Wilfredo Galvez P 286,284.05
20. Magno Tosalem 419,352.79
2. Joel Sales 246,526.61
21. Rolando Dela Guardia 419,352.79
3. Cristito G. Gruta 265,019.60
(Grand Total) P 7,104,483.84
4. Danilo Arguelles 340,403.33
B) The awards of ₱100,000.00 each, as indemnity for damages and ten percent
5. Renato Batayola 422,895.13 (10%) of the total amount, as attorney’s fees, are included in the above-individual
amount so awarded.
6. Patricio Fresnillo 422,895.13 C) Respondents should immediately reinstate all the complainants to their former
position without loss of seniority [sic] and other benefits; and to pay them full
7. Jovy Noble 422,895.13 backwages up to the time of their actual reinstatement.
All other claims of complainants, not included in the above awards, are hereby
8. Emilio Dominico 422,895.13
ordered dismissed for lack of merit.
9. Benny Nilmao 422,895.13 SO ORDERED.29
Proceedings before the National Labor Relations Commission
10. Jose Austral 271,146.04 Petitioners filed a Notice of Appeal With A Very Urgent Motion to Reduce
Bond30 before the NLRC and posted a cash bond in the amount of ₱500,000.00.
11. Nobelito Rivas 281,900.13

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In a Supplemental Motion to Reduce Bond,31 petitioners cited economic depression, Respondents are adjudged not guilty of illegal dismissal with respect to all
legality of the employees’ termination, compliance with labor standards, and wage complainants except complainant Joel Sales. With the exception of Joel Sales, all the
increases as grounds for the reduction of appeal bond. monetary awards to all complainants are deleted from the decision.1âwphi1
The NLRC issued an Order32 dated February 20, 2002 denying petitioners’ motion Respondents are ordered to pay, jointly and severally complainant Joel Sales his
to reduce bond and directing them to post an additional bond in the amount of backwages in the amount of ₱124,115.10 as computed in the assailed decision plus
₱4,084,736.70 in cash or surety within an unextendible period of 10 days; otherwise, ten (10%) thereof as attorney’s fees.
their appeal would be dismissed. Petitioners failed to comply with the Order. Thus, We also sustain the order to reinstate him to his former position without loss of
on February 3, 2003, complainants moved for the dismissal of the appeal since seniority rights and other benefits and to pay him backwages up to the time of his
petitioners had thus far posted only ₱1.5 million supersedeas bond and ₱500,000.00 actual reinstatement.
cash bond, short of the amount required by the NLRC.33
SO ORDERED.35
In a Decision34 dated September 10, 2003, the NLRC, despite its earlier Order
Complainants filed Motions for Reconsideration while petitioners filed a Motion for
denying petitioners’ motion for the reduction of bond, reduced the amount of appeal
Partial Reconsideration. In a Resolution36 dated January 14, 2004, the NLRC
bond to ₱1.5 million and gave due course to petitioners’ appeal. It also found the
reconsidered its ruling with respect to Sales, absolving petitioners from the charge
appeal meritorious and ruled that petitioners presented sufficient evidence to show
of illegally dismissing him as Sales was neither placed under preventive suspension
just causes for terminating complainants’ employment and compliance with due
nor terminated from the service. The NLRC upheld petitioners’ claim that it was Sales
process. Accordingly, complainants’ dismissal was valid, with the exception of Sales.
who abandoned his work by failing to report back for re-assignment. The dispositive
The NLRC adjudged petitioners to have illegally dismissed Sales as there was
portion of the Resolution reads:
absence of any record that the latter received any notice of suspension,
administrative hearing, or termination. WHEREFORE, premises considered, the Motions for Reconsideration filed by
complainants are denied for lack of merit. The Motion for Partial Reconsideration
The NLRC struck down the monetary awards given by the Labor Arbiter, which, it
filed by respondents is granted. The assailed decision is reconsidered in that
ruled, were based merely on the computations unilaterally prepared by the
Respondents are likewise adjudged not guilty of illegal dismissal with respect to
complainants. It also ruled that Galvez, a ship captain, is considered a managerial
complainant Joel Sales. The monetary awards in favor of complainant Joel Sales as
employee not entitled to premium pay for holiday and rest day, holiday pay and
well as the reinstatement order are hereby deleted from the Decision.
service incentive leave pay. As for the other complainants, the award for premium
pay, holiday pay, rest day pay and overtime pay had no factual basis because no SO ORDERED.37
proof was adduced to show that work was performed on a given holiday or rest day Proceedings before the Court of Appeals
or beyond the eight hours normal work time. Even then, the NLRC opined that these Respondents, excluding the other complainants, filed a Petition for Certiorari38 with
claims had already been given since complainants’ salaries were paid on a 365-day the CA, attributing grave abuse of discretion on the part of the NLRC in entertaining
basis. Likewise, service incentive leave pay, awards for damages and double the appeal despite the insufficiency of petitioners’ appeal bond. Respondents also
indemnity were deleted. Further, the NLRC sustained respondents’ contention that assailed the NLRC’s ruling upholding the validity of their dismissal. They posited that
it is the Secretary of Labor or the Regional Director who has jurisdiction to impose the charge of pilferage is not supported by clear, convincing and concrete evidence.
the penalty of double indemnity for violations of the Minimum Wage Laws and not In fact, the RTC, Branch 15 of Manila already rendered a Decision39 on December
the Labor Arbiter. The NLRC disposed of the case as follows: 19, 2003 acquitting them of the crime of qualified theft lodged by the petitioners.
WHEREFORE, premises considered, the assailed Decision is hereby reversed as to Respondents further prayed for the reinstatement of the Labor Arbiter’s monetary
all complainants but modified with respect to Joel Sales. awards in their favor.
In a Decision40 dated September 12, 2006, the CA set aside the NLRC’s Decision
and Resolution. It held that the NLRC’s act of entertaining the appeal is a

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jurisdictional error since petitioners’ failure to post additional bond rendered the EVIDENCE PROVIDED ADEQUATE BASIS FOR THE DISMISSAL OF PETITIONERS IN
Labor Arbiter’s Decision final, executory and immutable. The CA, nonetheless, ACCORDANCE WITH RELEVANT SUPREME COURT OF APPEAL [sic] DECISIONS.
proceeded to discuss the merits of the case insofar as the illegal dismissal charge is C. IN SUM, PETITIONERS WERE NOT ILLEGALLY DISMISSED SINCE THE
concerned. The CA conformed with the Labor Arbiter’s ruling that petitioners’ SUBSTANTIVE AND PROCEDURAL REQUIREMENTS FOR THE TERMINATION OF
evidence was inadequate to support the charge of pilferage and justify respondents’ THEIR EMPLOYMENT WERE SATISFIED IN THIS CASE.
termination. The CA ruled that Sales was also illegally dismissed, stating that Sales’
D. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN RULING THAT
active participation in the labor case against petitioners belies the theory that he
PETITIONER JOEL SALES WAS ILLEGALLY DISMISSED.
was not terminated from employment. The dispositive portion of the CA Decision
reads: II.
WHEREFORE, the petition is GRANTED and the assailed September 10, 2003 THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE
Decision and January 14, 2003 Resolution are, accordingly, ANNULLED and SET JURISPRUDENCE WHEN IT CONCLUDED THAT PETITIONERS WERE NOT ABLE TO
ASIDE. In lieu thereof, the Labor Arbiter’s August 30, 2001 Decision is ordered VALIDLY PERFECT [THEIR] APPEAL OF THE LABOR ARBITER’S DECISION.44
REINSTATED. Petitioners claim that the NLRC properly took cognizance of their appeal and properly
SO ORDERED.41 granted their motion for reduction of the appeal bond, explaining that strict
implementation of the rules may be relaxed in certain cases so as to avoid a
Petitioners filed a Motion for Reconsideration,42 questioning the CA in finding that
miscarriage of justice. Petitioners also claim that there was adequate basis to render
respondents were illegally dismissed, in reinstating the monetary awards granted by
respondents’ dismissal from service valid, as correctly ruled by the NLRC.
the Labor Arbiter without passing upon the merits of these money claims and in
ascribing grave abuse of discretion on the part of the NLRC in taking cognizance of Our Ruling
the appeal before it. The assailed CA Decision must be vacated and set aside.
On May 23, 2007, the CA issued a Resolution43 denying petitioners’ Motion for There was substantial compliance with
Reconsideration. Hence, the instant Petition. the rules on appeal bonds.
Issues In order to perfect an appeal from the Decision of the Labor Arbiter granting
Petitioners assign the following errors: monetary award, the Labor Code requires the posting of a bond, either in cash or
I. surety bond, in an amount equivalent to the monetary award. Article 223 of the
Labor Code provides:
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE
JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS WERE ILLEGALLY ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are final and
DISMISSED. executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. x x x
A. THIS HONORABLE COURT OF APPEAL[S] OF APPEALS [sic] DISREGARDED THE
FACT THAT THE OFFICE OF THE CITY PROSECUTOR OF MANILA DETERMINED xxxx
THAT THERE WAS A PRIMA FACIE CASE FOR QUALIFIED THEFT AGAINST In case of a judgment involving a monetary award, an appeal by the employer [may]
PETITIONERS, CONTRARY TO DECISIONS THIS MOST HONORABLE COURT OF be perfected only upon the posting of a cash or surety bond issued by a reputable
APPEAL[S] HAS HELD WHERE SIMILAR FINDINGS OF THE INVESTIGATING PUBLIC bonding company duly accredited by the Commission in the amount equivalent to
PROSECUTOR HAD BEEN CONSIDERED SUBSTANTIAL EVIDENCE TO JUSTIFY the monetary award in the judgment appealed from.
TERMINATION OF EMPLOYMENT BASED ON LOSS OF TRUST AND CONFIDENCE. Nonetheless, we have consistently held that rules should not be applied in a very
B. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN DISCREDITING rigid and strict sense.45 This is especially true in labor cases wherein the substantial
PRIVATE RESPONDENTS’ EVIDENCE ONE BY ONE WHEN, TAKEN TOGETHER, SUCH

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merits of the case must accordingly be decided upon to serve the interest of a crime or offense against their employer. Petitioners claim that based on the sworn
justice.46 When there has been substantial compliance, relaxation of the Rules is statement of Abis, joint affidavit of Bernabe and De la Rama, letter of petitioner
warranted.47 Francisco requesting assistance from the CIDG, formal complaint sheet, complaint
In Mendoza v. HMS Credit Corporation,48 we held that the posting of an appeal and supplementary complaint affidavit of Montegrico, CIDG’s letter referring
bond in the amount of ₱650,000.00 instead of ₱1,025,081.82 award stated in the respondents’ case to the Office of the City Prosecutor of Manila, resolution of the
Decision of the Labor Arbiter is substantial compliance with the requirement under City Prosecutor finding a prima facie case of qualified theft, and the Information for
Article 223. Likewise, in Pasig Cylinder Mfg. Corp. v. Rollo,49 we ruled that the filing qualified theft, there is a reasonable ground to believe that respondents were
of a reduced appeal bond of ₱100,000.00 is not fatal in an appeal from the labor responsible for the pilferage of diesel fuel oil at M/T Dorothy Uno, which renders
arbiter’s ruling awarding ₱3,132,335.57 to the dismissed employees. In Rosewood them unworthy of the trust and confidence reposed on them.
Processing, Inc. v. National Labor Relations Commission,50 we allowed the filing of After examination of the evidence presented, however, we find that petitioners failed
a reduced bond of ₱50,000.00, accompanied with a motion, in an appeal from the to substantiate adequately the charges of pilferage against respondents. "[T]he
Labor Arbiter’s award of ₱789,154.39. quantum of proof which the employer must discharge is substantial evidence. x x x
In the case at bench, petitioners appealed from the Decision of the Labor Arbiter Substantial evidence is that amount of relevant evidence as a reasonable mind might
awarding to crewmembers the amount of ₱7,104,483.84 by filing a Notice of Appeal accept as adequate to support a conclusion, even if other minds, equally reasonable,
with a Very Urgent Motion to Reduce Bond and posting a cash bond in the amount might conceivably opine otherwise."53
of ₱500,000.00 and a supersedeas bond in the amount of ₱1.5 million. We find this Here, the mere filing of a formal charge, to our mind, does not automatically make
to be in substantial compliance with Article 223 of the Labor Code. It is true that the the dismissal valid. Evidence submitted to support the charge should be evaluated
NLRC initially denied the request for reduction of the appeal bond. However, it to see if the degree of proof is met to justify respondents’ termination. The affidavit
eventually allowed its reduction and entertained petitioners’ appeal. We disagree executed by Montegrico simply contained the accusations of Abis that respondents
with the CA in holding that the NLRC acted with grave abuse of discretion as the committed pilferage, which allegations remain uncorroborated. "Unsubstantiated
granting of a motion to reduce appeal bond lies within the sound discretion of the suspicions, accusations, and conclusions of employers do not provide for legal
NLRC upon showing of the reasonableness of the bond tendered and the merits of justification for dismissing employees."54 The other bits of evidence were also
the grounds relied upon.51 Hence, the NLRC did not err or commit grave abuse of inadequate to support the charge of pilferage. The findings made by GASLI’s port
discretion in taking cognizance of petitioners’ appeal before it. captain and internal auditor and the resulting certification executed by De la Rama
Galvez and Gruta were validly dismissed merely showed an overstatement of fuel consumption as revealed in the Engineer’s
on the ground of loss of trust and Voyage Reports. The report of Jade Sea Land Inspection Services only declares the
confidence; there were no valid grounds actual usage and amount of fuel consumed for a particular voyage. There are no
for the dismissal of Arguelles, Batayola, other sufficient evidence to show that respondents participated in the commission
Fresnillo, Noble, Dominico, Nilmao and of a serious misconduct or an offense against their employer.
Austral. As for the second ground for respondents’ termination, which is loss of trust and
We do not, however, agree with the findings of the NLRC that all respondents were confidence, distinction should be made between managerial and rank and file
dismissed for just causes. In termination disputes, the burden of proving that the employees. "[W]ith respect to rank-and-file personnel, loss of trust and confidence,
dismissal is for a just or valid cause rests on the employers. Failure on their part to as ground for valid dismissal, requires proof of involvement in the alleged events x
discharge such burden will render the dismissal illegal.52 x x [while for] managerial employees, the mere existence of a basis for believing
that such employee has breached the trust of his employer would suffice for his
As specified in the termination notice, respondents were dismissed on the grounds
dismissal."55
of (i) serious misconduct, particularly in engaging in pilferage while navigating at
sea, (ii) willful breach of the trust reposed by the company, and (iii) commission of

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In the case before us, Galvez, as the ship captain, is considered a managerial records, it appears Sales was not among those preventively suspended on February
employee since his duties involve the governance, care and management of the 26, 2000. To bolster this fact, petitioners presented the Payroll Journal Register for
vessel.56 Gruta, as chief engineer, is also a managerial employee for he is tasked to the period March 1-15, 200060 showing that Sales was still included in the payroll
take complete charge of the technical operations of the vessel.57 As captain and as and was not among those who were charged with an offense to warrant suspension.
chief engineer, Galvez and Gruta perform functions vested with authority to execute In fact, Sales’ signature in the Semi-Monthly Attendance Report for February 26,
management policies and thereby hold positions of responsibility over the activities 2000 to March 10, 200061 proves that he continued to work as Chief Mate for the
in the vessel. Indeed, their position requires the full trust and confidence of their vessel M/T Dorothy Uno along with a new set of crewmembers. It is likewise worth
employer for they are entrusted with the custody, handling and care of company noting that in the Supplemental Complaint Affidavit of Montegrico, Sales was not
property and exercise authority over it. included in the list of those employees who were accused of having knowledge of
Thus, we find that there is some basis for the loss of confidence reposed on Galvez the alleged pilferage. This only shows that he was never subjected to any accusation
and Gruta. The certification issued by De la Rama stated that there is an or investigation as a prelude to termination. Hence, it would be pointless to
overstatement of fuel consumption. Notably, while respondents made self-serving determine the legality or illegality of his dismissal because, in the first place, he was
allegations that the computation made therein is erroneous, they never questioned not dismissed from employment.
the competence of De la Rama to make such certification. Neither did they question Respondents are not entitled to their
the authenticity and validity of the certification. Thus, the fact that there was an money claims except 13th month pay for
overstatement of fuel consumption and that there was loss of a considerable amount the period of their illegal dismissal,
of diesel fuel oil remained unrefuted. Their failure to account for this loss of company unpaid salaries, salary differentials,
property betrays the trust reposed and expected of them. They had violated double indemnity for violation of the
petitioners’ trust and for which their dismissal is justified on the ground of breach of Minimum Wage Law and attorney’s fees.
confidence. As for the money claims of respondents, we note that petitioners did not bring this
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, proof of issue before us or assign it as error in this Petition. It was raised by the petitioners
involvement in the loss of the vessel’s fuel as well as their participation in the alleged only in their Memorandum of Appeal filed with the NLRC and in their Motion for
theft is required for they are ordinary rank and file employees. And as discussed Reconsideration of the CA’s Decision reinstating the Labor Arbiter’s award.
above, no substantial evidence exists in the records that would establish their Nonetheless, in order to arrive at a complete adjudication of the case and avoid
participation in the offense charged. This renders their dismissal illegal, thus, piecemeal dispensation of justice, we deem it necessary to resolve the validity of
entitling them to reinstatement plus full backwages, inclusive of allowances and respondents’ money claims and to discuss the propriety of the Labor Arbiter’s award.
other benefits, computed from the time of their dismissal up to the time of actual Galvez and Gruta, as managerial employees, are not entitled to their claims for
reinstatement. holiday pay, service incentive leave pay and premium pay for holiday and restday.
No evidence of Sales’ dismissal from employment. Article 82 of the Labor Code specifically excludes managerial employees from the
The rule that the employer bears the burden of proof in illegal dismissal cases finds coverage of the law regarding conditions of employment which include hours of
no application when the employer denies having dismissed the employee.58 The work, weekly rest periods, holidays, service incentive leaves and service charges.62
employee must first establish by substantial evidence the fact of dismissal59 before As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, we cannot
shifting to the employer the burden of proving the validity of such dismissal. sustain the argument that they are classified as field personnel under Article 82 of
We give credence to petitioners’ claim that Sales was not dismissed from the Labor Code who are likewise excluded. Article 82 defines field personnel as
employment. Unlike the other respondents, we find no evidence in the records to referring to "non-agricultural employees who regularly perform their duties away
show that Sales was preventively suspended, that he was summoned and subjected from the principal place of business or branch office of the employer and whose
to any administrative hearing and that he was given termination notice. From the actual hours of work in the field cannot be determined with reasonable certainty."

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They are those who perform functions which "cannot be effectively monitored by years or both such fine and imprisonment at the discretion of the court: Provided,
the employer or his representative."63 Here, respondents, during the entire course That any person convicted under this Act shall not be entitled to the benefits
of their voyage, remain on board the vessel. They are not field personnel inasmuch provided for under the Probation Law.
as they were constantly supervised and under the effective control of the petitioners The employer concerned shall be ordered to pay an amount equivalent to double
through the vessel’s ship captain. the unpaid benefits owing to the employees: Provided, That payment of indemnity
Nevertheless, we cannot grant them their claims for holiday pay, premium pay for shall not absolve the employer from the criminal liability under this Act.
holiday and restday, overtime pay and service incentive leave pay. Respondents do If the violation is committed by a corporation, trust or firm, partnership, association
not dispute petitioners’ assertion that in computing respondents’ salaries, petitioners or any other entity, the penalty of imprisonment shall be imposed upon the entity’s
use 365 days as divisor. In fact, this was the same divisor respondents used in responsible officers including but not limited to, the president, vice president, chief
computing their money claims against petitioners. Hence, they are paid all the days executive officer, general manager, managing director or partner.
of the month, which already include the benefits they claim.64 As for overtime pay
Petitioners’ contention is untenable. First, there is no provision in RA 6727 or RA
and premium pay for holidays and restdays, no evidence was presented to prove
8188 which precludes the Labor Arbiter from imposing the penalty of double
that they rendered work in excess of the regular eight working hours a day or worked
indemnity against employers. Second, Article 217 of the Labor Code gives the Labor
during holidays and restdays. In the absence of such proof, there could be no basis
Arbiter jurisdiction over cases of termination disputes and those cases accompanied
to award these benefits.65
with a claim for reinstatement. Thus, in Bay Haven, Inc. v. Abuan71 the Court held
For the claim of service incentive leave pay, respondents did not specify what year that an allegation of illegal dismissal deprives the
they were not paid such benefit. In addition, records show that they were paid their
Secretary of Labor of jurisdiction over claims to enforce compliance with labor
vacation leave benefits.66 Thus, in accordance with Article 95 of the Labor
standards law.1âwphi1 This was also pronounced in People’s Broadcasting Service
Code,67 respondents can no longer claim service incentive leave pay.
(Bombo Radyo Phils., Inc.) v. Secretary of the Department of Labor and
On the other hand, for failure to effectively refute the awards for 13th month pay Employment,72 wherein we stated that the Secretary of Labor has no jurisdiction in
for the period that respondents were illegally dismissed, unpaid salaries and salary cases where employer-employee relationship has been terminated. We thus sustain
differentials,68 we affirm the grant thereof as computed by the Labor Arbiter. the Labor Arbiter’s award of double indemnity.
Petitioners’ evidence which consist of a mere tabulation69 of the amount of actual
We also sustain the award of attorney’s fees since respondents were compelled to
benefits paid and given to respondents is self-serving as it does not bear the
file a complaint for the recovery of wages and were forced to litigate and incur
signatures of the employees to prove that they had actually received the amounts
expenses.73
stated therein.
The Labor Arbiter’s grant of actual/compensatory, moral and exemplary damages in
Next, we come to the legitimacy of the Labor Arbiter’s authority to impose the
the amount of ₱100,000.00 is, however, incorrect. In order to recover actual or
penalty of double indemnity for violations of the Minimum Wage Law. Petitioners
compensatory damages, it must be capable of proof and must be necessarily proved
argue that the authority to issue compliance orders in relation to underpayment of
with a reasonable degree of certainty.74 While moral damages is given to a
wages is vested exclusively on the Secretary of Labor or the Regional Director and
dismissed employee when the dismissal is attended by bad faith or fraud or
that the Labor Arbiter has no jurisdiction thereover. They cite Section 12 of RA
constitutes an act oppressive to labor, or is done in a manner contrary to good
6727,70 as amended by RA 8188, which provides:
morals, good customs or public policy. Exemplary damages, on the other hand, is
Sec. 12. Any person, corporation, trust, firm, partnership, association or entity which given if the dismissal is effected in a wanton, oppressive or malevolent
refuses or fails to pay any of the prescribed increases or adjustments in the wage manner.75 Here, the Labor Arbiter erred in awarding the damages by lumping
rates made in accordance with this Act shall be punished by a fine [of] not less than actual, moral and exemplary damages. Said damages rest on different jural
Twenty-five thousand pesos (₱25,000) nor more than One hundred thousand pesos foundations and, hence, must be independently identified and justified.76 Also,
(₱100,000) or imprisonment of not less than two (2) years nor more than four (4) there are no competent evidence of actual expenses incurred that would justify the

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award of actual damages. Lastly, respondents were terminated after being accused SO ORDERED.
of the charge of pilferage of the vessel’s fuel oil after examination of the report made
by the vessel’s chief engineer which showed a considerable amount of fuel lost.
Although the dismissal of Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao
and Austral is illegal, based on the circumstances surrounding their dismissal,
petitioners could not have been motivated by bad faith in deciding to terminate their
services.
Lastly, this Court exculpates petitioners Francisco and How from being jointly and
severally liable with GASLI for the illegal dismissal and payment of money claims of
herein respondents. In order to hold them liable, it must first be shown by competent
proof that they have acted with malice and bad faith in directing the corporate
affairs.77 For want of such proof, Francisco and How should not be held liable for
the corporate obligations of GASLI.
WHEREFORE, the Court of Appeals’ Decision dated September 12, 2006 and the
Resolution dated May 23, 2007 in CA-G.R. SP No. 82379 are ANNULLED and SET
ASIDE. Respondents Wilfredo Galvez and Cristito Gruta are hereby DECLARED
dismissed from employment for just cause while respondent Joel Sales was not
dismissed from employment. Respondents Danilo
Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico, Benny
Nilmao, and Jose Austral are DECLARED to have been illegally dismissed; hence,
petitioners are ordered to reinstate them to their former position or its equivalent
without loss of seniority rights and to pay them full backwages, inclusive of
allowances and other benefits, computed from the time of dismissal up to the time
of actual reinstatement, as well as 13th month pay for the period of their illegal
dismissal.
Petitioner Grand Asian Shipping Lines, Inc. is also ordered to pay respondents
Wilfredo Galvez, Danilo Arguelles, Renato Batayola, Patricio Fresnillo, Jovy Noble,
Emilio Dominico, Benny Nilmao and Jose Austral unpaid salaries from February 16
to 29, 2000, as computed by the Labor Arbiter; and to pay respondents Danilo
Arguelles, Renato Batayola, Patricio Fresmillo, Jovy Noble, Emilio Dominico and
Benny Nilmao salary differentials plus double indemnity, as computed by the Labor
Arbiter. Ten percent (10%) of the monetary award should be added as and by way
of attorney’s fees. Interest at the rate of six percent (6%) per annum shall be
imposed on all monetary awards from date of finality of this Decision until full
payment pursuant to Nacar v. Gallery Frames.78
Petitioners Eduardo P. Francisco and William How are absolved from the liability
adjudged against petitioner Grand Asian Shipping Lines, Inc.

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Republic of the Philippines Feliciano Duiguan, Cecilio Remotigue, and other employees receiving P4,200.00 per
SUPREME COURT annum or more.
Manila Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
EN BANC admitted and approved by this Honorable Court, without prejudice to the parties
G.R. No. L-18939 August 31, 1964 adducing other evidence to prove their case not covered by this stipulation of
facts. 1äwphï1.ñët
NATIONAL WATERWORKS and SEWERAGE AUTHORITY, petitioner,
vs. On February 5, 1958, petitioner filed a motion to dismiss the claim for overtime pay
NWSA CONSOLIDATED UNIONS, ET AL., respondents. alleging that respondent Court of Industrial Relations was without jurisdiction to
pass upon the same because, as mere intervenors, the latter cannot raise new issues
not litigated in the principal case, the same not being the lis mota therein involved.
BAUTISTA ANGELO, J.:
To this motion the intervenors filed an opposition. Thereafter, respondent court
Petitioner National Waterworks & Sewerage Authority is a government-owned and issued an order allowing the issue to be litigated. Petitioner's motion to reconsider
controlled corporation created under Republic Act No. 1383, while respondent NWSA having been denied, it filed its answer to the petition for intervention. Finally, on
Consolidated Unions are various labor organizations composed of laborers and January 16, 1961, respondent court rendered its decision stating substantially as
employees of the NAWASA. The other respondents are intervenors Jesus Centeno, follows:
et al., hereinafter referred to as intervenors.
The NAWASA is an agency not performing governmental functions and, therefore,
Acting on a certification of the President of the Philippines, the Court of Industrial is liable to pay additional compensation for work on Sundays and legal holidays
Relations conducted a hearing on December 5, 1957 on the controversy then conformably to Commonwealth Act No. 444, known as the Eight-Hour Labor Law,
existing between petitioner and respondent unions which the latter embodied in a even if said days should be within the staggered five work days authorized by the
"Manifesto" dated December 51, 1957, namely: implementation of the 40-Hour President; the intervenors do not fall within the category of "managerial employees"
Week Law (Republic Act No. 1880); alleged violations of the collective bargaining as contemplated in Republic Act 2377 and so are not exempt from the coverage of
agreement dated December 28, 1956 concerning "distress pay"; minimum wage of the Eight-Hour Labor Law; even those intervenors attached to the General Auditing
P5.25; promotional appointments and filling of vacancies of newly created positions; Office and the Bureau of Public Works come within the purview of Commonwealth
additional compensation for night work; wage increases to some laborers and Act No. 444; the computation followed by NAWASA in computing overtime
employees; and strike duration pay. In addition, respondent unions raised the issue compensation is contrary to Commonwealth Act 444; the undertime of a worker
of whether the 25% additional compensation for Sunday work should be included in should not be set-off against the worker in determining whether the latter has
computing the daily wage and whether, in determining the daily wage of a monthly- rendered service in excess of eight hours for that day; in computing the daily wage
salaried employee, the salary should be divided by 30 days. of those employed on daily basis, the additional 25% compensation for Sunday work
On December 13, 1957, petitioner and respondent unions, conformably to a should be included; the computation used by the NAWASA for monthly salaried
suggestion of the Court of Industrial Relations, submitted a joint stipulation of facts employees to wit, dividing the monthly basic pay by 30 is erroneous; the minimum
on the issues concerning the 40-Hour Week Law, "distress pay," minimum wage of wage awarded by respondent court way back on November 25, 1950 in Case No.
P5.25, filling of vacancies, night compensation, and salary adjustments, reserving 359-V entitled MWD Workers Union v. Metropolitan Water District, applies even to
the right to present evidence on matters not covered therein. On December 4, 1957, those who were employed long after the promulgation of the award and even if their
respondent intervenors filed a petition in intervention on the issue for additional workers are hired only as temporary, emergency and casual workers for a definite
compensation for night work. Later, however, they amended their petition by period and for a particular project; the authority granted to NAWASA by the
including a new demand for overtime pay in favor of Jesus Centeno, Cesar Cabrera, President to stagger the working days of its workers should be limited exclusively to
those specified in the authorization and should not be extended to others who are

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not therein specified; and under the collective bargaining agreement entered into 11. How should the collection bargaining agreement of December 28, 1956 and
between the NAWASA and respondent unions on December 28, 1956, as well as Resolution No. 29, series of 1957 of the Grievance Committee be interpreted and
under Resolution No. 29, series of 1957 of the Grievance Committee, even those construed insofar as the stipulations therein contained relative to "distress pay" is
who work outside the sewerage chambers should be paid 25% additional concerned?; and
compensation as "distress pay." 12. Whether, under the first indorsement of the President of the Philippines dated
Its motion for reconsideration having been denied, NAWASA filed the present August 12, 1957, which authorizes herein petitioner to stagger the working days of
petition for review raising merely questions of law. Succinctly, these questions are: its employees and laborers, those whose services are indispensably continuous
1. Whether NAWASA is performing governmental functions and, therefore, throughout the year may be staggered in the same manner as the pump, valve,
essentially a service agency of the government; filter and chlorine operators, guards, watchmen, medical services, and those
attached to the recreational facilities.
2. Whether NAWASA is a public utility and, therefore, exempted from paying
additional compensation for work on Sundays and legal holidays; DISCUSSION OF THE ISSUES
3. Whether the intervenors are "managerial employees" within the meaning of 1. Is NAWASA an agency that performs governmental functions and, therefore,
Republic Act 2377 and, therefore, not entitled to the benefits of Commonwealth Act essentially a service agency of the government? Petitioner sustains the affirmative
No. 444, as amended; because, under Republic Act No. 1383, it is a public corporation, and such it exist a
an agency independent of the Department of Public Works of our government. It
4. Whether respondent Court of Industrial Relations has jurisdiction to adjudicate
also contends that under the same Act the Public Service Commission does not have
overtime pay considering that this issue was not among the demands of respondent
control, supervision or jurisdiction over it in the fixing of rates concerning of the
union in the principal case but was merely dragged into the case by the intervenors;
operation of the service. It can also incur indebtedness or issue bonds that are
5. Whether those attached to the General Auditing Office and the Bureau of Public exempt from taxation which circumstance implies that it is essentially a government-
Works come within the purview of Commonwealth Act No. 444, as amended; function corporation because it enjoys that attribute of sovereignty. Petitioner
6. In determining whether one has worked in excess of eight hours, whether the likewise invokes the opinion of the Secretary of Justice which holds that the NAWASA
undertime for that day should be set off; being essentially a service agency of the government can be classified as a
7. In computing the daily wage, whether the additional compensation for Sunday corporation performing governmental function.
work should be included; With this contention, we disagree. While under republic Act No. 1383 the NAWASA
8. What is the correct method to determine the equivalent daily wage of a monthly is considered as a public corporation it does not show that it was so created for the
salaried employee, especially in a firm which is a public utility?; government of a portion of the State. It should be borne in mind that there are two
kinds of public corporation, namely, municipal and non-municipal. A municipal
9. Considering that the payment of night compensation is not by virtue of any
corporation in its strict is the body politic constituted by the inhabitants of a city or
statutory provision but emanates only from an award of respondent Court of
town for the purpose of local government thereof. It is the body politic established
Industrial Relations, whether the same can be made retroactive and cover a period
by law particularly as an agency of the State to assist in the civil government of the
prior to the promulgation of the award;
country chiefly to regulate the local and internal affairs of the city or town that is
10. Whether the minimum wage fixed and awarded by respondent Court of incorporated (62 C.J.S., p. 61). Non- municipal corporations, on the other hand, are
Industrial Relations in another case (MWD Workers Union v. MWD CIR Case No. public corporations created as agencies of the State for limited purposes to take
359-V) applies to those employed long after the promulgation thereof, whether hired charge merely of some public or state work other than community government
as temporary, emergency and casual workers for a definite period and for a specific (Elliot, Municipal Corporations, 3rd ed., p. 7; McQuillin, Mun. Corp., 3rd ed., Vol. 1,
project; p. 476).

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The National Waterworks and Sewerage Authority was not created for purposes of within the Philippines, as authorized by the purpose for which the Authority was
local government. It was created for the "purpose of consolidating and centralizing created and reasonably and necessarily required of the transaction of the lawful
all waterworks, sewerage and drainage system in the Philippines under one control business of the same, unless otherwise provided in this Act;
and direction and general supervision." The NAWASA therefore, though a public The business of providing water supply and sewerage service, as this Court held,
corporation, is not a municipal corporation, because it is not an agency of the State "may for all practical purposes be likened to an industry engaged in by coal
to regulate or administer the local affairs of the town, city, or district which is companies, gas companies, power plants, ice plants, and the like" (Metropolitan
incorporated. Water District v. Court of Industrial Relations, et al., L-4488, August 27, 1952).
Moreover, the NAWASA, by its charter, has personality and power separate and These are but mere ministrant functions of government which are aimed at
distinct from the government. It is an independent agency of the government advancing the general interest of society. As such they are optional (Bacani v.
although it ids placed, for administrative purposes, under the Department of Public National Coconut Corporation, supra). And it has been held that "although the state
Works and Communications. It has continuous succession under its corporate name may regulate the service and rates of water plants owned and operated by
and sue and be sued in court. It has corporate power to exercised by its board of municipalities, such property is not employed for governmental purposes and in the
directors; it has its own assets and liabilities; and it may charge rates for its services. ownership operation thereof the municipality acts in its proprietary capacity, free
In Bacani vs. National Coconut Corporation, 53 O.G., 2798, we stated: "To from legislative interference" (1 McQuillin, p. 683). In Mendoza v. De Leon, 33 Phil.,
recapitulate, we may mention that the term 'Government of the Republic of the 508, 509, this Court also held:
Philippines'... refers only to that government entity through which the functions of Municipalities of the Philippine Islands organized under the Municipal Code have
the government are exercised as an attribute of sovereignty, and in this are included both governmental and corporate or business functions. Of the first class are the
those arms through which political authority is made effective whether they be adoption of regulations against fire and disease, preservation of the public peace,
provincial, municipal or other form of local government. These are what we call maintenance of municipal prisons, establishment of primary schools and post-
municipal corporations. They do not include government entities which are given a offices, etc. Of the latter class are the establishment of municipal waterworks for
corporate personality separate and distinct from the government and which are the use of the inhabitants, the construction and maintenance of municipal
governed by the Corporation Law. Their powers, duties and liabilities have to be slaughterhouses, markets, stables, bathing establishments, wharves, ferries, and
determined in the light of that law and of their corporate charter." fisheries. ...
The same conclusion may be reached by considering the powers, functions and On the strength of the foregoing considerations, our conclusions is that the NAWASA
activities of the NAWASA which are enumerated in Section 2, Republic Act No. 1383, is not an agency performing governmental functions. Rather, it performs proprietary
among others, as follows: functions, and as such comes within the coverage of Commonwealth Act No. 444.
(e) To construct, maintain and operate mains pipes, water reservoirs, machinery, 2. We agree with petitioner that the NAWASA is a public utility because its primary
and other waterworks for the purpose of supplying water to the inhabitants of its function is to construct, maintain and operate water reservoirs and waterworks for
zone, both domestic and other purposes; to purify the source of supply, regulate the purpose of supplying water to the inhabitants, as well as consolidate and
the control and use, and prevent the waste of water; and to fix water rates and centralize all water supplies and drainage systems in the Philippines. We likewise
provide for the collection of rents therefor; agree with petitioner that a public utility is exempt from paying additional
(f) To construct, maintain and operate such system of sanitary sewers as may be compensation for work on Sundays and legal holidays conformably to Section 4 of
necessary for the proper sanitation of the cities and towns comprising the Authority Commonwealth Act No. 444 which provides that the prohibition, regarding
and to charge and collect such sums for construction and rates for this service as employment of Sundays and holidays unless an additional sum of 25% of the
may be determined by the Board to be equitable and just; employee's regular remuneration is paid shall not apply to public utilities such as
those supplying gas, electricity, power, water or providing means of transportation
(g) To acquire, purchase, hold, transfer, sell, lease, rent, mortgage, encumber, and
or communication. In other words, the employees and laborers of NAWASA can be
otherwise dispose of real and personal property, including rights and franchises,

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made to work on Sundays and legal holidays without being required to pay them an On the other hand, in the Fair Labor Standards Act of the United States, which was
additional compensation of 25%. taken into account by the sponsors of the present Act in defining the degree of work
It is to be noted, however, that in the case at bar it has been stipulated that prior of a managerial employee, we find interesting the following dissertation of the
to the enactment of Republic Act No. 1880, providing for the implementation of the nature of work o a managerial employee:
40-Hour Week Law, the Metropolitan Water District had been paying 25% additional Decisions have consumed and applied a regulation in substance providing that the
compensation for work on Sundays and legal holidays to its employees and laborers term "professional" employee shall mean any employee ... who is engaged in work
by virtue of Resolution No. 47, series of 1948, of its board of Directors, which predominantly intellectual and varied in character, and requires the consistent
practice was continued by the NAWASA when the latter took over the service. And exercise of discretion and judgment in its performance and is of such a character
in the collective bargaining agreement entered into between the NAWASA and that the output produced or the result accomplished cannot be standardized in
respondent unions it was agreed that all existing benefits enjoyed by the employees relation to a given period of time, and whose hours of work of the same nature as
and laborers prior to its effectivity shall remain in force and shall form part of the that performed by non-exempt employees do not exceed twenty percent of the
agreement, among which certainly is the 25% additional compensation for work on hours worked in the work week by the non-exempt employees, except where such
Sundays and legal holidays therefore enjoyed by said laborers and employees. It work is necessarily incident to work of a professional nature; and which requires,
may, therefore, be said that while under Commonwealth Act No. 444 a public utility first, knowledge of an advanced type in a field of science or learning customarily
is not required to pay additional compensation to its employees and workers for acquired by a prolonged course or specialized intellectual instruction and study, or,
work done on Sundays and legal holidays, there is, however, no prohibition for it to second, predominantly original and creative in character in a recognized field of
pay such additional compensation if it voluntarily agrees to do so. The NAWASA artistic endeavor. Stranger v. Vocafilm Corp., C.C.A. N.Y., 151 F. 2d 894, 162 A.L.R.
committed itself to pay this additional compensation. It must pay not because of 216; Hofer v. Federal Cartridge Corp., D.C. Minn. 71 F. Supp. 243; Aulen v. Triumph
compulsion of law but because of contractual obligation. Explosive, D.C. Md., 58 P. Supp. 4." (56 C.J.S., p. 666).
3. This issue raises the question whether the intervenors are "managerial Under the provisions of the Fair Labor Standards Act 29 U.S.C.A., Section 23 (a) (1),
employees" within the meaning of Republic Act 2377 and as such are not entitled to executive employees are exempted from the statutory requirements as to minimum
the benefits of Commonwealth Act No. 444, as amended. Section 2 of Republic Act wages and overtime pay. ...
2377 provides: Thus the exemption attaches only where it appears that the employee's primary
Sec. 2. This Act shall apply to all persons employed in any industry or occupation, duty consists of the management of the establishment or of a customarily recognized
whether public or private with the exception of farm laborers, laborers who prefer department or subdivision thereof, that he customarily and regularly directs the work
to be paid on piece work basis, managerial employees, outside sales personnel, of other employees therein, that he has the authority to hire or discharge other
domestic servants, persons in the personal service of another and members of the employees or that his suggestions and recommendations as to the hiring or
family of the employer working for him. discharging and as to the advancement and promotion or any other change of status
The term "managerial employee" in this Act shall mean either (a) any person whose of other employees are given particular weight, that he customarily and, regularly
primary duty consists of the management of the establishment in which he is exercises discretionary powers, ... . (56 C.J.S., pp. 666-668.)
employed or of a customarily recognized department or subdivision thereof, or (b) The term "administrative employee" ordinarily applies only to an employee who is
ally officer or member of the managerial staff. compensated for his services at a salary or fee of not less than a prescribed sum per
One of the distinguishing characteristics managerial employee may be known as month, and who regularly and directly assists an employee employed in a bona fide
expressed in the explanatory note of Republic Act No. 2377 is that he is not subject executive or administrative capacity, where such assistance is nonmanual in nature
to the rigid observance of regular office hours. The true worth of his service does and requires the exercise of discretion and independent judgment; or who performs
not depend so much on the time he spends in office but more on the results he under only general supervision, responsible non-manual office or field work, directly
accomplishes. In fact, he is free to go out of office anytime. related to management policies or general business operations, along specialized or

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technical lines' requiring special training experience, or knowledge, and the exercise of the Philippines to the Court of Industrial Relations. The opposition was overruled.
of discretion and independent judgment; ... . (56 C.J.S., p. 671.) This is now assigned as error.
The reason underlying each exemption is in reality apparent. Executive, There is no dispute that the intervenors were in the employ of petitioner when they
administrative and professional workers are not usually employed at hourly wages intervened and that their claim refers to the 8-Hour Labor Law and since this Court
nor is it feasible in the case of such employees to provide a fixed hourly rate of pay has held time and again that disputes that call for the application of the 8-Hour
nor maximum hours of labor, Helena Glendale Perry Co. v. Walling, C.C.A. Ark. 132 Labor Law are within the jurisdiction of the Court of Industrial Relations if they arise
F. 2d 616, 619. (56 C.J.S., p. 664.) while the employer-employee relationship still exists, it is clear that the matter
The philosophy behind the exemption of managerial employees from the 8-Hour subject of intervention comes within the jurisdiction of respondent court.1 The fact
Labor Law is that such workers are not usually employed for every hour of work but that the question of overtime payment is not included in the principal casein the
their compensation is determined considering their special training, experience or sense that it is not one of the items of dispute certified to by the President is of no
knowledge which requires the exercise of discretion and independent judgment, or moment, for it comes within the sound discretion of the Court of Industrial Relations.
perform work related to management policies or general business operations along Moreover, in labor disputes technicalities of procedure should as much as possible
specialized or technical lines. For these workers it is not feasible to provide a fixed be avoided not only in the interest of labor but to avoid multiplicity of action. This
hourly rate of pay or maximum hours of labor. claim has no merit.
The intervenors herein are holding position of responsibility. One of them is the 5. It is claimed that some intervenors are occupying positions in the General Auditing
Secretary of the Board of Directors. Another is the private secretary of the general Office and in the Bureau of Public Works for they are appointed either by the Auditor
manager. Another is a public relations officer, and many other chiefs of divisions or General or by the Secretary of Public Works and, consequently, they are not officers
sections and others are supervisors and overseers. Respondent court, however, after of the NAWASA but of the insular government, and as such are not covered by the
examining carefully their respective functions, duties and responsibilities found that Eight-Hour Labor Law.
their primary duties do not bear any direct relation with the management of the The status of the GAO employees assigned to, and working in, government-
NAWASA, nor do they participate in the formulation of its policies nor in the hiring controlled corporations has already been decided by this Court in National Marketing
and firing of its employees. The chiefs of divisions and sections are given ready Corporation, et al. v. Court of Industrial Relations, et al., L-17804, January 31, 1963.
policies to execute and standard practices to observe for their execution. Hence, it In said case, this Court said:
concludes, they have little freedom of action, as their main function is merely to We agree with appellants that members of the auditing force can not be regarded
carry out the company's orders, plans and policies. as employees of the PRISCO in matters relating to their compensation. They are
To the foregoing comment, we agree. As a matter of fact, they are required to appointed and supervised by the Auditor General, have an independent tenure, and
observe working hours and record their time work and are not free to come and go work subject to his orders and instructions, and not to those of the management of
to their offices, nor move about at their own discretion. They do not, therefore, appellants. Above all, the nature of their functions and duties, for the purpose of
come within the category of "managerial employees" within the meaning of the law. fiscal control of appellants' operations, imperatively demands, as a matter of policy,
4. Petitioner's claim is that the issue of overtime compensation not having been that their positions be completely independent from interference or inducement on
raised in the original case but merely dragged into it by intervenors, respondent the part of the supervised management, in order to assure a maximum of impartiality
court cannot take cognizance thereof under Section 1, Rule 13, of the Rules of Court. in the auditing functions. Both independence and impartiality require that the
employees in question be utterly free from apprehension as to their tenure and from
Intervenors filed a petition for intervention alleging that being employees of
expectancy of benefits resulting from any action of the management, since in either
petitioner who have worked at night since 1954 without having been fully
case there would be an influence at work that could possibly lead, if not to positive
compensated they desire to intervene insofar as the payment of their night work is
malfeasance, to, laxity and indifference that would gradually erode and endanger
concerned. Petitioner opposed the petition on the ground that this matter was not
the critical supervision entrusted to these auditing employees.
in the original case since it was not included in the dispute certified by the President

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The inclusion of their items in the PRISCO budget should be viewed as no more than which is not contemplated by said Act. Respondent court disagrees with this manner
a designation by the national government of the fund or source from which their of computation. It holds that Republic Act 1880 requires that the basic weekly wage
emoluments are to be drawn, and does not signify that they are thereby made and the basic monthly salary should not be diminished notwithstanding the reduction
PRISCO employees. in the number of working days a week. If the automatic increase corresponding to
The GAO employees assigned to the NAWASA are exactly in the same position the salary differential should not be included there would be a diminution of the
regarding their status, compensation and right to overtime pay as the rest of the weekly wage of the laborer concerned. Of course, this should only benefit those who
GAO employees assigned to the defunct PRISCO, and following our ruling in the have been working seven days a week and had been regularly receiving 25%
PRISCO case, we hold that the GAO employees herein are not covered by the 8- additional compensation for Sunday work before the effectivity of the Act.
Hour Labor Law, but by other pertinent laws on the matter. It is evident that Republic Act 1880 does not intend to raise the wages of the
The same thing may be said with regard to the employer of the Bureau of Public employees over what they are actually receiving. Rather, its purpose is to limit the
Works assigned to, and working in, the NAWASA. Their position is the same as that working days in a week to five days, or to 40 hours without however permitting any
of the GAO employees. Therefore, they are not also covered by the 8-Hour Labor reduction in the weekly or daily wage of the compensation which was previously
Law. received. The question then to be determined is: what is meant by weekly or daily
wage? Does the regular wage include differential payments for work on Sundays or
The respondent court, therefore, erred in considering them as employees of the
at nights, or is it the total amount received by the laborer for whatever nature or
NAWASA for the mere reason that they are paid out of its fund and are subject to
concept?
its administration and supervision.
It has been held that for purposes of computing overtime compensation a regular
6. A worker is entitled to overtime pay only for work in actual service beyond eight
wage includes all payments which the parties have agreed shall be received during
hours. If a worker should incur in undertime during his regular daily work, should
the work week, including piece work wages, differential payments for working at
said undertime be deducted in computing his overtime work? Petitioner sustains the
undesirable times, such as at night or on Sundays and holidays, and the cost of
affirmative while respondent unions the negative, and respondent court decided the
board and lodging customarily furnished the employee (Walling v. Yangermah-
dispute in favor of the latter. Hence this error.
Reynolds Hardwook Co., 325 U.S. 419; Walling v. Harischfeger Corp., 325 U.S. 427.)
There is merit in the decision of respondent court that the method used by petitioner The "regular rate" of pay also ordinarily includes incentive bonus or profit-sharing
in offsetting the overtime with the undertime and at the same time charging said payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it
undertime to the accrued leave of the employee is unfair, for under such method was also held that the higher rate for night, Sunday and holiday work is just as much
the employee is made to pay twice for his undertime because his leave is reduced a regular rate as the lower rate for daytime work. The higher rate is merely an
to that extent while he was made to pay for it with work beyond the regular working inducement to accept employment at times which are not as desirable from a
hours. The proper method should be to deduct the undertime from the accrued workman's standpoint (International L. Ass'n v. National Terminals Corp. C.C. Wise,
leave but pay the employee the overtime to which he is entitled. This method also 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals Corp. 139 F. 2d
obviates the irregular schedule that would result if the overtime should be set off 853).
against the undertime for that would place the schedule for working hours
Respondent court, therefore, correctly included such differential pay in computing
dependent on the employee.
the weekly wages of those employees and laborers who worked seven days a week
7. and 8. How is a daily wage of a weekly employee computed in the light of Republic and were continuously receiving 25% Sunday differential for a period of three
Act 1880? months immediately preceding the implementation of Republic Act 1880.
According to petitioner, the daily wage should be computed exclusively on the basic The next issue refers to the method of computing the daily rate of a monthly-salaried
wage, without including the automatic increase of 25% corresponding to the Sunday employee. Petitioner in computing this daily rate divides the monthly basic pay of
differential. To include said Sunday differential would be to increase the basic pay the employee by 30 in accordance with Section 254 of the Revised Administrative

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Code which in part provides that "In making payment for part of a month, the The power of the Court of Industrial Relations to order the payment of compensation
amount to be paid for each day shall be determined by dividing the monthly pay for overtime service prior to the date of the filing of the claim has been recognized
into as many parts as there are days in the particular month." The respondent court by this Court (Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et
disagrees with this method and holds that the way to determine the daily rate of a al., L-9265, April 29, 1957). The same reasons given therein for the retroactivity of
monthly employee is to divide the monthly salary by the actual number of working overtime compensation may also be given for the retroactivity of payment of night
hours in the month. Thus, according to respondent court, Section 8 (g) of Republic compensation, as such reasoning runs along the line already above-stated.
Act No. 1161, as amended by Republic Act 1792, provides that the daily rate of 10. The Court of Industrial Relations in its resolution dated November 25, 1950
compensation is the total regular compensation for the customary number of hours issued in Case No. 359-V entitled MWD Workers Union, et al. v. Metropolitan Water
worked each day. In other words, according to respondent court, the correct District, fixed the following rates of minimum daily wage: P5.25 for those working
computation shall be (a) the monthly salary divided by the actual of working hours in Manila and suburbs; P4.50 for those working in Quezon City; and P4.00 for those
in a month or (b) the regular monthly compensation divided by the number of working in Ipo. Montalban and Balara. It appears that in spite of the notice to
working days in a month. terminate said award filed with the court on December 29, 1953, the Metropolitan
This finding of respondent court should be modified insofar as the employees of the Water District continued paying the above wages and the NAWASA which succeeded
General Auditing Office and of the Bureau of Public Works assigned to work in the it adopted the same rates for sometime. In September, 1955, the NAWASA hired
NAWASA are concerned for, as already stated, they are government employees and the claimants as temporary workers and it is now contended that said rates cannot
should be governed by Section 254 of the Revised Administrative Code. This section apply to these workers.
provides that in making payments for part of a month, the amount to be paid for The Court of Industrial Relations, however, held that the discontinuance of this
each day shall be determined by dividing the monthly pay. Into as many parts as minimum wage rate was improper and ordered the payment of the difference to
there are days in the particular month. With this modification we find correct the said workers from the date the payment of said rates was discontinued, advancing,
finding of the respondent court on this issue. among others, the following reasons: that the resolution of November 25, 1950 is
9. The Court of Industrial Relations awarded an additional 25% night compensation applicable not only to those laborers already in the service but also to those who
to some, workers with retroactive effect, that is, effective even before the may be employed thereafter; the notice of determination of said award given on
presentation of the claim, provided that they had been given authorization by the December 29, 1953 is not legally effective because the same was given without
general manager to perform night work. It is petitioner's theory that since there is hearing and the employer continued paying the minimum wages even after the
no statute requiring payment of additional compensation for night work but it can notice of termination; and there is no showing that the minimum wages violate Civil
only be granted either by the voluntary act of the employer or by an award of the Service Law or the principles underlying the WAPCO.
industrial court under its compulsory arbitration power, such grant should only be We find no valid reason to disagree with the foregoing finding of the Court of
prospective in operation, and not retroactive, as authorized by the court. Industrial Relations considering that the award continued to be valid and effective
It is of common occurrence that a working man who has already rendered night in spite of the notice of termination given by the employer. No good reason is seen
time service takes him a long time before he can muster enough courage to confront why such award should not apply to those who may be employed after its approval
his employer with the demand for payment for it for fear of possible reprisal. It by the court there being nothing therein that may prevent its extension to them.
happens that many months or years are allowed to pass by before he could be made Moreover, the industrial court can at any time during the effectiveness of an award
to present such claim against his employer, and so it is neither fair nor just that he or reopen any question involved therein under Section 17 of Commonwealth Act No.
be deprived of what is due him simply because of his silence for fear of losing the 103, and such is what said court has done when it made the award extensive to the
means of his livelihood. Hence, it is not erroneous for the Court of Industrial new employees, more so when they are similarly situated. To do otherwise would
Relations to make the payment of such night compensation retroactive to the date be to foster discrimination.
when the work was actually performed.

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11. This issue has to do with the meaning of "distress pay." Paragraph 3, Article The solution of the present issue hinges upon the interpretation of paragraph 3,
VIII, of the collective bargaining agreement entered into between the employer and Article VIII of the collective bargaining agreement, copied above, as explained by
respondent unions, provides: Resolution No. 9, and the agreement of November 25, 1957, also copied above,
Because of the peculiar nature of the function of those employees and laborers of which stipulation has to be interpreted as a whole pursuant to Article 1374 of the
the Sewerage Division who actually work in the sewerage chambers, causing Civil Code. As thus interpreted, we find that those who are entitled to the distress
"unusual distress" to them, they shall receive extra compensation equivalent to pay are those employees and laborers who work in the sewerage chambers whether
twenty-five (25%) of their basic wage. they belong to the sewerage division or not, and by sewerage chambers should be
understood to mean as the surroundings where the work is actually done, not
Pursuant to said agreement, a grievance committee was created composed of
necessarily "inside the sewerage chambers." This is clearly inferred from the
representatives of management and labor which adopted the following resolution:
conference held in the Department of Labor on November 25, 1957 where it was
Resolution No. 9 agreed that the compensation should be paid to those who work "in and outside"
Series of 1957 the sewerage chambers in accordance with the terms of Resolution No. 9 of the
BE IT RESOLVED, That the employees and laborers of the Sewerage Division who Grievance Committee. It should be noted that according to said resolution, sewerage
actually work in the sewerage chambers causing unusual distress to them, be paid chambers include "pits, trenches, and other excavations that are necessary to tap
extra compensation equivalent to 25% of their basic wage, as embodied in Article the sewer lines." And the reason given for this extra compensation is the "unusual
VIII, Paragraph 3 of the Collective Bargaining Agreement; PROVIDED, however, that distress" that is caused to the laborers by working in the sewerage chambers in the
any employee who may be required to work actually in the sewerage chambers shall form and extent above-mentioned.
also be paid 25% extra compensation and, PROVIDED FURTHER, that the term It is clear then that all the laborers whether of the sewerage division or not assigned
"sewerage chambers" shall include pits, trenches, and other excavations that are to work in and outside the sewerage chambers and suffer in unusual distress
necessary to tap the sewer line, and PROVIDED FINALLY that this will not prejudice because of the nature of their work are entitled to the extra compensatory. And this
any laborer or employee who may be included in one way or another in the term conclusion is further bolstered by the findings of the industrial court regarding the
"unusual distress" within the purview of Paragraph 3 of Article VIII, of the Collective main activities of the sewerage division.
Bargaining Agreement.
Thus, the Court of Industrial Relations found that the sewerage division has three
And in a conference held between management and labor on November 25, 1957, main activities, to wit: (a) cooperation of the sewerage pumping stations; (b)
the following was agreed upon: "Distress Management agreed to pay effective cleaning and maintenance of sewer mains; and (c) installation and repairs of house
October 1, 1956 25% additional compensation for those who actually work in and sewer connections.
outside sewerage chambers in accordance with Resolution No. 9 of the Grievance
The pump operators and the sewer attendants in the seven pumping stations in
Committee."
Manila, according to the industrial court, suffer unusual distress. The pump
The question that arose in connection with this distress pay is with regard to the operators have to go to the wet pit to see how the cleaning of the screen protecting
meaning of the phrase "who actually work in and outside sewerage chambers." the pump is being performed, and go also to the dry pit abutting the wet pit to make
Petitioner contends that the distress pay should be given only to those who actually repairs in the breakdown of the pumps. Although the operators used to stay near
work inside the sewerage chambers while the union maintains that such pay should the motor which is but a few meters from the pump, they unavoidably smell the foul
be given to all those whose work have to do with the sewerage chambers, whether odor emitting from the pit. Thesewerage attendants go down and work in the wet
inside or outside. The Court of Industrial Relations sustained the latter view holding pit containing sewerage materials in order to clean the screen.
that the distress pay should be given to those who actually work in and outside the
A group assigned to the cleaning and maintenance of the sewer mains which are
sewerage chambers effective October 1, 1956. This view is now disputed by
located in the middle of the streets of Manila is usually composed of a capataz and
petitioner.
four sewerage attendants. These attendants are rotated in going inside the

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manholes, operation of the window glass, bailing out from the main to the manhole In resolving this issue, the industrial court justified the staggering of the work days
and in supplying the water service as necessity demand. These attendants come of those holding positions as pump operators, valve operators, filter operators,
into contact with dirt, stink, and smell, darkness and heat inside and near the sewage chlorine operators, watchmen and guards, and those in the medical service for the
pipes. The capataz goes from one manhole to another seeing to it that the work is reason that the same was made pursuant to the authority granted by the President
properly performed and as such also suffers unusual distress although to a lesser who in the valid exercise of the powers conferred upon him by Republic Act No.
degree. 1880 could prescribe the working days of employees and laborers in government-
The group resigned to the third kind of activity is also usually composed of owned and controlled corporations depending upon the exigencies of the service.
a capataz and four attendants. Their work is to connect sewer pipes from houses to The court, however, stated that the staggering should not apply to the personnel in
the sewer mains and to do this they excavate the trench across the street from the the construction, sewerage, maintenance, machineries and shops because they work
proper line to the sewer main and then they install the pipe after tapping the sewer below 365 days a year and their services are not continuous to require staggering.
main. In the tapping, the sewer pipe is opened and so the sewerage gets out and From this portion of the decision, the petitioner appeals.
fills up the trench and the men have to wade in and work with the sewerage water. Considering that respondent court found that the workers in question work less than
The capataz has to go near the filthy excavations or trenches full of filthy sewerage, 365 days a year and their services are not continuous to require staggering, we see
matter to aid the attendants in making pipe connections, especially when these are no reason to disturb this finding. This is contrary to the very essence of the request
complicated. that the staggering should be made only with regard to those phases of the
It cannot therefore be gainsaid that all there laborers suffer unusual distress. The operation of the NAWASA that have to be attended to continuously for twenty-four
wet pits, trenches, manholes, which are full of sewage matters, are filthy sources of hours without interruption which certainly cannot apply to the workers mentioned
germs and different diseases. They emit foul and filthy odor dangerous to health. in the last part of the decision of the respondent court on the matter.
Those working in such places and exposed directly to the distress of contamination. RECAPITULATION
Premises considered, the decision of the Court of Industrial Relations in this respect In resume, this Court holds:
should be modified in the sense that all employees and laborers, whether or not (1) The NAWASA, though a public corporation, does not perform governmental
they belong to the sewerage division, who actually work in and outside the sewerage functions. It performs proprietary functions, and hence, it is covered by
chambers, should be paid the distress pay or the extra compensation equivalent to Commonwealth Act No. 444;
25% of their basic wage effective October 1, 1956.
(2) The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth
12. On August 6, 1957, the NAWASA requested the President of the Philippines for Act 444 it is not obliged to pay an additional sum of 25% to its laborers for work
exemption from Executive Order No. 251 which prescribes the office hours to be done on Sundays and legal holidays, yet it must pay said additional compensation
observed in government and government-owned or controlled corporations in order by virtue of the contractual obligation it assumed under the collective bargaining
that it could stagger the working hours of its employees and laborers. The request agreement;
is based on the fact that there are essential and indispensable phases in the
(3) The intervenors are not "managerial employees" as defined in Republic Act No.
operation of the NAWASA that are required to be attended to continuously for
2377, hence they are covered by Commonwealth Act No. 444, as amended;
twenty-four hours for the entire seven days of the week without interruption some
of which being the work performed by pump operators, valve operators, filter (4) The Court of Industrial Relations has jurisdiction to adjudicate overtime pay in
operators, chlorine operators, watchmen and guards, and medical personnel. This the case at bar there being an employer-employee relationship existing between
request was granted and, accordingly, the NAWASA staggered the work schedule of intervenors and petitioner;
the employees and laborers performing the activities above-mentioned. Respondent (5) The GAO employees assigned to work in the NAWASA cannot be regarded as
unions protested against this staggering schedule of work and this protest having employees of the NAWASA on matters relating to compensation. They are
been unheeded, they brought the matter to the Court of Industrial Relations. employees of the national government and are not covered by the Eight-Hour Labor

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Law. The same may be said of the employees of the Bureau of Public Works assigned
to work in the NAWASA;
(6) The method used by the NAWASA in off-setting the overtime with the undertime
and at the same time charging said undertime to the accrued leave is unfair;
(7) The differential pay for Sundays is a part of the legal wage. Hence, it was
correctly included in computing the weekly wages of those employees and laborers
who worked seven days a week and were regularly receiving the 25% salary
differential for a period of three months prior to the implementation of Republic Act
1880. This is so even if petitioner is a public utility in view of the contractual
obligation it has assumed on the matter;
(8) In the computation of the daily wages of employees paid by the month distinction
should be made between government employees like the GAO employees and those
who are not. The computation for government employees is governed by Section
254 of the Revised Administrative Code while for others the correct computation is
the monthly salary divided by the actual number of working hours in the month or
the regular monthly compensation divided by the number of working days in the
month;
(9) The Court of Industrial Relations did not err in ordering the payment of night
compensation from the time such services were rendered. The laborer must be
compensated for nighttime work as of the date the same was rendered;
(10) The rates of minimum pay fixed in CIR Case No. 359-V are applicable not only
to those who were already in the service as of the date of the decision but also to
those who were employed subsequent to said date;
(11) All the laborers, whether assigned to the sewerage division or not who are
actually working inside or outside the sewerage chambers are entitled to distress
pay; and
(12) There is no valid reason to disturb the finding of the Court of Industrial Relations
that the work of the personnel in the construction, sewerage, maintenance,
machineries and shops of petitioner is not continous as to require staggering.
CONCLUSION
With the modification indicated in the above resume as elaborated in this decision,
we hereby affirm the decision of respondent court in all other respects, without
pronouncement as to costs.

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Republic of the Philippines 3. With regard to work done during Sundays and holidays, Judge Bautista also
SUPREME COURT decreed that the employees concerned be paid an additional compensation of 25%
Manila as provided for in Commonwealth Act No. 444 even if they had been paid a
EN BANC compensation on monthly salary basis.
G.R. No. L-18353 July 31, 1963 The demands for the application of the Minimum Wage Law to workers paid on
"pakiao" basis, payment of accumulated vacation and sick leave and attorney's fees,
SAN MIGUEL BREWERY, INC., petitioner,
as well as the award of additional separation pay, were either dismissed, denied, or
vs.
set aside.
DEMOCRATIC LABOR ORGANIZATION, ET AL., respondents.
Its motion for reconsideration having been denied by the industrial court en banc,
BAUTISTA ANGELO, J.:
which affirmed the decision of the court a quo with few exceptions, the San Miguel
On January 27, 1955, the Democratic Labor Association filed complaint against the Brewery, Inc. interposed the present petition for review.
San Miguel Brewery, Inc. embodying 12 demands for the betterment of the
Anent the finding of the court a quo, as affirmed by the Court of Industrial Relations,
conditions of employment of its members. The company filed its answer to the
to the effect that outside or field sales personnel are entitled to the benefits of the
complaint specifically denying its material averments and answering the demands
Eight-Hour Labor Law, the pertinent facts are as follows:
point by point. The company asked for the dismissal of the complaint.
After the morning roll call, the employees leave the plant of the company to go on
At the hearing held sometime in September, 1955, the union manifested its desire
their respective sales routes either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m.
to confine its claim to its demands for overtime, night-shift differential pay, and
for beer trucks. They do not have a daily time record. The company never require
attorney's fees, although it was allowed to present evidence on service rendered
them to start their work as outside sales personnel earlier than the above schedule.
during Sundays and holidays, or on its claim for additional separation pay and sick
and vacation leave compensation.1äwphï1.ñët The sales routes are so planned that they can be completed within 8 hours at most,
or that the employees could make their sales on their routes within such number of
After the case had been submitted for decision, Presiding Judge Jose S. Bautista,
hours variable in the sense that sometimes they can be completed in less than 8
who was commissioned to receive the evidence, rendered decision expressing his
hours, sometimes 6 to 7 hours, or more. The moment these outside or field
disposition with regard to the points embodied in the complaint on which evidence
employees leave the plant and while in their sales routes they are on their own, and
was presented. Specifically, the disposition insofar as those points covered by this
often times when the sales are completed, or when making short trip deliveries only,
petition for review are concerned, is as follows:
they go back to the plant, load again, and make another round of sales. These
1. With regard to overtime compensation, Judge Bautista held that the provisions of employees receive monthly salaries and sales commissions in variable amounts. The
the Eight-Hour Labor Law apply to the employees concerned for those working in amount of compensation they receive is uncertain depending upon their individual
the field or engaged in the sale of the company's products outside its premises and efforts or industry. Besides the monthly salary, they are paid sales commission that
consequently they should be paid the extra compensation accorded them by said range from P30, P40, sometimes P60, P70, to sometimes P90, P100 and P109 a
law in addition to the monthly salary and commission earned by them, regardless of month, at the rate of P0.01 to P0.01-½ per case.
the meal allowance given to employees who work up to late at night.
It is contended that since the employees concerned are paid a commission on the
2. As to employees who work at night, Judge Bautista decreed that they be paid sales they make outside of the required 8 hours besides the fixed salary that is paid
their corresponding salary differentials for work done at night prior to January 1, to them, the Court of Industrial Relations erred in ordering that they be paid an
1949 with the present qualification: 25% on the basis of their salary to those who overtime compensation as required by the Eight-Hour Labor Law for the reason that
work from 6:00 to 12:00 p.m., and 75% to those who work from 12:01 to 6:00 in the commission they are paid already takes the place of such overtime
the morning. compensation. Indeed, it is claimed, overtime compensation is an additional pay for
work or services rendered in excess of 8 hours a day by an employee, and if the

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employee is already given extra compensation for labor performed in excess of 8 . . . Moreover, when a fieldman receives a regular monthly salary plus commission
hours a day, he is not covered by the law. His situation, the company contends, can on percentage basis of his sales, it is also the established policy of the Office to
be likened to an employee who is paid on piece-work, "pakiao", or commission basis, consider his commission as payment for the extra time he renders in excess of eight
which is expressly excluded from the operation of the Eight-Hour Labor Law.1 hours, thereby classifying him as if he were on piecework basis, and therefore,
We are in accord with this view, for in our opinion the Eight-Hour Labor Law only technically speaking, he is not subject to the Eight-Hour Labor Law.
has application where an employee or laborer is paid on a monthly or daily basis, or We are, therefore, of the opinion that the industrial court erred in holding that the
is paid a monthly or daily compensation, in which case, if he is made to work beyond Eight-Hour Labor Law applies to the employees composing the outside service force
the requisite period of 8 hours, he should be paid the additional compensation and in ordering that they be paid the corresponding additional compensation.
prescribed by law. This law has no application when the employee or laborer is paid With regard to the claim for night salary differentials, the industrial court found that
on a piece-work, "pakiao", or commission basis, regardless of the time employed. claimants Magno Johnson and Jose Sanchez worked with the respondent company
The philosophy behind this exemption is that his earnings in the form of commission during the period specified by them in their testimony and that watchmen Zoilo
based on the gross receipts of the day. His participation depends upon his industry Illiga, Inocentes Prescillas and Daniel Cayuca rendered night duties once every three
so that the more hours he employs in the work the greater are his gross returns and weeks continuously during the period of the employment and that they were never
the higher his commission. This philosophy is better explained in Jewel Tea Co. v. given any additional compensation aside from their monthly regular salaries. The
Williams, C.C.A. Okla., 118 F. 2d 202, as follows: court found that the company started paying night differentials only in January, 1949
The reasons for excluding an outside salesman are fairly apparent. Such salesman, but never before that time. And so it ordered that the employees concerned be paid
to a greater extent, works individually. There are no restrictions respecting the time 25% additional compensation for those who worked from 6:00 to 12:00 p.m. and
he shall work and he can earn as much or as little, within the range of his ability, as 75% additional compensation for those who worked from 12:01 to 6: 00 in the
his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra morning. It is now contended that this ruling is erroneous because an award for
compensation. He works away from his employer's place of business, is not subject night shift differentials cannot be given retroactive effect but can only be entertained
to the personal supervision of his employer, and his employer has no way of knowing from the date of demand which was on January 27, 1953, citing in support thereof
the number of hours he works per day. our ruling in Earnshaws Docks & Honolulu Iron Works v. The Court of Industrial
True it is that the employees concerned are paid a fixed salary for their month of Relations, et al., L-8896, January 25, 1957.
service, such as Benjamin Sevilla, a salesman, P215; Mariano Ruedas, a truck driver, This ruling, however, has no application here for it appears that before the filing of
P155; Alberto Alpaza and Alejandro Empleo, truck helpers, P125 each, and the petition concerning this claim a similar one had already been filed long ago which
sometimes they work in excess of the required 8-hour period of work, but for their had been the subject of negotiations between the union and the company which
extra work they are paid a commission which is in lieu of the extra compensation to culminated in a strike in 1952. Unfortunately, however, the strike fizzled out and the
which they are entitled. The record shows that these employees during the period strikers were ordered to return to work with the understanding that the claim for
of their employment were paid sales commission ranging from P30, P40, sometimes night salary differentials should be settled in court. It is perhaps for this reason that
P60, P70, to sometimes P90, P100 and P109 a month depending on the volume of the court a quo granted this claim in spite of the objection of the company to the
their sales and their rate of commission per case. And so, insofar is the extra work contrary.
they perform, they can be considered as employees paid on piece work, "pakiao", The remaining point to be determined refers to the claim for pay for Sundays and
or commission basis. The Department of Labor, called upon to implement, the Eight- holidays for service performed by some claimants who were watchmen or security
Hour Labor Law, is of this opinion when on December 9, 1957 it made the ruling on guards. It is contended that these employees are not entitled to extra pay for work
a query submitted to it, thru the Director of the Bureau of Labor Standards, to the done during these days because they are paid on a monthly basis and are given one
effect that field sales personnel receiving regular monthly salaries, plus commission, day off which may take the place of the work they may perform either on Sunday
are not subject to the Eight-Hour Labor Law. Thus, on this point, said official stated: or any holiday.

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We disagree with this claim because it runs counter to law. Section 4 of


Commonwealth Act No. 444 expressly provides that no person, firm or corporation
may compel an employee or laborer to work during Sundays and legal holidays
unless he is paid an additional sum of 25% of his regular compensation.
This proviso is mandatory, regardless of the nature of compensation. The only
exception is with regard to public utilities who perform some public service.
WHEREFORE, the decision of the industrial court is hereby modified as follows: the
award with regard to extra work performed by those employed in the outside or
field sales force is set aside. The rest of the decision insofar as work performed on
Sundays and holidays covering watchmen and security guards, as well as the award
for night salary differentials, is affirmed. No costs.

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Republic of the Philippines compensable, has become the law of the case which can no longer be disturbed
SUPREME COURT without doing violence to the time- honored principle of res judicata.
Manila WHEREFORE, in view of the foregoing considerations, the instant complaint should
SECOND DIVISION therefore be, as it is hereby, DISMISSED.
G.R. No. 78210 February 28, 1989 SO ORDERED. (Rollo, p. 58)
TEOFILO ARICA, DANILO BERNABE, MELQUIADES DOHINO, ABONDIO On December 12, 1986, after considering the appeal memorandum of complainant
OMERTA, GIL TANGIHAN, SAMUEL LABAJO, NESTOR NORBE, RODOLFO and the opposition of respondents, the First Division of public respondent NLRC
CONCEPCION, RICARDO RICHA, RODOLFO NENO, ALBERTO BALATRO, composed of Acting Presiding Commissioner Franklin Drilon, Commissioner Conrado
BENJAMIN JUMAMOY, FERMIN DAAROL, JOVENAL ENRIQUEZ, OSCAR Maglaya, Commissioner Rosario D. Encarnacion as Members, promulgated its
BASAL, RAMON ACENA, JAIME BUGTAY, and 561 OTHERS, HEREIN Resolution, upholding the Labor Arbiters’ decision. The Resolution’s dispositive
REPRESENTED BY KORONADO B. APUZEN, petitioners, portion reads:
vs. ‘Surely, the customary functions referred to in the above- quoted provision of the
NATIONAL LABOR RELATIONS COMMISSION, HONORABLE FRANKLIN agreement includes the long-standing practice and institutionalized non-
DRILON, HONORABLE CONRADO B. MAGLAYA, HONORABLE ROSARIO B. compensable assembly time. This, in effect, estopped complainants from pursuing
ENCARNACION, and STANDARD (PHILIPPINES) FRUIT this case.
CORPORATION, respondents. The Commission cannot ignore these hard facts, and we are constrained to uphold
DECISION the dismissal and closure of the case.
PARAS, J.: WHEREFORE, let the appeal be, as it is hereby dismissed, for lack of merit.
This is a petition for review on certiorari of the decision of the National Labor SO ORDERED. (Annex “H”, Rollo, pp. 86-89).
Relations Commission dated December 12, 1986 in NLRC Case No. 2327 MC-XI-84 On January 15, 1987, petitioners filed a Motion for Reconsideration which was
entitled Teofilo Arica et al. vs. Standard (Phil.) Fruits Corporation (STANFILCO) opposed by private respondent (Annex “I”, Rollo, pp. 90-91; Annex J Rollo, pp. 92-
which affirmed the decision of Labor Arbiter Pedro C. Ramos, NLRC, Special Task 96).
Force, Regional Arbitration Branch No. XI, Davao City dismissing the claim of Public respondent NLRC, on January 30, 1987, issued a resolution denying for lack
petitioners. of merit petitioners’ motion for reconsideration (Annex “K”, Rollo, p. 97).
This case stemmed from a complaint filed on April 9, 1984 against private Hence this petition for review on certiorari filed on May 7, 1987.
respondent Stanfilco for assembly time, moral damages and attorney’s fees, with
The Court in the resolution of May 4, 1988 gave due course to this petition.
the aforementioned Regional Arbitration Branch No. XI, Davao City.
Petitioners assign the following issues:
After the submission by the parties of their respective position papers (Annex “C”,
pp. 30-40; Annex “D”, Rollo, pp. 41-50), Labor Arbiter Pedro C. Ramos rendered a 1) Whether or not the 30-minute activity of the petitioners before the scheduled
decision dated October 9, 1985 (Annex ‘E’, Rollo, pp. 51-58) in favor of private working time is compensable under the Labor Code.
respondent STANFILCO, holding that: 2) Whether or not res judicata applies when the facts obtaining in the prior case and
Given these facts and circumstances, we cannot but agree with respondent that the in the case at bar are significantly different from each other in that there is merit in
pronouncement in that earlier case, i.e. the thirty-minute assembly time long the case at bar.
practiced cannot be considered waiting time or work time and, therefore, not 3) Whether or not there is finality in the decision of Secretary Ople in view of the
compromise agreement novating it and the withdrawal of the appeal.

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4) Whether or not estoppel and laches lie in decisions for the enforcement of labor Agreement cannot be considered as waiting time within the purview of Section 5,
standards (Rollo, p. 10). Rule I, Book III of the Rules and Regulations Implementing the Labor Code. …
Petitioners contend that the preliminary activities as workers of respondents Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice
STANFILCO in the assembly area is compensable as working time (from 5:30 to 6:00 of the employees, and the proceedings attendant thereto are not infected with
o’clock in the morning) since these preliminary activities are necessarily and primarily complexities as to deprive the workers the time to attend to other personal pursuits.
for private respondent’s benefit. They are not new employees as to require the company to deliver long briefings
These preliminary activities of the workers are as follows: regarding their respective work assignments. Their houses are situated right on the
area where the farm are located, such that after the roll call, which does not
(a) First there is the roll call. This is followed by getting their individual work
necessarily require the personal presence, they can go back to their houses to attend
assignments from the foreman.
to some chores. In short, they are not subject to the absolute control of the company
(b) Thereafter, they are individually required to accomplish the Laborer’s Daily during this period, otherwise, their failure to report in the assembly time would
Accomplishment Report during which they are often made to explain about their justify the company to impose disciplinary measures. The CBA does not contain any
reported accomplishment the following day. provision to this effect; the record is also bare of any proof on this point. This,
(c) Then they go to the stockroom to get the working materials, tools and therefore, demonstrates the indubitable fact that the thirty (30)-minute assembly
equipment. time was not primarily intended for the interests of the employer, but ultimately for
(d) Lastly, they travel to the field bringing with them their tools, equipment and the employees to indicate their availability or non-availability for work during every
materials. working day. (Annex “E”, Rollo, p. 57).

All these activities take 30 minutes to accomplish (Rollo, Petition, p. 11). Accordingly, the issues are reduced to the sole question as to whether public
respondent National Labor Relations Commission committed a grave abuse of
Contrary to this contention, respondent avers that the instant complaint is not new,
discretion in its resolution of December 17, 1986.
the very same claim having been brought against herein respondent by the same
group of rank and file employees in the case of Associated Labor Union and Standard The facts on which this decision was predicated continue to be the facts of the case
Fruit Corporation, NLRC Case No. 26-LS-XI-76 which was filed way back April 27, in this questioned resolution of the National Labor Relations Commission.
1976 when ALU was the bargaining agent of respondent’s rank and file workers. The It is clear that herein petitioners are merely reiterating the very same claim which
said case involved a claim for “waiting time”, as the complainants purportedly were they filed through the ALU and which records show had already long been
required to assemble at a designated area at least 30 minutes prior to the start of considered terminated and closed by this Court in G.R. No. L-48510. Therefore, the
their scheduled working hours “to ascertain the work force available for the day by NLRC cannot be faulted for ruling that petitioners’ claim is already barred by res
means of a roll call, for the purpose of assignment or reassignment of employees to judicata.
such areas in the plantation where they are most needed.” (Rollo, pp. 64- 65) Be that as it may, petitioners’ claim that there was a change in the factual scenario
Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the aforecited which are “substantial changes in the facts” makes respondent firm now liable for
case (Associated Labor Union vs. Standard (Phil.) Fruit Corporation, NLRC Case No. the same claim they earlier filed against respondent which was dismissed. It is thus
26-LS-XI-76 where significant findings of facts and conclusions had already been axiomatic that the non-compensability of the claim having been earlier established,
made on the matter. constitute the controlling legal rule or decision between the parties and remains to
The Minister of Labor held: be the law of the case making this petition without merit.

The thirty (30)-minute assembly time long practiced and institutionalized by mutual As aptly observed by the Solicitor General that this petition is “clearly violative of the
consent of the parties under Article IV, Section 3, of the Collective Bargaining familiar principle of res judicata. There will be no end to this controversy if the light
of the Minister of Labor’s decision dated May 12, 1979 that had long acquired the
character of finality and which already resolved that petitioners’ thirty (30)-minute

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assembly time is not compensable, the same issue can be re-litigated again.” (Rollo,
p. 183)
This Court has held:
In this connection account should be taken of the cognate principle that res
judicata operates to bar not only the relitigation in a subsequent action of the issues
squarely raised, passed upon and adjudicated in the first suit, but also the ventilation
in said subsequent suit of any other issue which could have been raised in the first
but was not. The law provides that ‘the judgment or order is, with respect to the
matter directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in interest by
title subsequent to the commencement of the action .. litigating for the same thing
and in the same capacity.’ So, even if new causes of action are asserted in the
second action (e.g. fraud, deceit, undue machinations in connection with their
execution of the convenio de transaccion), this would not preclude the operation of
the doctrine of res judicata. Those issues are also barred, even if not passed upon
in the first. They could have been, but were not, there raised. (Vda. de Buncio v.
Estate of the late Anita de Leon, 156 SCRA 352 [1987]).
Moreover, as a rule, the findings of facts of quasi-judicial agencies which have
acquired expertise because their jurisdiction is confined to specific matters are
accorded not only respect but at times even finality if such findings are supported
by substantial evidence (Special Events & Central Shipping Office Workers Union v.
San Miguel Corporation, 122 SCRA 557 [1983]; Dangan v. NLRC, 127 SCRA 706
[1984]; Phil. Labor Alliance Council v. Bureau of Labor Relations, 75 SCRA 162
[1977]; Mamerto v. Inciong, 118 SCRA 265 (1982]; National Federation of Labor
Union (NAFLU) v. Ople, 143 SCRA 124 [1986]; Edi-Staff Builders International, Inc.
v. Leogardo, Jr., 152 SCRA 453 [1987]; Asiaworld Publishing House, Inc. v. Ople,
152 SCRA 219 [1987]).
The records show that the Labor Arbiters’ decision dated October 9, 1985 (Annex
“E”, Petition) pointed out in detail the basis of his findings and conclusions, and no
cogent reason can be found to disturb these findings nor of those of the National
Labor Relations Commission which affirmed the same.
PREMISES CONSIDERED, the petition is DISMISSED for lack of merit and the
decision of the National Labor Relations Commission is AFFIRMED.
SO ORDERED.

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institutions in the country. As such, these breaks cannot be considered as absences


within the meaning of the law for which deductions may be made from monthly
allowances. The "No work, no pay" principle does not apply in the instant case. The
petitioner’s members received their regular salaries during this period. It is clear from
the aforequoted provision of law that it contemplates a "no work" situation where the
employees voluntarily absent themselves. Petitioners, in the case at bar, certainly do
not, ad voluntatem, absent themselves during semestral breaks. Rather, they are
constrained to take mandatory leave from work. For this they cannot be faulted nor
FIRST DIVISION
can they be begrudged that which is due them under the law.

[G.R. No. L-63122. February 20, 1984.]


3. ID.; ID.; ID.; EMPLOYEES WHETHER PAID ON MONTHLY OR DAILY BASIS
ENTITLED TO DAILY LIVING ALLOWANCE WHEN PAID THEIR BASIC WAGE. —
UNIVERSITY OF PANGASINAN FACULTY UNION, Petitioner, v. UNIVERSITY
Respondent’s contention that the "factor receiving a salary alone should not be the
OF PANGASINAN And NATIONAL LABOR RELATIONS
basis of receiving ECOLA", is likewise, without merit. Particular attention is brought to
COMMISSION, Respondents.
the Implementing Rules and Regulations of Wage Order No. 1 to wit: "Sec. 5.
Allowance for Unworked Days. — a) All covered employees whether paid on a monthly
SYLLABUS or daily basis shall be entitled to their daily living allowance when they are paid their
basic.." . .

1. LABOR AND SOCIAL LEGISLATIONS; LABOR LAWS; PRESIDENTIAL DECREES ON


4. ID.; ID.; ID.; PURPOSE OF THE LAW. — The legal principles of "No work, no pay;
EMERGENCY COST OF LIVING ALLOWANCE; REQUISITES FOR ENTITLEMENT TO
No pay, no ECOLA" must necessarily give way to the purpose of the law to augment
ALLOWANCES PROVIDED THEREUNDER. — The various Presidential Decrees on
the income of employees to enable them to cope with the harsh living conditions
ECOLAs to wit: PD’s 1614, 1634, 1678 and 1713, provide on "Allowances of Fulltime
brought about by inflation; and to protect employees and their wages against the
Employees . . ." that "Employees shall be paid in full the required monthly allowance
ravages brought by these conditions. Significantly, it is the commitment of the State
regardless of the number of their regular working days if they incur no absences during
to protect labor and to provide means by which the difficulties faced by the working
the month. If they incur absences without pay, the amounts corresponding to the
force may best be alleviated.
absences may be deducted from the monthly allowance . . ." ; and on "Leave of
Absence Without Pay", that "All covered employees shall be entitled to the allowance
5. ID.; ID.; ID.; PRESIDENTIAL DECREE 451; CONSTRUED. — Respondent overlooks
provided herein when they are on leave of absence with pay."cralaw virtua1aw library
the elemental principle of statutory construction that the general statements in the
whereas clauses cannot prevail over the specific or particular statements in the law
2. ID.; ID.; ID.; "NO WORK, NO PAY" PRINCIPLE NOT APPLICABLE’ CASE AT BAR. —
itself which define or limit the purposes of the legislation or proscribe certain acts.
It is beyond dispute that the petitioner’s members are full-time employees receiving
True, the whereas clauses of PD 451 provide for salary and or wage increase and other
their monthly salaries irrespective of the number of working days or teaching hours in
benefits, however, the same do not delineate the source of such funds and it is only in
a month. However, they find themselves in a most peculiar situation whereby they are
Section 3 which provides for the limitations wherein the intention of the framers of the
forced to go on leave during semestral breaks. These semestral breaks are in the
law is clearly outlined. The law is clear. The sixty (60%) percent incremental proceeds
nature of work interruptions beyond the employees’ control. The duration of the
from the tuition increase are to be devoted entirely to wage or salary increases which
semestral break varies from year to year dependent on a variety of circumstances
means increases in basic salary. The law cannot be construed to include allowances
affecting at times only the private respondent but at other times all educational
which are benefits over and above the basic salaries of the employees.

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regular monthly salaries. However, from November 7 to December 5, during the


6. REMEDIAL LAW; APPEALS; FINDINGS OF FACT OF NATIONAL LABOR RELATIONS semestral break, they were not paid their ECOLA. The private respondent claims that
COMMISSION ARE BINDING WHEN FULLY SUBSTANTIATED BY EVIDENCE. — As the teachers are not entitled thereto because the semestral break is not an integral
evidenced by the payrolls submitted by them during the period September 16 to part of the school year and there being no actual services rendered by the teachers
September 30, 1981, the faculty members have been paid for the extra loads. We during said period, the principle of "No work, no pay" applies.
agree with the respondents that this issue involves a question of fact properly within
the competence of the respondent NLRC to pass upon. The findings of fact of the During the same school year (1981-1982), the private respondent was authorized by
respondent Commission are binding on this Court there being no indication of their the Ministry of Education and Culture to collect, as it did collect, from its students a
being unsubstantiated by evidence. fifteen (15%) percent increase of tuition fees. Petitioner’s members demanded a salary
increase effective the first semester of said schoolyear to be taken from the sixty (60%)
percent incremental proceeds of the increased tuition fees. Private respondent refused,
DECISION
compelling the petitioner to include said demand in the complaint filed in the case at
GUTIERREZ, JR., J.: bar. While the complaint was pending in the arbitration branch, the private respondent
This is a petition for review on certiorari pursuant to Rule 65 of the Rules of Court to granted an across-the-board salary increase of 5.86%. Nonetheless, the petitioner is
annul and to set aside the decision of respondent National Labor Relations Commission still pursuing full distribution of the 60% of the incremental proceeds as mandated by
(NLRC) dated October 25, 1982, dismissing the appeal of petitioner in NLRC Case No. the Presidential Decree No. 451.
RBI-47-82, entitled "University of Pangasinan Faculty Union, complainant, versus
University of Pangasinan, Respondent." chanrobles law library : red Aside from their regular loads, some of petitioner’s members were given extra loads to
handle during the same 1981-1982 schoolyear. Some of them had extra loads to teach
Petitioner is a labor union composed of faculty members of the respondent University on September 21, 1981, but they were unable to teach as classes in all levels
of Pangasinan, an educational institution duly organized and existing by virtue of the throughout the country were suspended, although said days was proclaimed by the
laws of the Philippines. President of the Philippines as a working holiday. Those with extra loads to teach on
said day claimed they were not paid their salaries for those loads, but the private
On December 18, 1981, the petitioner, through its President, Miss Consuelo Abad, filed respondent claims otherwise.
a complaint against the private respondent with the Arbitration Branch of the NLRC,
Dagupan District Office, Dagupan City. The complaint seeks: (a) the payment of The issue to be resolved in the case at bar are the following:
Emergency Cost of Living Allowances (ECOLA) for November 7 to December 5, 1981, I
a semestral break; (b) salary increases from the sixty (60%) percent of the incremental
proceeds of increased tuition fees; and (c) payment of salaries for suspended extra "WHETHER OR NOT PETITIONER’S MEMBERS ARE ENTITLED TO ECOLA DURING THE
loads. SEMESTRAL BREAK FROM NOVEMBER 7 TO DECEMBER 5, 1981 OF THE 1981-82
SCHOOL YEAR.
The petitioner’s members are full-time professors, instructors, and teachers of
II
respondent University. The teachers in the college level teach for a normal duration of
ten (10) months a school year, divided into two (2) semesters of five (5) months each,
excluding the two (2) months summer vacation. These teachers are paid their salaries
on a regular monthly basis. "WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF INCREASED TUITION
FEES SHALL BE DEVOTED EXCLUSIVELY TO SALARY INCREASE,
In November and December, 1981, the petitioner’s members were fully paid their

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III the Implementing Rules and Regulations of Wage Order No. 1 to wit.

"WHETHER OR NOT ALLEGED PAYMENT OF SALARIES FOR EXTRA LOADS ON SECTION 5. Allowance for Unworked Days. —
SEPTEMBER 21, 1981 WAS PROVEN BY SUBSTANTIAL EVIDENCE."cralaw virtua1aw
library "a) All covered employees whether paid on a monthly or daily basis shall be entitled to
their daily living allowance when they are paid their basic wage."cralaw virtua1aw
Anent the first issue, the various Presidential Decrees on ECOLAs to wit: PD’s 1614, library
1634, 1678 and 1713, provide on "Allowances of Fulltime Employees . . ." that x x x
"Employees shall be paid in full the required monthly allowance regardless of the
number of their regular working days if they incur no absences during the month. If
This provision, at once refutes the above contention. It is evident that the intention of
they incur absences without pay, the amounts corresponding to the absences may be
the law is to grant ECOLA upon the payment of basic wages. Hence, we have the
deducted from the monthly allowance . . ." ; and on "Leave of Absence Without Pay",
principle of "No pay, no ECOLA" the converse of which finds application in the case at
that "All covered employees shall be entitled to the allowance provided herein when
bar. Petitioners cannot be considered to be on leave without pay so as not to be entitled
they are on leave of absence with pay."cralaw virtua1aw library
to ECOLA, for, as earlier stated, the petitioners were paid their wages in full for the
months of November and December of 1981, notwithstanding the intervening
It is beyond dispute that the petitioner’s members are full-time employees receiving
semestral break. This, in itself, is a tacit recognition of the rather unusual state of
their monthly salaries irrespective of the number of working days or teaching hours in
affairs in which teachers find themselves. Although said to be on forced leave,
a month. However, they find themselves in a most peculiar situation whereby they are
professors and teachers are, nevertheless, burdened with the task of working during a
forced to go on leave during semestral breaks. These semestral breaks are in the
period of time supposedly available for rest and private matters. There are papers to
nature of work interruptions beyond the employees’ control. The duration of the
correct, students to evaluate, deadlines to meet, and periods within which to submit
semestral break varies from year to year dependent on a variety of circumstances
grading reports. Although they may be considered by the respondent to be on leave,
affecting at times only the private respondent but at other times all educational
the semestral break could not be used effectively for the teacher’s own purposes for
institutions in the country. As such, these breaks cannot be considered as absences
the nature of a teacher’s job imposes upon him further duties which must be done
within the meaning of the law for which deductions may be made from monthly
during the said period of time. Learning is a never ending process. Teachers and
allowances. The "No work, no pay" principle does not apply in the instant case. The
professors must keep abreast of developments all the time. Teachers cannot also wait
petitioner’s members received their regular salaries during this period. It is clear from
for the opening of the next semester to begin their work. Arduous preparation is
the aforequoted provision of law that it contemplates a "no work" situation where the
necessary for the delicate task of educating our children. Teaching involves not only
employees voluntarily absent themselves. Petitioners, in the case at bar, certainly do
an application of skill and an imparting of knowledge, but a responsibility which entails
not, ad voluntatem, absent themselves during semestral breaks. Rather, they are
self dedication and sacrifice. The task of teaching ends not with the perceptible efforts
constrained to take mandatory leave from work. For this they cannot be faulted nor
of the petitioner’s members but goes beyond the classroom: a continuum where only
can they be begrudged that which is due them under the law. To a certain extent, the
the visible labor is relieved by academic intermissions. It would be most unfair for the
private respondent can specify dates when no classes would be held. Surely, it was not
private respondent to consider these teachers as employees on leave without pay to
the intention of the framers of the law to allow employers to withhold employee
suit its purposes and, yet, in the meantime, continue availing of their services as they
benefits by the simple expedient of unilaterally imposing "no work" days and
prepare for the next semester or complete all of the last semester’s requirements.
consequently avoiding compliance with the mandate of the law for those days.
Furthermore, we may also by analogy apply the principle enunciated in the Omnibus
Rules Implementing the Labor Code to wit:
Respondent’s contention that "the fact of receiving a salary alone should not be the
basis of receiving ECOLA", is, likewise, without merit. Particular attention is brought to

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and return to investments: Provided, That in no case shall the return to investments
Sec. 4. Principles in Determining Hours Worked. — The following general principles exceed twelve (12%) per centum of the incremental proceeds; . . ."
shall govern in determining whether the time spent by an employee is considered hours x x x
worked for purposes of this Rule:
x x x This Court had the occasion to rule squarely on this point in the very recent case
entitled, University of the East v. University of the East Faculty Association, 117 SCRA
"(d) The time during which an employee is inactive by reason of interruptions in his 554. We held that:
work beyond his control shall be considered time either if the imminence of the
resumption of work requires the employee’s presence at the place of work or if the
"In effect, the problem posed before Us is whether or not the reference in Section 3(a)
interval is too brief to be utilized effectively and gainfully in the employee’s own
to ‘increase in salaries or wages of the faculty and all other employees of the schools
interest." (Emphasis supplied).
concerned’ as the first purpose to which the incremental proceeds from authorized
increases to tuition fees may be devoted, may be construed to include allowances and
The petitioner’s members in the case at bar, are exactly in such a situation. The
benefits. In the negative, which is the position of respondents, it would follow that
semestral break scheduled is an interruption beyond petitioner’s control and it cannot
such allowances must be taken in resources of the school not derived from tuition fees.
be used "effectively nor gainfully in the employee’s interest’. Thus, the semestral break
may also be considered as "hours worked." For this, the teachers are paid regular
"Without delving into the factual issue of whether or not there could be any such other
salaries and, for this, they should be entitled to ECOLA. Not only do the teachers
resources, We note that among the items of second purpose stated in provision in
continue to work during this short recess but much less do they cease to live for which
question is return in investment. And the law provides only for a maximum, not a
the cost of living allowance is intended. The legal principles of "No work, no pay; No
minimum. In other words, the schools may get a return to investment of not more than
pay, no ECOLA" must necessarily give way to the purpose of the law to augment the
12%, but if circumstances warrant, there is no minimum fixed by law which they should
income of employees to enable them to cope with the harsh living conditions brought
get.
about by inflation; and to protect employees and their wages against the ravages
brought by these conditions. Significantly, it is the commitment of the State to protect
"On this predicate, We are of the considered view that, if the school happen to have
labor and to provide means by which the difficulties faced by the working force may
no other resources to grant allowances and benefits, either mandated by law or
best be alleviated. To submit to the respondents’ interpretation of the no work, no pay
secured by collective bargaining, such allowances and benefits should be charged
policy is to defeat this noble purpose. The Constitution and the law mandate otherwise.
against the return to investments referred to in the second purpose stated in Section
3(a) of P.D. 451."
With regard to the second issue, we are called upon to interpret and apply Section 3
of Presidential Decree 451 to wit:chanrob1es virtual 1aw library
Private respondent argues that the above interpretation "disregarded the intention and
SEC. 3. Limitations. — The increase in tuition or other school fees or other charges as spirit of the law" which intention is clear from the "whereas" clauses as follows:
well as the new fees or charges authorized under the next preceding section shall be
subject to the following conditions: "It is imperative that private educational institutions upgrade classroom instruction . .
. provide salary and or wage increases and other benefits . . ."
"(a) That no increase in tuition or other school fees or charges shall be approved unless
sixty (60%) per centum of the proceeds is allocated for increase in salaries or wages Respondent further contends that PD 451 was issued to alleviate the sad plight of
of the members of the faculty and all other employees of the school concerned, and private schools, their personnel and all those directly or indirectly on school income as
the balance for institutional development, student assistance and extension services, the decree was aimed —

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". . . to upgrade classroom instruction by improving their facilities and bring competent not so delimited. Besides, ROI is a return or profit over and above the operating
teachers in all levels of education, provide salary and or wage increases and other expenditures of the university, and still, over and above the profits it may have had
benefits to their teaching, administrative, and other personnel to keep up with the prior to the tuition increase. The earning capacities of private educational institutions
increasing cost of living." (Emphasis supplied) are not dependent on the increases in tuition fees allowed by P.D. 451. Accommodation
of the allowances required by law require wise and prudent management of all the
Respondent overlooks the elemental principle of statutory construction that the general university resources together with the incremental proceeds of tuition increases.
statements in the whereas clauses cannot prevail over the specific or particular Cognizance should be taken of the fact that the private respondent had, before PD
statements in the law itself which define or limit the purposes of the legislation or 451, managed to grant all allowances required by law. It cannot now claim that it could
proscribe certain acts. True, the whereas clauses of PD 451 provide for salary and or not afford the same, considering that additional funds are even granted them by the
wage increase and other benefits, however, the same do not delineate the source of law in question. We find no compelling reason, therefore, to deviate from our previous
such funds and it is only in Section 3 which provides for the limitations wherein the ruling in the University of the East case even as we take the second hard look at the
intention of the framers of the law is clearly outlined. The law is clear. The sixty (60%) decision requested by the private Respondent. This case was decided in 1982 when
percent incremental proceeds from the tuition increase are to be devoted entirely to PDs 1614, 1634, 1678, and 1713 which are also the various Presidential Decrees on
wage or salary increases which means increases in basic salary. The law cannot be ECOLA were already in force. PD 451 was interpreted in the light of these subsequent
construed to include allowances which are benefits over and above the basic salaries legislations which bear upon but do not modify nor amend, the same. We need not go
of the employees. To charge such benefits to the 60% incremental proceeds would be beyond the ruling in the University of the East case.
to reduce the increase in basic salary provided by law, an increase intended also to
help the teachers and other workers tide themselves and their families over these Coming now to the third issue, the respondents are of the considered view that as
difficult economic times. evidenced by the payrolls submitted by them during the period September 16 to
September 30, 1981, the faculty members have been paid for the extra loads. We
This Court is not guilty of usurpation of legislative functions as claimed by the agree with the respondents that this issue involves a question of fact properly within
respondents. We expressed the opinion in the University of the East case that benefits the competence of the respondent NLRC to pass upon. The findings of fact of the
mandated by law and collective bargaining may be charged to the 12% return on respondent Commission are binding on this Court there being no indication of their
investments within the 40% incremental proceeds of tuition increase. As admitted by being unsubstantiated by evidence. We find no grave abuse in the findings of
respondent, we merely made this statement as a suggestion in answer to the respondent NLRC on this matter to warrant reversal. Assuming arguendo, however,
respondent’s query as to where then, under the law, can such benefits be charged. We that the petitioners have not been paid for these extra loads, they are not entitled to
were merely interpreting the meaning of the law within the confines of its provisions. payment following the principles of "No work, no pay." This time, the rule applies.
The law provides that 60% should go to wage increases and 40% to institutional Involved herein is a matter different from the payment of ECOLA under the first issue.
developments, student assistance, extension services, and return on investments We are now concerned with extra, not regular loads for which the petitioners are paid
(ROI). Under the law, the last item ROI has flexibility sufficient to accommodate other regular salaries every month regardless of the number of working days or hours in
purposes of the law and the needs of the university. ROI is not set aside for any one such a month. Extra loads should be paid for only when actually performed by the
purpose of the university such as profits or returns on investments. The amount may employee. Compensation is based, therefore, on actual work done and on the number
be used to comply with other duties and obligations imposed by law which the of hours and days spent over and beyond their regular hours of duty. Since there was
university exercising managerial prerogatives finds cannot under present no work on September 21, 1981, it would now be unfair to grant petitioner’s demand
circumstances, be funded by other revenue sources. It may be applied to any other for extra wages on that day.
collateral purpose of the university or invested elsewhere. Hence, the framers of the
law intended this portion of the increases in tuition fees to be a general fund to cover Finally, disposing of the respondent’s charge of petitioner’s lack of legal capacity to
up for the university’s miscellaneous expenses and, precisely, for this reason, it was sue, suffice it to say that this question can no longer be raised initially on appeal

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or certiorari. It is quite belated for the private respondent to question the personality
of the petitioner after it had dealt with it as a party in the proceedings below.
Furthermore, it was not disputed that the petitioner is a duly registered labor
organization and as such has the legal capacity to sue and be sued. Registration grants
it the rights of a legitimate labor organization and recognition by the respondent
University is not necessary for it to institute this action in behalf of its members to
protect their interests and obtain relief from grievances. The issues raised by the
petitioner do not involve pure money claims but are more intricately intertwined with
conditions of employment.

WHEREFORE the petition for certiorari is hereby GRANTED. The private respondent is
ordered to pay its regular fulltime teachers/employees emergency cost of living
allowances for the semestral break from November 7 to December 5, 1981 and the
undistributed balance of the sixty (60%) percent incremental proceeds from tuition
increases for the same schoolyear as outlined above. The respondent Commission is
sustained insofar as it DENIED the payment of salaries for the suspended extra loads
on September 21, 1981.

SO ORDERED.

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Republic of the Philippines Excluded from the above schedule are the Warehouse and QA employees who are
SUPREME COURT on shifting. Their work and break time schedules will be maintained as it is now.1
Baguio City Since private respondent felt affected adversely by the change in the work schedule
FIRST DIVISION and discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of
G.R. No. 119205 April 15, 1998 its members a complaint with the Labor Arbiter for unfair labor practice,
discrimination and evasion of liability pursuant to the resolution of this Court in Sime
SIME DARBY PILIPINAS, INC. petitioner,
Darby International Tire Co., Inc. v. NLRC.2 However, the Labor Arbiter dismissed
vs.
the complaint on the ground that the change in the work schedule and the
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME
elimination of the 30-minute paid lunch break of the factory workers constituted a
DARBY SALARIED EMPLOYEES ASSOCIATION (ALU-TUCP), respondents.
valid exercise of management prerogative and that the new work schedule, break
BELLOSILLO, J.: time and one-hour lunch break did not have the effect of diminishing the benefits
Is the act of management in revising the work schedule of its employees and granted to factory workers as the working time did not exceed eight (8) hours.
discarding their paid lunch break constitutive of unfair labor practice? The Labor Arbiter further held that the factory workers would be unjustly enriched
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive if they continued to be paid during their lunch break even if they were no longer "on
tires, tubes and other rubber products. Sime Darby Salaried Employees Association call" or required to work during the break. He also ruled that the decision in the
(ALU-TUCP), private respondent, is an association of monthly salaried employees of earlier Sime Darby case3 was not applicable to the instant case because the former
petitioner at its Marikina factory. Prior to the present controversy, all company involved discrimination of certain employees who were not paid for their 30-minute
factory workers in Marikina including members of private respondent union worked lunch break while the rest of the factory workers were paid; hence, this Court
from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch break. ordered that the discriminated employees be similarly paid the additional
On 14 August 1992 petitioner issued a memorandum to all factory-based employees compensation for their lunch break.
advising all its monthly salaried employees in its Marikina Tire Plant, except those in Private respondent appealed to respondent National Labor Relations Commission
the Warehouse and Quality Assurance Department working on shifts, a change in (NLRC) which sustained the Labor Arbiter and dismissed the appeal.4 However,
work schedule effective 14 September 1992 thus — upon motion for reconsideration by private respondent, the NLRC, this time with two
TO: ALL FACTORY-BASED EMPLOYEES (2) new commissioners replacing those who earlier retired, reversed its earlier
decision of 20 April 1994 as well as the decision of the Labor Arbiter.5 The NLRC
RE: NEW WORK SCHEDULE
considered the decision of this Court in the Sime Darby case of 1990 as the law of
Effective Monday, September 14, 1992, the new work schedule of the factory office the case wherein petitioner was ordered to pay "the money value of these covered
will be as follows: employees deprived of lunch and/or working time breaks." The public respondent
7:45 A.M. — 4:45 P.M. (Monday to Friday) declared that the new work schedule deprived the employees of the benefits of a
7:45 A.M. — 11:45 A.M. (Saturday). time-honored company practice of providing its employees a 30-minute paid lunch
break resulting in an unjust diminution of company privileges prohibited by Art. 100
Coffee break time will be ten minutes only anytime between:
of the Labor Code, as amended. Hence, this petition alleging that public respondent
9:30 A.M. — 10:30 A.M. and committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a)
2:30 P.M. — 3:30 P.M. in ruling that petitioner committed unfair labor practice in the implementation of the
Lunch break will be between: change in the work schedule of its employees from 7:45 a.m. — 3:45 p.m. to 7:45
a.m. — 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in
12:00 NN — 1:00 P.M. (Monday to Friday).
holding that there was diminution of benefits when the 30-minute paid lunch break

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was eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming management deems necessary to increase production, constitutes unfair labor
the decision of the NLRC, petitioner was authorized to discontinue the practice of practice. As shown by the records, the change effected by management with regard
having a 30-minute paid lunch break should it decide to do so; and, (d) in ignoring to working time is made to apply to all factory employees engaged in the same line
petitioner's inherent management prerogative of determining and fixing the work of work whether or not they are members of private respondent union. Hence, it
schedule of its employees which is expressly recognized in the collective bargaining cannot be said that the new scheme adopted by management prejudices the right
agreement between petitioner and private respondent. of private respondent to self-organization.
The Office of the Solicitor General filed in a lieu of comment a manifestation and Every business enterprise endeavors to increase its profits. In the process, it may
motion recommending that the petitioner be granted, alleging that the 14 August devise means to attain that goal. Even as the law is solicitous of the welfare of the
1992 memorandum which contained the new work schedule was not discriminatory employees, it must also protect the right of an employer to exercise what are clearly
of the union members nor did it constitute unfair labor practice on the part of management prerogatives.10 Thus, management is free to regulate, according to
petitioner. its own discretion and judgment, all aspects of employment, including hiring, work
We agree, hence, we sustain petitioner. The right to fix the work schedules of the assignments, working methods, time, place and manner of work, processes to be
employees rests principally on their employer. In the instant case petitioner, as the followed, supervision of workers, working regulations, transfer of employees, work
employer, cites as reason for the adjustment the efficient conduct of its business supervision, lay off of workers and discipline, dismissal and recall of
operations and its improved production.6 It rationalizes that while the old work workers.11 Further, management retains the prerogative, whenever exigencies of
schedule included a 30-minute paid lunch break, the employees could be called upon the service so require, to change the working hours of its employees. So long as
to do jobs during that period as they were "on call." Even if denominated as lunch such prerogative is exercised in good faith for the advancement of the employer's
break, this period could very well be considered as working time because the factory interest and not for the purpose of defeating or circumventing the rights of the
employees were required to work if necessary and were paid accordingly for employees under special laws or under valid agreements, this Court will uphold such
working. With the new work schedule, the employees are now given a one-hour exercise.12
lunch break without any interruption from their employer. For a full one-hour While the Constitution is committed to the policy of social justice and the protection
undisturbed lunch break, the employees can freely and effectively use this hour not of the working class, it should not be supposed that every dispute will be
only for eating but also for their rest and comfort which are conducive to more automatically decided in favor of labor. Management also has rights which, as such,
efficiency and better performance in their work. Since the employees are no longer are entitled to respect and enforcement in the interest of simple fair play. Although
required to work during this one-hour lunch break, there is no more need for them this Court has inclined more often than not toward the worker and has upheld his
to be compensated for this period. We agree with the Labor Arbiter that the new cause in his conflicts with the employer, such favoritism has not blinded the Court
work schedule fully complies with the daily work period of eight (8) hours without to the rule that justice is in every case for the deserving, to be dispensed in the light
violating the Labor Code.7 Besides, the new schedule applies to all employees in the of the established facts and the applicable law and doctrine.13
factory similarly situated whether they are union members or not.8 WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor
Consequently, it was grave abuse of discretion for public respondent to equate the Relations Commission dated 29 November 1994 is SET ASIDE and the decision of
earlier Sime Darby case9 with the facts obtaining in this case. That ruling in the the Labor Arbiter dated 26 November 1993 dismissing the complaint against
former case is not applicable here. The issue in that case involved the matter of petitioner for unfair labor practice is AFFIRMED.
granting lunch breaks to certain employees while depriving the other employees of SO ORDERED.
such breaks. This Court affirmed in that case the NLRC's finding that such act of
management was discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of
employees but only the issue of whether the change of work schedule, which

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Republic of the Philippines authority to order the company to adopt a straight 8-hour shift inclusive of meal
SUPREME COURT period.
Manila On the issue of jurisdiction over claims for overtime pay, we have since definitely
EN BANC ruled in a recent decisions that the Industrial Court may properly take cognizance of
G.R. No. L-16275 February 23, 1961 such cases if, at the time of the petition, the complainants were still in the service
of the employer, or, having been separated from such service, should ask for
PAN AMERICAN WORLD AIRWAYS SYSTEM (PHILIPPINES), petitioner,
reinstatement; otherwise, such claims should be brought before the regular courts
vs.
(NASSCO v. CIR, et al., L-13888, April 29, 1960; FRISCO v. CIR, et al., L-13806, May
PAN AMERICAN EMPLOYEES ASSOCIATION, respondent.
23, 1960; Board of Liquidators, et al. vs. CIR, et al., L-15485, May 23, 1960; Sta.
REYES, J.B.L., J.: Cecilia, Sawmills Co. vs. CIR, L-14254 & L-14255, May 27, 1960; Ajax International
Appeal by certiorari from the decision of the Court of Industrial Relations in Case Corp. v. Seguritan, L-16038, October 25, 1960; Sampaguita Pictures, Inc., et al. vs.
No. 1055-V dated October 10, 1959, and its resolution en banc denying the motion CIR, L-16404, October 25, 1960). Since, in the instant case there is no question that
for reconsideration filed by the petitioner herein. the employees claiming overtime compensation were still in the service of the
The dispositive portion of the appealed decision reads: . company when the case was filed, the jurisdiction of the Court of Industrial Relations
cannot be assailed. In fact, since it is not pretended that, thereafter, the
WHEREFORE, the Court orders the Chief of the Examining Division or his
complainants were discharged or otherwise terminated their relationship with the
representative to compute the overtime compensation due the aforesaid fourteen
company for any reason, all of said complainants could still be with the company up
(14) aircraft mechanic and the two employees from the Communication Department
to the present.
based on the time sheet of said employees from February 23 1952 up to and
including July 15, 1958 and to submit his report within 30 days for further disposition Petitioner herein claims that the one-hour meal period should not be considered as
by the Court; and the company shall show to the Court Examiner such time sheets overtime work (after deducting 15 minutes), because the evidence showed that
an other documents that may be necessary in the aforesaid computation; and two complainants could rest completely, and were not in any manner under the control
(2) representatives for the company and two (2) representatives for the union shall of the company during that period. The court below found, on the contrary, that
be chosen to help the Court Examiner in said computation. during the so called meal period, the mechanics were required to stand by for
emergency work; that if they happened not to be available when called, they were
The company is also ordered to permanently adopt the straight 8-hour shift inclusive
reprimanded by the leadman; that as in fact it happened on many occasions, the
of meal period which is mutually beneficial to the parties.
mechanics had been called from their meals or told to hurry Employees Association
SO ORDERED. up eating to perform work during this period. Far from being unsupported by
In this appeal, petitioner advances five proposition which, briefly, are as follows: (1) substantial evidence, the record clearly confirms the above factual findings of the
the Industrial Court has no jurisdiction to order the payment of overtime Industrial Court.
compensation, it being a mere monetary claim cognizable by regular courts; (2) the Similarly, this Court is satisfied with the finding that there was no agreement to
finding that the one-hour meal period should be considered overtime work withdraw Case No. 1055-V in consideration of the wage increases obtained by the,
(deducting 15 minutes as time allotted for eating) is not supported by substantial union and set forth in the Collective Bargaining Agreement Exhibit "A". As reasoned
evidence; (3) the court below had no authority to delegate its judicial functions by out by the court below, such alleged agreement would have been incorporated in
ordering the Chief of the Examining Division or his representative to compute the the contract if it existed. The fact that the union filed a motion to dismiss without
overtime pay; (4) the finding that there was no agreement to withdraw Case No. prejudice, after the Collective Bargaining Contract had been signed, did not
1055-V in consideration of the wage increases in the Collective Bargaining Contract necessarily mean that it had agreed to withdraw the case in consideration of the
(Exh. "A") is not supported by substantial evidence; and (5) the court below had no wage increases. The motion itself (Annex "B", Petition for Certiorari) was expressly

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based on an understanding that the company would "formulate a schedule of work


which shall be in consonance with C. A. 444". All in all, there is substantial evidence
in the record to support the finding of the court below that no such agreement was
made.
It is next contended that in ordering the Chief of the Examining Division or his
representative to compute the compensation due, the Industrial Court unduly
delegated its judicial functions and thereby rendered an incomplete decision. We do
not believe so. Computation of the overtime pay involves a mechanical function, at
most. And the report would still have to be submitted to the Industrial Court for its
approval, by the very terms of the order itself. That there was no specification of
the amount of overtime pay in the decision did not make it incomplete, since this
matter would necessarily be made clear enough in the implementation of the
decision (see Malate Taxicab & Garage, Inc. vs. CIR, et al., L-8718, May 11, 1956).
The Industrial Court's order for permanent adoption of a straight 8-hour shift
including the meal period was but a consequence of its finding that the meal hour
was not one of complete rest, but was actually a work hour, since for its duration,
the laborers had to be on ready call. Of course, if the Company practices in this
regard should be modified to afford the mechanics a real rest during that hour (f.
ex., by installing an entirely different emergency crew, or any similar arrangement),
then the modification of this part of the decision may be sought from the Court
below. As things now stand, we see no warrant for altering the decision.
The judgment appealed from is affirmed. Costs against appellant.

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G.R. No. L-15422 November 30, 1962 In support of its contention that the CIR lost its jurisdiction over claims for overtime
NATIONAL DEVELOPMENT COMPANY, petitioner, pay upon the enactment of the Industrial Peace Act (Republic Act No. 875),
vs. petitioner cites a number of decisions of this Court. On May 23, 1960, however, We
COURT OF INDUSTRIAL RELATIONS and NATIONAL TEXTILE WORKERS ruled in Price Stabilization Corp. v. Court of Industrial Relations, et al., G.R. No. L-
UNION, respondents. 13206, that
REGALA, J.: Analyzing these cases, the underlying principle, it will be noted in all of them, though
not stated in express terms, is that where the employer-employee relationship is still
This is a case for review from the Court of Industrial Relations. The pertinent facts
existing or is sought to be reestablished because of its wrongful severance, (as
are the following:
where the employee seeks reinstatement) the Court of Industrial Relations has
At the National Development Co., a government-owned and controlled corporation, jurisdiction over all claims arising out of, or in connection with the employment, such
there were four shifts of work. One shift was from 8 a.m. to 4 p.m., while the three as those related to the Minimum Wage Law and the Eight-Hour Labor Law. After the
other shifts were from 6 a.m. to 2 p.m; then from 2 p.m. to 10 p.m. and, finally, termination of their relationship and no reinstatement is sought, such claims become
from 10 p.m. to 6 a.m. In each shift, there was a one-hour mealtime period, to wit: mere money claims, and come within the jurisdiction of the regular courts,
From (1) 11 a.m. to 12 noon for those working between 6 a.m. and 2 p.m. and from
We are aware that in 2 cases, some statements implying a different view have been
(2) 7 p.m. to 8 p.m. for those working between 2 p.m. and 10 p.m.
made, but we now hold and declare the principle set forth in the next preceding
The records disclose that although there was a one-hour mealtime, petitioner paragraph as the one governing all cases of this nature.
nevertheless credited the workers with eight hours of work for each shift and paid
This has been the constant doctrine of this Court since May 23, 1960.1
them for the same number of hours. However, since 1953, whenever workers in one
shift were required to continue working until the next shift, petitioner instead of A more recent definition of the jurisdiction of the CIR is found in Campos, et al. v.
crediting them with eight hours of overtime work, has been paying them for six Manila Railroad Co., et al., G.R. No. L-17905, May 25, 1962, in which We held that,
hours only, petitioner that the two hours corresponding to the mealtime periods for such jurisdiction to come into play, the following requisites must be complied
should not be included in computing compensation. On the other hand, respondent with: (a) there must exist between the parties an employer-employee relationship
National Textile Workers Union whose members are employed at the NDC, or the claimant must seek his reinstatement; and (b) the controversy must relate to
maintained the opposite view and asked the Court of Industrial Relations to order a case certified by the President to the CIR as one involving national interest, or
the payment of additional overtime pay corresponding to the mealtime periods. must arise either under the Eight-Hour Labor Law, or under the Minimum Wage Law.
In default of any of these circumstances, the claim becomes a mere money claim
After hearing, Judge Arsenio I. Martinez of the CIR issued an order dated March 19,
that comes under the jurisdiction of the regular courts. Here, petitioner does not
1959, holding that mealtime should be counted in the determination of overtime
deny the existence of an employer-employee relationship between it and the
work and accordingly ordered petitioner to pay P101,407.96 by way of overtime
members of the union. Neither is there any question that the claim is based on the
compensation. Petitioner filed a motion for reconsideration but the same was
Eight-Hour Labor Law (Com. Act No. 444, as amended). We therefore rule in favor
dismissed by the CIR en banc on the ground that petitioner failed to furnish the
of the jurisdiction of the CIR over the present claim.
union a copy of its motion.
The other issue raised in the appeal is whether or not, on the basis of the evidence,
Thereafter, petitioner appealed to this Court, contending, first, that the CIR has no
the mealtime breaks should be considered working time under the following
jurisdiction over claims for overtime compensation and, secondary that the CIR did
provision of the law;
not make "a correct appraisal of the facts, in the light of the evidence" in holding
that mealtime periods should be included in overtime work because workers could The legal working day for any person employed by another shall be of not more
not leave their places of work and rest completely during those hours. than eight hours daily. When the work is not continuous, the time during which the
laborer is not working and can leave his working place and can rest completely shall
not be counted. (Sec. 1, Com. Act No. 444, as amended. Emphasis ours.)

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It will be noted that, under the law, the idle time that an employee may spend for Petitioner gives an eight-hour credit to its employees who work a single shift say
resting and during which he may leave the spot or place of work though not the from 6 a.m. to 2 p.m. Why cannot it credit them sixteen hours should they work in
premises2 of his employer, is not counted as working time only where the work is two shifts?
broken or is not continuous. There is another reason why this appeal should dismissed and that is that there is
The determination as to whether work is continuous or not is mainly one of fact no decision by the CIR en bancfrom which petitioner can appeal to this Court. As
which We shall not review as long as the same is supported by evidence. (Sec. 15, already indicated above, the records show that petitioner's motion for
Com. Act No. 103, as amended, Philippine Newspaper Guild v. Evening News, Inc., reconsideration of the order of March 19, 1959 was dismissed by the CIR en
86 Phil. 303). banc because of petitioner's failure to serve a copy of the same on the union.
That is why We brushed aside petitioner's contention in one case that workers who Section 15 of the rules of the CIR, in relation to Section 1 of Commonwealth Act No.
worked under a 6 a.m. to 6 p.m. schedule had enough "free time" and therefore 103, states:
should not be credited with four hours of overtime and held that the finding of the The movant shall file the motion (for reconsideration), in six copies within five (5)
CIR "that claimants herein rendered services to the Company from 6:00 a.m. to 6:00 days from the date on which he receives notice of the order or decision, object of
p.m. including Sundays and holidays, . . . implies either that they were not allowed the motion for reconsideration, the same to be verified under oath with respect to
to leave the spot of their working place, or that they could not rest completely" the correctness of the allegations of fact, and serving a copy thereof personally or
(Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et al., G.R. No. L- by registered mail, on the adverse party. The latter may file an answer, in six (6)
9265, April 29, 1957). copies, duly verified under oath. (Emphasis ours.)
Indeed, it has been said that no general rule can be laid down is to what constitutes In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428, May 24, 1955), We
compensable work, rather the question is one of fact depending upon particular sustained the dismissal of a motion for reconsideration filed outside of the period
circumstances, to be determined by the controverted in cases. (31 Am. Jurisdiction provided in the rules of the CIR. A motion for reconsideration, a copy of which has
Sec. 626 pp. 878.) not been served on the adverse party as required by the rules, stands on the same
In this case, the CIR's finding that work in the petitioner company was continuous footing. For "in the very nature of things, a motion for reconsideration against a
and did not permit employees and laborers to rest completely is not without basis ruling or decision by one Judge is in effect an appeal to the Court of Industrial
in evidence and following our earlier rulings, shall not disturb the same. Thus, the Relations, en banc," the purpose being "to substitute the decision or order of a
CIR found: collegiate court for the ruling or decision of any judge." The provision in
While it may be correct to say that it is well-high impossible for an employee to work Commonwealth Act No. 103 authorizing the presentation of a motion for
while he is eating, yet under Section 1 of Com. Act No. 444 such a time for eating reconsideration of a decision or order of the judge to the CIR, en banc and not direct
can be segregated or deducted from his work, if the same is continuous and the appeal therefore to this Court, is also in accord with the principal of exhaustion of
employee can leave his working place rest completely. The time cards show that the administrative remedies before resort can be made to this Court. (Broce, et al., v.
work was continuous and without interruption. There is also the evidence adduced The Court of Industrial Relations, et al., G.R. No. L-12367, October 29, 1959).
by the petitioner that the pertinent employees can freely leave their working place Petitioner's motion for reconsideration having been dismissed for its failure to serve
nor rest completely. There is furthermore the aspect that during the period covered a copy of the same on the union, there is no decision of the CIR en banc that
the computation the work was on a 24-hour basis and previously stated divided into petitioner can bring to this Court for review.
shifts. WHEREFORE, the order of March 19, 1959 and the resolution of April 27, 1959 are
From these facts, the CIR correctly concluded that work in petitioner company was hereby affirmed and the appeal is dismissed, without pronouncement as to costs.
continuous and therefore the mealtime breaks should be counted as working time
for purposes of overtime compensation.

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G.R. No. L-30452 September 30, 1982 3. The third ground was denied, holding that there still exists the employer-
MERCURY DRUG CO., INC., petitioner, employee relationship between Nardo Dayao and the management.
vs. 4. With respect to the fourth ground, the Court held that on the basis of section 7-
NARDO DAYAO, ET AL., respondents, A of C.A. No. 444, as amended by R.A. No. 1993, 'it can be safely said that,
GUTIERREZ, JR., J.: counting backward the three (3) year prescriptive period from the date of the filing
This is a petition for review on certiorari of the decision of the Court of Industrial of the instant petition - March 20, 1964 - all-of petitioners' claims have not yet
Relations dated March 30, 1968 in Case No. 1926-V and the Resolution of the Court prescribed.'
en banc dated July 6, 1968 denying two separate motions for reconsideration filed 5. In so far as respondent union's motion is concerned, the Court held that
by petitioners and respondents. 'petitioners' cause of action against the respondent Association should be dismissed
The factual background of Case No. 1926-V is summarized by the respondent Court without prejudice to the refiling of the same as an unfair labor practice case.'
of Industrial Relations as follows: Only the respondent management moved to reconsider the Order of March 24, 1965
This is a verified petition dated March 17, 1964 which was subsequently amended but the same was denied by the Court en banc in a resolution dated August 26,
on July 31, 1964 filed by Nardo Dayao and 70 others against Mercury Drug Co., Inc., 1965. Respondent submitted an answer to the amended petition which was
and/or Mariano Que, President & General Manager, and Mercury Drug Co., Inc., subsequently amended on January 6, 1966, containing some admissions and some
Employees Association praying, with respect to respondent corporation and its denials of the material averments of the amended petition. By way of affirmative
president and general manager: 1) payment of their unpaid back wages for work and special defenses,, respondents alleged that petitioners have no cause of action
done on Sundays and legal holidays plus 25c/c additional compensation from date against Mariano Que because their employer respondent Mercury Drug Company,
of their employment up to June 30, 1962; 2) payment of extra compensation on Inc., an existing corporation which has a separate and distinct personality from its
work done at night; 3) reinstatement of Januario Referente and Oscar Echalar to incorporators stockholders and/or officer, that the company being a service
their former positions with back salaries; and, as against the respondent union, for enterprise is excluded from the coverage of the Eight Hour Labor Law, as amended;
its disestablishment and the refund of all monies it had collected from petitioners. that no court has the power to set wages, rates of pay, hours of employment, or
other conditions of employment to the extent of disregarding an agreement thereon
In separate motions, respondent management and respondent union move to
between the respondent company and the petitioners, and of fixing night differential
dismiss, the first on the ground that:
wages; that the petitioners were fully paid for services rendered under the terms
I. The petition states no cause of action. and conditions of the individual contracts of employment; that the petition having
II. This Court has no jurisdiction over the subject of the claims of petitioners Januario been verified by only three of the petitioners without showing that the others
Referente and Oscar Echalar. authorized the inclusion of their names as petitioners does not confer jurisdiction to
III. There is another action pending between the same parties, namely, Mercury this Court; that there is no employer-employee relationship between management
Drug Co., Inc., and/or Mariano Que and Nardo Dayao. and petitioner Nardo Dayao and that his claim has been released and/or barred by
another action and that petitioners' claims accuring before March 20, 1961 have
while on the other hand, the second alleges that this Court has no jurisdiction over
prescribed." (Annex "P", pp. 110-112, rollo).
the acts complained of against the respondent union.
After hearing on the merits, the respondent court rendered its decision. The
For reasons stated in the Order dated March 24, 1965, two Court resolved the
dispositive portion of the March 30, 1968 decision reads:
motions to dismiss, as follows:
IN VIEW OF THE FOREGOING, the Court hereby resolves that:
1. Ground No. 1 of management's motion to dismiss was denied for lack of merit.
2. Its second ground was found meritorious and, accordingly Januario Referente and
Oscar Echalar were dropped as party petitioners in this case.

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1. The claim of the petitioners for payment of back wages correspoding to the first II
four hours work rendered on every other Sunday and first four hours on legal RESPONDENT CIR ERRED IN SUSTAINING PRIVATE RESPONDENTS' CLAIMS FOR
holidays should be denied for lack of merit. NIGHTTIME WORK PREMIUMS NOT ONLY BECAUSE OF THE DECLARED POLICY ON
2. Respondent Mercury Drug Company, Inc.. is hereby ordered to pay the sixty- nine COLLECTIVE BARGAINING FREEDOM EX. PRESSED IN REPUBLIC ACT 875 AND THE
(69) petitioners: EXPRESS PROHIBITION IN SECTION 7 OF SAID STATUTE, BUT ALSO BECAUSE OF
(a) An additional sum equivalent to 25% of their respective basic or regular salaries THE WAIVER OF SAID CLAIMS AND THE TOTAL ABSENCE OF EVIDENCE THEREON.
for services rendered on Sundays and legal holidays during the period from March III
20. 1961 up to June 30, 1962; and RESPONDENT CIR ERRED IN MAKING AWARDS IN FAVOR OF THE PRIVATE
(b) Another additional sum or premium equivalent to 25% of their respective basic RESPONDENTS WHO NEITHER GAVE EVIDENCE NOR EVEN APPEARED TO SHOW
or regular salaries for nighttime services rendered from March 20, 1961 up to June THEIR INTEREST.
30, 1962. Three issues are discussed by the petitioner in its first assignment of error. The first
3. Petitioners' petition to convert them to monthly employees should be, as it is issue refers to its allegation that the respondent Court erred in declaring the
hereby, denied for lack of merit. contracts of employment null and void and contrary to law. This allegation is
4. Respondent Mariano Que, being an officer and acted only as an agent in behalf premised upon the following finding of the respondent court:
of the respondent corporation, should be absolved from the money claims of herein But the Court finds merit in the claim for the payment of additional compensation
petitioners whose employer, according to the pleadings and evidence, is the Mercury for work done on Sundays and holidays. While an employer may compel his
Drug Company,, Inc. employees to perform service on such days, the law nevertheless imposes upon him
To expedite the computation of the money award, the Chief Court Examiner or his the obligation to pay his employees at least 25% additional of their basic or regular
authorized representative is hereby directed to proceed to the office of the salaries.
respondent corporation at Bambang Street, Sta. Cruz, Manila, the latter to make No person, firm or corporation, business establishment or place of center of labor
available to said employee its records, like time records, payrolls and other pertinent shall compel an employee or laborer to work during Sundays and legal holidays
papers, and compute the money claims awarded in this decision and, upon the unless he is paid an additional sum of at least twenty-five per centum of his regular
completion thereof, to submit his report as soon as possible for further disposition remuneration: PROVIDED, HOWEVER, That this prohibition shall not apply to public
of the Court. utilities performing some public service such as supplying gas, electricity, power,
Not satisfied with the decision, the respondents filed a motion for its reconsideration. water, or providing means of transportation or communication. (Section 4, C. A. No.
The motion for reconsideration, was however, denied by the Court en banc in its 444) (Emphasis supplied)
Resolution dated July 6, 1968. Although a service enterprise, respondent company's employees are within the
Petitioner Mercury Drug Company, Inc., assigned the following errors in this petition: coverage of C. A. No. 444, as amended known as the Eight Hour Labor Law, for they
do not fall within the category or class of employees or laborers excluded from its
I
provisions. (Section 2, Ibid.)
RESPONDENT CIR ERRED IN DECLARING THE CONTRACTS OF EMPLOYMENT,
The Court is not impressed by the argument that under the contracts of employment
EXHIBITS "A" AND "B", NULL AND VOID AS BEING CONTRARY TO PUBLIC POLICY
the petitioners are not entitled to such claim for the reason that the same are
AND IN SUSTAINING, ACCORDINGLY, PRIVATE RESPONDENTS' CLAIMS FOR 25%
contrary to law. Payment of extra or additional pay for services rendered during
SUNDAY AND LEGAL HOLIDAY PREMIUMS BECAUSE SUCH DECLARATION AND
Sundays and legal holidays is mandated by law. Even assuming that the petitioners
AWARD ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, THUS INFRINGING
had agreed to work on Sundays and legal holidays without any further consideration
UPON THE CARDINAL RIGHTS OF THE PETITIONER; AND ALSO BECAUSE THE
than their monthly salaries, they are not barred nevertheless from claiming what is
VALIDITY OF SAID t CONTRACTS OF EMPLOYMENT HAS NOT BEEN RAISED.

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due them, because such agreement is contrary to public policy and is declared nun MERCURY DRUG CO., INC.
and void by law. (Sgd.) MARIANO QUE General Manager
Any agreement or contract between employer and the laborer or employee contrary ACCEPTED WITH FULL CONFORMITY:
to the provisions of this Act shall be null and void ab initio.
(Sgd.) NARDO DAYAO
Under the cited statutory provision, the petitioners are justified to receive additional (EXH. "A" and "l ")
amount equivalent to 25% of their respective basic or regular salaries for work done (Decision, pp. 114-115, rollo)
on Sundays and legal holidays for the period from March 20, 1961 to June 30, 1962.
These contracts were not declared by the respondent court null and void in their
(Decision, pp. 119-120, rollo)
entirety. The respondent court, on the basis of the conflicting evidence presented
From a perusal of the foregoing statements of the respondent court, it can be seen by the parties, in effect: 1) rejected the theory of the petitioner company that the
readily that the petitioner-company based its arguments in its first assignment of 25% additional compensation claimed by the private respondents for the four-hour
error on the wrong premise. The contracts of employment signed by the private work they rendered during Sundays and legal holidays provided in their contracts of
respondents are on a standard form, an example of which is that of private employment were covered by the private respondents' respective monthly salaries;
respondent Nardo Dayao quoted hereunder: 2) gave credence to private respondents', (Nardo Dayao, Ernesto Talampas and
Mercury Drug Co., Inc. 1580 Bambang, Manila Josias Federico) testimonies that the 25% additional compensation was not included
October 30, 1959 in the private respondents' respective monthly salaries and 3) ruled that any
Mr. Nardo Dayao agreement in a contract of employment which would exclude the 25% additional
1015 Sta. Catalina compensation for work done during Sundays and holidays is null and void as
Rizal Ave., Exten. mandated by law.
Dear Mr. Dayao: On the second issue, the petitioner-company reiterated its stand that under the,-
respective contracts of employment of the private respondents, the subject 25 %
You are hereby appointed as Checker, in the Checking Department of MERCURY
additional compensation had already been included in the latter's respective monthly
DRUG CO., INC., effective July 1, 1959 and you shall receive an annual
salaries. This contention is based on the testimony of its lone witness, Mr. Jacinto
compensation the amount of Two Thousand four hundred pesos only (P2,400.00),
Concepcion and pertinent exhibits. Thus:
that includes the additional compensation for work on Sundays and legal holidays.
Exhibit A shows that for the period of October 30, 1960, the annual compensation
Your firm being a Service Enterprise, you will be required to perform work every day
of private respondent Nardo Dayao, including the additional compensation for the
in a year as follows:
work he renders during the first four (4) hours on every other Sunday and on the
8 Hours work on regular days and-all special Holidays that may be declared but with eight (8) Legal Holidays at the time was P2,400.00 or P200.00 per month. These
the 25% additional compensation; amounts did not represent basic salary only, but they represented the basic daily
4 Hours work on every other Sundays of the month; wage of Nardo Dayao considered to be in the amount of P7.36 x 305 ordinary
For any work performed in excess of the hours as above mentioned, you shall be working days at the time or in the total amount of P2,144.80. So plus the amount
paid 25 % additional compensation per hour. of P156.40 which is the equivalent of the Sunday and Legal Holiday rate at P9.20
basic rate of P7.36 plus 25% thereof or P1.84) x 17, the latter figure representing
This appointment may be terminated without notice for cause and without cause
13 Sundays and 4 Legal Holidays of 8 hours each. ...
upon thirty days written notice.
xxx xxx xxx
This supersedes your appointment of July 1, 1959.
That the required minimum 25% Sunday and Legal Holiday additional compensation
Very truly yours,
was paid to and received by the employees for the work they rendered on every

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other Sunday and on the eight Legal Holidays for the period October, 1959 to June that such contracts of employment were null and void. In this connection We restate
30, 1962 is further corroborated by Exhibits 5, 6, 8, 9 and 9-A and the testimony of our finding that the respondent court did not declare the contracts of employment
Mr. Jacinto Concepcion thereon. (Brief for the Petitioner, pp. 24, 27). null and void in their entirety. Only the objectionable features violative of law were
The aforesaid computations were not given credence by the respondent court. In nullified. But even granting that the Court of Industrial Relations declared the
fact the same computations were not even mentioned in the court's decision which contracts of employment wholly void, it could do so notwithstanding the procedural
shows that the court found such computations incredible. The computations, objection. In Sanchez u. Court of Industrial Relations, supra, this Court speaking
supposedly patterned after the WAS Interpretative Bulletin No. 2 of the Department through then Justice, now Chief Justice Enrique M. Fernando, stated:
Labor demonstrated in Exhibits "6", "7", "8", "9", and "9-A", miserably failed to show xxx xxx xxx
the exact and correct annual salary as stated in the respective contracts of Moreover, petitioners appear to be oblivious of the statutory mandate that
employment of the respondent employees. The figures arrived at in each case did respondent Court in the hearing, investigation and determination of any question or
not tally with the annual salaries on to the employees' contracts of employment, the controversy and in the exercise of any of its duties or power is to act 'according to
difference varying from P1.20 to as much as P14.40 always against the interest of justice and equity and substantial merits of the case, without regard to technicalities
the employees. The petitioner's defense consists of mathematical computations or legal forms and shall not be bound by any technical rules of legal evidence'
made after the filing of the case in order to explain a clear attempt to make its informing its mind 'in such manner as it may deem just and equitable.' Again, this
employees work without the extra compensation provided by law on Sundays and Court has invariably accorded the most hospitable scope to the breadth and
legal holidays. amplitude with which such provision is couched. So it has been from the earliest
In not giving weight to the evidence of the petitioner company, the respondent court case decided in 1939 to a 1967 decision.
sustained the private respondents' evidence to the effect that their 25% additional Two issues are raised in the second assignment of error by the petitioner-company.
compensation for work done on Sundays and Legal Holidays were not included in The first hinges on the jurisdiction of the respondent court to award additional
their respective monthly salaries. The private respondents presented evidence compensation for nighttime work. Petitioner wants Us to re- examine Our rulings on
through the testimonies of Nardo Dayao, Ernesto Talampas, and Josias Federico the question of nighttime work. It contends that the respondent court has no
who are themselves among the employees who filed the case for unfair labor jurisdiction to award additional compensation for nighttime work because of the
practice in the respondent court and are private respondents herein. The petitioner- declared policy on freedom of collective bargaining expressed in Republic Act 875
company's contention that the respondent court's conclusion on the issue of the and the express prohibition in Section 7 of the said statute. A re- examination of the
25% additional compensation for work done on Sundays and legal holidays during decisions on nighttime pay differential was the focus of attention in Rheem of the
the first four hours that the private respondents had to work under their respective Philippines, Inc. et al., v. Ferrer, et al (19 SCRA 130). The earliest cases cited by the
contracts of employment was not supported by substantial evidence is, therefore, petitioner-company, Naric v. Naric Workers Union L-12075, - May 29, 1959 and
unfounded. Much less do We find any grave abuse of discretion on the part of the Philippine Engineers' Syndicate u. Bautista, L-16440, February 29, 196.4, were
respondent court in its interpretation of the employment contract's provision on discussed lengthily. Thus -
salaries. In view of the controlling doctrine that a grave abuse of discretion must be
xxx xxx xxx
shown in order to warrant our disturbing the findings of the respondent court, the
reversal of the court's endings on this matter is unwarranted. (Sanchez vs. Court of 2. On the claim for night differentials, no extended discussion is necessary. To be
Industrial Relations, 27 SCRA 490). read as controlling here is Philippine Engineers' Syndicate, Inc. vs. Hon. Jose S.
Bautista, et al., L-16440, February 29, 1964, where this Court, speaking thru Mr.
The last issue raised in the first assignment of error refers to a procedural matter.
Chief Justice Cesar Bengzon, declared —
The petitioner-company contends that ,-the question as to whether or not the
contracts of employment were null and void was not put in issue, hence, the Only one issue is raised: whether or not upon the enactment of Republic Act 875,
respondent court pursuant to the Rules of Court should have refrained from ruling the CIR lost its jurisdiction over claims for additional compensation for regular night
work. Petitioner says that this Act reduced the jurisdiction of respondent court and

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limited it to specific cases which this Court has defined as: ... (1) when the labor outside the domain of the industrial court. Withal, the record does not show that the
dispute affects an industry which is indispensable to the national interest and is so employer-employee relation between the 64 respondents and the petitioner had
certified by the President to the industrial court (Sec. 10, Republic Act 875); (2) ceased.
when the controversy refers to minimum wage under the Minimum Wage Law After the passage of Republic Act 875, this Court has not only upheld the industrial
(Republic Act 602); (3) when it involves hours of employment under the Eight-Hour court's assumption of jurisdiction over cases for salary differentials and overtime pay
Labor Law (Commonwealth Act 444) and (4) when it involves an unfair labor practice [Chua Workers Union (NLU) vs. City Automotive Co., et al., G.R. No. L- 11655, April
[Sec. 5(a), Republic Act 8751', [Paflu, et al. vs. Tan, et al., 52 Off. Gaz, No. 13, 29, 1959; Prisco vs. CIR, et al., G.R. No. L-13806, May 23, 1960] or for payment of
5836]. additional compensation for work rendered on Sundays and holidays and for night
Petitioner insists that respondents' case falls in none of these categories because as work [Nassco vs. Almin, et al., G.R. No. L9055, November 28, 1958; Detective &
held in two previous cases, night work is not overtime but regular work; and that Protective Bureau, Inc. vs. Felipe Guevara, et al., G.R. No. L-8738, May 31, 1957]
respondent court's authority to try the case cannot be implied from its general but has also supported such court's ruling that work performed at night should be
jurisdiction and broad powers' under Commonwealth Act 103 because Republic Act paid more than work done at daytime, and that if that work is done beyond the
875 precisely curbed such powers limiting them to certain specific litigations, beyond worker's regular hours of duty, he should also be paid additional compensation for
which it is not permitted to act. overtime work. [Naric vs. Naric Workers' Union. et al., G. R No. L-12075, May 29,
We believe petitioner to be in error. Its position collides with our ruling in the Naric 1959, citing Shell Co. vs. National Labor Union, 81 Phil. 315]. Besides, to hold that
case [National Rice & Corn Corp. (NARIC) vs. NARIC Workers' Union, et al., G.R. No. this case for extra compensation now falls beyond the powers of the industrial court
L-12075, May 29, 1959] where we held; to decide, would amount to a further curtailment of the jurisdiction of said court to
an extent which may defeat the purpose of the Magna Carta to the prejudice of
While it is true that this Court made the above comment in the aforementioned case,
labor.' [Luis Recato Dy, et al v-9. CIR, G.R. No. L-17788, May 25,1962]"
it does not intend to convey the Idea that work done at night cannot also be an
overtime work. The comment only served to emphasize that the demand which the The petitioner-company's arguments on the respondent court's alleged lack of
Shell Company made upon its laborers is not merely overtime work but night work jurisdiction over additional compensation for work done at night by the respondents
and so there was need to differentiate night work from daytime work. In fact, the is without merit.
company contended that there was no law that required the payment of additional The other issue raised in the second assignment of error is premised on the
compensation for night work unlike an overtime work which is covered by petitioner-company's contention that the respondent court's ruling on the additional
Commonwealth Act No. 444 (Eight Hour Labor Law). And this Court in that case said compensation for nighttime work is not supported by substantial evidence.
that while there was no law actually requiring payment of additional compensation This contention is untenable. Pertinent portions of the respondent court's decision
for night work, the industrial court has the power to determine the wages that night read:
workers should receive under Commonwealth Act No. 103, and so it justified the
xxx xxx xxx
additional compensation in the Shell case for 'hygienic, medical, moral, cultural and
sociological reasons. There is no serious disagreement between the petitioners and respondent
management on the facts recited above. The variance in the evidence is only with
xxx xxx xxx
respect to the money claims. Witnesses for petitioners declared they worked on
True, in Paflu, et al. vs. Tan, et al., supra, and in a series of cases thereafter, We regular days and on every other Sunday and also during all holidays; that for services
held that the broad powers conferred by Commonwealth Act 103 on the CIR may rendered on Sundays and holidays they were not paid for the first four (4) hours
have been curtailed by Republic Act 875 which limited them to the four categories and what they only received was the overtime compensation corresponding to the
therein expressed in line with the public policy of allowing settlement of industrial number of hours after or in excess of the first four hours; and that such payment is
disputes via the collective bargaining process; but We find no cogent reason for being indicated in the overtime pay for work done in excess of eight hours on regular
concluding that a suit of this nature for extra compensation for night work falls

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working days. It is also claimed that their nighttime services could well be seen on given concrete expression. Thus: 'The bases of the awards were not only the
their respective daily time records. .. (Emphasis supplied) (p.116, rollo) respective affidavits of the claimants but the testimonies of 24 witnesses (because
The respondent court's ruling on additional compensation for work done at night is, 6 were not given credence by the court below) who Identified the said 239 claimants.
therefore, not without evidence. Moreover, the petitioner-company did not deny that The contention of petitions on this point is therefore unfounded Moveover
the private respondents rendered nighttime work. In fact, no additional evidence in Philippine Land-Air-Sea Labor Union (PLASLU) v. Sy Indong company Rice & Corn
was necessary to prove that the private respondents were entitled to additional Mill, this Court, through the present Chief Justice rejected as untenable the theory
compensation for whether or not they were entitled to the same is a question of law of the Court of Industrial Relations concerning the imperative needs of all the
which the respondent court answered correctly. The "waiver rule" is not applicable claimants to testify personality and prove their charges in the complaint. As tersely
in the case at bar. Additional compensation for nighttime work is founded on public put: 'We do not share the view taken in the resolution appealed from.
policy, hence the same cannot be waived. (Article 6, Civil Code). On this matter, We The petitioner's contention that its employees fully understood what they signed
believe that the respondent court acted according to justice and equity and the when they entered into the contracts of employment and that they should be bound
substantial merits of the case, without regard to technicalities or legal forms and by their voluntary commitments is anachronistic in this time and age.
should be sustained. The Mercury Drug Co., Inc., maintains a chain of drugstores that are open every
The third assignment of error is likewise without merit. The fact that only three of day of the week and, for some stores, up to very late at night because of the nature
the private respondents testified in court does not adversely affect the interests of of the pharmaceutical retail business. The respondents knew that they had to work
the other respondents in the case. The ruling in Dimayuga V. Court of Industrial Sundays and holidays and at night, not as exceptions to the rule but as part of the
Relations (G.R. No. L-0213, May 27, 1957) has been abandoned in later rulings of regular course of employment. Presented with contracts setting their compensation
this Court. In Philippine Land Air-Sea Labor Union (PLASLU) vs. Sy Indong Company on an annual basis with an express waiver of extra compensation for work on
Rice And Corn Mill (11 SCRA 277) We had occasion to re-examine the ruling Sundays and holidays, the workers did not have much choice. The private
in Dimayuga We stated: respondents were at a disadvantage insofar as the contractual relationship was
The latter reversed the decision of the trial Judge as regards the reinstatement with concerned. Workers in our country do not have the luxury or freedom of declining
backwages of ... upon the theory that this is not a class suit; that, consequently, it job openings or filing resignations even when some terms and conditions of
is necessary and imperative that they should personally testify and prove the charges employment are not only onerous and inequitous but illegal. It is precisely because
in the complaint', and that, having failed to do so, the decision of the trial Judge in of this situation that the framers of the Constitution embodied the provisions on
their favor is untenable under the rule laid down in Dimayuga vs. Court of Industrial social justice (Section 6, Article 11) and protection to labor (Section 9, Article I I) in
Relations, G.R. No. L-0213 (May 27,1957). the Declaration of Principles And State Policies.
We do not share the view taken in the resolution appealed from. As the trial Judge It is pursuant to these constitutional mandates that the courts are ever vigilant to
correctly said, in Ms dissent from said resolution,: protect the rights of workers who are placed in contractually disadvantageous
positions and who sign waivers or provisions contrary to law and public policy.
xxx xxx xxx
WHEREFORE, the petition is hereby dismissed. The decision and resolution appealed
In the case of Sanchez v. Court of Industrial Relations, supra, this Court stated:
from are affirmed with costs against the petitioner.
To the reproach against the challenged order in the brief of petitioners in view of
SO ORDERED.
only two of the seven claimants testifying, a statement by this Court in Ormoc Sugar
Co., Inc. vs. OSCO Workers Fraternity Labor Union would suffice by way of
refutation. Thus: "This Court fully agrees with the respondent that quality and not
quantity of witnesses should be the primordial consideration in the appraisal of
evidence.' Barely eight days later, in another decision, the above statement was

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Republic of the Philippines On June 5, 2001, respondent Glenda M. Menese (Menese) filed a complaint for
Supreme Court constructive dismissal; illegal reduction of salaries and allowances; separation pay;
refund of contribution to cash bond; overtime, holiday, rest day and premium pay;
Manila
damages; and attorneys fees against the petitioners, Emirate Security and
SECOND DIVISION Maintenance Systems, Inc. (agency) and its General Manager, Robert A. Yan (Yan).
EMIRATE SECURITY AND G.R. No. 182848
MAINTENANCE SYSTEMS,
Menese alleged in the compulsory arbitration proceedings that on April 1, 1999, the
INC. and ROBERTO A.
Present: agency engaged her services as payroll and billing clerk. She was assigned to the
YAN,
agencys security detachment at the Philippine General Hospital (PGH). She was
Petitioners, given a monthly salary of P9,200.00 and an allowance of P2,500.00, for a total
CARPIO, J.,
of P11,700.00 in compensation. Effective May 2001, her allowance was allegedly
Chairperson, reduced to P1,500.00 without notice, and P100.00 was deducted from her salary
BRION, every month as her contribution to a cash bond which lasted throughout her
PEREZ, employment. She was required to work seven (7) days a week, from 8:00
a.m. to 5:00 p.m. She was also required to report for work on holidays, except on
SERENO, and
New Years Day and Christmas. She claimed that she was never given overtime,
REYES, JJ. holiday, rest day and premium pay.

- versus -
Promulgated: Menese further alleged that on May 4, 2001, she started getting pressures from the
agency for her to resign from her position because it had been committed to a
October 5, 2011 certain Amy Claro, a protge of Mrs. Violeta G. Dapula (Dapula) the new chief of the
GLENDA M. MENESE, Security Division of the University of the Philippines (UP) Manila and PGH. Menese
Respondent. raised the matter with Yan who told her that the agency was in the process of
x------------------------------------------------x establishing goodwill with Dapula, so it had to sacrifice her position to accommodate
Dapulas request to hire Claro.
DECISION
BRION, J.:
Menese claimed that she was told not to worry because if she was still interested in
working with the agency, she could still be retained as a lady guard with a salary
Before the Court is the petition for review on certiorari[1] which assails the equivalent to the minimum wage. She would then be detailed to another detachment
decision[2] and the resolution[3] of the Court of Appeals (CA) rendered on February because Dapula did not like to see her around anymore. If the offer was acceptable
28, 2008 and May 14, 2008, respectively, in CA-G.R. SP. No. 100073.[4] to her, she should report to the agencys personnel officer for the issuance of the
The Antecedents necessary duty detail order. Menese thought about the offer and soon realized
that she was actually being demoted in rank and salary. She eventually decided to
The facts of the case are summarized below.
decline the offer. She continued reporting to the PGH detachment and performed
her usual functions as if nothing happened.

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Menese alleged that at this juncture, Claro reported at the agencys PGH detachment be suffering a demotion in rank and a diminution in pay. Accordingly, he ordered
and performed the functions she was doing. She bewailed that thereafter she the petitioners to immediately reinstate Menese and, solidarily, to pay her full
continuously received harassment calls and letters. She was also publicly humiliated backwages of P83,443.75 (latest computation); P66,924.00 in monetary
and badly treated at the detachment. The agency, through Security Officer Alton benefits; P50,000.00 and P20,000.00 in moral and exemplary damages,
Acab, prohibited her from using the office computer. On May 18, 2001, Jose Dante respectively; and attorneys fees of P15,036.74.
Chan, the agencys PGH detachment commander, arrogantly told her to leave PGH.
Again on May 25, 2001, Chan shouted at her and told her to pack her things and to
The petitioners appealed to the National Labor Relations Commission (NLRC).
leave immediately, and not to return to the detachment anymore; otherwise, she
On September 30, 2003, the NLRC Second Division issued a resolution[8] granting
would be physically driven out of the office.
the appeal and reversing the labor arbiters decision. It ruled that Menese was not
constructively dismissed but was merely transferred to another detachment. It
Still not satisfied with what they did, the petitioners allegedly withheld her salary opined that the transfer was a valid exercise of the petitioners management
for May 16-31, 2001. She claimed that the petitioners dismissed her from the service prerogative. However, it ruled that despite Meneses refusal to accept the transfer,
without just cause and due process. she cannot be made liable for abandonment as her refusal was based on her honest
belief that she was being constructively dismissed. The NLRC ordered Menese, at
her option, to immediately report to the agencys head office and the agency to
The petitioners, for their part, denied liability. They alleged that on May 8, 2001,
accept her back to work. It absolved Yan from liability, and deleted the award of
Dapula informed the agency in writing,[5] through Yan, that she had been receiving
backwages, overtime pay and damages.
numerous complaints from security guards and other agency employees about
Meneses unprofessional conduct. She told the petitioners that she was not tolerating
Meneses negative work attitude despite the fact that she is the wife of Special Police On October 28, 2003, Menese filed a partial motion for reconsideration[9] of the
Major Divino Menese who is a member of the UP Manila police force, and that as a NLRC resolution and later (on June 17, 2005), a motion to recall the entry of
matter of policy and out of delicadeza, she does not condone nepotism in her judgment of October 31, 2003. On June 1, 2007, the NLRC rendered a
division. resolution[10] setting aside the entry of judgment and denying Meneses partial
motion for reconsideration.
On the basis of Dapulas letter, Yan sent Menese a memorandum dated May 16,
2001,[6] instructing her to report to the agencys head office and, there and then, The Petition for Certiorari
discussed with her Dapulas letter. Yan informed Menese that upon Dapulas request,
she would be transferred to another assignment which would not involve any
Menese elevated her case to the CA through a petition for certiorari[11] under Rule
demotion in rank or diminution in her salary and other benefits. Although Menese
65 of the Rules of Court. In the main, she argued that the agency was in bad faith
said that she would think about the matter, the petitioners were surprised to receive
when it issued the memoranda dated May 16, 2001,[12] May 22, 2001[13] and May
summons from the labor arbiter regarding the complaint.
28, 2001,[14] ordering her transfer from the PGH detachment to the agencys head
office. She posited that it was a ploy to create a vacancy in the detachment to
The Compulsory Arbitration Rulings accommodate the entry of Claro, Dapulas protge. She regarded the transfer as a
removal from her position at PGH a constructive dismissal.
In a decision dated March 14, 2002,[7] Labor Arbiter Jovencio LL. Mayor, Jr.
declared Menese to have been constructively dismissed. He found the petitioners The agency, in rebuttal, posited that Menese was not illegally dismissed, but was
wanting in good faith in transferring Menese to another detachment as she would merely transferred to its head office in response to the request of the new head of

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the UP-PGH security division for the transfer.The action, it maintained, was a valid Aside from the petition itself,[21] the petitioners filed a reply to Meneses
exercise of its management prerogative. Thus, Menese was guilty of abandoning her comment[22] and a memorandum[23] where they asked for a reversal of the
employment when she refused to report for work at her new posting. assailed CA rulings on the ground that the CA gravely erred in:
The CA Decision
(1) Affirming the labor arbiters findings that Menese was constructively
The CA granted the petition in its decision of February 28, 2008.[15] It set aside the dismissed;
assailed resolutions of the NLRC and reinstated the March 14, 2002 decision of the (2) Holding Yan solidarily liable with the agency for damages; and
labor arbiter. (3) Sustaining the award of backwages, damages and attorneys fees, as well
as overtime pay.
As the labor arbiter did, the CA found Menese to have been constructively, and
therefore illegally, dismissed. It noted that the memoranda[16] on Meneses transfer The petitioners insist that Menese was not illegally dismissed. They argue that it was
were prompted by Daculas letter, dated May 8, 2001,[17] to Yan, which contained Menese who deliberately and unjustifiably refused to work despite several
allegations on Meneses supposed unprofessional conduct and involvement in notices[24] to her after she was validly relieved from her current work assignment
nepotism. It further noted that when Yan asked Dapula in writing[18] to provide the due to a clients request. They maintain that since Menese chose not to return to
agency with documents/evidence that would support her allegations, she failed to work, she must be considered either to have resigned from or to have abandoned
do so. The CA thus concluded that the reasons for Meneses transfer did not exist or her employment. They further maintain that nothing on record shows any positive
that no substantial evidence was presented in that regard. or overt act of the agency in dismissing Menese.

The CA brushed aside the petitioners argument that it was their prerogative to Moreover, the petitioners regard Meneses continued refusal to report to the agencys
transfer Menese from the agencys PGH detachment to its head office at Ortigas head office as an act of gross insubordination constituting a just cause for
Avenue, Mandaluyong City. Relying on applicable jurisprudence, the appellate court termination under Article 282(a) of the Labor Code. They argue that under this law,
pointed out that while it is the managements prerogative to transfer an employee an employer may terminate an employment for serious misconduct or willful
from one office to another within the business establishment, it is not without disobedience by the employee of the lawful orders of his employer or his
limitation. It must be exercised in such a way that there is no demotion in rank or representative in connection with his work.
diminution in pay, benefits and other privileges. Otherwise, the transfer amounts to
a constructive dismissal, as correctly pointed out by the labor arbiter in his decision
of March 14, 2002.[19] In this light, the CA held that the petitioners failed to prove The petitioners posit that she is not entitled to reinstatement and backwages since
that Menese abandoned her employment. she failed to comply with the reinstatement option stated in the NLRC resolution.
Neither is she entitled to overtime pay because she did not work beyond the eight
(8)-hour working period; her one (1) hour time off from twelve noon to 1:00 p.m. is
The CA sustained all the other findings of the labor arbiter. On the whole, it ruled not compensable. Neither is Menese entitled to moral and exemplary damages
that the NLRC misappreciated the evidence in the case. The petitioners moved for because the evidence on record does not show any malice or bad faith on their part
reconsideration, but the CA denied the motion in its resolution of May 14, 2008.[20] to justify the award.

The Petitioners Case The petitioners likewise take exception to the award of attorneys fees as the labor
arbiters decision and the NLRCs resolution failed to state the justification for the

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award. They further contend that the CA gravely erred in upholding the labor Menese submits that the CA is correct in nullifying the NLRCs reversal of her illegal
arbiters ruling that Yan is solidarily liable with the agency, as Yan was merely acting dismissal case because the labor tribunal closed its eyes to the fact that bad faith
in his capacity as the agencys general manager, and that there is no showing that attended her transfer. She points out that the petitioners twin directives, vis--vis her
Yan acted maliciously or in bad faith when he ordered Meneses transfer. They also transfer upon which the NLRC based its ruling, were both issued for a selfish and
point out that Menese did not challenge before the CA the NLRC ruling absolving immoral purpose;[29] the first, dated May 16, 2001,[30] was issued for the purpose
Yan from any liability. of creating a vacancy, and the second, dated May 22, 2001,[31] was intended to
cover up the wrongdoing that was earlier committed. In other words, the directives
were tainted with malice and ill will. On the matter of Yans liability, Menese
The Case for Menese
maintains that the NLRC committed a serious error in allowing him to get away with
his wrongdoing considering the injustice done to her as a result of her
By way of her comment[25] and memorandum,[26] Menese asks that the appeal be unceremonious dismissal.
denied for lack of merit.
In a different vein, Menese assails the NLRCs exclusion of the one-hour meal break
She claims that at the arbitration stage, the petitioners readily admitted the fact of as overtime work, for it erroneously assumed that her employer had been giving its
her removal, manifesting in open session their lack of interest to settle the case employees a 60 minute time-off for regular meals and that she was not performing
amicably as they have a strong evidence to support their defense of her dismissal work during the period. She argues that this was not the actual practice in the
for cause. She observed during the hearing that the petitioners were very confident workplace, contending that she continued working even during the one-hour meal
about their case, because according to them, they had Dapulas letter asking for her break.
immediate removal.[27]
Finally, Menese maintains that the CA correctly reinstated the labor arbiters award
Menese further claims that the petitioners realized that they did not have the of attorneys fees and the imposition of solidary liability on Yan and the agency. She
necessary evidence, so Yan wrote Dapula a letter asking her for proof of the posits that in her quest for justice because of her unceremonious dismissal, she was
complaints or grievances of the security guards against Menese.[28] Dapula did not constrained to engage the services of a counsel to handle her case.
produce or present the evidence they asked for resulting in their failure to
substantiate their defense of dismissal for cause. Menese contends that the
The Courts Ruling
petitioners then revised their theory of the case and made it appear that she was
not actually dismissed but was merely transferred, purportedly in the exercise of
their management prerogative. We deny the petition for lack of merit. The evidence of Meneses unwarranted,
unjustified and, in her own language, unceremonious dismissal is so glaring that to
ignore it is to commit, as the NLRC did, grave abuse of discretion.
She posits that her transfer was motivated by ill will and bad faith, as it was done
to facilitate the entry of a favored applicant to the PGH detachment. She intimates
that the labor arbiter resolved the case correctly when he found her to have been We note as a starting point that at the time material to the case, Menese ceased to
constructively or illegally dismissed. She bewails the NLRCs surprising reversal of the be the agencys payroll and billing clerk at its PGH detachment. The position was
labor arbiters decision, but feels vindicated when the CA set aside the NLRC ruling. taken away from her as she had been transferred to the agencys main office
on Ortigas Avenue, Mandaluyong City, upon the request of Dapula, the new chief of
the UP-PGH Security Division. The transfer was to be carried out through a
memorandum dated May 16, 2001[32] issued by Yan; a second memorandum dated

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May 22, 2001[33] issued by Personnel Officer Edwin J. Yabes, reminding Menese of As Menese noted, the petitioners did not submit as annex to the petition Yans letter
Yans instruction for her to report to the main office; and a third memorandum dated to Dapula, and the reason appears to be obvious they were trying to avoid calling
May 28, 2001,[34] also issued by Yabes informing Menese that it was her second attention to the absence of proof of Meneses alleged unprofessionalism and her
notice to assume her work detail at the main office. Yabes instructed her to report involvement in nepotism. Evidently, the basis for Dapulas request did not exist. We
for work on May 30, 2001. thus find credible Meneses contention that her transfer was a ploy to remove her
from the PGH detachment to accommodate the entry of Dapulas protge. In short,
the agency wanted to create a vacancy for Claro, the protge. Confronted with this
Citing Mendoza v. Rural Bank of Lucban,[35] the petitioners argue that the transfer
clear intent of the petitioners, we cannot see how Meneses transfer could be
was undertaken in the exercise of management prerogative in the pursuit of their
considered a valid exercise of management prerogative. As Menese rightly put it,
legitimate interests. They submit that Menese refused to comply with the valid
her transfer was arbitrarily done, motivated no less by ill will and bad faith.
transfer orders they issued, making her liable for abandonment and insubordination.
They argue that nothing on record shows that she was illegally dismissed as no
dismissal had been imposed on her. In Blue Dairy Corporation v. NLRC,[39] the Court stressed as a matter of principle
that the managerial prerogative to transfer personnel must be exercised without
abuse of discretion, bearing in mind the basic elements of justice and fair
On a superficial consideration, the petitioners position looks unassailable as indeed
play. Having the right should not be confused with the manner in which that right is
an employer can regulate, generally without restraint and according to its own
exercised. Thus, it should not be used as a subterfuge by the employer to get rid of
discretion and judgment, every aspect of its business, including work assignments
an undesirable worker. Measured against this basic precept, the petitioners
and transfer of employees, subject only to limitations imposed by law.[36] This
undoubtedly abused their discretion or authority in transferring Menese to the
submission, however, glossed over or suppressed a crucial factor in the present labor
agencys head office. She had become undesirable because she stood in the way of
controversy. We refer to Dapulas letter to Yan in early May 2001,[37] asking for
Claros entry into the PGH detachment. Menese had to go, thus the need for a pretext
Meneses transfer allegedly due to numerous complaints from security guards and
to get rid of her. The request of a client for the transfer became the overriding
co-workers regarding her unprofessionalism and because of nepotism; Menese is
command that prevailed over the lack of basis for the transfer.
the wife of a member of the UP Manila police force.

We cannot blame Menese for refusing Yans offer to be transferred. Not only was
Had Yan inquired into Dapulas claim of Meneses alleged unprofessionalism, ideally
the transfer arbitrary and done in bad faith, it would also result, as Menese feared,
through an administrative investigation, he could have been provided with a genuine
in a demotion in rank and a diminution in pay. Although Yan informed Menese that
reason assuming proof of Dapulas accusation existed for Meneses transfer or even
based on the request of the client, she will be transferred to another assignment
for her dismissal, if warranted. That the agency did not get into the bottom of
which however will not involve any demotion in rank nor diminution in her salaries
Dapulas letter before it implemented Meneses transfer is indicative of the sheer
and other benefits,[40] the offer was such as to invite reluctance and suspicion as
absence of an objective justification for the transfer. The most that the agency did
it was couched in a very general manner. We find credible Meneses submission on
was to write Dapula a letter, through Yan, asking her to provide documents/evidence
this point, i.e., that under the offered transfer: (1) she would hold the position of
in support of her request for Meneses transfer.[38] Significantly, Yans request came
lady guard and (2) she would be paid in accordance with the statutory minimum
after the labor arbiters summons to Yan regarding Meneses complaint. Dapula never
wage, or from P11,720.00 to P7,500.00.
responded to Yans letter and neither did she provide the evidence needed for the
agencys defense in the complaint.
In these lights, Meneses transfer constituted a constructive dismissal as it had no
justifiable basis and entailed a demotion in rank and a diminution in pay for her. For
a transfer not to be considered a constructive dismissal, the employer must be able

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to show that the transfer is for a valid reason, entails no diminution in the terms and worked from 8:00 a.m. up to 5:00 p.m. She presented no evidence to show that she
conditions of employment, and must be unreasonably inconvenient or prejudicial to was working during the entire one hour meal break. We thus find the NLRCs deletion
the employee. If the employer fails to meet these standards, the employees transfer of the overtime pay award in order.
shall amount, at the very least, to constructive dismissal.[41] The petitioners,
unfortunately for them, failed to come up to these standards.
Also, the NLRC noted that the award of P2,600.00 for the refund of the cash bond
In declaring Meneses transfer to be in the valid exercise of the petitioners deposit is overstated and should be adjusted to P600.00 only, as indicated by the
management prerogative, the NLRC grossly misappreciated the evidence and, payrolls. We likewise find the adjustment in order.
therefore, gravely abused its discretion in closing its eyes to the patent injustice
committed on Menese. It completely disregarded the obvious presence of bad faith
in Meneses transfer. Labor justice demands that Menese be awarded moral and All told, except for the above clarifications on the overtime pay award and the refund
exemplary damages[42] and, for having been constrained to litigate in order to of the cash bond deposit, we reiterate and so declare the petition to be devoid of
protect her rights, attorneys fees.[43] merit.

Yans solidary liability WHEREFORE, premises considered, except for the overtime pay award and the
refund of deposit for the cash bond, the petition is DENIED for lack of merit. The
assailed decision and resolution of the Court of Appeals are AFFIRMED, with the
Yan had been aware all the time of the utter lack of a valid reason for Meneses following modifications:
transfer. He had been aware all the time that Dapulas charges against Menese the
ostensible reason for the transfer were nonexistent as Dapula failed to substantiate
the charges. He was very much a part of the flagrant and duplicitous move to get 1) The deletion of the overtime pay award; and
rid of Menese to give way to Claro, Dapulas protge. 2) Adjustment of the refund of the cash or surety bond deposit award
from P2,500.00 to P600.00.
Based on the facts, Yan is as guilty as the agency in causing the transfer that was
undertaken in bad faith and in a wanton and oppressive manner. Thus, he should Costs against the petitioners.
be solidarily liable with the agency for Meneses monetary awards.

SO ORDERED.
The overtime pay award

While the labor arbiter declared that Meneses claim for overtime pay is
unrebutted[44] and, indeed, nowhere in the petitioners position paper did they
controvert Meneses claim, we hold that the claim must still be
substantiated. In Global Incorporated v. Commissioner Atienza,[45] a claim for
overtime pay will not be granted for want of factual and legal basis. In this respect,
the records indicate that the labor arbiter granted Meneses claim for holiday pay,
rest day and premium pay on the basis of payrolls.[46] There is no such proof in
support of Meneses claim for overtime pay other than her contention that she

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Republic of the Philippines On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all
SUPREME COURT employees, from rank-and-file to department heads. The JE Program was designed
Manila to rationalized the duties and functions of all positions, reestablish levels of
SECOND DIVISION responsibility, and recognize both wage and operational structures. Jobs were
ranked according to effort, responsibility, training and working conditions and
relative worth of the job. As a result, all positions were re-evaluated, and all
G.R. No. 101761. March 24, 1993.
employees including the members of respondent union were granted salary
NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs. adjustments and increases in benefits commensurate to their actual duties and
NATIONAL LABOR RELATIONS COMMISSION and NBSR SUPERVISORY functions.
UNION, (PACIWU) TUCP, respondents.
We glean from the records that for about ten years prior to the JE Program, the
Jose Mario C. Bunag for petitioner. members of respondent union were treated in the same manner as rank-and file
The Solicitor General and the Chief Legal Officer, NLRC, for public employees. As such, they used to be paid overtime, rest day and holiday pay
respondent. pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as amended.
Zoilo V. de la Cruz for private respondent. With the implementation of the JE Program, the following adjustments were made:
(1) the members of respondent union were re-classified under levels S-5 to S-8
DECISION
which are considered managerial staff for purposes of compensation and benefits;
REGALADO, J p: (2) there was an increase in basic pay of the average of 50% of their basic pay prior
The main issue presented for resolution in this original petition for certiorari is to the JE Program, with the union members now enjoying a wide gap (P1,269.00
whether supervisory employees, as defined in Article 212 (m), Book V of the Labor per month) in basic pay compared to the highest paid rank-and-file employee; (3)
Code, should be considered as officers or members of the managerial staff under longevity pay was increased on top of alignment adjustments; (4) they were entitled
Article 82, Book III of the same Code, and hence are not entitled to overtime rest to increased company COLA of P225.00 per month; (5) there was a grant of P100.00
day and holiday pay. allowance for rest day/holiday work.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which
is fully owned and controlled by the Government, operates three (3) sugar refineries was organized pursuant to Republic Act NO. 6715 allowing supervisory employees
located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on to form their own unions, as the bargaining representative of all the supervisory
April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union employees at the NASUREFCO Batangas Sugar Refinery.
represents the former supervisors of the NASUREFCO Batangas Sugar Refinery, Two years after the implementation of the JE Program, specifically on June 20, 1990,
namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar the members of herein respondent union filed a complainant with the executive labor
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation
Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler of Article 100 of the Labor Code.
Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2
Supervisor, Instrumentation Supervisor, Community Development Officer,
disposing as follows:
Employment and Training Supervisor, Assistant Safety and Security Officer, Head
and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head of "WHEREFORE, premises considered, respondent National Sugar refineries
Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor Corporation is hereby directed to —
and Motorpool Supervisor. 1. pay the individual members of complainant union the usual overtime pay, rest
day pay and holiday pay enjoyed by them instead of the P100.00 special allowance
which was implemented on June 11, 1988; and

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2. pay the individual members of complainant union the difference in money value We find creditable merit in the petition and that the extraordinary writ of certiorari
between the P100.00 special allowance and the overtime pay, rest day pay and shall accordingly issue.
holiday pay that they ought to have received from June 1, 1988. The primordial issue to be resolved herein is whether the members of respondent
All other claims are hereby dismissed for lack of merit. union are entitled to overtime, rest day and holiday pay. Before this can be resolved,
SO ORDERED." however it must of necessity be ascertained first whether or not the union members,
as supervisory employees, are to be considered as officers or members of the
In finding for the members therein respondent union, the labor ruled that the along
managerial staff who are exempt from the coverage of Article 82 of the Labor Code.
span of time during which the benefits were being paid to the supervisors has
accused the payment thereof to ripen into contractual obligation; at the It is not disputed that the members of respondent union are supervisory employees,
complainants cannot be estopped from questioning the validity of the new as defined employees, as defined under Article 212(m), Book V of the Labor Code
compensation package despite the fact that they have been receiving the benefits on Labor Relations, which reads:
therefrom, considering that respondent union was formed only a year after the "(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay
implementation of the Job Evaluation Program, hence there was no way for the down and execute management policies and/or to hire, transfer, suspend, lay-off,
individual supervisors to express their collective response thereto prior to the recall, discharged, assign or discipline employees. Supervisory employees are those
formation of the union; and the comparative computations presented by the private who, in the interest of the employer effectively recommend such managerial actions
respondent union showed that the P100.00 special allowance given NASUREFCO fell if the exercise of such authority is not merely routinary or clerical in nature but
short of what the supervisors ought to receive had the overtime pay rest day pay requires the use of independent judgment. All employees not falling within any of
and holiday pay not been discontinued, which arrangement, therefore, amounted to those above definitions are considered rank-and-file employees of this Book."
a diminution of benefits. Respondent NLRC, in holding that the union members are entitled to overtime, rest
On appeal, in a decision promulgated on July 19, 1991 by its Third Division, day and holiday pay, and in ruling that the latter are not managerial employees,
respondent National Labor Relations Commission (NLRC) affirmed the decision of adopted the definition stated in the aforequoted statutory provision.
the labor arbiter on the ground that the members of respondent union are not Petitioner, however, avers that for purposes of determining whether or not the
managerial employees, as defined under Article 212 (m) of the Labor Code and, members of respondent union are entitled to overtime, rest day and holiday pay,
therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC said employees should be considered as "officers or members of the managerial
declared that these supervisory employees are merely exercising recommendatory staff" as defined under Article 82, Book III of the Labor Code on "Working Conditions
powers subject to the evaluation, review and final action by their department heads; and Rest Periods" and amplified in Section 2, Rule I, Book III of the Rules to
their responsibilities do not require the exercise of discretion and independent Implement the Labor Code, to wit:
judgment; they do not participate in the formulation of management policies nor in
"Art. 82 Coverage. — The provisions of this title shall apply to employees in all
the hiring or firing of employees; and their main function is to carry out the ready
establishments and undertakings whether for profit or not, but not to government
policies and plans of the corporation. 3 Reconsideration of said decision was denied
employees, managerial employees, field personnel, members of the family of the
in a resolution of public respondent dated August 30, 1991. 4
employer who are dependent on him for support, domestic helpers, persons in the
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that personal service of another, and workers who are paid by results as determined by
public respondent commission committed a grave abuse of discretion in refusing to the Secretary of Labor in Appropriate regulations.
recognized the fact that the members of respondent union are members of the
"As used herein, 'managerial employees' refer to those whose primary duty consists
managerial staff who are not entitled to overtime, rest day and holiday pay; and in
of the management of the establishment in which they are employed or of a
making petitioner assume the "double burden" of giving the benefits due to rank-
department or subdivision thereof, and to other officers or members of the
and-file employees together with those due to supervisors under the JE Program.
managerial staff." (Emphasis supplied.)

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xxx xxx xxx purposes of forming and joining unions, certification elections, collective bargaining,
'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following and so forth, the union members are supervisory employees. In terms of working
persons if they qualify for exemption under the condition set forth herein: conditions and rest periods and entitlement to the questioned benefits, however,
they are officers or members of the managerial staff, hence they are not entitled
xxx xxx xxx
thereto.
(b) Managerial employees, if they meet all of the following conditions, namely:
While the Constitution is committed to the policy of social justice and the protection
(1) Their primary duty consists of the management of the establishment in which of the working class, it should not be supposed that every labor dispute will be
they are employed or of a department or subdivision thereof: automatically decided in favor of labor. Management also has its own rights which,
(2) They customarily and regularly direct the work of two or more employees as such, are entitled to respect and enforcement in the interest of simple fair play.
therein: Out of its concern for those with less privileges in life, this Court has inclined more
(3) They have the authority to hire or fire other employees of lower rank; or their often than not toward the worker and upheld his cause in his conflicts with the
suggestions and recommendations as to the hiring and firing and as to the promotion employer. Such favoritism, however, has not blinded us to the rule that justice is in
or any other change of status of other employees are given particular weight. every case for the deserving, to be dispensed in the light of the established facts
and the applicable law and doctrine. 5
(c) Officers or members of a managerial staff if they perform the following duties
and responsibilities: This is one such case where we are inclined to tip the scales of justice in favor of
the employer.
(1) The primary duty consists of the performance of work directly related to
management policies of their employer; The question whether a given employee is exempt from the benefits of the law is a
factual one dependent on the circumstances of the particular case, In determining
(2) Customarily and regularly exercise discretion and independent judgment;
whether an employee is within the terms of the statutes, the criterion is the character
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose of the work performed, rather than the title of the employee's position. 6
primary duty consists of the management of the establishment in which he is
Consequently, while generally this Court is not supposed to review the factual
employed or subdivision thereof; or (ii) execute under general supervision work
findings of respondent commission, substantial justice and the peculiar
along specialized or technical lines requiring special training, experience, or
circumstances obtaining herein mandate a deviation from the rule.
knowledge; or (iii) execute under general supervision special assignments and tasks;
and A cursory perusal of the Job Value Contribution Statements 7 of the union members
will readily show that these supervisory employees are under the direct supervision
(4) Who do not devote more 20 percent of their hours worked in a work-week to
of their respective department superintendents and that generally they assist the
activities which are not directly and closely related to the performance of the work
latter in planning, organizing, staffing, directing, controlling communicating and in
described in paragraphs (1), (2), and above."
making decisions in attaining the company's set goals and objectives. These
It is the submission of petitioner that while the members of respondent union, as supervisory employees are likewise responsible for the effective and efficient
supervisors, may not be occupying managerial positions, they are clearly officers or operation of their respective departments. More specifically, their duties and
members of the managerial staff because they meet all the conditions prescribed by functions include, among others, the following operations whereby the employee:
law and, hence, they are not entitled to overtime, rest day and supervisory
1) assists the department superintendent in the following:
employees under Article 212 (m) should be made to apply only to the provisions on
Labor Relations, while the right of said employees to the questioned benefits should a) planning of systems and procedures relative to department activities;
be considered in the light of the meaning of a managerial employee and of the b) organizing and scheduling of work activities of the department, which includes
officers or members of the managerial staff, as contemplated under Article 82 of the employee shifting scheduled and manning complement;
Code and Section 2, Rule I Book III of the implementing rules. In other words, for c) decision making by providing relevant information data and other inputs;

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d) attaining the company's set goals and objectives by giving his full support; not directly and clearly related to the performance of their work hereinbefore
e) selecting the appropriate man to handle the job in the department; and described.
f) preparing annual departmental budget; Under the facts obtaining in this case, we are constrained to agree with petitioner
that the union members should be considered as officers and members of the
2) observes, follows and implements company policies at all times and recommends
managerial staff and are, therefore, exempt from the coverage of Article 82.
disciplinary action on erring subordinates;
Perforce, they are not entitled to overtime, rest day and holiday.
3) trains and guides subordinates on how to assume responsibilities and become
The distinction made by respondent NLRC on the basis of whether or not the union
more productive;
members are managerial employees, to determine the latter's entitlement to the
4) conducts semi-annual performance evaluation of his subordinates and questioned benefits, is misplaced and inappropriate. It is admitted that these union
recommends necessary action for their development/advancement; members are supervisory employees and this is one instance where the
5) represents the superintendent or the department when appointed and authorized nomenclatures or titles of their jobs conform with the nature of their functions.
by the former; Hence, to distinguish them from a managerial employee, as defined either under
6) coordinates and communicates with other inter and intra department supervisors Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The
when necessary; controversy actually involved here seeks a determination of whether or not these
supervisory employees ought to be considered as officers or members of the
7) recommends disciplinary actions/promotions;
managerial staff. The distinction, therefore, should have been made along that line
8) recommends measures to improve work methods, equipment performance, and its corresponding conceptual criteria.
quality of service and working conditions;
II. We likewise no not subscribe to the finding of the labor arbiter that the payment
9) sees to it that safety rules and regulations and procedure and are implemented of the questioned benefits to the union members has ripened into a contractual
and followed by all NASUREFCO employees, recommends revisions or modifications obligation.
to said rules when deemed necessary, and initiates and prepares reports for any
A. Prior to the JE Program, the union members, while being supervisors, received
observed abnormality within the refinery;
benefits similar to the rank-and-file employees such as overtime, rest day and
10) supervises the activities of all personnel under him and goes to it that holiday pay, simply because they were treated in the same manner as rank-and-file
instructions to subordinates are properly implemented; and employees, and their basic pay was nearly on the same level as those of the latter,
11) performs other related tasks as may be assigned by his immediate superior. aside from the fact that their specific functions and duties then as supervisors had
From the foregoing, it is apparent that the members of respondent union discharge not been properly defined and delineated from those of the rank-and-file. Such fact
duties and responsibilities which ineluctably qualify them as officers or members of is apparent from the clarification made by petitioner in its motion for reconsideration
the managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules 8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated August
to Implement the Labor Code, viz.: (1) their primary duty consists of the 16, 1991, wherein, it lucidly explained:
performance of work directly related to management policies of their employer; (2) "But, complainants no longer occupy the same positions they held before the JE
they customarily and regularly exercise discretion and independent judgment; (3) Program. Those positions formerly classified as 'supervisory' and found after the JE
they regularly and directly assist the managerial employee whose primary duty Program to be rank-and-file were classified correctly and continue to receive
consist of the management of a department of the establishment in which they are overtime, holiday and restday pay. As to them, the practice subsists.
employed (4) they execute, under general supervision, work along specialized or "However, those whose duties confirmed them to be supervisory, were re-evaluated,
technical lines requiring special training, experience, or knowledge; (5) they execute, their duties re-defined and in most cases their organizational positions re-designated
under general supervision, special assignments and tasks; and (6) they do not to confirm their superior rank and duties. Thus, after the JE program, complainants
devote more than 20% of their hours worked in a work-week to activities which are cannot be said to occupy the same positions." 9

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It bears mention that this positional submission was never refuted nor controverted it too or, as petitioner suggests, they could not, as a simple matter of law and
by respondent union in any of its pleadings filed before herein public respondent or fairness, get the best of both worlds at the expense of NASUREFCO.
with this Court. Hence, it can be safely concluded therefrom that the members of Promotion of its employees is one of the jurisprudentially-recognized exclusive
respondent union were paid the questioned benefits for the reason that, at that prerogatives of management, provided it is done in good faith. In the case at bar,
time, they were rightfully entitled thereto. Prior to the JE Program, they could not private respondent union has miserably failed to convince this Court that the
be categorically classified as members or officers of the managerial staff considering petitioner acted implementing the JE Program. There is no showing that the JE
that they were then treated merely on the same level as rank-and-file. Consequently, Program was intended to circumvent the law and deprive the members of
the payment thereof could not be construed as constitutive of voluntary employer respondent union of the benefits they used to receive.
practice, which cannot be now be unilaterally withdrawn by petitioner. To be
Not so long ago, on this particular score, we had the occasion to hold that:
considered as such, it should have been practiced over a long period of time, and
must be shown to have been consistent and deliberate. 10 ". . . it is the prerogative of the management to regulate, according to its discretion
and judgment, all aspects of employment. This flows from the established rule that
The test or rationale of this rule on long practice requires an indubitable showing
labor law does not authorize the substitution of the judgment of the employer in the
that the employer agreed to continue giving the benefits knowingly fully well that
conduct of its business. Such management prerogative may be availed of without
said employees are not covered by the law requiring payment thereof. 11 In the
fear of any liability so long as it is exercised in good faith for the advancement of
case at bar, respondent union failed to sufficiently establish that petitioner has been
the employer's interest and not for the purpose of defeating on circumventing the
motivated or is wont to give these benefits out of pure generosity.
rights of employees under special laws or valid agreement and are not exercised in
B. It remains undisputed that the implementation of the JE Program, the members a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or
of private respondent union were re-classified under levels S-5 S-8 which were spite." 13
considered under the program as managerial staff purposes of compensation and
WHEREFORE, the impugned decision and resolution of respondent National Labor
benefits, that they occupied re-evaluated positions, and that their basic pay was
Relations Commission promulgated on July 19, 1991 and August 30, 1991,
increased by an average of 50% of their basic salary prior to the JE Program. In
respectively, are hereby ANNULLED and SET ASIDE for having been rendered and
other words, after the JE Program there was an ascent in position, rank and salary.
adopted with grave abuse of discretion, and the basic complaint of private
This in essence is a promotion which is defined as the advancement from one
respondent union is DISMISSED.
position to another with an increase in duties and responsibilities as authorized by
law, and usually accompanied by an increase in salary. 12
Quintessentially, with the promotion of the union members, they are no longer
entitled to the benefits which attach and pertain exclusively to their positions.
Entitlement to the benefits provided for by law requires prior compliance with the
conditions set forth therein. With the promotion of the members of respondent
union, they occupied positions which no longer met the requirements imposed by
law. Their assumption of these positions removed them from the coverage of the
law, ergo, their exemption therefrom.
As correctly pointed out by petitioner, if the union members really wanted to
continue receiving the benefits which attach to their former positions, there was
nothing to prevent them from refusing to accept their promotions and their
corresponding benefits. As the sating goes by, they cannot have their cake and eat

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Republic of the Philippines sign blank payroll sheets. On June 11, 2001, the petitioners amended their complaint
SUPREME COURT and included illegal dismissal as their cause of action. They claimed that the
Manila respondents relieved them from service in retaliation for the filing of their original
SECOND DIVISION complaint.
G.R. No. 189404 December 11, 2013 Notably, the respondents did not participate in the proceedings before the Labor
Arbiter except on April 19, 2001 and May 21, 2001 when Mr. Romulo Pacia, Jr.
WILGEN LOON, JERRY ARCILLA, ALBERTPEREYE, ARNOLD PEREYE,
appeared on the respondents’ behalf.5 The respondents’ counsel also appeared in a
EDGARDO OBOSE, ARNEL MALARAS, PATROCINO TOETIN, EVELYN
preliminary mandatory conference on July 5, 2001.6 However, the respondents
LEONARDO, ELMER GLOCENDA, RUFO CUNAMAY, ROLANDOSAJOL,
neither filed any position paper nor proffered pieces of evidence in their defense
ROLANDO ABUCAYON, JENNIFER NATIVIDAD, MARITESS TORION,
despite their knowledge of the pendency of the case.
ARMANDO LONZAGA, RIZAL GELLIDO, EVIRDE HAQUE,1 MYRNA VINAS,
RODELITO AYALA, WINELITO OJEL, RENATO RODREGO, NENA ABINA, The Labor Arbiter’s Ruling
EMALYN OLIVEROS, LOUIE ILAGAN, JOEL ENTIG, ARNEL ARANETA, In a decision7 dated March 15, 2002, Labor Arbiter (LA) Elias H. Salinas partially
BENJAMIN COSE, WELITO LOON and WILLIAM ALIPAO, Petitioners, ruled in favor of the petitioners. The LA awarded the petitioners salary differential,
vs. service incentive leave, and thirteenth month pays. In awarding these claims, the
POWER MASTER, INC., TRI-C GENERAL SERVICES, and SPOUSES HOMER LA stated that the burden of proving the payment of these money claims rests with
and CARINA ALUMISIN,Respondents. the employer. The LA also awarded attorney’s fees in favor of the petitioners,
DECISION pursuant to Article 111 of the Labor Code.8
BRION, J.: However, the LA denied the petitioners’ claims for backwages, overtime, holiday,
and premium pays. The LA observed that the petitioners failed to show that they
We resolve the petition for review on certiorari,2 filed by petitioners Wilgen Loon,
rendered overtime work and worked on holidays and rest days without
Jerry Arcilla, Albert Pereye, Arnold Pereye, Edgardo Obose, Arnel Malaras, Patrocino
compensation. The LA further concluded that the petitioners cannot be declared to
Toetin, Evelyn Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando Sajol, Rolando
have been dismissed from employment because they did not show any notice of
Abucayon, Jennifer Natividad, Maritess Torion, Armando Lonzaga, Rizal Gellido,
termination of employment. They were also not barred from entering the
Evirde Haque, Myrna Vinas, Rodelito Ayala, Winelito Ojel, Renato Rodrego, Nena
respondents’ premises.
Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Arnel Araneta, Benjamin Cose,
Welito Loon, William Alipao (collectively, the petitioners), to challenge the June 5, The Proceedings before the NLRC
2009 decision3 and the August 28, 2009 resolution4 of the Court of Appeals (CA) in Both parties appealed the LA’s ruling with the National Labor Relations Commission.
CA-G.R. SP No. 95182. The petitioners disputed the LA’s denial of their claim for backwages, overtime,
The Factual Antecedents holiday and premium pays. Meanwhile, the respondents questioned the LA’s ruling
on the ground that the LA did not acquire jurisdiction over their persons.
Respondents Power Master, Inc. and Tri-C General Services employed and assigned
the petitioners as janitors and leadsmen in various Philippine Long Distance The respondents insisted that they were not personally served with summons and
Telephone Company (PLDT) offices in Metro Manila area. Subsequently, the other processes. They also claimed that they paid the petitioners minimum wages,
petitioners filed a complaint for money claims against Power Master, Inc., Tri-C service incentive leave and thirteenth month pays. As proofs, they attached
General Services and their officers, the spouses Homer and Carina Alumisin photocopied and computerized copies of payroll sheets to their memorandum on
(collectively, the respondents). The petitioners alleged in their complaint that they appeal.9 They further maintained that the petitioners were validly dismissed. They
were not paid minimum wages, overtime, holiday, premium, service incentive leave, argued that the petitioners’ repeated defiance to their transfer to different
and thirteenth month pays. They further averred that the respondents made them

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workplaces and their violations of the company rules and regulations constituted be disregarded to serve the greater interest of substantial due process. Furthermore,
serious misconduct and willful disobedience.10 the Rules of Court do not require the verification of a supplemental pleading.
On January 3, 2003, the respondents filed an unverified supplemental appeal. They The NLRC also vacated the LA’s awards of salary differential, thirteenth month and
attached photocopied and computerized copies of list of employees with automated service incentive leave pays. In so ruling, it gave weight to the pieces of evidence
teller machine (ATM) cards to the supplemental appeal. This list also showed the attached to the memorandum on appeal and the supplemental appeal. It maintained
amounts allegedly deposited in the employees’ ATM cards.11 They also attached that the absence of the petitioners’ signatures in the payrolls was not an
documentary evidence showing that the petitioners were dismissed for cause and indispensable factor for their authenticity. It pointed out that the payment of money
had been accorded due process. claims was further evidenced by the list of employees with ATM cards. It also found
On January 22, 2003, the petitioners filed an Urgent Manifestation and that the petitioners’ signatures were not forged. It took judicial notice that many
Motion12 where they asked for the deletion of the supplemental appeal from the people use at least two or more different signatures.
records because it allegedly suffered from infirmities. First, the supplemental appeal The NLRC further ruled that the petitioners were lawfully dismissed on grounds of
was not verified. Second, it was belatedly filed six months from the filing of the serious misconduct and willful disobedience. It found that the petitioners failed to
respondents’ notice of appeal with memorandum on appeal. The petitioners pointed comply with various memoranda directing them to transfer to other workplaces and
out that they only agreed to the respondents’ filing of a responsive pleading until to attend training seminars for the intended reorganization and reshuffling.
December 18, 2002.13 Third¸ the attached documentary evidence on the The NLRC denied the petitioners’ motion for reconsideration in a resolution dated
supplemental appeal bore the petitioners’ forged signatures. April 28, 2006.17 Aggrieved, the petitioners filed a petition for certiorari under Rule
They reiterated these allegations in an Urgent Motion to Resolve Manifestation and 65 of the Rules of Court before the CA.18
Motion (To Expunge from the Records Respondents’ Supplemental Appeal, Reply The CA Ruling
and/or Rejoinder) dated January 31, 2003.14Subsequently, the petitioners filed
The CA affirmed the NLRC’s ruling. The CA held that the petitioners were afforded
an Urgent Manifestation with Reiterating Motion to Strike-Off the Record
substantive and procedural due process. Accordingly, the petitioners deliberately did
Supplemental Appeal/Reply, Quitclaims and Spurious Documents Attached to
not explain their side. Instead, they continuously resisted their transfer to other
Respondents’ Appeal dated August 7, 2003.15 The petitioners argued in this last
PLDT offices and violated company rules and regulations. It also upheld the NLRC’s
motion that the payrolls should not be given probative value because they were the
findings on the petitioners’ monetary claims.
respondents’ fabrications. They reiterated that the genuine payrolls bore their
signatures, unlike the respondents’ photocopies of the payrolls. They also The CA denied the petitioners’ motion for reconsideration in a resolution dated
maintained that their signatures in the respondents’ documents (which showed their August 28, 2009, prompting the petitioners to file the present petition.19
receipt of thirteenth month pay) had been forged. The Petition
The NLRC Ruling In the petition before this Court, the petitioners argue that the CA committed a
In a resolution dated November 27, 2003, the NLRC partially ruled in favor of the reversible error when it did not find that the NLRC committed grave abuse of
respondents.16 The NLRC affirmed the LA’s awards of holiday pay and attorney’s discretion. They reiterate their arguments before the lower tribunals and the CA in
fees. It also maintained that the LA acquired jurisdiction over the persons of the support of this conclusion. They also point out that the respondents posted a bond
respondents through their voluntary appearance. from a surety that was not accredited by this Court and by the NLRC. In effect, the
respondents failed to perfect their appeal before the NLRC. They further insist that
However, it allowed the respondents to submit pieces of evidence for the first time
the NLRC should not have admitted the respondents’ unverified supplemental
on appeal on the ground that they had been deprived of due process. It found that
appeal.20
the respondents did not actually receive the LA’s processes. It also admitted the
respondents’ unverified supplemental appeal on the ground that technicalities may The Respondents’ Position

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In their Comments, the respondents stress that the petitioners only raised the issue workers that they will receive the money judgment in their favor upon the dismissal
of the validity of the appeal bond for the first time on appeal. They also reiterate of the employer’s appeal.23
their arguments before the NLRC and the CA. They additionally submit that the In the present case, the respondents filed a surety bond issued by Security Pacific
petitioners’ arguments have been fully passed upon and found unmeritorious by the Assurance Corporation (Security Pacific) on June 28, 2002. At that time, Security
NLRC and the CA.21 Pacific was still an accredited bonding company. However, the NLRC revoked its
The Issues accreditation on February 16, 2003.24 Nonetheless, this subsequent revocation
This case presents to us the following issues: should not prejudice the respondents who relied on its then subsisting accreditation
in good faith. In Del Rosario v. Philippine Journalists, Inc.,25 we ruled that a bonding
1) Whether the CA erred when it did not find that the NLRC committed grave abuse
company’s revocation of authority is prospective in application.
of discretion in giving due course to the respondents’ appeal;
However, the respondents should post a new bond issued by an accredited bonding
a) Whether the respondents perfected their appeal before the NLRC; and
company in compliance with paragraph 4, Section 6, Rule 6 of the NLRC Rules of
b) Whether the NLRC properly allowed the respondents’ supplemental appeal Procedure. This provision states that "[a] cash or surety bond shall be valid and
2) Whether the respondents were estopped from submitting pieces of evidence for effective from the date of deposit or posting, until the case is finally decided,
the first time on appeal; resolved or terminated or the award satisfied."
3) Whether the petitioners were illegally dismissed and are thus entitled to The CA correctly ruled that the
backwages; NLRC properly gave due course to
4) Whether the petitioners are entitled to salary differential, overtime, holiday, the respondents’ supplemental
premium, service incentive leave, and thirteenth month pays; and appeal

5) Whether the petitioners are entitled to attorney’s fees. The CA also correctly ruled that the NLRC properly gave due course to the
respondents’ supplemental appeal. Neither the laws nor the rules require the
The Court’s Ruling
verification of the supplemental appeal.26 Furthermore, verification is a formal, not
The respondents perfected their a jurisdictional, requirement. It is mainly intended for the assurance that the matters
appeal with the NLRC because the alleged in the pleading are true and correct and not of mere speculation.27 Also, a
revocation of the bonding company's supplemental appeal is merely an addendum to the verified memorandum on appeal
authority has a prospective that was earlier filed in the present case; hence, the requirement for verification has
application substantially been complied with.
Paragraph 2, Article 223 of the Labor Code provides that "[i]n case of a judgment The respondents also timely filed their supplemental appeal on January 3, 2003. The
involving a monetary award, an appeal by the employer may be perfected only upon records of the case show that the petitioners themselves agreed that the pleading
the posting of a cash or surety bond issued by a reputable bonding company duly shall be filed until December 18, 2002. The NLRC further extended the filing of the
accredited by the Commission in the amount equivalent to the monetary award in supplemental pleading until January 3, 2003 upon the respondents’ motion for
the judgment appealed from." extension.
Contrary to the respondents’ claim, the issue of the appeal bond’s validity may be A party may only adduce evidence for the first time on appeal if he adequately
raised for the first time on appeal since its proper filing is a jurisdictional explains his delay in the submission of evidence and he sufficiently proves the
requirement.22 The requirement that the appeal bond should be issued by an allegations sought to be proven
accredited bonding company is mandatory and jurisdictional. The rationale of
In labor cases, strict adherence to the technical rules of procedure is not required.
requiring an appeal bond is to discourage the employers from using an appeal to
Time and again, we have allowed evidence to be submitted for the first time on
delay or evade the employees' just and lawful claims. It is intended to assure the

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appeal with the NLRC in the interest of substantial justice.28 Thus, we have B. The respondents failed to sufficiently prove the allegations sought to be proven
consistently supported the rule that labor officials should use all reasonable means Furthermore, the respondents failed to sufficiently prove the allegations sought to
to ascertain the facts in each case speedily and objectively, without regard to be proven. Why the respondents’ photocopied and computerized copies of
technicalities of law or procedure, in the interest of due process.29 documentary evidence were not presented at the earliest opportunity is a serious
However, this liberal policy should still be subject to rules of reason and fairplay. The question that lends credence to the petitioners’ claim that the respondents fabricated
liberality of procedural rules is qualified by two requirements: (1) a party should the evidence for purposes of appeal. While we generally admit in evidence and give
adequately explain any delay in the submission of evidence; and (2) a party should probative value to photocopied documents in administrative proceedings, allegations
sufficiently prove the allegations sought to be proven.30 The reason for these of forgery and fabrication should prompt the adverse party to present the original
requirements is that the liberal application of the rules before quasi-judicial agencies documents for inspection.35 It was incumbent upon the respondents to present the
cannot be used to perpetuate injustice and hamper the just resolution of the case. originals, especially in this case where the petitioners had submitted their specimen
Neither is the rule on liberal construction a license to disregard the rules of signatures. Instead, the respondents effectively deprived the petitioners of the
procedure.31 opportunity to examine and controvert the alleged spurious evidence by not
Guided by these principles, the CA grossly erred in ruling that the NLRC did not adducing the originals. This Court is thus left with no option but to rule that the
commit grave abuse of discretion in arbitrarily admitting and giving weight to the respondents’ failure to present the originals raises the presumption that evidence
respondents’ pieces of evidence for the first time on appeal. willfully suppressed would be adverse if produced.36
A. The respondents failed to adequately explain their delay in the submission of It was also gross error for the CA to affirm the NLRC’s proposition that "[i]t is of
evidence common knowledge that there are many people who use at least two or more
different signatures."37 The NLRC cannot take judicial notice that many people use
We cannot accept the respondents’ cavalier attitude in blatantly disregarding the
at least two signatures, especially in this case where the petitioners themselves
NLRC Rules of Procedure. The CA gravely erred when it overlooked that the NLRC
disown the signatures in the respondents’ assailed documentary evidence.38 The
blindly admitted and arbitrarily gave probative value to the respondents’ evidence
NLRC’s position is unwarranted and is patently unsupported by the law and
despite their failure to adequately explain their delay in the submission of evidence.
jurisprudence.
Notably, the respondents’ delay was anchored on their assertion that they were
oblivious of the proceedings before the LA. However, the respondents did not Viewed in these lights, the scales of justice must tilt in favor of the employees. This
dispute the LA’s finding that Mr. Romulo Pacia, Jr. appeared on their behalf on April conclusion is consistent with the rule that the employer’s cause can only succeed on
19, 2001 and May 21, 2001.32 The respondents also failed to contest the petitioners’ the strength of its own evidence and not on the weakness of the employee’s
assertion that the respondents’ counsel appeared in a preliminary mandatory evidence.39
conference on July 5, 2001.33 The petitioners are entitled to backwages
Indeed, the NLRC capriciously and whimsically admitted and gave weight to the Based on the above considerations, we reverse the NLRC and the CA’s finding that
respondents’ evidence despite its finding that they voluntarily appeared in the the petitioners were terminated for just cause and were afforded procedural due
compulsory arbitration proceedings. The NLRC blatantly disregarded the fact that process. In termination cases, the burden of proving just and valid cause for
the respondents voluntarily opted not to participate, to adduce evidence in their dismissing an employee from his employment rests upon the employer. The
defense and to file a position paper despite their knowledge of the pendency of the employer’s failure to discharge this burden results in the finding that the dismissal
proceedings before the LA. The respondents were also grossly negligent in not is unjustified.40 This is exactly what happened in the present case.
informing the LA of the specific building unit where the respondents were conducting The petitioners are entitled to salary differential, service incentive, holiday, and
their business and their counsel’s address despite their knowledge of their non- thirteenth month pays
receipt of the processes.34

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We also reverse the NLRC and the CA’s finding that the petitioners are not entitled Elmer Glocenda, Rufo Cunamay, Rolando Sajol, Rolando Abucayon, Jennifer
to salary differential, service incentive, holiday, and thirteenth month pays. As in Natividad, Maritess Torion, Ammndo Lonzaga, Rizal Gellido, Evirdly Haque, Myrna
illegal dismissal cases, the general rule is that the burden rests on the defendant to Vinas, Nena Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Amel Araneta,
prove payment rather than on the plaintiff to prove non-payment of these money Benjamin Cose and William Alipao) full backwages (computed from the date of their
claims.41 The rationale for this rule is that the pertinent personnel files, payrolls, respective dismissals up to the finality of this decision) and their salary differential,
records, remittances and other similar documents – which will show that service incentive leave, holiday, thirteenth month pays, and attorney's fees
differentials, service incentive leave and other claims of workers have been paid – equivalent to ten percent (10%) of the withheld wages. The respondents are further
are not in the possession of the worker but are in the custody and control of the directed to immediately post a satisfactory bond conditioned on the satisfaction of
employer.42 the awards affirmed in this Decision.
The petitioners are not entitled to overtime and premium pays SO ORDERED.
However, the CA was correct in its finding that the petitioners failed to provide
sufficient factual basis for the award of overtime, and premium pays for holidays
and rest days. The burden of proving entitlement to overtime pay and premium pay
for holidays and rest days rests on the employee because these are not incurred in
the normal course of business.43 In the present case, the petitioners failed to
adduce any evidence that would show that they actually rendered service in excess
of the regular eight working hours a day, and that they in fact worked on holidays
and rest days.
The petitioners are entitled to attorney’s fees
The award of attorney’s fees is also warranted under the circumstances of this
case.1âwphi1 An employee is entitled to an award of attorney’s fees equivalent to
ten percent (10%) of the amount of the wages in actions for unlawful withholding
of wages.44
As a final note, we observe that Rodelito Ayala, Winelito Ojel, Renato Rodrego and
Welito Loon are also named as petitioners in this case. However, we deny their
petition for the reason that they were not part of the proceedings before the CA.
Their failure to timely seek redress before the CA precludes this Court from awarding
them monetary claims.
All told, we find that the NLRC committed grave abuse of discretion in admitting and
giving probative value to the respondents' evidence on appeal, which errors the CA
replicated when it upheld the NLRC rulings.
WHEREFORE, based on these premises, we REVERSE and SET ASIDE the decision
dated June 5, 2009, and the resolution dated August 28, 2009 of the Court of
Appeals in CA-G.R. SP No. 95182. This case is REMANDED to the Labor Arbiter for
the sole purpose of computing petitioners' (Wilgen Loon, Jerry Arcilla, Albert Pereye,
Arnold Pereye, Edgardo Obose, Arnel Malaras, Patrocino Toetin, Evelyn Leonardo,

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Republic of the Philippines


Aniceto Betana 3rd Engineer US$400.00
SUPREME COURT
Manila Petitioners were deployed on May 7, 1985, and discharged on July 12, 1986.
SECOND DIVISION Thereafter, petitioners collectively and/or individually filed complaints for non-
G.R. Nos. 85122-24 March 22, 1991 payment of overtime pay, vacation pay and terminal pay against private respondent.
In addition, they claimed that they were made to sign their contracts in blank.
JULIO N. CAGAMPAN, SILVINO C. VICERA, JORGE C. DE CASTRO,
Likewise, petitioners averred that although they agreed to render services on board
JUANITO R. DE JESUS, ARNOLD J. MIRANDA, , MAXIMO O. ROSELLO &
the vessel Rio Colorado managed by Golden Light Ocean Transport, Ltd., the vessel
ANICETO L. BETANA, petitioners,
they actually boarded was MV "SOIC I" managed by Columbus Navigation. Two (2)
vs.
petitioners, Jorge de Castro and Juanito de Jesus, charged that although they were
NATIONAL LABOR RELATIONS COMMISSION, & ACE MARITIME
employed as ordinary seamen (OS), they actually performed the work and duties of
AGENCIES, INC., respondents.
Able Seamen (AB).
PARAS, J.:
Private respondent was furnished with copies of petitioners' complaints and
Presented before Us for review is the decision of public respondent National Labor summons, but it failed to file its answer within the reglementary period. Thus, on
Relations Commission handed down on March 16, 1988 reversing the decision of the January 12, 1987, an Order was issued declaring that private respondent has waived
Philippine Oversees Employment Administration and correspondingly dismissing the its right to present evidence in its behalf and that the cases are submitted for
cases for lack of merit. The POEA decision granted overtime pay to petitioners decision (Page 68, Records).
equivalent to 30% of their basic pay.
On August 5, 1987, the Philippine Overseas Employment Administration (POEA)
We do not dispute the facts as found by the Solicitor General. Thus: rendered a Decision dismissing petitioners' claim for terminal pay but granted their
On April 17 and 18,1985, petitioners, all seamen, entered into separate contracts of prayer for leave pay and overtime pay. The dispositive portion of the Decision reads:
employment with the Golden Light Ocean Transport, Ltd., through its local agency, IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering respondent
private respondent ACE MARITIME AGENCIES, INC. Petitioners, with their respective (private respondent) Ace Maritime Agencies, Inc. to pay the following complainants
ratings and monthly salary rates, are as follows: (petitioners) in the amounts opposite their names:
Petitioners Rating Salary per month 1. Julio Cagampan—US$583.33 plus US$2,125.00 representing the 30% guaranteed
overtime pay;
Julio Cagampan 2nd Engineer US$500.00 2. Silvino Vicera—US$933.33 plus US$3,400.00 representing the 30% guaranteed
overtime pay;
Silvino Vicera 2nd Engineer US$800.00 3. Jorge de Castro—US$233.33 plus US$850.00 representing the 30% guaranteed
overtime pay;
Juanito de Jesus Ordinary Seaman US$120.00
4. Juanito de Jesus—US$233.33 plus US$850.00 representing the 30% guaranteed
overtime pay;
Jorge C. de Castro Ordinary Seaman US$160.00
5. Lauro Diongzon—US$233.33 plus US$850.00 representing the 30% guaranteed
Arnold Miranda 3rd Officer US$310.00 overtime pay;
6. Arnold Miranda—US$455.00 plus US$1,659.50 representing the 30% guaranteed
Maximo Rosello Cook US$230.00 overtime pay;

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7. Maximo Rosello—US$303.33 plus US$1,105.00 representing the 30% guaranteed 3. In the hearings conducted by respondent Commission, all the arguments of both
overtime pay; and parties were properly ventilated and considered by said Commission in rendering its
8. Aniceto Betana—US$583.33 plus US$2,125.00 representing the 30% guaranteed decision.
overtime pay. 4. The Labor Code basically provides that the rules of evidence prevailing in courts
The payments represent their leave pay equivalent to their respective salary (sic) of of law or equity shall not be controlling and it is the spirit and intention of the Code
35 days and should be paid in Philippine currency at the current rate of exchange at that the Commission and its members and Labor Arbiters should use every and an
the time of actual payment. (pp. 81-82, Records) reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law and procedure, all in the interest of due
Private respondent appealed from the POEA's Decision to the NLRC on August 24,
process.
1987. On March 16, 1988, the NLRC promulgated a Decision, the dispositive portion
of which reads: 5. Petitioners' motion for reconsideration of the NLRC decision did not invoke the
merits of the case but merely raised purely technical and procedural matters. Even
WHEREFORE, premises considered, the appealed decision is hereby REVERSED and
assuming that private respondent, technically speaking, waived the presentation of
SET ASIDE and another one entered dismissing these cases for lack of merit. (p.
evidence, its appeal to the NLRC was valid since it involved merely a correct
144, Records)
interpretation and clarification of certain provisions of the contract the validity of
On May 8, 1988, petitioners filed an Urgent Motion for Reconsideration of the NLRC's which has never been questioned.
Decision (p. 210, Records), but the same was denied by the NLRC for lack of merit
The Solicitor General, arguing for public respondent NLRC, contends:
in its Resolution dated September 12, 1988 (p. 212, Records).
1. Petitioners' assumption that a party who is declared to have waived his right to
Hence, this appeal from the decision and resolution of the respondent NLRC.
present evidence also loses his right to appeal from an adverse judgment made
Petitioners allege that respondent Commission gravely abused its discretion or erred against him is a falsity for, although the technical rules of evidence prevailing in the
in deciding in favor of private respondent company by reason of the following: courts of law or equity do not bind labor tribunals, even the Rules of Court allows a
1. Respondent NLRC overlooked the fact that private respondent company had party declared in default to appeal from said judgment by attaching the propriety of
repeatedly failed and refused to file its answer to petitioners' complaints with their the relief awarded therein.
supporting documents. 2. The NLRC did not abuse its discretion in the rendition of subject decision because
2. Respondent Commission erred in reversing and setting aside the POEA decision the evidence presented by petitioners in support of their complaint is by itself
and correspondingly dismissing the appeal of petitioners, allegedly in contravention sufficient to back up the decision. The issue of the disallowance of overtime pay
of law and jurisprudence. stems from an interpretation of particular provisions of the employment contract.
Private respondent maritime company disclaims the aforesaid allegations of We cannot sustain petitioners' position.
petitioners through these arguments: The failure of respondent to submit its responsive pleading was not fatal as to
1. As borne out by the records, its former counsel attended all the hearings before invalidate its case before the Phil. Overseas Employment Authority. Evidently, such
the POEA wherein he raised the basis objection that the complaint of petitioners was formal or technical defect was rectified by the fact that the POEA proceeded with
so generally couched that a more detailed pleading with supporting documents was the hearings on the case where both parties were given sufficient leeway to ventilate
repeatedly requested for the latter to submit. their cases.
2. The NLRC never abused its discretion in arriving at assailed decision considering Petitioners' manifest pursuit of their claims before the POEA in the absence of the
that the same was based on the Memorandum on Appeal dated August 14, 1987 answer produced the effect of condoning the failure of private respondent to submit
filed by private respondent. the said answer. Their submission to the POEA's authority without questioning its
jurisdiction to continue the hearings further strengthens the fact that the alleged

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technical defect had already been cured. After all, what is there to complain of when (petitioners) were even paid much more than what they should receive by way of
the POEA handed down a decision favorable to petitioners with the allowance of the leave pay, then they would be enriching themselves at the expense of others.
latter's leave pay and overtime pay. Accordingly, justice and equity compel Us to deny this award.
Notably, it was only when private respondent appealed the NLRC decision to this Even as the denial of petitioners' terminal pay by the NLRC has been justified, such
Court that petitioners suddenly unearth the issue of private respondent's default in denial should not have been applied to petitioners Julio Cagampan and Silvino
the POEA case. Had the decision favoring them not been reversed by the NLRC, Vicera. For, a deeper scrutiny of the records by the Solicitor General has revealed
petitioners could have just clammed up. They resorted to bringing up a technical, that the fact of overpayment does not cover the aforenamed petitioners since the
not a substantial, defect in their desperate attempt to sway the Court's decision in amounts awarded them were equal only to the amounts stipulated in the crew
their favor. contracts. Since petitioners Cagampan and Vicera were not overpaid by the
Private respondent has pointedly argued that the NLRC anchored its decision company, they should be paid the amounts of US$583.33 and US$933.33,
primarily upon the Memorandum on Appeal.1âwphi1 In the case of Manila Doctors respectively. Further examination by the Solicitor General shows that petitioner
Hospital v. NLRC (153 SCRA 262) this Court ruled that the National Labor Relations Maximo Rosello was also overpaid in the amount of US$420.00.
Commission and the Labor Arbiter have authority under the Labor Code to decide a Hence, with respect to petitioners Cagampan and Vicera, the NLRC decision must
case based on the position papers and documents submitted without resorting to be modified correspondingly.
the technical rules of evidence. As regards the question of overtime pay, the NLRC cannot be faulted for disallowing
On the issue of whether or not petitioners should be entitled to terminal the payment of said pay because it merely straightened out the distorted
pay, We sustain the finding of respondent NLRC that petitioners were actually paid interpretation asserted by petitioners and defined the correct interpretation of the
more than the amounts fixed in their employment contracts. The pertinent portion provision on overtime pay embodied in the contract conformably with settled
of the NLRC decision reads as follows. doctrines on the matter. Notably, the NLRC ruling on the disallowance of overtime
On this award for leave pay to the complainants (petitioners), the (private) pay is ably supported by the fact that petitioners never produced any proof of actual
respondent maintains that the actually they were paid much more than what they performance of overtime work.
were legally entitled to under their contract. This fact has not been disputed by the Petitioners have conveniently adopted the view that the "guaranteed or fixed
complainants (petitioners.) Thus, as mentioned in (private) respondent's overtime pay of 30% of the basic salary per month" embodied in their employment
Memorandum on Appeal dated 14 August 1987, their overpayment is more than contract should be awarded to them as part of a "package benefit." They have
enough and sufficient to offset whatever claims for leave pay they filed in this theorized that even without sufficient evidence of actual rendition of overtime work,
case and for which the POEA favorably considered in their favor. For complainant they would automatically be entitled to overtime pay. Their theory is erroneous for
(petitioner) Aniceto Betana, it appears that under the crew contract his monthly being illogical and unrealistic. Their thinking even runs counter to the intention
salary was US$400 while he was overpaid by US$100 as he actually received behind the provision. The contract provision means that the fixed overtime pay of
US$500. In fine, Betana had received at least US1,400 excess salary for a period of 30% would be the basis for computing the overtime pay if and when overtime work
fourteen (14) months which was the period of his employment. In the case of would be rendered. Simply, stated, the rendition of overtime work and the
complainant (petitioner) Jorge C. de Castro his stipulated monthly pay was US$160 submission of sufficient proof that said work was actually performed are conditions
but he actually received a monthly pay of US$200 or an overpayment of US$560 for to be satisfied before a seaman could be entitled to overtime pay which should be
the same period of service. For complainant (petitioner) Juanito R. de Jesus, his computed on the basis of 30% of the basic monthly salary. In short, the contract
overpayment is US$1120. Complainant (petitioner) Arnold J. Miranda has also the provision guarantees the right to overtime pay but the entitlement to such benefit
same amount of excess payment as de Jesus. Indeed, We cannot simply ignore this must first be established. Realistically speaking, a seaman, by the very nature of his
material fact. It is our duty to prevent a miscarriage of justice for if We sustain the job, stays on board a ship or vessel beyond the regular eight-hour work schedule.
award for leave pay in the face of undisputed facts that the complainants For the employer to give him overtime pay for the extra hours when he might be

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sleeping or attending to his personal chores or even just lulling away his time would
be extremely unfair and unreasonable.
We already resolved the question of overtime pay of a worker aboard a vessel in the
case of National Shipyards and Steel Corporation v. CIR (3 SCRA 890). We ruled:
We can not agree with the Court below that respondent Malondras should be paid
overtime compensation for every hour in excess of the regular working hours that
he was on board his vessel or barge each day, irrespective of whether or not he
actually put in work during those hours. Seamen are required to stay on board their
vessels by the very nature of their duties, and it is for this reason that, in addition
to their regular compensation, they are given free living quarters and subsistence
allowances when required to be on board. It could not have been the purpose of
our law to require their employers to pay them overtime even when they are not
actually working; otherwise, every sailor on board a vessel would be entitled to
overtime for sixteen hours each day, even if he spent all those hours resting or
sleeping in his bunk, after his regular tour of duty. The correct criterion in
determining whether or not sailors are entitled to overtime pay is not, therefore,
whether they were on board and can not leave ship beyond the regular eight working
hours a day, but whether they actually rendered service in excess of said number of
hours. (Emphasis supplied)
The aforequoted ruling is a reiteration of Our resolution in Luzon Stevedoring
Co., Inc. vs. Luzon Marine Department Union, et al. (G.R. No. 9265, April 29, 1957).
WHEREFORE, the decision of the NLRC is hereby AFFIRMED with the modification
that petitioners Cagampan and Vicera are awarded their leave pay according to the
terms of the contract.
SO ORDERED.

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THIRD DIVISION reminded to submit the same and was even given up to February 17, 1993 to do so.
[G.R. No. 121004. January 28, 1998] Instead of complying with said directive, petitioner, on February 16, 1993, wrote a
note, TO HELL WITH COLD CALLS! WHO CARES? and exhibited the same to his co-
ROMEO LAGATIC, petitioner, vs. NATIONAL LABOR RELATIONS
employees. To worsen matters, he left the same lying on his desk where everyone
COMMISSION, CITYLAND DEVELOPMENT CORPORATION, STEPHEN
could see it.
ROXAS, JESUS GO, GRACE LIUSON, and ANDREW LIUSON, respondents.
On February 23, 1993, petitioner received a memorandum requiring him to explain
DECISION
why Cityland should not make good its previous warning for his failure to submit
ROMERO, J.: cold call reports, as well as for issuing the written statement aforementioned. On
Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of the February 24, 1993, he sent a letter-reply alleging that his failure to submit cold call
resolution of the National Labor Relations Commission dated May 12, 1995, affirming reports should not be deemed as gross insubordination. He denied any knowledge
the February 17, 1994, decision of Labor Arbiter Ricardo C. Nora finding that of the damaging statement, TO HELL WITH COLD CALLS!
petitioner had been validly dismissed by private respondent Cityland Development Finding petitioner guilty of gross insubordination, Cityland served a notice of
Corporation (hereafter referred to as Cityland) and that petitioner was not entitled dismissal upon him on February 26, 1993. Aggrieved by such dismissal, petitioner
to separation pay, premium pay and overtime pay. filed a complaint against Cityland for illegal dismissal, illegal deduction,
The facts of the case are as follows: underpayment, overtime and rest day pay, damages and attorneys fees. The labor
Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a arbiter dismissed the petition for lack of merit. On appeal, the same was affirmed
probationary sales agent, and later on as a marketing specialist. He was tasked with by the NLRC; hence the present recourse.
soliciting sales for the company, with the corresponding duties of accepting call-ins, Petitioner raises the following issues:
referrals, and making client calls and cold calls. Cold calls refer to the practice 1. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN
of prospecting for clients through the telephone directory. Cityland, believing that NOT FINDING THAT PETITIONER WAS ILLEGALLY DISMISSED;
the same is an effective and cost-efficient method of finding clients, requires all its
2. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN
marketing specialists to make cold calls. The number of cold calls depends on the
RULING THAT PETITIONER IS NOT ENTITLED TO SALARY DIFFERENTIALS,
sales generated by each: more sales mean less cold calls. Likewise, in order to
BACKWAGES, SEPARATION PAY, OVERTIME PAY, REST DAY PAY, UNPAID
assess cold calls made by the sales staff, as well as to determine the results thereof,
COMMISSIONS, MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.
Cityland requires the submission of daily progress reports on the same.
The petition lacks merit.
On October 22, 1991, Cityland issued a written reprimand to petitioner for his failure
to submit cold call reports for September 10, October 1 and 10, 1991. This To constitute a valid dismissal from employment, two requisites must be met,
notwithstanding, petitioner again failed to submit cold call reports for September 2, namely: (1) the employee must be afforded due process, and (2) the dismissal must
5, 8, 10, 11, 12, 15, 17, 18, 19, 20, 22, and 28, as well as for October 6, 8, 9, 10, be for a valid cause.[1] In the case at bar, petitioner contends that his termination
12, 13 and 14, 1992. Petitioner was required to explain his inaction, with a warning was illegal on both substantive and procedural aspects. It is his submission that the
that further non-compliance would result in his termination from the company. In a failure to submit a few cold calls does not qualify as willful disobedience, as, in his
reply dated October 18, 1992, petitioner claimed that the same was an honest experience, cold calls are one of the least effective means of soliciting sales. He thus
omission brought about by his concentration on other aspects of his job. Cityland asserts that a couple of cold call reports need not be accorded such tremendous
found said excuse inadequate and, on November 9, 1992, suspended him for three significance as to warrant his dismissal for failure to submit them on time.
days, with a similar warning. These arguments are specious. Petitioner loses sight of the fact that (e)xcept as
Notwithstanding the aforesaid suspension and warning, petitioner again failed to provided for, or limited by, special laws, an employer is free to regulate, according
submit cold call reports for February 5, 6, 8, 10 and 12, 1993. He was verbally to his discretion and judgment, all aspects of employment.[2] Employers may, thus,

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make reasonable rules and regulations for the government of their employees, and with the duties which he had been engaged to discharge. There is, thus, just cause
when employees, with knowledge of an established rule, enter the service, the rule for his dismissal.
becomes a part of the contract of employment.[3] It is also generally recognized On the procedural aspect, petitioner claims that he was denied due process.
that company policies and regulations, unless shown to be grossly oppressive or
Well settled is the dictum that the twin requirements of notice and hearing constitute
contrary to law, are generally valid and binding on the parties and must be complied
the elements of due process in the dismissal of employees. Thus, the employer must
with.[4] Corollarily, an employee may be validly dismissed for violation of a
furnish the employee with two written notices before the termination of employment
reasonable company rule or regulation adopted for the conduct of the company
can be effected. The first apprises the employee of the particular acts or omissions
business. An employer cannot rationally be expected to retain the employment of a
for which his dismissal is sought; the second informs him of the employers decision
person whose x x x lack of regard for his employers rules x x x has so plainly and
to dismiss him.[8]
completely been bared.[5] Petitioners continued infraction of company policy
requiring cold call reports, as evidenced by the 28 instances of non-submission of In the case at bar, petitioner was notified of the charges against him in a
aforesaid reports, justifies his dismissal. He cannot be allowed to arrogate unto memorandum dated February 19, 1993, which he received on February 23, 1993.
himself the privilege of setting company policy on the effectivity of solicitation He submitted a letter-reply thereto on February 24, 1993, wherein he asked that his
methods. To do so would be to sanction oppression and the self-destruction of the failure to submit cold call reports be not interpreted as gross insubordination.[9] He
employer. was given notice of his termination on February 26, 1993. This chronology
of events clearly show that petitioner was served with the required written notices.
Moreover, petitioner made it worse for himself when he wrote the statement, TO
HELL WITH COLD CALLS! WHO CARES? When required to explain, he merely denied Nonetheless, petitioner contends that he has not been given the benefit of an
any knowledge of the same. Cityland, on the other hand, effective hearing. He alleges that he was not adequately informed of the results of
submitted the affidavits of his co-employees attesting to his authorship of the same. the investigation conducted by the company, nor was he able to confront the affiants
Petitioners only defense is denial. The rule, however, is that denial, if who attested to his writing the statement, TO HELL WITH COLD CALLS! While we
unsubstantiated by clear and convincing evidence, is negative and self-serving have held that in dismissing employees, the employee must be afforded ample
evidence which has no weight in law.[6] More telling, petitioner, while making much opportunity to be heard, ample opportunity connoting every kind of assistance that
capital out of his lack of opportunity to confront the affiants, never, in all of his management must afford the employee to enable him to prepare adequately for his
pleadings, categorically denied writing the same. He only denied knowledge of the defense,[10] it is also true that the requirement of a hearing is complied with as
allegation that he issued such a statement. long as there was an opportunity to be heard, and not necessarily that an actual
hearing be conducted.[11] Petitioner had an opportunity to be heard as he
Based on the foregoing, we find petitioner guilty of willful disobedience. Willful
submitted a letter-reply to the charge. He, however, adduced no other evidence on
disobedience requires the concurrence of at least two requisites: the employees
his behalf. In fact, he admitted his failure to submit cold call reports, praying that
assailed conduct must have been willful or intentional, the willfulness being
the same be not considered as gross insubordination. As held by this Court in
characterized by a wrongful and perverse attitude; and the order violated must have
Bernardo vs. NLRC,[12] there is no necessity for a formal hearing where an
been reasonable, lawful, made known to the employee and must pertain to the
employee admits responsibility for an alleged misconduct. As to the written
duties which he had been engaged to discharge.[7]
statement, TO HELL WITH COLD CALLS!, petitioner merely denied knowledge of the
Petitioners failure to comply with Citylands policy of requiring cold call reports is same. He failed to submit controverting evidence thereon although the
clearly willful, given the 28 instances of his failure to do so, despite a previous memorandum of February 19, 1993, clearly charged that he had shown said
reprimand and suspension. More than that, his written statement shows his open statement to several sales personnel. Denials are weak forms of defenses,
defiance and disobedience to lawful rules and regulations of the company. Likewise, particularly when they are not substantiated by clear and convincing evidence. Given
said company policy of requiring cold calls and the concomitant reports thereon is the foregoing, we hold that petitioners constitutional right to due process has not
clearly reasonable and lawful, sufficiently known to petitioner, and in connection been violated.

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As regards the second issue, petitioner contends that he is entitled to amounts A.R. = 5,640.00
illegally deducted from his commissions, to unpaid overtime, rest day and Petitioners Basic Salary AR = P 1,410.00
holiday premiums, to moral and exemplary damages, as well as attorneys fees and
While it is true that an increase in salary would cause an increase in AR, with the
costs.
same being deducted from credits earned, thus lessening his commissions, the fact
Petitioner anchors his claim for illegal deductions of commissions on Citylands remains that petitioner still receives his basic salary without deductions. Petitioners
formula for determining commissions, viz: argument that he is indebted to respondent by P1,410.00 is fallacious as his basic
COMMISSIONS= Credits Earned (CE) less CUMULATIVE NEGATIVE (CN) salary remains the same and he continues to receive the same, regardless of his
less AMOUNTS RECEIVED (AR) collections. The failure to attain a CE equivalent to the AR of P5,640.00 only means
that the difference would be credited to his CN for the next month. Clearly, the
= (CE CN) AR where CE = Monthly Sales Volume x
purpose of the same is to encourage sales personnel to accelerate their sales in
Commission Rate (CR) order for them to earn commissions.
AR = Monthly Compensation/.75 Additionally, there is no law which requires employers to pay commissions, and when
CR = 4.5% they do so, as stated in the letter-opinion of the Department of Labor and
Under said formula, an increase in salary would entail an increase in AR, thus Employment dated February 19, 1993, there is no law which prescribes a method
diminishing the amount of commissions that petitioner would receive. Petitioner for computing commissions. The determination of the amount of commissions is the
construes the same as violative of the non-diminution of benefits clause embodied result of collective bargaining negotiations, individual employment contracts or
in the wage orders applicable to petitioner. Inasmuch as Cityland has paid petitioner established employer practice.[14] Since the formula for the computation of
commissions based on a higher AR each time there has been a wage increase, the commissions was presented to and accepted by petitioner, such prescribed formula
difference between the original AR and the subsequent ARs have been viewed by is in order. As to the allegation that said formula diminishes the benefits being
petitioner as illegal deductions, to wit: received by petitioner whenever there is a wage increase, it must be noted that his
commissions are not meant to be in a fixed amount. In fact, there was no assurance
Wage Date of Amount of Corresponding Duration Total
that he would receive any commission at all. Non-diminution of benefits, as applied
Order Effectivity Increase Increase in Up To here, merely means that the company may not remove the privilege of sales
Quota (AR) 2/26/93 personnel to earn a commission, not that they are entitled to a fixed amount thereof.
----------- ------------- -------------- ----------------- ------------ ------------ With respect to petitioners claims for overtime pay, rest day pay and holiday
RA 6640 1/1/88 P265.75 P 353.33 x 62 mos. P 21,906.46 premiums, Cityland maintains that Saturday and Sunday call-ins were voluntary
activities on the part of sales personnel who wanted to realize more sales and
RA 6727 7/1/89 780.75 1,040.00 x 44 mos. 45,760.00
thereby earn more commissions. It is their contention that sales personnel were
NCR 01 11/1/90 785.75 1,046.67 x 28 mos. 29,306.76 clamoring for the privilege to attend Saturday and Sunday call-ins, as well as to
NCR 01-A ------------ entertain walk-in clients at project sites during weekends, that Cityland had to
Grand Total P 96,973.22[13] stagger the schedule of sales employees to give everyone a chance to do so. But
simultaneously, Cityland claims that the same were optional because call-ins and
=======
walk-ins were not scheduled every weekend. If there really were a clamor on the
Petitioner even goes as far as to claim that with the use of Citylands formula, he is part of sales staff to voluntarily work on weekends, so much so that Cityland needed
indebted to the company in the amount of P 1,410.00, illustrated as follows: to schedule them, how come no call-ins or walk-ins were scheduled on some
Petitioners Basic Salary = P 4,230.00 weekends?
= 4,230.00/.75

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In addition to the above, the labor arbiter and the NLRC sanctioned respondents
practice of offsetting rest day or holiday work with equivalent time on regular
workdays on the ground that the same is authorized by Department Order 21, Series
of 1990. As correctly pointed out by petitioner, said D. O. was misapplied in this
case. The D. O. involves the shortening of the workweek from six days to five days
but with prolonged hours on those five days. Under this scheme, non-payment of
overtime premiums was allowed in exchange for longer weekends for employees. In
the instant case, petitioners workweek was never compressed. Instead, he claims
payment for work over and above his normal 5 days of work in a week. Applying by
analogy the principle that overtime cannot be offset by undertime, to allow off-
setting would prejudice the worker. He would be deprived of the additional pay for
the rest day work he has rendered and which is utilized to offset his equivalent time
off on regular workdays. To allow Cityland to do so would be to circumvent the law
on payment of premiums for rest day and holiday work.
Notwithstanding the foregoing discussion, petitioner failed to show his entitlement
to overtime and rest day pay due, to the lack of sufficient evidence as to the number
of days and hours when he rendered overtime and rest day work. Entitlement to
overtime pay must first be established by proof that said overtime work was actually
performed, before an employee may avail of said benefit.[15] To support his
allegations, petitioner submitted in evidence minutes of meetings wherein he was
assigned to work on weekends and holidays at Citylands housing projects. Suffice it
to say that said minutes do not prove that petitioner actually worked on said dates.
It is a basic rule in evidence that each party must prove his affirmative
allegations.[16] This petitioner failed to do. He explains his failure to submit more
concrete evidence as being due to the decision rendered by the labor arbiter without
resolving his motion for the production and inspection of documents in the control
of Cityland. Petitioner conveniently forgets that on January 27, 1994, he agreed to
submit the case for decision based on the records available to the labor arbiter. This
amounted to an abandonment of above-said motion, which was then pending
resolution.
Lastly, with the finding that petitioners dismissal was for a just and valid cause, his
claims for moral and exemplary damages, as well as attorneys fees, must fail.
WHEREFORE, premises considered, the assailed Resolution is AFFIRMED and this
petition is hereby DISMISSED for lack of merit. Costs against petitioner.
SO ORDERED.

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Republic of the Philippines According to the very decision now on appeal, "on May 22, 1965, petitioner (private
SUPREME COURT respondent herein) filed another pleading submitting to this Court for determination
Manila certain matters which it claims cannot be resolved by the parties, which are as
EN BANC follows:
G.R. No. L-30279 July 30, 1982 First Cause of Action
PHILIPPINE NATIONAL BANK, petitioner, a. In a Resolution No. 1162 dated September 16, 1957, the Respondent's Board of
vs. Directors approved a revision of the computation of overtime pay retroactive as of
PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATION (PEMA) and July 1, 1954, and authorized a recomputation of the regular one- hour and extra
COURT OF INDUSTRIAL RELATIONS, respondents. overtime already rendered by all officers and employees of the Respondent Bank.
Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for The details of the benefits involved in said Resolution are contained in a
petitioner. Memorandum of the Respondent Bank dated September 18, 1957.
BARREDO, J.: b. Since the grant of the benefits in question, the employees of the Respondent,
represented by the petitioner, have always considered them to be a part of their
Appeal by the Philippine National Bank from the decision of the trial court of the
salaries and/or fringe benefits; nevertheless, the Respondent, in 1963, without just
Court of Industrial Relations in Case No. IPA-53 dated August 5, 1967 and
cause, withdrew said benefits and in spite of repeated demands refused, and still
affirmed en banc by said court on January 15, 1968.
refuses to reinstate the same up to the present.
This case started on January 28, 1965 in consequence of the certification of the
Second Cause of Action
President of the Philippines of an industrial dispute between the Philippine National
Bank Employees Association (PEMA, for short), on the one hand, and the Philippine c. After the promulgation of the Decision in National Waterworks and Sewerage
National Bank (PNB, for short), on the other, which arose from no more than the Authority vs. NAWASA Consolidated Unions, et al. G.R. No. L-18938, Aug. 31, 1964,
alleged failure of the PNB to comply with its commitment of organizing a Committee the Petitioner has repeatedly requested Respondent that the cost of living allowance
on Personnel Affairs to take charge of screening and deliberating on the promotion and longevity pay be taken into account in the computation of overtime pay,
of employees covered by the collective bargaining agreement then in force between effective as of the grant of said benefits on January 1, 1958, in accordance with the
the said parties. On January 28, 1965, the Industrial Court issued an order aimed at ruling in said Decision of the Supreme Court.
settling the dispute temporarily between the parties, which was certified by the d. Until now Respondent has not taken any concrete steps toward the payment of
President. Pertinent portions of the order read thus: the differential overtime and nighttime pays arising from the cost of living allowance
xxx xxx xxx and longevity pay.
1. That in order to settle the strike and for the employees to return to work xxx xxx xxx
immediately starting January 29, 1965, the Committee on Personnel Affairs is hereby Respondent in its answer of June 7, 1965 took exception to this mentioned petition
created to start functioning on February 1, 1965; on several grounds, namely, (1) the said alleged causes of action were not disputes
xxx xxx xxx existing between the parties, (2) the same are mere money claims and therefore
not within this Court's jurisdiction, and (3) that the parties have not so stipulated
f. That in return for this concession, an injunction against future strikes or lockouts
under the collective bargaining agreement between them, or the same is premature
shall be issued by the Court to last for a period of six months but which shall
as the pertinent collective bargaining agreement has not yet expired." (Pp. 84-86,
terminate even before that period should all disputes of the parties be already
Record.) 1
resolved; (Page 84, Record.)
Resolving the issues of jurisdiction and prematurity thus raised by PNB, the court
held:

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As to the first ground, it is well to note that this Court in its Order of January 28, As to the objection posed that the issues are mere money claims, there appears to
1965 has enjoined the parties not to strike or lockout for a period of six (6) months be no ground for the same. In the first place, although the same involves a claim
starting from said date. In a very definite sense the labor disputes between the for additional compensation it is also a part of the labor dispute existing between
parties have been given a specific period for the settlement of their differences. The the parties and subject to the compulsory arbitration powers of the Court, pursuant
fact that thereafter the question of the manner of payment of overtime pay is being to Section 10 of Rep. Act No. 875. In the second place, on the basis of the so-called
put in issue, appears to indicate that this was a part of the labor dispute. If we are PRISCO doctrine (G.R. No. L- 13806, May 23,.1960), there is an existing and current
to consider that this question, particularly the second cause of action, has in fact employer-employee relationship between the respondent and the members of
existed as early as 1958, shows the necessity of resolving the same now. And the petitioner union, for whom the additional overtime compensation is claimed.
same would indeed be an existing issue considering that the present certification With respect to ground three of the answer on which objection is based, on C.A.
came only in 1965. 444, as amended, Section 6 thereof, provides as follows:
It is further to be noted that the presidential certification has not limited specific 'Any agreement or contract between the employer and the laborer or employee
areas of the labor dispute embraced within the said certification. It speaks of the contrary to the provisions of this Act shall be null and void ab initio'.
existence of a labor dispute between the parties and of a strike declared by the
The instant action is partially subject to the provisions of Commonwealth Act 444,
PEMA, for which the Court has been requested to take immediate steps in the
as amended. Even if, the parties have stipulated to the extent that overtime will not
exercise of its powers under the law.
be paid, the same will not be binding. More so under the present circumstances,
Even on the assumption that the present issue is not one embraced by the where the only question is the correctness of the computation of the overtime
presidential certification or it is an issue presented by one party on a cause arising payments.
subsequent to the certification, the same would still be subject to the jurisdiction of
While the Court notes that the first cause of action has become moot and academic
this Court. In "Apo Cement Workers Union versus Cebu Portland Cement", Case No.
in view of the compliance by respondent, hence there is no further need to resolve
11 IPA (G.R. No. L-12451, July 10, 1957), the Court en banc (where this Sala has
the same (t.s.n., pp. 5-7, August 16, 1965), the settlement of said first cause of
taken an opposite view) upheld its jurisdiction under the circumstances just
action further strengthens the view that the second cause of action is indeed an
enumerated. It would seem that this question has been further settled by our
existing dispute between the parties. Both causes of fiction involve overtime
Supreme Court in "National Waterworks & Sewerage Authority vs. NAWASA
questions. Both stem from dates well beyond and before the presidential certification
Consolidated Unions, et al." (supra), which we quote in part:
of the present proceedings. If respondent has been fit to take steps to expedite and
xxx xxx xxx resolve, without court intervention, the first cause of action, it cannot deny the
4. Petitioner's claim that the issue of overtime compensation not having been raised existence of the second cause of action as the first and second appear to be
in the original case but merely dragged into it by intervenors, respondent Court interrelated matters. (Pp. 86-89, Record)
cannot take cognizance thereof under Section 1, Rule 13 of the Rules of Court. And We agree that the foregoing holding is well taken. It would be more worthwhile
xxx xxx xxx to proceed to the basic issues immediately than to add anything more of Our own
... The fact that the question of overtime payment is not included in the principal discourse to the sufficiently based disposition of the court a quo of the above-
case in the sense that it is not one of the items of dispute certified to by the President mentioned preliminary questions.
is of no moment, for it comes within the sound discretion of the Court of Industrial After discussing the pros and cons on the issue involved in the second cause of
Relations. Moreover, in labor disputes technicalities of procedure should as much as action as to whether or not the cost-of-living allowance otherwise denominated as
possible be avoided not only in the interest of labor but to avoid multiplicity of action. equity pay and longevity pay granted by the bank, the first beginning January 1,
This claim has no merit. 1958 and the latter effective July 1, 1961, should be included in the computation of
xxx xxx xxx overtime-pay, the court granted the demands of PE MA, except the additional rate
of work for night pay, and rendered the following judgment:

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WHEREFORE, in view of the foregoing, this Court hereby promulgates the following: The first is that in upholding its jurisdiction to take cognizance of the demand in
1. The respondent Philippine National Bank is hereby required to pay overtime and question about cost-of-living allowance and longevity pay, the Industrial Court
nighttime rates to its employees from January 28, 1962; and such overtime carefully noted that it was not resolving a petition for declaratory relief in the light
compensation shall be based on the sum total of the employee's basic salary or of the decision of this Court in NAWASA vs. NAWASA Consolidated Unions, G.R. No.
wage plus cost of living allowance and longevity pay under the following schedule: L- 18938, August 31, 1964, 11 SCRA 766. Thus the decision under review states:
'a. Overtime services rendered shall be paid at the rate of time and one-third, but Incidentally, the present action is not one for declaratory relief as to the applicability
overtime work performed between 6:00 P.M. and 6- .00 A.M. shall be paid at the of a judicial decision to the herein parties. A careful perusal of the pleadings indicates
rate of 150% or 50% beyond the regular rate; that what is being sought is the payment of differential overtime and nighttime pay
based on existing law and jurisprudence. The cause of action is not anchored on any
'b. The rate for work performed in the night shift, or during the period from 6:00
decision of any court but on provisions of the law which have been in effect at the
P.M. to 6:00 A.M. shall be compensated at the rate of 150% or 50% beyond the
time of the occurrence of the cause of the action in relation to a labor dispute.
regular rate, provided the work performed involved a definite night shift and not
Hence, this is not a petition for declaratory relief. (Pp. 94-95, Record.)
merely a continuation by way of overtime of the regular and established hours of
the respondent Bank. The second refers to a subsequent decision of the same Industrial Court in Shell Oil
Workers Union vs. Shell Co., et al., Case No. 2410-V and Shell & Affiliates
2. The Chief of the Examining Division of the Court or any of his duly designated
Supervisors Union vs. Shell Company of the Philippines, et al., Case No. 2411- V, in
representatives is hereby ordered to compute the overtime rates due each employee
which the court made an explanatory discourse of its understanding of the NAWASA
of the respondent Bank from January 28, 1962, in accordance with the above
ruling, supra, and on that basis rejected the claim of the workers. In brief, it held
determination; and to complete the same within a period of sixty (60) days from
that (1) NAWASA does not apply where the collective bargaining agreement does
receipt of this Order. However, considering that the Philippine National Bank is a
not provide for the method of computation of overtime pay herein insisted upon by
government depository, and renders and performs functions distinct and unique;
private respondent PEMA and (2) the fact-situation in the Shell cases differed from
and, while it may be a banking institution, its relationship with other government
that of NAWASA, since the sole and definite ratio decidendi in NAWASA was merely
agencies and the public is such that it has no basis for comparison with other banking
that inasmuch as Republic Act 1880 merely fixed a 40-hour 5-day work for all
institutions organized under the corporation law or special charter. To require it to
workers, laborers and employees including government-owned corporations like
pay immediately the liability after the exact amount shall have been determined by
NAWASA, the weekly pay of NAWASA workers working more than five days a week
the Court Examiner and duly approved by the Court, as in other cases, would work
should remain intact; with overtime pay in excess of eight hours work and 25 %
undue hardship to the whole government machinery, not to mention the outstanding
additional compensation on Sundays. There was no pronouncement at all therein
foreign liabilities and outside commitments, if any. Moreover, the records show that
regarding the basis of the computation of overtime pay in regard to bonuses and
this case was initiated long before the taking over of the incumbent bank officials.
other fringe benefits.
Accordingly, the Court feels that the payment shall be subject to the negotiations by
For being commendably lucid and comprehensive, We deem it justified to quote
the parties as to time, amount, and duration.
from that Shell decision:
The Court may intervene in said negotiations for the purpose of settling once and
The main issue:
for all this case to maintain industrial peace pursuant to Section 13 of
Commonwealth Act 103, as amended, if desired, however by the parties. The Unions appear to have read the NAWASA case very broadly. They would want
it held that in view of the said ruling of the Supreme Court, employers and employees
After all this is not an unfair labor practice case.
must, even in the face of existing bargaining contracts providing otherwise,
SO ORDERED. (Pp. 98-100, Record.) determine the daily and hourly rates of employees in this manner: Add to basic pay
In connection with the above decision, two interesting points appear at once to be all the money value of all fringe benefits agreed upon or already received by the
of determinative relevance: workers individually and overtime pay shall be computed thus —

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Basic yearly Rate plus Value of all Fringe Benefits divided by number of days worked have been working seven days a week and had been regularly receiving 25%
during the year equals daily wage; Daily wage divided by 8 equals hourly rate. Hourly additional compensation for Sunday work before the effectivity of the Act.
rate plus premium rate equals hourly overtime rate. It is thus necessary to analyze the Court's rationale in the said NAWASA case, 'in the
The NAWASA case must be viewed to determine whether it is that broad. NAWASA light of Rep. Act 1880', and the 'specific corollaries' discussed preparatory to arriving
case must be understood in its setting. The words used by the Supreme Court in its at a final conclusion on the main issue. What was required to be done, by way of
reasoning should not be disengaged from the fact-situation with which it was implementing R. A. 1880? The statute directs that working hours and days of
confronted and the specific question which it was there required to decide. Above government employees (including those of government owned and controlled
all care should be taken not to lose sight of the truth that the facts obtaining, the proprietary corporations) shall be reduced to five days-forty hours a week. But, the
issue settled, and the law applied in the said case, and these, though extractable same law carried the specific proviso, designed to guard against diminution of
from the records thereof as material in the resolution herein, were, as they are, salaries or earnings of affected employees. The Supreme Court itself clearly spelled
primarily declarative of the rights and liabilities of the parties involved therein. this out in the following language: 'It is evident that Republic Act 1880 does not
Recourse to the records of the NAWASA case shows that the fact- situation, as far intend to raise the wages of the employees over what they are actually receiving.
as can be materially connected with the instant case, is as follows: Rather, its purpose is to limit the working days in a week to five days, or to 40 hours
without however permitting any reduction in the weekly or daily wage of the
In view of the enactment of Rep. Act 1880, providing that the legal hours of work
compensation which was previously received. ...
for government employees, (including those in government-owned or controlled
corporations) shall be eight (8) hours a day for five (5) days a week or forty (40) If the object of the law was to keep intact, (not either to increase it or decrease it)
hours a week, its implementation by NAWASA was disputed by the Union. The it is but natural that the Court should concern itself, as it did, with the corollary,
workers affected were those who, for a period of three (3) months prior to or what is the weekly wage of worker who, prior to R.A. 1880, had been working seven
immediately preceding the implementation of Rep. Act 1880, were working seven (7) days a week and regularly receiving differential payments for work on Sundays
(7) days a week and were continuously receiving 25% Sunday differential pay. The or at night? It seems clear that the Court was only concerned in implementing
manner of computing or determining the daily rate of monthly salaried employees. correctly R.A. 1880 by ensuring that in diminishing the working days and hours of
workers in one week, no diminution should result in the worker's weekly or daily
And the Supreme Court, specifically laid out the issue to be decided, as it did decide,
wage. And, the conclusion reached by the Supreme Court was to affirm or recognize
in the NAWASA, as follows:
the correctness of the action taken by the industrial court including such differential
7. and 8. How is a daily wage of a weekly employee computed in the light of Republic pay in computing the weekly wages of these employees and laborers who worked
Act 1880?'(G.R. L-18938) seven days a week and were continuously receiving 25% Sunday differential for a
Resolving the above issue, it was held; period of three months immediately preceding the implementation of R.A. 1880.'
According to petitioner, the daily wage should be computed exclusively on the basic Nothing was said about adding the money value of some other bonuses or
wage without including the automatic increase of 25% corresponding to the Sunday allowances or money value of other fringe benefits, received outside the week or at
differential. To include said Sunday differential would be to increase the basic pay some other periods. That was not within the scope of the issue before the Court. in
which is not contemplated by said Act. Respondent court disagrees with this manner fact, the limited application of the decision is expressed in the decision itself. The
of computation. lt holds that Republic Act 1880 requires that the basic weekly wage resolution of this particular issue was for the benefit of only a segment of the
and the basic monthly salary should not be diminished notwithstanding the reduction NAWASA employees. Said the Court 'Of course, this should only benefit those who
in the number of working days a week. If the automatic increase corresponding to have been working seven days a week and had been regularly receiving 25%
the salary differential should not be included there would be a diminution of the additional compensation for Sunday work before the effectivity of the Act.'
weekly wage of the laborer concerned. Of course, this should only benefit those who Unions make capital of the following pronouncement of the Supreme Court in the
NAWASA case:

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It has been held that for purposes of computing overtime compensation a regular The above discussions impel the objective analyst to reject the proposition that the
wage includes all payments which the parties have agreed shall be received during NAWASA decision is an embracing and can be used with the authority of a statute's
the work week, including piece-work wages, differential payments for working at effects on existing contracts.
undesirable times, such as at night or on Sundays and holidays, and the cost of It appears that the answer to dispute lies, not in the text of the NAWASA case but
board and lodging customarily furnished the employee (Walling v. Yangerman- in the terms and conditions and practice in the implementation of, the agreement,
Reynolds Hardwook Co., 325 U.S. 419; Walling v. Harischfeger Corp. 325 U.S. 427). an area which makes resolution of the issue dependent on the relation of the terms
The 'Regular rate of pay also ordinarily includes incentive bonus or profit- sharing and conditions of the contract to the phraseology and purpose of the Eight-Hour
payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it Labor Law (Act 444).
was also held that the higher rate for night, Sunday and holiday work is just as much
The more we read the NAWASA case, the more we are convinced that the overtime
as regular rate as the lower rate for daytime work. The higher rate is merely an
computation set therein cannot apply to the cases at bar. For to do so would lead
inducement to accept employment at times which are not at desirable form a
to unjust results, inequities between and among the employees themselves and
workman's standpoint (International L. Ass'n. Wise 50 F. Supp. 26, affirmed C.C.A.
absurd situations. To apply the NAWASA computation would require a different
Carbunao v. National Terminals Corp. 139 F. 853).
formula for each and every employee, would require reference to and continued use
But this paragraph in the decision appears to have been used and cited by the Court of individual earnings in the past, thus multiplying the administrative difficulties of
to sustain the action of the court a quo: that it was correct to include the 25% the Company. It would be cumbersome and tedious a process to compute overtime
Sunday premium for the purpose of setting the weekly wage of specified workers pay and this may again cause delays in payments, which in turn could lead to serious
whose weekly earnings before the passage of R.A. 1880 would be diminished, if said disputes. To apply this mode of computation would retard and stifle the growth of
premium pay regularly received for three months were not included. It is significant unions themselves as Companies would be irresistibly drawn into denying, new and
that the citations therein used by the Supreme Court are excerpts from American additional fringe benefits, if not those already existing, for fear of bloating their
decisions whose legislation on overtime is at variance with the law in this jurisdiction overhead expenses through overtime which, by reason of being unfixed, becomes
in this respect: the U.S. legislation considers work in excess of forty hours a week instead a veritable source of irritant in labor relations.
as overtime; whereas, what is generally considered overtime in the Philippines is
One other reason why application of the NAWASA case should be rejected is that
work in excess 'of the regular 8-hours a day. It is understandably material to refer
this Court is not prepared to accept that it can lay down a less cumbersome formula
to precedents in the U.S. for purposes of computing weekly wages under a 40- hour
for a company-wide overtime pay other than that which is already provided in the
a week rule, since the particular issue involved in NAWASA is the conversion of prior
collective bargaining agreement. Courts cannot make contracts for the parties
weekly regular earnings into daily rates without allowing diminution or addition.
themselves.
No rule of universal application to other cases may, therefore, be justifiably extracted
Commonwealth Act 444 prescribes that overtime work shall be paid 'at the same
from the NAWASA case. Let it be enough that in arriving at just solution and correct
rate as their regular wages or salary, plus at least twenty-five per centum additional'
application of R.A. 1880, an inference was drawn from other decisions that a regular
(Secs. 4 & 5). The law did not define what is a 'regular wage or salary'. What the
wage includes payments 'agreed by the parties to be received during the week.' But
law emphasized by way of repeated expression is that in addition to 'regular wage',
to use this analogy in another fact- situation would unmitigatingly stretch its value
there must be paid an additional 25% of that 'regular wage' to constitute overtime
as basis for legal reasoning, for analogies are not perfect and can bring a collapse if
rate of pay. The parties were thus allowed to agree on what shag be mutually
stretched far beyond their logical and reasoned efficacy. Neither would it be far to
considered regular pay from or upon which a 25% premium shall be based and
ascribe to the Supreme Court's citation of foreign jurisprudence, which was used for
added to make up overtime compensation. This the parties did by agreeing and
purposes of analogy, the force of statute law, for this would be the consequence if
accepting for a very long period to a basic hourly rate to which a premium shall be
it were allowed to be used as authority for all fact-situations, even if different from
added for purposes of overtime.
the NAWASA case. This, because courts do not legislate. All they do is apply the law.

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Also significant is the fact that Commonwealth Act 444 merely sets a minimum, a rule that the NAWASA case is not in point and, therefore, is inapplicable to the case
least premium rate for purposes of overtime. In this case, the parties agreed to at bar.
premium rates four (4) or even six (6) times than that fixed by the Act. Far from The ruling of this Court in the NAWASA case contemplates the regularity and
being against the law, therefore, the agreement provided for rates 'commensurate continuity of the benefits enjoyed by the employees or workers (for at least three
with the Company's reputation of being among the leading employers in the (3) months) as the condition precedent before such additional payments or benefits
Philippines' (Art. 1, Sec. 2, Coll. Barg. Agreement) at the same time that the are taken into account. This is evident in the aforequoted ruling of this Court in the
Company is maintained in a competitive position in the market Coll. Barg. NAWASA case as well as in the hereinbelow cited authorities, to wit:
Agreement, lbid).
The 'regular rate' of pay on the basis of which overtime must be computed must
Since the agreed rates are way above prevailing statutory wages and premiums, reflect an payments which parties have agreed shall be received regularly during the
fixed by themselves bona fide through negotiations favored by law, there appears work week, exclusive of overtime payments.' Walling v. Garlock Packing Co.
no compelling reason nor basis for declaring the same illegal. A basic principle C.C.A.N.Y., 159 F. 2d 44, 45. (Page 289, WORDS And PHRASES, Permanent Edition,
forming an important foundation of R.A. 875 is the encouragement given to parties Vol. 36A; Italics supplied); and
to resort to peaceful settlement of industrial problems through collective bargaining.
As a general rule the words 'regular rate' mean the hourly rate actually paid for the
It behooves this Court, therefore, to help develop respect for those agreements
normal, non-overtime work week, and an employee's regular compensation is the
which do not exhibit features of illegality This is the only way to build confidence in
compensation which regularly and actually reaches him, ... .' (56 C.J.S. 704;
the democratic process of collective bargaining. Parties cannot be permitted to avoid
Emphasis supplied).
the implications and ramifications of the agreement.
Even in the definition of wage under the Minimum Wage Law, the words 'customarily
Although this Court has gone very far in resolving an doubts and in giving great
furnished' are used in referring to the additional payments or benefits, thus, -
weight to evidence and presumptions in favor of labor, it may not go as far as
reconstruct the law to fit particular cases." (Pp. 174-181, Record) 'Wage' paid to any employee shag mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
Proof of the correctness of the aforequoted considerations, the appeal of the workers
ascertained on a time, task, piece, commission basis, or other method of calculating
from the Industrial Court's decision did not prosper. Affirming the appealed decision,
the same, which is payable by an employer to an employee under a written or
We held:
unwritten contract of employment for work done or to be done or for services
The theory, therefore, of the petitioners is to the effect that, notwithstanding the rendered or to be rendered, and includes the fair and reasonable value, as
terms and conditions of their existing collective bargaining agreement with determined by the Secretary of Labor, of board, lodging or other facilities customarily
respondent Shell Company, particularly Exhibit 'A-l' for the Petitioners and Exhibit 'l- furnished by the employer to the employee.' (Sec. 2 (g), R.A. No. 602).
A' for the Respondent (which is Appendix 'B' of the Collective Bargaining Agreement
Having been stipulated by the parties that ... the Tin Factory Incentive Pay has
of the parties), considering the ruling in the NAWASA case, a recomputation should
ceased in view of the closure of the factory in May 1966 the fringe benefits as
be made of their basic wage by adding the money value of the fringe benefits
described show that they are occasionally not regularly enjoyed and that not all
enjoyed by them from whence the premium rates agreed upon shall be computed
employees are entitled to them', herein petitioners failed to meet the test laid down
in order to arrive at the correct computation of their overtime compensation from
by this Court in the NAWASA case. Further, the collective bargaining agreement
the Company. On the other hand, respondent Shell Company maintains that the
resorted to by the parties being in accordance with R.A. 875, with its provision on
NAWASA case should not be utilized as the basis for the alteration of their mode of
overtime pay far way beyond the premium rate provided for in Sections 4 and 5 of
computing overtime rate of pay as set forth in their collective Bargaining Agreement.
Commonwealth Act 444, the same should govern their relationship. Since this is their
It insists that their collective bargaining agreement should be the law between them.
contract entered into by them pursuant to bargaining negotiations under existing
After a careful and thorough re-examination of the NAWASA case, supra, and a laws, they are bound to respect it. It is the duty of this Court to see to it that
minute examination of the facts and the evidence of the case now before Us, We contracts between parties, not tainted with infirmity or irregularity or illegality, be

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strictly complied with by the parties themselves. This is the only way by which unity employees has not been severed. Besides, 'money claim' is embraced within the
and order can be properly attained in our society. term 'compensation' and therefore falls squarely under the jurisdiction of the CIR in
It should be noted in passing that Commonwealth Act 444 prescribes only a the exercise of its arbitration power (Sec. 4, CA 103; Please see also Republic vs.
minimum of at least 25% in addition to the regular wage or salary of an employee CIR, L- 21303, Sept. 23/68; Makalintal J., NWSA Case, L-26894-96, Feb. 28/69;
to constitute his overtime rate of pay, whereas, under Appendix 'B', (Exhs. 'A-l', Fernando, J.).
Petitioners and 'l-A', Respondent) of the Collective Bargaining Agreement of the What confers jurisdiction on the Industrial Court, says Justice J.B.L. Reyes, is not
parties, the premium rate of overtime pay is as high as l50% on regular working the form or manner of certification by the President, but the referral to said court of
days up to 250 % on Sundays and recognized national holidays. (Shell Oil Workers the industrial dispute between the employer and the employees. (Liberation
Union vs. Shell Company of the Philippines, G.R. No. L-30658-59, March 31, 1976, Steamship vs. CIR, etc., L-25389 & 25390, June 27/68).
70 SCRA 242-243.) In Phil. Postal Savings Bank, et al. vs. CIR, et al., L-24572, Dec. 20/67, this
In the instant case, on May 22, 1965 PEMA alleged in the court below the following Honorable Court, speaking through Chief Justice Concepcion, held that the
cause of action as amended on June 7, 1965: certification of the issue 'as a dispute affecting an industry indispensable to the
Since the start of the giving of cost of living allowance and longevity pay and national interest' leaves 'no room for doubt on the jurisdiction of the CIR to settle
reiterated, after the promulgation of the Decision in National Waterworks and such dispute.'
Sewerage Authority vs. NAWASA Consolidated Unions et al., G.R. No. L-18938, Relatedly, however, it is to be noted that it is clear from the holding of the Industrial
August 31, 1964, the petitioner has repeatedly requested respondent that the cost Court's decision We have earlier quoted, "the cause of action (here) is not on any
of living allowance and longevity pay be taken into account in the computation of decision of any court but on the provisions of the law which have been in effect at
overtime pay, effective as of the grant of said benefits on January 1, 1958, in the time of the occurrence of the cause of action in relation to a labor dispute".
accordance with the ruling in said Decision of the Supreme Court. (Page 14, PNB's Viewed from such perspective laid by the lower court itself, it can hardly be said that
Brief.) it indeed exercised purely its power of arbitration, which means laying down the
To be sure, there could be some plausibility in PNB's pose regarding the jurisdiction terms and conditions that should govern the relationship between the employer and
of the Industrial Court over the above cause of action. But, as We have already employees of an enterprise following its own appreciation of the relevant
stated, We agree with the broader view adopted by the court a quo on said point, circumstances rather empirically. More accurately understood, the court in fact
and We find that it is in the best interests of an concerned that this almost 25-year indulged in an interpretation of the applicable law, namely, CA 444, in the light of
dispute be settled once and for all without the need of going through other forums its own impression of the opinion of this Court in NAWASA and based its decision
only for the matter to ultimately come back to this Court probably years later, taking thereon.
particular note as We do, in this regard, of the cases cited on pages 9-10 of PEMA's Accordingly, upon the fact-situation of this case hereunder to be set forth, the
original memo, as follows: fundamental question for Us to decide is whether or not the decision under appeal
Realizing its error before in not considering the present case a certified labor dispute, is in accordance with that law and the cited jurisprudence. In brief, as PEMA posits,
the Bank now concedes that the case at bar 'belongs to compulsory arbitration'. is NAWASA four-square with this case? And even assuming, for a while, that in a
Hence, the lawful powers of the CIR over the same. However, the Bank says sense what is before Us is an arbitration decision, private respondent itself admits
'overtime differential is but a money claim, (and) respondent court does not have in its above-mentioned memorandum that this Court is not without power and
jurisdiction to take cognizance of the same'. authority to determine whether or not such arbitration decision is against the law or
jurisprudence or constitutes a grave abuse of discretion. Thus, in PEMA's
But this is not a pure money claim (pp. 10-11, Opposition) because other factors are
memorandum, it makes the observation that "(F)urthermore, in the Shell cases, the
involved - certification by the President, the matter may likely cause a strike, the
unions are using the NAWASA decision as a source of right for recomputation, while
dispute concerns national interest and comes within the CIR's injunction against
in the PNB, the Union merely cites the NAWASA doctrine, not as a source of right,
striking, and the employer-employee relationship between the Bank and the

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but as a legal authority or reference by both parties so the Union demand may be might have no time for relaxation, amusement or sports; he might miss important
granted. " (Motion to Dismiss, p. 3.) pre-arranged engagements; etc., etc. It is thus the additional work, labor or service
Obviously, therefore, the polestar to which Our mental vision must be focused in employed and the adverse effects just mentioned of his longer stay in his place of
order that We may arrive at a correct legal and equitable determination of this work that justify and is the real reason for the extra compensation that he called
controversy and, in the process make NAWASA better understood as We believe it overtime pay.
should be, is none other than Sections 3 and 4 of Com. Act No. 444, the Eight Hour Overtime work is actually the lengthening of hours developed to the interests of the
Labor Law, which pertinently provide thus: employer and the requirements of his enterprise. It follows that the wage or salary
SEC. 3. Work may be performed beyond eight hours a day in case of actual or to be received must likewise be increased, and more than that, a special additional
impending emergencies caused by serious accidents, fire, flood, typhoon, amount must be added to serve either as encouragement or inducement or to make
earthquake, epidemic, or other disaster or calamity in order to prevent loss to life up fop the things he loses which We have already referred to. And on this score, it
and property or imminent danger to public safety; or in case of urgent work to be must always be borne in mind that wage is indisputably intended as payment for
performed on the machines, equipment, or installations in order to avoid a serious work done or services rendered. Thus, in the definition of wage for purposes of the
loss which the employer would otherwise suffer, or some other just cause of a similar Minimum Wage Law, Republic Act No. 602, it is stated:
nature; but in all such cases the laborers and employees shall be entitled to receive 'Wage' paid to any employee shall mean the remuneration or earnings, however
compensation for the overtime work performed at the same rate as their regular designated, capable of being expressed in terms of money, whether fixed or
wages or salary, plus at least twenty-five per centum additional. ascertained on a time task, piece, commission basis or other method of calculating
In case of national emergency the Government is empowered to establish rules and the same, which is payable by an employer to an employee under a written or
regulations for the operation of the plants and factories and to determine the wages unwritten contract of employment for work done or to be done or for services
to be paid the laborers. rendered or to be rendered and includes the fair and reasonable value as determined
by the Secretary of Labor, of board, lodging or other facilities customarily furnished
xxx xxx xxx
by the employer to the employee. 'Fair and reasonable value' shall not include a
SEC. 4. No person, firm, or corporation, business establishment or place or center profit to the employer which reduces the wage received by the employee below the
of labor shall compel an employee or laborer to work during Sundays and legal minimum wage applicable to the employee under this Act, nor shall any transaction
holidays, unless he is paid an additional sum of at least twenty-five per centum of between an employer or any person affiliated with the employer and the employee
his regular remuneration: Provided, however, that this prohibition shall not apply to of the employer include any profit to the employer or affiliated person which reduces
public utilities performing some public service such as supplying gas, electricity, the employee's wage below the wage applicable to the employee under this
power, water, or providing means of transportation or communication. Act.' 2 (Emphasis supplied).
The vital question is, what does "regular wage or salary" mean or connote in the As can be seen, wage under said law, in whatever means or form it is given to the
light of the demand of PEMA? worker, is "for work done or to be done or for services rendered or to be rendered"
In Our considered opinion, the answer to such question lies in the basic rationale of and logically "includes (only) the fair and reasonable value as determined by the
overtime pay. Why is a laborer or employee who works beyond the regular hours of Secretary of Labor, of board, lodging or other facilities customarily furnished by the
work entitled to extra compensation called in this enlightened time, overtime pay? employer to the employee".
Verily, there can be no other reason than that he is made to work longer than what Indeed, for the purpose of avoiding any misunderstanding or misinterpretation of
is commensurate with his agreed compensation for the statutorily fixed or voluntarily the word "wage" used in the law and to differentiate it from "supplement", the Wage
agreed hours of labor he is supposed to do. When he thus spends additional time to Administration Service to implement the Minimum Wage Law, defined the latter as:
his work, the effect upon him is multi-faceted: he puts in more effort, physical and/or
extra remunerati