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G.R. No. L-48645 January 7, 1987
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES,
ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON,
PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO
PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO
MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS
SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B.
MATIAR, ET AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL
AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO G. INCIONG,
UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO
OLIVES, ENRIQUE CAMAHORT, FEDERICO OÑATE, ERNESTO
VILLANUEVA, ANTONIO BOCALING and GODOFREDO
CUETO, respondents.
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an employer-employee
relationship exists between petitioners-members of the "Brotherhood Labor Unit
Movement of the Philippines" (BLUM) and respondent San Miguel Corporation, is the
main issue in this petition. The disputed decision of public respondent Ronaldo
Zamora, Presidential Assistant for legal Affairs, contains a brief summary of the facts
involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now
defunct Court of Industrial Relations, charging San Miguel Corporation, and the
following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair
labor practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act
No. 875 and of Legal dismissal. It was alleged that respondents ordered the
individual complainants to disaffiliate from the complainant union; and that
management dismissed the individual complainants when they insisted on their
union membership.
On their part, respondents moved for the dismissal of the complaint on the grounds
that the complainants are not and have never been employees of respondent
company but employees of the independent contractor; that respondent company
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
the individual complainants are barred by estoppel from asserting that they are
employees of respondent company.
While pending with the Court of Industrial Relations CIR pleadings and testimonial
and documentary evidences were duly presented, although the actual hearing was
delayed by several postponements. The dispute was taken over by the National
Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the
hearing of the case intransferably commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was
concurred in by the NLRC in a decision dated June 28, 1976. The amount of
backwages awarded, however, was reduced by NLRC to the equivalent of one (1)
year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling,
stressing the absence of an employer-mployee relationship as borne out by the
records of the case. ...
The petitioners strongly argue that there exists an employer-employee relationship
between them and the respondent company and that they were dismissed for
unionism, an act constituting unfair labor practice "for which respondents must be
made to answer."
Unrebutted evidence and testimony on record establish that the petitioners are
workers who have been employed at the San Miguel Parola Glass Factory since 1961,
averaging about seven (7) years of service at the time of their termination. They
worked as "cargadores" or "pahinante" at the SMC Plant loading, unloading, piling
or palleting empty bottles and woosen shells to and from company trucks and
warehouses. At times, they accompanied the company trucks on their delivery
routes.
The petitioners first reported for work to Superintendent-in-Charge Camahort. They
were issued gate passes signed by Camahort and were provided by the respondent
company with the tools, equipment and paraphernalia used in the loading,
unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then transmitted to an
assistant-officer-in-charge. In turn, the assistant informs the warehousemen and
checkers regarding the same. The latter, thereafter, relays said orders to the
capatazes or group leaders who then give orders to the workers as to where, when
and what to load, unload, pile, pallet or clean.
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
day for the petitioners. However, work,at times, exceeded the eight (8) hour day
and necessitated work on Sundays and holidays. For this, they were neither paid
overtime nor compensation for work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is, according to
the number of cartons and wooden shells they were able to load, unload, or pile.
The group leader notes down the number or volume of work that each individual
worker has accomplished. This is then made the basis of a report or statement which
is compared with the notes of the checker and warehousemen as to whether or not
they tally. Final approval of report is by officer-in-charge Camahort. The pay check
is given to the group leaders for encashment, distribution, and payment to the
petitioners in accordance with payrolls prepared by said leaders. From the total
earnings of the group, the group leader gets a participation or share of ten (10%)
percent plus an additional amount from the earnings of each individual.
The petitioners worked exclusive at the SMC plant, never having been assigned to
other companies or departments of SMC plant, even when the volume of work was
at its minimum. When any of the glass furnaces suffered a breakdown, making a
shutdown necessary, the petitioners work was temporarily suspended. Thereafter,
the petitioners would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers — numbering one hundred and
forty (140) organized and affiliated themselves with the petitioner union and
engaged in union activities. Believing themselves entitled to overtime and holiday
pay, the petitioners pressed management, airing other grievances such as being
paid below the minimum wage law, inhuman treatment, being forced to borrow at
usurious rates of interest and to buy raffle tickets, coerced by withholding their
salaries, and salary deductions made without their consent. However, their gripes
and grievances were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of
Labor Relations in connection with the dismissal of some of its members who were
allegedly castigated for their union membership and warned that should they persist
in continuing with their union activities they would be dismissed from their jobs.
Several conciliation conferences were scheduled in order to thresh out their
differences, On February 12, 1969, union member Rogelio Dipad was dismissed from
work. At the scheduled conference on February 19, 1969, the complainant union
through its officers headed by National President Artemio Portugal Sr., presented a
letter to the respondent company containing proposals and/or labor demands
together with a request for recognition and collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers
are not their employees.
On February 20, 1969, all the petitioners were dismissed from their jobs and,
thereafter, denied entrance to respondent company's glass factory despite their
regularly reporting for work. A complaint for illegal dismissal and unfair labor practice
was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had begun.
The question of whether an employer-employee relationship exists in a certain
situation continues to bedevil the courts. Some businessmen try to avoid the
bringing about of an employer-employee relationship in their enterprises because
that judicial relation spawns obligations connected with workmen's compensation,
social security, medicare, minimum wage, termination pay, and unionism. (Mafinco
Trading Corporation v. Ople, 70 SCRA 139).
In determining the existence of an employer-employee relationship, the elements
that are generally considered are the following: (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer's power to control the employee with respect to the means and methods
by which the work is to be accomplished. It. is the called "control test" that is the
most important element (Investment Planning Corp. of the Phils. v. The Social
Security System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario
Brothers, Inc. v. Ople, 131 SCRA 72).
Applying the above criteria, the evidence strongly indicates the existence of an
employer-employee relationship between petitioner workers and respondent San
Miguel Corporation. The respondent asserts that the petitioners are employees of
the Guaranteed Labor Contractor, an independent labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally established by
the following criteria: "whether or not the contractor is carrying on an independent
business; the nature and extent of the work; the skill required; the term and duration
of the relationship; the right to assign the performance of a specified piece of work;
the control and supervision of the work to another; the employer's power with
respect to the hiring, firing and payment of the contractor's workers; the control of
the premises; the duty to supply the premises tools, appliances, materials and labor;
and the mode, manner and terms of payment" (56 CJS Master and Servant, Sec.
3(2), 46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75
ALR 7260727)
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None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the
performance of a specified piece of work, the nature and extent of the work and the
term and duration of the relationship. The records fail to show that a large
commercial outfit, such as the San Miguel Corporation, entered into mere oral
agreements of employment or labor contracting where the same would involve
considerable expenses and dealings with a large number of workers over a long
period of time. Despite respondent company's allegations not an iota of evidence
was offered to prove the same or its particulars. Such failure makes respondent
SMC's stand subject to serious doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the
petitioners had worked continuously and exclusively for the respondent company's
shipping and warehousing department. Considering the length of time that the
petitioners have worked with the respondent company, there is justification to
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
employees (Phil. Fishing Boat Officers and Engineers Union v. Court of Industrial
Relations, 112 SCRA 159 and RJL Martinez Fishing Corporation v. National Labor
Relations Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations
Commission (supra):
... [T]he employer-employee relationship between the parties herein is not
coterminous with each loading and unloading job. As earlier shown, respondents are
engaged in the business of fishing. For this purpose, they have a fleet of fishing
vessels. Under this situation, respondents' activity of catching fish is a continuous
process and could hardly be considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of tuna fish from
respondents' vessels and then loading the same to refrigerated vans, are necessary
or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on
any specific project or seasonable activity. (NLRC Decision, p. 94, Rollo).lwphl@itç
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the
glass plant for repairs, the petitioners, thereafter, promptly returned to their jobs,
never having been replaced, or assigned elsewhere until the present controversy
arose. The term of the petitioners' employment appears indefinite. The continuity
and habituality of petitioners' work bolsters their claim of employee status vis-a-vis
respondent company,
Even under the assumption that a contract of employment had indeed been
executed between respondent SMC and the alleged labor contractor, respondent's
case will, nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
Job contracting. — There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results
thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.
We find that Guaranteed and Reliable Labor contractors have neither substantial
capital nor investment to qualify as an independent contractor under the law. The
premises, tools, equipment and paraphernalia used by the petitioners in their jobs
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"
contracting scheme prohibited by law (Article 106, 109 of the Labor Code; Section
9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code).
In fact, even the alleged contractor's office, which consists of a space at respondent
company's warehouse, table, chair, typewriter and cabinet, are provided for by
respondent SMC. It is therefore clear that the alleged contractors have no capital
outlay involved in the conduct of its business, in the maintenance thereof or in the
payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the actuality
of an employer-employee relationship whether between respondent company and
petitioners or between the alleged independent contractor and petitioners. It is
important to emphasize that in a truly independent contractor-contractee
relationship, the fees are paid directly to the manpower agency in lump sum without
indicating or implying that the basis of such lump sum is the salary per worker
multiplied by the number of workers assigned to the company. This is the rule
in Social Security System v. Court of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump sum
representing only the salaries the workers were entitled to, arrived at by adding the
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salaries of each worker which depend on the volume of work they. had accomplished
individually. These are based on payrolls, reports or statements prepared by the
workers' group leader, warehousemen and checkers, where they note down the
number of cartons, wooden shells and bottles each worker was able to load, unload,
pile or pallet and see whether they tally. The amount paid by respondent company
to the alleged independent contractor considers no business expenses or capital
outlay of the latter. Nor is the profit or gain of the alleged contractor in the conduct
of its business provided for as an amount over and above the workers' wages.
Instead, the alleged contractor receives a percentage from the total earnings of all
the workers plus an additional amount corresponding to a percentage of the
earnings of each individual worker, which, perhaps, accounts for the petitioners'
charge of unauthorized deductions from their salaries by the respondents.
Anent the argument that the petitioners are not employees as they worked on piece
basis, we merely have to cite our rulings in Dy Keh Beng v. International Labor and
Marine Union of the Philippines (90 SCRA 161), as follows:
"[C]ircumstances must be construed to determine indeed if payment by the piece is
just a method of compensation and does not define the essence of the relation.
Units of time . . . and units of work are in establishments like respondent (sic) just
yardsticks whereby to determine rate of compensation, to be applied whenever
agreed upon. We cannot construe payment by the piece where work is done in such
an establishment so as to put the worker completely at liberty to turn him out and
take in another at pleasure."
Article 106 of the Labor Code provides the legal effect of a labor only contracting
scheme, to wit:
... the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him.
Firmly establishing respondent SMC's role as employer is the control exercised by it
over the petitioners that is, control in the means and methods/manner by which
petitioners are to go about their work, as well as in disciplinary measures imposed
by it.
Because of the nature of the petitioners' work as cargadores or pahinantes,
supervision as to the means and manner of performing the same is practically nil.
For, how many ways are there to load and unload bottles and wooden shells? The
mere concern of both respondent SMC and the alleged contractor is that the job of
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
discipline of petitioners. Documentary evidence presented by the petitioners
establish respondent SMC's right to impose disciplinary measures for violations or
infractions of its rules and regulations as well as its right to recommend transfers
and dismissals of the piece workers. The inter-office memoranda submitted in
evidence prove the company's control over the petitioners. That respondent SMC
has the power to recommend penalties or dismissal of the piece workers, even as
to Abner Bungay who is alleged by SMC to be a representative of the alleged labor
contractor, is the strongest indication of respondent company's right of control over
the petitioners as direct employer. There is no evidence to show that the alleged
labor contractor had such right of control or much less had been there to supervise
or deal with the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the glass
manufacturing plant. Respondent company would have us believe that this was a
case of retrenchment due to the closure or cessation of operations of the
establishment or undertaking. But such is not the case here. The respondent's
shutdown was merely temporary, one of its furnaces needing repair. Operations
continued after such repairs, but the petitioners had already been refused entry to
the premises and dismissed from respondent's service. New workers manned their
positions. It is apparent that the closure of respondent's warehouse was merely a
ploy to get rid of the petitioners, who were then agitating the respondent company
for benefits, reforms and collective bargaining as a union. There is no showing that
petitioners had been remiss in their obligations and inefficient in their jobs to warrant
their separation.
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
bargaining agreement with the IBM union which is the recognized collective
bargaining representative at the respondent's glass plant.
There being a recognized bargaining representative of all employees at the
company's glass plant, the petitioners cannot merely form a union and demand
bargaining. The Labor Code provides the proper procedure for the recognition of
unions as sole bargaining representatives. This must be followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San
Miguel Corporation is hereby ordered to REINSTATE petitioners, with three (3) years
backwages. However, where reinstatement is no longer possible, the respondent
SMC is ordered to pay the petitioners separation pay equivalent to one (1) month
pay for every year of service.
SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 181393 July 28, 2009
GRANDTEQ INDUSTRIAL STEEL PRODUCTS, INC. and ABELARDO M.
GONZALES, Petitioners,
vs.
EDNA MARGALLO, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision1 dated 21 January 2008 of the Court of Appeals in CA-G.R.
SP No. 100012, which affirmed the Decision2 dated 18 October 2006, as modified
by the Resolution3 dated 21 May 2007, of the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 045888-05. The NLRC effectively reversed the
Decision4 dated 11 July 2005 of the Labor Arbiter in NLRC NCR Case No. 00-09-
10803-04, which entirely dismissed the Complaint filed by respondent Edna Margallo
(Margallo) against petitioners Grandteq Industrial Steel Products, Inc. (Grandteq)
and Abelardo M. Gonzales (Gonzales); and, instead, ordered Grandteq and Gonzales
to refund to Margallo her car loan payments, as well as to pay the latter sales
commission and attorney’s fees.
Grandteq is a domestic corporation engaged in the business of selling welding
electrodes, alloy steels, aluminum and copper alloys.5 Gonzales is the
President/Owner of Grandteq.6 Grandteq employed Margallo as Sales Engineer
beginning 3 August 1999.7
Margallo claimed that on an unstated date, she availed herself of the car loan
program offered to her by Grandteq as a reward for being "Salesman of the Year."
She paid the down payment on a brand new Toyota Corolla,8amounting to
₱201,000.00, out of her own pocket. The monthly amortization for the car was
₱10,302.00, of which ₱5,302.00 was to be her share and ₱5,000.00 was to be the
share of Grandteq.
On 29 December 2003, Margallo received a letter9 signed by Gonzales and Rolando
de Leon (De Leon), Vice-President for Administration of Grandteq, which reads:
Mrs. Edna E. Margallo
c/o Grandteq Industrial
Steel Products, Inc.
#2 Cooper St., cor. Benitez
SFDM, Quezon City
Dear Mrs. Margallo:
This is to inform you that our records show the following:
1) That, last December 18, 2003, you instructed our company driver and helper to
load 4 pcs. tool steel to be delivered at circle freight.
2) That together with Mr. Steve Rivera, on or about 12:00 noon, you went at (sic)
Eagle Global Logistics at Circle Freight, NAIA, Parañaque City to ship the following
items to Moog Control Corp. Phils. Branch located at Baguio Ecozone, Baguio City,
using the Sales Invoice of JVM Industrial Supply and Allied Services.
a) 2 pcs. tool steel 4140 – ¾" x 2’x 3’
b) 2 pcs. tool steel 4140 – 1"x 2’ x 3’
3) That you are working with JVM Industrial Supply and Allied Services concurrent
with your being employed with Grandteq Industrial Steel Products, Inc.
4) That JVM Industrial Supply and Allied Services are supplying steel products to
Moog Control Corp. Phils. Branch which is also a client of Grandteq and which you
are the authorized salesman of the company.
Because of this, you are given a (sic) twenty-four (24) hours upon receipt of this
letter to submit a written explanation on why you should not be given a disciplinary
action for allegedly violating/committing:
a) Moonlighting
b) Sabotage
c) Breach of trust and confidence (labor code).
You are also invited to attend a meeting with regards to the allegations on Jan. 5,
2004 at 10:00 a.m. You may bring with you a lawyer or any representative to assist
you on (sic) the said meeting.
Failure on your part to submit a written explanation on the specified period and
failure to attend the hearing would mean that you are waiving your rights to be
heard and the appropriate action will be taken against you.
Moreover, to protect the evidences and witnesses against you, management has
decided to place you under preventive suspension effective December 29, 2003.
Very truly yours,
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(Signed) (Signed)
Abelardo M. Gonzales Ronaldo A. de Leon
President VP - Administration
Responding to the foregoing letter, Margallo wrote the following letter-reply dated
30 December 2003:
December 30, 2003
To: Mr. Abelardo M. Gonzales
President
Thru: Mr. Ronald A. de Leon
VP – Administration
Dear Sir,
Last December 18, 2003, Mr. Steve D. Rivera instructed me to tell to our delivery
people to bring the said item to circle freight. Which I did that (sic) I thought it was
ok because it was inside the company. Sir I was just following orders from Mr. D.
Rivera who is one of my boss (sic). Sir, what I did is the same thing that I’ve been
doing with my other bosses. That i[f] they instructed me to do things I immediately
follow. Because I am only an employee. Sir never that I work with JVM (sic).
Sir im (sic) sorry if I did wrong by not asking what to do. Which I think an ordinary
employee like me would do is to follow orders from my superiors.
IM SO SORRY SIR IF I FAIL YOU.
(Signed)
Edna E. Margallo10
Margallo then averred that in January 2004, De Leon asked her to just resign,
promising that if she did, she would still be paid her commissions and other benefits,
as well as be reimbursed her car loan payments. Relying on De Leon’s promise,
Margallo tendered on 13 January 2004, her irrevocable resignation, effective
immediately.11
Margallo, however, alleged that she was never paid her money claims. Grandteq
failed to pay her commissions in the sum of ₱87,508.00, equivalent to 5% of the
total sales that she collected as of January 2004, which amounted to ₱1,750,148.84.
Grandteq likewise failed to refund the "sales accommodations" or advances she gave
her customers. In addition, after Margallo’s resignation, Grandteq sold her car to
Annaliza Estrella, another employee, for ₱550,000.00.12 These events prompted her
to file before the Labor Arbiter a Complaint13 against Grandteq and Gonzales, for
recovery of sales commission, cash incentive and car loan payment, damages and
attorney fees, which was docketed as NLRC Case No. 0009-108-03-04.
Grandteq and Gonzales opposed Margallo’s claims. They maintained that Margallo
was not entitled to sales commissions because the computation thereof, according
to company policy, should be based on actual collections within 180 days from
invoice date. All of Margallo’s credit sales transactions were unpaid, outstanding,
and past due. Margallo was also not entitled to any sales incentive, because said
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
payments under the car loan agreement she executed with Grandteq, which
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
forfeited in favor of Grandteq, and Grandteq would regain possession of the car.
The Labor Arbiter rendered a Decision on 11 July 2005, dismissing all of Margallo’s
claims, thus:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the
instant case for lack of merit.15
The Labor Arbiter held that Margallo was not able to prove by substantial evidence
her entitlement to the sales commission:
After a careful review of the records, this Office finds that considering [Margallo]
already receives a basic salary plus allowances, her claim for sales commission is
therefore an added benefit wholly dependent upon her sales performance based on
existing company policy. As such, it is an affirmative allegation or claim that is not
normally included in the regular course of business and for which law presumes that
an employee is generally not entitled to. Thus, it behooves, upon the employee to
prove that he is entitled to said affirmative allegations and the onus is upon him to
establish his right thereto (see Eternit Employees and Workers Unions vs. De Veyra,
189 SCRA 752 and Nucum vs. Inciong, 204 SCRA 697).
In the instant case, this Office finds [Margallo] to have failed to substantially
discharge her burden of proving that she is entitled to the ₱87,508.00 in sales
commissions since other than her bare allegations, [Margallo] did not show any
other proof, including prior payment of said sales commissions, to justify her claim.
And, quite noteworthy too is that under the [Grandteq]’s policy, rules and regulations
on the grant of sales commissions, the computation thereof shall be based on actual
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
and forfeits any right to demand payment of the commission thereon as the sales
are considered bad debts as uncollectible. Since the records of [Grandteq] showed
that [Margallo]’s credit sales remain unpaid and outstanding for over 180 days,
[Margallo] is therefore not entitled to sales commissions.
No denial whatsoever of the above-discussed company policy was made by
[Margallo] in her Reply.
Thus, having failed to establish entitlement to said sales commission, the same is
hereby denied.16
For a similar reason, the Labor Arbiter denied Margallo’s claim for payment of cash
incentive:
As regards to cash incentives, once again this Office finds that the same is also an
affirmative allegation and the burden of proving entitlement thereto rests upon the
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
denied.17
Finally, the Labor Arbiter found that Margallo had no right to the reimbursement of
her car loan payments under her car loan agreement with Grandteq:
And as regards of (sic) the car loan, the same should be governed by the undisputed
terms and conditions of the Agreement between complainant and respondent
company (Annex "A" of respondents’ position paper). And page 2 of said Agreement
clearly stipulates that in case of resignation, all payments made by the personnel
shall be forfeited in favor of the company. Thus, the claim for refund of the car loan
should likewise be denied.18
Margallo filed an appeal with the NLRC, docketed as NLRC NCR CA No. 045888-05.
Although the NLRC, in its Decision dated 18 October 2006, stated that it merely
"modified" the Decision dated 11 July 2005 of the Labor Arbiter, it effectively
reversed the same by granting Margallo her claims for sales commission,
reimbursement of her car loan payments, and attorney’s fees. The fallo of the NLRC
Decision is quoted below:
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners]
Grandteq Industrial Products, Inc. and/or its President/General Manager,
[petitioner] Abelardo M. Gonzales, are hereby ordered to refund to the [herein
respondent Margallo] her car loan payments amounting to ₱217,815.94 and to pay
her the amount of ₱10,870.79 representing her unpaid sales commissions plus ten
percent (10%) of the total monetary award as attorney’s fees.19
In ordering that Grandteq and Gonzales reimburse the car loan payments made by
Margallo, the NLRC reasoned:
It is unlikely for an employee who has invested his time and industry in a particular
job to simply give it up after being accused of violating company rules and
regulations. It is more likely that he did so upon the expectation that she would
derive a certain benefit from it. Thus, the claim that the [herein respondent
Margalllo] resigned because she was promised that she would be paid her money
claims if she did, is more credible than the contention that she did so without any
prodding from the [herein petitioners Grandteq and Gonzales].
It would therefore appear that the provision, in the agreement (records, pp. 32-340)
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
COMPANY" has been superseded by the above-mentioned subsequent agreement
between the parties.
Besides, it is uncontroverted that the car loan program was offered to the
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
that the [respondent Margallo] paid the down payment, entire first amortization,
insurance, and her share in the monthly amortizations for seventeen months, or the
total amount of ₱214,395.90 for the car. It is also uncontroverted that after the
[respondent Margallo]’s negotiated resignation, her car was resold to another
employee for the original price. Under the circumstances, the above-quoted
contractual provision is null and void for being contrary to morals, good customs,
and public policy. The law overrides contracts which are prepared by employers to
circumvent the rights of their employees (Baguio Country Club vs. NLRC, 206 SCRA
643). Thus, the above-quoted contractual provision does not bar the [respondent
Margallo] from recovering her car loan payments from the [petitioners Grandteq and
Gonzales].20
As for Margallo’s other claims, the NLRC affirmed her entitlement to the unpaid sales
commission, but not to the cash incentive:
Insofar as the [respondent Margallo]’s claim for unpaid sales commission is
concerned, it is noteworthy that in the list (records, pp. 16-18) of sales she adduced
in evidence, the column bearing the heading "collected" indicates that, as of January
2004, the total collections from her sales amount to only ₱217,815.94. Since it is
undisputed hat her sales commission are equivalent to 5% of her collections, she
may recover unpaid sales commissions amounting to ₱10,890.79. Finally, since there
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
merit.21
Grandteq and Gonzales filed a Motion for Reconsideration,22 while Margallo also
filed an Omnibus Motion for Partial Reconsideration and Issuance of
Subpoena.23 The NLRC denied the Motions for Reconsideration of all parties in a
Resolution dated 21 May 2007, but modified the NLRC Decision dated 18 October
2006 by slightly reducing the amount of car loan payments to be refunded to
Margallo:
WHEREFORE, the Motions for Reconsideration are hereby DENIED for lack of merit.
However, the dispositive portion of this Commission’s (2nd Division) October 18,
2006 Decision is hereby corrected to read:
WHEREFORE, the decision appealed from is hereby MODIFIED. [Herein petitioners]
Grandteq Industrial Products, Inc. and/or its President/General Manager,
[petitioner] Abelardo M. Gonzales, are hereby ordered to refund to [herein
respondent Margallo] her car loan payments amounting to ₱214,395.90 and to pay
her the amount of ₱10,870.79 representing her unpaid sales commissions plus ten
percent (10%) of the total monetary award as attorney’s fees.24
Grandteq and Gonzales elevated the case to the Court of Appeals by way of a Petition
for Certiorari, under Rule 65 of the Rules of Court, which was docketed as CA-G.R.
SP No. 100012.lawphil
In its Decision dated 21 January 2008, the Court of Appeals agreed with the NLRC,
dismissing the therein Petition of Grandteq and Gonzales in this wise:
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. Costs
against petitioners.25
Like the NLRC, the Court of Appeals found that Margallo had a right to be reimbursed
her car loan payments, and the terms of the car loan agreement between Margallo
and Grandteq should not be applied for being highly prejudicial to the employee’s
interest:
Truly, the contracting parties may establish such stipulations, clauses, terms and
conditions as they want, and their agreement would have the force of law between
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
conditions which are prejudicial to the interest of the worker. The law affords
protection to an employee, and it will not countenance any attempt to subvert its
spirit and intent. The sheer inequality that characterizes employer-employee
relations, where the scales generally tip against the employee, often scarcely
provides him real and better options. Moreover, in controversies between a laborer
and his master, doubts reasonably arising from the evidence, or in the interpretation
of agreements and writing should be resolved in the former’s favor.26
The Court of Appeals likewise affirmed the order of the NLRC that Grandteq and
Gonzales pay Margallo her sales commission, placing the burden upon the employer
to prove that the employee’s money claims had been paid:
With respect to the unpaid sales commissions of ₱10,870.79 to be paid by petitioners
in favor of private respondent, it is incumbent upon petitioner employer to prove
that said money claim has been paid. This is in tune with the general precept that:
"one who pleads payment has the burden of proving it, and even where the
employees must allege nonpayment, the general rule is that the burden rests on the
defendant to prove (payment), rather than on the plaintiff to prove non-payment."
The reason for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents – which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid –
are not in the possession of the worker but in the custody and absolute control of
the employer. In the present case, petitioners [Grandteq and Gonzales] failed to
discharge the burden of proving that the amount of ₱10,870.79 representing [herein
respondent Margallo]’s sales commissions has already been paid to the latter. Thus,
the NLRC (Second Division) did not commit grave abuse of discretion in awarding
said money claim in favor of [respondent Margallo].27
Assiduous, Grandteq and Gonzales are now before this Court via the Petition at bar.
Grandteq and Gonzales assert that the Court of Appeals erred in declaring the car
loan agreement between Grandteq and Margallo, particularly the provision therein
on the forfeiture of car loan payments in favor of Grandteq should Margallo resign
from the company, as null and void.28
The Court, however, is in agreement with the Court of Appeals and the NLRC.
Generally speaking, contracts are respected as the law between the contracting
parties. The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order or public policy.29
The questionable provision in the car loan agreement between Grandteq and
Margallo provides: "In case of resignation, of the personnel from the company, all
payments made by the personnel shall be forfeited in favor of the
company."30 Connected thereto is the provision in the same car loan agreement,
which reads:
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1. The COMPANY shall have the right to regain the possession of the car before the
expiration of the term of the loan in the event of any of the following:
a. The PERSONNEL resigns from the COMPANY during the effectivity of this
agreement.31
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
and her share in the monthly amortization of the car. However, she did not get to
leave with the car when she resigned from Grandteq. In effect, Margallo parted with
her hard-earned money for nothing, being left, as she is, with an empty bag. The
inequitableness in the conduct of Grandteq and Gonzales is heightened by the fact
that after they regained possession of the car, they resold the same to another
employee under a similar contract bearing the same terms and conditions signed by
Margallo.
The principle that no person may unjustly enrich oneself at the expense of another
(Nemo cum alteris detrimento locupletari potest) is embodied in Article 22 of the
New Civil Code, to wit:
ART. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him.
The above-quoted article is part of the chapter of the Civil Code on Human Relations,
the provisions of which were formulated as "basic principles to be observed for the
rightful relationship between human beings and for the stability of the social order;
designed to indicate certain norms that spring from the fountain of good conscience;
[are] guides for human conduct that should run as golden threads through society
to the end that law may approach its supreme ideal, which is the sway and
dominance of justice." There is unjust enrichment when a person unjustly retains a
benefit at the loss of another, or when a person retains the money or property of
another against the fundamental principles of justice, equity and good conscience.32
As can be gleaned from the foregoing, there is unjust enrichment when (1) a person
is unjustly benefited, and (2) such benefit is derived at the expense of or with
damages to another. The main objective of the principle of unjust enrichment is to
prevent one from enriching oneself at the expense of another. It is commonly
accepted that this doctrine simply means that a person shall not be allowed to profit
or enrich himself inequitably at another’s expense. One condition for invoking this
principle is that the aggrieved party has no other action based on a contract, quasi-
contract, crime, quasi-delict, or any other provision of law.
This is not a case of equity overruling or supplanting a positive provision of law or
judicial rule. Rather, equity is exercised in this case "as the complement of legal
jurisdiction [that] seeks to reach and to complete justice where courts of law,
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
The principle against unjust enrichment obliges Grandteq and Gonzales to refund to
Margallo the car loan payments she had made, since she has not actually acquired
the car. To relieve Grandteq and Gonzales of their obligation to reimburse Margallo
would, indeed, be to sanction unjust enrichment in favor of the first two and cause
unjust poverty to the latter.34
The Court rigorously disapproves contracts that demonstrate a clear attempt to
exploit the employee and deprive him of the protection sanctioned by both the
Constitution and the Labor Code.
The Constitution and the Labor Code mandate the protection of labor. Hence, as a
matter of judicial policy, this Court has, in a number of instances, leaned backwards
to protect labor and the working class against the machinations and incursions of
their more financially entrenched employers.35
Although not strictly a labor contract, the car loan agreement herein involves a
benefit extended by the employers, Grandteq and Gonzales, to their employee,
Margallo. It should benefit, and not unduly burden, Margallo. The Court cannot, in
any way, uphold a car loan agreement that threatens the employee with the
forfeiture of all the car loan payments he/she had previously made, plus loss of the
possession of the car, should the employee wish to resign; otherwise, said
agreement can then be used by the employer as an instrument to either hold said
employee hostage to the job or punish him/her for resigning.
The Court further finds no error in the grant by the Court of Appeals and the NLRC
of Margallo’s claim for sales commission.
In cases involving money claims of employees, the employer has the burden of
proving that the employees did receive their wages and benefits and that the same
were paid in accordance with law.36
It is settled that once the employee has set out with particularity in his complaint,
position paper, affidavits and other documents the labor standard benefits he is
entitled to, and which the employer allegedly failed to pay him, it becomes the
employer’s burden to prove that it has paid these money claims. One who pleads
payment has the burden of proving it; and even where the employees must allege
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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
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 112877 February 26, 1996
SANDIGAN SAVINGS and LOAN BANK, INC., and SANDIGAN REALTY
DEVELOPMENT CORPORATION,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ANITA M.
JAVIER, respondents.
DECISION
HERMOSISIMA, JR., J.:
This Petition for Certiorari, with prayer for the issuance of a temporary restraining
order, seeks to review, modify and/or set aside the Resolution1 dated 24 September
1993 and the Resolution2 dated 19 November 1993 of public respondent National
Labor Relations Commission (NLRC) in NLRC CAS RAB-III-05-1560-90. The former
affirmed, with modification, the Decision3 of the Labor Arbiter of the NLRC Regional
Arbitration Branch No. III while the latter denied the motion to reconsider the
former.
Private respondent Anita M. Javier (hereinafter referred to as Javier) worked as a
realty sales agent of the petitioner Sandigan Realty Development Corporation
(hereinafter called the Sandigan Realty) from November 2, 1982 (or November 9,
1982)4 to November 30, 1986. Their agreement was that Javier would receive a 5%
commission for every sale, or if no sale was made, she would receive a monthly
allowance of P500,00.
Subsequently, that is, on 1 December 1986, Javier was hired as a marketing collector
of petitioner Sandigan Savings and Loan Bank (hereinafter called the Sandigan Bank)
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
P585.00, respectively. These were adjusted thereafter (the latest adjustment having
been made on 1 July 1989), to P1,840.00 per month as salary and to P510.00 as
monthly allowance, per "Notice of Salary Adjustment."5
Meanwhile, respondent Javier continued to be a realty sales agent of Sandigan
Realty oh the side, and while she still received the 5% commission on her sales, she
no longer enjoyed the P500,00 monthly allowance.
On 20 April 1990, Javier was advised by Angel Andan not to report for work anymore.
This in effect was a notice of dismissal. The manner by which her dismissal was
effected has been correctly described by the Solicitor General, thus:
On April 20, 1990, around 8:30 in the morning, while performing her duties at the
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)
termination papers. Immediately thereafter, Andan changed his mind and told Mrs.
Fajardo to prepare instead a resignation letter for Javier, saying, "Ayaw ko na siyang
makita sa susnod." Turning to private respondent, he said, "Huwag na ninyong
itanong kong anong dahilan, basta't gusto ko, ito ang desisyon ko. Naawa lang ako
sa iyo noon kaya kita tinanggap. Ka Anita, huwag mong isipin na may kinalaman
ang mga pangyayari kay Ditas, wala, wala, hindi iyon, basta't si Alice, iniskandalo
na naman ako.
xxx xxx xxx
In the afternoon, after she received P50,000.00 from one Mr. Ben Santos as full
payment for a lot sold in Sta. Rita Village, Guiguinto, Bulacan, Andan ordered
Reynaldo Bordado, her co-employee, to withdraw her commission of P10,000.00
from the account of the Realty, saying, "Ibigay mo sa ka Anita" yan para hindi na
balikan dito.6
The advice of her termination notwithstanding, Javier reported for work at the bank
on the next working day or on 23 April 1990. Though she signed the attendance
sheet, she left when she could not find her table.
On 18 May 1990, Javier filed a complaint against petitioners and Angel Andan with
the NLRC Regional Arbitration Branch No. III at San Fernando, Pampanga, for illegal
dismissal, seeking reinstatement and payment of backwages and moral and
exemplary damages.
On 6 October 1992, the labor arbiter rendered judgment in private respondent's
favor, the dispositive portion of which reads:
WHEREFORE, considering the foregoing consideration, and for having unjustly
dismissed Anita Javier from her employment, respondents are hereby directed to
reinstate her to her former position as marketing collector of Sandigan Savings and
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
monetary award, until her actual reinstatement, and P60,000.00 moral and
exemplary damages to compensate for her mental pain and anguish, her social
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
P500.00 monthly allowance if she was unable to make any sale. The P500.00
allowance ceased when she became a regular employee of the petitioner bank.
Javier sold houses or lots according to the manner or means she chose to. The
petitioner realty firm, while interested in the result of her work, had no control with
respect to the details of how the sale of a house or lot was achieved. She was free
to adopt her own selling methods or free to sell at her own time. (cf. Insular Life
Assurance Co., Ltd. v. NLRC, 179 SCRA 459 [1989]). Her obligation was merely to
turn over the proceeds of each sale to the Realty and, in turn, the Realty paid her
by the job, i.e., her commission, not by the hour.
Moreover, selling houses and lots was merely her sideline or extra work for a sister
company. 15
As it appears that Sandigan Realty had no control over the conduct of Javier as a
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
employee, much less a regular employee of the Sandigan Realty. Hence, she cannot
be entitled to the right to security of tenure nor to backwages and separation pay
as a consequence of her separation therefrom.
Evidently, the legal relation of Javier to the Sandigan Realty can be that of an
independent contractor, where the control of the contracting party is only with
respect td the result of the work, as distinguished from an employment relationship
where the person rendering service is under the control of the hirer with respect to
the details and manner of performance. 16
In the case of Sara v. Agarrado, private respondent who sold palay and rice for the
petitioners under an arrangement or agreement that the former would be paid P2.00
commission per sack of milled rice sold as well as a commission of 10% per kilo of
palay purchased, 17 and that she would spend her own money for the undertaking,
and where she was shown to have worked for petitioners at her own pleasure, that
she was not subject to definite hours or conditions of work, that she could even
delegate the task of buying and selling to others, if she so desired, or simultaneously
engaged in other means of livelihood while selling and purchasing rice or palay, was
held to be an independent contractor. 18
By the same token, the private respondent in another case, 19 who earns on a per
head/talent commission basis and who works as she pleases, on her own schedule,
terms and conditions was also held to be an independent contractor.
Private respondent Anita Javier is clearly similarly placed as the private respondents
in the above-cited cases. Hence, she could not have been a regular employee but
an independent contractor in relation to the petitioner Sandigan Realty.
As we hold that private respondent was not a regular employee of the Sandigan
Realty and that she could not, therefore, be entitled to backwages and separation
pay, we will necessarily have to limit our treatment of the alleged errors committed
by the NLRC in the computation of the monetary award to that adjudged against
the petitioner Sandigan Bank. But, first, we have to settle the question as to whether
reinstatement or payment of separation pay in its stead is the proper relief to be
accorded the private respondent, it appearing that neither the labor arbiter nor the
NLRC made a definitive ruling on the matter. This has become especially more
significant since private respondent, in her Comment20 and
Memorandum, 21 presses for an order of reinstatement to her former position,
claiming that there is no sufficient basis for a grant of separation pay in lieu thereof.
We agree with the private respondent in this respect.
Private respondent Anita Javier, by virtue of her employment status, is, under the
law entitled to security of tenure, which means that she has the right to continue in
employment until the same is terminated under conditions required by law. Article
279 of the Labor Code, as amended, clearly provides that:
Security of Tenure. - In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized
by the Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.
There being a finding of illegal dismissal of private respondent Anita Javier, her
reinstatement should follow as a matter of course, unless it be shown that the same
is no longer possible, in which case, payment of separation pay will be ordered, in
lieu thereof. 22 In this case, we do not find any such showing or basis to preclude
private respondent's reinstatement.
In effect, the petitioner bank is liable to private respondent only for backwages,
inclusive of allowances, and other benefits or their monetary equivalent computed
from the time her compensation was withheld from her up to the time of her actual
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
G.R. No. 151372 January 28, 2008
REGINA M. ASTORGA, petitioner,
vs.
SMART COMMUNICATIONS, INC. and ANN MARGARET V.
SANTIAGO, respondents.
DECISION
NACHURA, J.:
For the resolution of the Court are three consolidated petitions for review
on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails the
February 28, 2000 Decision1 and the May 7, 2001 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the
June 11, 2001 Decision3 and the December 18, 2001 Resolution4 in CA-G.R. SP. No.
57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications,
Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate
Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a
monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional
benefits, namely, annual performance incentive equivalent to 30% of her annual
gross salary, a group life and hospitalization insurance coverage, and a car plan in
the amount of P455,000.00.5
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
of her employment on ground of redundancy, effective April 3, 1998. Astorga
received it on March 16, 1998.7
The termination of her employment prompted Astorga to file a Complaint8 for illegal
dismissal, non-payment of salaries and other benefits with prayer for moral and
exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She
claimed that abolishing CSMG and, consequently, terminating her employment was
illegal for it violated her right to security of tenure. She also posited that it was illegal
for an employer, like SMART, to contract out services which will displace the
employees, especially if the contractor is an in-house agency.9
SMART responded that there was valid termination. It argued that Astorga was
dismissed by reason of redundancy, which is an authorized cause for termination of
employment, and the dismissal was effected in accordance with the requirements of
the Labor Code. The redundancy of Astorga’s position was the result of the abolition
of CSMG and the creation of a specialized and more technically equipped SNMI,
which is a valid and legitimate exercise of management prerogative.10
In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that
she pay the current market value of the Honda Civic Sedan which was given to her
under the company’s car plan program, or to surrender the same to the company
for proper disposition.11 Astorga, however, failed and refused to do either, thus
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
been denied,20 it elevated the case to this Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the
illegal dismissal case to the National Labor Relations Commission (NLRC). In its
September 27, 1999 Decision,21 the NLRC sustained Astorga’s dismissal. Reversing
the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI
to do the sales and marketing services for SMART a valid organizational action. It
overruled the Labor Arbiter’s ruling that SNMI is an in-house agency, holding that it
lacked legal basis. It also declared that contracting, subcontracting and streamlining
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
valid must be impelled by economic reasons, and upheld the redundancy measures
undertaken by SMART.
The NLRC disposed, thus:
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
her. [Smart and Santiago] are hereby ordered to pay the final wages of [Astorga]
after [she] had submitted the required supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21,
1999.23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a
Decision24 affirming with modification the resolutions of the NLRC. In gist, the CA
agreed with the NLRC that the reorganization undertaken by SMART resulting in the
abolition of CSMG was a legitimate exercise of management prerogative. It rejected
Astorga’s posturing that her non-absorption into SNMI was tainted with bad faith.
However, the CA found that SMART failed to comply with the mandatory one-month
notice prior to the intended termination. Accordingly, the CA imposed a penalty
equivalent to Astorga’s one-month salary for this non-compliance. The CA also set
aside the NLRC’s order for the return of the company vehicle holding that this issue
is not essentially a labor concern, but is civil in nature, and thus, within the
competence of the regular court to decide. It added that the matter had not been
fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial
reconsideration, of the Decision. On December 18, 2001, the CA resolved the
motions, viz.:
WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY
GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15
February 1998 to 06 November 1998. [Smart’s] motion for reconsideration is
outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions for review assailing
the CA ruling, docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this
Court ordered the consolidation of these petitions with G.R. No. 148132.26
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S
DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR
VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL.
II
SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE
APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA
TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL
COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR
WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.27
On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED
THAT SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO
TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.
II
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WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT
OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS
COMMISSION FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN
THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.28
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH
APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS
AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED
THAT THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE
COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY
VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE
THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR
PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE
THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART
UNDER THE LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin case filed with
the RTC of Makati City allegedly for lack of jurisdiction, which is the issue raised in
G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession of goods
or chattels may recover those goods or chattels from one who has wrongfully
distrained or taken, or who wrongfully detains such goods or chattels. It is designed
to permit one having right to possession to recover property in specie from one who
has wrongfully taken or detained the property.30 The term may refer either to the
action itself, for the recovery of personalty, or to the provisional remedy traditionally
associated with it, by which possession of the property may be obtained by the
plaintiff and retained during the pendency of the action.31
That the action commenced by SMART against Astorga in the RTC of Makati City
was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of
jurisdiction, the CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the
employment package. We doubt that [SMART] would extend [to Astorga] the same
car plan privilege were it not for her employment as district sales manager of the
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
employer-employee relationship. Thus, the claim for such falls squarely within the
original and exclusive jurisdiction of the labor arbiters and the NLRC.32
We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed
jurisdiction over the suit and acted well within its discretion in denying Astorga’s
motion to dismiss. SMART’s demand for payment of the market value of the car or,
in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It
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.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over
the replevin suit, explained:
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
wrongfully detained by another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property. The question of
whether or not a party has the right of possession over the property involved and if
so, whether or not the adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the pale of competence of a
labor tribunal and beyond the field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the Replevin Case.
The respective issues raised in each forum can be resolved independently on the
other. In fact in 18 November 1986, the NLRC in the case before it had issued an
Injunctive Writ enjoining the petitioners from blocking the free ingress and egress
to the Vessel and ordering the petitioners to disembark and vacate. That aspect of
the controversy is properly settled under the Labor Code. So also with petitioners’
right to picket. But the determination of the question of who has the better right to
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
competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of
jurisdiction as laid down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the RTC ruling and
ordered the dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes
for the dismissal of an employee. The nature of redundancy as an authorized cause
for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National
Labor Relations Commission,35 viz:
x x x redundancy in an employer’s personnel force necessarily or even ordinarily
refers to duplication of work. That no other person was holding the same position
that private respondent held prior to termination of his services does not show that
his position had not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for purposes of
the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. Succinctly put,
a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise.
The characterization of an employee’s services as superfluous or no longer necessary
and, therefore, properly terminable, is an exercise of business judgment on the part
of the employer. The wisdom and soundness of such characterization or decision is
not subject to discretionary review provided, of course, that a violation of law or
arbitrary or malicious action is not shown.36
Astorga claims that the termination of her employment was illegal and tainted with
bad faith. She asserts that the reorganization was done in order to get rid of her.
But except for her barefaced allegation, no convincing evidence was offered to prove
it. This Court finds it extremely difficult to believe that SMART would enter into a
joint venture agreement with NTT, form SNMI and abolish CSMG/FSD simply for the
sole purpose of easing out a particular employee, such as Astorga. Moreover,
Astorga never denied that SMART offered her a supervisory position in the Customer
Care Department, but she refused the offer because the position carried a lower
salary rank and rate. If indeed SMART simply wanted to get rid of her, it would not
have offered her a position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because
there was no compelling economic reason for redundancy. But contrary to her claim,
an employer is not precluded from adopting a new policy conducive to a more
economical and effective management even if it is not experiencing economic
reverses. Neither does the law require that the employer should suffer financial
losses before he can terminate the services of the employee on the ground of
redundancy. 37
We agree with the CA that the organizational realignment introduced by SMART,
which culminated in the abolition of CSMG/FSD and termination of Astorga’s
employment was an honest effort to make SMART’s sales and marketing
departments more efficient and competitive. As the CA had taken pains to elucidate:
x x x a careful and assiduous review of the records will yield no other conclusion
than that the reorganization undertaken by SMART is for no purpose other than its
declared objective – as a labor and cost savings device. Indeed, this Court finds no
fault in SMART’s decision to outsource the corporate sales market to SNMI in order
to attain greater productivity. [Astorga] belonged to the Sales Marketing Group
under the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in
charge of selling SMART’s telecommunications services to the corporate market.
SMART, to ensure it can respond quickly, efficiently and flexibly to its customer’s
requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to
newly-created SNMI Multimedia Incorporated, a joint venture company of SMART
and NTT of Japan, for the reason that CSMG/FSD does not have the necessary
technical expertise required for the value added services. By transferring the duties
of CSMG/FSD to SNMI, SMART has created a more competent and specialized
organization to perform the work required for corporate accounts. It is also relieved
SMART of all administrative costs – management, time and money-needed in
maintaining the CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on relevant
criteria and is therefore a legitimate exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this Court has
inclined towards the worker and upheld his cause in most of his conflicts with his
employer. This favored treatment is consonant with the social justice policy of the
Constitution. But while tilting the scales of justice in favor of workers, the
fundamental law also guarantees the right of the employer to reasonable returns for
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
overhead costs and enhance prospects of economic gains, albeit always within the
framework of existing laws. Accordingly, we sustain the reorganization and
redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one
(1) month notice prior to termination. The record is clear that Astorga received the
notice of termination only on March 16, 199839 or less than a month prior to its
effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was
notified of the redundancy program only on March 6, 1998.40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel. — The employer may
also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof x x x.
SMART’s assertion that Astorga cannot complain of lack of notice because the
organizational realignment was made known to all the employees as early as
February 1998 fails to persuade. Astorga’s actual knowledge of the reorganization
cannot replace the formal and written notice required by the law. In the written
notice, the employees are informed of the specific date of the termination, at least
a month prior to the effectivity of such termination, to give them sufficient time to
find other suitable employment or to make whatever arrangements are needed to
cushion the impact of termination. In this case, notwithstanding Astorga’s
knowledge of the reorganization, she remained uncertain about the status of her
employment until SMART gave her formal notice of termination. But such notice was
received by Astorga barely two (2) weeks before the effective date of termination,
a period very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination of
Astorga’s employment illegal. The validity of termination can exist independently of
the procedural infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found
the dismissal of the employees therein valid and for authorized cause even if the
employer failed to comply with the notice requirement under Article 283 of the Labor
Code. This Court upheld the dismissal, but held the employer liable for non-
compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal
and at the same time, awarding indemnity for violation of Astorga's statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the
CA to Astorga, as a sanction on SMART for non-compliance with the one-month
mandatory notice requirement, in light of our ruling in Jaka Food Processing
Corporation v. Pacot,43 viz.:
[I]f the dismissal is based on a just cause under Article 282 but the employer failed
to comply with the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee, and (2) if the dismissal is based on an authorized cause
under Article 283 but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was initiated by the
employer’s exercise of his management prerogative.
We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to
separation pay equivalent to at least one (1) month salary or to at least one (1)
month’s pay for every year of service, whichever is higher. The records show that
Astorga’s length of service is less than a year. She is, therefore, also entitled to
separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15,
1998. This assertion was never rebutted by SMART in the proceedings a quo. No
proof of payment was presented by SMART to disprove the allegation. It is settled
that in labor cases, the burden of proving payment of monetary claims rests on the
employer.44 SMART failed to discharge the onus probandi. Accordingly, it must be
held liable for Astorga’s salary from February 15, 1998 until the effective date of her
termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack
of basis. Backwages is a relief given to an illegally dismissed employee. Thus, before
backwages may be granted, there must be a finding of unjust or illegal dismissal
from work.45 The Labor Arbiter ruled that Astorga was illegally dismissed. But on
appeal, the NLRC reversed the Labor Arbiter’s ruling and categorically declared
Astorga’s dismissal valid. This ruling was affirmed by the CA in its assailed Decision.
Since Astorga’s dismissal is for an authorized cause, she is not entitled to backwages.
The CA’s award of backwages is totally inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The
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
G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to
annul and set aside the Decision and Resolution of the Court of Appeals dated
October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner Angelina
Francisco. The appellate court reversed and set aside the Decision of the National
Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No.
032766-02 which affirmed with modification the decision of the Labor Arbiter dated
July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private
respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage.
She was designated as Accountant and Corporate Secretary and was assigned to
handle all the accounting needs of the company. She was also designated as Liaison
Officer to the City of Makati to secure business permits, construction permits and
other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with
the corporate documents; neither did she attend any board meeting nor required to
do so. She never prepared any legal document and never represented the company
as its Corporate Secretary. However, on some occasions, she was prevailed upon to
sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry
Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned
to handle recruitment of all employees and perform management administration
functions; represent the company in all dealings with government agencies,
especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS)
and in the city government of Makati; and to administer all other matters pertaining
to the operation of Kasei Restaurant which is owned and operated by Kasei
Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December
31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10%
share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner
alleged that she was required to sign a prepared resolution for her replacement but
she was assured that she would still be connected with Kasei Corporation. Timoteo
Acedo, the designated Treasurer, convened a meeting of all employees of Kasei
Corporation and announced that nothing had changed and that petitioner was still
connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in
charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning
January up to September 2001 for a total reduction of P22,500.00 as of September
2001. Petitioner was not paid her mid-year bonus allegedly because the company
was not earning well. On October 2001, petitioner did not receive her salary from
the company. She made repeated follow-ups with the company cashier but she was
advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the
officers but she was informed that she is no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed
an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation.
They alleged that petitioner was hired in 1995 as one of its technical consultants on
accounting matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion without control and
supervision of Kasei Corporation. Petitioner had no daily time record and she came
to the office any time she wanted. The company never interfered with her work
except that from time to time, the management would ask her opinion on matters
relating to her profession. Petitioner did not go through the usual procedure of
selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the
corporation was her professional fee subject to the 10% expanded withholding tax
on professionals, and that she was not one of those reported to the BIR or SSS as
one of the company’s employees. 12
Petitioner’s designation as technical consultant depended solely upon the will of
management. As such, her consultancy may be terminated any time considering
that her services were only temporary in nature and dependent on the needs of the
corporation.
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To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly received
by the BIR showing that petitioner was not among the employees reported to the
BIR, as well as a list of payees subject to expanded withholding tax which included
petitioner. SSS records were also submitted showing that petitioner’s latest employer
was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant’s dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss
of seniority rights and jointly and severally pay complainant her money claims in
accordance with the following computation:
a. Backwages 10/2001 – 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant
separation pay with additional backwages that would accrue up to actual payment
of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor
Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as
follows:
1) Respondents are directed to pay complainant separation pay computed at one
month per year of service in addition to full backwages from October 2001 to July
31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit
in the respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorney’s fees shall be based on salary differential award
only;
4) The awards representing salary differentials, housing allowance, mid year bonus
and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National
Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET
ASIDE and a new one is hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner’s motion for reconsideration, hence, the
present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-
employee relationship between petitioner and private respondent Kasei Corporation;
and if in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor
Relations Commission on one hand, and the Court of Appeals on the other, there is
a need to reexamine the records to determine which of the propositions espoused
by the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no
uniform test to determine the existence of an employer-employee relation.
Generally, courts have relied on the so-called right of control test where the person
for whom the services are performed reserves a right to control not only the end to
be achieved but also the means to be used in reaching such end. In addition to the
standard of right-of-control, the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, can help in determining
the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture
of the relationship between the parties, owing to the complexity of such a
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relationship where several positions have been held by the worker. There are
instances when, aside from the employer’s power to control the employee with
respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the
putative employer’s power to control the employee with respect to the means and
methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would
take into consideration the totality of circumstances surrounding the true nature of
the relationship between the parties. This is especially appropriate in this case where
there is no written agreement or terms of reference to base the relationship on; and
due to the complexity of the relationship based on the various positions and
responsibilities given to the worker over the period of the latter’s employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and
Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is
an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing
economic conditions prevailing between the parties, in addition to the standard of
right-of-control like the inclusion of the employee in the payrolls, to give a clearer
picture in determining the existence of an employer-employee relationship based on
an analysis of the totality of economic circumstances of the worker.
Thus, the determination of the relationship between employer and employee
depends upon the circumstances of the whole economic activity, 22 such as: (1) the
extent to which the services performed are an integral part of the employer’s
business; (2) the extent of the worker’s investment in equipment and facilities; (3)
the nature and degree of control exercised by the employer; (4) the worker’s
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer;
and (7) the degree of dependency of the worker upon the employer for his continued
employment in that line of business. 23
The proper standard of economic dependence is whether the worker is dependent
on the alleged employer for his continued employment in that line of business. 24 In
the United States, the touchstone of economic reality in analyzing possible
employment relationships for purposes of the Federal Labor Standards Act is
dependency. 25 By analogy, the benchmark of economic reality in analyzing possible
employment relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji
Kamura, the corporation’s Technical Consultant. She reported for work regularly and
served in various capacities as Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with substantially the same job functions,
that is, rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the corporation such
as securing business permits and other licenses over an indefinite period of
engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an
employee of respondent corporation because she had served the company for six
years before her dismissal, receiving check vouchers indicating her salaries/wages,
benefits, 13th month pay, bonuses and allowances, as well as deductions and Social
Security contributions from August 1, 1999 to December 18, 2000. 26 When
petitioner was designated General Manager, respondent corporation made a report
to the SSS signed by Irene Ballesteros. Petitioner’s membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the
President of Kasei Corporation and the inclusion of her name in the on-line inquiry
system of the SSS evinces the existence of an employer-employee relationship
between petitioner and respondent corporation. 27
It is therefore apparent that petitioner is economically dependent on respondent
corporation for her continued employment in the latter’s line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business
establishment, an identification card is provided not only as a security measure but
mainly to identify the holder thereof as a bona fide employee of the firm that issues
it. Together with the cash vouchers covering petitioner’s salaries for the months
stated therein, these matters constitute substantial evidence adequate to support a
conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers
with the SSS is proof that the latter were the former’s employees. The coverage of
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Social Security Law is predicated on the existence of an employer-employee
relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her
designation as such was only for convenience. The actual nature of petitioner’s job
was as Kamura’s direct assistant with the duty of acting as Liaison Officer in
representing the company to secure construction permits, license to operate and
other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any document
for the corporation, although once in a while she was required to sign prepared
documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December
5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records
of the case. 31 Regardless of this fact, we are convinced that the allegations in the
first affidavit are sufficient to establish that petitioner is an employee of Kasei
Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts
do not generally look with favor on any retraction or recanted testimony, for it could
have been secured by considerations other than to tell the truth and would make
solemn trials a mockery and place the investigation of the truth at the mercy of
unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier
declaration, but like any other testimony the same is subject to the test of credibility
and should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an
employee of respondent Kasei Corporation. She was selected and engaged by the
company for compensation, and is economically dependent upon respondent for her
continued employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a regular basis
over an indefinite period of engagement. Respondent corporation hired and engaged
petitioner for compensation, with the power to dismiss her for cause. More
importantly, respondent corporation had the power to control petitioner with the
means and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by
P2,500 a month from January to September 2001. This amounts to an illegal
termination of employment, where the petitioner is entitled to full backwages. Since
the position of petitioner as accountant is one of trust and confidence, and under
the principle of strained relations, petitioner is further entitled to separation pay, in
lieu of reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to constructive
dismissal. Constructive dismissal is an involuntary resignation resulting in cessation
of work resorted to when continued employment becomes impossible, unreasonable
or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an
employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an
employee ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working environment
rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and therefore
amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work opportunities
regardless of sex, race or creed. Even as we, in every case, attempt to carefully
balance the fragile relationship between employees and employers, we are mindful
of the fact that the policy of the law is to apply the Labor Code to a greater number
of employees. This would enable employees to avail of the benefits accorded to
them by law, in line with the constitutional mandate giving maximum aid and
protection to labor, promoting their welfare and reaffirming it as a primary social
economic force in furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of
Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP
No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02,
is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation
of petitioner Angelina Francisco’s full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay representing
one-half month pay for every year of service, where a fraction of at least six months
shall be considered as one whole year.
SO ORDERED.
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FIRST DIVISION
G.R. No. 164156 September 26, 2006
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and
JOSEPHINE LERASAN, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for
reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the
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
of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon,
Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the
broadcasting business and owns a network of television and radio stations, whose
operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the airtime it
generates from its radio and television operations. It has a franchise as a
broadcasting company, and was likewise issued a license and authority to operate
by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production assistants (PAs) on different dates. They were assigned at the news and
public affairs, for various radio programs in the Cebu Broadcasting Station, with a
monthly compensation of P4,000. They were issued ABS-CBN employees’
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
duties:
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
and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio.4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
8:00 A.M.-12:00 noon
2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.
9:00 A.M.-6:00 P.M. (WF) 9 hrs.
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante
J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees
executed a Collective Bargaining Agreement (CBA) to be effective during the period
from December 11, 1996 to December 11, 1999. However, since petitioner refused
to recognize PAs as part of the bargaining unit, respondents were not included to
the CBA.6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing
the PAs that effective August 1, 2000, they would be assigned to non-drama
programs, and that the DYAB studio operations would be handled by the studio
technician. Thus, their revised schedule and other assignments would be as follows:
Monday – Saturday
4:30 A.M. – 8:00 A.M. – Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
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
PA may also be assigned to new programs upon the cancellation of one program
and the commencement of another. As such program employees, their
compensation is computed on a program basis, a fixed amount for performance
services irrespective of the time consumed. At any rate, petitioner claimed, as the
payroll will show, respondents were paid all salaries and benefits due them under
the law.12
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA
and interpret the same, especially since respondents were not covered by the
bargaining unit.
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents,
and declared that they were regular employees of petitioner; as such, they were
awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered
declaring the complainants regular employees of the respondent ABS-CBN
Broadcasting Corporation and directing the same respondent to pay complainants
as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00
_________
P48,100.00
plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS:
FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED.13
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
same was within the jurisdiction of the Voluntary Arbitrator as provided in Article
261 of the Labor Code.
Respondents’ counsel received a copy of the decision on August 29, 2001.
Respondent Nazareno received her copy on August 27, 2001, while the other
respondents received theirs on September 8, 2001. Respondents signed and filed
their Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter
denied and considered as an appeal, conformably with Section 5, Rule V, of the
NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC,
while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long
been dismissed without prejudice for more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right
to due process of law;
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;
4. That the Labor Arbiter erred when he ruled that the complainants are regular
employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to
13th month pay, service incentive leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to
attorney’s fees.14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the
Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez
dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING
respondent ABS-CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from
the CBA as of 30 September 2002 in the aggregate amount of Two Million Five
Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
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
of 30 September 2002 representing their rice subsidy in the CBA, broken down as
follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code
when it granted respondents’ motion to refile the complaint and admit their position
paper. Although respondents were not parties to the CBA between petitioner and
the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and
computed respondents’ monetary benefits based on the 1999 CBA, which was
effective until September 2002. The NLRC also ruled that the Labor Arbiter had
jurisdiction over the complaint of respondents because they acted in their individual
capacities and not as members of the union. Their claim for monetary benefits was
within the context of Article 217(6) of the Labor Code. The validity of respondents’
claim does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA
because they were regular employees who contributed to the profits of petitioner
through their labor. The NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA, raising both procedural and substantive issues, as follows: (a)
whether the NLRC acted without jurisdiction in admitting the appeal of respondents;
(b) whether the NLRC committed palpable error in scrutinizing the reopening and
revival of the complaint of respondents with the Labor Arbiter upon due notice
despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the
Labor Arbiter; (c) whether respondents were regular employees; (d) whether the
NLRC acted without jurisdiction in entertaining and resolving the claim of the
respondents under the CBA instead of referring the same to the Voluntary Arbitrators
as provided in the CBA; and (e) whether the NLRC acted with grave abuse of
discretion when it awarded monetary benefits to respondents under the CBA
although they are not members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held
that the perfection of an appeal shall be upon the expiration of the last day to appeal
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
received her copy of the decision on August 27, 2001), they had until September
18, 2001 within which to file their Appeal Memorandum. Moreover, the CA declared
that respondents’ failure to submit their position paper on time is not a ground to
strike out the paper from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not
mere project employees, but regular employees who perform tasks necessary and
desirable in the usual trade and business of petitioner and not just its project
employees. Moreover, the CA added, the award of benefits accorded to rank-and-
file employees under the 1996-1999 CBA is a necessary consequence of the NLRC
ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioner’s motion for reconsideration, the CA denied the same
in a Resolution17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the
following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND
GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION
NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER’S DECISION AND
RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
RULING OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
RULING OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve
them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of
law when it affirmed the rulings of the NLRC, and entertained respondents’ appeal
from the decision of the Labor Arbiter despite the admitted lapse of the reglementary
period within which to perfect the same. Petitioner likewise maintains that the 10-
day period to appeal must be reckoned from receipt of a party’s counsel, not from
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
complaint which the Labor Arbiter has dismissed without prejudice is a clear violation
of Section 1, Rule V of the NLRC Rules; such order of dismissal had already attained
finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue because
it was petitioner’s own timely appeal that empowered the NLRC to reopen the case.
They assert that although the appeal was filed 10 days late, it may still be given due
course in the interest of substantial justice as an exception to the general rule that
the negligence of a counsel binds the client. On the issue of the late filing of their
position paper, they maintain that this is not a ground to strike it out from the
records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioner’s contention that the perfection of an appeal within the
statutory or reglementary period is not only mandatory, but also jurisdictional;
failure to do so renders the assailed decision final and executory and deprives the
appellate court or body of the legal authority to alter the final judgment, much less
entertain the appeal. However, this Court has time and again ruled that in
exceptional cases, a belated appeal may be given due course if greater injustice may
occur if an appeal is not given due course than if the reglementary period to appeal
were strictly followed.19 The Court resorted to this extraordinary measure even at
the expense of sacrificing order and efficiency if only to serve the greater principles
of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving
Article 22321 of the Labor Code a liberal application to prevent the miscarriage of
justice. Technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties.22 We have held in a
catena of cases that technical rules are not binding in labor cases and are not to be
applied strictly if the result would be detrimental to the workingman.23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor
Arbiter within the reglementary period therefor. However, petitioner perfected its
appeal within the period, and since petitioner had filed a timely appeal, the NLRC
acquired jurisdiction over the case to give due course to its appeal and render the
decision of November 14, 2002. Case law is that the party who failed to appeal from
the decision of the Labor Arbiter to the NLRC can still participate in a separate appeal
timely filed by the adverse party as the situation is considered to be of greater
benefit to both parties.24
We find no merit in petitioner’s contention that the Labor Arbiter abused his
discretion when he admitted respondents’ position paper which had been belatedly
filed. It bears stressing that the Labor Arbiter is mandated by law to use every
reasonable means to ascertain the facts in each case speedily and objectively,
without technicalities of law or procedure, all in the interest of due
process.25 Indeed, as stressed by the appellate court, respondents’ failure to submit
a position paper on time is not a ground for striking out the paper from the records,
much less for dismissing a complaint.26 Likewise, there is simply no truth to
petitioner’s assertion that it was denied due process when the Labor Arbiter admitted
respondents’ position paper without requiring it to file a comment before admitting
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
of the action or ruling complained of. Obviously, there is nothing in the records that
would suggest that petitioner had absolute lack of opportunity to be
heard.27 Petitioner had the right to file a motion for reconsideration of the Labor
Arbiter’s admission of respondents’ position paper, and even file a Reply thereto. In
fact, petitioner filed its position paper on April 2, 2001. It must be stressed that
Article 280 of the Labor Code was encoded in our statute books to hinder the
circumvention by unscrupulous employers of the employees’ right to security of
tenure by indiscriminately and absolutely ruling out all written and oral agreements
inharmonious with the concept of regular employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor
Arbiter’s order dated 18 June 2001 as violative of the NLRC Rules of Procedure and
as such is violative of their right to procedural due process. That while suggesting
that an Order be instead issued by the Labor Arbiter for complainants to refile this
case, respondents impliedly submit that there is not any substantial damage or
prejudice upon the refiling, even so, respondents’ suggestion acknowledges
complainants right to prosecute this case, albeit with the burden of repeating the
same procedure, thus, entailing additional time, efforts, litigation cost and precious
time for the Arbiter to repeat the same process twice. Respondent’s suggestion,
betrays its notion of prolonging, rather than promoting the early resolution of the
case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-
opened the dismissed case without prejudice beyond the ten (10) day reglementary
period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the
NLRC which states:
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"A party may file a motion to revive or re-open a case dismissed without prejudice
within ten (10) calendar days from receipt of notice of the order dismissing the
same; otherwise, his only remedy shall be to re-file the case in the arbitration branch
of origin."
the same is not a serious flaw that had prejudiced the respondents’ right to due
process. The case can still be refiled because it has not yet prescribed. Anyway,
Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules
of evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or procedure, all
in the interest of due process."
The admission by the Labor Arbiter of the complainants’ Position Paper and
Supplemental Manifestation which were belatedly filed just only shows that he acted
within his discretion as he is enjoined by law to use every reasonable means to
ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process. Indeed, the
failure to submit a position paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint in the case of the
complainant. (University of Immaculate Conception vs. UIC Teaching and Non-
Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents’ position paper albeit late, the Labor Arbiter acted
within her discretion. In fact, she is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without technicalities of
law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA
53).
The respondents were given by the Labor Arbiter the opportunity to submit position
paper. In fact, the respondents had filed their position paper on 2 April 2001. What
is material in the compliance of due process is the fact that the parties are given the
opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the
opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of
law.29
We reject, as barren of factual basis, petitioner’s contention that respondents are
considered as its talents, hence, not regular employees of the broadcasting
company. Petitioner’s claim that the functions performed by the respondents are not
at all necessary, desirable, or even vital to its trade or business is belied by the
evidence on record.
Case law is that this Court has always accorded respect and finality to the findings
of fact of the CA, particularly if they coincide with those of the Labor Arbiter and the
National Labor Relations Commission, when supported by substantial
evidence.30 The question of whether respondents are regular or project employees
or independent contractors is essentially factual in nature; nonetheless, the Court is
constrained to resolve it due to its tremendous effects to the legions of production
assistants working in the Philippine broadcasting industry.
We agree with respondents’ contention that where a person has rendered at least
one year of service, regardless of the nature of the activity performed, or where the
work is continuous or intermittent, the employment is considered regular as long as
the activity exists, the reason being that a customary appointment is not
indispensable before one may be formally declared as having attained regular status.
Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer except where the employment has been
fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for
the duration of the season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in
determining whether one is a regular employee:
The primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the employee
in relation to the usual trade or business of the employer. The test is whether the
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
performed and its relation to the scheme of the particular business or trade in its
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
necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while
such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of Working Men:33
Even while the language of law might have been more definitive, the clarity of its
spirit and intent, i.e., to ensure a "regular" worker’s security of tenure, however, can
hardly be doubted. In determining whether an employment should be considered
regular or non-regular, the applicable test is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or
trade of the employer. The standard, supplied by the law itself, is whether the work
undertaken is necessary or desirable in the usual business or trade of the employer,
a fact that can be assessed by looking into the nature of the services rendered and
its relation to the general scheme under which the business or trade is pursued in
the usual course. It is distinguished from a specific undertaking that is divorced from
the normal activities required in carrying on the particular business or trade. But,
although the work to be performed is only for a specific project or seasonal, where
a person thus engaged has been performing the job for at least one year, even if
the performance is not continuous or is merely intermittent, the law deems the
repeated and continuing need for its performance as being sufficient to indicate the
necessity or desirability of that activity to the business or trade of the employer. The
employment of such person is also then deemed to be regular with respect to such
activity and while such activity exists.34
Not considered regular employees are "project employees," the completion or
termination of which is more or less determinable at the time of employment, such
as those employed in connection with a particular construction project, and
"seasonal employees" whose employment by its nature is only desirable for a limited
period of time. Even then, any employee who has rendered at least one year of
service, whether continuous or intermittent, is deemed regular with respect to the
activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that
respondents received pre-agreed "talent fees" instead of salaries, that they did not
observe the required office hours, and that they were permitted to join other
productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered "talents" because they are not
actors or actresses or radio specialists or mere clerks or utility employees. They are
regular employees who perform several different duties under the control and
direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged
to perform activities which are necessary or desirable in the usual business or trade
of the employer; and (2) those casual employees who have rendered at least one
year of service, whether continuous or broken, with respect to the activities in which
they are employed.35
The law overrides such conditions which are prejudicial to the interest of the worker
whose weak bargaining situation 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, much less the
procedure of hiring the employee or the manner of paying the salary or the actual
time spent at work. It is the character of the activities performed in relation to the
particular trade or business taking into account all the circumstances, and in some
cases the length of time of its performance and its continued existence.36 It is
obvious that one year after they were employed by petitioner, respondents became
regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees
because no evidence was presented to show that the duration and scope of the
project were determined or specified at the time of their engagement. Under existing
jurisprudence, project could refer to two distinguishable types of activities. First, a
project may refer to a particular job or undertaking that is within the regular or usual
business of the employer, but which is distinct and separate, and identifiable as
such, from the other undertakings of the company. Such job or undertaking begins
and ends at determined or determinable times. Second, the term project may also
refer to a particular job or undertaking that is not within the regular business of the
employer. Such a job or undertaking must also be identifiably separate and distinct
from the ordinary or regular business operations of the employer. The job or
undertaking also begins and ends at determined or determinable times.38
The principal test is whether or not the project employees were assigned to carry
out a specific project or undertaking, the duration and scope of which were specified
at the time the employees were engaged for that project.39
In this case, it is undisputed that respondents had continuously performed the same
activities for an average of five years. Their assigned tasks are necessary or desirable
in the usual business or trade of the petitioner. The persisting need for their services
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
employee was hired for a specific undertaking or in fact tasked to perform functions
which are vital, necessary and indispensable to the usual trade or business of the
employer.41 We note further that petitioner did not report the termination of
respondents’ employment in the particular "project" to the Department of Labor and
Employment Regional Office having jurisdiction over the workplace within 30 days
following the date of their separation from work, using the prescribed form on
employees’ termination/ dismissals/suspensions.42
As gleaned from the records of this case, petitioner itself is not certain how to
categorize respondents. In its earlier pleadings, petitioner classified respondents as
program employees, and in later pleadings, independent contractors. Program
employees, or project employees, are different from independent contractors
because in the case of the latter, no employer-employee relationship exists.
Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting
Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a
well-known television and radio personality, was an independent contractor and not
a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’S services to co-host its television and radio programs
because of SONZA’S peculiar skills, talent and celebrity status. SONZA contends that
the "discretion used by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and qualification as
complainant belies respondent’s claim of independent contractorship."
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship,
with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits
and privileges "which he would not have enjoyed if he were truly the subject of a
valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBN’s employee, there would be no need
for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month
pay which the law automatically incorporates into every employer-employee
contract. Whatever benefits SONZA enjoyed arose from contract and not because of
an employer-employee relationship.
SONZA’s talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZA’S unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive
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
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed on
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
Agreement.44
In the case at bar, however, the employer-employee relationship between petitioner
and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill,
talent or celebrity status was required from them because they were merely hired
through petitioner’s personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a
result of an employer-employee relationship. Respondents did not have the power
to bargain for huge talent fees, a circumstance negating independent contractual
relationship.
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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
DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO
R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA,
FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER
ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA,
NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners,
vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A.
AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON.
EMERSON C. TUMANON, respondents.
SARMIENTO, J.:
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the
National Labor Relations Commission for reinstatement and payment of various
benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay,
and emergency cost of living allowance pay, against the respondent, the California
Manufacturing Company. 1
On October 7, 1986, after the cases had been consolidated, the California
Manufacturing Company (California) filed a motion to dismiss as well as a position
paper denying the existence of an employer-employee relation between the
petitioners and the company and, consequently, any liability for payment of money
claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded
as a party-respondent.
It appears that the petitioners were, prior to their stint with California, employees
of Livi Manpower Services, Inc. (Livi), which subsequently assigned them to work as
"promotional merchandisers" 3 for the former firm pursuant to a manpower supply
agreement. Among other things, the agreement provided that California "has no
control or supervisions whatsoever over [Livi's] workers with respect to how they
accomplish their work or perform [Californias] obligation"; 4 the Livi "is an
independent contractor and nothing herein contained shall be construed as creating
between [California] and [Livi] . . . the relationship of principal[-]agent or employer[-
]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to
comply with all existing as well as future laws, rules and regulations pertinent to
employment of labor" 6 and that "[California] is free and harmless from any liability
arising from such laws or from any accident that may befall workers and employees
of [Livi] while in the performance of their duties for [California].7
It was further expressly stipulated that the assignment of workers to California shall
be on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10
legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for
the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8
The petitioners were then made to sign employment contracts with durations of six
months, upon the expiration of which they signed new agreements with the same
period, and so on. Unlike regular California employees, who received not less than
P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received
P38.56 plus P15.00 in allowance daily.
The petitioners now allege that they had become regular California employees and
demand, as a consequence whereof, similar benefits. They likewise claim that
pending further proceedings below, they were notified by California that they would
not be rehired. As a result, they filed an amended complaint charging California with
illegal dismissal.
California admits having refused to accept the petitioners back to work but deny
liability therefor for the reason that it is not, to begin with, the petitioners' employer
and that the "retrenchment" had been forced by business losses as well as expiration
of contracts.9 It appears that thereafter, Livi re-absorbed them into its labor pool
on a "wait-in or standby" status. 10
Amid these factual antecedents, the Court finds the single most important issue to
be: Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the
existence of any employer-employee relation between the petitioners and California
ostensibly in the light of the manpower supply contract, supra, and consequently,
against the latter's liability as and for the money claims demanded. In the same
breath, however, the labor arbiter absolved Livi from any obligation because the
"retrenchment" in question was allegedly "beyond its control ." 13 He assessed
against the firm, nevertheless, separation pay and attorney's fees.
We reverse.
The existence of an employer-employees relation is a question of law and being
such, it cannot be made the subject of agreement. Hence, the fact that the
manpower supply agreement between Livi and California had specifically designated
the former as the petitioners' employer and had absolved the latter from any liability
as an employer, will not erase either party's obligations as an employer, if an
employer-employee relation otherwise exists between the workers and either firm.
At any rate, since the agreement was between Livi and California, they alone are
bound by it, and the petitioners cannot be made to suffer from its adverse
consequences.
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This Court has consistently ruled that the determination of whether or not there is
an employer-employee relation depends upon four standards: (1) the manner of
selection and engagement of the putative employee; (2) the mode of payment of
wages; (3) the presence or absence of a power of dismissal; and (4) the presence
or absence of a power to control the putative employee's conduct. 14 Of the four,
the right-of-control test has been held to be the decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the Labor Code,
hereinbelow reproduced:
ART. 106. Contractor or sub-contractor. — Whenever an employee enters into a
contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's sub-contractor, if any, shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or sub-contractor fails to pay wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or sub-contractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under this Code.
In so prohibiting or restricting, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations within these types of
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
provisions of this Code.
There is 'labor-only' contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed
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
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.
that notwithstanding the absence of a direct employer-employee relationship
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
the "labor-only" contractor, for any valid labor claims, 16 by operation of law. The
reason, so we held, is that the "labor-only" contractor is considered "merely an agent
of the employer,"17 and liability must be shouldered by either one or shared by
both. 18
There is no doubt that in the case at bar, Livi performs "manpower
services", 19 meaning to say, it contracts out labor in favor of clients. We hold that
it is one notwithstanding its vehement claims to the contrary, and notwithstanding
the provision of the contract that it is "an independent contractor." 20 The nature
of one's business is not determined by self-serving appellations one attaches thereto
but by the tests provided by statute and prevailing case law. 21 The bare fact that
Livi maintains a separate line of business does not extinguish the equal fact that it
has provided California with workers to pursue the latter's own business. In this
connection, we do not agree that the petitioners had been made to perform activities
'which are not directly related to the general business of
manufacturing," 22California's purported "principal operation activity. " 23 The
petitioner's had been charged with "merchandizing [sic] promotion or sale of the
products of [California] in the different sales outlets in Metro Manila including task
and occational [sic] price tagging," 24 an activity that is doubtless, an integral part
of the manufacturing business. It is not, then, as if Livi had served as its (California's)
promotions or sales arm or agent, or otherwise, rendered a piece of work it
(California) could not have itself done; Livi, as a placement agency, had simply
supplied it with the manpower necessary to carry out its (California's) merchandising
activities, using its (California's) premises and equipment. 25
Neither Livi nor California can therefore escape liability, that is, assuming one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct
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
by legal operation. For another, and as we indicated, the relations of parties must
be judged from case to case and the decree of law, and not by declarations of
parties.
The fact that the petitioners have been hired on a "temporary or seasonal" basis
merely is no argument either. As we held in Philippine Bank of Communications v.
NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code,
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
obvious reason that it is an activity related to the day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a promotions firm,
and that California had hired it to perform the latter's merchandising activities. For
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.
The employees would not in that event be unlike waiters, who, although at the
service of customers, are not the latter's employees, but of the restaurant. As we
pointed out in the Philippine Bank of Communications case:
... The undertaking given by CESI in favor of the bank was not the performance of
a specific job for instance, the carriage and delivery of documents and parcels to
the addresses thereof. There appear to be many companies today which perform
this discrete service, companies with their own personnel who pick up documents
and packages from the offices of a client or customer, and who deliver such materials
utilizing their own delivery vans or motorcycles to the addressees. In the present
case, the undertaking of CESI was to provide its client the bank with a certain
number of persons able to carry out the work of messengers. Such undertaking of
CESI was complied with when the requisite number of persons were assigned or
seconded to the petitioner bank. Orpiada utilized the premises and office equipment
of the bank and not those of CESI. Messengerial work the delivery of documents to
designated persons whether within or without the bank premises-is of course directly
related to the day-to-day operations of the bank. Section 9(2) quoted above does
not require for its applicability that the petitioner must be engaged in the delivery
of items as a distinct and separate line of business.
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a
recruitment and placement corporation placing bodies, as it were, in different client
companies for longer or shorter periods of time, ... 28
In the case at bar, Livi is admittedly an "independent contractor providing temporary
services of manpower to its client. " 29 When it thus provided California with
manpower, it supplied California with personnel, as if such personnel had been
directly hired by California. Hence, Article 106 of the Code applies.
The Court need not therefore consider whether it is Livi or California which exercises
control over the petitioner vis-a-vis the four barometers referred to earlier, since by
fiction of law, either or both shoulder responsibility.
It is not that by dismissing the terms and conditions of the manpower supply
agreement, we have, hence, considered it illegal. Under the Labor Code, genuine
job contracts are permissible, provided they are genuine job contracts. But, as we
held in Philippine Bank of Communications, supra, when such arrangements are
resorted to "in anticipation of, and for the very purpose of making possible, the
secondment" 30 of the employees from the true employer, the Court will be justified
in expressing its concern. For then that would compromise the rights of the workers,
especially their right to security of tenure.
This brings us to the question: What is the liability of either Livi or California?
The records show that the petitioners bad been given an initial six-month contract,
renewed for another six months. Accordingly, under Article 281 of the Code, they
had become regular employees-of-California-and had acquired a secure tenure.
Hence, they cannot be separated without due process of law.
California resists reinstatement on the ground, first, and as we Id, that the
petitioners are not its employees, and second, by reason of financial distress brought
about by "unfavorable political and economic atmosphere" 31"coupled by the
February Revolution." 32 As to the first objection, we reiterate that the petitioners
are its employees and who, by virtue of the required one-year length-of-service,
have acquired a regular status. As to the second, we are not convinced that
California has shown enough evidence, other than its bare say so, that it had in fact
suffered serious business reverses as a result alone of the prevailing political and
economic climate. We further find the attribution to the February Revolution as a
cause for its alleged losses to be gratuitous and without basis in fact.
California should be warned that retrenchment of workers, unless clearly warranted,
has serious consequences not only on the State's initiatives to maintain a stable
employment record for the country, but more so, on the workingman himself, amid
an environment that is desperately scarce in jobs. And, the National Labor Relations
Commission should have known better than to fall for such unwarranted excuses
and nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1):
SETTING ASIDE the decision, dated March 20, 1987, and the resolution, dated
August 19, 1987; (2) ORDERING the respondent, the California Manufacturing
Company, to REINSTATE the petitioners with full status and rights of regular
employees; and (3) ORDERING the respondent, the California Manufacturing
Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria
Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and
differential pays effective as and from the time they had acquired a regular status
under the second paragraph, of Section 281, of the Labor Code, but not to exceed
three (3) years, and (b) all such other and further benefits as may be provided by
existing collective bargaining agreement(s) or other relations, or by law, beginning
such time; and (4) ORDERING the private respondents to PAY unto the petitioners
attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded,
in addition to those money claims. The private respondents are likewise ORDERED
to PAY the costs of this suit.
IT IS SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 155731 September 3, 2007
LOLITA LOPEZ, petitioner,
vs.
BODEGA CITY (Video-Disco Kitchen of the Philippines) and/or ANDRES
C. TORRES-YAP, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court assailing the July 18, 2002 Decision1 of the Court of Appeals (CA) in CA-G.R.
SP No. 66861, dismissing the petition for certiorari filed before it and affirming the
Decision of the National Labor Relations Commission (NLRC) in NLRC-NCR Case No.
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
Arbiter finding that Lolita Lopez (petitioner) was illegally dismissed by Bodega City
and/or Andres C. Torres-Yap (respondents).
Respondent Bodega City (Bodega City) is a corporation duly registered and existing
under and by virtue of the laws of the Republic of the Philippines, while respondent
Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the "lady keeper"
of Bodega City tasked with manning its ladies' comfort room.
In a letter signed by Yap dated February 10, 1995, petitioner was made to explain
why the concessionaire agreement between her and respondents should not be
terminated or suspended in view of an incident that happened on February 3, 1995,
wherein petitioner was seen to have acted in a hostile manner against a lady
customer of Bodega City who informed the management that she saw petitioner
sleeping while on duty.
In a subsequent letter dated February 25, 1995, Yap informed petitioner that
because of the incident that happened on February 3, 1995, respondents had
decided to terminate the concessionaire agreement between them.
On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC, National
Capital Region, Quezon City, a complaint for illegal dismissal against respondents
contending that she was dismissed from her employment without cause and due
process.
In their answer, respondents contended that no employer-employee relationship
ever existed between them and petitioner; that the latter's services rendered within
the premises of Bodega City was by virtue of a concessionaire agreement she
entered into with respondents.
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
proceedings. Upon remand, the case was assigned to a different Labor Arbiter.
Thereafter, hearings were conducted and the parties were required to submit
memoranda and other supporting documents.
On December 28, 1999, the Labor Arbiter rendered judgment finding that petitioner
was an employee of respondents and that the latter illegally dismissed her.3
Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC issued a
Resolution, the dispositive portion of which reads as follows:
WHEREFORE, premises duly considered, the Decision appealed from is hereby
ordered SET ASIDE and VACATED, and in its stead, a new one entered DISMISSING
the above-entitled case for lack of merit.4
Petitioner filed a motion for reconsideration of the above-quoted NLRC Resolution,
but the NLRC denied the same.
Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18, 2002, the
CA promulgated the presently assailed Decision dismissing her special civil action
for certiorari. Petitioner moved for reconsideration but her motion was denied.
Hence, herein petition based on the following grounds:
1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION IN RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION
DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION
OF THE LABOR ARBITER FINDING PETITIONER TO HAVE BEEN ILLEGALLY
DISMISSED BY PRIVATE RESPONDENTS.
2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION IN RULING THAT PETITIONER WAS NOT AN EMPLOYEE OF PRIVATE
RESPONDENTS.5
Petitioner contends that it was wrong for the CA to conclude that even if she did not
sign the document evidencing the concessionaire agreement, she impliedly accepted
and thus bound herself to the terms and conditions contained in the said agreement
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
only offered to her during her tenth year of service and after she organized a union
and filed a complaint against respondents. Prior to all these, petitioner asserts that
her job as a "lady keeper" was a task assigned to her as an employee of respondents.
Petitioner further argues that her receipt of a special allowance from respondents is
a clear evidence that she was an employee of the latter, as the amount she received
was equivalent to the minimum wage at that time.
Petitioner also contends that her identification card clearly shows that she was not
a concessionaire but an employee of respondents; that if respondents really
intended the ID card issued to her to be used simply for having access to the
premises of Bodega City, then respondents could have clearly indicated such intent
on the said ID card.
Moreover, petitioner submits that the fact that she was required to follow rules and
regulations prescribing appropriate conduct while she was in the premises of Bodega
City is clear evidence of the existence of an employer-employee relationship between
her and petitioners.
On the other hand, respondents contend that the present petition was filed for the
sole purpose of delaying the proceedings of the case; the grounds relied upon in the
instant petition are matters that have been exhaustively discussed by the NLRC and
the CA; the present petition raises questions of fact which are not proper in a petition
for review on certiorari under Rule 45 of the Rules of Court; the respective decisions
of the NLRC and the CA are based on evidence presented by both parties;
petitioner's compliance with the terms and conditions of the proposed concessionaire
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
subject concessionaire agreement was only proposed to her in her 10th year of
employment with respondent company and after she organized a union and filed a
labor complaint against respondents; petitioner failed to present competent
documentary and testimonial evidence to prove her contention that she was an
employee of respondents since 1985.
The main issue to be resolved in the present case is whether or not petitioner is an
employee of respondents.
The issue of whether or not an employer-employee relationship exists in a given
case is essentially a question of fact.6
While it is a settled rule that only errors of law are generally reviewed by this Court
in petitions for review on certiorari of CA decisions,7 there are well-recognized
exceptions to this rule, as in this case, when the factual findings of the NLRC as
affirmed by the CA contradict those of the Labor Arbiter.8 In that event, it is this
Court's task, in the exercise of its equity jurisdiction, to re-evaluate and review the
factual issues by looking into the records of the case and re-examining the
questioned findings.9
It is a basic rule of evidence that each party must prove his affirmative
allegation.10 If he claims a right granted by law, he must prove his claim by
competent evidence, relying on the strength of his own evidence and not upon the
weakness of that of his opponent.11
The test for determining on whom the burden of proof lies is found in the result of
an inquiry as to which party would be successful if no evidence of such matters were
given.12
In an illegal dismissal case, the onus probandi rests on the employer to prove that
its dismissal of an employee was for a valid cause.13 However, before a case for
illegal dismissal can prosper, an employer-employee relationship must first be
established.14
In filing a complaint before the Labor Arbiter for illegal dismissal based on the
premise that she was an employee of respondent, it is incumbent upon petitioner to
prove the employee-employer relationship by substantial evidence.15
The NLRC and the CA found that petitioner failed to discharge this burden, and the
Court finds no cogent reason to depart from their findings.
The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and
Parts Corp.,16 to wit:
To ascertain the existence of an employer-employee relationship, jurisprudence has
invariably applied the four-fold test, namely: (1) the manner of selection and
engagement; (2) the payment of wages; (3) the presence or absence of the power
of dismissal; and (4) the presence or absence of the power of control. Of these four,
the last one is the most important. The so-called "control test" is commonly regarded
as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under the control test, an employer-employee
relationship exists where the person for whom the services areperformed reserves
the right to control not only the end achieved, but also the manner and means to
be used in reaching that end.17
To prove the element of payment of wages, petitioner presented a petty cash
voucher showing that she received an allowance for five (5) days.18 The CA did not
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
for 10 years.
Indeed, if petitioner was really an employee of respondents for that length of time,
she should have been able to present salary vouchers or pay slips and not just a
single petty cash voucher. The Court agrees with respondents that petitioner could
have easily shown other pieces of evidence such as a contract of employment, SSS
or Medicare forms, or certificates of withholding tax on compensation income; or
she could have presented witnesses to prove her contention that she was an
employee of respondents. Petitioner failed to do so.
Anent the element of control, petitioner's contention that she was an employee of
respondents because she was subject to their control does not hold water.
Petitioner failed to cite a single instance to prove that she was subject to the control
of respondents insofar as the manner in which she should perform her job as a "lady
keeper" was concerned.
It is true that petitioner was required to follow rules and regulations prescribing
appropriate conduct while within the premises of Bodega City. However, this was
imposed upon petitioner as part of the terms and conditions in the concessionaire
agreement embodied in a 1992 letter of Yap addressed to petitioner, to wit:
January 6, 1992
Dear Ms. Lolita Lopez,
The new owners of Bodega City, 1121 Food Service Corporation offers to your
goodself the concessionaire/contract to provide independently, customer comfort
services to assist users of the ladies comfort room of the Club to further enhance its
business, under the following terms and conditions:
1. You will provide at your own expense, all toilet supplies, useful for the purpose,
such as toilet papers, soap, hair pins, safety pins and other related items or things
which in your opinion is beneficial to the services you will undertake;
2. For the entire duration of this concessionaire contract, and during the Club's
operating hours, you shall maintain the cleanliness of the ladies comfort room.
Provided, that general cleanliness, sanitation and physical maintenance of said
comfort rooms shall be undertaken by the owners of Bodega City;
3. You shall at all times ensure satisfaction and good services in the discharge of
your undertaking. More importantly, you shall always observe utmost courtesy in
dealing with the persons/individuals using said comfort room and shall refrain from
doing acts that may adversely affect the goodwill and business standing of Bodega
City;
4. All remunerations, tips, donations given to you by individuals/persons utilizing
said comfort rooms and/or guests of Bodega City shall be waived by the latter to
your benefit provided however, that if concessionaire receives tips or donations per
day in an amount exceeding 200% the prevailing minimum wage, then, she shall
remit fifty percent (50%) of said amount to Bodega City by way of royalty or
concession fees;
5. This contract shall be for a period of one year and shall be automatically renewed
on a yearly basis unless notice of termination is given thirty (30) days prior to
expiration. Any violation of the terms and conditions of this contract shall be a
ground for its immediate revocation and/or termination.
6. It is hereby understood that no employer-employee relationship exists between
Bodega City and/or 1121 FoodService Corporation and your goodself, as you are an
independent contractor who has represented to us that you possess the necessary
qualification as such including manpower compliment, equipment, facilities, etc. and
that any person you may engage or employ to work with or assist you in the
discharge of your undertaking shall be solely your own employees and/or agents.
1121 FoodService Corporation Bodega City
By:
(Sgd.) ANDRES C. TORRES-YAP
Conforme:
_______________
LOLITA LOPEZ19
Petitioner does not dispute the existence of the letter; neither does she deny that
respondents offered her the subject concessionaire agreement. However, she
contends that she could not have entered into the said agreement with respondents
because she did not sign the document evidencing the same.
Settled is the rule that contracts are perfected by mere consent, upon the
acceptance by the offeree of the offer made by the offeror.20 For a contract, to
arise, the acceptance must be made known to the offeror.21 Moreover, the
acceptance of the thing and the cause, which are to constitute a contract, may be
express or implied as can be inferred from the contemporaneous and subsequent
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
may have been entered into.23
In the present case, the Court finds no cogent reason to disregard the findings of
both the CA and the NLRC that while petitioner did not affix her signature to the
document evidencing the subject concessionaire agreement, the fact that she
performed the tasks indicated in the said agreement for a period of three years
without any complaint or question only goes to show that she has given her implied
acceptance of or consent to the said agreement.
Petitioner is likewise estopped from denying the existence of the subject
concessionaire agreement. She should not, after enjoying the benefits of the
concessionaire agreement with respondents, be allowed to later disown the same
through her allegation that she was an employee of the respondents when the said
agreement was terminated by reason of her violation of the terms and conditions
thereof.
The principle of estoppel in pais applies wherein -- by one's acts, representations or
admissions, or silence when one ought to speak out -- intentionally or through
culpable negligence, induces another to believe certain facts to exist and to rightfully
rely and act on such belief, so as to be prejudiced if the former is permitted to deny
the existence of those facts.24
Moreover, petitioner failed to dispute the contents of the affidavit25 as well as the
testimony26 of Felimon Habitan (Habitan), the concessionaire of the men's comfort
room of Bodega City, that he had personal knowledge of the fact that petitioner was
the concessionaire of the ladies' comfort room of Bodega City.
Petitioner also claims that the concessionaire agreement was offered to her only in
her 10th year of service, after she organized a union and filed a complaint against
respondents. However, petitioner's claim remains to be an allegation which is not
supported by any evidence. It is a basic rule in evidence that each party must prove
his affirmative allegation,27 that mere allegation is not evidence.28
The Court is not persuaded by petitioner's contention that the Labor Arbiter was
correct in concluding that there existed an employer-employee relationship between
respondents and petitioner. A perusal of the Decision29 of the Labor Arbiter shows
that his only basis for arriving at such a conclusion are the bare assertions of
petitioner and the fact that the latter did not sign the letter of Yap containing the
proposed concessionaire agreement. However, as earlier discussed, this Court finds
no error in the findings of the NLRC and the CA that petitioner is deemed as having
given her consent to the said proposal when she continuously performed the tasks
indicated therein for a considerable length of time. For all intents and purposes, the
concessionaire agreement had been perfected.
Petitioner insists that her ID card is sufficient proof of her employment. In Domasig
v. National Labor Relations Commission,30 this Court held that the complainant's ID
card and the cash vouchers covering his salaries for the months indicated therein
were substantial evidence that he was an employee of respondents, especially in
light of the fact that the latter failed to deny said evidence. This is not the situation
in the present case. The only evidence presented by petitioner as proof of her
alleged employment are her ID card and one petty cash voucher for a five-day
allowance which were disputed by respondents.
As to the ID card, it is true that the words "EMPLOYEE'S NAME" appear printed
below petitioner's name.31However, she failed to dispute respondents' evidence
consisting of Habitan's testimony,32 that he and the other "contractors" of Bodega
City such as the singers and band performers, were also issued the same ID cards
for the purpose of enabling them to enter the premises of Bodega City.
The Court quotes, with approval, the ruling of the CA on this matter, to wit:
Nor can petitioners identification card improve her cause any better. It is undisputed
that non-employees, such as Felimon Habitan, an admitted concessionaire,
musicians, singers and the like at Bodega City are also issued identification cards.
Given this premise, it appears clear to Us that petitioner's I.D. Card is incompetent
proof of an alleged employer-employee relationship between the herein parties.
Viewed in the context of this case, the card is at best a "passport" from management
assuring the holder thereof of his unmolested access to the premises of Bodega
City.33
With respect to the petty cash voucher, petitioner failed to refute respondent's claim
that it was not given to her for services rendered or on a regular basis, but simply
granted as financial assistance to help her temporarily meet her family's needs.
Hence, going back to the element of control, the concessionaire agreement merely
stated that petitioner shall maintain the cleanliness of the ladies' comfort room and
observe courtesy guidelines that would help her obtain the results they wanted to
achieve. There is nothing in the agreement which specifies the methods by which
petitioner should achieve these results. Respondents did not indicate the manner in
which she should go about in maintaining the cleanliness of the ladies' comfort room.
Neither did respondents determine the means and methods by which petitioner
could ensure the satisfaction of respondent company's customers. In other words,
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
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 164820 March 28, 2007
VICTORY LINER, INC., Petitioner,
vs.
PABLO M. RACE, Respondent.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Rules of
Court,1 petitioner Victory Liner Inc. seeks to set aside the Decision of the Court of
Appeals dated 26 April 2004 in CA-G.R. SP No. 74010,2 affirming the Decision and
Resolution of the National Labor Relations Commission (NLRC) dated 30 July 2002
and 30 August 2002, respectively, in NLRC-CA-029327-01.3 In its Decision and
Resolution, the NLRC vacated the Decision4 of Labor Arbiter Salimathar V. Nambi
(Labor Arbiter Nambi) dated 31 July 2001 in NLRC-NCR-00-09-08922-99 and ordered
the petitioner to reinstate respondent Pablo M. Race to his former position as a bus
driver without loss of seniority rights and other privileges and benefits with full
backwages computed from the time of his illegal dismissal in January 1998 up to his
actual reinstatement.
Culled from the records are the following facts:
In June 1993, respondent was employed by the petitioner as a bus driver. As a
requisite for his hiring, the respondent deposited a cash bond in the amount of
₱10,000.00 to the petitioner. Respondent was assigned to the Alaminos, Pangasinan
- Cubao, Quezon City, route on the evening schedule.5
On the night of 24 August 1994, respondent drove his assigned bus from Alaminos,
Pangasinan, destined to Cubao, Quezon City. While traversing Moncada, Tarlac, the
bus he was driving was bumped by a Dagupan-bound bus. As a consequence
thereof, respondent suffered a fractured left leg and was rushed to the Country
Medical and Trauma Center in Tarlac City where he was operated on and confined
from 24 August 1994 up to 10 October 1994. One month after his release from the
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
therein lasted a month. Petitioner shouldered the doctor’s professional fee and the
operation, medication and hospital expenses of the respondent in the aforestated
hospitals.6
In January 1998, the respondent, still limping heavily, went to the petitioner’s office
to report for work. He was, however, informed by the petitioner that he was
considered resigned from his job. Respondent refused to accede and insisted on
having a dialogue with the petitioner’s officer named Yolanda Montes (Montes).
During their meeting, Montes told him that he was deemed to have resigned from
his work and to accept a consideration of ₱50,000.00. Respondent rejected the
explanation and offer. Thereafter, before Christmas of 1998, he again conversed
with Montes who reiterated to him that he was regarded as resigned but raised the
consideration therein to ₱100,000.00. Respondent rebuffed the increased offer.7
On 30 June 1999, respondent, through his counsel, sent a letter to the petitioner
demanding employment-related money claims. There being no response from the
petitioner, the respondent filed before the Labor Arbiter on 1 September 1999 a
complaint for (1) unfair labor practice; (2) illegal dismissal; (3) underpayment of
wages; (4) nonpayment of overtime and holiday premium, service incentive leave
pay, vacation and sick leave benefits, 13th month pay; (5) excessive deduction of
withholding tax and SSS premium; and (6) moral and exemplary damages and
attorney’s fees. This was docketed as NLRC-NCR-00-09-08922-99.8
In its Position Paper dated 27 March 2000, petitioner claimed that respondent was
paid strictly on commission basis; that respondent was a mere field personnel who
performed his duties and functions outside the petitioner’s premises and whose time
of work cannot be determined with reasonable certainty; that petitioner, therefore,
was exempted from paying the respondent overtime compensation, night shift
differential, holiday pay and service incentive leave; that notwithstanding the specific
exemptions provided for in the Labor Code, the petitioner gave the respondent
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
offenses which were sufficient bases for his dismissal; that the prescriptive period
for the filing of an action or claim for reinstatement and payment of labor standard
benefits is four years from the time the cause of action accrued; and that the
respondent’s cause of action against petitioner had already prescribed because when
the former instituted the aforesaid complaint on 1 September 1999, more than five
years had already lapsed from the accrual of his cause of action on 24 August 1994.9
In his Reply dated 30 June 2000, respondent explained that when he stated in his
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
that it was only in January 1998 that he informed the petitioner of his intent to
report back for work.10
On 31 July 2001, Labor Arbiter Nambi rendered his Decision dismissing the complaint
of respondent for lack of merit. He stated that the prescriptive period for filing an
illegal dismissal case is four years from the dismissal of the employee concerned.
Since the respondent stated in his complaint that he was dismissed from work on
24 August 1994 and he filed the complaint only on 1 September 1999, Labor Arbiter
Nambi concluded that respondent’s cause of action against petitioner had already
prescribed. He also noted that respondent committed several labor-related offenses
against the petitioner which may be considered as just causes for the termination of
his employment under Article 282 of the Labor Code.
Further, Labor Arbiter Nambi opined that respondent was not a regular employee
but a mere field personnel and, therefore, not entitled to service incentive leave,
holiday pay, overtime pay and 13th month pay. He also ruled that respondent failed
to present evidence showing that the latter was entitled to the abovestated money
claims. The fallo of the said decision reads:
WHEREFORE, considering that the causes of action in this case rooted from the
purported illegal dismissal of Pablo M. Race on August 24, 1994 when he figured in
a vehicular accident, or on October 10, 1994 when he was released from the
hospital, and he filed his complaint only on September 1, 1999 after a lapse of more
than five (5) years, the action has long prescribed, aside from the fact that there is
absolutely no evidence that respondent Victory Liner, Inc. is guilty of unfair labor
practice and unjust dismissal, in addition to its specific exemptions from the letters
of Article 82 of the Labor Code, as amended, the complaint and money claims are
hereby DISMISSED by reason of prescription and for utter lack of merit and total
absence of legal and factual basis in support thereof.11
Respondent appealed to the NLRC. On 30 July 2002, the NLRC promulgated its
Decision reversing the decision of Labor Arbiter Nambi. It ordered the reinstatement
of the respondent to his former position without loss of seniority rights and other
privileges and benefits with full back-wages computed from the time of his illegal
dismissal in January 1998 up to his actual reinstatement. It held that the
respondent’s cause of action accrued, not on 24 August 1994, but in January 1998,
when the respondent reported for work but was rejected by the petitioner. Thus,
the respondent’s filing of complaint on 1 September 1999 was well-within the four-
year prescriptive period. It also ruled that respondent was illegally dismissed by the
petitioner as the latter failed to accord him due process. It found that the petitioner
did not give the respondent a written notice apprising him of acts or omissions being
complained of and a written notice informing him of the termination of his
employment. In conclusion, the NLRC stated:
WHEREFORE, in view of all the foregoing, respondent-appellee’s company is hereby
ordered to reinstate complainant-appellant to his former position without loss of
seniority rights and other privileges and benefits with full backwages computed from
the time of his illegal dismissal on (sic) January 1988 up to his actual reinstatement.
Except for this modification, the appealed decision is hereby AFFIRMED.12
Petitioner filed a Motion for Reconsideration of the NLRC Decision alleging, among
other things, that the award of backwages to the respondent computed from
January 1988 up to the promulgation of the NLRC Decision on 30 July 2002 was
unlawful and unjust considering that respondent was employed only in June 1993.
The NLRC, however, denied the same for lack of merit in its Resolution dated 30
August 2002.
Petitioner assailed the NLRC Decision and Resolution, dated 30 July 2002 and 30
August 2002, respectively, via a Petition for Certiorari to the Court of Appeals. On
26 April 2004, the Court of Appeals dismissed the Petition, and found no grave abuse
of discretion on the part of the NLRC. It ruled that the NLRC committed a simple
typographical error when it stated in the fallo that the backwages of respondent
shall be computed from January 1988 instead of January 1998 because in the
paragraph prior to the dispositive portion, the NLRC categorically declared that the
full backwages of the respondent was to be computed from January1998. In
addition, the NLRC has indicated in its Statement of Facts that respondent was hired
by the petitioner sometime in June 1993. It also held that the respondent’s filing of
complaint on 1 September 1999 was within the four-year prescriptive period since
the cause of action accrued when the respondent reported for work in January 1998
and was informed that he was considered resigned. It ratiocinated that respondent
did not abandon his work and, instead, continued to be an employee of petitioner
after he was discharged from the hospital, viz:
Race did not abandon his work and continued to be an employee of Victory Liner,
and their contemporaneous conduct show this. He has his pay slip covering the
period of August 1-15, 1998 (p. 114, record), he was consulting the company
physician who issued him receipts dated October 28, 1996 and July 21 1997 (p. 115,
record), and he wrote a letter dated March 18, 1996 addressed to Gerarda Villa,
Vice-President for Victory Liner, signifying his intention to be a dispatcher or
conductor due to his injured leg (p. 116, Record). Further, annexed to Victory Liner’s
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,
where Race stated before the investigator that after his release from the hospital he
reported to Victory Liner twice a month. He also said that he filed for a sick leave
which was approved for the maximum of 120 days. After his sick leave, he filed for
disability leave, and this was also approved and ran until sometime in May 1997.13
It also found that the petitioner failed to comply with the requirements of due
process in terminating the employment of respondent. The decretal portion of the
said decision reads:
WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED.14
Petitioner filed the instant petition on the following grounds:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED CONTRARY TO LAW AND
JURISPRUDENCE WHEN IT HELD IN THE ASSAILED DECISION THAT:
A.
THE CAUSE OF ACTION OF RESPONDENT FOR ILLEGAL DISMISSAL HAS NOT YET
PRESCRIBED DESPITE HAVING BEEN FILED AFTER FOUR (4) YEARS AND NINE (9)
MONTHS FROM THE ACCRUAL OF THE ALLEGED ACTIONABLE WRONG;
B.
RESPONDENT IS ENTITLED TO REINSTATEMENT WITH FULL BACKWAGES AND
OTHER BENEFITS CONSIDERING THAT THE TERMINATION OF HIS EMPLOYMENT
BY PETITIONER WAS LEGAL AND JUSTIFIED.15
Anent the first issue, petitioner insisted that respondent had already abandoned his
work and ceased to be its employee since November 1994; that the alleged "pay
slip" for the period August 1-15, 1998 was not actually a pay slip but a mere cash
advance/monetary aid extended to the respondent as the large amount of
₱65,000.00 stated therein was clearly inconsistent and disproportionate to the
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
physician on 28 October 1996 and 21 July 1997; that the respondent’s letter dated
18 March 1996 to the petitioner’s Vice-President Gerarda Villa was only an
application for the position of dispatcher or conductor and that such application was
not granted; and that the foregoing circumstances cannot be considered as an
indication of employer-employee relationship between the petitioner and
respondent.16
Moreover, petitioner asserted that although the respondent reported for work twice
a month after he was discharged from the hospital, it does not imply that the
respondent was still considered as an employee at that time by the petitioner; that
it allowed the respondent to have a 120-day sick leave because the latter was a
former employee; and that it granted disability leave to the respondent since the
latter was a former employee and that respondent’s application for disability leave
implied an admission on the part of the respondent that he was no longer fit to work
as a bus driver.17
Petitioner also asseverated that, based on the four-fold tests in determining the
employer-employee relationship which includes the payment of wages and power to
control the conduct of the employees, the respondent was no longer its employee
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
not render services to the petitioner. Thus, petitioner reasoned that it had no more
power to control the conduct of, and it no longer paid any wages to, the
respondent.18
Petitioner also argued that the cause of action of respondent had accrued on 10
November 1994; that from 10 November 1994 up to November 1998, the
respondent did not render any services to nor filed a case or action against the
petitioner; that the respondent’s filing of a complaint against petitioner on 1
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
time when the written demand was made by the respondent on the petitioner, then
the four-year prescriptive period would be interminable as it could be extended to
one or more years; that this is not the spirit or intent of the law; that otherwise
there is no more need to provide the four-year prescriptive period as any
complainant may simply allow the lapse of four years and file the action thereafter
and that it would be considered as a compliance by simply making a purported
demand for reinstatement after more than four years.19
These contentions are devoid of merit.
It should be emphasized at the outset that as a rule, this Court is not a trier of facts
and this applies with greater force in labor cases. Hence, factual findings of quasi-
judicial bodies like the NLRC, particularly when they coincide with those of the Labor
Arbiter and if supported by substantial evidence, are accorded respect and even
finality by this Court. But where the findings of the NLRC and the Labor Arbiter are
contradictory, as in the present case, this Court may delve into the records and
examine for itself the questioned findings.20
In illegal dismissal cases, the employee concerned is given a period of four years
from the time of his dismissal within which to institute a complaint. This is based on
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
rationale in the case of Callanta v. Carnation Philippines, Inc.,21 thus:
[O]ne’s employment, profession, trade or calling is a "property right," and the
wrongful interference therewith is an actionable wrong. The right is considered to
be property within the protection of a constitutional guaranty of due process of law.
Clearly then, when one is arbitrarily and unjustly deprived of his job or means of
livelihood, the action instituted to contest the legality of one’s dismissal from
employment constitutes, in essence, an action predicated "upon an injury to the
rights of the plaintiff," as contemplated under Art. 1146 of the New Civil Code, which
must be brought within four years.
The four-year prescriptive period shall commence to run only upon the accrual of a
cause of action of the worker. It is settled that in illegal dismissal cases, the cause
of action accrues from the time the employment of the worker was unjustly
terminated.22 Thus, the four-year prescriptive period shall be counted and
computed from the date of the employee’s dismissal up to the date of the filing of
complaint for unlawful termination of employment.23
Proceeding therefrom, we shall now discuss and determine when the respondent’s
cause of action accrued in order to ascertain whether the same had already
prescribed.
It is error to conclude that the employment of the respondent was unjustly
terminated on 10 November 1994 because he was, at that time, still confined at the
Specialist Group Hospital, Dagupan City, for further treatment of his fractured left
leg. He must be considered as merely on sick leave at such time. Likewise, the
respondent cannot also be deemed as illegally dismissed from work upon his release
from the said hospital in December 1994 up to December 1997 since the records
show that the respondent still reported for work to the petitioner and was granted
sick and disability leave by the petitioner during the same period.24
The respondent must be considered as unjustly terminated from work in January
1998 since this was the first time he was informed by the petitioner that he was
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
for his dismissal but the latter rejected it.25 Thus, it was only at this time that the
respondent’s cause of action accrued. Consequently, the respondent’s filing of
complaint for illegal dismissal on 1 September 1999 was well within the four-year
prescriptive period.
It is also significant to note that from 10 November 1994 up to December 1997, the
petitioner never formally informed the respondent of the fact of his dismissal either
through a written notice or hearing. Indeed, it cannot be gainfully said that
respondent was unlawfully dismissed on 10 November 1994 and that the cause of
action accrued on that date.
As to the alleged abandonment of work by the respondent on 10 November 1994,
it should be emphasized that two factors must be present in order to constitute an
abandonment: (a) the failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention to sever employer-employee relationship.
The second factor is the more determinative factor and is manifested by overt acts
from which it may be deduced that the employee has no more intention to work.
The intent to discontinue the employment must be shown by clear proof that it was
deliberate and unjustified. Mere absence from work does not imply abandonment.26
It is apparent that respondent did not abandon his work. His absence from work for
a long period of time was obviously due to the fact that he was still recuperating
from two operations on his fractured leg. Petitioner knew this very well. In fact,
petitioner shouldered the respondent’s medication and hospital expenses during the
latter’s confinement and operation in two hospitals.27 Moreover, when the
respondent was able to walk, although limping heavily, he still reported for work to
the petitioner and was granted sick and disability leave.28 Clearly then, respondent
did not abandon his job on 10 November 1994.
In the same vein, the employer-employee relationship between the petitioner and
respondent cannot be deemed to have been extinguished on 10 November 1994. It
should be borne in mind that there are four tests in determining the existence of
employer-employee relationship: (1) the manner of selection and engagement; (2)
the payment of wages; (3) the presence or absence of the power of dismissal; and
(4) the presence or absence of the power of control. The so-called "control test" is
commonly regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship. Under the control test, an
employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end achieved, but also the
manner and means to be used in reaching that end.29
Applying the aforecited tests, the employer-employee relationship between
petitioner and respondent continued even after the latter’s discharge from the
hospital in December 1994 up to 1997. Respondent had reported for work to the
petitioner after his release from the hospital in December 1994. Subsequently,
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
physician on two occasions after his release from the hospital in December 1994.31
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On the other hand, the petitioner failed to establish the fact that the respondent
ceased to be its employee on 10 November 1994. Except for its flimsy reason that
the sick leave, disability leave and physician consultations were given to the
respondent as mere accommodations for a former employee, the petitioner did not
present any evidence showing that its employer-employee relationship with the
respondent was extinguished on 10 November 1994.
Evidently, these circumstances clearly manifest that petitioner exercised control over
the respondent and that the latter was still under the employment of the petitioner
even after December 1994.
Given the foregoing considerations, petitioner’s assertion that the respondent’s
cause of action accrued on 10 November 1994 must fail.
Apropos the second issue, petitioner contended that the order for the reinstatement
of the respondent as bus driver was unconstitutional for being tantamount to
involuntary servitude; that when the respondent filed his complaint for illegal
dismissal, the latter no longer desired to be reinstated to his former position as bus
driver; that the respondent’s unwillingness to be reinstated as bus driver was also
evident from his letter to the petitioner where the respondent manifested his
intention to be hired as a dispatcher or conductor; and that to reinstate the
respondent as bus driver despite the fact that it is against his will is involuntary
servitude.32
Petitioner also argued that the order for the reinstatement was contrary to law; that
as a common carrier, it is obliged under the law to observe extra-ordinary diligence
in the conduct of its business; that it will violate such obligation if it will reinstate
the respondent as bus driver; that to allow the respondent to drive a bus, despite
the fact that the latter sustained a fractured left leg and was still limping, would
imperil the lives of the passengers and the property of the petitioner; and that the
award of backwages to the respondent was unjustified.33
The Labor Code mandates that before an employer may legally dismiss an employee
from the service, the requirement of substantial and procedural due process must
be complied with. Under the requirement of substantial due process, the grounds
for termination of employment must be based on just or authorized causes. The
following are just causes for the termination of employment under Article 282 of the
Labor Code:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders
of his employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative; and
(e) Other causes analogous to the foregoing.
Abandonment of work, or the deliberate and unjustified refusal of an employee to
resume his employment, may be a just cause for the termination of employment
under paragraph (b) of Article 282 of the Labor Code since it is a form of neglect of
duty.
As earlier discussed, the petitioner insisted that respondent had already abandoned
his work on 10 November 1994 and, thus, the latter’s employment was deemed
terminated as of such date. We, however, found that there was no abandonment of
work on the part of the respondent. Petitioner also alleged that respondent was
guilty of insubordination as well as gross and habitual neglect in the performance of
his duties for reckless driving and for being involved in several vehicular
accidents.34 The records, nonetheless, failed to show that the said charges were
proven and that respondent was duly informed and heard with regard to the
accusations. Since the petitioner, as an employer, is burdened to prove just cause
for terminating the employment of respondent with clear and convincing evidence,
and that petitioner failed to discharge this burden, we hold that respondent was
dismissed without just cause by the petitioner.
It has been established that petitioners failed to comply with the requirement of
substantial due process in terminating the employment of respondent. We will now
determine whether the petitioner had complied with the procedural aspect of a
lawful dismissal.
In the termination of employment, the employer must (a) give the employee a
written notice specifying the ground or grounds of termination, giving to said
employee reasonable opportunity within which to explain his side; (b) conduct a
hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given the opportunity to respond to the charge,
present his evidence or rebut the evidence presented against him; and (c) give the
employee a written notice of termination indicating that upon due consideration of
all circumstances, grounds have been established to justify his termination.35
Petitioner miserably failed to comply with the foregoing requirements. There was
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
SIXTY PESOS (P101,660.00) in backwages to be updated until actual reinstatement;
and
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
award.
The respondent is further ordered to pay the aggregate amount of ONE HUNDRED
FOURTEEN THOUSAND AND NINETEEN PESOS (P114,019.00) to the complainant
through the cashier of this Commission within ten (10) days from receipt hereof.
SO ORDERED.[10]
Respondents motion for reconsideration was denied by the NLRC on September 9,
2002.[11]
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
go to Dumaguete City to hire a competent lawyer to help him secure justice if he
did not believe that his right as a laborer had been violated.[12] It added that the
creation of the PPLC required the tremendous task of constructing hotels, inns,
restaurants, bars, boutiques and service shops, thus involving extensive carpentry
work. As an old carpentry hand in the old corporation, the possibility of petitioners
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
worked for the respondent for a period of two years, he was a regular employee.[15]
Aggrieved, respondent instituted a special civil action for certiorari under Rule 65
before the Court of Appeals which granted the same; and consequently annulled
and set aside the NLRC decision. The CA disposed, as follows:
WHEREFORE, premises considered, the instant petition is GRANTED. The assailed
decision of the NLRC dated October 24, 2000, as well as the Resolution
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.
SO ORDERED.[16]
Contrary to the NLRCs finding, the CA concluded that there was no employer-
employee relationship. The CA stressed that petitioner having raised a positive
averment, had the burden of proving the existence of an employer-employee
relationship. Respondent, therefore, had no obligation to prove its negative
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
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
employment contracts are in personam and binding only between the parties.[19]
Petitioner now comes before this Court raising the sole issue:
WHETHER OR NOT THE DECISION OF [THE] COURT OF APPEALS DATED AUGUST
27, 2003, REVERSING AND SETTING ASIDE THE NLRC (Fourth Division, Cebu City)
RULING THAT THE PETITIONER WAS NOT ILLEGALLY DISMISSED AS HE WAS NOT
AN EMPLOYEE OF RESPONDENT, IS CONTRARY TO LAW AND JURISPRUDENCE ON
WHICH IT WAS BASED, AND NOT IN CONSONANCE WITH THE EVIDENCE ON
RECORD.[20]
The disposition of this petition rests on the resolution of the following questions: 1)
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?
Petitioner insists that he was a regular employee of the respondent corporation. The
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,
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.
xxxx
In other words, as regards those workers who worked in 1995 specifically in
connection with the construction of the facilities of Pamplona Plantation Leisure
Article 280 of the Labor Code, as amended, provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. - The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the employment has been
fixed for a specific project or undertaking, the completion or termination of which

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has been determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.
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
employer; and (2) those who have rendered at least one year of service, whether
continuous or broken, with respect to the activity in which they are
employed.[27] Simply stated, regular employees are classified into: regular
employees by nature of work; and regular employees by years of service. The former
refers to those employees who perform a particular activity which is necessary or
desirable in the usual business or trade of the employer, regardless of their length
of service; while the latter refers to those employees who have been performing the
job, regardless of the nature thereof, for at least a year.[28]If the employee has
been performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and continuing need
for its performance as sufficient evidence of the necessity, if not indispensability, of
that activity to the business.[29]
Respondent is engaged in the management of the Pamplona Plantation as well as
in the operation of tourist resorts, hotels, inns, restaurants, etc. Petitioner, on the
other hand, was engaged to perform carpentry work. His services were needed for
a period of two years until such time that the respondent decided not to give him
work assignment anymore. Owing to his length of service, petitioner became a
regular employee, by operation of law.
Respondent argues that, even assuming that petitioner can be considered an
employee, he cannot be classified as a regular employee, but merely as a project
employee whose services were hired only with respect to a specific job and only
while that specific job existed.
A project employee is assigned to carry out a specific project or undertaking the
duration and scope of which are specified at the time the employee is engaged in
the project. A project is a job or undertaking which is distinct, separate and
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]
The principal test used to determine whether employees are project employees as
distinguished from regular employees, is whether or not the employees were
assigned to carry out a specific project or undertaking, the duration or scope of
which was specified at the time the employees were engaged for that project.[31] In
this case, apart from respondents bare allegation that petitioner was a project
employee, it had not shown that petitioner was informed that he would be assigned
to a specific project or undertaking. Neither was it established that he was informed
of the duration and scope of such project or undertaking at the time of his
engagement.
Most important of all, based on the records, respondent did not report the
termination of petitioners supposed project employment to the Department of Labor
and Employment (DOLE). Department Order No. 19 (as well as the old Policy
Instructions No. 20) requires employers to submit a report of an employees
termination to the nearest public employment
office every time the employment is terminated due to a completion of a
project. Respondents failure to file termination reports, particularly on the cessation
of petitioners employment, was an indication that the petitioner was not a project
but a regular employee.[32]
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
performed by the employer in relation to the particular trade or business of the
employer, taking into account all the circumstances, including the length of time of
its performance and its continued existence. Given the attendant circumstances in
the case at bar, it is obvious that one year after he was employed by the respondent,
petitioner became a regular employee by operation of law.[33]
As to the question of whether petitioner was illegally dismissed, we answer in the
affirmative.
Well-established is the rule that regular employees enjoy security of tenure and they
can only be dismissed for just cause and with due process, i.e., after notice and
hearing. In cases involving an employees dismissal, the burden is on the employer
to prove that the dismissal was legal. This burden was not amply discharged by the
respondent in this case.
Obviously, petitioners dismissal was not based on any of the just or authorized
causes enumerated under Articles 282,[34] 283[35] and 284[36] of the Labor Code,
as amended. After working for the respondent for a period of two years, petitioner
was shocked to find out that he was not given any work assignment
anymore. Hence, the requirement of substantive due process was not complied with.
Apart from the requirement that the dismissal of an employee be based on any of
the just or authorized causes, the procedure laid down in Book VI, Rule I, Section 2
(d) of the Omnibus Rules Implementing the Labor Code, must be
followed.[37] Failure to observe the rules is a violation of the employees right to
procedural due process.
In view of the non-observance of both substantive and procedural due process, in
accordance with the guidelines outlined by this Court in Agabon v. National Labor
Relations Commission,[38] we declare that petitioners dismissal from employment
is illegal.[39]
Having shown that petitioner is a regular employee and that his dismissal was illegal,
we now discuss the propriety of the monetary claims of the petitioner. An illegally
dismissed employee is entitled to: (1) either reinstatement, if viable, or separation
pay if reinstatement is no longer viable, and (2) backwages.[40]
In the instant case, we are prepared to concede the impossibility of the
reinstatement of petitioner considering that his position or any equivalent position
may no longer be available in view of the length of time that this case has been
pending. Moreover, the protracted litigation may have seriously abraded the
relationship of the parties so as to render reinstatement impractical. Accordingly,
petitioner may be awarded separation pay in lieu of reinstatement.[41]
Petitioners separation pay is pegged at the amount equivalent to petitioners one (1)
month pay, or one-half (1/2) month pay for every year of service, whichever is
higher, reckoned from his first day of employment up to finality of this decision. Full
backwages, on the other hand, should be computed from the date of his illegal
dismissal until the finality of this decision.
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
benefits were withheld from him without any valid and legal basis. As a
consequence, he was compelled to file an action for the recovery of his lawful wages
and other benefits and, in the process, incurred expenses. On these bases, the Court
finds that he is entitled to attorneys fees equivalent to ten percent (10%) of the
monetary award.[42]
Lastly, we affirm the NLRCs award of salary differential. In light of our foregoing
disquisition on the illegality of petitioners dismissal, and our adoption of the NLRCs
findings, suffice it to state that such issue is a question of fact, and we find no cogent
reason to disturb the findings of the labor tribunal.
WHEREFORE, premises considered, the petition is GRANTED. The Decision of the
Court of Appeals dated August 27, 2003 and its Resolution dated November 11,
2003 in CA-G.R. SP No. 74892 are REVERSED and SET ASIDE. Petitioner is found to
have been illegally dismissed from employment and thus, is ENTITLED to: 1) Salary
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
equivalent to ten percent (10%) of the monetary awards. Upon finality of this
judgment, let the records of the case be remanded to the NLRC for the computation
of the exact amounts due the petitioner.
SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41182-3 April 16, 1988
DR. CARLOS L. SEVILLA and LINA O. SEVILLA, petitioners-appellants,
vs.
THE COURT OF APPEALS, TOURIST WORLD SERVICE, INC., ELISEO
S.CANILAO, and SEGUNDINA NOGUERA, respondents-appellees.
SARMIENTO , J.:
The petitioners invoke the provisions on human relations of the Civil Code in this
appeal by certiorari. The facts are beyond dispute:
xxx xxx xxx
On the strength of a contract (Exhibit A for the appellant Exhibit 2 for the appellees)
entered into on Oct. 19, 1960 by and between Mrs. Segundina Noguera, party of
the first part; the Tourist World Service, Inc., represented by Mr. Eliseo Canilao as
party of the second part, and hereinafter referred to as appellants, the Tourist World
Service, Inc. leased the premises belonging to the party of the first part at Mabini
St., Manila for the former-s use as a branch office. In the said contract the party of
the third part held herself solidarily liable with the party of the part for the prompt
payment of the monthly rental agreed on. When the branch office was opened, the
same was run by the herein appellant Una 0. Sevilla payable to Tourist World Service
Inc. by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was
to go to Lina Sevilla and 3% was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961 (Exhibit 16) the Tourist World Service, Inc. appears
to have been informed that Lina Sevilla was connected with a rival firm, the
Philippine Travel Bureau, and, since the branch office was anyhow losing, the Tourist
World Service considered closing down its office. This was firmed up by two
resolutions of the board of directors of Tourist World Service, Inc. dated Dec. 2,
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
second,authorizing the corporate secretary to receive the properties of the Tourist
World Service then located at the said branch office. It further appears that on Jan.
3, 1962, the contract with the appellees for the use of the Branch Office premises
was terminated and while the effectivity thereof was Jan. 31, 1962, the appellees
no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of
this, and to comply with the mandate of the Tourist World Service, the corporate
secretary Gabino Canilao went over to the branch office, and, finding the premises
locked, and, being unable to contact Lina Sevilla, he padlocked the premises on June
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
complaint wall filed by the herein appellants against the appellees with a prayer for
the issuance of mandatory preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the parties therein, the trial court
ordered the dismissal of the case without prejudice.
The appellee Segundina Noguera sought reconsideration of the order dismissing her
counterclaim which the court a quo, in an order dated June 8, 1963, granted
permitting her to present evidence in support of her counterclaim.
On June 17,1963, appellant Lina Sevilla refiled her case against the herein appellees
and after the issues were joined, the reinstated counterclaim of Segundina Noguera
and the new complaint of appellant Lina Sevilla were jointly heard following which
the court a quo ordered both cases dismiss for lack of merit, on the basis of which
was elevated the instant appeal on the following assignment of errors:
I. THE LOWER COURT ERRED EVEN IN APPRECIATING THE NATURE OF PLAINTIFF-
APPELLANT MRS. LINA O. SEVILLA'S COMPLAINT.
II. THE LOWER COURT ERRED IN HOLDING THAT APPELLANT MRS. LINA 0.
SEVILA'S ARRANGEMENT (WITH APPELLEE TOURIST WORLD SERVICE, INC.) WAS
ONE MERELY OF EMPLOYER-EMPLOYEE RELATION AND IN FAILING TO HOLD THAT
THE SAID ARRANGEMENT WAS ONE OF JOINT BUSINESS VENTURE.
III. THE LOWER COURT ERRED IN RULING THAT PLAINTIFF-APPELLANT MRS. LINA
O. SEVILLA IS ESTOPPED FROM DENYING THAT SHE WAS A MERE EMPLOYEE OF
DEFENDANT-APPELLEE TOURIST WORLD SERVICE, INC. EVEN AS AGAINST THE
LATTER.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT APPELLEES HAD NO RIGHT
TO EVICT APPELLANT MRS. LINA O. SEVILLA FROM THE A. MABINI OFFICE BY
TAKING THE LAW INTO THEIR OWN HANDS.
V. THE LOWER COURT ERRED IN NOT CONSIDERING AT .ALL APPELLEE
NOGUERA'S RESPONSIBILITY FOR APPELLANT LINA O. SEVILLA'S FORCIBLE
DISPOSSESSION OF THE A. MABINI PREMISES.
VI. THE LOWER COURT ERRED IN FINDING THAT APPELLANT APPELLANT MRS.
LINA O. SEVILLA SIGNED MERELY AS GUARANTOR FOR RENTALS.
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On the foregoing facts and in the light of the errors asigned the issues to be resolved
are:
1. Whether the appellee Tourist World Service unilaterally disco the telephone line
at the branch office on Ermita;
2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and
3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.
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
office and that she was not an employee of the TWS to the end that her relationship
with TWS was one of a joint business venture appellant made declarations showing:
1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye, ear
and nose specialist as well as a imediately columnist had been in the travel business
prior to the establishment of the joint business venture with appellee Tourist World
Service, Inc. and appellee Eliseo Canilao, her compadre, she being the godmother
of one of his children, with her own clientele, coming mostly from her own social
circle (pp. 3-6 tsn. February 16,1965).
2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October 1960
(Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and
holding [sic] herself 'solidarily' liable with appellee Tourist World Service, Inc. for the
prompt payment of the monthly rentals thereof to other appellee Mrs. Noguera (pp.
14-15, tsn. Jan. 18,1964).
3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World
Service, Inc., which had its own, separate office located at the Trade & Commerce
Building; nor was she an employee thereof, having no participation in nor connection
with said business at the Trade & Commerce Building (pp. 16-18 tsn Id.).
4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own
bookings her own business (and not for any of the business of appellee Tourist
World Service, Inc.) obtained from the airline companies. She shared the 7%
commissions given by the airline companies giving appellee Tourist World Service,
Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.)
5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A. Mabini
St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry
expenses, aside from desicion the office furniture and supplying some of fice
furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World Service, Inc.
shouldering the rental and other expenses in consideration for the 3% split in the
co procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).
6. It was the understanding between them that appellant Mrs. Sevilla would be given
the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee
Eliseo Canilao admit that it was just a title for dignity (p. 36 tsn. June 18, 1965-
testimony of appellee Eliseo Canilao pp. 38-39 tsn April 61965-testimony of
corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)
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
xxx xxx xxx
The trial court2 held for the private respondent on the premise that the private
respondent, Tourist World Service, Inc., being the true lessee, it was within its
prerogative to terminate the lease and padlock the premises. 3 It likewise found the
petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service, Inc.
and as such, she was bound by the acts of her employer. 4 The respondent Court
of Appeal 5 rendered an affirmance.
The petitioners now claim that the respondent Court, in sustaining the lower court,
erred. Specifically, they state:
I
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN HOLDING THAT "THE PADLOCKING OF THE PREMISES BY
TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND CONSENT OF
THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR
ANY OF HER EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE
APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE THE PADLOCKING INCIDENT,
WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD
SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN
THEIR ATTEMP AMICABLY SETTLE THE CONTROVERSY BETWEEN THE APPELLANT
(SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT) ENTITLE THE LATTER
TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION
AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.
II
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING APPELLANT SEVILLA RELIEF BECAUSE SHE HAD
"OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL CLAIMS AND
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COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A"
P. 8)
III
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT
SEVILLAS CAUSE OF ACTION FOUNDED ON ARTICLES 19, 20 AND 21 OF THE CIVIL
CODE ON RELATIONS.
IV
THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED
ITS DISCRETION IN DENYING APPEAL APPELLANT SEVILLA RELIEF YET NOT
RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH TOURIST
WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST
WHICH COULD NOT BE TERMINATED OR REVOKED UNILATERALLY BY TOURIST
WORLD SERVICE INC.6
As a preliminary inquiry, the Court is asked to declare the true nature of the relation
between Lina Sevilla and Tourist World Service, Inc. The respondent Court of see fit
to rule on the question, the crucial issue, in its opinion being "whether or not the
padlocking of the premises by the Tourist World Service, Inc. without the knowledge
and consent of the appellant Lina Sevilla entitled the latter to the relief of damages
prayed for and whether or not the evidence for the said appellant supports the
contention that the appellee Tourist World Service, Inc. unilaterally and without the
consent of the appellant disconnected the telephone lines of the Ermita branch office
of the appellee Tourist World Service, Inc.7 Tourist World Service, Inc., insists, on
the other hand, that Lina SEVILLA was a mere employee, being "branch manager"
of its Ermita "branch" office and that inferentially, she had no say on the lease
executed with the private respondent, Segundina Noguera. The petitioners contend,
however, that relation between the between parties was one of joint venture, but
concede that "whatever might have been the true relationship between Sevilla and
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
questioned.
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
the character of employer and employee, the courts would have been without
jurisdiction to try the case, labor disputes being the exclusive domain of the Court
of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes
then in force. 9
In this jurisdiction, there has been no uniform test to determine the evidence of an
employer-employee relation. In general, we have relied on the so-called right of
control test, "where the person for whom the services are performed reserves a
right to control not only the end to be achieved but also the means to be used in
reaching such end." 10Subsequently, however, we have considered, in addition to
the standard of right-of control, the existing economic conditions prevailing between
the parties, like the inclusion of the employee in the payrolls, in determining the
existence of an employer-employee relationship.11
The records will show that the petitioner, Lina Sevilla, was not subject to control by
the private respondent Tourist World Service, Inc., either as to the result of the
enterprise or as to the means used in connection therewith. In the first place, under
the contract of lease covering the Tourist Worlds Ermita office, she had bound
herself in solidum as and for rental payments, an arrangement that would be like
claims of a master-servant relationship. True the respondent Court would later
minimize her participation in the lease as one of mere guaranty, 12 that does not
make her an employee of Tourist World, since in any case, a true employee cannot
be made to part with his own money in pursuance of his employer's business, or
otherwise, assume any liability thereof. In that event, the parties must be bound by
some other relation, but certainly not employment.
In the second place, and as found by the Appellate Court, '[w]hen the branch office
was opened, the same was run by the herein appellant Lina O. Sevilla payable to
Tourist World Service, Inc. by any airline for any fare brought in on the effort of Mrs.
Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was under
the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing
the business, obviously relied on her own gifts and capabilities.
It is further admitted that Sevilla was not in the company's payroll. For her efforts,
she retained 4% in commissions from airline bookings, the remaining 3% going to
Tourist World. Unlike an employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking successes.
The fact that Sevilla had been designated 'branch manager" does not make her,
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.
In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a
consequence, accepting Lina Sevilla's own, that is, that the parties had embarked
on a joint venture or otherwise, a partnership. And apparently, Sevilla herself did
not recognize the existence of such a relation. In her letter of November 28, 1961,
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
control over the manner in which the business was run. A joint venture, including a
partnership, presupposes generally a of standing between the joint co-venturers or
partners, in which each party has an equal proprietary interest in the capital or
property contributed 15 and where each party exercises equal rights in the conduct
of the business.16 furthermore, the parties did not hold themselves out as partners,
and the building itself was embellished with the electric sign "Tourist World Service,
Inc. 17in lieu of a distinct partnership name.
It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to
(wo)man the private respondent, Tourist World Service, Inc.'s Ermita office, she
must have done so pursuant to a contract of agency. It is the essence of this contract
that the agent renders services "in representation or on behalf of another.18 In the
case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. As compensation, she received 4% of the
proceeds in the concept of commissions. And as we said, Sevilla herself based on
her letter of November 28, 1961, pre-assumed her principal's authority as owner of
the business undertaking. We are convinced, considering the circumstances and
from the respondent Court's recital of facts, that the ties had contemplated a
principal agent relationship, rather than a joint managament or a partnership..
But unlike simple grants of a power of attorney, the agency that we hereby declare
to be compatible with the intent of the parties, cannot be revoked at will. The reason
is that it is one coupled with an interest, the agency having been created for mutual
interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona
fide travel agent herself, and as such, she had acquired an interest in the business
entrusted to her. Moreover, she had assumed a personal obligation for the operation
thereof, holding herself solidarily liable for the payment of rentals. She continued
the business, using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not to the commissions she earned as a result
of her business transactions, but one that extends to the very subject matter of the
power of management delegated to her. It is an agency that, as we said, cannot be
revoked at the pleasure of the principal. Accordingly, the revocation complained of
should entitle the petitioner, Lina Sevilla, to damages.
As we have stated, the respondent Court avoided this issue, confining itself to the
telephone disconnection and padlocking incidents. Anent the disconnection issue, it
is the holding of the Court of Appeals that there is 'no evidence showing that the
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
not take pains to have them reconnected. Assuming, therefore, that it had no hand
in the disconnection now complained of, it had clearly condoned it, and as owner of
the telephone lines, it must shoulder responsibility therefor.
The Court of Appeals must likewise be held to be in error with respect to the
padlocking incident. For the fact that Tourist World Service, Inc. was the lessee
named in the lease con-tract did not accord it any authority to terminate that
contract without notice to its actual occupant, and to padlock the premises in such
fashion. As this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal
stake in the business itself, and necessarily, in the equipment pertaining thereto.
Furthermore, Sevilla was not a stranger to that contract having been explicitly
named therein as a third party in charge of rental payments (solidarily with Tourist
World, Inc.). She could not be ousted from possession as summarily as one would
eject an interloper.
The Court is satisfied that from the chronicle of events, there was indeed some
malevolent design to put the petitioner, Lina Sevilla, in a bad light following
disclosures that she had worked for a rival firm. To be sure, the respondent court
speaks of alleged business losses to justify the closure '21 but there is no clear
showing that Tourist World Ermita Branch had in fact sustained such reverses, let
alone, the fact that Sevilla had moonlit for another company. What the evidence
discloses, on the other hand, is that following such an information (that Sevilla was
working for another company), Tourist World's board of directors adopted two
resolutions abolishing the office of 'manager" and authorizing the corporate
secretary, the respondent Eliseo Canilao, to effect the takeover of its branch office
properties. On January 3, 1962, the private respondents ended the lease over the
branch office premises, incidentally, without notice to her.
It was only on June 4, 1962, and after office hours significantly, that the Ermita
office was padlocked, personally by the respondent Canilao, on the pretext that it
was necessary to Protect the interests of the Tourist World Service. " 22It is strange
indeed that Tourist World Service, Inc. did not find such a need when it cancelled
the lease five months earlier. While Tourist World Service, Inc. would not pretend
that it sought to locate Sevilla to inform her of the closure, but surely, it was aware
that after office hours, she could not have been anywhere near the premises.
Capping these series of "offensives," it cut the office's telephone lines, paralyzing
completely its business operations, and in the process, depriving Sevilla articipation
therein.
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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
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178184 January 29, 2014
GRAND ASIAN SHIPPING LINES, INC., EDUARDO P. FRANCISCO and
WILLIAM HOW, Petitioners,
vs.
WILFREDO GALVEZ, JOEL SALES, CRISTITO GRUTA, DANILO
ARGUELLES, RENATO BATAYOLA, PATRICIO FRESMILLO,* JOVY NOBLE,
EMILIO DOMINICO, BENNY NILMAO, and JOSE AUSTRAL,Respondents.
DECISION
DEL CASTILLO, J.:
The employer has broader discretion in dismissing managerial employees on the
ground of loss of trust and confidence than those occupying ordinary ranks. While
plain accusations are not sufficient to justify the dismissal of rank and file employees,
the mere existence of a basis for believing that managerial employees have breached
the trust reposed on them by their employer would suffice to justify their dismissal.1
Before us is a Petition for Review on Certiorari2 assailing the September 12, 2006
Decision3 of the Court of Appeals (CA) in CA-G.R. SP No. 82379, which annulled the
September 10, 2003 Decision4 and January 14, 2004 Resolution5 of the National
Labor Relations Commission (NLRC), thereby reinstating the August 30, 2001
Decision6of the Labor Arbiter for having attained finality as a result of petitioners’
failure to post the correct amount of bond in their appeal before the NLRC. Likewise
assailed is the May 23, 2007 Resolution7 of the CA which denied petitioners’ Motion
for Reconsideration.8
Factual Antecedents
Petitioner Grand Asian Shipping Lines, Inc. (GASLI) is a domestic corporation
engaged in transporting liquified petroleum gas (LPG) from Petron Corporation’s
refinery in Limay, Bataan to Petron’s Plant in Ugong, Pasig and Petron’s Depot in
Rosario, Cavite. Petitioners William How and Eduardo Francisco are its President and
General Manager, respectively. Respondents, on the other hand, are crewmembers
of one of GASLI’s vessels, M/T Dorothy Uno, with the following designations:
Wilfredo Galvez (Galvez) as Captain; Joel Sales (Sales) as Chief Mate; Cristito Gruta
(Gruta) as Chief Engineer; Danilo Arguelles (Arguelles) as Radio Operator; Renato
Batayola (Batayola), Patricio Fresmillo (Fresmillo) and Jovy Noble (Noble) as Able
Seamen; Emilio Dominico (Dominico) and Benny Nilmao (Nilmao) as Oilers; and Jose
Austral (Austral) as 2nd Engineer.
Sometime in January 2000, one of the vessel’s Oilers, Richard Abis (Abis), reported
to GASLI’s Office and Crewing Manager, Elsa Montegrico (Montegrico), an alleged
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
unconsumed and stored in the vessel’s fuel tanks. However, Gruta would misdeclare
it as consumed fuel in the Engineer’s Voyage Reports. Then, the saved fuel oil is
siphoned and sold to other vessels out at sea usually at nighttime. Respondents
would then divide among themselves the proceeds of the sale. Abis added that he
was hesitant at first to report respondents’ illegal activities for fear for his life.
An investigation on the alleged pilferage was conducted. After audit and examination
of the Engineer’s Voyage Reports, GASLI’s Internal Auditor, Roger de la Rama (De
la Rama), issued a Certification of Overstatement of Fuel Oil Consumption9 for M/T
Dorothy Uno stating that for the period June 30, 1999 to February 15, 2000 fuel oil
consumption was overstated by 6,954.3 liters amounting to ₱74,737.86.10
On February 11, 2000, a formal complaint11 for qualified theft was filed with the
Criminal Investigation and Detection Group (CIDG) at Camp Crame against
respondents, with Montegrico’s Complaint-Affidavit12 attached. On February 14,
2000, Abis submitted his Sinumpaang Salaysay,13 attesting to the facts surrounding
respondents’ pilferage of fuel oil while on board the vessel, which he alleged started
in August of 1999. On March 22, 2000, GASLI’s Port Captain, Genaro Bernabe
(Bernabe), and De la Rama submitted a Complaint-Joint Affidavit,14 stating that in
Gruta’s Engineer’s Voyage Reports, particularly for the period June 30, 1999 to
February 15, 2000, he overstated the number of hours the vessel’s main and
auxiliary engines, as well as its generators, were used resulting in the exaggerated
fuel consumption. They also stated that according to independent surveyor Jade
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
only. Thus, comparing this with the declared amount of fuel consumed by the vessel
when manned by the respondents, Bernabe and De la Rama concluded that the
pilferage was considerable.15 In her Supplementary Complaint
Affidavit,16 Montegrico implicated respondents except Sales, in the illegal activity.
Bernabe, in his Reply-Affidavit,17 further detailed their analysis of the voyage
reports vis-a-vis the report of Jade Sea-Land Inspection Services to strengthen the
accusations.
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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,
legality of the employees’ termination, compliance with labor standards, and wage
increases as grounds for the reduction of appeal bond.
The NLRC issued an Order32 dated February 20, 2002 denying petitioners’ motion
to reduce bond and directing them to post an additional bond in the amount of
₱4,084,736.70 in cash or surety within an unextendible period of 10 days; otherwise,
their appeal would be dismissed. Petitioners failed to comply with the Order. Thus,
on February 3, 2003, complainants moved for the dismissal of the appeal since
petitioners had thus far posted only ₱1.5 million supersedeas bond and ₱500,000.00
cash bond, short of the amount required by the NLRC.33
In a Decision34 dated September 10, 2003, the NLRC, despite its earlier Order
denying petitioners’ motion for the reduction of bond, reduced the amount of appeal
bond to ₱1.5 million and gave due course to petitioners’ appeal. It also found the
appeal meritorious and ruled that petitioners presented sufficient evidence to show
just causes for terminating complainants’ employment and compliance with due
process. Accordingly, complainants’ dismissal was valid, with the exception of Sales.
The NLRC adjudged petitioners to have illegally dismissed Sales as there was
absence of any record that the latter received any notice of suspension,
administrative hearing, or termination.
The NLRC struck down the monetary awards given by the Labor Arbiter, which, it
ruled, were based merely on the computations unilaterally prepared by the
complainants. It also ruled that Galvez, a ship captain, is considered a managerial
employee not entitled to premium pay for holiday and rest day, holiday pay and
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
proof was adduced to show that work was performed on a given holiday or rest day
or beyond the eight hours normal work time. Even then, the NLRC opined that these
claims had already been given since complainants’ salaries were paid on a 365-day
basis. Likewise, service incentive leave pay, awards for damages and double
indemnity were deleted. Further, the NLRC sustained respondents’ contention that
it is the Secretary of Labor or the Regional Director who has jurisdiction to impose
the penalty of double indemnity for violations of the Minimum Wage Laws and not
the Labor Arbiter. The NLRC disposed of the case as follows:
WHEREFORE, premises considered, the assailed Decision is hereby reversed as to
all complainants but modified with respect to Joel Sales.
Respondents are adjudged not guilty of illegal dismissal with respect to all
complainants except complainant Joel Sales. With the exception of Joel Sales, all the
monetary awards to all complainants are deleted from the decision.1âwphi1
Respondents are ordered to pay, jointly and severally complainant Joel Sales his
backwages in the amount of ₱124,115.10 as computed in the assailed decision plus
ten (10%) thereof as attorney’s fees.
We also sustain the order to reinstate him to his former position without loss of
seniority rights and other benefits and to pay him backwages up to the time of his
actual reinstatement.
SO ORDERED.35
Complainants filed Motions for Reconsideration while petitioners filed a Motion for
Partial Reconsideration. In a Resolution36 dated January 14, 2004, the NLRC
reconsidered its ruling with respect to Sales, absolving petitioners from the charge
of illegally dismissing him as Sales was neither placed under preventive suspension
nor terminated from the service. The NLRC upheld petitioners’ claim that it was Sales
who abandoned his work by failing to report back for re-assignment. The dispositive
portion of the Resolution reads:
WHEREFORE, premises considered, the Motions for Reconsideration filed by
complainants are denied for lack of merit. The Motion for Partial Reconsideration
filed by respondents is granted. The assailed decision is reconsidered in that
Respondents are likewise adjudged not guilty of illegal dismissal with respect to
complainant Joel Sales. The monetary awards in favor of complainant Joel Sales as
well as the reinstatement order are hereby deleted from the Decision.
SO ORDERED.37
Proceedings before the Court of Appeals
Respondents, excluding the other complainants, filed a Petition for Certiorari38 with
the CA, attributing grave abuse of discretion on the part of the NLRC in entertaining
the appeal despite the insufficiency of petitioners’ appeal bond. Respondents also
assailed the NLRC’s ruling upholding the validity of their dismissal. They posited that
the charge of pilferage is not supported by clear, convincing and concrete evidence.
In fact, the RTC, Branch 15 of Manila already rendered a Decision39 on December
19, 2003 acquitting them of the crime of qualified theft lodged by the petitioners.
Respondents further prayed for the reinstatement of the Labor Arbiter’s monetary
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
Labor Arbiter’s Decision final, executory and immutable. The CA, nonetheless,
proceeded to discuss the merits of the case insofar as the illegal dismissal charge is
concerned. The CA conformed with the Labor Arbiter’s ruling that petitioners’
evidence was inadequate to support the charge of pilferage and justify respondents’
termination. The CA ruled that Sales was also illegally dismissed, stating that Sales’
active participation in the labor case against petitioners belies the theory that he
was not terminated from employment. The dispositive portion of the CA Decision
reads:
WHEREFORE, the petition is GRANTED and the assailed September 10, 2003
Decision and January 14, 2003 Resolution are, accordingly, ANNULLED and SET
ASIDE. In lieu thereof, the Labor Arbiter’s August 30, 2001 Decision is ordered
REINSTATED.
SO ORDERED.41
Petitioners filed a Motion for Reconsideration,42 questioning the CA in finding that
respondents were illegally dismissed, in reinstating the monetary awards granted by
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
the appeal before it.
On May 23, 2007, the CA issued a Resolution43 denying petitioners’ Motion for
Reconsideration. Hence, the instant Petition.
Issues
Petitioners assign the following errors:
I.
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE
JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS WERE ILLEGALLY
DISMISSED.
A. THIS HONORABLE COURT OF APPEAL[S] OF APPEALS [sic] DISREGARDED THE
FACT THAT THE OFFICE OF THE CITY PROSECUTOR OF MANILA DETERMINED
THAT THERE WAS A PRIMA FACIE CASE FOR QUALIFIED THEFT AGAINST
PETITIONERS, CONTRARY TO DECISIONS THIS MOST HONORABLE COURT OF
APPEAL[S] HAS HELD WHERE SIMILAR FINDINGS OF THE INVESTIGATING PUBLIC
PROSECUTOR HAD BEEN CONSIDERED SUBSTANTIAL EVIDENCE TO JUSTIFY
TERMINATION OF EMPLOYMENT BASED ON LOSS OF TRUST AND CONFIDENCE.
B. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN DISCREDITING
PRIVATE RESPONDENTS’ EVIDENCE ONE BY ONE WHEN, TAKEN TOGETHER, SUCH
EVIDENCE PROVIDED ADEQUATE BASIS FOR THE DISMISSAL OF PETITIONERS IN
ACCORDANCE WITH RELEVANT SUPREME COURT OF APPEAL [sic] DECISIONS.
C. IN SUM, PETITIONERS WERE NOT ILLEGALLY DISMISSED SINCE THE
SUBSTANTIVE AND PROCEDURAL REQUIREMENTS FOR THE TERMINATION OF
THEIR EMPLOYMENT WERE SATISFIED IN THIS CASE.
D. THIS HONORABLE COURT OF APPEAL[S] GRIEVOUSLY ERRED IN RULING THAT
PETITIONER JOEL SALES WAS ILLEGALLY DISMISSED.
II.
THE HONORABLE COURT OF APPEALS RULED CONTRARY TO APPLICABLE
JURISPRUDENCE WHEN IT CONCLUDED THAT PETITIONERS WERE NOT ABLE TO
VALIDLY PERFECT [THEIR] APPEAL OF THE LABOR ARBITER’S DECISION.44
Petitioners claim that the NLRC properly took cognizance of their appeal and properly
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
miscarriage of justice. Petitioners also claim that there was adequate basis to render
respondents’ dismissal from service valid, as correctly ruled by the NLRC.
Our Ruling
The assailed CA Decision must be vacated and set aside.
There was substantial compliance with
the rules on appeal bonds.
In order to perfect an appeal from the Decision of the Labor Arbiter granting
monetary award, the Labor Code requires the posting of a bond, either in cash or
surety bond, in an amount equivalent to the monetary award. Article 223 of the
Labor Code provides:
ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are final and
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
xxxx
In case of a judgment involving a monetary award, an appeal by the employer [may]
be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from.
Nonetheless, we have consistently held that rules should not be applied in a very
rigid and strict sense.45 This is especially true in labor cases wherein the substantial
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merits of the case must accordingly be decided upon to serve the interest of
justice.46 When there has been substantial compliance, relaxation of the Rules is
warranted.47
In Mendoza v. HMS Credit Corporation,48 we held that the posting of an appeal
bond in the amount of ₱650,000.00 instead of ₱1,025,081.82 award stated in the
Decision of the Labor Arbiter is substantial compliance with the requirement under
Article 223. Likewise, in Pasig Cylinder Mfg. Corp. v. Rollo,49 we ruled that the filing
of a reduced appeal bond of ₱100,000.00 is not fatal in an appeal from the labor
arbiter’s ruling awarding ₱3,132,335.57 to the dismissed employees. In Rosewood
Processing, Inc. v. National Labor Relations Commission,50 we allowed the filing of
a reduced bond of ₱50,000.00, accompanied with a motion, in an appeal from the
Labor Arbiter’s award of ₱789,154.39.
In the case at bench, petitioners appealed from the Decision of the Labor Arbiter
awarding to crewmembers the amount of ₱7,104,483.84 by filing a Notice of Appeal
with a Very Urgent Motion to Reduce Bond and posting a cash bond in the amount
of ₱500,000.00 and a supersedeas bond in the amount of ₱1.5 million. We find this
to be in substantial compliance with Article 223 of the Labor Code. It is true that the
NLRC initially denied the request for reduction of the appeal bond. However, it
eventually allowed its reduction and entertained petitioners’ appeal. We disagree
with the CA in holding that the NLRC acted with grave abuse of discretion as the
granting of a motion to reduce appeal bond lies within the sound discretion of the
NLRC upon showing of the reasonableness of the bond tendered and the merits of
the grounds relied upon.51 Hence, the NLRC did not err or commit grave abuse of
discretion in taking cognizance of petitioners’ appeal before it.
Galvez and Gruta were validly dismissed
on the ground of loss of trust and
confidence; there were no valid grounds
for the dismissal of Arguelles, Batayola,
Fresnillo, Noble, Dominico, Nilmao and
Austral.
We do not, however, agree with the findings of the NLRC that all respondents were
dismissed for just causes. In termination disputes, the burden of proving that the
dismissal is for a just or valid cause rests on the employers. Failure on their part to
discharge such burden will render the dismissal illegal.52
As specified in the termination notice, respondents were dismissed on the grounds
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
a crime or offense against their employer. Petitioners claim that based on the sworn
statement of Abis, joint affidavit of Bernabe and De la Rama, letter of petitioner
Francisco requesting assistance from the CIDG, formal complaint sheet, complaint
and supplementary complaint affidavit of Montegrico, CIDG’s letter referring
respondents’ case to the Office of the City Prosecutor of Manila, resolution of the
City Prosecutor finding a prima facie case of qualified theft, and the Information for
qualified theft, there is a reasonable ground to believe that respondents were
responsible for the pilferage of diesel fuel oil at M/T Dorothy Uno, which renders
them unworthy of the trust and confidence reposed on them.
After examination of the evidence presented, however, we find that petitioners failed
to substantiate adequately the charges of pilferage against respondents. "[T]he
quantum of proof which the employer must discharge is substantial evidence. x x x
Substantial evidence is that amount of relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, even if other minds, equally reasonable,
might conceivably opine otherwise."53
Here, the mere filing of a formal charge, to our mind, does not automatically make
the dismissal valid. Evidence submitted to support the charge should be evaluated
to see if the degree of proof is met to justify respondents’ termination. The affidavit
executed by Montegrico simply contained the accusations of Abis that respondents
committed pilferage, which allegations remain uncorroborated. "Unsubstantiated
suspicions, accusations, and conclusions of employers do not provide for legal
justification for dismissing employees."54 The other bits of evidence were also
inadequate to support the charge of pilferage. The findings made by GASLI’s port
captain and internal auditor and the resulting certification executed by De la Rama
merely showed an overstatement of fuel consumption as revealed in the Engineer’s
Voyage Reports. The report of Jade Sea Land Inspection Services only declares the
actual usage and amount of fuel consumed for a particular voyage. There are no
other sufficient evidence to show that respondents participated in the commission
of a serious misconduct or an offense against their employer.
As for the second ground for respondents’ termination, which is loss of trust and
confidence, distinction should be made between managerial and rank and file
employees. "[W]ith respect to rank-and-file personnel, loss of trust and confidence,
as ground for valid dismissal, requires proof of involvement in the alleged events x
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
dismissal."55
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In the case before us, Galvez, as the ship captain, is considered a managerial
employee since his duties involve the governance, care and management of the
vessel.56 Gruta, as chief engineer, is also a managerial employee for he is tasked to
take complete charge of the technical operations of the vessel.57 As captain and as
chief engineer, Galvez and Gruta perform functions vested with authority to execute
management policies and thereby hold positions of responsibility over the activities
in the vessel. Indeed, their position requires the full trust and confidence of their
employer for they are entrusted with the custody, handling and care of company
property and exercise authority over it.
Thus, we find that there is some basis for the loss of confidence reposed on Galvez
and Gruta. The certification issued by De la Rama stated that there is an
overstatement of fuel consumption. Notably, while respondents made self-serving
allegations that the computation made therein is erroneous, they never questioned
the competence of De la Rama to make such certification. Neither did they question
the authenticity and validity of the certification. Thus, the fact that there was an
overstatement of fuel consumption and that there was loss of a considerable amount
of diesel fuel oil remained unrefuted. Their failure to account for this loss of company
property betrays the trust reposed and expected of them. They had violated
petitioners’ trust and for which their dismissal is justified on the ground of breach of
confidence.
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, proof of
involvement in the loss of the vessel’s fuel as well as their participation in the alleged
theft is required for they are ordinary rank and file employees. And as discussed
above, no substantial evidence exists in the records that would establish their
participation in the offense charged. This renders their dismissal illegal, thus,
entitling them to reinstatement plus full backwages, inclusive of allowances and
other benefits, computed from the time of their dismissal up to the time of actual
reinstatement.
No evidence of Sales’ dismissal from employment.
The rule that the employer bears the burden of proof in illegal dismissal cases finds
no application when the employer denies having dismissed the employee.58 The
employee must first establish by substantial evidence the fact of dismissal59 before
shifting to the employer the burden of proving the validity of such dismissal.
We give credence to petitioners’ claim that Sales was not dismissed from
employment. Unlike the other respondents, we find no evidence in the records to
show that Sales was preventively suspended, that he was summoned and subjected
to any administrative hearing and that he was given termination notice. From the
records, it appears Sales was not among those preventively suspended on February
26, 2000. To bolster this fact, petitioners presented the Payroll Journal Register for
the period March 1-15, 200060 showing that Sales was still included in the payroll
and was not among those who were charged with an offense to warrant suspension.
In fact, Sales’ signature in the Semi-Monthly Attendance Report for February 26,
2000 to March 10, 200061 proves that he continued to work as Chief Mate for the
vessel M/T Dorothy Uno along with a new set of crewmembers. It is likewise worth
noting that in the Supplemental Complaint Affidavit of Montegrico, Sales was not
included in the list of those employees who were accused of having knowledge of
the alleged pilferage. This only shows that he was never subjected to any accusation
or investigation as a prelude to termination. Hence, it would be pointless to
determine the legality or illegality of his dismissal because, in the first place, he was
not dismissed from employment.
Respondents are not entitled to their
money claims except 13th month pay for
the period of their illegal dismissal,
unpaid salaries, salary differentials,
double indemnity for violation of the
Minimum Wage Law and attorney’s fees.
As for the money claims of respondents, we note that petitioners did not bring this
issue before us or assign it as error in this Petition. It was raised by the petitioners
only in their Memorandum of Appeal filed with the NLRC and in their Motion for
Reconsideration of the CA’s Decision reinstating the Labor Arbiter’s award.
Nonetheless, in order to arrive at a complete adjudication of the case and avoid
piecemeal dispensation of justice, we deem it necessary to resolve the validity of
respondents’ money claims and to discuss the propriety of the Labor Arbiter’s award.
Galvez and Gruta, as managerial employees, are not entitled to their claims for
holiday pay, service incentive leave pay and premium pay for holiday and restday.
Article 82 of the Labor Code specifically excludes managerial employees from the
coverage of the law regarding conditions of employment which include hours of
work, weekly rest periods, holidays, service incentive leaves and service charges.62
As for Arguelles, Batayola, Fresnillo, Noble, Dominico, Nilmao and Austral, we cannot
sustain the argument that they are classified as field personnel under Article 82 of
the Labor Code who are likewise excluded. Article 82 defines field personnel as
referring to "non-agricultural employees who regularly perform their duties away
from the principal place of business or branch office of the employer and whose
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
the employer or his representative."63 Here, respondents, during the entire course
of their voyage, remain on board the vessel. They are not field personnel inasmuch
as they were constantly supervised and under the effective control of the petitioners
through the vessel’s ship captain.
Nevertheless, we cannot grant them their claims for holiday pay, premium pay for
holiday and restday, overtime pay and service incentive leave pay. Respondents do
not dispute petitioners’ assertion that in computing respondents’ salaries, petitioners
use 365 days as divisor. In fact, this was the same divisor respondents used in
computing their money claims against petitioners. Hence, they are paid all the days
of the month, which already include the benefits they claim.64 As for overtime pay
and premium pay for holidays and restdays, no evidence was presented to prove
that they rendered work in excess of the regular eight working hours a day or worked
during holidays and restdays. In the absence of such proof, there could be no basis
to award these benefits.65
For the claim of service incentive leave pay, respondents did not specify what year
they were not paid such benefit. In addition, records show that they were paid their
vacation leave benefits.66 Thus, in accordance with Article 95 of the Labor
Code,67 respondents can no longer claim service incentive leave pay.
On the other hand, for failure to effectively refute the awards for 13th month pay
for the period that respondents were illegally dismissed, unpaid salaries and salary
differentials,68 we affirm the grant thereof as computed by the Labor Arbiter.
Petitioners’ evidence which consist of a mere tabulation69 of the amount of actual
benefits paid and given to respondents is self-serving as it does not bear the
signatures of the employees to prove that they had actually received the amounts
stated therein.
Next, we come to the legitimacy of the Labor Arbiter’s authority to impose the
penalty of double indemnity for violations of the Minimum Wage Law. Petitioners
argue that the authority to issue compliance orders in relation to underpayment of
wages is vested exclusively on the Secretary of Labor or the Regional Director and
that the Labor Arbiter has no jurisdiction thereover. They cite Section 12 of RA
6727,70 as amended by RA 8188, which provides:
Sec. 12. Any person, corporation, trust, firm, partnership, association or entity which
refuses or fails to pay any of the prescribed increases or adjustments in the wage
rates made in accordance with this Act shall be punished by a fine [of] not less than
Twenty-five thousand pesos (₱25,000) nor more than One hundred thousand pesos
(₱100,000) or imprisonment of not less than two (2) years nor more than four (4)
years or both such fine and imprisonment at the discretion of the court: Provided,
That any person convicted under this Act shall not be entitled to the benefits
provided for under the Probation Law.
The employer concerned shall be ordered to pay an amount equivalent to double
the unpaid benefits owing to the employees: Provided, That payment of indemnity
shall not absolve the employer from the criminal liability under this Act.
If the violation is committed by a corporation, trust or firm, partnership, association
or any other entity, the penalty of imprisonment shall be imposed upon the entity’s
responsible officers including but not limited to, the president, vice president, chief
executive officer, general manager, managing director or partner.
Petitioners’ contention is untenable. First, there is no provision in RA 6727 or RA
8188 which precludes the Labor Arbiter from imposing the penalty of double
indemnity against employers. Second, Article 217 of the Labor Code gives the Labor
Arbiter jurisdiction over cases of termination disputes and those cases accompanied
with a claim for reinstatement. Thus, in Bay Haven, Inc. v. Abuan71 the Court held
that an allegation of illegal dismissal deprives the
Secretary of Labor of jurisdiction over claims to enforce compliance with labor
standards law.1âwphi1 This was also pronounced in People’s Broadcasting Service
(Bombo Radyo Phils., Inc.) v. Secretary of the Department of Labor and
Employment,72 wherein we stated that the Secretary of Labor has no jurisdiction in
cases where employer-employee relationship has been terminated. We thus sustain
the Labor Arbiter’s award of double indemnity.
We also sustain the award of attorney’s fees since respondents were compelled to
file a complaint for the recovery of wages and were forced to litigate and incur
expenses.73
The Labor Arbiter’s grant of actual/compensatory, moral and exemplary damages in
the amount of ₱100,000.00 is, however, incorrect. In order to recover actual or
compensatory damages, it must be capable of proof and must be necessarily proved
with a reasonable degree of certainty.74 While moral damages is given to a
dismissed employee when the dismissal is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner contrary to good
morals, good customs or public policy. Exemplary damages, on the other hand, is
given if the dismissal is effected in a wanton, oppressive or malevolent
manner.75 Here, the Labor Arbiter erred in awarding the damages by lumping
actual, moral and exemplary damages. Said damages rest on different jural
foundations and, hence, must be independently identified and justified.76 Also,
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
SUPREME COURT
Manila
EN BANC
G.R. No. L-18939 August 31, 1964
NATIONAL WATERWORKS and SEWERAGE AUTHORITY, petitioner,
vs.
NWSA CONSOLIDATED UNIONS, ET AL., respondents.
BAUTISTA ANGELO, J.:
Petitioner National Waterworks & Sewerage Authority is a government-owned and
controlled corporation created under Republic Act No. 1383, while respondent NWSA
Consolidated Unions are various labor organizations composed of laborers and
employees of the NAWASA. The other respondents are intervenors Jesus Centeno,
et al., hereinafter referred to as intervenors.
Acting on a certification of the President of the Philippines, the Court of Industrial
Relations conducted a hearing on December 5, 1957 on the controversy then
existing between petitioner and respondent unions which the latter embodied in a
"Manifesto" dated December 51, 1957, namely: implementation of the 40-Hour
Week Law (Republic Act No. 1880); alleged violations of the collective bargaining
agreement dated December 28, 1956 concerning "distress pay"; minimum wage of
P5.25; promotional appointments and filling of vacancies of newly created positions;
additional compensation for night work; wage increases to some laborers and
employees; and strike duration pay. In addition, respondent unions raised the issue
of whether the 25% additional compensation for Sunday work should be included in
computing the daily wage and whether, in determining the daily wage of a monthly-
salaried employee, the salary should be divided by 30 days.
On December 13, 1957, petitioner and respondent unions, conformably to a
suggestion of the Court of Industrial Relations, submitted a joint stipulation of facts
on the issues concerning the 40-Hour Week Law, "distress pay," minimum wage of
P5.25, filling of vacancies, night compensation, and salary adjustments, reserving
the right to present evidence on matters not covered therein. On December 4, 1957,
respondent intervenors filed a petition in intervention on the issue for additional
compensation for night work. Later, however, they amended their petition by
including a new demand for overtime pay in favor of Jesus Centeno, Cesar Cabrera,
Feliciano Duiguan, Cecilio Remotigue, and other employees receiving P4,200.00 per
annum or more.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1äwphï1.ñët
On February 5, 1958, petitioner filed a motion to dismiss the claim for overtime pay
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.
To this motion the intervenors filed an opposition. Thereafter, respondent court
issued an order allowing the issue to be litigated. Petitioner's motion to reconsider
having been denied, it filed its answer to the petition for intervention. Finally, on
January 16, 1961, respondent court rendered its decision stating substantially as
follows:
The NAWASA is an agency not performing governmental functions and, therefore,
is liable to pay additional compensation for work on Sundays and legal holidays
conformably to Commonwealth Act No. 444, known as the Eight-Hour Labor Law,
even if said days should be within the staggered five work days authorized by the
President; the intervenors do not fall within the category of "managerial employees"
as contemplated in Republic Act 2377 and so are not exempt from the coverage of
the Eight-Hour Labor Law; even those intervenors attached to the General Auditing
Office and the Bureau of Public Works come within the purview of Commonwealth
Act No. 444; the computation followed by NAWASA in computing overtime
compensation is contrary to Commonwealth Act 444; the undertime of a worker
should not be set-off against the worker in determining whether the latter has
rendered service in excess of eight hours for that day; in computing the daily wage
of those employed on daily basis, the additional 25% compensation for Sunday work
should be included; the computation used by the NAWASA for monthly salaried
employees to wit, dividing the monthly basic pay by 30 is erroneous; the minimum
wage awarded by respondent court way back on November 25, 1950 in Case No.
359-V entitled MWD Workers Union v. Metropolitan Water District, applies even to
those who were employed long after the promulgation of the award and even if their
workers are hired only as temporary, emergency and casual workers for a definite
period and for a particular project; the authority granted to NAWASA by the
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
between the NAWASA and respondent unions on December 28, 1956, as well as
under Resolution No. 29, series of 1957 of the Grievance Committee, even those
who work outside the sewerage chambers should be paid 25% additional
compensation as "distress pay."
Its motion for reconsideration having been denied, NAWASA filed the present
petition for review raising merely questions of law. Succinctly, these questions are:
1. Whether NAWASA is performing governmental functions and, therefore,
essentially a service agency of the government;
2. Whether NAWASA is a public utility and, therefore, exempted from paying
additional compensation for work on Sundays and legal holidays;
3. Whether the intervenors are "managerial employees" within the meaning of
Republic Act 2377 and, therefore, not entitled to the benefits of Commonwealth Act
No. 444, as amended;
4. Whether respondent Court of Industrial Relations has jurisdiction to adjudicate
overtime pay considering that this issue was not among the demands of respondent
union in the principal case but was merely dragged into the case by the intervenors;
5. Whether those attached to the General Auditing Office and the Bureau of Public
Works come within the purview of Commonwealth Act No. 444, as amended;
6. In determining whether one has worked in excess of eight hours, whether the
undertime for that day should be set off;
7. In computing the daily wage, whether the additional compensation for Sunday
work should be included;
8. What is the correct method to determine the equivalent daily wage of a monthly
salaried employee, especially in a firm which is a public utility?;
9. Considering that the payment of night compensation is not by virtue of any
statutory provision but emanates only from an award of respondent Court of
Industrial Relations, whether the same can be made retroactive and cover a period
prior to the promulgation of the award;
10. Whether the minimum wage fixed and awarded by respondent Court of
Industrial Relations in another case (MWD Workers Union v. MWD CIR Case No.
359-V) applies to those employed long after the promulgation thereof, whether hired
as temporary, emergency and casual workers for a definite period and for a specific
project;
11. How should the collection bargaining agreement of December 28, 1956 and
Resolution No. 29, series of 1957 of the Grievance Committee be interpreted and
construed insofar as the stipulations therein contained relative to "distress pay" is
concerned?; and
12. Whether, under the first indorsement of the President of the Philippines dated
August 12, 1957, which authorizes herein petitioner to stagger the working days of
its employees and laborers, those whose services are indispensably continuous
throughout the year may be staggered in the same manner as the pump, valve,
filter and chlorine operators, guards, watchmen, medical services, and those
attached to the recreational facilities.
DISCUSSION OF THE ISSUES
1. Is NAWASA an agency that performs governmental functions and, therefore,
essentially a service agency of the government? Petitioner sustains the affirmative
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
also contends that under the same Act the Public Service Commission does not have
control, supervision or jurisdiction over it in the fixing of rates concerning of the
operation of the service. It can also incur indebtedness or issue bonds that are
exempt from taxation which circumstance implies that it is essentially a government-
function corporation because it enjoys that attribute of sovereignty. Petitioner
likewise invokes the opinion of the Secretary of Justice which holds that the NAWASA
being essentially a service agency of the government can be classified as a
corporation performing governmental function.
With this contention, we disagree. While under republic Act No. 1383 the NAWASA
is considered as a public corporation it does not show that it was so created for the
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
corporation in its strict is the body politic constituted by the inhabitants of a city or
town for the purpose of local government thereof. It is the body politic established
by law particularly as an agency of the State to assist in the civil government of the
country chiefly to regulate the local and internal affairs of the city or town that is
incorporated (62 C.J.S., p. 61). Non- municipal corporations, on the other hand, are
public corporations created as agencies of the State for limited purposes to take
charge merely of some public or state work other than community government
(Elliot, Municipal Corporations, 3rd ed., p. 7; McQuillin, Mun. Corp., 3rd ed., Vol. 1,
p. 476).
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The National Waterworks and Sewerage Authority was not created for purposes of
local government. It was created for the "purpose of consolidating and centralizing
all waterworks, sewerage and drainage system in the Philippines under one control
and direction and general supervision." The NAWASA therefore, though a public
corporation, is not a municipal corporation, because it is not an agency of the State
to regulate or administer the local affairs of the town, city, or district which is
incorporated.
Moreover, the NAWASA, by its charter, has personality and power separate and
distinct from the government. It is an independent agency of the government
although it ids placed, for administrative purposes, under the Department of Public
Works and Communications. It has continuous succession under its corporate name
and sue and be sued in court. It has corporate power to exercised by its board of
directors; it has its own assets and liabilities; and it may charge rates for its services.
In Bacani vs. National Coconut Corporation, 53 O.G., 2798, we stated: "To
recapitulate, we may mention that the term 'Government of the Republic of the
Philippines'... refers only to that government entity through which the functions of
the government are exercised as an attribute of sovereignty, and in this are included
those arms through which political authority is made effective whether they be
provincial, municipal or other form of local government. These are what we call
municipal corporations. They do not include government entities which are given a
corporate personality separate and distinct from the government and which are
governed by the Corporation Law. Their powers, duties and liabilities have to be
determined in the light of that law and of their corporate charter."
The same conclusion may be reached by considering the powers, functions and
activities of the NAWASA which are enumerated in Section 2, Republic Act No. 1383,
among others, as follows:
(e) To construct, maintain and operate mains pipes, water reservoirs, machinery,
and other waterworks for the purpose of supplying water to the inhabitants of its
zone, both domestic and other purposes; to purify the source of supply, regulate
the control and use, and prevent the waste of water; and to fix water rates and
provide for the collection of rents therefor;
(f) To construct, maintain and operate such system of sanitary sewers as may be
necessary for the proper sanitation of the cities and towns comprising the Authority
and to charge and collect such sums for construction and rates for this service as
may be determined by the Board to be equitable and just;
(g) To acquire, purchase, hold, transfer, sell, lease, rent, mortgage, encumber, and
otherwise dispose of real and personal property, including rights and franchises,
within the Philippines, as authorized by the purpose for which the Authority was
created and reasonably and necessarily required of the transaction of the lawful
business of the same, unless otherwise provided in this Act;
The business of providing water supply and sewerage service, as this Court held,
"may for all practical purposes be likened to an industry engaged in by coal
companies, gas companies, power plants, ice plants, and the like" (Metropolitan
Water District v. Court of Industrial Relations, et al., L-4488, August 27, 1952).
These are but mere ministrant functions of government which are aimed at
advancing the general interest of society. As such they are optional (Bacani v.
National Coconut Corporation, supra). And it has been held that "although the state
may regulate the service and rates of water plants owned and operated by
municipalities, such property is not employed for governmental purposes and in the
ownership operation thereof the municipality acts in its proprietary capacity, free
from legislative interference" (1 McQuillin, p. 683). In Mendoza v. De Leon, 33 Phil.,
508, 509, this Court also held:
Municipalities of the Philippine Islands organized under the Municipal Code have
both governmental and corporate or business functions. Of the first class are the
adoption of regulations against fire and disease, preservation of the public peace,
maintenance of municipal prisons, establishment of primary schools and post-
offices, etc. Of the latter class are the establishment of municipal waterworks for
the use of the inhabitants, the construction and maintenance of municipal
slaughterhouses, markets, stables, bathing establishments, wharves, ferries, and
fisheries. ...
On the strength of the foregoing considerations, our conclusions is that the NAWASA
is not an agency performing governmental functions. Rather, it performs proprietary
functions, and as such comes within the coverage of Commonwealth Act No. 444.
2. We agree with petitioner that the NAWASA is a public utility because its primary
function is to construct, maintain and operate water reservoirs and waterworks for
the purpose of supplying water to the inhabitants, as well as consolidate and
centralize all water supplies and drainage systems in the Philippines. We likewise
agree with petitioner that a public utility is exempt from paying additional
compensation for work on Sundays and legal holidays conformably to Section 4 of
Commonwealth Act No. 444 which provides that the prohibition, regarding
employment of Sundays and holidays unless an additional sum of 25% of the
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
or communication. In other words, the employees and laborers of NAWASA can be
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made to work on Sundays and legal holidays without being required to pay them an
additional compensation of 25%.
It is to be noted, however, that in the case at bar it has been stipulated that prior
to the enactment of Republic Act No. 1880, providing for the implementation of the
40-Hour Week Law, the Metropolitan Water District had been paying 25% additional
compensation for work on Sundays and legal holidays to its employees and laborers
by virtue of Resolution No. 47, series of 1948, of its board of Directors, which
practice was continued by the NAWASA when the latter took over the service. And
in the collective bargaining agreement entered into between the NAWASA and
respondent unions it was agreed that all existing benefits enjoyed by the employees
and laborers prior to its effectivity shall remain in force and shall form part of the
agreement, among which certainly is the 25% additional compensation for work on
Sundays and legal holidays therefore enjoyed by said laborers and employees. It
may, therefore, be said that while under Commonwealth Act No. 444 a public utility
is not required to pay additional compensation to its employees and workers for
work done on Sundays and legal holidays, there is, however, no prohibition for it to
pay such additional compensation if it voluntarily agrees to do so. The NAWASA
committed itself to pay this additional compensation. It must pay not because of
compulsion of law but because of contractual obligation.
3. This issue raises the question whether the intervenors are "managerial
employees" within the meaning of Republic Act 2377 and as such are not entitled to
the benefits of Commonwealth Act No. 444, as amended. Section 2 of Republic Act
2377 provides:
Sec. 2. This Act shall apply to all persons employed in any industry or occupation,
whether public or private with the exception of farm laborers, laborers who prefer
to be paid on piece work basis, managerial employees, outside sales personnel,
domestic servants, persons in the personal service of another and members of the
family of the employer working for him.
The term "managerial employee" in this Act shall mean either (a) any person whose
primary duty consists of the management of the establishment in which he is
employed or of a customarily recognized department or subdivision thereof, or (b)
ally officer or member of the managerial staff.
One of the distinguishing characteristics managerial employee may be known as
expressed in the explanatory note of Republic Act No. 2377 is that he is not subject
to the rigid observance of regular office hours. The true worth of his service does
not depend so much on the time he spends in office but more on the results he
accomplishes. In fact, he is free to go out of office anytime.
On the other hand, in the Fair Labor Standards Act of the United States, which was
taken into account by the sponsors of the present Act in defining the degree of work
of a managerial employee, we find interesting the following dissertation of the
nature of work o a managerial employee:
Decisions have consumed and applied a regulation in substance providing that the
term "professional" employee shall mean any employee ... who is engaged in work
predominantly intellectual and varied in character, and requires the consistent
exercise of discretion and judgment in its performance and is of such a character
that the output produced or the result accomplished cannot be standardized in
relation to a given period of time, and whose hours of work of the same nature as
that performed by non-exempt employees do not exceed twenty percent of the
hours worked in the work week by the non-exempt employees, except where such
work is necessarily incident to work of a professional nature; and which requires,
first, knowledge of an advanced type in a field of science or learning customarily
acquired by a prolonged course or specialized intellectual instruction and study, or,
second, predominantly original and creative in character in a recognized field of
artistic endeavor. Stranger v. Vocafilm Corp., C.C.A. N.Y., 151 F. 2d 894, 162 A.L.R.
216; Hofer v. Federal Cartridge Corp., D.C. Minn. 71 F. Supp. 243; Aulen v. Triumph
Explosive, D.C. Md., 58 P. Supp. 4." (56 C.J.S., p. 666).
Under the provisions of the Fair Labor Standards Act 29 U.S.C.A., Section 23 (a) (1),
executive employees are exempted from the statutory requirements as to minimum
wages and overtime pay. ...
Thus the exemption attaches only where it appears that the employee's primary
duty consists of the management of the establishment or of a customarily recognized
department or subdivision thereof, that he customarily and regularly directs the work
of other employees therein, that he has the authority to hire or discharge other
employees or that his suggestions and recommendations as to the hiring or
discharging and as to the advancement and promotion or any other change of status
of other employees are given particular weight, that he customarily and, regularly
exercises discretionary powers, ... . (56 C.J.S., pp. 666-668.)
The term "administrative employee" ordinarily applies only to an employee who is
compensated for his services at a salary or fee of not less than a prescribed sum per
month, and who regularly and directly assists an employee employed in a bona fide
executive or administrative capacity, where such assistance is nonmanual in nature
and requires the exercise of discretion and independent judgment; or who performs
under only general supervision, responsible non-manual office or field work, directly
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 discretion and independent judgment; ... . (56 C.J.S., p. 671.)
The reason underlying each exemption is in reality apparent. Executive,
administrative and professional workers are not usually employed at hourly wages
nor is it feasible in the case of such employees to provide a fixed hourly rate of pay
nor maximum hours of labor, Helena Glendale Perry Co. v. Walling, C.C.A. Ark. 132
F. 2d 616, 619. (56 C.J.S., p. 664.)
The philosophy behind the exemption of managerial employees from the 8-Hour
Labor Law is that such workers are not usually employed for every hour of work but
their compensation is determined considering their special training, experience or
knowledge which requires the exercise of discretion and independent judgment, or
perform work related to management policies or general business operations along
specialized or technical lines. For these workers it is not feasible to provide a fixed
hourly rate of pay or maximum hours of labor.
The intervenors herein are holding position of responsibility. One of them is the
Secretary of the Board of Directors. Another is the private secretary of the general
manager. Another is a public relations officer, and many other chiefs of divisions or
sections and others are supervisors and overseers. Respondent court, however, after
examining carefully their respective functions, duties and responsibilities found that
their primary duties do not bear any direct relation with the management of the
NAWASA, nor do they participate in the formulation of its policies nor in the hiring
and firing of its employees. The chiefs of divisions and sections are given ready
policies to execute and standard practices to observe for their execution. Hence, it
concludes, they have little freedom of action, as their main function is merely to
carry out the company's orders, plans and policies.
To the foregoing comment, we agree. As a matter of fact, they are required to
observe working hours and record their time work and are not free to come and go
to their offices, nor move about at their own discretion. They do not, therefore,
come within the category of "managerial employees" within the meaning of the law.
4. Petitioner's claim is that the issue of overtime compensation not having been
raised in the original case but merely dragged into it by intervenors, respondent
court cannot take cognizance thereof under Section 1, Rule 13, of the Rules of Court.
Intervenors filed a petition for intervention alleging that being employees of
petitioner who have worked at night since 1954 without having been fully
compensated they desire to intervene insofar as the payment of their night work is
concerned. Petitioner opposed the petition on the ground that this matter was not
in the original case since it was not included in the dispute certified by the President
of the Philippines to the Court of Industrial Relations. The opposition was overruled.
This is now assigned as error.
There is no dispute that the intervenors were in the employ of petitioner when they
intervened and that their claim refers to the 8-Hour Labor Law and since this Court
has held time and again that disputes that call for the application of the 8-Hour
Labor Law are within the jurisdiction of the Court of Industrial Relations if they arise
while the employer-employee relationship still exists, it is clear that the matter
subject of intervention comes within the jurisdiction of respondent court.1 The fact
that the question of overtime payment is not included in the principal casein the
sense that it is not one of the items of dispute certified to by the President is of no
moment, for it comes within the sound discretion of the Court of Industrial Relations.
Moreover, in labor disputes technicalities of procedure should as much as possible
be avoided not only in the interest of labor but to avoid multiplicity of action. This
claim has no merit.
5. It is claimed that some intervenors are occupying positions in the General Auditing
Office and in the Bureau of Public Works for they are appointed either by the Auditor
General or by the Secretary of Public Works and, consequently, they are not officers
of the NAWASA but of the insular government, and as such are not covered by the
Eight-Hour Labor Law.
The status of the GAO employees assigned to, and working in, government-
controlled corporations has already been decided by this Court in National Marketing
Corporation, et al. v. Court of Industrial Relations, et al., L-17804, January 31, 1963.
In said case, this Court said:
We agree with appellants that members of the auditing force can not be regarded
as employees of the PRISCO in matters relating to their compensation. They are
appointed and supervised by the Auditor General, have an independent tenure, and
work subject to his orders and instructions, and not to those of the management of
appellants. Above all, the nature of their functions and duties, for the purpose of
fiscal control of appellants' operations, imperatively demands, as a matter of policy,
that their positions be completely independent from interference or inducement on
the part of the supervised management, in order to assure a maximum of impartiality
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
expectancy of benefits resulting from any action of the management, since in either
case there would be an influence at work that could possibly lead, if not to positive
malfeasance, to, laxity and indifference that would gradually erode and endanger
the critical supervision entrusted to these auditing employees.
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The inclusion of their items in the PRISCO budget should be viewed as no more than
a designation by the national government of the fund or source from which their
emoluments are to be drawn, and does not signify that they are thereby made
PRISCO employees.
The GAO employees assigned to the NAWASA are exactly in the same position
regarding their status, compensation and right to overtime pay as the rest of the
GAO employees assigned to the defunct PRISCO, and following our ruling in the
PRISCO case, we hold that the GAO employees herein are not covered by the 8-
Hour Labor Law, but by other pertinent laws on the matter.
The same thing may be said with regard to the employer of the Bureau of Public
Works assigned to, and working in, the NAWASA. Their position is the same as that
of the GAO employees. Therefore, they are not also covered by the 8-Hour Labor
Law.
The respondent court, therefore, erred in considering them as employees of the
NAWASA for the mere reason that they are paid out of its fund and are subject to
its administration and supervision.
6. A worker is entitled to overtime pay only for work in actual service beyond eight
hours. If a worker should incur in undertime during his regular daily work, should
said undertime be deducted in computing his overtime work? Petitioner sustains the
affirmative while respondent unions the negative, and respondent court decided the
dispute in favor of the latter. Hence this error.
There is merit in the decision of respondent court that the method used by petitioner
in offsetting the overtime with the undertime and at the same time charging said
undertime to the accrued leave of the employee is unfair, for under such method
the employee is made to pay twice for his undertime because his leave is reduced
to that extent while he was made to pay for it with work beyond the regular working
hours. The proper method should be to deduct the undertime from the accrued
leave but pay the employee the overtime to which he is entitled. This method also
obviates the irregular schedule that would result if the overtime should be set off
against the undertime for that would place the schedule for working hours
dependent on the employee.
7. and 8. How is a daily wage of a weekly employee computed in the light of Republic
Act 1880?
According to petitioner, the daily wage should be computed exclusively on the basic
wage, without including the automatic increase of 25% corresponding to the Sunday
differential. To include said Sunday differential would be to increase the basic pay
which is not contemplated by said Act. Respondent court disagrees with this manner
of computation. It holds that Republic Act 1880 requires that the basic weekly wage
and the basic monthly salary should not be diminished notwithstanding the reduction
in the number of working days a week. If the automatic increase corresponding to
the salary differential should not be included there would be a diminution of the
weekly wage of the laborer concerned. Of course, this should only benefit those who
have been working seven days a week and had been regularly receiving 25%
additional compensation for Sunday work before the effectivity of the Act.
It is evident that Republic Act 1880 does not intend to raise the wages of the
employees over what they are actually receiving. 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 compensation which was previously
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
at nights, or is it the total amount received by the laborer for whatever nature or
concept?
It has been held that for purposes of computing overtime compensation a regular
wage includes all payments which the parties have agreed shall be received during
the work week, including piece work wages, differential payments for working at
undesirable times, such as at night or on Sundays and holidays, and the cost of
board and lodging customarily furnished the employee (Walling v. Yangermah-
Reynolds Hardwook Co., 325 U.S. 419; Walling v. Harischfeger Corp., 325 U.S. 427.)
The "regular rate" of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it
was also held that the higher rate for night, Sunday and holiday work is just as much
a regular rate as the lower rate for daytime work. The higher rate is merely an
inducement to accept employment at times which are not as desirable from a
workman's standpoint (International L. Ass'n v. National Terminals Corp. C.C. Wise,
50 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals Corp. 139 F. 2d
853).
Respondent court, therefore, correctly included such differential pay in computing
the weekly wages of those employees and laborers who worked seven days a week
and were continuously receiving 25% Sunday differential for a period of three
months immediately preceding the implementation of Republic Act 1880.
The next issue refers to the method of computing the daily rate of a monthly-salaried
employee. Petitioner in computing this daily rate divides the monthly basic pay of
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
amount to be paid for each day shall be determined by dividing the monthly pay
into as many parts as there are days in the particular month." The respondent court
disagrees with this method and holds that the way to determine the daily rate of a
monthly employee is to divide the monthly salary by the actual number of working
hours in the month. Thus, according to respondent court, Section 8 (g) of Republic
Act No. 1161, as amended by Republic Act 1792, provides that the daily rate of
compensation is the total regular compensation for the customary number of hours
worked each day. In other words, according to respondent court, the correct
computation shall be (a) the monthly salary divided by the actual of working hours
in a month or (b) the regular monthly compensation divided by the number of
working days in a month.
This finding of respondent court should be modified insofar as the employees of the
General Auditing Office and of the Bureau of Public Works assigned to work in the
NAWASA are concerned for, as already stated, they are government employees and
should be governed by Section 254 of the Revised Administrative Code. This section
provides that in making payments for part of a month, the amount to be paid for
each day shall be determined by dividing the monthly pay. Into as many parts as
there are days in the particular month. With this modification we find correct the
finding of the respondent court on this issue.
9. The Court of Industrial Relations awarded an additional 25% night compensation
to some, workers with retroactive effect, that is, effective even before the
presentation of the claim, provided that they had been given authorization by the
general manager to perform night work. It is petitioner's theory that since there is
no statute requiring payment of additional compensation for night work but it can
only be granted either by the voluntary act of the employer or by an award of the
industrial court under its compulsory arbitration power, such grant should only be
prospective in operation, and not retroactive, as authorized by the court.
It is of common occurrence that a working man who has already rendered night
time service takes him a long time before he can muster enough courage to confront
his employer with the demand for payment for it for fear of possible reprisal. It
happens that many months or years are allowed to pass by before he could be made
to present such claim against his employer, and so it is neither fair nor just that he
be deprived of what is due him simply because of his silence for fear of losing the
means of his livelihood. Hence, it is not erroneous for the Court of Industrial
Relations to make the payment of such night compensation retroactive to the date
when the work was actually performed.
The power of the Court of Industrial Relations to order the payment of compensation
for overtime service prior to the date of the filing of the claim has been recognized
by this Court (Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et
al., L-9265, April 29, 1957). The same reasons given therein for the retroactivity of
overtime compensation may also be given for the retroactivity of payment of night
compensation, as such reasoning runs along the line already above-stated.
10. The Court of Industrial Relations in its resolution dated November 25, 1950
issued in Case No. 359-V entitled MWD Workers Union, et al. v. Metropolitan Water
District, fixed the following rates of minimum daily wage: P5.25 for those working
in Manila and suburbs; P4.50 for those working in Quezon City; and P4.00 for those
working in Ipo. Montalban and Balara. It appears that in spite of the notice to
terminate said award filed with the court on December 29, 1953, the Metropolitan
Water District continued paying the above wages and the NAWASA which succeeded
it adopted the same rates for sometime. In September, 1955, the NAWASA hired
the claimants as temporary workers and it is now contended that said rates cannot
apply to these workers.
The Court of Industrial Relations, however, held that the discontinuance of this
minimum wage rate was improper and ordered the payment of the difference to
said workers from the date the payment of said rates was discontinued, advancing,
among others, the following reasons: that the resolution of November 25, 1950 is
applicable not only to those laborers already in the service but also to those who
may be employed thereafter; the notice of determination of said award given on
December 29, 1953 is not legally effective because the same was given without
hearing and the employer continued paying the minimum wages even after the
notice of termination; and there is no showing that the minimum wages violate Civil
Service Law or the principles underlying the WAPCO.
We find no valid reason to disagree with the foregoing finding of the Court of
Industrial Relations considering that the award continued to be valid and effective
in spite of the notice of termination given by the employer. No good reason is seen
why such award should not apply to those who may be employed after its approval
by the court there being nothing therein that may prevent its extension to them.
Moreover, the industrial court can at any time during the effectiveness of an award
or reopen any question involved therein under Section 17 of Commonwealth Act No.
103, and such is what said court has done when it made the award extensive to the
new employees, more so when they are similarly situated. To do otherwise would
be to foster discrimination.
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11. This issue has to do with the meaning of "distress pay." Paragraph 3, Article
VIII, of the collective bargaining agreement entered into between the employer and
respondent unions, provides:
Because of the peculiar nature of the function of those employees and laborers of
the Sewerage Division who actually work in the sewerage chambers, causing
"unusual distress" to them, they shall receive extra compensation equivalent to
twenty-five (25%) of their basic wage.
Pursuant to said agreement, a grievance committee was created composed of
representatives of management and labor which adopted the following resolution:
Resolution No. 9 agreed that the compensation should be paid to those who work "in and outside"
Series of 1957
BE IT RESOLVED, That the employees and laborers of the Sewerage Division who
actually work in the sewerage chambers causing unusual distress to them, be paid
extra compensation equivalent to 25% of their basic wage, as embodied in Article
VIII, Paragraph 3 of the Collective Bargaining Agreement; PROVIDED, however, that
any employee who may be required to work actually in the sewerage chambers shall
also be paid 25% extra compensation and, PROVIDED FURTHER, that the term
"sewerage chambers" shall include pits, trenches, and other excavations that are
necessary to tap the sewer line, and PROVIDED FINALLY that this will not prejudice
any laborer or employee who may be included in one way or another in the term
"unusual distress" within the purview of Paragraph 3 of Article VIII, of the Collective
Bargaining Agreement.
And in a conference held between management and labor on November 25, 1957,
the following was agreed upon: "Distress Management agreed to pay effective
October 1, 1956 25% additional compensation for those who actually work in and
outside sewerage chambers in accordance with Resolution No. 9 of the Grievance
Committee."
The question that arose in connection with this distress pay is with regard to the
meaning of the phrase "who actually work in and outside sewerage chambers."
Petitioner contends that the distress pay should be given only to those who actually
work inside the sewerage chambers while the union maintains that such pay should
be given to all those whose work have to do with the sewerage chambers, whether
inside or outside. The Court of Industrial Relations sustained the latter view holding
that the distress pay should be given to those who actually work in and outside the
sewerage chambers effective October 1, 1956. This view is now disputed by
petitioner.
The solution of the present issue hinges upon the interpretation of paragraph 3,
Article VIII of the collective bargaining agreement, copied above, as explained by
Resolution No. 9, and the agreement of November 25, 1957, also copied above,
which stipulation has to be interpreted as a whole pursuant to Article 1374 of the
Civil Code. As thus interpreted, we find that those who are entitled to the distress
pay are those employees and laborers who work in the sewerage chambers whether
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
necessarily "inside the sewerage chambers." This is clearly inferred from the
conference held in the Department of Labor on November 25, 1957 where it was
the sewerage chambers in accordance with the terms of Resolution No. 9 of the
Grievance Committee. It should be noted that according to said resolution, sewerage
chambers include "pits, trenches, and other excavations that are necessary to tap
the sewer lines." And the reason given for this extra compensation is the "unusual
distress" that is caused to the laborers by working in the sewerage chambers in the
form and extent above-mentioned.
It is clear then that all the laborers whether of the sewerage division or not assigned
to work in and outside the sewerage chambers and suffer in unusual distress
because of the nature of their work are entitled to the extra compensatory. And this
conclusion is further bolstered by the findings of the industrial court regarding the
main activities of the sewerage division.
Thus, the Court of Industrial Relations found that the sewerage division has three
main activities, to wit: (a) cooperation of the sewerage pumping stations; (b)
cleaning and maintenance of sewer mains; and (c) installation and repairs of house
sewer connections.
The pump operators and the sewer attendants in the seven pumping stations in
Manila, according to the industrial court, suffer unusual distress. The pump
operators have to go to the wet pit to see how the cleaning of the screen protecting
the pump is being performed, and go also to the dry pit abutting the wet pit to make
repairs in the breakdown of the pumps. Although the operators used to stay near
the motor which is but a few meters from the pump, they unavoidably smell the foul
odor emitting from the pit. Thesewerage attendants go down and work in the wet
pit containing sewerage materials in order to clean the screen.
A group assigned to the cleaning and maintenance of the sewer mains which are
located in the middle of the streets of Manila is usually composed of a capataz and
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
and in supplying the water service as necessity demand. These attendants come
into contact with dirt, stink, and smell, darkness and heat inside and near the sewage
pipes. The capataz goes from one manhole to another seeing to it that the work is
properly performed and as such also suffers unusual distress although to a lesser
degree.
The group resigned to the third kind of activity is also usually composed of
a capataz and four attendants. Their work is to connect sewer pipes from houses to
the sewer mains and to do this they excavate the trench across the street from the
proper line to the sewer main and then they install the pipe after tapping the sewer
main. In the tapping, the sewer pipe is opened and so the sewerage gets out and
fills up the trench and the men have to wade in and work with the sewerage water.
The capataz has to go near the filthy excavations or trenches full of filthy sewerage,
matter to aid the attendants in making pipe connections, especially when these are
complicated.
It cannot therefore be gainsaid that all there laborers suffer unusual distress. The
wet pits, trenches, manholes, which are full of sewage matters, are filthy sources of
germs and different diseases. They emit foul and filthy odor dangerous to health.
Those working in such places and exposed directly to the distress of contamination.
Premises considered, the decision of the Court of Industrial Relations in this respect
should be modified in the sense that all employees and laborers, whether or not
they belong to the sewerage division, who actually work in and outside the sewerage
chambers, should be paid the distress pay or the extra compensation equivalent to
25% of their basic wage effective October 1, 1956.
12. On August 6, 1957, the NAWASA requested the President of the Philippines for
exemption from Executive Order No. 251 which prescribes the office hours to be
observed in government and government-owned or controlled corporations in order
that it could stagger the working hours of its employees and laborers. The request
is based on the fact that there are essential and indispensable phases in the
operation of the NAWASA that are required to be attended to continuously for
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
operators, chlorine operators, watchmen and guards, and medical personnel. This
request was granted and, accordingly, the NAWASA staggered the work schedule of
the employees and laborers performing the activities above-mentioned. Respondent
unions protested against this staggering schedule of work and this protest having
been unheeded, they brought the matter to the Court of Industrial Relations.
In resolving this issue, the industrial court justified the staggering of the work days
of those holding positions as pump operators, valve operators, filter operators,
chlorine operators, watchmen and guards, and those in the medical service for the
reason that the same was made pursuant to the authority granted by the President
who in the valid exercise of the powers conferred upon him by Republic Act No.
1880 could prescribe the working days of employees and laborers in government-
owned and controlled corporations depending upon the exigencies of the service.
The court, however, stated that the staggering should not apply to the personnel in
the construction, sewerage, maintenance, machineries and shops because they work
below 365 days a year and their services are not continuous to require staggering.
From this portion of the decision, the petitioner appeals.
Considering that respondent court found that the workers in question work less than
365 days a year and their services are not continuous to require staggering, we see
no reason to disturb this finding. This is contrary to the very essence of the request
that the staggering should be made only with regard to those phases of the
operation of the NAWASA that have to be attended to continuously for twenty-four
hours without interruption which certainly cannot apply to the workers mentioned
in the last part of the decision of the respondent court on the matter.
RECAPITULATION
In resume, this Court holds:
(1) The NAWASA, though a public corporation, does not perform governmental
functions. It performs proprietary functions, and hence, it is covered by
Commonwealth Act No. 444;
(2) The NAWASA is a public utility. Although pursuant to Section 4 of Commonwealth
Act 444 it is not obliged to pay an additional sum of 25% to its laborers for work
done on Sundays and legal holidays, yet it must pay said additional compensation
by virtue of the contractual obligation it assumed under the collective bargaining
agreement;
(3) The intervenors are not "managerial employees" as defined in Republic Act No.
2377, hence they are covered by Commonwealth Act No. 444, as amended;
(4) The Court of Industrial Relations has jurisdiction to adjudicate overtime pay in
the case at bar there being an employer-employee relationship existing between
intervenors and petitioner;
(5) The GAO employees assigned to work in the NAWASA cannot be regarded as
employees of the NAWASA on matters relating to compensation. They are
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
SUPREME COURT
Manila
EN BANC
G.R. No. L-18353 July 31, 1963
SAN MIGUEL BREWERY, INC., petitioner,
vs.
DEMOCRATIC LABOR ORGANIZATION, ET AL., respondents.
BAUTISTA ANGELO, J.:
On January 27, 1955, the Democratic Labor Association filed complaint against the
San Miguel Brewery, Inc. embodying 12 demands for the betterment of the
conditions of employment of its members. The company filed its answer to the
complaint specifically denying its material averments and answering the demands
point by point. The company asked for the dismissal of the complaint.
At the hearing held sometime in September, 1955, the union manifested its desire
to confine its claim to its demands for overtime, night-shift differential pay, and
attorney's fees, although it was allowed to present evidence on service rendered
during Sundays and holidays, or on its claim for additional separation pay and sick
and vacation leave compensation.1äwphï1.ñët
After the case had been submitted for decision, Presiding Judge Jose S. Bautista,
who was commissioned to receive the evidence, rendered decision expressing his
disposition with regard to the points embodied in the complaint on which evidence
was presented. Specifically, the disposition insofar as those points covered by this
petition for review are concerned, is as follows:
1. With regard to overtime compensation, Judge Bautista held that the provisions of
the Eight-Hour Labor Law apply to the employees concerned for those working in
the field or engaged in the sale of the company's products outside its premises and
consequently they should be paid the extra compensation accorded them by said
law in addition to the monthly salary and commission earned by them, regardless of
the meal allowance given to employees who work up to late at night.
2. As to employees who work at night, Judge Bautista decreed that they be paid
their corresponding salary differentials for work done at night prior to January 1,
1949 with the present qualification: 25% on the basis of their salary to those who
work from 6:00 to 12:00 p.m., and 75% to those who work from 12:01 to 6:00 in
the morning.
3. With regard to work done during Sundays and holidays, Judge Bautista also
decreed that the employees concerned be paid an additional compensation of 25%
as provided for in Commonwealth Act No. 444 even if they had been paid a
compensation on monthly salary basis.
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,
as well as the award of additional separation pay, were either dismissed, denied, or
set aside.
Its motion for reconsideration having been denied by the industrial court en banc,
which affirmed the decision of the court a quo with few exceptions, the San Miguel
Brewery, Inc. interposed the present petition for review.
Anent the finding of the court a quo, as affirmed by the Court of Industrial Relations,
to the effect that outside or field sales personnel are entitled to the benefits of the
Eight-Hour Labor Law, the pertinent facts are as follows:
After the morning roll call, the employees leave the plant of the company to go on
their respective sales routes either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m.
for beer trucks. They do not have a daily time record. The company never require
them to start their work as outside sales personnel earlier than the above schedule.
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
hours variable in the sense that sometimes they can be completed in less than 8
hours, sometimes 6 to 7 hours, or more. The moment these outside or field
employees leave the plant and while in their sales routes they are on their own, and
often times when the sales are completed, or when making short trip deliveries only,
they go back to the plant, load again, and make another round of sales. These
employees receive monthly salaries and sales commissions in variable amounts. The
amount of compensation they receive is uncertain depending upon their individual
efforts or industry. Besides the monthly salary, they are paid sales commission that
range from P30, P40, sometimes P60, P70, to sometimes P90, P100 and P109 a
month, at the rate of P0.01 to P0.01-½ per case.
It is contended that since the employees concerned are paid a commission on the
sales they make outside of the required 8 hours besides the fixed salary that is paid
to them, the Court of Industrial Relations erred in ordering that they be paid an
overtime compensation as required by the Eight-Hour Labor Law for the reason that
the commission they are paid already takes the place of such overtime
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
hours a day, he is not covered by the law. His situation, the company contends, can
be likened to an employee who is paid on piece-work, "pakiao", or commission basis,
which is expressly excluded from the operation of the Eight-Hour Labor Law.1
We are in accord with this view, for in our opinion the Eight-Hour Labor Law only
has application where an employee or laborer is paid on a monthly or daily basis, or
is paid a monthly or daily compensation, in which case, if he is made to work beyond
the requisite period of 8 hours, he should be paid the additional compensation
prescribed by law. This law has no application when the employee or laborer is paid
on a piece-work, "pakiao", or commission basis, regardless of the time employed.
The philosophy behind this exemption is that his earnings in the form of commission
based on the gross receipts of the day. His participation depends upon his industry
so that the more hours he employs in the work the greater are his gross returns and
the higher his commission. This philosophy is better explained in Jewel Tea Co. v.
Williams, C.C.A. Okla., 118 F. 2d 202, as follows:
The reasons for excluding an outside salesman are fairly apparent. Such salesman,
to a greater extent, works individually. There are no restrictions respecting the time
he shall work and he can earn as much or as little, within the range of his ability, as
his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject
to the personal supervision of his employer, and his employer has no way of knowing
the number of hours he works per day.
True it is that the employees concerned are paid a fixed salary for their month of
service, such as Benjamin Sevilla, a salesman, P215; Mariano Ruedas, a truck driver,
P155; Alberto Alpaza and Alejandro Empleo, truck helpers, P125 each, and
sometimes they work in excess of the required 8-hour period of work, but for their
extra work they are paid a commission which is in lieu of the extra compensation to
which they are entitled. The record shows that these employees during the period
of their employment were paid sales commission ranging from P30, P40, sometimes
P60, P70, to sometimes P90, P100 and P109 a month depending on the volume of
their sales and their rate of commission per case. And so, insofar is the extra work
they perform, they can be considered as employees paid on piece work, "pakiao",
or commission basis. The Department of Labor, called upon to implement, the Eight-
Hour Labor Law, is of this opinion when on December 9, 1957 it made the ruling on
a query submitted to it, thru the Director of the Bureau of Labor Standards, to the
effect that field sales personnel receiving regular monthly salaries, plus commission,
are not subject to the Eight-Hour Labor Law. Thus, on this point, said official stated:
. . . Moreover, when a fieldman receives a regular monthly salary plus commission
on percentage basis of his sales, it is also the established policy of the Office to
consider his commission as payment for the extra time he renders in excess of eight
hours, thereby classifying him as if he were on piecework basis, and therefore,
technically speaking, he is not subject to the Eight-Hour Labor Law.
We are, therefore, of the opinion that the industrial court erred in holding that the
Eight-Hour Labor Law applies to the employees composing the outside service force
and in ordering that they be paid the corresponding additional compensation.
With regard to the claim for night salary differentials, the industrial court found that
claimants Magno Johnson and Jose Sanchez worked with the respondent company
during the period specified by them in their testimony and that watchmen Zoilo
Illiga, Inocentes Prescillas and Daniel Cayuca rendered night duties once every three
weeks continuously during the period of the employment and that they were never
given any additional compensation aside from their monthly regular salaries. The
court found that the company started paying night differentials only in January, 1949
but never before that time. And so it ordered that the employees concerned be paid
25% additional compensation for those who worked from 6:00 to 12:00 p.m. and
75% additional compensation for those who worked from 12:01 to 6: 00 in the
morning. It is now contended that this ruling is erroneous because an award for
night shift differentials cannot be given retroactive effect but can only be entertained
from the date of demand which was on January 27, 1953, citing in support thereof
our ruling in Earnshaws Docks & Honolulu Iron Works v. The Court of Industrial
Relations, et al., L-8896, January 25, 1957.
This ruling, however, has no application here for it appears that before the filing of
the petition concerning this claim a similar one had already been filed long ago which
had been the subject of negotiations between the union and the company which
culminated in a strike in 1952. Unfortunately, however, the strike fizzled out and the
strikers were ordered to return to work with the understanding that the claim for
night salary differentials should be settled in court. It is perhaps for this reason that
the court a quo granted this claim in spite of the objection of the company to the
contrary.
The remaining point to be determined refers to the claim for pay for Sundays and
holidays for service performed by some claimants who were watchmen or security
guards. It is contended that these employees are not entitled to extra pay for work
done during these days because they are paid on a monthly basis and are given one
day off which may take the place of the work they may perform either on Sunday
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
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 78210 February 28, 1989
TEOFILO ARICA, DANILO BERNABE, MELQUIADES DOHINO, ABONDIO
OMERTA, GIL TANGIHAN, SAMUEL LABAJO, NESTOR NORBE, RODOLFO
CONCEPCION, RICARDO RICHA, RODOLFO NENO, ALBERTO BALATRO,
BENJAMIN JUMAMOY, FERMIN DAAROL, JOVENAL ENRIQUEZ, OSCAR
BASAL, RAMON ACENA, JAIME BUGTAY, and 561 OTHERS, HEREIN
REPRESENTED BY KORONADO B. APUZEN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HONORABLE FRANKLIN
DRILON, HONORABLE CONRADO B. MAGLAYA, HONORABLE ROSARIO B.
ENCARNACION, and STANDARD (PHILIPPINES) FRUIT
CORPORATION, respondents.
DECISION
PARAS, J.:
This is a petition for review on certiorari of the decision of the National Labor
Relations Commission dated December 12, 1986 in NLRC Case No. 2327 MC-XI-84
entitled Teofilo Arica et al. vs. Standard (Phil.) Fruits Corporation (STANFILCO)
which affirmed the decision of Labor Arbiter Pedro C. Ramos, NLRC, Special Task
Force, Regional Arbitration Branch No. XI, Davao City dismissing the claim of
petitioners.
This case stemmed from a complaint filed on April 9, 1984 against private
respondent Stanfilco for assembly time, moral damages and attorney’s fees, with
the aforementioned Regional Arbitration Branch No. XI, Davao City.
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
decision dated October 9, 1985 (Annex ‘E’, Rollo, pp. 51-58) in favor of private
respondent STANFILCO, holding that:
Given these facts and circumstances, we cannot but agree with respondent that the
pronouncement in that earlier case, i.e. the thirty-minute assembly time long
practiced cannot be considered waiting time or work time and, therefore, not
compensable, has become the law of the case which can no longer be disturbed
without doing violence to the time- honored principle of res judicata.
WHEREFORE, in view of the foregoing considerations, the instant complaint should
therefore be, as it is hereby, DISMISSED.
SO ORDERED. (Rollo, p. 58)
On December 12, 1986, after considering the appeal memorandum of complainant
and the opposition of respondents, the First Division of public respondent NLRC
composed of Acting Presiding Commissioner Franklin Drilon, Commissioner Conrado
Maglaya, Commissioner Rosario D. Encarnacion as Members, promulgated its
Resolution, upholding the Labor Arbiters’ decision. The Resolution’s dispositive
portion reads:
‘Surely, the customary functions referred to in the above- quoted provision of the
agreement includes the long-standing practice and institutionalized non-
compensable assembly time. This, in effect, estopped complainants from pursuing
this case.
The Commission cannot ignore these hard facts, and we are constrained to uphold
the dismissal and closure of the case.
WHEREFORE, let the appeal be, as it is hereby dismissed, for lack of merit.
SO ORDERED. (Annex “H”, Rollo, pp. 86-89).
On January 15, 1987, petitioners filed a Motion for Reconsideration which was
opposed by private respondent (Annex “I”, Rollo, pp. 90-91; Annex J Rollo, pp. 92-
96).
Public respondent NLRC, on January 30, 1987, issued a resolution denying for lack
of merit petitioners’ motion for reconsideration (Annex “K”, Rollo, p. 97).
Hence this petition for review on certiorari filed on May 7, 1987.
The Court in the resolution of May 4, 1988 gave due course to this petition.
Petitioners assign the following issues:
1) Whether or not the 30-minute activity of the petitioners before the scheduled
working time is compensable under the Labor Code.
2) Whether or not res judicata applies when the facts obtaining in the prior case and
in the case at bar are significantly different from each other in that there is merit in
the case at bar.
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
standards (Rollo, p. 10).
Petitioners contend that the preliminary activities as workers of respondents
STANFILCO in the assembly area is compensable as working time (from 5:30 to 6:00
o’clock in the morning) since these preliminary activities are necessarily and primarily
for private respondent’s benefit.
These preliminary activities of the workers are as follows:
(a) First there is the roll call. This is followed by getting their individual work
assignments from the foreman.
(b) Thereafter, they are individually required to accomplish the Laborer’s Daily
Accomplishment Report during which they are often made to explain about their
reported accomplishment the following day.
(c) Then they go to the stockroom to get the working materials, tools and
equipment.
(d) Lastly, they travel to the field bringing with them their tools, equipment and
materials.
All these activities take 30 minutes to accomplish (Rollo, Petition, p. 11).
Contrary to this contention, respondent avers that the instant complaint is not new,
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
Fruit Corporation, NLRC Case No. 26-LS-XI-76 which was filed way back April 27,
1976 when ALU was the bargaining agent of respondent’s rank and file workers. The
said case involved a claim for “waiting time”, as the complainants purportedly were
required to assemble at a designated area at least 30 minutes prior to the start of
their scheduled working hours “to ascertain the work force available for the day by
means of a roll call, for the purpose of assignment or reassignment of employees to
such areas in the plantation where they are most needed.” (Rollo, pp. 64- 65)
Noteworthy is the decision of the Minister of Labor, on May 12, 1978 in the aforecited
case (Associated Labor Union vs. Standard (Phil.) Fruit Corporation, NLRC Case No.
26-LS-XI-76 where significant findings of facts and conclusions had already been
made on the matter.
The Minister of Labor held:
The thirty (30)-minute assembly time long practiced and institutionalized by mutual
consent of the parties under Article IV, Section 3, of the Collective Bargaining
Agreement cannot be considered as waiting time within the purview of Section 5,
Rule I, Book III of the Rules and Regulations Implementing the Labor Code. …
Furthermore, the thirty (30)-minute assembly is a deeply- rooted, routinary practice
of the employees, and the proceedings attendant thereto are not infected with
complexities as to deprive the workers the time to attend to other personal pursuits.
They are not new employees as to require the company to deliver long briefings
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
necessarily require the personal presence, they can go back to their houses to attend
to some chores. In short, they are not subject to the absolute control of the company
during this period, otherwise, their failure to report in the assembly time would
justify the company to impose disciplinary measures. The CBA does not contain any
provision to this effect; the record is also bare of any proof on this point. This,
therefore, demonstrates the indubitable fact that the thirty (30)-minute assembly
time was not primarily intended for the interests of the employer, but ultimately for
the employees to indicate their availability or non-availability for work during every
working day. (Annex “E”, Rollo, p. 57).
Accordingly, the issues are reduced to the sole question as to whether public
respondent National Labor Relations Commission committed a grave abuse of
discretion in its resolution of December 17, 1986.
The facts on which this decision was predicated continue to be the facts of the case
in this questioned resolution of the National Labor Relations Commission.
It is clear that herein petitioners are merely reiterating the very same claim which
they filed through the ALU and which records show had already long been
considered terminated and closed by this Court in G.R. No. L-48510. Therefore, the
NLRC cannot be faulted for ruling that petitioners’ claim is already barred by res
judicata.
Be that as it may, petitioners’ claim that there was a change in the factual scenario
which are “substantial changes in the facts” makes respondent firm now liable for
the same claim they earlier filed against respondent which was dismissed. It is thus
axiomatic that the non-compensability of the claim having been earlier established,
constitute the controlling legal rule or decision between the parties and remains to
be the law of the case making this petition without merit.
As aptly observed by the Solicitor General that this petition is “clearly violative of the
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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6. REMEDIAL LAW; APPEALS; FINDINGS OF FACT OF NATIONAL LABOR RELATIONS
COMMISSION ARE BINDING WHEN FULLY SUBSTANTIATED BY EVIDENCE. — As
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
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
respondent Commission are binding on this Court there being no indication of their
being unsubstantiated by evidence.
DECISION
GUTIERREZ, JR., J.:
This is a petition for review on certiorari pursuant to Rule 65 of the Rules of Court to
annul and to set aside the decision of respondent National Labor Relations Commission
(NLRC) dated October 25, 1982, dismissing the appeal of petitioner in NLRC Case No.
RBI-47-82, entitled "University of Pangasinan Faculty Union, complainant, versus
University of Pangasinan, Respondent." chanrobles law library : red
Petitioner is a labor union composed of faculty members of the respondent University
of Pangasinan, an educational institution duly organized and existing by virtue of the
laws of the Philippines.
On December 18, 1981, the petitioner, through its President, Miss Consuelo Abad, filed
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
Emergency Cost of Living Allowances (ECOLA) for November 7 to December 5, 1981,
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
loads.
The petitioner’s members are full-time professors, instructors, and teachers of
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.
In November and December, 1981, the petitioner’s members were fully paid their
regular monthly salaries. However, from November 7 to December 5, during the
semestral break, they were not paid their ECOLA. The private respondent claims that
the teachers are not entitled thereto because the semestral break is not an integral
part of the school year and there being no actual services rendered by the teachers
during said period, the principle of "No work, no pay" applies.
During the same school year (1981-1982), the private respondent was authorized by
the Ministry of Education and Culture to collect, as it did collect, from its students a
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,
compelling the petitioner to include said demand in the complaint filed in the case at
bar. While the complaint was pending in the arbitration branch, the private respondent
granted an across-the-board salary increase of 5.86%. Nonetheless, the petitioner is
still pursuing full distribution of the 60% of the incremental proceeds as mandated by
the Presidential Decree No. 451.
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
on September 21, 1981, but they were unable to teach as classes in all levels
throughout the country were suspended, although said days was proclaimed by the
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
respondent claims otherwise.
The issue to be resolved in the case at bar are the following:
I
"WHETHER OR NOT PETITIONER’S MEMBERS ARE ENTITLED TO ECOLA DURING THE
SEMESTRAL BREAK FROM NOVEMBER 7 TO DECEMBER 5, 1981 OF THE 1981-82
SCHOOL YEAR.
II
"WHETHER OR NOT 60% OF THE INCREMENTAL PROCEEDS OF INCREASED TUITION
FEES SHALL BE DEVOTED EXCLUSIVELY TO SALARY INCREASE,
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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
teachers in all levels of education, provide salary and or wage increases and other
benefits to their teaching, administrative, and other personnel to keep up with the
increasing cost of living." (Emphasis supplied)
Respondent overlooks 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 itself which define or limit the purposes of the legislation or
proscribe certain acts. True, the whereas clauses of PD 451 provide for salary and or
wage increase and other benefits, however, the same do not delineate the source of
such funds and it is only in Section 3 which provides for the limitations wherein the
intention of the framers of the law is clearly outlined. The law is clear. The sixty (60%)
percent incremental proceeds from the tuition increase are to be devoted entirely to
wage or salary increases which means increases in basic salary. The law cannot be
construed to include allowances which are benefits over and above the basic salaries
of the employees. To charge such benefits to the 60% incremental proceeds would be
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
difficult economic times.
This Court is not guilty of usurpation of legislative functions as claimed by the
respondents. We expressed the opinion in the University of the East case that benefits
mandated by law and collective bargaining may be charged to the 12% return on
investments within the 40% incremental proceeds of tuition increase. As admitted by
respondent, we merely made this statement as a suggestion in answer to the
respondent’s query as to where then, under the law, can such benefits be charged. We
were merely interpreting the meaning of the law within the confines of its provisions.
The law provides that 60% should go to wage increases and 40% to institutional
developments, student assistance, extension services, and return on investments
(ROI). Under the law, the last item ROI has flexibility sufficient to accommodate other
purposes of the law and the needs of the university. ROI is not set aside for any one
purpose of the university such as profits or returns on investments. The amount may
be used to comply with other duties and obligations imposed by law which the
university exercising managerial prerogatives finds cannot under present
circumstances, be funded by other revenue sources. It may be applied to any other
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
up for the university’s miscellaneous expenses and, precisely, for this reason, it was
not so delimited. Besides, ROI is a return or profit over and above the operating
expenditures of the university, and still, over and above the profits it may have had
prior to the tuition increase. The earning capacities of private educational institutions
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
university resources together with the incremental proceeds of tuition increases.
Cognizance should be taken of the fact that the private respondent had, before PD
451, managed to grant all allowances required by law. It cannot now claim that it could
not afford the same, considering that additional funds are even granted them by the
law in question. We find no compelling reason, therefore, to deviate from our previous
ruling in the University of the East case even as we take the second hard look at the
decision requested by the private Respondent. This case was decided in 1982 when
PDs 1614, 1634, 1678, and 1713 which are also the various Presidential Decrees on
ECOLA were already in force. PD 451 was interpreted in the light of these subsequent
legislations which bear upon but do not modify nor amend, the same. We need not go
beyond the ruling in the University of the East case.
Coming now to the third issue, the respondents are of the considered view that as
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
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
respondent Commission are binding on this Court there being no indication of their
being unsubstantiated by evidence. We find no grave abuse in the findings of
respondent NLRC on this matter to warrant reversal. Assuming arguendo, however,
that the petitioners have not been paid for these extra loads, they are not entitled to
payment following the principles of "No work, no pay." This time, the rule applies.
Involved herein is a matter different from the payment of ECOLA under the first issue.
We are now concerned with extra, not regular loads for which the petitioners are paid
regular salaries every month regardless of the number of working days or hours in
such a month. Extra loads should be paid for only when actually performed by the
employee. Compensation is based, therefore, on actual work done and on the number
of hours and days spent over and beyond their regular hours of duty. Since there was
no work on September 21, 1981, it would now be unfair to grant petitioner’s demand
for extra wages on that day.
Finally, disposing of the respondent’s charge of petitioner’s lack of legal capacity to
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
the decision of the NLRC, petitioner was authorized to discontinue the practice of
having a 30-minute paid lunch break should it decide to do so; and, (d) in ignoring
petitioner's inherent management prerogative of determining and fixing the work
schedule of its employees which is expressly recognized in the collective bargaining
agreement between petitioner and private respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and
motion recommending that the petitioner be granted, alleging that the 14 August
1992 memorandum which contained the new work schedule was not discriminatory
of the union members nor did it constitute unfair labor practice on the part of
petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the
employees rests principally on their employer. In the instant case petitioner, as the
employer, cites as reason for the adjustment the efficient conduct of its business
operations and its improved production.6 It rationalizes that while the old work
schedule included a 30-minute paid lunch break, the employees could be called upon
to do jobs during that period as they were "on call." Even if denominated as lunch
break, this period could very well be considered as working time because the factory
employees were required to work if necessary and were paid accordingly for
working. With the new work schedule, the employees are now given a one-hour
lunch break without any interruption from their employer. For a full one-hour
undisturbed lunch break, the employees can freely and effectively use this hour not
only for eating but also for their rest and comfort which are conducive to more
efficiency and better performance in their work. Since the employees are no longer
required to work during this one-hour lunch break, there is no more need for them
to be compensated for this period. We agree with the Labor Arbiter that the new
work schedule fully complies with the daily work period of eight (8) hours without
violating the Labor Code.7 Besides, the new schedule applies to all employees in the
factory similarly situated whether they are union members or not.8
Consequently, it was grave abuse of discretion for public respondent to equate the
earlier Sime Darby case9 with the facts obtaining in this case. That ruling in the
former case is not applicable here. The issue in that case involved the matter of
granting lunch breaks to certain employees while depriving the other employees of
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
management deems necessary to increase production, constitutes unfair labor
practice. As shown by the records, the change effected by management with regard
to working time is made to apply to all factory employees engaged in the same line
of work whether or not they are members of private respondent union. Hence, it
cannot be said that the new scheme adopted by management prejudices the right
of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may
devise means to attain that goal. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives.10 Thus, management is free to regulate, according to
its own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of
workers.11 Further, management retains the prerogative, whenever exigencies of
the service so require, to change the working hours of its employees. So long as
such prerogative is exercised in good faith for the advancement of the employer's
interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this Court will uphold such
exercise.12
While the Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every dispute will be
automatically decided in favor of labor. Management also has rights which, as such,
are entitled to respect and enforcement in the interest of simple fair play. Although
this Court has inclined more often than not toward the worker and has upheld his
cause in his conflicts with the employer, such favoritism has not blinded the Court
to the rule that justice is in every case for the deserving, to be dispensed in the light
of the established facts and the applicable law and doctrine.13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor
Relations Commission dated 29 November 1994 is SET ASIDE and the decision of
the Labor Arbiter dated 26 November 1993 dismissing the complaint against
petitioner for unfair labor practice is AFFIRMED.
SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16275 February 23, 1961
PAN AMERICAN WORLD AIRWAYS SYSTEM (PHILIPPINES), petitioner,
vs.
PAN AMERICAN EMPLOYEES ASSOCIATION, respondent.
REYES, J.B.L., J.:
Appeal by certiorari from the decision of the Court of Industrial Relations in Case
No. 1055-V dated October 10, 1959, and its resolution en banc denying the motion
for reconsideration filed by the petitioner herein.
The dispositive portion of the appealed decision reads: .
WHEREFORE, the Court orders the Chief of the Examining Division or his
representative to compute the overtime compensation due the aforesaid fourteen
(14) aircraft mechanic and the two employees from the Communication Department
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
by the Court; and the company shall show to the Court Examiner such time sheets
an other documents that may be necessary in the aforesaid computation; and two
(2) representatives for the company and two (2) representatives for the union shall
be chosen to help the Court Examiner in said computation.
The company is also ordered to permanently adopt the straight 8-hour shift inclusive
of meal period which is mutually beneficial to the parties.
SO ORDERED.
In this appeal, petitioner advances five proposition which, briefly, are as follows: (1)
the Industrial Court has no jurisdiction to order the payment of overtime
compensation, it being a mere monetary claim cognizable by regular courts; (2) the
finding that the one-hour meal period should be considered overtime work
(deducting 15 minutes as time allotted for eating) is not supported by substantial
evidence; (3) the court below had no authority to delegate its judicial functions by
ordering the Chief of the Examining Division or his representative to compute the
overtime pay; (4) the finding that there was no agreement to withdraw Case No.
1055-V in consideration of the wage increases in the Collective Bargaining Contract
(Exh. "A") is not supported by substantial evidence; and (5) the court below had no
authority to order the company to adopt a straight 8-hour shift inclusive of meal
period.
On the issue of jurisdiction over claims for overtime pay, we have since definitely
ruled in a recent decisions that the Industrial Court may properly take cognizance of
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
reinstatement; otherwise, such claims should be brought before the regular courts
(NASSCO v. CIR, et al., L-13888, April 29, 1960; FRISCO v. CIR, et al., L-13806, May
23, 1960; Board of Liquidators, et al. vs. CIR, et al., L-15485, May 23, 1960; Sta.
Cecilia, Sawmills Co. vs. CIR, L-14254 & L-14255, May 27, 1960; Ajax International
Corp. v. Seguritan, L-16038, October 25, 1960; Sampaguita Pictures, Inc., et al. vs.
CIR, L-16404, October 25, 1960). Since, in the instant case there is no question that
the employees claiming overtime compensation were still in the service of the
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
complainants were discharged or otherwise terminated their relationship with the
company for any reason, all of said complainants could still be with the company up
to the present.
Petitioner herein claims that the one-hour meal period should not be considered as
overtime work (after deducting 15 minutes), because the evidence showed that
complainants could rest completely, and were not in any manner under the control
of the company during that period. The court below found, on the contrary, that
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
reprimanded by the leadman; that as in fact it happened on many occasions, the
mechanics had been called from their meals or told to hurry Employees Association
up eating to perform work during this period. Far from being unsupported by
substantial evidence, the record clearly confirms the above factual findings of the
Industrial Court.
Similarly, this Court is satisfied with the finding that there was no agreement to
withdraw Case No. 1055-V in consideration of the wage increases obtained by the,
union and set forth in the Collective Bargaining Agreement Exhibit "A". As reasoned
out by the court below, such alleged agreement would have been incorporated in
the contract if it existed. The fact that the union filed a motion to dismiss without
prejudice, after the Collective Bargaining Contract had been signed, did not
necessarily mean that it had agreed to withdraw the case in consideration of the
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
NATIONAL DEVELOPMENT COMPANY, petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS and NATIONAL TEXTILE WORKERS
UNION, respondents.
REGALA, J.:
This is a case for review from the Court of Industrial Relations. The pertinent facts
are the following:
At the National Development Co., a government-owned and controlled corporation,
there were four shifts of work. One shift was from 8 a.m. to 4 p.m., while the three
other shifts were from 6 a.m. to 2 p.m; then from 2 p.m. to 10 p.m. and, finally,
from 10 p.m. to 6 a.m. In each shift, there was a one-hour mealtime period, to wit:
From (1) 11 a.m. to 12 noon for those working between 6 a.m. and 2 p.m. and from
(2) 7 p.m. to 8 p.m. for those working between 2 p.m. and 10 p.m.
The records disclose that although there was a one-hour mealtime, petitioner
nevertheless credited the workers with eight hours of work for each shift and paid
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
crediting them with eight hours of overtime work, has been paying them for six
hours only, petitioner that the two hours corresponding to the mealtime periods
should not be included in computing compensation. On the other hand, respondent
National Textile Workers Union whose members are employed at the NDC,
maintained the opposite view and asked the Court of Industrial Relations to order
the payment of additional overtime pay corresponding to the mealtime periods.
After hearing, Judge Arsenio I. Martinez of the CIR issued an order dated March 19,
1959, holding that mealtime should be counted in the determination of overtime
work and accordingly ordered petitioner to pay P101,407.96 by way of overtime
compensation. Petitioner filed a motion for reconsideration but the same was
dismissed by the CIR en banc on the ground that petitioner failed to furnish the
union a copy of its motion.
Thereafter, petitioner appealed to this Court, contending, first, that the CIR has no
jurisdiction over claims for overtime compensation and, secondary that the CIR did
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
not leave their places of work and rest completely during those hours.
In support of its contention that the CIR lost its jurisdiction over claims for overtime
pay upon the enactment of the Industrial Peace Act (Republic Act No. 875),
petitioner cites a number of decisions of this Court. On May 23, 1960, however, We
ruled in Price Stabilization Corp. v. Court of Industrial Relations, et al., G.R. No. L-
13206, that
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
existing or is sought to be reestablished because of its wrongful severance, (as
where the employee seeks reinstatement) the Court of Industrial Relations has
jurisdiction over all claims arising out of, or in connection with the employment, such
as those related to the Minimum Wage Law and the Eight-Hour Labor Law. After the
termination of their relationship and no reinstatement is sought, such claims become
mere money claims, and come within the jurisdiction of the regular courts,
We are aware that in 2 cases, some statements implying a different view have been
made, but we now hold and declare the principle set forth in the next preceding
paragraph as the one governing all cases of this nature.
This has been the constant doctrine of this Court since May 23, 1960.1
A more recent definition of the jurisdiction of the CIR is found in Campos, et al. v.
Manila Railroad Co., et al., G.R. No. L-17905, May 25, 1962, in which We held that,
for such jurisdiction to come into play, the following requisites must be complied
with: (a) there must exist between the parties an employer-employee relationship
or the claimant must seek his reinstatement; and (b) the controversy must relate to
a case certified by the President to the CIR as one involving national interest, or
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
that comes under the jurisdiction of the regular courts. Here, petitioner does not
deny the existence of an employer-employee relationship between it and the
members of the union. Neither is there any question that the claim is based on the
Eight-Hour Labor Law (Com. Act No. 444, as amended). We therefore rule in favor
of the jurisdiction of the CIR over the present claim.
The other issue raised in the appeal is whether or not, on the basis of the evidence,
the mealtime breaks should be considered working time under the following
provision of the law;
The legal working day for any person employed by another shall be of not more
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
resting and during which he may leave the spot or place of work though not the
premises2 of his employer, is not counted as working time only where the work is
broken or is not continuous.
The determination as to whether work is continuous or not is mainly one of fact
which We shall not review as long as the same is supported by evidence. (Sec. 15,
Com. Act No. 103, as amended, Philippine Newspaper Guild v. Evening News, Inc.,
86 Phil. 303).
That is why We brushed aside petitioner's contention in one case that workers who
worked under a 6 a.m. to 6 p.m. schedule had enough "free time" and therefore
should not be credited with four hours of overtime and held that the finding of the
CIR "that claimants herein rendered services to the Company from 6:00 a.m. to 6:00
p.m. including Sundays and holidays, . . . implies either that they were not allowed
to leave the spot of their working place, or that they could not rest completely"
(Luzon Stevedoring Co., Inc. v. Luzon Marine Department Union, et al., G.R. No. L-
9265, April 29, 1957).
Indeed, it has been said that no general rule can be laid down is to what constitutes
compensable work, rather the question is one of fact depending upon particular
circumstances, to be determined by the controverted in cases. (31 Am. Jurisdiction
Sec. 626 pp. 878.)
In this case, the CIR's finding that work in the petitioner company was continuous
and did not permit employees and laborers to rest completely is not without basis
in evidence and following our earlier rulings, shall not disturb the same. Thus, the
CIR found:
While it may be correct to say that it is well-high impossible for an employee to work
while he is eating, yet under Section 1 of Com. Act No. 444 such a time for eating
can be segregated or deducted from his work, if the same is continuous and the
employee can leave his working place rest completely. The time cards show that the
work was continuous and without interruption. There is also the evidence adduced
by the petitioner that the pertinent employees can freely leave their working place
nor rest completely. There is furthermore the aspect that during the period covered
the computation the work was on a 24-hour basis and previously stated divided into
shifts.
From these facts, the CIR correctly concluded that work in petitioner company was
continuous and therefore the mealtime breaks should be counted as working time
for purposes of overtime compensation.
Petitioner gives an eight-hour credit to its employees who work a single shift say
from 6 a.m. to 2 p.m. Why cannot it credit them sixteen hours should they work in
two shifts?
There is another reason why this appeal should dismissed and that is that there is
no decision by the CIR en bancfrom which petitioner can appeal to this Court. As
already indicated above, the records show that petitioner's motion for
reconsideration of the order of March 19, 1959 was dismissed by the CIR en
banc because of petitioner's failure to serve a copy of the same on the union.
Section 15 of the rules of the CIR, in relation to Section 1 of Commonwealth Act No.
103, states:
The movant shall file the motion (for reconsideration), in six copies within five (5)
days from the date on which he receives notice of the order or decision, object of
the motion for reconsideration, the same to be verified under oath with respect to
the correctness of the allegations of fact, and serving a copy thereof personally or
by registered mail, on the adverse party. The latter may file an answer, in six (6)
copies, duly verified under oath. (Emphasis ours.)
In one case (Bien, et al. v. Castillo, etc., et al., G.R. No. L-7428, May 24, 1955), We
sustained the dismissal of a motion for reconsideration filed outside of the period
provided in the rules of the CIR. A motion for reconsideration, a copy of which has
not been served on the adverse party as required by the rules, stands on the same
footing. For "in the very nature of things, a motion for reconsideration against a
ruling or decision by one Judge is in effect an appeal to the Court of Industrial
Relations, en banc," the purpose being "to substitute the decision or order of a
collegiate court for the ruling or decision of any judge." The provision in
Commonwealth Act No. 103 authorizing the presentation of a motion for
reconsideration of a decision or order of the judge to the CIR, en banc and not direct
appeal therefore to this Court, is also in accord with the principal of exhaustion of
administrative remedies before resort can be made to this Court. (Broce, et al., v.
The Court of Industrial Relations, et al., G.R. No. L-12367, October 29, 1959).
Petitioner's motion for reconsideration having been dismissed for its failure to serve
a copy of the same on the union, there is no decision of the CIR en banc that
petitioner can bring to this Court for review.
WHEREFORE, the order of March 19, 1959 and the resolution of April 27, 1959 are
hereby affirmed and the appeal is dismissed, without pronouncement as to costs.
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G.R. No. L-30452 September 30, 1982
MERCURY DRUG CO., INC., petitioner,
vs.
NARDO DAYAO, ET AL., respondents,
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of the decision of the Court of Industrial
Relations dated March 30, 1968 in Case No. 1926-V and the Resolution of the Court
en banc dated July 6, 1968 denying two separate motions for reconsideration filed
by petitioners and respondents.
The factual background of Case No. 1926-V is summarized by the respondent Court
of Industrial Relations as follows:
This is a verified petition dated March 17, 1964 which was subsequently amended
on July 31, 1964 filed by Nardo Dayao and 70 others against Mercury Drug Co., Inc.,
and/or Mariano Que, President & General Manager, and Mercury Drug Co., Inc.,
Employees Association praying, with respect to respondent corporation and its
president and general manager: 1) payment of their unpaid back wages for work
done on Sundays and legal holidays plus 25c/c additional compensation from date
of their employment up to June 30, 1962; 2) payment of extra compensation on
work done at night; 3) reinstatement of Januario Referente and Oscar Echalar to
their former positions with back salaries; and, as against the respondent union, for
its disestablishment and the refund of all monies it had collected from petitioners.
In separate motions, respondent management and respondent union move to
dismiss, the first on the ground that:
I. The petition states no cause of action.
II. This Court has no jurisdiction over the subject of the claims of petitioners Januario
Referente and Oscar Echalar.
III. There is another action pending between the same parties, namely, Mercury
Drug Co., Inc., and/or Mariano Que and Nardo Dayao.
while on the other hand, the second alleges that this Court has no jurisdiction over
the acts complained of against the respondent union.
For reasons stated in the Order dated March 24, 1965, two Court resolved the
motions to dismiss, as follows:
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.
3. The third ground was denied, holding that there still exists the employer-
employee relationship between Nardo Dayao and the management.
4. With respect to the fourth ground, the Court held that on the basis of section 7-
A of C.A. No. 444, as amended by R.A. No. 1993, 'it can be safely said that,
counting backward the three (3) year prescriptive period from the date of the filing
of the instant petition - March 20, 1964 - all-of petitioners' claims have not yet
prescribed.'
5. In so far as respondent union's motion is concerned, the Court held that
'petitioners' cause of action against the respondent Association should be dismissed
without prejudice to the refiling of the same as an unfair labor practice case.'
Only the respondent management moved to reconsider the Order of March 24, 1965
but the same was denied by the Court en banc in a resolution dated August 26,
1965. Respondent submitted an answer to the amended petition which was
subsequently amended on January 6, 1966, containing some admissions and some
denials of the material averments of the amended petition. By way of affirmative
and special defenses,, respondents alleged that petitioners have no cause of action
against Mariano Que because their employer respondent Mercury Drug Company,
Inc., an existing corporation which has a separate and distinct personality from its
incorporators stockholders and/or officer, that the company being a service
enterprise is excluded from the coverage of the Eight Hour Labor Law, as amended;
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
between the respondent company and the petitioners, and of fixing night differential
wages; that the petitioners were fully paid for services rendered under the terms
and conditions of the individual contracts of employment; that the petition having
been verified by only three of the petitioners without showing that the others
authorized the inclusion of their names as petitioners does not confer jurisdiction to
this Court; that there is no employer-employee relationship between management
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
prescribed." (Annex "P", pp. 110-112, rollo).
After hearing on the merits, the respondent court rendered its decision. The
dispositive portion of the March 30, 1968 decision reads:
IN VIEW OF THE FOREGOING, the Court hereby resolves that:
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1. The claim of the petitioners for payment of back wages correspoding to the first
four hours work rendered on every other Sunday and first four hours on legal
holidays should be denied for lack of merit.
2. Respondent Mercury Drug Company, Inc.. is hereby ordered to pay the sixty- nine
(69) petitioners:
(a) An additional sum equivalent to 25% of their respective basic or regular salaries
for services rendered on Sundays and legal holidays during the period from March
20. 1961 up to June 30, 1962; and
(b) Another additional sum or premium equivalent to 25% of their respective basic
or regular salaries for nighttime services rendered from March 20, 1961 up to June
30, 1962.
3. Petitioners' petition to convert them to monthly employees should be, as it is
hereby, denied for lack of merit.
4. Respondent Mariano Que, being an officer and acted only as an agent in behalf
of the respondent corporation, should be absolved from the money claims of herein
petitioners whose employer, according to the pleadings and evidence, is the Mercury
Drug Company,, Inc.
To expedite the computation of the money award, the Chief Court Examiner or his
authorized representative is hereby directed to proceed to the office of the
respondent corporation at Bambang Street, Sta. Cruz, Manila, the latter to make
available to said employee its records, like time records, payrolls and other pertinent
papers, and compute the money claims awarded in this decision and, upon the
completion thereof, to submit his report as soon as possible for further disposition
of the Court.
Not satisfied with the decision, the respondents filed a motion for its reconsideration.
The motion for reconsideration, was however, denied by the Court en banc in its
Resolution dated July 6, 1968.
Petitioner Mercury Drug Company, Inc., assigned the following errors in this petition:
I
RESPONDENT CIR ERRED IN DECLARING THE CONTRACTS OF EMPLOYMENT,
EXHIBITS "A" AND "B", NULL AND VOID AS BEING CONTRARY TO PUBLIC POLICY
AND IN SUSTAINING, ACCORDINGLY, PRIVATE RESPONDENTS' CLAIMS FOR 25%
SUNDAY AND LEGAL HOLIDAY PREMIUMS BECAUSE SUCH DECLARATION AND
AWARD ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, THUS INFRINGING
UPON THE CARDINAL RIGHTS OF THE PETITIONER; AND ALSO BECAUSE THE
VALIDITY OF SAID t CONTRACTS OF EMPLOYMENT HAS NOT BEEN RAISED.
II
RESPONDENT CIR ERRED IN SUSTAINING PRIVATE RESPONDENTS' CLAIMS FOR
NIGHTTIME WORK PREMIUMS NOT ONLY BECAUSE OF THE DECLARED POLICY ON
COLLECTIVE BARGAINING FREEDOM EX. PRESSED IN REPUBLIC ACT 875 AND THE
EXPRESS PROHIBITION IN SECTION 7 OF SAID STATUTE, BUT ALSO BECAUSE OF
THE WAIVER OF SAID CLAIMS AND THE TOTAL ABSENCE OF EVIDENCE THEREON.
III
RESPONDENT CIR ERRED IN MAKING AWARDS IN FAVOR OF THE PRIVATE
RESPONDENTS WHO NEITHER GAVE EVIDENCE NOR EVEN APPEARED TO SHOW
THEIR INTEREST.
Three issues are discussed by the petitioner in its first assignment of error. The first
issue refers to its allegation that the respondent Court erred in declaring the
contracts of employment null and void and contrary to law. This allegation is
premised upon the following finding of the respondent court:
But the Court finds merit in the claim for the payment of additional compensation
for work done on Sundays and holidays. While an employer may compel his
employees to perform service on such days, the law nevertheless imposes upon him
the obligation to pay his employees at least 25% additional of their basic or regular
salaries.
No person, firm or corporation, business establishment or place of center of labor
shall compel an employee or laborer to work during Sundays and legal holidays
unless he is paid an additional sum of at least twenty-five per centum of his regular
remuneration: PROVIDED, HOWEVER, That this prohibition shall not apply to public
utilities performing some public service such as supplying gas, electricity, power,
water, or providing means of transportation or communication. (Section 4, C. A. No.
444) (Emphasis supplied)
Although a service enterprise, respondent company's employees are within the
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
provisions. (Section 2, Ibid.)
The Court is not impressed by the argument that under the contracts of employment
the petitioners are not entitled to such claim for the reason that the same are
contrary to law. Payment of extra or additional pay for services rendered during
Sundays and legal holidays is mandated by law. Even assuming that the petitioners
had agreed to work on Sundays and legal holidays without any further consideration
than their monthly salaries, they are not barred nevertheless from claiming what is
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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
30, 1962 is further corroborated by Exhibits 5, 6, 8, 9 and 9-A and the testimony of
Mr. Jacinto Concepcion thereon. (Brief for the Petitioner, pp. 24, 27).
The aforesaid computations were not given credence by the respondent court. In
fact the same computations were not even mentioned in the court's decision which
shows that the court found such computations incredible. The computations,
supposedly patterned after the WAS Interpretative Bulletin No. 2 of the Department
Labor demonstrated in Exhibits "6", "7", "8", "9", and "9-A", miserably failed to show
the exact and correct annual salary as stated in the respective contracts of
employment of the respondent employees. The figures arrived at in each case did
not tally with the annual salaries on to the employees' contracts of employment, the
difference varying from P1.20 to as much as P14.40 always against the interest of
the employees. The petitioner's defense consists of mathematical computations
made after the filing of the case in order to explain a clear attempt to make its
employees work without the extra compensation provided by law on Sundays and
legal holidays.
In not giving weight to the evidence of the petitioner company, the respondent court
sustained the private respondents' evidence to the effect that their 25% additional
compensation for work done on Sundays and Legal Holidays were not included in
their respective monthly salaries. The private respondents presented evidence
through the testimonies of Nardo Dayao, Ernesto Talampas, and Josias Federico
who are themselves among the employees who filed the case for unfair labor
practice in the respondent court and are private respondents herein. The petitioner-
company's contention that the respondent court's conclusion on the issue of the
25% additional compensation for work done on Sundays and legal holidays during
the first four hours that the private respondents had to work under their respective
contracts of employment was not supported by substantial evidence is, therefore,
unfounded. Much less do We find any grave abuse of discretion on the part of the
respondent court in its interpretation of the employment contract's provision on
salaries. In view of the controlling doctrine that a grave abuse of discretion must be
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
Industrial Relations, 27 SCRA 490).
The last issue raised in the first assignment of error refers to a procedural matter.
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
respondent court pursuant to the Rules of Court should have refrained from ruling
that such contracts of employment were null and void. In this connection We restate
our finding that the respondent court did not declare the contracts of employment
null and void in their entirety. Only the objectionable features violative of law were
nullified. But even granting that the Court of Industrial Relations declared the
contracts of employment wholly void, it could do so notwithstanding the procedural
objection. In Sanchez u. Court of Industrial Relations, supra, this Court speaking
through then Justice, now Chief Justice Enrique M. Fernando, stated:
xxx xxx xxx
Moreover, petitioners appear to be oblivious of the statutory mandate that
respondent Court in the hearing, investigation and determination of any question or
controversy and in the exercise of any of its duties or power is to act 'according to
justice and equity and substantial merits of the case, without regard to technicalities
or legal forms and shall not be bound by any technical rules of legal evidence'
informing its mind 'in such manner as it may deem just and equitable.' Again, this
Court has invariably accorded the most hospitable scope to the breadth and
amplitude with which such provision is couched. So it has been from the earliest
case decided in 1939 to a 1967 decision.
Two issues are raised in the second assignment of error by the petitioner-company.
The first hinges on the jurisdiction of the respondent court to award additional
compensation for nighttime work. Petitioner wants Us to re- examine Our rulings on
the question of nighttime work. It contends that the respondent court has no
jurisdiction to award additional compensation for nighttime work because of the
declared policy on freedom of collective bargaining expressed in Republic Act 875
and the express prohibition in Section 7 of the said statute. A re- examination of the
decisions on nighttime pay differential was the focus of attention in Rheem of the
Philippines, Inc. et al., v. Ferrer, et al (19 SCRA 130). The earliest cases cited by the
petitioner-company, Naric v. Naric Workers Union L-12075, - May 29, 1959 and
Philippine Engineers' Syndicate u. Bautista, L-16440, February 29, 196.4, were
discussed lengthily. Thus -
xxx xxx xxx
2. On the claim for night differentials, no extended discussion is necessary. To be
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.
Chief Justice Cesar Bengzon, declared —
Only one issue is raised: whether or not upon the enactment of Republic Act 875,
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
dispute affects an industry which is indispensable to the national interest and is so
certified by the President to the industrial court (Sec. 10, Republic Act 875); (2)
when the controversy refers to minimum wage under the Minimum Wage Law
(Republic Act 602); (3) when it involves hours of employment under the Eight-Hour
Labor Law (Commonwealth Act 444) and (4) when it involves an unfair labor practice
[Sec. 5(a), Republic Act 8751', [Paflu, et al. vs. Tan, et al., 52 Off. Gaz, No. 13,
5836].
Petitioner insists that respondents' case falls in none of these categories because as
held in two previous cases, night work is not overtime but regular work; and that
respondent court's authority to try the case cannot be implied from its general
jurisdiction and broad powers' under Commonwealth Act 103 because Republic Act
875 precisely curbed such powers limiting them to certain specific litigations, beyond
which it is not permitted to act.
We believe petitioner to be in error. Its position collides with our ruling in the Naric
case [National Rice & Corn Corp. (NARIC) vs. NARIC Workers' Union, et al., G.R. No.
L-12075, May 29, 1959] where we held;
While it is true that this Court made the above comment in the aforementioned case,
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
Shell Company made upon its laborers is not merely overtime work but night work
and so there was need to differentiate night work from daytime work. In fact, the
company contended that there was no law that required the payment of additional
compensation for night work unlike an overtime work which is covered by
Commonwealth Act No. 444 (Eight Hour Labor Law). And this Court in that case said
that while there was no law actually requiring payment of additional compensation
for night work, the industrial court has the power to determine the wages that night
workers should receive under Commonwealth Act No. 103, and so it justified the
additional compensation in the Shell case for 'hygienic, medical, moral, cultural and
sociological reasons.
xxx xxx xxx
True, in Paflu, et al. vs. Tan, et al., supra, and in a series of cases thereafter, We
held that the broad powers conferred by Commonwealth Act 103 on the CIR may
have been curtailed by Republic Act 875 which limited them to the four categories
therein expressed in line with the public policy of allowing settlement of industrial
disputes via the collective bargaining process; but We find no cogent reason for
concluding that a suit of this nature for extra compensation for night work falls
outside the domain of the industrial court. Withal, the record does not show that the
employer-employee relation between the 64 respondents and the petitioner had
ceased.
After the passage of Republic Act 875, this Court has not only upheld the industrial
court's assumption of jurisdiction over cases for salary differentials and overtime pay
[Chua Workers Union (NLU) vs. City Automotive Co., et al., G.R. No. L- 11655, April
29, 1959; Prisco vs. CIR, et al., G.R. No. L-13806, May 23, 1960] or for payment of
additional compensation for work rendered on Sundays and holidays and for night
work [Nassco vs. Almin, et al., G.R. No. L9055, November 28, 1958; Detective &
Protective Bureau, Inc. vs. Felipe Guevara, et al., G.R. No. L-8738, May 31, 1957]
but has also supported such court's ruling that work performed at night should be
paid more than work done at daytime, and that if that work is done beyond the
worker's regular hours of duty, he should also be paid additional compensation for
overtime work. [Naric vs. Naric Workers' Union. et al., G. R No. L-12075, May 29,
1959, citing Shell Co. vs. National Labor Union, 81 Phil. 315]. Besides, to hold that
this case for extra compensation now falls beyond the powers of the industrial court
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
labor.' [Luis Recato Dy, et al v-9. CIR, G.R. No. L-17788, May 25,1962]"
The petitioner-company's arguments on the respondent court's alleged lack of
jurisdiction over additional compensation for work done at night by the respondents
is without merit.
The other issue raised in the second assignment of error is premised on the
petitioner-company's contention that the respondent court's ruling on the additional
compensation for nighttime work is not supported by substantial evidence.
This contention is untenable. Pertinent portions of the respondent court's decision
read:
xxx xxx xxx
There is no serious disagreement between the petitioners and respondent
management on the facts recited above. The variance in the evidence is only with
respect to the money claims. Witnesses for petitioners declared they worked on
regular days and on every other Sunday and also during all holidays; that for services
rendered on Sundays and holidays they were not paid for the first four (4) hours
and what they only received was the overtime compensation corresponding to the
number of hours after or in excess of the first four hours; and that such payment is
being indicated in the overtime pay for work done in excess of eight hours on regular
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working days. It is also claimed that their nighttime services could well be seen on
their respective daily time records. .. (Emphasis supplied) (p.116, rollo)
The respondent court's ruling on additional compensation for work done at night is,
therefore, not without evidence. Moreover, the petitioner-company did not deny that
the private respondents rendered nighttime work. In fact, no additional evidence
was necessary to prove that the private respondents were entitled to additional
compensation for whether or not they were entitled to the same is a question of law
which the respondent court answered correctly. The "waiver rule" is not applicable
in the case at bar. Additional compensation for nighttime work is founded on public
policy, hence the same cannot be waived. (Article 6, Civil Code). On this matter, We
believe that the respondent court acted according to justice and equity and the
substantial merits of the case, without regard to technicalities or legal forms and
should be sustained.
The third assignment of error is likewise without merit. The fact that only three of
the private respondents testified in court does not adversely affect the interests of
the other respondents in the case. The ruling in Dimayuga V. Court of Industrial
Relations (G.R. No. L-0213, May 27, 1957) has been abandoned in later rulings of
this Court. In Philippine Land Air-Sea Labor Union (PLASLU) vs. Sy Indong Company
Rice And Corn Mill (11 SCRA 277) We had occasion to re-examine the ruling
in Dimayuga We stated:
The latter reversed the decision of the trial Judge as regards the reinstatement with
backwages of ... upon the theory that this is not a class suit; that, consequently, it
is necessary and imperative that they should personally testify and prove the charges
in the complaint', and that, having failed to do so, the decision of the trial Judge in
their favor is untenable under the rule laid down in Dimayuga vs. Court of Industrial
Relations, G.R. No. L-0213 (May 27,1957).
We do not share the view taken in the resolution appealed from. As the trial Judge
correctly said, in Ms dissent from said resolution,:
xxx xxx xxx
In the case of Sanchez v. Court of Industrial Relations, supra, this Court stated:
To the reproach against the challenged order in the brief of petitioners in view of
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
given concrete expression. Thus: 'The bases of the awards were not only the
respective affidavits of the claimants but the testimonies of 24 witnesses (because
6 were not given credence by the court below) who Identified the said 239 claimants.
The contention of petitions on this point is therefore unfounded Moveover
in Philippine Land-Air-Sea Labor Union (PLASLU) v. Sy Indong company Rice & Corn
Mill, this Court, through the present Chief Justice rejected as untenable the theory
of the Court of Industrial Relations concerning the imperative needs of all the
claimants to testify personality and prove their charges in the complaint. As tersely
put: 'We do not share the view taken in the resolution appealed from.
The petitioner's contention that its employees fully understood what they signed
when they entered into the contracts of employment and that they should be bound
by their voluntary commitments is anachronistic in this time and age.
The Mercury Drug Co., Inc., maintains a chain of drugstores that are open every
day of the week and, for some stores, up to very late at night because of the nature
of the pharmaceutical retail business. The respondents knew that they had to work
Sundays and holidays and at night, not as exceptions to the rule but as part of the
regular course of employment. Presented with contracts setting their compensation
on an annual basis with an express waiver of extra compensation for work on
Sundays and holidays, the workers did not have much choice. The private
respondents were at a disadvantage insofar as the contractual relationship was
concerned. Workers in our country do not have the luxury or freedom of declining
job openings or filing resignations even when some terms and conditions of
employment are not only onerous and inequitous but illegal. It is precisely because
of this situation that the framers of the Constitution embodied the provisions on
social justice (Section 6, Article 11) and protection to labor (Section 9, Article I I) in
the Declaration of Principles And State Policies.
It is pursuant to these constitutional mandates that the courts are ever vigilant to
protect the rights of workers who are placed in contractually disadvantageous
positions and who sign waivers or provisions contrary to law and public policy.
WHEREFORE, the petition is hereby dismissed. The decision and resolution appealed
from are affirmed with costs against the petitioner.
SO ORDERED.
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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
and performed the functions she was doing. She bewailed that thereafter she
continuously received harassment calls and letters. She was also publicly humiliated
and badly treated at the detachment. The agency, through Security Officer Alton
Acab, prohibited her from using the office computer. On May 18, 2001, Jose Dante
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
leave immediately, and not to return to the detachment anymore; otherwise, she
would be physically driven out of the office.
Still not satisfied with what they did, the petitioners allegedly withheld her salary
for May 16-31, 2001. She claimed that the petitioners dismissed her from the service
without just cause and due process.
The petitioners, for their part, denied liability. They alleged that on May 8, 2001,
Dapula informed the agency in writing,[5] through Yan, that she had been receiving
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
Major Divino Menese who is a member of the UP Manila police force, and that as a
matter of policy and out of delicadeza, she does not condone nepotism in her
division.
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,
discussed with her Dapulas letter. Yan informed Menese that upon Dapulas request,
she would be transferred to another assignment which would not involve any
demotion in rank or diminution in her salary and other benefits. Although Menese
said that she would think about the matter, the petitioners were surprised to receive
summons from the labor arbiter regarding the complaint.
The Compulsory Arbitration Rulings
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
wanting in good faith in transferring Menese to another detachment as she would
be suffering a demotion in rank and a diminution in pay. Accordingly, he ordered
the petitioners to immediately reinstate Menese and, solidarily, to pay her full
backwages of P83,443.75 (latest computation); P66,924.00 in monetary
benefits; P50,000.00 and P20,000.00 in moral and exemplary damages,
respectively; and attorneys fees of P15,036.74.
The petitioners appealed to the National Labor Relations Commission (NLRC).
On September 30, 2003, the NLRC Second Division issued a resolution[8] granting
the appeal and reversing the labor arbiters decision. It ruled that Menese was not
constructively dismissed but was merely transferred to another detachment. It
opined that the transfer was a valid exercise of the petitioners management
prerogative. However, it ruled that despite Meneses refusal to accept the transfer,
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
accept her back to work. It absolved Yan from liability, and deleted the award of
backwages, overtime pay and damages.
On October 28, 2003, Menese filed a partial motion for reconsideration[9] of the
NLRC resolution and later (on June 17, 2005), a motion to recall the entry of
judgment of October 31, 2003. On June 1, 2007, the NLRC rendered a
resolution[10] setting aside the entry of judgment and denying Meneses partial
motion for reconsideration.
The Petition for Certiorari
Menese elevated her case to the CA through a petition for certiorari[11] under Rule
65 of the Rules of Court. In the main, she argued that the agency was in bad faith
when it issued the memoranda dated May 16, 2001,[12] May 22, 2001[13] and May
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
accommodate the entry of Claro, Dapulas protge. She regarded the transfer as a
removal from her position at PGH a constructive dismissal.
The agency, in rebuttal, posited that Menese was not illegally dismissed, but was
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
exercise of its management prerogative. Thus, Menese was guilty of abandoning her
employment when she refused to report for work at her new posting.
The CA Decision
The CA granted the petition in its decision of February 28, 2008.[15] It set aside the
assailed resolutions of the NLRC and reinstated the March 14, 2002 decision of the
labor arbiter.
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
were prompted by Daculas letter, dated May 8, 2001,[17] to Yan, which contained
allegations on Meneses supposed unprofessional conduct and involvement in
nepotism. It further noted that when Yan asked Dapula in writing[18] to provide the
agency with documents/evidence that would support her allegations, she failed to
do so. The CA thus concluded that the reasons for Meneses transfer did not exist or
that no substantial evidence was presented in that regard.
The CA brushed aside the petitioners argument that it was their prerogative to
transfer Menese from the agencys PGH detachment to its head office at Ortigas
Avenue, Mandaluyong City. Relying on applicable jurisprudence, the appellate court
pointed out that while it is the managements prerogative to transfer an employee
from one office to another within the business establishment, it is not without
limitation. It must be exercised in such a way that there is no demotion in rank or
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
that Menese abandoned her employment.
The CA sustained all the other findings of the labor arbiter. On the whole, it ruled
that the NLRC misappreciated the evidence in the case. The petitioners moved for
reconsideration, but the CA denied the motion in its resolution of May 14, 2008.[20]
The Petitioners Case
Aside from the petition itself,[21] the petitioners filed a reply to Meneses
comment[22] and a memorandum[23] where they asked for a reversal of the
assailed CA rulings on the ground that the CA gravely erred in:
(1) Affirming the labor arbiters findings that Menese was constructively
dismissed;
(2) Holding Yan solidarily liable with the agency for damages; and
(3) Sustaining the award of backwages, damages and attorneys fees, as well
as overtime pay.
The petitioners insist that Menese was not illegally dismissed. They argue that it was
Menese who deliberately and unjustifiably refused to work despite several
notices[24] to her after she was validly relieved from her current work assignment
due to a clients request. They maintain that since Menese chose not to return to
work, she must be considered either to have resigned from or to have abandoned
her employment. They further maintain that nothing on record shows any positive
or overt act of the agency in dismissing Menese.
Moreover, the petitioners regard Meneses continued refusal to report to the agencys
head office as an act of gross insubordination constituting a just cause for
termination under Article 282(a) of the Labor Code. They argue that under this law,
an employer may terminate an employment for serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or his
representative in connection with his work.
The petitioners posit that she is not entitled to reinstatement and backwages since
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
not compensable. Neither is Menese entitled to moral and exemplary damages
because the evidence on record does not show any malice or bad faith on their part
to justify the award.
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
arbiters ruling that Yan is solidarily liable with the agency, as Yan was merely acting
in his capacity as the agencys general manager, and that there is no showing that
Yan acted maliciously or in bad faith when he ordered Meneses transfer. They also
point out that Menese did not challenge before the CA the NLRC ruling absolving
Yan from any liability.
The Case for Menese
By way of her comment[25] and memorandum,[26] Menese asks that the appeal be
denied for lack of merit.
She claims that at the arbitration stage, the petitioners readily admitted the fact of
her removal, manifesting in open session their lack of interest to settle the case
amicably as they have a strong evidence to support their defense of her dismissal
for cause. She observed during the hearing that the petitioners were very confident
about their case, because according to them, they had Dapulas letter asking for her
immediate removal.[27]
Menese further claims that the petitioners realized that they did not have the
necessary evidence, so Yan wrote Dapula a letter asking her for proof of the
complaints or grievances of the security guards against Menese.[28] Dapula did not
produce or present the evidence they asked for resulting in their failure to
substantiate their defense of dismissal for cause. Menese contends that the
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.
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
constructively or illegally dismissed. She bewails the NLRCs surprising reversal of the
labor arbiters decision, but feels vindicated when the CA set aside the NLRC ruling.
Menese submits that the CA is correct in nullifying the NLRCs reversal of her illegal
dismissal case because the labor tribunal closed its eyes to the fact that bad faith
attended her transfer. She points out that the petitioners twin directives, vis--vis her
transfer upon which the NLRC based its ruling, were both issued for a selfish and
immoral purpose;[29] the first, dated May 16, 2001,[30] was issued for the purpose
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
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
unceremonious dismissal.
In a different vein, Menese assails the NLRCs exclusion of the one-hour meal break
as overtime work, for it erroneously assumed that her employer had been giving its
employees a 60 minute time-off for regular meals and that she was not performing
work during the period. She argues that this was not the actual practice in the
workplace, contending that she continued working even during the one-hour meal
break.
Finally, Menese maintains that the CA correctly reinstated the labor arbiters award
of attorneys fees and the imposition of solidary liability on Yan and the agency. She
posits that in her quest for justice because of her unceremonious dismissal, she was
constrained to engage the services of a counsel to handle her case.
The Courts Ruling
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.
We note as a starting point that at the time material to the case, Menese ceased to
be the agencys payroll and billing clerk at its PGH detachment. The position was
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
Yans instruction for her to report to the main office; and a third memorandum dated
May 28, 2001,[34] also issued by Yabes informing Menese that it was her second
notice to assume her work detail at the main office. Yabes instructed her to report
for work on May 30, 2001.
Citing Mendoza v. Rural Bank of Lucban,[35] the petitioners argue that the transfer
was undertaken in the exercise of management prerogative in the pursuit of their
legitimate interests. They submit that Menese refused to comply with the valid
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.
On a superficial consideration, the petitioners position looks unassailable as indeed
an employer can regulate, generally without restraint and according to its own
discretion and judgment, every aspect of its business, including work assignments
and transfer of employees, subject only to limitations imposed by law.[36] This
submission, however, glossed over or suppressed a crucial factor in the present labor
controversy. We refer to Dapulas letter to Yan in early May 2001,[37] asking for
Meneses transfer allegedly due to numerous complaints from security guards and
co-workers regarding her unprofessionalism and because of nepotism; Menese is
the wife of a member of the UP Manila police force.
As Menese noted, the petitioners did not submit as annex to the petition Yans letter
to Dapula, and the reason appears to be obvious they were trying to avoid calling
attention to the absence of proof of Meneses alleged unprofessionalism and her
involvement in nepotism. Evidently, the basis for Dapulas request did not exist. We
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
clear intent of the petitioners, we cannot see how Meneses transfer could be
considered a valid exercise of management prerogative. As Menese rightly put it,
her transfer was arbitrarily done, motivated no less by ill will and bad faith.
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
play. Having the right should not be confused with the manner in which that right is
exercised. Thus, it should not be used as a subterfuge by the employer to get rid of
an undesirable worker. Measured against this basic precept, the petitioners
undoubtedly abused their discretion or authority in transferring Menese to the
agencys head office. She had become undesirable because she stood in the way of
Claros entry into the PGH detachment. Menese had to go, thus the need for a pretext
to get rid of her. The request of a client for the transfer became the overriding
command that prevailed over the lack of basis for the transfer.

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

Yans solidary liability
Yan had been aware all the time of the utter lack of a valid reason for Meneses
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
rid of Menese to give way to Claro, Dapulas protge.
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
be solidarily liable with the agency for Meneses monetary awards.
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
following modifications:
1) The deletion of the overtime pay award; and
2) Adjustment of the refund of the cash or surety bond deposit award
from P2,500.00 to P600.00.
Costs against the petitioners.

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
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 101761. March 24, 1993.
NATIONAL SUGAR REFINERIES CORPORATION, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and NBSR SUPERVISORY
UNION, (PACIWU) TUCP, respondents.
Jose Mario C. Bunag for petitioner.
The Solicitor General and the Chief Legal Officer, NLRC, for public
respondent.
Zoilo V. de la Cruz for private respondent.
DECISION
REGALADO, J p:
The main issue presented for resolution in this original petition for certiorari is
whether supervisory employees, as defined in Article 212 (m), Book V of the Labor
Code, should be considered as officers or members of the managerial staff under
Article 82, Book III of the same Code, and hence are not entitled to overtime rest
day and holiday pay.
Petitioner National Sugar Refineries Corporation (NASUREFCO), a corporation which
is fully owned and controlled by the Government, operates three (3) sugar refineries
located at Bukidnon, Iloilo and Batangas. The Batangas refinery was privatized on
April 11, 1992 pursuant to Proclamation No. 50. 1 Private respondent union
represents the former supervisors of the NASUREFCO Batangas Sugar Refinery,
namely, the Technical Assistant to the Refinery Operations Manager, Shift Sugar
Warehouse Supervisor, Senior Financial/Budget Analyst, General Accountant, Cost
Accountant, Sugar Accountant, Junior Financial/Budget Analyst, Shift Boiler
Supervisor,, Shift Operations Chemist, Shift Electrical Supervisor, General Services
Supervisor, Instrumentation Supervisor, Community Development Officer,
Employment and Training Supervisor, Assistant Safety and Security Officer, Head
and Personnel Services, Head Nurse, Property Warehouse Supervisor, Head of
Inventory Control Section, Shift Process Supervisor, Day Maintenance Supervisor
and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE) Program affecting all
employees, from rank-and-file to department heads. The JE Program was designed
to rationalized the duties and functions of all positions, reestablish levels of
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
employees including the members of respondent union were granted salary
adjustments and increases in benefits commensurate to their actual duties and
functions.
We glean from the records that for about ten years prior to the JE Program, the
members of respondent union were treated in the same manner as rank-and file
employees. As such, they used to be paid overtime, rest day and holiday pay
pursuant to the provisions of Articles 87, 93 and 94 of the Labor Code as amended.
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
which are considered managerial staff for purposes of compensation and benefits;
(2) there was an increase in basic pay of the average of 50% of their basic pay prior
to the JE Program, with the union members now enjoying a wide gap (P1,269.00
per month) in basic pay compared to the highest paid rank-and-file employee; (3)
longevity pay was increased on top of alignment adjustments; (4) they were entitled
to increased company COLA of P225.00 per month; (5) there was a grant of P100.00
allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein respondent union, which
was organized pursuant to Republic Act NO. 6715 allowing supervisory employees
to form their own unions, as the bargaining representative of all the supervisory
employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program, specifically on June 20, 1990,
the members of herein respondent union filed a complainant with the executive labor
arbiter for non-payment of overtime, rest day and holiday pay allegedly in violation
of Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido rendered a decision 2
disposing as follows:
"WHEREFORE, premises considered, respondent National Sugar refineries
Corporation is hereby directed to —
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
between the P100.00 special allowance and the overtime pay, rest day pay and
holiday pay that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED."
In finding for the members therein respondent union, the labor ruled that the along
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
complainants cannot be estopped from questioning the validity of the new
compensation package despite the fact that they have been receiving the benefits
therefrom, considering that respondent union was formed only a year after the
implementation of the Job Evaluation Program, hence there was no way for the
individual supervisors to express their collective response thereto prior to the
formation of the union; and the comparative computations presented by the private
respondent union showed that the P100.00 special allowance given NASUREFCO fell
short of what the supervisors ought to receive had the overtime pay rest day pay
and holiday pay not been discontinued, which arrangement, therefore, amounted to
a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its Third Division,
respondent National Labor Relations Commission (NLRC) affirmed the decision of
the labor arbiter on the ground that the members of respondent union are not
managerial employees, as defined under Article 212 (m) of the Labor Code and,
therefore, they are entitled to overtime, rest day and holiday pay. Respondent NLRC
declared that these supervisory employees are merely exercising recommendatory
powers subject to the evaluation, review and final action by their department heads;
their responsibilities do not require the exercise of discretion and independent
judgment; they do not participate in the formulation of management policies nor in
the hiring or firing of employees; and their main function is to carry out the ready
policies and plans of the corporation. 3 Reconsideration of said decision was denied
in a resolution of public respondent dated August 30, 1991. 4
Hence this petition for certiorari, with petitioner NASUREFCO asseverating that
public respondent commission committed a grave abuse of discretion in refusing to
recognized the fact that the members of respondent union are members of the
managerial staff who are not entitled to overtime, rest day and holiday pay; and in
making petitioner assume the "double burden" of giving the benefits due to rank-
and-file employees together with those due to supervisors under the JE Program.
We find creditable merit in the petition and that the extraordinary writ of certiorari
shall accordingly issue.
The primordial issue to be resolved herein is whether the members of respondent
union are entitled to overtime, rest day and holiday pay. Before this can be resolved,
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
managerial staff who are exempt from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are supervisory employees,
as defined employees, as defined under Article 212(m), Book V of the Labor Code
on Labor Relations, which reads:
"(m) 'Managerial employee' is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharged, assign or discipline employees. Supervisory employees are those
who, in the interest of the employer effectively recommend such managerial actions
if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not falling within any of
those above definitions are considered rank-and-file employees of this Book."
Respondent NLRC, in holding that the union members are entitled to overtime, rest
day and holiday pay, and in ruling that the latter are not managerial employees,
adopted the definition stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining whether or not the
members of respondent union are entitled to overtime, rest day and holiday pay,
said employees should be considered as "officers or members of the managerial
staff" as defined under Article 82, Book III of the Labor Code on "Working Conditions
and Rest Periods" and amplified in Section 2, Rule I, Book III of the Rules to
Implement the Labor Code, to wit:
"Art. 82 Coverage. — The provisions of this title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in Appropriate regulations.
"As used herein, 'managerial employees' refer to those whose primary duty consists
of the management of the establishment in which they are employed or of a
department or subdivision thereof, and to other officers or members of the
managerial staff." (Emphasis supplied.)
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xxx xxx xxx
'Sec. 2. Exemption. — The provisions of this rule shall not apply to the following
persons if they qualify for exemption under the condition set forth herein:
xxx xxx xxx
(b) Managerial employees, if they meet all of the following conditions, namely:
(1) Their primary duty consists of the management of the establishment in which
they are employed or of a department or subdivision thereof:
(2) They customarily and regularly direct the work of two or more employees
therein:
(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion
or any other change of status of other employees are given particular weight.
(c) Officers or members of a managerial staff if they perform the following duties
and responsibilities:
(1) The primary duty consists of the performance of work directly related to
management policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment;
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work
along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute under general supervision special assignments and tasks;
and
(4) Who do not devote more 20 percent of their hours worked in a work-week to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and above."
It is the submission of petitioner that while the members of respondent union, as
supervisors, may not be occupying managerial positions, they are clearly officers or
members of the managerial staff because they meet all the conditions prescribed by
law and, hence, they are not entitled to overtime, rest day and supervisory
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
be considered in the light of the meaning of a managerial employee and of the
officers or members of the managerial staff, as contemplated under Article 82 of the
Code and Section 2, Rule I Book III of the implementing rules. In other words, for
purposes of forming and joining unions, certification elections, collective bargaining,
and so forth, the union members are supervisory employees. In terms of working
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
thereto.
While the Constitution is committed to the policy of social justice and the protection
of the working class, it should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also has its own rights which,
as such, are entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for those with less privileges in life, this Court has inclined more
often than not toward the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded us to the rule that justice is in
every case for the deserving, to be dispensed in the light of the established facts
and the applicable law and doctrine. 5
This is one such case where we are inclined to tip the scales of justice in favor of
the 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
whether an employee is within the terms of the statutes, the criterion is the character
of the work performed, rather than the title of the employee's position. 6
Consequently, while generally this Court is not supposed to review the factual
findings of respondent commission, substantial justice and the peculiar
circumstances obtaining herein mandate a deviation from the rule.
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
of their respective department superintendents and that generally they assist the
latter in planning, organizing, staffing, directing, controlling communicating and in
making decisions in attaining the company's set goals and objectives. These
supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. More specifically, their duties and
functions include, among others, the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department activities;
b) organizing and scheduling of work activities of the department, which includes
employee shifting scheduled and manning complement;
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;
e) selecting the appropriate man to handle the job in the department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all times and recommends
disciplinary action on erring subordinates;
3) trains and guides subordinates on how to assume responsibilities and become
more productive;
4) conducts semi-annual performance evaluation of his subordinates and
recommends necessary action for their development/advancement;
5) represents the superintendent or the department when appointed and authorized
by the former;
6) coordinates and communicates with other inter and intra department supervisors
when necessary;
7) recommends disciplinary actions/promotions;
8) recommends measures to improve work methods, equipment performance,
quality of service and working conditions;
9) sees to it that safety rules and regulations and procedure and are implemented
and followed by all NASUREFCO employees, recommends revisions or modifications
to said rules when deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
10) supervises the activities of all personnel under him and goes to it that
instructions to subordinates are properly implemented; and
11) performs other related tasks as may be assigned by his immediate superior.
From the foregoing, it is apparent that the members of respondent union discharge
duties and responsibilities which ineluctably qualify them as officers or members of
the managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules
to Implement the Labor Code, viz.: (1) their primary duty consists of the
performance of work directly related to management policies of their employer; (2)
they customarily and regularly exercise discretion and independent judgment; (3)
they regularly and directly assist the managerial employee whose primary duty
consist of the management of a department of the establishment in which they are
employed (4) they execute, under general supervision, work along specialized or
technical lines requiring special training, experience, or knowledge; (5) they execute,
under general supervision, special assignments and tasks; and (6) they do not
devote more than 20% of their hours worked in a work-week to activities which are
not directly and clearly related to the performance of their work hereinbefore
described.
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
managerial staff and are, therefore, exempt from the coverage of Article 82.
Perforce, they are not entitled to overtime, rest day and holiday.
The distinction made by respondent NLRC on the basis of whether or not the union
members are managerial employees, to determine the latter's entitlement to the
questioned benefits, is misplaced and inappropriate. It is admitted that these union
members are supervisory employees and this is one instance where the
nomenclatures or titles of their jobs conform with the nature of their functions.
Hence, to distinguish them from a managerial employee, as defined either under
Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The
controversy actually involved here seeks a determination of whether or not these
supervisory employees ought to be considered as officers or members of the
managerial staff. The distinction, therefore, should have been made along that line
and its corresponding conceptual criteria.
II. We likewise no not subscribe to the finding of the labor arbiter that the payment
of the questioned benefits to the union members has ripened into a contractual
obligation.
A. Prior to the JE Program, the union members, while being supervisors, received
benefits similar to the rank-and-file employees such as overtime, rest day and
holiday pay, simply because they were treated in the same manner as rank-and-file
employees, and their basic pay was nearly on the same level as those of the latter,
aside from the fact that their specific functions and duties then as supervisors had
not been properly defined and delineated from those of the rank-and-file. Such fact
is apparent from the clarification made by petitioner in its motion for reconsideration
8 filed with respondent commission in NLRC Case No. CA No. I-000058, dated August
16, 1991, wherein, it lucidly explained:
"But, complainants no longer occupy the same positions they held before the JE
Program. Those positions formerly classified as 'supervisory' and found after the JE
Program to be rank-and-file were classified correctly and continue to receive
overtime, holiday and restday pay. As to them, the practice subsists.
"However, those whose duties confirmed them to be supervisory, were re-evaluated,
their duties re-defined and in most cases their organizational positions re-designated
to confirm their superior rank and duties. Thus, after the JE program, complainants
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
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 189404 December 11, 2013
WILGEN LOON, JERRY ARCILLA, ALBERTPEREYE, ARNOLD PEREYE,
EDGARDO OBOSE, ARNEL MALARAS, PATROCINO TOETIN, EVELYN
LEONARDO, ELMER GLOCENDA, RUFO CUNAMAY, ROLANDOSAJOL,
ROLANDO ABUCAYON, JENNIFER NATIVIDAD, MARITESS TORION,
ARMANDO LONZAGA, RIZAL GELLIDO, EVIRDE HAQUE,1 MYRNA VINAS,
RODELITO AYALA, WINELITO OJEL, RENATO RODREGO, NENA ABINA,
EMALYN OLIVEROS, LOUIE ILAGAN, JOEL ENTIG, ARNEL ARANETA,
BENJAMIN COSE, WELITO LOON and WILLIAM ALIPAO, Petitioners,
vs.
POWER MASTER, INC., TRI-C GENERAL SERVICES, and SPOUSES HOMER
and CARINA ALUMISIN,Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,2 filed by petitioners Wilgen Loon,
Jerry Arcilla, Albert Pereye, Arnold Pereye, Edgardo Obose, Arnel Malaras, Patrocino
Toetin, Evelyn Leonardo, Elmer Glocenda, Rufo Cunamay, Rolando Sajol, Rolando
Abucayon, Jennifer Natividad, Maritess Torion, Armando Lonzaga, Rizal Gellido,
Evirde Haque, Myrna Vinas, Rodelito Ayala, Winelito Ojel, Renato Rodrego, Nena
Abina, Emalyn Oliveros, Louie Ilagan, Joel Entig, Arnel Araneta, Benjamin Cose,
Welito Loon, William Alipao (collectively, the petitioners), to challenge the June 5,
2009 decision3 and the August 28, 2009 resolution4 of the Court of Appeals (CA) in
CA-G.R. SP No. 95182.
The Factual Antecedents
Respondents Power Master, Inc. and Tri-C General Services employed and assigned
the petitioners as janitors and leadsmen in various Philippine Long Distance
Telephone Company (PLDT) offices in Metro Manila area. Subsequently, the
petitioners filed a complaint for money claims against Power Master, Inc., Tri-C
General Services and their officers, the spouses Homer and Carina Alumisin
(collectively, the respondents). The petitioners alleged in their complaint that they
were not paid minimum wages, overtime, holiday, premium, service incentive leave,
and thirteenth month pays. They further averred that the respondents made them
sign blank payroll sheets. On June 11, 2001, the petitioners amended their complaint
and included illegal dismissal as their cause of action. They claimed that the
respondents relieved them from service in retaliation for the filing of their original
complaint.
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.
appeared on the respondents’ behalf.5 The respondents’ counsel also appeared in a
preliminary mandatory conference on July 5, 2001.6 However, the respondents
neither filed any position paper nor proffered pieces of evidence in their defense
despite their knowledge of the pendency of the case.
The Labor Arbiter’s Ruling
In a decision7 dated March 15, 2002, Labor Arbiter (LA) Elias H. Salinas partially
ruled in favor of the petitioners. The LA awarded the petitioners salary differential,
service incentive leave, and thirteenth month pays. In awarding these claims, the
LA stated that the burden of proving the payment of these money claims rests with
the employer. The LA also awarded attorney’s fees in favor of the petitioners,
pursuant to Article 111 of the Labor Code.8
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
rendered overtime work and worked on holidays and rest days without
compensation. The LA further concluded that the petitioners cannot be declared to
have been dismissed from employment because they did not show any notice of
termination of employment. They were also not barred from entering the
respondents’ premises.
The Proceedings before the NLRC
Both parties appealed the LA’s ruling with the National Labor Relations Commission.
The petitioners disputed the LA’s denial of their claim for backwages, overtime,
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.
The respondents insisted that they were not personally served with summons and
other processes. They also claimed that they paid the petitioners minimum wages,
service incentive leave and thirteenth month pays. As proofs, they attached
photocopied and computerized copies of payroll sheets to their memorandum on
appeal.9 They further maintained that the petitioners were validly dismissed. They
argued that the petitioners’ repeated defiance to their transfer to different
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workplaces and their violations of the company rules and regulations constituted
serious misconduct and willful disobedience.10
On January 3, 2003, the respondents filed an unverified supplemental appeal. They
attached photocopied and computerized copies of list of employees with automated
teller machine (ATM) cards to the supplemental appeal. This list also showed the
amounts allegedly deposited in the employees’ ATM cards.11 They also attached
documentary evidence showing that the petitioners were dismissed for cause and
had been accorded due process.
On January 22, 2003, the petitioners filed an Urgent Manifestation and
Motion12 where they asked for the deletion of the supplemental appeal from the
records because it allegedly suffered from infirmities. First, the supplemental appeal
was not verified. Second, it was belatedly filed six months from the filing of the
respondents’ notice of appeal with memorandum on appeal. The petitioners pointed
out that they only agreed to the respondents’ filing of a responsive pleading until
December 18, 2002.13 Third¸ the attached documentary evidence on the
supplemental appeal bore the petitioners’ forged signatures.
They reiterated these allegations in an Urgent Motion to Resolve Manifestation and
Motion (To Expunge from the Records Respondents’ Supplemental Appeal, Reply
and/or Rejoinder) dated January 31, 2003.14Subsequently, the petitioners filed
an Urgent Manifestation with Reiterating Motion to Strike-Off the Record
Supplemental Appeal/Reply, Quitclaims and Spurious Documents Attached to
Respondents’ Appeal dated August 7, 2003.15 The petitioners argued in this last
motion that the payrolls should not be given probative value because they were the
respondents’ fabrications. They reiterated that the genuine payrolls bore their
signatures, unlike the respondents’ photocopies of the payrolls. They also
maintained that their signatures in the respondents’ documents (which showed their
receipt of thirteenth month pay) had been forged.
The NLRC Ruling
In a resolution dated November 27, 2003, the NLRC partially ruled in favor of the
respondents.16 The NLRC affirmed the LA’s awards of holiday pay and attorney’s
fees. It also maintained that the LA acquired jurisdiction over the persons of the
respondents through their voluntary appearance.
However, it allowed the respondents to submit pieces of evidence for the first time
on appeal on the ground that they had been deprived of due process. It found that
the respondents did not actually receive the LA’s processes. It also admitted the
respondents’ unverified supplemental appeal on the ground that technicalities may
be disregarded to serve the greater interest of substantial due process. Furthermore,
the Rules of Court do not require the verification of a supplemental pleading.
The NLRC also vacated the LA’s awards of salary differential, thirteenth month and
service incentive leave pays. In so ruling, it gave weight to the pieces of evidence
attached to the memorandum on appeal and the supplemental appeal. It maintained
that the absence of the petitioners’ signatures in the payrolls was not an
indispensable factor for their authenticity. It pointed out that the payment of money
claims was further evidenced by the list of employees with ATM cards. It also found
that the petitioners’ signatures were not forged. It took judicial notice that many
people use at least two or more different signatures.
The NLRC further ruled that the petitioners were lawfully dismissed on grounds of
serious misconduct and willful disobedience. It found that the petitioners failed to
comply with various memoranda directing them to transfer to other workplaces and
to attend training seminars for the intended reorganization and reshuffling.
The NLRC denied the petitioners’ motion for reconsideration in a resolution dated
April 28, 2006.17 Aggrieved, the petitioners filed a petition for certiorari under Rule
65 of the Rules of Court before the CA.18
The CA Ruling
The CA affirmed the NLRC’s ruling. The CA held that the petitioners were afforded
substantive and procedural due process. Accordingly, the petitioners deliberately did
not explain their side. Instead, they continuously resisted their transfer to other
PLDT offices and violated company rules and regulations. It also upheld the NLRC’s
findings on the petitioners’ monetary claims.
The CA denied the petitioners’ motion for reconsideration in a resolution dated
August 28, 2009, prompting the petitioners to file the present petition.19
The Petition
In the petition before this Court, the petitioners argue that the CA committed a
reversible error when it did not find that the NLRC committed grave abuse of
discretion. They reiterate their arguments before the lower tribunals and the CA in
support of this conclusion. They also point out that the respondents posted a bond
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
the NLRC should not have admitted the respondents’ unverified supplemental
appeal.20
The Respondents’ Position
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In their Comments, the respondents stress that the petitioners only raised the issue
of the validity of the appeal bond for the first time on appeal. They also reiterate
their arguments before the NLRC and the CA. They additionally submit that the
petitioners’ arguments have been fully passed upon and found unmeritorious by the
NLRC and the CA.21
The Issues
This case presents to us the following issues:
1) Whether the CA erred when it did not find that the NLRC committed grave abuse
of discretion in giving due course to the respondents’ appeal;
a) Whether the respondents perfected their appeal before the NLRC; and
b) Whether the NLRC properly allowed the respondents’ supplemental appeal
2) Whether the respondents were estopped from submitting pieces of evidence for
the first time on appeal;
3) Whether the petitioners were illegally dismissed and are thus entitled to
backwages;
4) Whether the petitioners are entitled to salary differential, overtime, holiday,
premium, service incentive leave, and thirteenth month pays; and
5) Whether the petitioners are entitled to attorney’s fees.
The Court’s Ruling
The respondents perfected their
appeal with the NLRC because the
revocation of the bonding company's
authority has a prospective
application
Paragraph 2, Article 223 of the Labor Code provides that "[i]n case of a judgment
involving a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the monetary award in
the judgment appealed from."
Contrary to the respondents’ claim, the issue of the appeal bond’s validity may be
raised for the first time on appeal since its proper filing is a jurisdictional
requirement.22 The requirement that the appeal bond should be issued by an
accredited bonding company is mandatory and jurisdictional. The rationale of
requiring an appeal bond is to discourage the employers from using an appeal to
delay or evade the employees' just and lawful claims. It is intended to assure the
workers that they will receive the money judgment in their favor upon the dismissal
of the employer’s appeal.23
In the present case, the respondents filed a surety bond issued by Security Pacific
Assurance Corporation (Security Pacific) on June 28, 2002. At that time, Security
Pacific was still an accredited bonding company. However, the NLRC revoked its
accreditation on February 16, 2003.24 Nonetheless, this subsequent revocation
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
company’s revocation of authority is prospective in application.
However, the respondents should post a new bond issued by an accredited bonding
company in compliance with paragraph 4, Section 6, Rule 6 of the NLRC Rules of
Procedure. This provision states that "[a] cash or surety bond shall be valid and
effective from the date of deposit or posting, until the case is finally decided,
resolved or terminated or the award satisfied."
The CA correctly ruled that the
NLRC properly gave due course to
the respondents’ supplemental
appeal
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
verification of the supplemental appeal.26 Furthermore, verification is a formal, not
a jurisdictional, requirement. It is mainly intended for the assurance that the matters
alleged in the pleading are true and correct and not of mere speculation.27 Also, a
supplemental appeal is merely an addendum to the verified memorandum on appeal
that was earlier filed in the present case; hence, the requirement for verification has
substantially been complied with.
The respondents also timely filed their supplemental appeal on January 3, 2003. The
records of the case show that the petitioners themselves agreed that the pleading
shall be filed until December 18, 2002. The NLRC further extended the filing of the
supplemental pleading until January 3, 2003 upon the respondents’ motion for
extension.
A party may only adduce evidence for the first time on appeal if he adequately
explains his delay in the submission of evidence and he sufficiently proves the
allegations sought to be proven
In labor cases, strict adherence to the technical rules of procedure is not required.
Time and again, we have allowed evidence to be submitted for the first time on
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appeal with the NLRC in the interest of substantial justice.28 Thus, we have
consistently supported the rule that labor officials should use all reasonable means
to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, in the interest of due process.29
However, this liberal policy should still be subject to rules of reason and fairplay. The
liberality of procedural rules is qualified by two requirements: (1) a party should
adequately explain any delay in the submission of evidence; and (2) a party should
sufficiently prove the allegations sought to be proven.30 The reason for these
requirements is that the liberal application of the rules before quasi-judicial agencies
cannot be used to perpetuate injustice and hamper the just resolution of the case.
Neither is the rule on liberal construction a license to disregard the rules of
procedure.31
Guided by these principles, the CA grossly erred in ruling that the NLRC did not
commit grave abuse of discretion in arbitrarily admitting and giving weight to the
respondents’ pieces of evidence for the first time on appeal.
A. The respondents failed to adequately explain their delay in the submission of
evidence
We cannot accept the respondents’ cavalier attitude in blatantly disregarding the
NLRC Rules of Procedure. The CA gravely erred when it overlooked that the NLRC
blindly admitted and arbitrarily gave probative value to the respondents’ evidence
despite their failure to adequately explain their delay in the submission of evidence.
Notably, the respondents’ delay was anchored on their assertion that they were
oblivious of the proceedings before the LA. However, the respondents did not
dispute the LA’s finding that Mr. Romulo Pacia, Jr. appeared on their behalf on April
19, 2001 and May 21, 2001.32 The respondents also failed to contest the petitioners’
assertion that the respondents’ counsel appeared in a preliminary mandatory
conference on July 5, 2001.33
Indeed, the NLRC capriciously and whimsically admitted and gave weight to the
respondents’ evidence despite its finding that they voluntarily appeared in the
compulsory arbitration proceedings. The NLRC blatantly disregarded the fact that
the respondents voluntarily opted not to participate, to adduce evidence in their
defense and to file a position paper despite their knowledge of the pendency of the
proceedings before the LA. The respondents were also grossly negligent in not
informing the LA of the specific building unit where the respondents were conducting
their business and their counsel’s address despite their knowledge of their non-
receipt of the processes.34
B. The respondents failed to sufficiently prove the allegations sought to be proven
Furthermore, the respondents failed to sufficiently prove the allegations sought to
be proven. Why the respondents’ photocopied and computerized copies of
documentary evidence were not presented at the earliest opportunity is a serious
question that lends credence to the petitioners’ claim that the respondents fabricated
the evidence for purposes of appeal. While we generally admit in evidence and give
probative value to photocopied documents in administrative proceedings, allegations
of forgery and fabrication should prompt the adverse party to present the original
documents for inspection.35 It was incumbent upon the respondents to present the
originals, especially in this case where the petitioners had submitted their specimen
signatures. Instead, the respondents effectively deprived the petitioners of the
opportunity to examine and controvert the alleged spurious evidence by not
adducing the originals. This Court is thus left with no option but to rule that the
respondents’ failure to present the originals raises the presumption that evidence
willfully suppressed would be adverse if produced.36
It was also gross error for the CA to affirm the NLRC’s proposition that "[i]t is of
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
at least two signatures, especially in this case where the petitioners themselves
disown the signatures in the respondents’ assailed documentary evidence.38 The
NLRC’s position is unwarranted and is patently unsupported by the law and
jurisprudence.
Viewed in these lights, the scales of justice must tilt in favor of the employees. This
conclusion is consistent with the rule that the employer’s cause can only succeed on
the strength of its own evidence and not on the weakness of the employee’s
evidence.39
The petitioners are entitled to backwages
Based on the above considerations, we reverse the NLRC and the CA’s finding that
the petitioners were terminated for just cause and were afforded procedural due
process. In termination cases, the burden of proving just and valid cause for
dismissing an employee from his employment rests upon the employer. The
employer’s failure to discharge this burden results in the finding that the dismissal
is unjustified.40 This is exactly what happened in the present case.
The petitioners are entitled to salary differential, service incentive, holiday, and
thirteenth month pays
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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
overtime pay; and
8. Aniceto Betana—US$583.33 plus US$2,125.00 representing the 30% guaranteed
overtime pay.
The payments represent their leave pay equivalent to their respective salary (sic) of
35 days and should be paid in Philippine currency at the current rate of exchange at
the time of actual payment. (pp. 81-82, Records)
Private respondent appealed from the POEA's Decision to the NLRC on August 24,
1987. On March 16, 1988, the NLRC promulgated a Decision, the dispositive portion
of which reads:
WHEREFORE, premises considered, the appealed decision is hereby REVERSED and
SET ASIDE and another one entered dismissing these cases for lack of merit. (p.
144, Records)
On May 8, 1988, petitioners filed an Urgent Motion for Reconsideration of the NLRC's
Decision (p. 210, Records), but the same was denied by the NLRC for lack of merit
in its Resolution dated September 12, 1988 (p. 212, Records).
Hence, this appeal from the decision and resolution of the respondent NLRC.
Petitioners allege that respondent Commission gravely abused its discretion or erred
in deciding in favor of private respondent company by reason of the following:
1. Respondent NLRC overlooked the fact that private respondent company had
repeatedly failed and refused to file its answer to petitioners' complaints with their
supporting documents.
2. Respondent Commission erred in reversing and setting aside the POEA decision
and correspondingly dismissing the appeal of petitioners, allegedly in contravention
of law and jurisprudence.
Private respondent maritime company disclaims the aforesaid allegations of
petitioners through these arguments:
1. As borne out by the records, its former counsel attended all the hearings before
the POEA wherein he raised the basis objection that the complaint of petitioners was
so generally couched that a more detailed pleading with supporting documents was
repeatedly requested for the latter to submit.
2. The NLRC never abused its discretion in arriving at assailed decision considering
that the same was based on the Memorandum on Appeal dated August 14, 1987
filed by private respondent.
3. In the hearings conducted by respondent Commission, all the arguments of both
parties were properly ventilated and considered by said Commission in rendering its
decision.
4. The Labor Code basically provides that the rules of evidence prevailing in courts
of law or equity shall not be controlling and it is the spirit and intention of the Code
that the Commission and its members and Labor Arbiters should use every and an
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
process.
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
assuming that private respondent, technically speaking, waived the presentation of
evidence, its appeal to the NLRC was valid since it involved merely a correct
interpretation and clarification of certain provisions of the contract the validity of
which has never been questioned.
The Solicitor General, arguing for public respondent NLRC, contends:
1. Petitioners' assumption that a party who is declared to have waived his right to
present evidence also loses his right to appeal from an adverse judgment made
against him is a falsity for, although the technical rules of evidence prevailing in the
courts of law or equity do not bind labor tribunals, even the Rules of Court allows a
party declared in default to appeal from said judgment by attaching the propriety of
the relief awarded therein.
2. The NLRC did not abuse its discretion in the rendition of subject decision because
the evidence presented by petitioners in support of their complaint is by itself
sufficient to back up the decision. The issue of the disallowance of overtime pay
stems from an interpretation of particular provisions of the employment contract.
We cannot sustain petitioners' position.
The failure of respondent to submit its responsive pleading was not fatal as to
invalidate its case before the Phil. Overseas Employment Authority. Evidently, such
formal or technical defect was rectified by the fact that the POEA proceeded with
the hearings on the case where both parties were given sufficient leeway to ventilate
their cases.
Petitioners' manifest pursuit of their claims before the POEA in the absence of the
answer produced the effect of condoning the failure of private respondent to submit
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
the POEA handed down a decision favorable to petitioners with the allowance of the
latter's leave pay and overtime pay.
Notably, it was only when private respondent appealed the NLRC decision to this
Court that petitioners suddenly unearth the issue of private respondent's default in
the POEA case. Had the decision favoring them not been reversed by the NLRC,
petitioners could have just clammed up. They resorted to bringing up a technical,
not a substantial, defect in their desperate attempt to sway the Court's decision in
their favor.
Private respondent has pointedly argued that the NLRC anchored its decision
primarily upon the Memorandum on Appeal.1âwphi1 In the case of Manila Doctors
Hospital v. NLRC (153 SCRA 262) this Court ruled that the National Labor Relations
Commission and the Labor Arbiter have authority under the Labor Code to decide a
case based on the position papers and documents submitted without resorting to
the technical rules of evidence.
On the issue of whether or not petitioners should be entitled to terminal
pay, We sustain the finding of respondent NLRC that petitioners were actually paid
more than the amounts fixed in their employment contracts. The pertinent portion
of the NLRC decision reads as follows.
On this award for leave pay to the complainants (petitioners), the (private)
respondent maintains that the actually they were paid much more than what they
were legally entitled to under their contract. This fact has not been disputed by the
complainants (petitioners.) Thus, as mentioned in (private) respondent's
Memorandum on Appeal dated 14 August 1987, their overpayment is more than
enough and sufficient to offset whatever claims for leave pay they filed in this
case and for which the POEA favorably considered in their favor. For complainant
(petitioner) Aniceto Betana, it appears that under the crew contract his monthly
salary was US$400 while he was overpaid by US$100 as he actually received
US$500. In fine, Betana had received at least US1,400 excess salary for a period of
fourteen (14) months which was the period of his employment. In the case of
complainant (petitioner) Jorge C. de Castro his stipulated monthly pay was US$160
but he actually received a monthly pay of US$200 or an overpayment of US$560 for
the same period of service. For complainant (petitioner) Juanito R. de Jesus, his
overpayment is US$1120. Complainant (petitioner) Arnold J. Miranda has also the
same amount of excess payment as de Jesus. Indeed, We cannot simply ignore this
material fact. It is our duty to prevent a miscarriage of justice for if We sustain the
award for leave pay in the face of undisputed facts that the complainants
(petitioners) were even paid much more than what they should receive by way of
leave pay, then they would be enriching themselves at the expense of others.
Accordingly, justice and equity compel Us to deny this award.
Even as the denial of petitioners' terminal pay by the NLRC has been justified, such
denial should not have been applied to petitioners Julio Cagampan and Silvino
Vicera. For, a deeper scrutiny of the records by the Solicitor General has revealed
that the fact of overpayment does not cover the aforenamed petitioners since the
amounts awarded them were equal only to the amounts stipulated in the crew
contracts. Since petitioners Cagampan and Vicera were not overpaid by the
company, they should be paid the amounts of US$583.33 and US$933.33,
respectively. Further examination by the Solicitor General shows that petitioner
Maximo Rosello was also overpaid in the amount of US$420.00.
Hence, with respect to petitioners Cagampan and Vicera, the NLRC decision must
be modified correspondingly.
As regards the question of overtime pay, the NLRC cannot be faulted for disallowing
the payment of said pay because it merely straightened out the distorted
interpretation asserted by petitioners and defined the correct interpretation of the
provision on overtime pay embodied in the contract conformably with settled
doctrines on the matter. Notably, the NLRC ruling on the disallowance of overtime
pay is ably supported by the fact that petitioners never produced any proof of actual
performance of overtime work.
Petitioners have conveniently adopted the view that the "guaranteed or fixed
overtime pay of 30% of the basic salary per month" embodied in their employment
contract should be awarded to them as part of a "package benefit." They have
theorized that even without sufficient evidence of actual rendition of overtime work,
they would automatically be entitled to overtime pay. Their theory is erroneous for
being illogical and unrealistic. Their thinking even runs counter to the intention
behind the provision. The contract provision means that the fixed overtime pay of
30% would be the basis for computing the overtime pay if and when overtime work
would be rendered. Simply, stated, the rendition of overtime work and the
submission of sufficient proof that said work was actually performed are conditions
to be satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the entitlement to such benefit
must first be established. Realistically speaking, a seaman, by the very nature of his
job, stays on board a ship or vessel beyond the regular eight-hour work schedule.
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
[G.R. No. 121004. January 28, 1998]
ROMEO LAGATIC, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, CITYLAND DEVELOPMENT CORPORATION, STEPHEN
ROXAS, JESUS GO, GRACE LIUSON, and ANDREW LIUSON, respondents.
DECISION
ROMERO, J.:
Petitioner seeks, in this petition for certiorari under Rule 65, the reversal of the
resolution of the National Labor Relations Commission dated May 12, 1995, affirming
the February 17, 1994, decision of Labor Arbiter Ricardo C. Nora finding that
petitioner had been validly dismissed by private respondent Cityland Development
Corporation (hereafter referred to as Cityland) and that petitioner was not entitled
to separation pay, premium pay and overtime pay.
The facts of the case are as follows:
Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a
probationary sales agent, and later on as a marketing specialist. He was tasked with
soliciting sales for the company, with the corresponding duties of accepting call-ins,
referrals, and making client calls and cold calls. Cold calls refer to the practice
of prospecting for clients through the telephone directory. Cityland, believing that
the same is an effective and cost-efficient method of finding clients, requires all its
marketing specialists to make cold calls. The number of cold calls depends on the
sales generated by each: more sales mean less cold calls. Likewise, in order to
assess cold calls made by the sales staff, as well as to determine the results thereof,
Cityland requires the submission of daily progress reports on the same.
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
notwithstanding, petitioner again failed to submit cold call reports for September 2,
5, 8, 10, 11, 12, 15, 17, 18, 19, 20, 22, and 28, as well as for October 6, 8, 9, 10,
12, 13 and 14, 1992. Petitioner was required to explain his inaction, with a warning
that further non-compliance would result in his termination from the company. In a
reply dated October 18, 1992, petitioner claimed that the same was an honest
omission brought about by his concentration on other aspects of his job. Cityland
found said excuse inadequate and, on November 9, 1992, suspended him for three
days, with a similar warning.
Notwithstanding the aforesaid suspension and warning, petitioner again failed to
submit cold call reports for February 5, 6, 8, 10 and 12, 1993. He was verbally
reminded to submit the same and was even given up to February 17, 1993 to do so.
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-
employees. To worsen matters, he left the same lying on his desk where everyone
could see it.
On February 23, 1993, petitioner received a memorandum requiring him to explain
why Cityland should not make good its previous warning for his failure to submit
cold call reports, as well as for issuing the written statement aforementioned. On
February 24, 1993, he sent a letter-reply alleging that his failure to submit cold call
reports should not be deemed as gross insubordination. He denied any knowledge
of the damaging statement, TO HELL WITH COLD CALLS!
Finding petitioner guilty of gross insubordination, Cityland served a notice of
dismissal upon him on February 26, 1993. Aggrieved by such dismissal, petitioner
filed a complaint against Cityland for illegal dismissal, illegal deduction,
underpayment, overtime and rest day pay, damages and attorneys fees. The labor
arbiter dismissed the petition for lack of merit. On appeal, the same was affirmed
by the NLRC; hence the present recourse.
Petitioner raises the following issues:
1. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN
NOT FINDING THAT PETITIONER WAS ILLEGALLY DISMISSED;
2. WHETHER OR NOT RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN
RULING THAT PETITIONER IS NOT ENTITLED TO SALARY DIFFERENTIALS,
BACKWAGES, SEPARATION PAY, OVERTIME PAY, REST DAY PAY, UNPAID
COMMISSIONS, MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.
The petition lacks merit.
To constitute a valid dismissal from employment, two requisites must be met,
namely: (1) the employee must be afforded due process, and (2) the dismissal must
be for a valid cause.[1] In the case at bar, petitioner contends that his termination
was illegal on both substantive and procedural aspects. It is his submission that the
failure to submit a few cold calls does not qualify as willful disobedience, as, in his
experience, cold calls are one of the least effective means of soliciting sales. He thus
asserts that a couple of cold call reports need not be accorded such tremendous
significance as to warrant his dismissal for failure to submit them on time.
These arguments are specious. Petitioner loses sight of the fact that (e)xcept as
provided for, or limited by, special laws, an employer is free to regulate, according
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
when employees, with knowledge of an established rule, enter the service, the rule
becomes a part of the contract of employment.[3] It is also generally recognized
that company policies and regulations, unless shown to be grossly oppressive or
contrary to law, are generally valid and binding on the parties and must be complied
with.[4] Corollarily, an employee may be validly dismissed for violation of a
reasonable company rule or regulation adopted for the conduct of the company
business. An employer cannot rationally be expected to retain the employment of a
person whose x x x lack of regard for his employers rules x x x has so plainly and
completely been bared.[5] Petitioners continued infraction of company policy
requiring cold call reports, as evidenced by the 28 instances of non-submission of
aforesaid reports, justifies his dismissal. He cannot be allowed to arrogate unto
himself the privilege of setting company policy on the effectivity of solicitation
methods. To do so would be to sanction oppression and the self-destruction of the
employer.
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
any knowledge of the same. Cityland, on the other hand,
submitted the affidavits of his co-employees attesting to his authorship of the same.
Petitioners only defense is denial. The rule, however, is that denial, if
unsubstantiated by clear and convincing evidence, is negative and self-serving
evidence which has no weight in law.[6] More telling, petitioner, while making much
capital out of his lack of opportunity to confront the affiants, never, in all of his
pleadings, categorically denied writing the same. He only denied knowledge of the
allegation that he issued such a statement.
Based on the foregoing, we find petitioner guilty of willful disobedience. Willful
disobedience requires the concurrence of at least two requisites: the employees
assailed conduct must have been willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude; and the order violated must have
been reasonable, lawful, made known to the employee and must pertain to the
duties which he had been engaged to discharge.[7]
Petitioners failure to comply with Citylands policy of requiring cold call reports is
clearly willful, given the 28 instances of his failure to do so, despite a previous
reprimand and suspension. More than that, his written statement shows his open
defiance and disobedience to lawful rules and regulations of the company. Likewise,
said company policy of requiring cold calls and the concomitant reports thereon is
clearly reasonable and lawful, sufficiently known to petitioner, and in connection
with the duties which he had been engaged to discharge. There is, thus, just cause
for his dismissal.
On the procedural aspect, petitioner claims that he was denied due process.
Well settled is the dictum that the twin requirements of notice and hearing constitute
the elements of due process in the dismissal of employees. Thus, the employer must
furnish the employee with two written notices before the termination of employment
can be effected. The first apprises the employee of the particular acts or omissions
for which his dismissal is sought; the second informs him of the employers decision
to dismiss him.[8]
In the case at bar, petitioner was notified of the charges against him in a
memorandum dated February 19, 1993, which he received on February 23, 1993.
He submitted a letter-reply thereto on February 24, 1993, wherein he asked that his
failure to submit cold call reports be not interpreted as gross insubordination.[9] He
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.
Nonetheless, petitioner contends that he has not been given the benefit of an
effective hearing. He alleges that he was not adequately informed of the results of
the investigation conducted by the company, nor was he able to confront the affiants
who attested to his writing the statement, TO HELL WITH COLD CALLS! While we
have held that in dismissing employees, the employee must be afforded ample
opportunity to be heard, ample opportunity connoting every kind of assistance that
management must afford the employee to enable him to prepare adequately for his
defense,[10] it is also true that the requirement of a hearing is complied with as
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
submitted a letter-reply to the charge. He, however, adduced no other evidence on
his behalf. In fact, he admitted his failure to submit cold call reports, praying that
the same be not considered as gross insubordination. As held by this Court in
Bernardo vs. NLRC,[12] there is no necessity for a formal hearing where an
employee admits responsibility for an alleged misconduct. As to the written
statement, TO HELL WITH COLD CALLS!, petitioner merely denied knowledge of the
same. He failed to submit controverting evidence thereon although the
memorandum of February 19, 1993, clearly charged that he had shown said
statement to several sales personnel. Denials are weak forms of defenses,
particularly when they are not substantiated by clear and convincing evidence. Given
the foregoing, we hold that petitioners constitutional right to due process has not
been violated.
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As regards the second issue, petitioner contends that he is entitled to amounts
illegally deducted from his commissions, to unpaid overtime, rest day and
holiday premiums, to moral and exemplary damages, as well as attorneys fees and
costs.
Petitioner anchors his claim for illegal deductions of commissions on Citylands
formula for determining commissions, viz:
COMMISSIONS= Credits Earned (CE) less CUMULATIVE NEGATIVE (CN)
less AMOUNTS RECEIVED (AR)
= (CE CN) AR where CE = Monthly Sales Volume x
Commission Rate (CR)
AR = Monthly Compensation/.75
CR = 4.5%
Under said formula, an increase in salary would entail an increase in AR, thus
diminishing the amount of commissions that petitioner would receive. Petitioner
construes the same as violative of the non-diminution of benefits clause embodied
in the wage orders applicable to petitioner. Inasmuch as Cityland has paid petitioner
commissions based on a higher AR each time there has been a wage increase, the
difference between the original AR and the subsequent ARs have been viewed by
petitioner as illegal deductions, to wit:
Wage Date of Amount of Corresponding Duration Total
Order Effectivity Increase Increase in Up To
Quota (AR) 2/26/93
----------- ------------- -------------- ----------------- ------------ ------------
RA 6640 1/1/88 P265.75 P 353.33 x 62 mos. P 21,906.46
RA 6727 7/1/89 780.75 1,040.00 x 44 mos. 45,760.00
NCR 01 11/1/90 785.75 1,046.67 x 28 mos. 29,306.76
NCR 01-A ------------
Grand Total P 96,973.22[13]
=======
Petitioner even goes as far as to claim that with the use of Citylands formula, he is
indebted to the company in the amount of P 1,410.00, illustrated as follows:
Petitioners Basic Salary = P 4,230.00
= 4,230.00/.75
A.R. = 5,640.00
Petitioners Basic Salary AR = P 1,410.00
While it is true that an increase in salary would cause an increase in AR, with the
same being deducted from credits earned, thus lessening his commissions, the fact
remains that petitioner still receives his basic salary without deductions. Petitioners
argument that he is indebted to respondent by P1,410.00 is fallacious as his basic
salary remains the same and he continues to receive the same, regardless of his
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
purpose of the same is to encourage sales personnel to accelerate their sales in
order for them to earn commissions.
Additionally, there is no law which requires employers to pay commissions, and when
they do so, as stated in the letter-opinion of the Department of Labor and
Employment dated February 19, 1993, there is no law which prescribes a method
for computing commissions. The determination of the amount of commissions is the
result of collective bargaining negotiations, individual employment contracts or
established employer practice.[14] Since the formula for the computation of
commissions was presented to and accepted by petitioner, such prescribed formula
is in order. As to the allegation that said formula diminishes the benefits being
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
that he would receive any commission at all. Non-diminution of benefits, as applied
here, merely means that the company may not remove the privilege of sales
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
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
thereby earn more commissions. It is their contention that sales personnel were
clamoring for the privilege to attend Saturday and Sunday call-ins, as well as to
entertain walk-in clients at project sites during weekends, that Cityland had to
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
part of sales staff to voluntarily work on weekends, so much so that Cityland needed
to schedule them, how come no call-ins or walk-ins were scheduled on some
weekends?
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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
SUPREME COURT
Manila
EN BANC
G.R. No. L-30279 July 30, 1982
PHILIPPINE NATIONAL BANK, petitioner,
vs.
PHILIPPINE NATIONAL BANK EMPLOYEES ASSOCIATION (PEMA) and
COURT OF INDUSTRIAL RELATIONS, respondents.
Conrado E. Medina, Edgardo M. Magtalas and Nestor Kalaw for
petitioner.
BARREDO, J.:
Appeal by the Philippine National Bank from the decision of the trial court of the
Court of Industrial Relations in Case No. IPA-53 dated August 5, 1967 and
affirmed en banc by said court on January 15, 1968.
This case started on January 28, 1965 in consequence of the certification of the
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
National Bank (PNB, for short), on the other, which arose from no more than the
alleged failure of the PNB to comply with its commitment of organizing a Committee
on Personnel Affairs to take charge of screening and deliberating on the promotion
of employees covered by the collective bargaining agreement then in force between
the said parties. On January 28, 1965, the Industrial Court issued an order aimed at
settling the dispute temporarily between the parties, which was certified by the
President. Pertinent portions of the order read thus:
xxx xxx xxx
1. That in order to settle the strike and for the employees to return to work
immediately starting January 29, 1965, the Committee on Personnel Affairs is hereby
created to start functioning on February 1, 1965;
xxx xxx xxx
f. That in return for this concession, an injunction against future strikes or lockouts
shall be issued by the Court to last for a period of six months but which shall
terminate even before that period should all disputes of the parties be already
resolved; (Page 84, Record.)
According to the very decision now on appeal, "on May 22, 1965, petitioner (private
respondent herein) filed another pleading submitting to this Court for determination
certain matters which it claims cannot be resolved by the parties, which are as
follows:
First Cause of Action
a. In a Resolution No. 1162 dated September 16, 1957, the Respondent's Board of
Directors approved a revision of the computation of overtime pay retroactive as of
July 1, 1954, and authorized a recomputation of the regular one- hour and extra
overtime already rendered by all officers and employees of the Respondent Bank.
The details of the benefits involved in said Resolution are contained in a
Memorandum of the Respondent Bank dated September 18, 1957.
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
salaries and/or fringe benefits; nevertheless, the Respondent, in 1963, without just
cause, withdrew said benefits and in spite of repeated demands refused, and still
refuses to reinstate the same up to the present.
Second Cause of Action
c. After the promulgation of the Decision in National Waterworks and Sewerage
Authority vs. NAWASA Consolidated Unions, et al. G.R. No. L-18938, Aug. 31, 1964,
the Petitioner has repeatedly requested Respondent that the cost of living allowance
and longevity pay be taken into account in the computation of overtime pay,
effective as of the grant of said benefits on January 1, 1958, in accordance with the
ruling in said Decision of the Supreme Court.
d. Until now Respondent has not taken any concrete steps toward the payment of
the differential overtime and nighttime pays arising from the cost of living allowance
and longevity pay.
xxx xxx xxx
Respondent in its answer of June 7, 1965 took exception to this mentioned petition
on several grounds, namely, (1) the said alleged causes of action were not disputes
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
under the collective bargaining agreement between them, or the same is premature
as the pertinent collective bargaining agreement has not yet expired." (Pp. 84-86,
Record.) 1
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,
1965 has enjoined the parties not to strike or lockout for a period of six (6) months
starting from said date. In a very definite sense the labor disputes between the
parties have been given a specific period for the settlement of their differences. The
fact that thereafter the question of the manner of payment of overtime pay is being
put in issue, appears to indicate that this was a part of the labor dispute. If we are
to consider that this question, particularly the second cause of action, has in fact
existed as early as 1958, shows the necessity of resolving the same now. And the
same would indeed be an existing issue considering that the present certification
came only in 1965.
It is further to be noted that the presidential certification has not limited specific
areas of the labor dispute embraced within the said certification. It speaks of the
existence of a labor dispute between the parties and of a strike declared by the
PEMA, for which the Court has been requested to take immediate steps in the
exercise of its powers under the law.
Even on the assumption that the present issue is not one embraced by the
presidential certification or it is an issue presented by one party on a cause arising
subsequent to the certification, the same would still be subject to the jurisdiction of
this Court. In "Apo Cement Workers Union versus Cebu Portland Cement", Case No.
11 IPA (G.R. No. L-12451, July 10, 1957), the Court en banc (where this Sala has
taken an opposite view) upheld its jurisdiction under the circumstances just
enumerated. It would seem that this question has been further settled by our
Supreme Court in "National Waterworks & Sewerage Authority vs. NAWASA
Consolidated Unions, et al." (supra), which we quote in part:
xxx xxx xxx
4. Petitioner's claim that the issue of overtime compensation not having been raised
in the original case but merely dragged into it by intervenors, respondent Court
cannot take cognizance thereof under Section 1, Rule 13 of the Rules of Court.
xxx xxx xxx
... The fact that the question of overtime payment is not included in the principal
case in the sense that it is not one of the items of dispute certified to by the President
is of no moment, for it comes within the sound discretion of the Court of Industrial
Relations. Moreover, in labor disputes technicalities of procedure should as much as
possible be avoided not only in the interest of labor but to avoid multiplicity of action.
This claim has no merit.
xxx xxx xxx
As to the objection posed that the issues are mere money claims, there appears to
be no ground for the same. In the first place, although the same involves a claim
for additional compensation it is also a part of the labor dispute existing between
the parties and subject to the compulsory arbitration powers of the Court, pursuant
to Section 10 of Rep. Act No. 875. In the second place, on the basis of the so-called
PRISCO doctrine (G.R. No. L- 13806, May 23,.1960), there is an existing and current
employer-employee relationship between the respondent and the members of
petitioner union, for whom the additional overtime compensation is claimed.
With respect to ground three of the answer on which objection is based, on C.A.
444, as amended, Section 6 thereof, provides as follows:
'Any agreement or contract between the employer and the laborer or employee
contrary to the provisions of this Act shall be null and void ab initio'.
The instant action is partially subject to the provisions of Commonwealth Act 444,
as amended. Even if, the parties have stipulated to the extent that overtime will not
be paid, the same will not be binding. More so under the present circumstances,
where the only question is the correctness of the computation of the overtime
payments.
While the Court notes that the first cause of action has become moot and academic
in view of the compliance by respondent, hence there is no further need to resolve
the same (t.s.n., pp. 5-7, August 16, 1965), the settlement of said first cause of
action further strengthens the view that the second cause of action is indeed an
existing dispute between the parties. Both causes of fiction involve overtime
questions. Both stem from dates well beyond and before the presidential certification
of the present proceedings. If respondent has been fit to take steps to expedite and
resolve, without court intervention, the first cause of action, it cannot deny the
existence of the second cause of action as the first and second appear to be
interrelated matters. (Pp. 86-89, Record)
And We agree that the foregoing holding is well taken. It would be more worthwhile
to proceed to the basic issues immediately than to add anything more of Our own
discourse to the sufficiently based disposition of the court a quo of the above-
mentioned preliminary questions.
After discussing the pros and cons on the issue involved in the second cause of
action as to whether or not the cost-of-living allowance otherwise denominated as
equity pay and longevity pay granted by the bank, the first beginning January 1,
1958 and the latter effective July 1, 1961, should be included in the computation of
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:
1. The respondent Philippine National Bank is hereby required to pay overtime and
nighttime rates to its employees from January 28, 1962; and such overtime
compensation shall be based on the sum total of the employee's basic salary or
wage plus cost of living allowance and longevity pay under the following schedule:
'a. Overtime services rendered shall be paid at the rate of time and one-third, but
overtime work performed between 6:00 P.M. and 6- .00 A.M. shall be paid at the
rate of 150% or 50% beyond the regular rate;
'b. The rate for work performed in the night shift, or during the period from 6:00
P.M. to 6:00 A.M. shall be compensated at the rate of 150% or 50% beyond the
regular rate, provided the work performed involved a definite night shift and not
merely a continuation by way of overtime of the regular and established hours of
the respondent Bank.
2. The Chief of the Examining Division of the Court or any of his duly designated
representatives is hereby ordered to compute the overtime rates due each employee
of the respondent Bank from January 28, 1962, in accordance with the above
determination; and to complete the same within a period of sixty (60) days from
receipt of this Order. However, considering that the Philippine National Bank is a
government depository, and renders and performs functions distinct and unique;
and, while it may be a banking institution, its relationship with other government
agencies and the public is such that it has no basis for comparison with other banking
institutions organized under the corporation law or special charter. To require it to
pay immediately the liability after the exact amount shall have been determined by
the Court Examiner and duly approved by the Court, as in other cases, would work
undue hardship to the whole government machinery, not to mention the outstanding
foreign liabilities and outside commitments, if any. Moreover, the records show that
this case was initiated long before the taking over of the incumbent bank officials.
Accordingly, the Court feels that the payment shall be subject to the negotiations by
the parties as to time, amount, and duration.
The Court may intervene in said negotiations for the purpose of settling once and
for all this case to maintain industrial peace pursuant to Section 13 of
Commonwealth Act 103, as amended, if desired, however by the parties.
After all this is not an unfair labor practice case.
SO ORDERED. (Pp. 98-100, Record.)
In connection with the above decision, two interesting points appear at once to be
of determinative relevance:
The first is that in upholding its jurisdiction to take cognizance of the demand in
question about cost-of-living allowance and longevity pay, the Industrial Court
carefully noted that it was not resolving a petition for declaratory relief in the light
of the decision of this Court in NAWASA vs. NAWASA Consolidated Unions, G.R. No.
L- 18938, August 31, 1964, 11 SCRA 766. Thus the decision under review states:
Incidentally, the present action is not one for declaratory relief as to the applicability
of a judicial decision to the herein parties. A careful perusal of the pleadings indicates
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
decision of any court but on provisions of the law which have been in effect at the
time of the occurrence of the cause of the action in relation to a labor dispute.
Hence, this is not a petition for declaratory relief. (Pp. 94-95, Record.)
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
Supervisors Union vs. Shell Company of the Philippines, et al., Case No. 2411- V, in
which the court made an explanatory discourse of its understanding of the NAWASA
ruling, supra, and on that basis rejected the claim of the workers. In brief, it held
that (1) NAWASA does not apply where the collective bargaining agreement does
not provide for the method of computation of overtime pay herein insisted upon by
private respondent PEMA and (2) the fact-situation in the Shell cases differed from
that of NAWASA, since the sole and definite ratio decidendi in NAWASA was merely
that inasmuch as Republic Act 1880 merely fixed a 40-hour 5-day work for all
workers, laborers and employees including government-owned corporations like
NAWASA, the weekly pay of NAWASA workers working more than five days a week
should remain intact; with overtime pay in excess of eight hours work and 25 %
additional compensation on Sundays. There was no pronouncement at all therein
regarding the basis of the computation of overtime pay in regard to bonuses and
other fringe benefits.
For being commendably lucid and comprehensive, We deem it justified to quote
from that Shell decision:
The main issue:
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
must, even in the face of existing bargaining contracts providing otherwise,
determine the daily and hourly rates of employees in this manner: Add to basic pay
all the money value of all fringe benefits agreed upon or already received by the
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
during the year equals daily wage; Daily wage divided by 8 equals hourly rate. Hourly
rate plus premium rate equals hourly overtime rate.
The NAWASA case must be viewed to determine whether it is that broad. NAWASA
case must be understood in its setting. The words used by the Supreme Court in its
reasoning should not be disengaged from the fact-situation with which it was
confronted and the specific question which it was there required to decide. Above
all care should be taken not to lose sight of the truth that the facts obtaining, the
issue settled, and the law applied in the said case, and these, though extractable
from the records thereof as material in the resolution herein, were, as they are,
primarily declarative of the rights and liabilities of the parties involved therein.
Recourse to the records of the NAWASA case shows that the fact- situation, as far
as can be materially connected with the instant case, is as follows:
In view of the enactment of Rep. Act 1880, providing that the legal hours of work
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)
hours a week, its implementation by NAWASA was disputed by the Union. The
workers affected were those who, for a period of three (3) months prior to or
immediately preceding the implementation of Rep. Act 1880, were working seven
(7) days a week and were continuously receiving 25% Sunday differential pay. The
manner of computing or determining the daily rate of monthly salaried employees.
And the Supreme Court, specifically laid out the issue to be decided, as it did decide,
in the NAWASA, as follows:
7. and 8. How is a daily wage of a weekly employee computed in the light of Republic
Act 1880?'(G.R. L-18938)
Resolving the above issue, it was held;
According to petitioner, the daily wage should be computed exclusively on the basic
wage without including the automatic increase of 25% corresponding to the Sunday
differential. To include said Sunday differential would be to increase the basic pay
which is not contemplated by said Act. Respondent court disagrees with this manner
of computation. lt holds that Republic Act 1880 requires that the basic weekly wage
and the basic monthly salary should not be diminished notwithstanding the reduction
in the number of working days a week. If the automatic increase corresponding to
the salary differential should not be included there would be a diminution of the
weekly wage of the laborer concerned. Of course, this should only benefit those who
have been working seven days a week and had been regularly receiving 25%
additional compensation for Sunday work before the effectivity of the Act.
It is thus necessary to analyze the Court's rationale in the said NAWASA case, 'in the
light of Rep. Act 1880', and the 'specific corollaries' discussed preparatory to arriving
at a final conclusion on the main issue. What was required to be done, by way of
implementing R. A. 1880? The statute directs that working hours and days of
government employees (including those of government owned and controlled
proprietary corporations) shall be reduced to five days-forty hours a week. But, the
same law carried the specific proviso, designed to guard against diminution of
salaries or earnings of affected employees. The Supreme Court itself clearly spelled
this out in the following language: 'It is evident that Republic Act 1880 does not
intend to raise the wages of the employees over what they are actually receiving.
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
compensation which was previously received. ...
If the object of the law was to keep intact, (not either to increase it or decrease it)
it is but natural that the Court should concern itself, as it did, with the corollary,
what is the weekly wage of worker who, prior to R.A. 1880, had been working seven
(7) days a week and regularly receiving differential payments for work on Sundays
or at night? It seems clear that the Court was only concerned in implementing
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
wage. And, the conclusion reached by the Supreme Court was to affirm or recognize
the correctness of the action taken by the industrial court including such differential
pay in computing the weekly wages of these employees and laborers who worked
seven days a week and were continuously receiving 25% Sunday differential for a
period of three months immediately preceding the implementation of R.A. 1880.'
Nothing was said about adding the money value of some other bonuses or
allowances or money value of other fringe benefits, received outside the week or at
some other periods. That was not within the scope of the issue before the Court. in
fact, the limited application of the decision is expressed in the decision itself. The
resolution of this particular issue was for the benefit of only a segment of the
NAWASA employees. Said the Court 'Of course, this should only benefit those who
have been working seven days a week and had been regularly receiving 25%
additional compensation for Sunday work before the effectivity of the Act.'
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
wage includes all payments which the parties have agreed shall be received during
the work week, including piece-work wages, differential payments for working at
undesirable times, such as at night or on Sundays and holidays, and the cost of
board and lodging customarily furnished the employee (Walling v. Yangerman-
Reynolds Hardwook Co., 325 U.S. 419; Walling v. Harischfeger Corp. 325 U.S. 427).
The 'Regular rate of pay also ordinarily includes incentive bonus or profit- sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it
was also held that the higher rate for night, Sunday and holiday work is just as much
as regular rate as the lower rate for daytime work. The higher rate is merely an
inducement to accept employment at times which are not at desirable form a
workman's standpoint (International L. Ass'n. Wise 50 F. Supp. 26, affirmed C.C.A.
Carbunao v. National Terminals Corp. 139 F. 853).
But this paragraph in the decision appears to have been used and cited by the Court
to sustain the action of the court a quo: that it was correct to include the 25%
Sunday premium for the purpose of setting the weekly wage of specified workers
whose weekly earnings before the passage of R.A. 1880 would be diminished, if said
premium pay regularly received for three months were not included. It is significant
that the citations therein used by the Supreme Court are excerpts from American
decisions whose legislation on overtime is at variance with the law in this jurisdiction
in this respect: the U.S. legislation considers work in excess of forty hours a week
as overtime; whereas, what is generally considered overtime in the Philippines is
work in excess 'of the regular 8-hours a day. It is understandably material to refer
to precedents in the U.S. for purposes of computing weekly wages under a 40- hour
a week rule, since the particular issue involved in NAWASA is the conversion of prior
weekly regular earnings into daily rates without allowing diminution or addition.
No rule of universal application to other cases may, therefore, be justifiably extracted
from the NAWASA case. Let it be enough that in arriving at just solution and correct
application of R.A. 1880, an inference was drawn from other decisions that a regular
wage includes payments 'agreed by the parties to be received during the week.' But
to use this analogy in another fact- situation would unmitigatingly stretch its value
as basis for legal reasoning, for analogies are not perfect and can bring a collapse if
stretched far beyond their logical and reasoned efficacy. Neither would it be far to
ascribe to the Supreme Court's citation of foreign jurisprudence, which was used for
purposes of analogy, the force of statute law, for this would be the consequence if
it were allowed to be used as authority for all fact-situations, even if different from
the NAWASA case. This, because courts do not legislate. All they do is apply the law.
The above discussions impel the objective analyst to reject the proposition that the
NAWASA decision is an embracing and can be used with the authority of a statute's
effects on existing contracts.
It appears that the answer to dispute lies, not in the text of the NAWASA case but
in the terms and conditions and practice in the implementation of, the agreement,
an area which makes resolution of the issue dependent on the relation of the terms
and conditions of the contract to the phraseology and purpose of the Eight-Hour
Labor Law (Act 444).
The more we read the NAWASA case, the more we are convinced that the overtime
computation set therein cannot apply to the cases at bar. For to do so would lead
to unjust results, inequities between and among the employees themselves and
absurd situations. To apply the NAWASA computation would require a different
formula for each and every employee, would require reference to and continued use
of individual earnings in the past, thus multiplying the administrative difficulties of
the Company. It would be cumbersome and tedious a process to compute overtime
pay and this may again cause delays in payments, which in turn could lead to serious
disputes. To apply this mode of computation would retard and stifle the growth of
unions themselves as Companies would be irresistibly drawn into denying, new and
additional fringe benefits, if not those already existing, for fear of bloating their
overhead expenses through overtime which, by reason of being unfixed, becomes
instead a veritable source of irritant in labor relations.
One other reason why application of the NAWASA case should be rejected is that
this Court is not prepared to accept that it can lay down a less cumbersome formula
for a company-wide overtime pay other than that which is already provided in the
collective bargaining agreement. Courts cannot make contracts for the parties
themselves.
Commonwealth Act 444 prescribes that overtime work shall be paid 'at the same
rate as their regular wages or salary, plus at least twenty-five per centum additional'
(Secs. 4 & 5). The law did not define what is a 'regular wage or salary'. What the
law emphasized by way of repeated expression is that in addition to 'regular wage',
there must be paid an additional 25% of that 'regular wage' to constitute overtime
rate of pay. The parties were thus allowed to agree on what shag be mutually
considered regular pay from or upon which a 25% premium shall be based and
added to make up overtime compensation. This the parties did by agreeing and
accepting for a very long period to a basic hourly rate to which a premium shall be
added for purposes of overtime.
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Also significant is the fact that Commonwealth Act 444 merely sets a minimum, a
least premium rate for purposes of overtime. In this case, the parties agreed to
premium rates four (4) or even six (6) times than that fixed by the Act. Far from
being against the law, therefore, the agreement provided for rates 'commensurate
with the Company's reputation of being among the leading employers in the
Philippines' (Art. 1, Sec. 2, Coll. Barg. Agreement) at the same time that the
Company is maintained in a competitive position in the market Coll. Barg.
Agreement, lbid).
Since the agreed rates are way above prevailing statutory wages and premiums,
fixed by themselves bona fide through negotiations favored by law, there appears
no compelling reason nor basis for declaring the same illegal. A basic principle
forming an important foundation of R.A. 875 is the encouragement given to parties
to resort to peaceful settlement of industrial problems through collective bargaining.
It behooves this Court, therefore, to help develop respect for those agreements
which do not exhibit features of illegality This is the only way to build confidence in
the democratic process of collective bargaining. Parties cannot be permitted to avoid
the implications and ramifications of the agreement.
Although this Court has gone very far in resolving an doubts and in giving great
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)
Proof of the correctness of the aforequoted considerations, the appeal of the workers
from the Industrial Court's decision did not prosper. Affirming the appealed decision,
We held:
The theory, therefore, of the petitioners is to the effect that, notwithstanding the
terms and conditions of their existing collective bargaining agreement with
respondent Shell Company, particularly Exhibit 'A-l' for the Petitioners and Exhibit 'l-
A' for the Respondent (which is Appendix 'B' of the Collective Bargaining Agreement
of the parties), considering the ruling in the NAWASA case, a recomputation should
be made of their basic wage by adding the money value of the fringe benefits
enjoyed by them from whence the premium rates agreed upon shall be computed
in order to arrive at the correct computation of their overtime compensation from
the Company. On the other hand, respondent Shell Company maintains that the
NAWASA case should not be utilized as the basis for the alteration of their mode of
computing overtime rate of pay as set forth in their collective Bargaining Agreement.
It insists that their collective bargaining agreement should be the law between them.
After a careful and thorough re-examination of the NAWASA case, supra, and a
minute examination of the facts and the evidence of the case now before Us, We
rule that the NAWASA case is not in point and, therefore, is inapplicable to the case
at bar.
The ruling of this Court in the NAWASA case contemplates the regularity and
continuity of the benefits enjoyed by the employees or workers (for at least three
(3) months) as the condition precedent before such additional payments or benefits
are taken into account. This is evident in the aforequoted ruling of this Court in the
NAWASA case as well as in the hereinbelow cited authorities, to wit:
The 'regular rate' of pay on the basis of which overtime must be computed must
reflect an payments which parties have agreed shall be received regularly during the
work week, exclusive of overtime payments.' Walling v. Garlock Packing Co.
C.C.A.N.Y., 159 F. 2d 44, 45. (Page 289, WORDS And PHRASES, Permanent Edition,
Vol. 36A; Italics supplied); and
As a general rule the words 'regular rate' mean the hourly rate actually paid for the
normal, non-overtime work week, and an employee's regular compensation is the
compensation which regularly and actually reaches him, ... .' (56 C.J.S. 704;
Emphasis supplied).
Even in the definition of wage under the Minimum Wage Law, the words 'customarily
furnished' are used in referring to the additional payments or benefits, thus, -
'Wage' paid to any employee shag mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, commission basis, or other method of calculating
the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging or other facilities customarily
furnished by the employer to the employee.' (Sec. 2 (g), R.A. No. 602).
Having been stipulated by the parties that ... the Tin Factory Incentive Pay has
ceased in view of the closure of the factory in May 1966 the fringe benefits as
described show that they are occasionally not regularly enjoyed and that not all
employees are entitled to them', herein petitioners failed to meet the test laid down
by this Court in the NAWASA case. Further, the collective bargaining agreement
resorted to by the parties being in accordance with R.A. 875, with its provision on
overtime pay far way beyond the premium rate provided for in Sections 4 and 5 of
Commonwealth Act 444, the same should govern their relationship. Since this is their
contract entered into by them pursuant to bargaining negotiations under existing
laws, they are bound to respect it. It is the duty of this Court to see to it that
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
and order can be properly attained in our society.
It should be noted in passing that Commonwealth Act 444 prescribes only a
minimum of at least 25% in addition to the regular wage or salary of an employee
to constitute his overtime rate of pay, whereas, under Appendix 'B', (Exhs. 'A-l',
Petitioners and 'l-A', Respondent) of the Collective Bargaining Agreement of the
parties, the premium rate of overtime pay is as high as l50% on regular working
days up to 250 % on Sundays and recognized national holidays. (Shell Oil Workers
Union vs. Shell Company of the Philippines, G.R. No. L-30658-59, March 31, 1976,
70 SCRA 242-243.)
In the instant case, on May 22, 1965 PEMA alleged in the court below the following
cause of action as amended on June 7, 1965:
Since the start of the giving of cost of living allowance and longevity pay and
reiterated, after the promulgation of the Decision in National Waterworks and
Sewerage Authority vs. NAWASA Consolidated Unions et al., G.R. No. L-18938,
August 31, 1964, the petitioner has repeatedly requested respondent that the cost
of living allowance and longevity pay be taken into account in the computation of
overtime pay, effective as of the grant of said benefits on January 1, 1958, in
accordance with the ruling in said Decision of the Supreme Court. (Page 14, PNB's
Brief.)
To be sure, there could be some plausibility in PNB's pose regarding the jurisdiction
of the Industrial Court over the above cause of action. But, as We have already
stated, We agree with the broader view adopted by the court a quo on said point,
and We find that it is in the best interests of an concerned that this almost 25-year
dispute be settled once and for all without the need of going through other forums
only for the matter to ultimately come back to this Court probably years later, taking
particular note as We do, in this regard, of the cases cited on pages 9-10 of PEMA's
original memo, as follows:
Realizing its error before in not considering the present case a certified labor dispute,
the Bank now concedes that the case at bar 'belongs to compulsory arbitration'.
Hence, the lawful powers of the CIR over the same. However, the Bank says
'overtime differential is but a money claim, (and) respondent court does not have
jurisdiction to take cognizance of the same'.
But this is not a pure money claim (pp. 10-11, Opposition) because other factors are
involved - certification by the President, the matter may likely cause a strike, the
dispute concerns national interest and comes within the CIR's injunction against
striking, and the employer-employee relationship between the Bank and the
employees has not been severed. Besides, 'money claim' is embraced within the
term 'compensation' and therefore falls squarely under the jurisdiction of the CIR in
the exercise of its arbitration power (Sec. 4, CA 103; Please see also Republic vs.
CIR, L- 21303, Sept. 23/68; Makalintal J., NWSA Case, L-26894-96, Feb. 28/69;
Fernando, J.).
What confers jurisdiction on the Industrial Court, says Justice J.B.L. Reyes, is not
the form or manner of certification by the President, but the referral to said court of
the industrial dispute between the employer and the employees. (Liberation
Steamship vs. CIR, etc., L-25389 & 25390, June 27/68).
In Phil. Postal Savings Bank, et al. vs. CIR, et al., L-24572, Dec. 20/67, this
Honorable Court, speaking through Chief Justice Concepcion, held that the
certification of the issue 'as a dispute affecting an industry indispensable to the
national interest' leaves 'no room for doubt on the jurisdiction of the CIR to settle
such dispute.'
Relatedly, however, it is to be noted that it is clear from the holding of the Industrial
Court's decision We have earlier quoted, "the cause of action (here) is not on any
decision of any court but on the provisions of the law which have been in effect at
the time of the occurrence of the cause of action in relation to a labor dispute".
Viewed from such perspective laid by the lower court itself, it can hardly be said that
it indeed exercised purely its power of arbitration, which means laying down the
terms and conditions that should govern the relationship between the employer and
employees of an enterprise following its own appreciation of the relevant
circumstances rather empirically. More accurately understood, the court in fact
indulged in an interpretation of the applicable law, namely, CA 444, in the light of
its own impression of the opinion of this Court in NAWASA and based its decision
thereon.
Accordingly, upon the fact-situation of this case hereunder to be set forth, the
fundamental question for Us to decide is whether or not the decision under appeal
is in accordance with that law and the cited jurisprudence. In brief, as PEMA posits,
is NAWASA four-square with this case? And even assuming, for a while, that in a
sense what is before Us is an arbitration decision, private respondent itself admits
in its above-mentioned memorandum that this Court is not without power and
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
memorandum, it makes the observation that "(F)urthermore, in the Shell cases, the
unions are using the NAWASA decision as a source of right for recomputation, while
in the PNB, the Union merely cites the NAWASA doctrine, not as a source of right,
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but as a legal authority or reference by both parties so the Union demand may be
granted. " (Motion to Dismiss, p. 3.)
Obviously, therefore, the polestar to which Our mental vision must be focused in
order that We may arrive at a correct legal and equitable determination of this
controversy and, in the process make NAWASA better understood as We believe it
should be, is none other than Sections 3 and 4 of Com. Act No. 444, the Eight Hour
Labor Law, which pertinently provide thus:
SEC. 3. Work may be performed beyond eight hours a day in case of actual or
impending emergencies caused by serious accidents, fire, flood, typhoon,
earthquake, epidemic, or other disaster or calamity in order to prevent loss to life
and property or imminent danger to public safety; or in case of urgent work to be
performed on the machines, equipment, or installations in order to avoid a serious
loss which the employer would otherwise suffer, or some other just cause of a similar
nature; but in all such cases the laborers and employees shall be entitled to receive
compensation for the overtime work performed at the same rate as their regular
wages or salary, plus at least twenty-five per centum additional.
In case of national emergency the Government is empowered to establish rules and
regulations for the operation of the plants and factories and to determine the wages
to be paid the laborers.
xxx xxx xxx
SEC. 4. No person, firm, or corporation, business establishment or place or center
of labor shall compel an employee or laborer to work during Sundays and legal
holidays, unless he is paid an additional sum of at least twenty-five per centum of
his regular remuneration: Provided, however, that this prohibition shall not apply to
public utilities performing some public service such as supplying gas, electricity,
power, water, or providing means of transportation or communication.
The vital question is, what does "regular wage or salary" mean or connote in the
light of the demand of PEMA?
In Our considered opinion, the answer to such question lies in the basic rationale of
overtime pay. Why is a laborer or employee who works beyond the regular hours of
work entitled to extra compensation called in this enlightened time, overtime pay?
Verily, there can be no other reason than that he is made to work longer than what
is commensurate with his agreed compensation for the statutorily fixed or voluntarily
agreed hours of labor he is supposed to do. When he thus spends additional time to
his work, the effect upon him is multi-faceted: he puts in more effort, physical and/or
mental; he is delayed in going home to his family to enjoy the comforts thereof; he
might have no time for relaxation, amusement or sports; he might miss important
pre-arranged engagements; etc., etc. It is thus the additional work, labor or service
employed and the adverse effects just mentioned of his longer stay in his place of
work that justify and is the real reason for the extra compensation that he called
overtime pay.
Overtime work is actually the lengthening of hours developed to the interests of the
employer and the requirements of his enterprise. It follows that the wage or salary
to be received must likewise be increased, and more than that, a special additional
amount must be added to serve either as encouragement or inducement or to make
up fop the things he loses which We have already referred to. And on this score, it
must always be borne in mind that wage is indisputably intended as payment for
work done or services rendered. Thus, in the definition of wage for purposes of the
Minimum Wage Law, Republic Act No. 602, it is stated:
'Wage' paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time task, piece, commission basis or other method of calculating
the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done or for services
rendered or to be rendered and includes the fair and reasonable value as determined
by the Secretary of Labor, of board, lodging or other facilities customarily furnished
by the employer to the employee. 'Fair and reasonable value' shall not include a
profit to the employer which reduces the wage received by the employee below the
minimum wage applicable to the employee under this Act, nor shall any transaction
between an employer or any person affiliated with the employer and the employee
of the employer include any profit to the employer or affiliated person which reduces
the employee's wage below the wage applicable to the employee under this
Act.' 2 (Emphasis supplied).
As can be seen, wage under said law, in whatever means or form it is given to the
worker, is "for work done or to be done or for services rendered or to be rendered"
and logically "includes (only) the fair and reasonable value as determined by the
Secretary of Labor, of board, lodging or other facilities customarily furnished by the
employer to the employee".
Indeed, for the purpose of avoiding any misunderstanding or misinterpretation of
the word "wage" used in the law and to differentiate it from "supplement", the Wage
Administration Service to implement the Minimum Wage Law, defined the latter as:
extra remuneration or benefits received by wage earners from their employers and
include but are not restricted to pay for vacation and holidays not worked; paid sick
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leave or maternity leave; overtime rate in excess of what is required by law; pension,
retirement, and death benefits; profit-sharing, family allowances; Christmas, war
risk and cost-of-living bonuses; or other bonuses other than those paid as a reward
for extra output or time spent on the job. (Emphasis ours).
In these times when humane and dignified treatment of labor is steadily becoming
universally an obsession of society, we, in our country, have reached a point in
employer- employee relationship wherein employers themselves realize the
indispensability of at least making the compensation of workers equal to the worth
of their efforts as much as this case can be statistically determined. Thus, in order
to meet the effects of uncertain economic conditions affecting adversely the living
conditions of wage earners, employers, whenever the financial conditions of the
enterprise permit, grant them what has been called as cost-of-living allowance. In
other words, instead of leaving the workers to assume the risks of or drift by
themselves amidst the cross -currents of country-wide economic dislocation,
employers try their best to help them tide over the hardships and difficulties of the
situation. Sometimes, such allowances are voluntarily agreed upon in collective
bargaining agreements. At other times, it is imposed by the government as in the
instances of Presidential Decrees Nos. 525, 928, 1123, 1389, 1614, 1678, 1751 and
1790; Letters of Instructions No. 1056 and Wage Order No. 1. Notably, Presidential
Decree No. 1751 increased the statutory wage at all levels by P400 in addition to
integrating the mandatory emergency living allowances under Presidential Decree
No. 525 and Presidential Decree No. 1123 into the basic pay of all covered workers.
Going over these laws, one readily notices two distinctive features: First, it is
evidently gratifying that the government, in keeping with the humanitarian trend of
the times, always makes every effort to keep wages abreast with increased cost of
living conditions, doing it as soon as the necessity for it arises. However, obviously,
in order not to overdo things, except when otherwise provided, it spares from such
obligation employers who by mutual agreement with their workers are already
paying what the corresponding law provides (See Sec. 4 of P.D. No. 525; Section 2
of P.D. No. 851 until P.D. 1684 abolished all exemptions under P.D. No. 525, P.D.
No. 1123, P.D. No. 851 and P.D. No. 928 among distressed employers who even
though given sufficient lapse of time to make the necessary adjustment have not
done so.)3
In the case at bar, as already related earlier, the cost-of-living allowance began to
be granted in 1958 and the longevity pay in 1981. In other words, they were granted
by PNB upon realizing the difficult plight of its labor force in the face of the unusual
inflationary situation in the economy of the country, which, however acute, was
nevertheless expected to improve. There was thus evident an inherently contingent
character in said allowances. They were not intended to be regular, much less
permanent additional part of the compensation of the employees and workers. To
such effect were the testimonies of the witnesses at the trial. For instance, Mr.
Ladislao Yuzon declared:
ATTORNEY GESMUNDO
Questioning ....
Q. Calling your attention to paragraph No. 1, entitled monthly living allowance, which
has been marked as Exhibit 'A-l', will you kindly tell us the history of this benefit-
monthly living allowance, why the same has been granted?
A. Well, in view of the increasing standard of living, we decided to demand from
management in our set of demands ... included in our set of demands in 1957-1958
a monthly living allowance in addition to our basic salary. This benefit was agreed
upon and granted to take effect as of January 1, 1958. That was the first time it was
enjoyed by the employees of the Philippine National Bank. It started on a lesser
amount but year after year we have been demanding for increases on this living
allowance until we have attained the present amount of P 1 50.00 a month, starting
with P40.00 when it was first granted. The same is still being enjoyed by the
employees on a much higher amount. There were a few variations to that. (t. t.s.n.,
pp. 18-19, Hearing of August 16, 1965)
which testimony was affirmed by Mr. Panfilo Domingo, on cross- examination by
counsel for the respondent, reading as follows:
ATTORNEY GESMUNDO:
Q. Do you recall Mr. Domingo, that in denying the cost of living allowance and
longevity pay for incorporation with the basic salary, the reason given by the
management was that as according to you, it will mean an added cost and '
furthermore it will increase the contribution of the Philippine National Bank to the
GSIS, is that correct?
A. This is one of the reasons, of the objections for the inclusion of the living
allowance and longevity pay to form part of the basic pay, I mean among others,
because the basic reason why management would object is the cost of living
allowance is temporary in nature, the philosophy behind the grant of this benefit,
Nonetheless, it was the understanding if I recall right that in the event that cost of
living should go down then there should be a corresponding decrease in the cost of
living allowance being granted I have to mention this because this is the
fundamental philosophy in the grant of cost of living allowance. (Pp. 19-20, Record.)
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Much less were they dependent on extra or special work done or service rendered
by the corresponding recipient. Rather, they were based on the needs of their
families as the conditions of the economy warranted. Such is the inexorable import
of the pertinent provisions of the collective bargaining agreement:
MONTHLY LIVING ALLOWANCE
All employees of the Bank shall be granted a monthly living allowance of P140, plus
P10 for each minor dependent child below 21 years of age, but in no case shall the
total allowance exceed P200 or 25% of the monthly salary, whichever is higher,
subject to the following conditions:
a) That this new basic allowance shall be applicable to all employees, irrespective of
their civil status;
b) That a widow or widower shall also enjoy the basic allowance of P140 a month,
plus the additional benefit of P10 for each minor dependent child but not to exceed
P200 or 25% of basic salary whichever is higher.
c) That in case the husband and wife are both employees in the Bank both shall
enjoy this new basic monthly living allowance of P140 but only one of spouses shall
be entitled to claim the additional benefit of P10 for each minor legitimate or
acknowledged child. (Pp. 30-31, PNB's memo.)
So also with the longevity pay; manifestly, this was not based on the daily or monthly
amount of work done or service rendered it was more of a gratuity for their loyalty,
or their having been in the bank's employment for consideration periods of time.
Indeed, with particular reference to the longevity pay, the then existing collective
bargaining contract expressly provided: "... That this benefit shall not form part of
the basic salaries of the officers so affected."
PEMA may contend that the express exclusion of the longevity pay, means that the
cost-of-living allowance was not intended to be excluded. Considering, however, the
contingent nature of the allowances and their lack of relation to work done or service
rendered, which in a sense may be otherwise in respect to longevity pay PEMA's
contention is untenable. The rule of exclusio unius, exclusio alterius would not apply
here, if only because in the very nature of the two benefits in question,
considerations and conclusions as to one of them could be non-sequitur as to the
other.
Withal, there is the indisputable significant fact that after 1958, everytime a
collective bargaining agreement was being entered into, the union always demanded
the integration of the cost-of-living allowances and longevity pay, and as many
times, upon opposition of the bank, no stipulation to such effect has ever been
included in any of said agreements. And the express exclusion of longevity pay was
continued to be maintained.
On this point, the respondent court held that under its broad jurisdiction, it was
within the ambit of its authority to provide for what the parties could not agree upon.
We are not persuaded to view the matter that way. We are not convinced that the
government, thru the Industrial Court, then, could impose upon the parties in an
employer-employee conflict, terms and conditions which are inconsistent with the
existing law and jurisprudence, particularly where the remedy is sought by the actors
more on such legal basis and not purely on the court's arbitration powers.
As pointed out earlier in this opinion, Our task here is two-fold: First, reviewing the
decision under scrutiny as based on law and jurisprudence, the question is whether
or not the rulings therein are correct. And second, reading such judgment as an
arbitration decision, did the court a quo gravely abuse its discretion in holding, as it
did, that cost-of-living allowance and longevity pay should be included in the
computation of overtime pay?
In regard to the first question, We have already pointed out to start with, that as far
as longevity pay is concerned, it is beyond question that the same cannot be included
in the computation of overtime pay for the very simple reason that the contrary is
expressly stipulated in the collective bargaining agreement and, as should be the
case, it is settled that the terms and conditions of a collective bargaining agreement
constitute the law between the parties. (Mactan Workers Union vs. Aboitiz, 45 SCRA
577. See also Shell Oil Workers Union et al. vs. Shell Company of the Philippines,
supra) The contention of PEMA that the express provision in the collective bargaining
agreement that "this benefit (longevity pay) shall not form part of the basic salaries
of the officers so affected" cannot imply the same Idea insofar as the computation
of the overtime pay is concerned defies the rules of logic and mathematics. If the
basic pay cannot be deemed increased, how could the overtime pay be based on
any increased amount at all?
However, the matter of the cost-of-living allowance has to be examined from
another perspective, namely, that while PEMA had been always demanding for its
integration into the basic pay, it never succeeded in getting the conformity of PNB
thereto, and so, all collective bargaining agreements entered -4 into periodically by
the said parties did not provide therefor. And it would appear that PEMA took the
non-agreement of the bank in good grace, for the record does not show that any
remedial measure was ever taken by it in connection therewith. In other words, the
parties seemed to be mutually satisfied that the matter could be better left for
settlement on the bargaining table sooner or later, pursuant to the spirit of free
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bargaining underlying Republic Act 875, the Industrial Peace Act then in force. Or,
as observed by PEMA in its memorandum, (page 23), the parties "agreed to let the
question remain open-pending decision of authorities that would justify the demand
of the Union." Indeed, on pages 23-24 of said memorandum, the following position
of PEMA is stated thus:
Thus the following proceeding took place at the Court a quo:
ATTY. GESMUNDO:
That is our position, Your Honor, because apparently there was an understanding
reached between the parties as to their having to wait for authorities and considering
that the issue or one of the issues then involved in the NAWASA case pending in the
CIR supports the stand of the union, that the principle enunciated in connection with
that issue is applicable to this case.
xxx xxx xxx
Q. Do we understand from you, Mister Yuson, that it was because of the
management asking you for authorities in allowing the integration of the cost of
living allowance with your basic salary and your failure to produce at the time such
authorities that the union then did not bring any case to the Court?
A. Well, in the first place, it is not really my Idea to be bringing matters to the Court
during my time but I would much prefer that we agree on the issue. Well, insofar
as you said that the management was asking me, welt I would say that they were
invoking (on) authorities that we can show in order to become as a basis for granting
or for agreeing with us although we were aware of the existence of a pending case
which is very closely similar to our demand, yet we decided to wait until this case
should be decided by the Court so that we can avail of the decision to present to
management as what they are asking for. (t.s.n., pp. 31-32, 35-36, Aug. 28,1965.)
Now, to complete proper understanding of the character of the controversy before
Us, and lest it be felt by those concerned that We have overlooked a point precisely
related to the matter touched in the above immediately preceding paragraph, it
should be relevant to quote a portion of the "Stipulation of Facts" of the parties
hereto:
1. This particular demand was among those submitted by Petitioner-Union in the
current collective bargaining negotiations to the Respondent Bank. However, since
this case was already filed in court on May 22, 1965, the parties agreed not to
include this particular demand in the discussion, leaving the matter to the discretion
and final judicial determination of the courts of justice." (Page 81, Rec.)
In fine, what the parties commonly desire is for this Court to construe CA 444 in the
light of NAWASA, considering the fact- situation of the instant case.
In this respect, it is Our considered opinion, after mature deliberation, that
notwithstanding the portions of the NAWASA's opinion relied upon by PEMA, there
is nothing in CA 444 that could justify its posture that cost-of-living allowance should
be added to the regular wage in computing overtime pay.
After all, what was said in NAWASA that could be controlling here? True, it is there
stated that "for purposes of computing overtime compensation, regular wage
includes all payments which the parties have agreed shall be received during the
work week, including - differential payments for working at undesirable times, such
as at night and the board and lodging customarily furnished the employee. ... The
'regular rate' of pay also ordinarily includes incentive bonus or profit-sharing
payments made in addition to the normal basic pay (56 C.J.S., pp. 704-705), and it
was also held that the higher rate for night, Sunday and holiday work is just as much
a regular rate as the lower rate for daytime work. The higher rate is merely an
inducement to accept employment at times which are not as desirable from a
workmen's standpoint (International L. Ass'n vs. National Terminals Corp. C.C. Wise,
50 F. Supp. 26, affirmed C.C.A. Carbunoa v. National Terminals Corp. 139 F. 2d
853)." (11 SCRA, p. 783)
But nowhere did NAWASA refer to extra, temporary and contingent compensation
unrelated to work done or service rendered, which as explained earlier is the very
nature of cost-of- living allowance. Withal, in strict sense, what We have just quoted
from NAWASA was obiter dictum, since the only issue before the Court there was
whether or not "in computing the daily wage, (whether) the addition compensation
for Sunday should be included. " (See No. 7 of Record)
In any event, as stressed by Us in the Shell cases, the basis of computation of
overtime pay beyond that required by CA 444 must be the collective bargaining
agreement, 4 for, to reiterate Our postulation therein and in Bisig ng
Manggagawa, supra, it is not for the court to impose upon the parties anything
beyond what they have agreed upon which is not tainted with illegality. On the other
hand, where the parties fail to come to an agreement, on a matter not legally
required, the court abuses its discretion when it obliges any 6f them to do more
than what is legally obliged.
Doctrinally, We hold that, in the absence of any specific provision on the matter in
a collective bargaining agreement, what are decisive in determining the basis for the
computation of overtime pay are two very germane considerations, namely, (1)
whether or not the additional pay is for extra work done or service rendered and (2)
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whether or not the same is intended to be permanent and regular, not contingent
nor temporary and given only to remedy a situation which can change any time. We
reiterate, overtime pay is for extra effort beyond that contemplated in the
employment contract, hence when additional pay is given for any other purpose, it
is illogical to include the same in the basis for the computation of overtime pay. This
holding supersedes NAWASA.
Having arrived at the foregoing conclusions, We deem it unnecessary to discuss any
of the other issues raised by the parties.
WHEREFORE, judgment is hereby rendered reversing the decision appealed from,
without costs.

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Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-39387 June 29, 1982
PAMPANGA SUGAR DEVELOPMENT CO., INC., petitioner,
vs.
COURT OF INDUSTRIAL RELATIONS AND SUGAR WORKERS
ASSOCIATION, respondents.
MAKASIAR, J.:
Petitioner Pampanga Sugar Development Company, Inc. seeks the reversal of the
order dated June 6, 1974 of respondent Court of Industrial Relations awarding to
respondent Sugar Workers Association's (Union) counsel attorney's fees equivalent
to 20% of the judgment in CIR Case No. 4264- ULP and ordering the lower court's
Examining Division to compute the wage and fringe benefits differentials due the 28
individual workers who did not execute quitclaims as well as attorney's fees
corresponding to 20% of the benefits due to 53 workers who entered into
agreements waiving their rights and benefits under the decision dated December 4,
1972 in the aforecited case; also, the setting aside of the CIR resolution of
September 3, 1974 denying petitioner's motion for reconsideration of the questioned
order (pp. 15 & 57, rec.).
For a better appreciation of this case, certain prefatory facts must be recalled.
Sometime in February, 1956, the workers' affiliates of respondent Union staged a
strike against petitioner company. This labor dispute was certified by the President
to the Court of Industrial Relations which was docketed as Case No. 13-IPA. After
six years, the said Court issued an order on November 8, 1962 directing petitioner
company to reinstate the members of respondent union. On March 12, 1963 some
88 union members were thus reinstated by petitioner. However, petitioner
discriminated against the reemployed workers with respect to wage rates, off-
season pay, cost of living allowance, milling bonus and Christmas bonus by depriving
them of aforesaid benefits or by granting to some members benefits lesser than
those given to members of the Pasudeco Workers Union, another labor group in the
service of petitioner. By reason of such denial and/or grant of lower benefits to
respondent's members because of their union affiliation and union activities,
respondent filed with the CIR a complaint dated September 10, 1964 for unfair labor
practice against petitioner which case was docketed as Case No. 4264-ULP.
On December 4, 1972, the CIR handed down a decision adjudging herein petitioner
guilty of unfair labor practice acts as charged and finding the same to have been
committed, and thereby directing petitioner to cease and desist from further
committing the said unfair labor practice acts and directing petitioner to pay wage
differentials to certain workers and fringe benefits as would be found due and
payable to them and to readmitted seasonal and casual members of respondent
union totalling 88 with the exception of 7 workers.
In a resolution dated May 28, 1973, the CIR denied petitioner's motion for
reconsideration of aforesaid decision filed on December 14, 1972. Petitioner
appealed the above decision and resolution to this Court on June 15, 1973 praying
in its petition for the nullification of said decision and motion for being contrary to
law, and for the rendition of a new judgment dismissing CIR Case No. 4264-ULP.
This Court, in its resolution of July 31, 1973, denied the said petition for review
(docketed as G.R. No. L-36994) for lack of merit. Petitioner then moved for
reconsideration of aforesaid denial which was denied on October 4, 1973 for lack of
merit. Said resolution denying the motion for reconsideration thus became final and
executory on October 12, 1973.
With the finality of the December 4, 1972 decision having been settled, respondent
Union filed with the CIR a motion for computation of final judgment and a petition
for attorney's lien both dated October 17, 1973 (pp. 47 & 50, rec.).
Petitioner company filed its answer to motion for computation of final judgment and
the petition for attorney's lien under date of November 20, 1973 (p. 52, rec.).
The CIR, acting on the aforesaid motions of respondent Union, issued its order of
June 6, 1974 approving and granting to respondent's counsel, Atty. Ignacio Lacsina,
attorney's fees equivalent to 20% of the total amount of final judgment or whatever
recovery or settlement is made and directing its Examining Division to compute the
wage and fringe benefits differentials due the 28 individual workers who did not
waive or quitclaim their rights established by the decision of December 4, 1972 as
well as the attorney's fees equivalent to 20% of the total wage and fringe benefits
differentials due the fifty-three (53) individual workers who executed agreements
with the company waiving and quitclaiming their rights, benefits and privileges under
the aforesaid decision (pp. 15 & 57, rec.).
Petitioner moved for reconsideration of aforecited order on June 26, 1974 and on
July 5, 1974, the arguments supporting said motion for reconsideration followed
(pp. 63 & 65, rec.).
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Respondent Union then filed its motion to strike out the motion for reconsideration
dated July 23, 1974 (p. 72, rec.). In a resolution of September 3, 1974, respondent
lower court denied petitioner's motion for reconsideration.
Thus, this appeal from the subject order and resolution of the CIR.
Petitioner alleges the following assignment of errors:
1. The Court of Industrial Relations erred in awarding attorney's fees to the union's
counsel equivalent to 20% of the total amount of final judgment or whatever
recovery or settlement is made thereunder; because, aside from being inequitable,
exorbitant, excessive and unconscionable, the same is without legal basis.
2. The Court of Industrial Relations erred in ordering the Chief of its examining
division or his duly authorized representative to examine the payrolls, vouchers,
books of account and other pertinent documents of petitioner, and to compute the
wage and fringe-benefits differentials allegedly due the members of respondent
Union because such examination and computation have become academic.
3. The Court of Industrial Relations erred in not denying or dismissing the two
motions filed by respondent union on October 18, 1973 praying therein that the
union's counsel be awarded attorney's fees and that an order be issued directing the
examining division of the court to compute the wage and fringe benefits differentials
allegedly due the members of the union under the decision of December 4, 1972.
Respondents, however, contend that —
1. The issue of quitclaims is now res judicata;
2. The CIR finding that 81 members of respondent union are entitled to adjudged
benefits is no longer alterable after decision has become final;
3. The CIR power to adjust unfair labor practices is unaffected by individual
settlements;
4. The rights of labor are unwaivable; quitclaims null and void; and
5. The question regarding alleged unreasonableness of award of attorney's fees, not
raised before Court a quo, is barred on appeal.
After a careful evaluation of the petitioners' and respondents' pleadings, this Court,
finds the allegations of petitioner to be without merit.
On the first assignment of error, paragraph (a), the petitioner failed to raise the
issue before the trial court. This Court notes that petitioner's answer to the motion
for computation of final judgment and to petition for attorney's lien filed by the
respondent in the trial court did not raise the foregoing issue. It is a well-settled
doctrine in this jurisdiction that issues not raised in the trial court may not be raised
on appeal. Otherwise, there will be no end to litigations thus defeating the ends of
justice.
Nevertheless, this Court finds the allegations to be devoid of merit. Petitioner's
contention that there is no basis for respondent's petition for attorney's lien filed
with the trial court containing allegations relative to attorney's fees as agreed upon
between him and his client, the complainant Sugar Workers' Association, is
untenable. The written conformity of the President of said Sugar Workers Association
on behalf thereof confirms the existence of such an agreement on attorney's fees
and constitutes an irrefutable evidence of such agreement. The trial court, therefore,
had sufficient evidence upon which it based its decision. The petitioner did not
contest the allegations contained in the respondent's petition for attorney's lien
before the trial court. This constitutes an implied admission thereof. Moreover, it is
evident from the tenor of the trial court's order issued on June 6, 1974 that the said
court carefully evaluated the respondent's petition for attorney's lien and even
reduced the percentage from 25 IC to 20 %.
On the first assignment of error, paragraph (b), this Court likewise finds the same
to be without merit. This issue has already been resolved by this Court when the
petitioner filed its first petition for certiorari (G.R. No. L- 36994) seeking nullification
of the trial court's judgment on the same issue. Petitioner's allegations were rejected
by this Court in said case. It may not now be repeated and raised on appeal before
this Court, the same being res judicata.
Be that as it may, the allegations of petitioner to the effect that by reason of the
quitclaims there is nothing upon which the attorney's lien attaches, is not valid. This
Court finds the quitclaims not valid. Firstly, said quitclaims were secured on
December 27, 1972 by petitioner after it lost its case in the lower court when the
latter promulgated its decision on the case on December 4, 1972. Obviously in its
desire to deny what is due the sugar workers concerned and frustrate the decision
of the lower court awarding benefits to them, it used its moral ascendancy as
employer over said workers to secure said quitclaims. Predicated on said quitclaims,
petitioner filed a petition for certiorari before this Court but the same was denied by
the Court on July 31, 1973 and October 4, 1973. Petitioner now has the audacity to
return before this Court still invoking said quitclaims, which We again reject.
Secondly, while rights may be waived, the same must not be contrary to law, public
order, public policy, morals or good customs or prejudicial to a third person with a
right recognized by law (Art. 6, New Civil Code). The quitclaim agreements contain
the following provisions in paragraph I 1, No. 3, thereof:
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3. Nothing herein stipulated shall be construed as an admission and/or recognition
by the Party of The Second Part of its failure refusal and/or omission as employer,
to faithfully comply with the pertinent laws, rules and regulations and/or
agreements, nor its liability therefor and thereunder.
Needless to state, the foregoing provisions are contrary to law, It exempts the
petitioner from any legal liability. The above- quoted provision renders the quitclaim
agreements void ab initio in their entirety since they obligated the workers
concerned to forego their benefits, while at the same time, exempted the petitioner
from any liability that it may choose to reject. This runs counter to Article 22 of the
New Civil Code which provides that no one shall be unjustly enriched at the expense
of another.
Thirdly, the alleged quitclaim agreements are contrary to public policy. Once a civil
action is filed in court, the cause of action may not be the subject of compromise
unless the same is by leave of the court concerned. Otherwise, this will render the
entire judicial system irrelevant to the prejudice of the national interest. Parties to
litigations cannot be allowed to trifle with the judicial system by coming to court and
later on agreeing to a compromise without the knowledge and approval of the court.
This converts the judiciary into a mere tool of party-litigants who act according to
their whims and caprices. This is more so when the court has already rendered its
decision on the issues submitted.
In the case at bar, the lower court has already rendered a decision on the issues
presented before the alleged quitclaims agreements were made. The quitclaim
agreements were secured by petitioner while it filed a petition for certiorari before
this Court for a review of the lower court's decision. The quiclaim agreements taken
together with the petitioner's petition for certiorari of the trial court's decision clearly
and unmistakably shows the bad faith of the petitioner and its outright refusal to
comply with its legal obligations. And now it has the temerity to attempt to use this
Court as its instrument for the purpose.
This Court rejects the contention of petitioner to the effect that the lien of an
attorney on the judgment or decree for the payment of money and the preference
thereof which he has secured in favor of his client takes legal effect only from and
after, but not before notice of said lien has been entered in the record and served
on the adverse party, citing the cases of Menzi and Co. vs. Bastida (63 Phil. 16) and
Macondray & Co. vs. Jose (66 Phil. 590) in support thereof.
This Court finds the petitioner's contentions and citations applicable only when the
case has already been decided with finality. In the case at bar, the original case was
decided with finality only after this Court denied the petitioner's motion for
reconsideration of this Court's denial of its petition for certiorari on the lower court's
decision.
This Court is appalled by the attempt of petitioner to mislead it by alleging that the
lower court recognized the validity and effectivity of the 53 individual agreements
when it declared allegedly that "rights may be waived. " The records show that the
lower court qualified its statement to the effect that the waiver must not be contrary
to law, public order, public policy, morals or good customs, or prejudicial to a third
person with a right recognized by law citing Article 6 of the New Civil Code. This
attempt by petitioner casts a serious doubt on the integrity and good faith not only
of the petitioner but also of its counsel.
This Court rejects the allegation of petitioner to the effect that the 53 agreements
gave substance to the policy of the Industrial Peace Act of encouraging the parties
to make all reasonable efforts to settle their differences by mutual agreement, citing
the case of Filomena Dionela, et al. vs. CIR, et al. (L-18334, August 31, 1963).
Petitioner's contention and the case cited in support thereof apply only where there
is good faith on the part of the party litigants. In the case at bar, petitioner acted
with evident bad faith and malice. Petitioner secured the 53 quitclaim agreements
individually with the 53 sugar workers without the intervention of respondent's
lawyer who was representing them before the lower court. This subterfuge is
tantamount to a sabotage of the interest of respondent association. Needless to say,
the means employed by petitioner in dealing with the workers individually, instead
of collectively through respondent and its counsel, violates good morals as they
undermine the unity of respondent union and fuels industrial disputes, contrary to
the declared policy in the Industrial Peace Act.
This Court likewise rejects petitioner's allegation that the 53 quitclaim agreements
were in the nature of a compromise citing the case of Republic vs. Estenzo, et al.,
(L-24656, September 25, 1968, 25 SCRA 122) and Articles 2028 and 2040 of the
New Civil Code.
Petitioner's allegations and citations apply only to compromises between the party-
litigants done in good faith. In the case at bar, there was no compromise between
the petitioner and the respondent Sugar Workers Association. In respect of the 53
quitclaims, these are not compromise agreements between the petitioner and
respondent union. They are separate documents of renunciation of individual rights.
Compromise involves the mutual renunciation of rights by both parties on a parity
basis. The quitclaims, however, bind the workers to renounce their rights while the
petitioner not only does not renounce anything but also acquires exemption from
any legal liability in connection therewith.
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On the First Assignment of Error, Paragraph (c), the petitioner anchors his SO ORDERED.
allegations on the technical procedural requirements of Section 37, Rule 138 of the
New Rules of Court. This Court, however, finds petitioner's allegation without merit.
Said provision of the Rules of Court is meant to protect the interest of an attorney's
client and the adverse party by seeing to it that they are given the opportunity to
contest the creation of the attorney's lien. It will be noted from the records that the
client Sugar Workers Union was not only notified but also affixed its conformity to
the respondents' motion for attorney's lien. With respect to the adverse party, the
petitioner in this case, said adverse party's interest was amply protected by the lower
court when the latter admitted petitioner's answer to respondent's motion for
computation of final judgment and to respondent's counsel's petition for attorney's
lien. Petitioner did not raise the aforesaid technicality in its answer before the lower
court. It cannot now raise it for the first time on appeal.
On the First Assignment of Error, Paragraph (d), this Court finds petitioner's
allegations to the effect that the attorney's fees awarded are inequitable, exorbitant,
excessive and unconscionable, citing in the process the case of Meralco Workers'
Union vs. Gaerlan (32 SCRA 419), completely without basis nor merit.
Again, petitioner did not raise this issue in the lower court. It cannot now raise said
issue for the first time on appeal before this Court. Nevertheless, petitioner has failed
to prove any of its allegations. Hence, this Court finds the same worthless. The
Meralco case does not apply in this case for the reason that the facts and
circusmtances are entirely different.
On the Second Assignment of Error, this Court finds petitioner's allegation to the
effect that the lower court erred in ordering the computation of judgment on the
ground that by reason of the quitclaim agreements the computation of judgment
has become academic, to be without merit and grossly inane.
The allegations of petitioner are premised on its previous allegations regarding the
quitclaims. This Court has earlier stated that the quitclaim agreements are void ab
initio. The lower court was correct in directing the computation of judgment, there
being a basis therefor.
On the Third Assignment of Error, this Court likewise finds petitioner's allegations
which are based on its allegations in support of the first and second assignments of
errors, without merit, as heretofore discussed.
WHEREFORE, THE PETITION IS HEREBY DISMISSED AND RESPONDENT CIR (NOW
THE NLRC) IS HEREBY DIRECTED TO IMPLEMENT ITS ORDER DATED JUNE 6,1974.
COSTS AGAINST PETITIONER.

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G.R. No. 151966 July 8, 2005
JPL MARKETING PROMOTIONS, Petitioner,
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL
GONZALES, RAMON ABESA III and FAUSTINO ANINIPOT, Respondents.
DECISION
Tinga, J.:
This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. SP
No. 62631 dated 03 October 2001 and its Resolution2 dated 25 January 2002
denying petitioner’s Motion for Reconsideration, affirming the Resolution of the
National Labor Relations Commission (NLRC), Second Division, dated 27 July 2000,
awarding separation pay, service incentive leave pay, and 13th month pay to private
respondents.
JPL Marketing and Promotions (hereinafter referred to as "JPL") is a domestic
corporation engaged in the business of recruitment and placement of workers. On
the other hand, private respondents Noel Gonzales, Ramon Abesa III and Faustino
Aninipot were employed by JPL as merchandisers on separate dates and assigned
at different establishments in Naga City and Daet, Camarines Norte as attendants to
the display of California Marketing Corporation (CMC), one of petitioner’s clients.
On 13 August 1996, JPL notified private respondents that CMC would stop its direct
merchandising activity in the Bicol Region, Isabela, and Cagayan Valley effective 15
August 1996.3 They were advised to wait for further notice as they would be
transferred to other clients. However, on 17 October 1996,4 private respondents
Abesa and Gonzales filed before the National Labor Relations Commission Regional
Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for
separation pay, 13th month pay, service incentive leave pay and payment for moral
damages.5 Aninipot filed a similar case thereafter.
After the submission of pertinent pleadings by all of the parties and after some
clarificatory hearings, the complaints were consolidated and submitted for
resolution. Executive Labor Arbiter Gelacio L. Rivera, Jr. dismissed the complaints
for lack of merit.6 The Labor Arbiter found that Gonzales and Abesa applied with
and were employed by the store where they were originally assigned by JPL even
before the lapse of the six (6)-month period given by law to JPL to provide private
respondents a new assignment. Thus, they may be considered to have unilaterally
severed their relation with JPL, and cannot charge JPL with illegal dismissal.7 The
Labor Arbiter held that it was incumbent upon private respondents to wait until they
were reassigned by JPL, and if after six months they were not reassigned, they can
file an action for separation pay but not for illegal dismissal.8 The claims for 13th
month pay and service incentive leave pay was also denied since private respondents
were paid way above the applicable minimum wage during their employment.9
Private respondents appealed to the NLRC. In its Resolution,10 the Second Division
of the NLRC agreed with the Labor Arbiter’s finding that when private respondents
filed their complaints, the six-month period had not yet expired, and that CMC’s
decision to stop its operations in the areas was beyond the control of JPL, thus, they
were not illegally dismissed. However, it found that despite JPL’s effort to look for
clients to which private respondents may be reassigned it was unable to do so, and
hence they are entitled to separation pay.11 Setting aside the Labor Arbiter’s
decision, the NLRC ordered the payment of:
1. Separation pay, based on their last salary rate and counted from the first day of
their employment with the respondent JPL up to the finality of this judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.12
Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with
the Court of Appeals, imputing grave abuse of discretion on the part of the NLRC. It
claimed that private respondents are not by law entitled to separation pay, service
incentive leave pay and 13th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC
resolution. While conceding that there was no illegal dismissal, it justified the award
of separation pay on the grounds of equity and social justice.13 The Court of Appeals
rejected JPL’s argument that the difference in the amounts of private respondents’
salaries and the minimum wage in the region should be considered as payment for
their service incentive leave and 13th month pay.14 Notwithstanding the absence of
a contractual agreement on the grant of 13th month pay, compliance with the same
is mandatory under the law. Moreover, JPL failed to show that it was exempt from
paying service incentive leave pay. JPL filed a motion for reconsideration of the said
resolution, but the same was denied on 25 January 2002.15
In the instant petition for review, JPL claims that the Court of Appeals committed
reversible error in rendering the assailed Decision and Resolution.16 The instant
case does not fall under any of the instances where separation pay is due, to wit:
installation of labor-saving devices, redundancy, retrenchment or closing or
cessation of business operation,17 or disease of an employee whose continued
employment is prejudicial to him or co-employees,18 or illegal dismissal of an
employee but reinstatement is no longer feasible.19 Meanwhile, an employee who
voluntarily resigns is not entitled to separation unless stipulated in the employment
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contract, or the collective bargaining agreement, or is sanctioned by established
practice or policy of the employer.20 It argues that private respondents’ good record
and length of service, as well as the social justice precept, are not enough to warrant
the award of separation pay. Gonzales and Aninipot were employed by JPL for more
than four (4) years, while Abesa rendered his services for more than two (2) years,
hence, JPL claims that such short period could not have shown their worth to JPL so
as to reward them with payment of separation pay.21
In addition, even assuming arguendo that private respondents are entitled to the
benefits awarded, the computation thereof should only be from their first day of
employment with JPL up to 15 August 1996, the date of termination of CMC’s
contract, and not up to the finality of the 27 July 2000 resolution of the NLRC.22 To
compute separation pay, 13th month pay, and service incentive leave pay up to 27
July 2000 would negate the findings of both the Court of Appeals and the NLRC that
private respondents were not unlawfully terminated.23 Additionally, it would be
erroneous to compute service incentive leave pay from the first day of their
employment up to the finality of the NLRC resolution since an employee has to
render at least one (1) year of service before he is entitled to the same. Thus, service
incentive leave pay should be counted from the second year of service.24
On the other hand, private respondents maintain that they are entitled to the
benefits being claimed as per the ruling of this Court in Serrano v. NLRC, et
al.25 They claim that their dismissal, while not illegal, was tainted with bad
faith.26 They allege that they were deprived of due process because the notice of
termination was sent to them only two (2) days before the actual
termination.27 Likewise, the most that JPL offered to them by way of settlement
was the payment of separation pay of seven (7) days for every year of service.28
Replying to private respondents’ allegations, JPL disagrees that the notice it sent to
them was a notice of actual termination. The said memo merely notified them of the
end of merchandising for CMC, and that they will be transferred to other
clients.29 Moreover, JPL is not bound to observe the thirty (30)-day notice rule as
there was no dismissal to speak of. JPL counters that it was private respondents
who acted in bad faith when they sought employment with another establishment,
without even the courtesy of informing JPL that they were leaving for good, much
less tender their resignation.30 In addition, the offer of seven (7) days per year of
service as separation pay was merely an act of magnanimity on its part, even if
private respondents are not entitled to a single centavo of separation pay.31
The case thus presents two major issues, to wit: whether or not private respondents
are entitled to separation pay, 13th month pay and service incentive leave pay, and
granting that they are so entitled, what should be the reckoning point for computing
said awards.
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in
cases of dismissals due to any of these reasons: (a) installation of labor saving
devices; (b) redundancy; (c) retrenchment; (d) cessation of the employer's
business; and (e) when the employee is suffering from a disease and his continued
employment is prohibited by law or is prejudicial to his health and to the health of
his co-employees. However, separation pay shall be allowed as a measure of social
justice in those cases where the employee is validly dismissed for causes other than
serious misconduct or those reflecting on his moral character, but only when he was
illegally dismissed.32 In addition, Sec. 4(b), Rule I, Book VI of the Implementing
Rules to Implement the Labor Code provides for the payment of separation pay to
an employee entitled to reinstatement but the establishment where he is to be
reinstated has closed or has ceased operations or his present position no longer
exists at the time of reinstatement for reasons not attributable to the employer.
The common denominator of the instances where payment of separation pay is
warranted is that the employee was dismissed by the employer.33 In the instant
case, there was no dismissal to speak of. Private respondents were simply not
dismissed at all, whether legally or illegally. What they received from JPL was not a
notice of termination of employment, but a memo informing them of the termination
of CMC’s contract with JPL. More importantly, they were advised that they were to
be reassigned. At that time, there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the
operation of a business or undertaking for a period not exceeding six (6) months,
wherein an employee/employees are placed on the so-called "floating status." When
that "floating status" of an employee lasts for more than six months, he may be
considered to have been illegally dismissed from the service. Thus, he is entitled to
the corresponding benefits for his separation, and this would apply to suspension
either of the entire business or of a specific component thereof.34
As clearly borne out by the records of this case, private respondents sought
employment from other establishments even before the expiration of the six (6)-
month period provided by law. As they admitted in their comment, all three of them
applied for and were employed by another establishment after they received the
notice from JPL.35 JPL did not terminate their employment; they themselves
severed their relations with JPL. Thus, they are not entitled to separation pay.
The Court is not inclined in this case to award separation pay even on the ground
of compassionate justice. The Court of Appeals relied on the cases36 wherein the
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Court awarded separation pay to legally dismissed employees on the grounds of
equity and social consideration. Said cases involved employees who were actually
dismissed by their employers, whether for cause or not. Clearly, the principle applies
only when the employee is dismissed by the employer, which is not the case in this
instance. In seeking and obtaining employment elsewhere, private respondents
effectively terminated their employment with JPL.
In addition, the doctrine enunciated in the case of Serrano37 cited by private
respondents has already been abandoned by our ruling in Agabon v. National Labor
Relations Commission.38 There we ruled that an employer is liable to pay indemnity
in the form of nominal damages to a dismissed employee if, in effecting such
dismissal, the employer failed to comply with the requirements of due process.
However, private respondents are not entitled to the payment of damages
considering that there was no violation of due process in this case. JPL’s memo
dated 13 August 1996 to private respondents is not a notice of termination, but a
mere note informing private respondents of the termination of CMC’s contract and
their re-assignment to other clients. The thirty (30)-day notice rule does not apply.
Nonetheless, JPL cannot escape the payment of 13th month pay and service
incentive leave pay to private respondents. Said benefits are mandated by law and
should be given to employees as a matter of right.
Presidential Decree No. 851, as amended, requires an employer to pay its rank and
file employees a 13th month pay not later than 24 December of every year.
However, employers not paying their employees a 13th month pay or its equivalent
are not covered by said law.39 The term "its equivalent" was defined by the law’s
implementing guidelines as including Christmas bonus, mid-year bonus, cash
bonuses and other payment amounting to not less than 1/12 of the basic salary but
shall not include cash and stock dividends, cost-of-living-allowances and all other
allowances regularly enjoyed by the employee, as well as non-monetary benefits.40
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code,
is a yearly leave benefit of five (5) days with pay, enjoyed by an employee who has
rendered at least one year of service. Unless specifically excepted, all establishments
are required to grant service incentive leave to their employees. The term "at least
one year of service" shall mean service within twelve (12) months, whether
continuous or broken reckoned from the date the employee started working.41 The
Court has held in several instances that "service incentive leave is clearly
demandable after one year of service."42
Admittedly, private respondents were not given their 13th month pay and service
incentive leave pay while they were under the employ of JPL. Instead, JPL provided
salaries which were over and above the minimum wage. The Court rules that the
difference between the minimum wage and the actual salary received by private
respondents cannot be deemed as their 13th month pay and service incentive leave
pay as such difference is not equivalent to or of the same import as the said benefits
contemplated by law. Thus, as properly held by the Court of Appeals and by the
NLRC, private respondents are entitled to the 13th month pay and service incentive
leave pay.
However, the Court disagrees with the Court of Appeals’ ruling that the 13th month
pay and service incentive leave pay should be computed from the start of
employment up to the finality of the NLRC resolution. While computation for the
13th month pay should properly begin from the first day of employment, the service
incentive leave pay should start a year after commencement of service, for it is only
then that the employee is entitled to said benefit. On the other hand, the
computation for both benefits should only be up to 15 August 1996, or the last day
that private respondents worked for JPL. To extend the period to the date of finality
of the NLRC resolution would negate the absence of illegal dismissal, or to be more
precise, the want of dismissal in this case. Besides, it would be unfair to require JPL
to pay private respondents the said benefits beyond 15 August 1996 when they did
not render any service to JPL beyond that date. These benefits are given by law on
the basis of the service actually rendered by the employee, and in the particular
case of the service incentive leave, is granted as a motivation for the employee to
stay longer with the employer. There is no cause for granting said incentive to one
who has already terminated his relationship with the employer.
The law in protecting the rights of the employees authorizes neither oppression nor
self-destruction of the employer. It should be made clear that when the law tilts the
scale of justice in favor of labor, it is but recognition of the inherent economic
inequality between labor and management. The intent is to balance the scale of
justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management
but never should the scale be so tilted if the result is an injustice to the
employer. Justitia nemini neganda est (Justice is to be denied to none).43
WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 62631 are hereby MODIFIED. The award of
separation pay is deleted. Petitioner is ordered to pay private respondents their 13th
month pay commencing from the date of employment up to 15 August 1996, as well
as service incentive leave pay from the second year of employment up to 15 August
1996. No pronouncement as to costs. SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-52415 October 23, 1984
INSULAR BANK OF ASIA AND AMERICA EMPLOYEES' UNION
(IBAAEU), petitioner,
vs.
HON. AMADO G. INCIONG, Deputy Minister, Ministry of Labor and
INSULAR BANK OF ASIA AND AMERICA, respondents.
MAKASIAR, J.:
This is a petition for certiorari to set aside the order dated November 10, 1979, of
respondent Deputy Minister of Labor, Amado G. Inciong, in NLRC case No. RB-IV-
1561-76 entitled "Insular Bank of Asia and America Employees' Union (complainant-
appellee), vs. Insular Bank of Asia and America" (respondent-appellant), the
dispositive portion of which reads as follows: têñ.£îhqwâ£
xxx xxx xxx
ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the
National Labor Relations Commission dated 20 June 1978 be, as it is hereby, set
aside and a new judgment. promulgated dismissing the instant case for lack of merit
(p. 109 rec.).
The antecedent facts culled from the records are as follows:
On June 20, 1975, petitioner filed a complaint against the respondent bank for the
payment of holiday pay before the then Department of Labor, National Labor
Relations Commission, Regional Office No. IV in Manila. Conciliation having failed,
and upon the request of both parties, the case was certified for arbitration on July
7, 1975 (p. 18, NLRC rec.
On August 25, 1975, Labor Arbiter Ricarte T. Soriano rendered a decision in the
above-entitled case, granting petitioner's complaint for payment of holiday pay.
Pertinent portions of the decision read: têñ.£îhqwâ£
xxx xxx xxx
The records disclosed that employees of respondent bank were not paid their wages
on unworked regular holidays as mandated by the Code, particularly Article 208, to
wit: têñ.£îhqwâ£
Art. 208. Right to holiday pay.
(a) Every worker shall be paid his regular daily wage during regular holidays, except
in retail and service establishments regularly employing less than 10 workers.
(b) The term "holiday" as used in this chapter, shall include: New Year's Day,
Maundy Thursday, Good Friday, the ninth of April the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the twenty-fifth and the thirtieth
of December and the day designated by law for holding a general election.
xxx xxx xxx
This conclusion is deduced from the fact that the daily rate of pay of the bank
employees was computed in the past with the unworked regular holidays as
excluded for purposes of determining the deductible amount for absences
incurred Thus, if the employer uses the factor 303 days as a divisor in determining
the daily rate of monthly paid employee, this gives rise to a presumption that the
monthly rate does not include payments for unworked regular holidays. The use of
the factor 303 indicates the number of ordinary working days in a year (which
normally has 365 calendar days), excluding the 52 Sundays and the 10 regular
holidays. The use of 251 as a factor (365 calendar days less 52 Saturdays, 52
Sundays, and 10 regular holidays) gives rise likewise to the same presumption that
the unworked Saturdays, Sundays and regular holidays are unpaid. This being the
case, it is not amiss to state with certainty that the instant claim for wages on regular
unworked holidays is found to be tenable and meritorious.
WHEREFORE, judgment is hereby rendered:
(a) xxx xxxx xxx
(b) Ordering respondent to pay wages to all its employees for all regular h(olidays
since November 1, 1974 (pp. 97-99, rec., underscoring supplied).
Respondent bank did not appeal from the said decision. Instead, it complied with
the order of Arbiter Ricarte T. Soriano by paying their holiday pay up to and including
January, 1976.
On December 16, 1975, Presidential Decree No. 850 was promulgated amending,
among others, the provisions of the Labor Code on the right to holiday pay to read
as follows: têñ.£îhqwâ£
Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular daily
wages during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate and
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(c) As used in this Article, "holiday" includes New Year's Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of
July, the thirtieth of November, the twenty-fifth and the thirtieth of December, and
the day designated by law for holding a general election.
Accordingly, on February 16, 1976, by authority of Article 5 of the same Code, the
Department of Labor (now Ministry of Labor) promulgated the rules and regulations
for the implementation of holidays with pay. The controversial section thereof
reads: têñ.£îhqwâ£
Sec. 2. Status of employees paid by the month. — Employees who are uniformly
paid by the month, irrespective of the number of working days therein, with a salary
of not less than the statutory or established minimum wage shall be presumed to
be paid for all days in the month whether worked or not.
For this purpose, the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve" (italics supplied).
On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of Labor
(now Minister) interpreting the above-quoted rule, pertinent portions of which
read: têñ.£îhqwâ£
xxx xxx xxx
The ten (10) paid legal holidays law, to start with, is intended to benefit principally
daily employees. In the case of monthly, only those whose monthly salary did not
yet include payment for the ten (10) paid legal holidays are entitled to the benefit.
Under the rules implementing P.D. 850, this policy has been fully clarified to
eliminate controversies on the entitlement of monthly paid employees, The new
determining rule is this: If the monthly paid employee is receiving not less than
P240, the maximum monthly minimum wage, and his monthly pay is uniform from
January to December, he is presumed to be already paid the ten (10) paid legal
holidays. However, if deductions are made from his monthly salary on account of
holidays in months where they occur, then he is still entitled to the ten (10) paid
legal holidays. ..." (emphasis supplied).
Respondent bank, by reason of the ruling laid down by the aforecited rule
implementing Article 94 of the Labor Code and by Policy Instruction No. 9, stopped
the payment of holiday pay to an its employees.
On August 30, 1976, petitioner filed a motion for a writ of execution to enforce the
arbiter's decision of August 25, 1975, whereby the respondent bank was ordered to
pay its employees their daily wage for the unworked regular holidays.
On September 10, 1975, respondent bank filed an opposition to the motion for a
writ of execution alleging, among others, that: (a) its refusal to pay the
corresponding unworked holiday pay in accordance with the award of Labor Arbiter
Ricarte T. Soriano dated August 25, 1975, is based on and justified by Policy
Instruction No. 9 which interpreted the rules implementing P. D. 850; and (b) that
the said award is already repealed by P.D. 850 which took effect on December 16,
1975, and by said Policy Instruction No. 9 of the Department of Labor, considering
that its monthly paid employees are not receiving less than P240.00 and their
monthly pay is uniform from January to December, and that no deductions are made
from the monthly salaries of its employees on account of holidays in months where
they occur (pp. 64-65, NLRC rec.).
On October 18, 1976, Labor Arbiter Ricarte T. Soriano, instead of issuing a writ of
execution, issued an order enjoining the respondent bank to continue paying its
employees their regular holiday pay on the following grounds: (a) that the judgment
is already final and the findings which is found in the body of the decision as well as
the dispositive portion thereof is res judicata or is the law of the case between the
parties; and (b) that since the decision had been partially implemented by the
respondent bank, appeal from the said decision is no longer available (pp. 100-103,
rec.).
On November 17, 1976, respondent bank appealed from the above-cited order of
Labor Arbiter Soriano to the National Labor Relations Commission, reiterating therein
its contentions averred in its opposition to the motion for writ of execution.
Respondent bank further alleged for the first time that the questioned order is not
supported by evidence insofar as it finds that respondent bank discontinued
payment of holiday pay beginning January, 1976 (p. 84, NLRC rec.).
On June 20, 1978, the National Labor Relations Commission promulgated its
resolution en banc dismissing respondent bank's appeal, the dispositive portion of
which reads as follows: têñ.£îhqwâ£
In view of the foregoing, we hereby resolve to dismiss, as we hereby dismiss,
respondent's appeal; to set aside Labor Arbiter Ricarte T. Soriano's order of 18
October 1976 and, as prayed for by complainant, to order the issuance of the proper
writ of execution (p. 244, NLRC rec.).
Copies of the above resolution were served on the petitioner only on February 9,
1979 or almost eight. (8) months after it was promulgated, while copies were served
on the respondent bank on February 13, 1979.
On February 21, 1979, respondent bank filed with the Office of the Minister of Labor
a motion for reconsideration/appeal with urgent prayer to stay execution, alleging
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therein the following: (a) that there is prima facie evidence of grave abuse of
discretion, amounting to lack of jurisdiction on the part of the National Labor
Relations Commission, in dismissing the respondent's appeal on pure technicalities
without passing upon the merits of the appeal and (b) that the resolution appealed
from is contrary to the law and jurisprudence (pp. 260-274, NLRC rec.).
On March 19, 1979, petitioner filed its opposition to the respondent bank's appeal
and alleged the following grounds: (a) that the office of the Minister of Labor has
no jurisdiction to entertain the instant appeal pursuant to the provisions of P. D.
1391; (b) that the labor arbiter's decision being final, executory and unappealable,
execution is a matter of right for the petitioner; and (c) that the decision of the labor
arbiter dated August 25, 1975 is supported by the law and the evidence in the case
(p. 364, NLRC rec.).
On July 30, 1979, petitioner filed a second motion for execution pending appeal,
praying that a writ of execution be issued by the National Labor Relations
Commission pending appeal of the case with the Office of the Minister of Labor.
Respondent bank filed its opposition thereto on August 8, 1979.
On August 13, 1979, the National Labor Relations Commission issued an order which
states: têñ.£îhqwâ£
The Chief, Research and Information Division of this Commission is hereby directed
to designate a Socio-Economic Analyst to compute the holiday pay of the employees
of the Insular Bank of Asia and America from April 1976 to the present, in accordance
with the Decision of the Labor Arbiter dated August 25, 1975" (p. 80, rec.).
On November 10, 1979, the Office of the Minister of Labor, through Deputy Minister
Amado G. Inciong, issued an order, the dispositive portion of which
states: têñ.£îhqwâ£
ALL THE FOREGOING CONSIDERED, let the appealed Resolution en banc of the
National Labor Relations Commission dated 20 June 1978 be, as it is hereby, set
aside and a new judgment promulgated dismissing the instant case for lack of merit
(p. 436, NLRC rec.).
Hence, this petition for certiorari charging public respondent Amado G. Inciong with
abuse of discretion amounting to lack or excess of jurisdiction.
The issue in this case is: whether or not the decision of a Labor Arbiter awarding
payment of regular holiday pay can still be set aside on appeal by the Deputy
Minister of Labor even though it has already become final and had been partially
executed, the finality of which was affirmed by the National Labor Relations
Commission sitting en banc, on the basis of an Implementing Rule and Policy
Instruction promulgated by the Ministry of Labor long after the said decision had
become final and executory.
WE find for the petitioner.
I
WE agree with the petitioner's contention that Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9 issued by the then Secretary of
Labor are null and void since in the guise of clarifying the Labor Code's provisions
on holiday pay, they in effect amended them by enlarging the scope of their
exclusion (p. 1 1, rec.).
Article 94 of the Labor Code, as amended by P.D. 850, provides: têñ.£îhqwâ£
Art. 94. Right to holiday pay. — (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers. ...
The coverage and scope of exclusion of the Labor Code's holiday pay provisions is
spelled out under Article 82 thereof which reads: têñ.£îhqwâ£
Art. 82. Coverage. — The provision of this Title shall apply to employees in all
establishments and undertakings, whether for profit or not, but not to government
employees, managerial employees, field personnel members of the family of the
employer who are dependent on him for support domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in appropriate regulations.
... (emphasis supplied).
From the above-cited provisions, it is clear that monthly paid employees are not
excluded from the benefits of holiday pay. However, the implementing rules on
holiday pay promulgated by the then Secretary of Labor excludes monthly paid
employees from the said benefits by inserting, under Rule IV, Book Ill of the
implementing rules, Section 2, which provides that: "employees who are uniformly
paid by the month, irrespective of the number of working days therein, with a salary
of not less than the statutory or established minimum wage shall be presumed to
be paid for all days in the month whether worked or not. "
Public respondent maintains that "(T)he rules implementing P. D. 850 and Policy
Instruction No. 9 were issued to clarify the policy in the implementation of the ten
(10) paid legal holidays. As interpreted, 'unworked' legal holidays are deemed paid
insofar as monthly paid employees are concerned if (a) they are receiving not less
than the statutory minimum wage, (b) their monthly pay is uniform from January to
December, and (c) no deduction is made from their monthly salary on account of
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holidays in months where they occur. As explained in Policy Instruction No, 9, 'The
ten (10) paid legal holidays law, to start with, is intended to benefit principally daily
paid employees. In case of monthly, only those whose monthly salary did not yet
include payment for the ten (10) paid legal holidays are entitled to the benefit' " (pp.
340-341, rec.). This contention is untenable.
It is elementary in the rules of statutory construction that when the language of the
law is clear and unequivocal the law must be taken to mean exactly what it says. In
the case at bar, the provisions of the Labor Code on the entitlement to the benefits
of holiday pay are clear and explicit - it provides for both the coverage of and
exclusion from the benefits. In Policy Instruction No. 9, the then Secretary of Labor
went as far as to categorically state that the benefit is principally intended for daily
paid employees, when the law clearly states that every worker shall be paid their
regular holiday pay. This is a flagrant violation of the mandatory directive of Article
4 of the Labor Code, which states that "All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor." Moreover, it shall always be
presumed that the legislature intended to enact a valid and permanent statute which
would have the most beneficial effect that its language permits (Orlosky vs. Haskell,
155 A. 112.)
Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority
granted by Article 5 of the Labor Code authorizing him to promulgate the necessary
implementing rules and regulations.
Public respondent vehemently argues that the intent and spirit of the holiday pay
law, as expressed by the Secretary of Labor in the case of Chartered Bank Employees
Association v. The Chartered Bank (NLRC Case No. RB-1789-75, March 24, 1976),
is to correct the disadvantages inherent in the daily compensation system of
employment — holiday pay is primarily intended to benefit the daily paid workers
whose employment and income are circumscribed by the principle of "no work, no
pay." This argument may sound meritorious; but, until the provisions of the Labor
Code on holiday pay is amended by another law, monthly paid employees are
definitely included in the benefits of regular holiday pay. As earlier stated, the
presumption is always in favor of law, negatively put, the Labor Code is always
strictly construed against management.
While it is true that the contemporaneous construction placed upon a statute by
executive officers whose duty is to enforce it should be given great weight by the
courts, still if such construction is so erroneous, as in the instant case, the same
must be declared as null and void. It is the role of the Judiciary to refine and, when
necessary, correct constitutional (and/or statutory) interpretation, in the context of
the interactions of the three branches of the government, almost always in situations
where some agency of the State has engaged in action that stems ultimately from
some legitimate area of governmental power (The Supreme Court in Modern Role,
C. B. Swisher 1958, p. 36).
Thus. in the case of Philippine Apparel Workers Union vs. National Labor Relations
Commission (106 SCRA 444, July 31, 1981) where the Secretary of Labor enlarged
the scope of exemption from the coverage of a Presidential Decree granting increase
in emergency allowance, this Court ruled that: têñ.£îhqwâ£
... the Secretary of Labor has exceeded his authority when he included paragraph
(k) in Section 1 of the Rules implementing P. D. 1 1 23.
xxx xxx xxx
Clearly, the inclusion of paragraph k contravenes the statutory authority granted to
the Secretary of Labor, and the same is therefore void, as ruled by this Court in a
long line of cases . . . .. têñ.£îhqwâ£
The recognition of the power of administrative officials to promulgate rules in the
administration of the statute, necessarily limited to what is provided for in the
legislative enactment, may be found in the early case of United States vs. Barrios
decided in 1908. Then came in a 1914 decision, United States vs. Tupasi Molina (29
Phil. 119) delineation of the scope of such competence. Thus: "Of course the
regulations adopted under legislative authority by a particular department must be
in harmony with the provisions of the law, and for the sole purpose of carrying into
effect its general provisions. By such regulations, of course, the law itself cannot be
extended. So long, however, as the regulations relate solely to carrying into effect
the provisions of the law, they are valid." In 1936, in People vs. Santos, this Court
expressed its disapproval of an administrative order that would amount to an excess
of the regulatory power vested in an administrative official We reaffirmed such a
doctrine in a 1951 decision, where we again made clear that where an administrative
order betrays inconsistency or repugnancy to the provisions of the Act, 'the mandate
of the Act must prevail and must be followed. Justice Barrera, speaking for the Court
in Victorias Milling inc. vs. Social Security Commission, citing Parker as well as Davis
did tersely sum up the matter thus: "A rule is binding on the Courts so long as the
procedure fixed for its promulgation is followed and its scope is within the statutory
authority granted by the legislature, even if the courts are not in agreement with
the policy stated therein or its innate wisdom. ... On the other hand, administrative
interpretation of the law is at best merely advisory, for it is the courts that finally
determine chat the law means."
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"It cannot be otherwise as the Constitution limits the authority of the President, in
whom all executive power resides, to take care that the laws be faithfully executed.
No lesser administrative executive office or agency then can, contrary to the express
language of the Constitution assert for itself a more extensive prerogative.
Necessarily, it is bound to observe the constitutional mandate. There must be strict
compliance with the legislative enactment. Its terms must be followed the statute
requires adherence to, not departure from its provisions. No deviation is allowable.
In the terse language of the present Chief Justice, an administrative agency "cannot
amend an act of Congress." Respondents can be sustained, therefore, only if it could
be shown that the rules and regulations promulgated by them were in accordance
with what the Veterans Bill of Rights provides" (Phil. Apparel Workers Union vs.
National Labor Relations Commission, supra, 463, 464, citing Teozon vs. Members
of the Board of Administrators, PVA 33 SCRA 585; see also Santos vs. Hon. Estenzo,
et al, 109 Phil. 419; Hilado vs. Collector of Internal Revenue, 100 Phil. 295; Sy Man
vs. Jacinto & Fabros, 93 Phil. 1093; Olsen & Co., Inc. vs. Aldanese and Trinidad, 43
Phil. 259).
This ruling of the Court was recently reiterated in the case of American Wire & Cable
Workers Union (TUPAS) vs. The National Labor Relations Commission and American
Wire & Cable Co., Inc., G.R. No. 53337, promulgated on June 29, 1984.
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the
Labor Code and Policy instruction No. 9 issued by the then Secretary of Labor must
be declared null and void. Accordingly, public respondent Deputy Minister of Labor
Amado G. Inciong had no basis at all to deny the members of petitioner union their
regular holiday pay as directed by the Labor Code.
II
It is not disputed that the decision of Labor Arbiter Ricarte T. Soriano dated August
25, 1975, had already become final, and was, in fact, partially executed by the
respondent bank.
However, public respondent maintains that on the authority of De Luna vs. Kayanan,
61 SCRA 49, November 13, 1974, he can annul the final decision of Labor Arbiter
Soriano since the ensuing promulgation of the integrated implementing rules of the
Labor Code pursuant to P.D. 850 on February 16, 1976, and the issuance of Policy
Instruction No. 9 on April 23, 1976 by the then Secretary of Labor are facts and
circumstances that transpired subsequent to the promulgation of the decision of the
labor arbiter, which renders the execution of the said decision impossible and unjust
on the part of herein respondent bank (pp. 342-343, rec.).
This contention is untenable.
To start with, unlike the instant case, the case of De Luna relied upon by the public
respondent is not a labor case wherein the express mandate of the Constitution on
the protection to labor is applied. Thus Article 4 of the Labor Code provides that,
"All doubts in the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor
and Article 1702 of the Civil Code provides that, " In case of doubt, all labor
legislation and all labor contracts shall be construed in favor of the safety and decent
living for the laborer.
Consequently, contrary to public respondent's allegations, it is patently unjust to
deprive the members of petitioner union of their vested right acquired by virtue of
a final judgment on the basis of a labor statute promulgated following the acquisition
of the "right".
On the question of whether or not a law or statute can annul or modify a judicial
order issued prior to its promulgation, this Court, through Associate Justice Claro M.
Recto, said: têñ.£îhqwâ£
xxx xxx xxx
We are decidedly of the opinion that they did not. Said order, being unappealable,
became final on the date of its issuance and the parties who acquired rights
thereunder cannot be deprived thereof by a constitutional provision enacted or
promulgated subsequent thereto. Neither the Constitution nor the statutes, except
penal laws favorable to the accused, have retroactive effect in the sense of annulling
or modifying vested rights, or altering contractual obligations" (China Ins. & Surety
Co. vs. Judge of First Instance of Manila, 63 Phil. 324, emphasis supplied).
In the case of In re: Cunanan, et al., 19 Phil. 585, March 18, 1954, this Court said:
"... when a court renders a decision or promulgates a resolution or order on the
basis of and in accordance with a certain law or rule then in force, the subsequent
amendment or even repeal of said law or rule may not affect the final decision,
order, or resolution already promulgated, in the sense of revoking or rendering it
void and of no effect." Thus, the amendatory rule (Rule IV, Book III of the Rules to
Implement the Labor Code) cannot be given retroactive effect as to modify final
judgments. Not even a law can validly annul final decisions (In re: Cunanan, et al.,
Ibid).
Furthermore, the facts of the case relied upon by the public respondent are not
analogous to that of the case at bar. The case of De Luna speaks of final and
executory judgment, while iii the instant case, the final judgment is partially
executed. just as the court is ousted of its jurisdiction to annul or modify a judgment
the moment it becomes final, the court also loses its jurisdiction to annul or modify
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a writ of execution upon its service or execution; for, otherwise, we will have a
situation wherein a final and executed judgment can still be annulled or modified by
the court upon mere motion of a panty This would certainly result in endless
litigations thereby rendering inutile the rule of law.
Respondent bank counters with the argument that its partial compliance was
involuntary because it did so under pain of levy and execution of its assets (p. 138,
rec.). WE find no merit in this argument. Respondent bank clearly manifested its
voluntariness in complying with the decision of the labor arbiter by not appealing to
the National Labor Relations Commission as provided for under the Labor Code
under Article 223. A party who waives his right to appeal is deemed to have accepted
the judgment, adverse or not, as correct, especially if such party readily acquiesced
in the judgment by starting to execute said judgment even before a writ of execution
was issued, as in this case. Under these circumstances, to permit a party to appeal
from the said partially executed final judgment would make a mockery of the
doctrine of finality of judgments long enshrined in this jurisdiction.
Section I of Rule 39 of the Revised Rules of Court provides that "... execution shall
issue as a matter of right upon the expiration of the period to appeal ... or if no
appeal has been duly perfected." This rule applies to decisions or orders of labor
arbiters who are exercising quasi-judicial functions since "... the rule of execution of
judgments under the rules should govern all kinds of execution of judgment, unless
it is otherwise provided in other laws" Sagucio vs. Bulos 5 SCRA 803) and Article 223
of the Labor Code provides that "... decisions, awards, or orders of the Labor Arbiter
or compulsory arbitrators are final and executory unless appealed to the Commission
by any or both of the parties within ten (10) days from receipt of such awards,
orders, or decisions. ..."
Thus, under the aforecited rule, the lapse of the appeal period deprives the courts
of jurisdiction to alter the final judgment and the judgment becomes final ipso
jure (Vega vs. WCC, 89 SCRA 143, citing Cruz vs. WCC, 2 PHILAJUR 436, 440,
January 31, 1978; see also Soliven vs. WCC, 77 SCRA 621; Carrero vs. WCC and
Regala vs. WCC, decided jointly, 77 SCRA 297; Vitug vs. Republic, 75 SCRA 436;
Ramos vs. Republic, 69 SCRA 576).
In Galvez vs. Philippine Long Distance Telephone Co., 3 SCRA 422, 423, October 31,
1961, where the lower court modified a final order, this Court ruled
thus: têñ.£îhqwâ£
xxx xxx xxx
The lower court was thus aware of the fact that it was thereby altering or modifying
its order of January 8, 1959. Regardless of the excellence of the motive for acting
as it did, we are constrained to hold however, that the lower court had no authorities
to make said alteration or modification. ...
xxx xxx xxx
The equitable considerations that led the lower court to take the action complained
of cannot offset the dem ands of public policy and public interest — which are also
responsive to the tenets of equity — requiring that an issues passed upon in
decisions or final orders that have become executory, be deemed conclusively
disposed of and definitely closed for, otherwise, there would be no end to litigations,
thus setting at naught the main role of courts of justice, which is to assist in the
enforcement of the rule of law and the maintenance of peace and order, by settling
justiciable controversies with finality.
xxx xxx xxx
In the recent case of Gabaya vs. Mendoza, 113 SCRA 405, 406, March 30, 1982, this
Court said: têñ.£îhqwâ£
xxx xxx xxx
In Marasigan vs. Ronquillo (94 Phil. 237), it was categorically stated that the rule is
absolute that after a judgment becomes final by the expiration of the period provided
by the rules within which it so becomes, no further amendment or correction can be
made by the court except for clerical errors or mistakes. And such final judgment is
conclusive not only as to every matter which was offered and received to sustain or
defeat the claim or demand but as to any other admissible matter which must have
been offered for that purpose (L-7044, 96 Phil. 526). In the earlier case of Contreras
and Ginco vs. Felix and China Banking Corp., Inc. (44 O.G. 4306), it was stated
that the rule must be adhered to regardless of any possible injustice in a particular
case for (W)e have to subordinate the equity of a particular situation to the over-
mastering need of certainty and immutability of judicial pronouncements
xxx xxx xxx
III
The despotic manner by which public respondent Amado G. Inciong divested the
members of the petitioner union of their rights acquired by virtue of a final judgment
is tantamount to a deprivation of property without due process of law Public
respondent completely ignored the rights of the petitioner union's members in
dismissing their complaint since he knew for a fact that the judgment of the labor
arbiter had long become final and was even partially executed by the respondent
bank.
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A final judgment vests in the prevailing party a right recognized and protected by
law under the due process clause of the Constitution (China Ins. & Surety Co. vs.
Judge of First Instance of Manila, 63 Phil. 324). A final judgment is "a vested interest
which it is right and equitable that the government should recognize and protect,
and of which the individual could no. be deprived arbitrarily without injustice"
(Rookledge v. Garwood, 65 N.W. 2d 785, 791).
lt is by this guiding principle that the due process clause is interpreted. Thus, in the
pithy language of then Justice, later Chief Justice, Concepcion "... acts of Congress,
as well as those of the Executive, can deny due process only under pain of nullity,
and judicial proceedings suffering from the same flaw are subject to the same
sanction, any statutory provision to the contrary notwithstanding (Vda. de Cuaycong
vs. Vda. de Sengbengco 110 Phil. 118, emphasis supplied), And "(I)t has been
likewise established that a violation of a constitutional right divested the court of
jurisdiction; and as a consequence its judgment is null and void and confers no
rights" (Phil. Blooming Mills Employees Organization vs. Phil. Blooming Mills Co.,
Inc., 51 SCRA 211, June 5, 1973).
Tested by and pitted against this broad concept of the constitutional guarantee of
due process, the action of public respondent Amado G. Inciong is a clear example
of deprivation of property without due process of law and constituted grave abuse
of discretion, amounting to lack or excess of jurisdiction in issuing the order dated
November 10, 1979.
WHEREFORE, THE PETITION IS HEREBY GRANTED, THE ORDER OF PUBLIC
RESPONDENT IS SET ASIDE, AND THE DECISION OF LABOR ARBITER RICARTE T.
SORIANO DATED AUGUST 25, 1975, IS HEREBY REINSTATED.
COSTS AGAINST PRIVATE RESPONDENT INSULAR BANK OF ASIA AND AMERICA
SO ORDERED.

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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-44717 August 28, 1985
THE CHARTERED BANK EMPLOYEES ASSOCIATION, petitioner,
vs.
HON. BLAS F. OPLE, in his capacity as the Incumbent Secretary of Labor,
and THE CHARTERED BANK, respondents.
GUTIERREZ, JR., J.:
This is a petition for certiorari seeking to annul the decision of the respondent
Secretary, now Minister of Labor which denied the petitioner's claim for holiday pay
and its claim for premium and overtime pay differentials. The petitioner claims that
the respondent Minister of Labor acted contrary to law and jurisprudence and with
grave abuse of discretion in promulgating Sec. 2, Rule IV, Book III of the Integrated
Rules and in issuing Policy Instruction No. 9, both referring to holidays with pay.
On May 20, 1975, the Chartered Bank Employees Association, in representation of
its monthly paid employees/members, instituted a complaint with the Regional Office
No. IV, Department of Labor, now Ministry of Labor and Employment (MOLE) against
private respondent Chartered Bank, for the payment of ten (10) unworked legal
holidays, as well as for premium and overtime differentials for worked legal holidays
from November 1, 1974.
The memorandum for the respondents summarizes the admitted and/or undisputed
facts as follows:
l. The work force of respondent bank consists of 149 regular employees, all of whom
are paid by the month;
2. Under their existing collective bargaining agreement, (Art. VII thereof) said
monthly paid employees are paid for overtime work as follows:
Section l. The basic work week for all employees excepting security guards who by
virtue of the nature of their work are required to be at their posts for 365 days per
year, shall be forty (40) hours based on five (5) eight (8) hours days, Monday to
Friday.
Section 2. Time and a quarter hourly rate shall be paid for authorized work
performed in excess of eight (8) hours from Monday through Friday and for any
hour of work performed on Saturdays subject to Section 5 hereof.
Section 3. Time and a half hourly rate shall be paid for authorized work performed
on Sundays, legal and special holidays.
xxx xxx xxx
xxx xxx xxx
Section 5. The provisions of Section I above notwithstanding the BANK may revert
to the six (6) days work week, to include Saturday for a four (4) hour day, in the
event the Central Bank should require commercial banks to open for business on
Saturday.
3. In computing overtime pay and premium pay for work done during regular
holidays, the divisor used in arriving at the daily rate of pay is 251 days although
formerly the divisor used was 303 days and this was when the respondent bank was
still operating on a 6-day work week basis. However, for purposes of computing
deductions corresponding to absences without pay the divisor used is 365 days.
4. All regular monthly paid employees of respondent bank are receiving salaries way
beyond the statutory or minimum rates and are among the highest paid employees
in the banking industry.
5. The salaries of respondent bank's monthly paid employees suffer no deduction
for holidays occurring within the month.
On the bases of the foregoing facts, both the arbitrator and the National Labor
Relations Commission (NLRC) ruled in favor of the petitioners ordering the
respondent bank to pay its monthly paid employees, holiday pay for the ten (10)
legal holidays effective November 1, 1974 and to pay premium or overtime pay
differentials to all employees who rendered work during said legal holidays. On
appeal, the Minister of Labor set aside the decision of the NLRC and dismissed the
petitioner's claim for lack of merit basing its decision on Section 2, Rule IV, Book Ill
of the Integrated Rules and Policy Instruction No. 9, which respectively provide:
Sec. 2. Status of employees paid by the month. Employees who are uniformly paid
by the month, irrespective of the number of working days therein, with a salary of
not less than the statutory or established minimum wage shall be presumed to be
paid for all days in the month whether worked or not.
POLICY INSTRUCTION NO. 9
TO: All Regional Directors
SUBJECT: PAID LEGAL HOLIDAYS
The rules implementing PD 850 have clarified the policy in the implementation of
the ten (10) paid legal holidays. Before PD 850, the number of working days a year
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in a firm was considered important in determining entitlement to the benefit. Thus,
where an employee was working for at least 313 days, he was considered definitely
already paid. If he was working for less than 313, there was no certainty whether
the ten (10) paid legal holidays were already paid to him or not.
The ten (10) paid legal holidays law, to start with, is intended to benefit principally
daily employees. In the case of monthly, only those whose monthly salary did not
yet include payment for the ten (10) paid legal holidays are entitled to the benefit.
Under the rules implementing PD 850, this policy has been fully clarified to eliminate
controversies on the entitlement of monthly paid employees. The new determining
rule is this: 'If the monthly paid employee is receiving not less than P240, the
maximum monthly minimum wage, and his monthly pay is uniform from January to
December, he is presumed to be already paid the ten (10) paid legal holidays.
However, if deductions are made from his monthly salary on account of holidays in
months where they occur, then he is still entitled to the ten (10) paid legal holidays.
These new interpretations must be uniformly and consistently upheld.
This issuance shall take effect immediately.
The issues are presented in the form of the following assignments of errors:
First Error
Whether or not the Secretary of Labor erred and acted contrary to law in
promulgating Sec. 2, Rule IV, Book III of the Integrated Rules and Policy Instruction
No. 9.
Second Error
Whether or not the respondent Secretary of Labor abused his discretion and acted
contrary to law in applying Sec. 2, Rule IV of the Integrated Rules and Policy
Instruction No. 9 abovestated to private respondent's monthly-paid employees.
Third Error
Whether or not the respondent Secretary of Labor, in not giving due credence to
the respondent bank's practice of paying its employees base pay of 100% and
premium pay of 50% for work done during legal holidays, acted contrary to law and
abused his discretion in denying the claim of petitioners for unworked holidays and
premium and overtime pay differentials for worked holidays.
The petitioner contends that the respondent Minister of Labor gravely abused his
discretion in promulgating Section 2, Rule IV, Book III of the Integrated Rules and
Policy Instruction No. 9 as guidelines for the implementation of Articles 82 and 94
of the Labor Code and in applying said guidelines to this case. It maintains that while
it is true that the respondent Minister has the authority in the performance of his
duty to promulgate rules and regulations to implement, construe and clarify the
Labor Code, such power is limited by provisions of the statute sought to be
implemented, construed or clarified. According to the petitioner, the so-called
"guidelines" promulgated by the respondent Minister totally contravened and
violated the Code by excluding the employees/members of the petitioner from the
benefits of the holiday pay, when the Code itself did not provide for their expanding
the Code's clear and concise conclusion and notwithstanding the Code's clear and
concise phraseology defining those employees who are covered and those who are
excluded from the benefits of holiday pay.
On the other hand, the private respondent contends that the questioned guidelines
did not deprive the petitioner's members of the benefits of holiday pay but merely
classified those monthly paid employees whose monthly salary already includes
holiday pay and those whose do not, and that the guidelines did not deprive the
employees of holiday pay. It states that the question to be clarified is whether or
not the monthly salaries of the petitioner's members already includes holiday pay.
Thus, the guidelines were promulgated to avoid confusion or misconstruction in the
application of Articles 82 and 94 of the Labor Code but not to violate them.
Respondent explains that the rationale behind the promulgation of the questioned
guidelines is to benefit the daily paid workers who, unlike monthly-paid employees,
suffer deductions in their salaries for not working on holidays. Hence, the Holiday
Pay Law was enacted precisely to countervail the disparity between daily paid
workers and monthly-paid employees.
The decision in Insular Bank of Asia and America Employees' Union (IBAAEU) v.
Inciong (132 SCRA 663) resolved a similar issue. Significantly, the petitioner in that
case was also a union of bank employees. We ruled that Section 2, Rule IV, Book
III of the Integrated Rules and Policy Instruction No. 9, are contrary to the provisions
of the Labor Code and, therefore, invalid This Court stated:
It is elementary in the rules of statutory construction that when the language of the
law is clear and unequivocal the law must be taken to mean exactly what it says. In
the case at bar, the provisions of the Labor Code on the entitlement to the benefits
of holiday pay are clear and explicit it provides for both the coverage of and exclusion
from the benefit. In Policy Instruction No. 9, the then Secretary of Labor went as far
as to categorically state that the benefit is principally intended for daily paid
employees, when the law clearly states that every worker shall be paid their regular
holiday pay. This is flagrant violation of the mandatory directive of Article 4 of the
Labor Code, which states that 'All doubts in the implementation and interpretation
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of the provisions of this Code, including its implementing rules and regulations, shall
be resolved in favor of labor.' Moreover, it shall always be presumed that the
legislature intended to enact a valid and permanent statute which would have the
most beneficial effect that its language permits (Orlosky v. Hasken, 155 A. 112)
Obviously, the Secretary (Minister) of Labor had exceeded his statutory authority
granted by Article 5 of the Labor Code authorizing him to promulgate the necessary
implementing rules and regulations.
We further ruled:
While it is true that the contemporaneous construction placed upon a statute by
executive officers whose duty is to enforce it should be given great weight by the
courts, still if such construction is so erroneous, as in the instant case, the same
must be declared as null and void. It is the role of the Judiciary to refine and, when
necessary correct constitutional (and/or statutory) interpretation, in the context of
the interactions of the three branches of the government, almost always in situations
where some agency of the State has engaged in action that stems ultimately from
some legitimate area of governmental power (The Supreme Court in Modern Role,
C.B. Swisher 1958, p. 36).
xxx xxx xxx
In view of the foregoing, Section 2, Rule IV, Book III of the Rules to implement the
Labor Code and Policy Instruction No. 9 issued by the then Secretary of Labor must
be declared null and void. Accordinglyl public respondent Deputy Minister of Labor
Amado G. Inciong had no basis at all to deny the members of petitioner union their
regular holiday pay as directed by the Labor Code.
Since the private respondent premises its action on the invalidated rule and policy
instruction, it is clear that the employees belonging to the petitioner association are
entitled to the payment of ten (10) legal holidays under Articles 82 and 94 of the
Labor Code, aside from their monthly salary. They are not among those excluded by
law from the benefits of such holiday pay.
Presidential Decree No. 850 states who are excluded from the holiday provisions of
that law. It states:
ART. 82. Coverage. The provision of this Title shall apply to employees in all
establishments and undertakings, whether for profit or not, but not to government
employees, managerial employees, field personnel members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in appropriate regulations. (Emphasis supplied).
The questioned Section 2, Rule IV, Book III of the Integrated Rules and the
Secretary's Policy Instruction No. 9 add another excluded group, namely,
"employees who are uniformly paid by the month." While the additional exclusion is
only in the form of a presumption that all monthly paid employees have already
been paid holiday pay, it constitutes a taking away or a deprivation which must be
in the law if it is to be valid. An administrative interpretation which diminishes the
benefits of labor more than what the statute delimits or withholds is obviously ultra
vires.
It is argued that even without the presumption found in the rules and in the policy
instruction, the company practice indicates that the monthly salaries of the
employees are so computed as to include the holiday pay provided by law. The
petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered
Bank, in computing overtime compensation for its employees, employs a "divisor"
of 251 days. The 251 working days divisor is the result of subtracting all Saturdays,
Sundays and the ten (10) legal holidays from the total number of calendar days in
a year. If the employees are already paid for all non-working days, the divisor should
be 365 and not 251.
The situation is muddled somewhat by the fact that, in computing the employees'
absences from work, the respondent bank uses 365 as divisor. Any slight doubts,
however, must be resolved in favor of the workers. This is in keeping with the
constitutional mandate of promoting social justice and affording protection to labor
(Sections 6 and 9, Article II, Constitution). The Labor Code, as amended, itself
provides:
ART. 4. Construction in favor of labor. All doubts in the implementation and
interpretation of the provisions of this Code, including its implementing rules and
regulations, shall be resolved in favor of labor.
Any remaining doubts which may arise from the conflicting or different divisors used
in the computation of overtime pay and employees' absences are resolved by the
manner in which work actually rendered on holidays is paid. Thus, whenever
monthly paid employees work on a holiday, they are given an additional 100% base
pay on top of a premium pay of 50%. If the employees' monthly pay already includes
their salaries for holidays, they should be paid only premium pay but not both base
pay and premium pay.
The contention of the respondent that 100% base pay and 50% premium pay for
work actually rendered on holidays is given in addition to monthly salaries only
because the collective bargaining agreement so provides is itself an argument in
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favor of the petitioner stand. It shows that the Collective Bargaining Agreement
already contemplated a divisor of 251 days for holiday pay computations before the
questioned presumption in the Integrated Rules and the Policy Instruction was
formulated. There is furthermore a similarity between overtime pay, which is
computed on the basis of 251 working days a year, and holiday pay, which should
be similarly treated notwithstanding the public respondents' issuances. In both cases
overtime work and holiday work- the employee works when he is supposed to be
resting. In the absence of an express provision of the CBA or the law to the contrary,
the computation should be similarly handled.
We are not unmindful of the fact that the respondent's employees are among the
highest paid in the industry. It is not the intent of this Court to impose any undue
burdens on an employer which is already doing its best for its personnel. we have
to resolve the labor dispute in the light of the parties' own collective bargaining
agreement and the benefits given by law to all workers. When the law provides
benefits for "employees in all establishments and undertakings, whether for profit
or not" and lists specifically the employees not entitled to those benefits, the
administrative agency implementing that law cannot exclude certain employees from
its coverage simply because they are paid by the month or because they are already
highly paid. The remedy lies in a clear redrafting of the collective bargaining
agreement with a statement that monthly pay already includes holiday pay or an
amendment of the law to that effect but not an administrative rule or a policy
instruction.
WHEREFORE, the September 7, 1976 order of the public respondent is hereby
REVERSED and SET ASIDE. The March 24, 1976 decision of the National Labor
Relations Commission which affirmed the October 30, 1975 resolution of the Labor
Arbiter but deleted interest payments is REINSTATED.
SO ORDERED.

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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 79255 January 20, 1992
UNION OF FILIPRO EMPLOYEES (UFE), petitioner,
vs.
BENIGNO VIVAR, JR., NATIONAL LABOR RELATIONS COMMISSION and
NESTLÉ PHILIPPINES, INC. (formerly FILIPRO, INC.), respondents.
GUTIERREZ, JR., J.:
This labor dispute stems from the exclusion of sales personnel from the holiday pay
award and the change of the divisor in the computation of benefits from 251 to 261
days.
On November 8, 1985, respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed
with the National Labor Relations Commission (NLRC) a petition for declaratory relief
seeking a ruling on its rights and obligations respecting claims of its monthly paid
employees for holiday pay in the light of the Court's decision in Chartered Bank
Employees Association v. Ople (138 SCRA 273 [1985]).
Both Filipro and the Union of Filipino Employees (UFE) agreed to submit the case
for voluntary arbitration and appointed respondent Benigno Vivar, Jr. as voluntary
arbitrator.
On January 2, 1980, Arbitrator Vivar rendered a decision directing Filipro to:
pay its monthly paid employees holiday pay pursuant to Article 94 of the Code,
subject only to the exclusions and limitations specified in Article 82 and such other
legal restrictions as are provided for in the Code. (Rollo,
p. 31)
Filipro filed a motion for clarification seeking (1) the limitation of the award to three
years, (2) the exclusion of salesmen, sales representatives, truck drivers,
merchandisers and medical representatives (hereinafter referred to as sales
personnel) from the award of the holiday pay, and (3) deduction from the holiday
pay award of overpayment for overtime, night differential, vacation and sick leave
benefits due to the use of 251 divisor. (Rollo, pp. 138-145)
Petitioner UFE answered that the award should be made effective from the date of
effectivity of the Labor Code, that their sales personnel are not field personnel and
are therefore entitled to holiday pay, and that the use of 251 as divisor is an
established employee benefit which cannot be diminished.
On January 14, 1986, the respondent arbitrator issued an order declaring that the
effectivity of the holiday pay award shall retroact to November 1, 1974, the date of
effectivity of the Labor Code. He adjudged, however, that the company's sales
personnel are field personnel and, as such, are not entitled to holiday pay. He
likewise ruled that with the grant of 10 days' holiday pay, the divisor should be
changed from 251 to 261 and ordered the reimbursement of overpayment for
overtime, night differential, vacation and sick leave pay due to the use of 251 days
as divisor.
Both Nestle and UFE filed their respective motions for partial reconsideration.
Respondent Arbitrator treated the two motions as appeals and forwarded the case
to the NLRC which issued a resolution dated May 25, 1987 remanding the case to
the respondent arbitrator on the ground that it has no jurisdiction to review decisions
in voluntary arbitration cases pursuant to Article 263 of the Labor Code as amended
by Section 10, Batas Pambansa Blg. 130 and as implemented by Section 5 of the
rules implementing B.P. Blg. 130.
However, in a letter dated July 6, 1987, the respondent arbitrator refused to take
cognizance of the case reasoning that he had no more jurisdiction to continue as
arbitrator because he had resigned from service effective May 1, 1986.
Hence, this petition.
The petitioner union raises the following issues:
1) Whether or not Nestle's sales personnel are entitled to holiday pay; and
2) Whether or not, concomitant with the award of holiday pay, the divisor should be
changed from 251 to 261 days and whether or not the previous use of 251 as divisor
resulted in overpayment for overtime, night differential, vacation and sick leave pay.
The petitioner insists that respondent's sales personnel are not field personnel under
Article 82 of the Labor Code. The respondent company controverts this assertion.
Under Article 82, field personnel are not entitled to holiday pay. Said article defines
field personnel as "non-agritultural employees who regularly perform their duties
away from the principal place of business or branch office of the employer and
whose actual hours of work in the field cannot be determined with reasonable
certainty."
The controversy centers on the interpretation of the clause "whose actual hours of
work in the field cannot be determined with reasonable certainty."

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It is undisputed that these sales personnel start their field work at 8:00 a.m. after
having reported to the office and come back to the office at 4:00 p.m. or 4:30 p.m.
if they are Makati-based.
The petitioner maintains that the period between 8:00 a.m. to 4:00 or 4:30 p.m.
comprises the sales personnel's working hours which can be determined with
reasonable certainty.
The Court does not agree. The law requires that the actual hours of work in the field
be reasonably ascertained. The company has no way of determining whether or not
these sales personnel, even if they report to the office before 8:00 a.m. prior to field
work and come back at 4:30 p.m, really spend the hours in between in actual field
work.
We concur with the following disquisition by the respondent arbitrator:
The requirement for the salesmen and other similarly situated employees to report
for work at the office at 8:00 a.m. and return at 4:00 or 4:30 p.m. is not within the
realm of work in the field as defined in the Code but an exercise of purely
management prerogative of providing administrative control over such personnel.
This does not in any manner provide a reasonable level of determination on the
actual field work of the employees which can be reasonably ascertained. The
theoretical analysis that salesmen and other similarly-situated workers regularly
report for work at 8:00 a.m. and return to their home station at 4:00 or 4:30 p.m.,
creating the assumption that their field work is supervised, is surface projection.
Actual field work begins after 8:00 a.m., when the sales personnel follow their field
itinerary, and ends immediately before 4:00 or 4:30 p.m. when they report back to
their office. The period between 8:00 a.m. and 4:00 or 4:30 p.m. comprises their
hours of work in the field, the extent or scope and result of which are subject to
their individual capacity and industry and which "cannot be determined with
reasonable certainty." This is the reason why effective supervision over field work
of salesmen and medical representatives, truck drivers and merchandisers is
practically a physical impossibility. Consequently, they are excluded from the ten
holidays with pay award. (Rollo, pp. 36-37)
Moreover, the requirement that "actual hours of work in the field cannot be
determined with reasonable certainty" must be read in conjunction with Rule IV,
Book III of the Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage — This rule shall apply to all employees except:
xxx xxx xxx
(e) Field personnel and other employees whose time and performance is
unsupervised by the employer . . . (Emphasis supplied)
While contending that such rule added another element not found in the law (Rollo,
p. 13), the petitioner nevertheless attempted to show that its affected members are
not covered by the abovementioned rule. The petitioner asserts that the company's
sales personnel are strictly supervised as shown by the SOD (Supervisor of the Day)
schedule and the company circular dated March 15, 1984 (Annexes 2 and 3, Rollo,
pp. 53-55).
Contrary to the contention of the petitioner, the Court finds that the aforementioned
rule did not add another element to the Labor Code definition of field personnel. The
clause "whose time and performance is unsupervised by the employer" did not
amplify but merely interpreted and expounded the clause "whose actual hours of
work in the field cannot be determined with reasonable certainty." The former clause
is still within the scope and purview of Article 82 which defines field personnel.
Hence, in deciding whether or not an employee's actual working hours in the field
can be determined with reasonable certainty, query must be made as to whether or
not such employee's time and performance is constantly supervised by the
employer.
The SOD schedule adverted to by the petitioner does not in the least signify that
these sales personnel's time and performance are supervised. The purpose of this
schedule is merely to ensure that the sales personnel are out of the office not later
than 8:00 a.m. and are back in the office not earlier than 4:00 p.m.
Likewise, the Court fails to see how the company can monitor the number of actual
hours spent in field work by an employee through the imposition of sanctions on
absenteeism contained in the company circular of March 15, 1984.
The petitioner claims that the fact that these sales personnel are given incentive
bonus every quarter based on their performance is proof that their actual hours of
work in the field can be determined with reasonable certainty.
The Court thinks otherwise.
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume
based on sales target; (2) good collection performance; (3) proper compliance with
good market hygiene; (4) good merchandising work; (5) minimal market returns;
and (6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses
precisely because of the difficulty in measuring their actual hours of field work. These
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employees are evaluated by the result of their work and not by the actual hours of
field work which are hardly susceptible to determination.
In San Miguel Brewery, Inc. v. Democratic Labor Organization (8 SCRA 613 [1963]),
the Court had occasion to discuss the nature of the job of a salesman. Citing the
case of Jewel Tea Co. v. Williams, C.C.A. Okla., 118 F. 2d 202, the Court stated:
The reasons for excluding an outside salesman are fairly apparent. Such a salesman,
to a greater extent, works individually. There are no restrictions respecting the time
he shall work and he can earn as much or as little, within the range of his ability, as
his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject
to the personal supervision of his employer, and his employer has no way of knowing
the number of hours he works per day.
While in that case the issue was whether or not salesmen were entitled to overtime
pay, the same rationale for their exclusion as field personnel from holiday pay
benefits also applies.
The petitioner union also assails the respondent arbitrator's ruling that, concomitant
with the award of holiday pay, the divisor should be changed from 251 to 261 days
to include the additional 10 holidays and the employees should reimburse the
amounts overpaid by Filipro due to the use of 251 days' divisor.
Arbitrator Vivar's rationale for his decision is as follows:
. . . The new doctrinal policy established which ordered payment of ten holidays
certainly adds to or accelerates the basis of conversion and computation by ten days.
With the inclusion of ten holidays as paid days, the divisor is no longer 251 but 261
or 262 if election day is counted. This is indeed an extremely difficult legal question
of interpretation which accounts for what is claimed as falling within the concept of
"solutio indebti."
When the claim of the Union for payment of ten holidays was granted, there was a
consequent need to abandon that 251 divisor. To maintain it would create an
impossible situation where the employees would benefit with additional ten days
with pay but would simultaneously enjoy higher benefits by discarding the same ten
days for purposes of computing overtime and night time services and considering
sick and vacation leave credits. Therefore, reimbursement of such overpayment with
the use of 251 as divisor arises concomitant with the award of ten holidays with pay.
(Rollo, p. 34)
The divisor assumes an important role in determining whether or not holiday pay is
already included in the monthly paid employee's salary and in the computation of
his daily rate. This is the thrust of our pronouncement in Chartered Bank Employees
Association v. Ople (supra). In that case, We held:
It is argued that even without the presumption found in the rules and in the policy
instruction, the company practice indicates that the monthly salaries of the
employees are so computed as to include the holiday pay provided by law. The
petitioner contends otherwise.
One strong argument in favor of the petitioner's stand is the fact that the Chartered
Bank, in computing overtime compensation for its employees, employs a "divisor"
of 251 days. The 251 working days divisor is the result of subtracting all Saturdays,
Sundays and the ten (10) legal holidays from the total number of calendar days in
a year. If the employees are already paid for all non-working days, the divisor should
be 365 and not 251.
In the petitioner's case, its computation of daily ratio since September 1, 1980, is as
follows:
monthly rate x 12 months
———————————
251 days
Following the criterion laid down in the Chartered Bank case, the use of 251 days'
divisor by respondent Filipro indicates that holiday pay is not yet included in the
employee's salary, otherwise the divisor should have been 261.
It must be stressed that the daily rate, assuming there are no intervening salary
increases, is a constant figure for the purpose of computing overtime and night
differential pay and commutation of sick and vacation leave credits. Necessarily, the
daily rate should also be the same basis for computing the 10 unpaid holidays.
The respondent arbitrator's order to change the divisor from 251 to 261 days would
result in a lower daily rate which is violative of the prohibition on non-diminution of
benefits found in Article 100 of the Labor Code. To maintain the same daily rate if
the divisor is adjusted to 261 days, then the dividend, which represents the
employee's annual salary, should correspondingly be increased to incorporate the
holiday pay. To illustrate, if prior to the grant of holiday pay, the employee's annual
salary is P25,100, then dividing such figure by 251 days, his daily rate is P100.00
After the payment of 10 days' holiday pay, his annual salary already includes holiday
pay and totals P26,100 (P25,100 + 1,000). Dividing this by 261 days, the daily rate
is still P100.00. There is thus no merit in respondent Nestle's claim of overpayment
of overtime and night differential pay and sick and vacation leave benefits, the
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computation of which are all based on the daily rate, since the daily rate is still the
same before and after the grant of holiday pay.
Respondent Nestle's invocation of solutio indebiti, or payment by mistake, due to its
use of 251 days as divisor must fail in light of the Labor Code mandate that "all
doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations, shall be resolved in favor of labor." (Article 4).
Moreover, prior to September 1, 1980, when the company was on a 6-day working
schedule, the divisor used by the company was 303, indicating that the 10 holidays
were likewise not paid. When Filipro shifted to a 5-day working schebule on
September 1, 1980, it had the chance to rectify its error, if ever there was one but
did not do so. It is now too late to allege payment by mistake.
Nestle also questions the voluntary arbitrator's ruling that holiday pay should be
computed from November 1, 1974. This ruling was not questioned by the petitioner
union as obviously said decision was favorable to it. Technically, therefore,
respondent Nestle should have filed a separate petition raising the issue of effectivity
of the holiday pay award. This Court has ruled that an appellee who is not an
appellant may assign errors in his brief where his purpose is to maintain the
judgment on other grounds, but he cannot seek modification or reversal of the
judgment or affirmative relief unless he has also appealed. (Franco v. Intermediate
Appellate Court, 178 SCRA 331 [1989], citing La Campana Food Products, Inc. v.
Philippine Commercial and Industrial Bank, 142 SCRA 394 [1986]). Nevertheless, in
order to fully settle the issues so that the execution of the Court's decision in this
case may not be needlessly delayed by another petition, the Court resolved to take
up the matter of effectivity of the holiday pay award raised by Nestle.
Nestle insists that the reckoning period for the application of the holiday pay award
is 1985 when the Chartered Bank decision, promulgated on August 28, 1985,
became final and executory, and not from the date of effectivity of the Labor Code.
Although the Court does not entirely agree with Nestle, we find its claim meritorious.
In Insular Bank of Asia and America Employees' Union (IBAAEU) v. Inciong, 132
SCRA 663 [1984], hereinafter referred to as the IBAA case, the Court declared that
Section 2, Rule IV, Book III of the implementing rules and Policy Instruction No. 9,
issued by the then Secretary of Labor on February 16, 1976 and April 23, 1976,
respectively, and which excluded monthly paid employees from holiday pay benefits,
are null and void. The Court therein reasoned that, in the guise of clarifying the
Labor Code's provisions on holiday pay, the aforementioned implementing rule and
policy instruction amended them by enlarging the scope of their exclusion.
The Chartered Bank case reiterated the above ruling and added the "divisor" test.
However, prior to their being declared null and void, the implementing rule and
policy instruction enjoyed the presumption of validity and hence, Nestle's non-
payment of the holiday benefit up to the promulgation of the IBAA case on October
23, 1984 was in compliance with these presumably valid rule and policy instruction.
In the case of De Agbayani v. Philippine National Bank, 38 SCRA 429 [1971], the
Court discussed the effect to be given to a legislative or executive act subsequently
declared invalid:
xxx xxx xxx
. . . It does not admit of doubt that prior to the declaration of nullity such challenged
legislative or executive act must have been in force and had to be complied with.
This is so as until after the judiciary, in an appropriate case, declares its invalidity,
it is entitled to obedience and respect. Parties may have acted under it and may
have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive
act was in operation and presumed to be valid in all respects. It is now accepted as
a doctrine that prior to its being nullified, its existence as a fact must be reckoned
with. This is merely to reflect awareness that precisely because the judiciary is the
government organ which has the final say on whether or not a legislative or
executive measure is valid, a period of time may have elapsed before it can exercise
the power of judicial review that may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice then, if there be no recognition
of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a
statute, prior to such a determination of [unconstitutionality], is an operative fact
and may have consequences which cannot justly be ignored. The past cannot always
be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, — with respect to particular
relations, individual and corporate, and particular conduct, private and official."
(Chicot County Drainage Dist. v. Baxter States Bank, 308 US 371, 374 [1940]). This
language has been quoted with approval in a resolution in Araneta v. Hill (93 Phil.
1002 [1952]) and the decision in Manila Motor Co., Inc. v. Flores (99 Phil. 738
[1956]). An even more recent instance is the opinion of Justice Zaldivar speaking
for the Court in Fernandez v. Cuerva and Co. (21 SCRA 1095 [1967]. (At pp. 434-
435)
The "operative fact" doctrine realizes that in declaring a law or rule null and void,
undue harshness and resulting unfairness must be avoided. It is now almost the end
of 1991. To require various companies to reach back to 1975 now and nullify acts
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done in good faith is unduly harsh. 1984 is a fairer reckoning period under the facts
of this case.
Applying the aforementioned doctrine to the case at bar, it is not far-fetched that
Nestle, relying on the implicit validity of the implementing rule and policy instruction
before this Court nullified them, and thinking that it was not obliged to give holiday
pay benefits to its monthly paid employees, may have been moved to grant other
concessions to its employees, especially in the collective bargaining agreement. This
possibility is bolstered by the fact that respondent Nestle's employees are among
the highest paid in the industry. With this consideration, it would be unfair to impose
additional burdens on Nestle when the non-payment of the holiday benefits up to
1984 was not in any way attributed to Nestle's fault.
The Court thereby resolves that the grant of holiday pay be effective, not from the
date of promulgation of the Chartered Bank case nor from the date of effectivity of
the Labor Code, but from October 23, 1984, the date of promulgation of the IBAA
case.
WHEREFORE, the order of the voluntary arbitrator in hereby MODIFIED. The divisor
to be used in computing holiday pay shall be 251 days. The holiday pay as above
directed shall be computed from October 23, 1984. In all other respects, the order
of the respondent arbitrator is hereby AFFIRMED.
SO ORDERED.

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THIRD DIVISION
[G.R. No. 118069. November 16, 1998]
PRODUCERS BANK OF THE PHILIPPINES, (now First Philippine
International Bank), petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and PRODUCERS BANK EMPLOYEES
ASSOCIATION, respondents.
DECISION
ROMERO, J.:
Initially, this action was resolved in petitioner's favor with the dismissal of private
respondent's complaint for unfair labor practice and violation of the CBA against the
former Labor Arbiter Jovencio Mayon.[1] Upon appeal to the National Labor
Relations Commission (NLRC), the decision of the Labor Arbiter was reversed and
instead a judgment was rendered in favor of the private respondent. Dismayed,
petitioner is now before us seeking the reversal of the NLRC'S decision.
The facts are quite simple.
Prefatorily, at the time the instant controversy started, petitioner was placed by the
then Central Bank of the Philippines (now Bangko Sentral ng Pilipinas) under a
conservator for the purpose of protecting its assets.[2] It appears that when the
private respondents sought the implementation of Section 1, Article XI of the CBA
regarding the retirement plan and Section 4, Article X thereof, pertaining to uniform
allowance, the acting conservator of the petitioner expressed her objection to such
plan, resulting in an impasse between the petitioner bank and the private respondent
union. The deadlock continued for at least six months when the private respondent,
to resolve the issue, decided to file a case against the petitioner for unfair labor
practice and for flagrant violation of the CBA provisions.
As stated earlier, the Labor Arbiter dismissed private respondent's complaint, on this
premise:
"Considering that the Bank is under conservatorship program under which the bank
is under the rule of a conservator, the latter is under no compulsion to implement
the resolutions issued by the LMRC. If he finds that the enforcement of the
resolutions would not redound for the best interest of the Bank in accordance with
the conservatorship program, he may not be faulted by such inaction or action."
Undaunted by the initial setback, private respondent union interposed an appeal
before the NLRC. The NLRC, after reviewing the arguments of both parties, reversed
the findings of the Labor Arbiter, thus:
"Not only is the worker protected by the Labor Code, he is likewise protected by
other laws (Civil Code) and social legislations the source of which is no less than the
Constitution itself. To adhere first to the interest of the company to the prejudice of
the workers can never be allowed or tolerated as the interest of the working masses
is the paramount concern of the government."
Consequently, the NLRC ordered the petitioner to implement the provisions of the
CBA which were disallowed by the conservator.[3]
The issue need not detain us at length. The NLRC's finding deserves our
concurrence.
In a similar case involving the petitioner and the acts of its conservator,[4] we
already ruled that:
"In the third place, while admittedly, the Central Bank law gives vast and far-
reaching powers to the conservator of a bank, it must be pointed out that such
powers must be related to the '(preservation of)' the assets of the banks, (the
reorganization of) the management thereof and (the restoration of) its
viability.' Such powers, enormous and extensive as they are, cannot extend to the
post-facto repudiation of perfected transactions, otherwise they would infringe
against the non-impairment clause of the Constitution. If the legislature itself cannot
revoke an existing valid contract, how can it delegate such non-existent powers to
the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke
contracts that are, under existing law, deemed to be defective - i.e., void, voidable,
unenforceable or rescissible. Hence, the conservator merely takes the place of a
bank's board of directors. What the said board cannot do - such as repudiating a
contract validly entered into under the doctrine of implied authority - the conservator
cannot do either. Ineluctably, his power is not unilateral and he cannot simply
repudiate valid obligations of the Bank. His authority would be only to bring court
actions to assail such contracts - as he has already done so in the instant case. A
contrary understanding of the law would simply not be permitted by the
Constitution. Neither by common sense. To rule otherwise would be to enable a
failing bank to become solvent, at the expense of third parties, by simply getting the
conservator to unilaterally revoke all previous dealings which had one way or
another come to be considered unfavorable to the Bank, yielding nothing to
perfected contractual rights nor vested interests of the third parties who had dealt
with the Bank."
Prescinding from the rationalization that a conservator cannot rescind a valid and
existing contract and that the CBA is the law between the contracting parties,[5] it
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is obvious that the conservator had no authority whatsoever to disallow the
implementation of Article XI, Section 1 and Article X, Section 4 of the CBA, especially
considering that ideals of social justice and protection of labor are guaranteed not
only by the Labor Code, but more importantly by the fundamental law of the land.
It bears repeating that apart from the non-impairment clause, what is also well-
settled, to the point of being trite, is the principle that when the conflicting interests
of labor and capital are weighed on the scales of social justice, the dominant
influence of the latter must be counter-balanced by the sympathy and compassion
the law must accord the under-privileged worker.[6]
Next, petitioner insists that both the Labor Arbiter and the NLRC have no jurisdiction
to entertain the complaint of the private respondent,[7] asserting that the issue was
cognizable by the voluntary arbitrator pursuant to Article 261 of the Labor Code.
Granting that both the Labor Arbiter and the NLRC indeed had no jurisdiction over
the issue, petitioner cannot anymore plead such procedural flaw under the principle
of estoppel.[8] It appears that in the proceedings before the Labor Arbiter, it
vigorously argued its defense and prayed for alternative relief. In fact, in its position
paper[9] and reply,[10] the issue concerning the Labor Arbiter's lack of jurisdiction
was not raised by the petitioner. Moreover, in its answer[11] to the memorandum
of appeal filed by the private respondents before the NLRC, petitioner was again
silent regarding the issue of jurisdiction on the part of the NLRC to decide the
appeal. It was only when the decision of the NLRC was unfavorable that it raised
the issue of jurisdiction.
Petitioner should bear the consequence of its act. It cannot be allowed to profit from
its own omission to the damage and prejudice of the private respondent. As we
declared in Ilocos Sur Electric Cooperative, Inc. v. NLRC:[12]
"x x x. Petitioners did not question the jurisdiction of the Labor Arbiter either in a
motion to dismiss or in their answer. In fact, petitioners participated in the
proceedings before the Labor Arbiter, as well as in the NLRC to which they appealed
the Labor Arbiter's decision. It has been consistently held by this Court that while
jurisdiction may be assailed at any stage, a party's active participation in the
proceedings before a court without jurisdiction will estop such party from assailing
such lack of it. It is an undesirable practice of a party participating in the proceedings
and submitting his case for decision and then accepting the judgment, only if
favorable, and attacking it for lack of jurisdiction, when adverse."
Finally, petitioner asserts since the employees have retired, as a consequence of
which no employee-employer relationship exists anymore between it and the
employees, private respondent no longer had the personality to file the complaint
for them.[13]
Petitioner's contention in untenable. Retirement results from a voluntary agreement
between the employer and the employee whereby the latter after reaching a certain
age agrees to sever his employment with the former.[14] The very essence of
retirement is the termination of the employer-employee relationship.
Hence, the retirement of an employee does not, in itself, affect his employment
status especially when it involves all rights and benefits due to him, since these must
be protected as though there had been no interruption of service. It must be borne
in mind that the retirement scheme was part of the employment package and the
benefits to be derived therefrom constituted, as it were, a continuing consideration
for services rendered, as well as an effective inducement for remaining with the
corporation. It is intended to help the employee enjoy the remaining years of his
life, releasing him from the burden of worrying for his financial support, and are a
form of reward for his loyalty.[15]
When the retired employees were requesting that their retirement benefits be
granted, they were not pleading for generosity but were merely demanding that
their rights, as embodied in the CBA, be recognized. Thus, when an employee has
retired but his benefits under the law or the CBA have not yet been given, he still
retains, for the purpose of prosecuting his claims, the status of an employee entitled
to the protection of the Labor Code, one of which is the protection of the labor
union. In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME),[16] we
recognized that while the individual complainants are the real party in interest in
issues involving monetary claims and benefits, the union, however, is not denied its
right to sue on behalf of its members, thus:
"We see no legal impediments to considering this particular matter of retirement
benefits to be within the ambit of Our consistent holding that when it comes to
individual benefits accruing to members of a union from a favorable final judgment
of any court, the members themselves become the real parties in interest and it is
for them, rather than for the union, to accept or reject individually the fruits of the
litigation. In the case at bar, the representations of the MME which may result in
prejudice to the interests of any of its individual members in the final judgment being
sought to be executed should yield to the individual decisions of the said members
themselves, who are free to choose whichever position suits their conscience."
WHEREFORE, in view of the foregoing, the instant petition is DISMISSED and the
decision of the National Labor Relations Commission dated August 31, 1994 is
AFFIRMED. Costs against petitioner. SO ORDERED.
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THIRD DIVISION
G.R. No. 144664 March 15, 2004
ASIAN TRANSMISSION CORPORATION, petitioner,
vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M.
BACUNGAN as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union
representative to the Panel Arbitrators; BISIG NG ASIAN
TRANSMISSION LABOR UNION (BATLU); HON. BIENVENIDO T.
LAGUESMA in his capacity as Secretary of Labor and Employment; and
DIRECTOR CHITA G. CILINDRO in her capacity as Director of Bureau of
Working Conditions, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under
Rule 65 of the 1995 Rules of Civil Procedure the nullification of the March 28, 2000
Decision1 of the Court of Appeals denying its petition to annul 1) the March 11, 1993
"Explanatory Bulletin"2 of the Department of Labor and Employment (DOLE) entitled
"Workers’ Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good
Friday", which bulletin the DOLE reproduced on January 23, 1998, 2) the July 31,
1998 Decision3 of the Panel of Voluntary Arbitrators ruling that the said explanatory
bulletin applied as well to April 9, 1998, and 3) the September 18, 19984 Resolution
of the Panel of Voluntary Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:
The Department of Labor and Employment (DOLE), through Undersecretary
Cresenciano B. Trajano, issued an Explanatory Bulletin dated March 11, 1993
wherein it clarified, inter alia, that employees are entitled to 200% of their basic
wage on April 9, 1993, whether unworked, which[,] apart from being Good Friday
[and, therefore, a legal holiday], is also Araw ng Kagitingan [which is also a legal
holiday]. The bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from
being Good Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on
the same day, this Department is of the view that the covered employees are entitled
to at least two hundred percent (200%) of their basic wage even if said holiday is
unworked. The first 100% represents the payment of holiday pay on April 9, 1993
as Good Friday and the second 100% is the payment of holiday pay for the same
date as Araw ng Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both
Maundy Thursday and Araw ng Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted
to pay its daily paid employees only 100% of their basic pay on April 9, 1998.
Respondent Bisig ng Asian Transmission Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining
Agreement (CBA) existing between petitioner and BATLU, the controversy was
submitted for voluntary arbitration. x x x x On July 31, 1998, the Office of the
Voluntary Arbitrator rendered a decision directing petitioner to pay its covered
employees "200% and not just 100% of their regular daily wages for the unworked
April 9, 1998 which covers two regular holidays, namely, Araw ng Kagitignan and
Maundy Thursday." (Emphasis and underscoring supplied)
Subject of interpretation in the case at bar is Article 94 of the Labor Code which
reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly
employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Year’s Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of
July, the thirtieth of November, the twenty-fifth and thirtieth of December and the
day designated by law for holding a general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that
the regular holidays are now:
1. New Year’s Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
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6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the
Voluntary Arbitrator held that Article 94 of the Labor Code provides for holiday pay
for every regular holiday, the computation of which is determined by a legal formula
which is not changed by the fact that there are two holidays falling on one day, like
on April 9, 1998 when it was Araw ng Kagitingan and at the same time was Maundy
Thursday; and that that the law, as amended, enumerates ten regular holidays for
every year should not be interpreted as authorizing a reduction to nine the number
of paid regular holidays "just because April 9 (Araw ng Kagitingan) in certain years,
like 1993 and 1998, is also Holy Friday or Maundy Thursday."
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary
Arbitrator, holding that the Collective Bargaining Agreement (CBA) between
petitioner and BATLU, the law governing the relations between them, clearly
recognizes their intent to consider Araw ng Kagitingan and Maundy Thursday, on
whatever date they may fall in any calendar year, as paid legal holidays during the
effectivity of the CBA and that "[t]here is no condition, qualification or exception for
any variance from the clear intent that all holidays shall be compensated."5
The Court of Appeals further held that "in the absence of an explicit provision in law
which provides for [a] reduction of holiday pay if two holidays happen to fall on the
same day, any doubt in the interpretation and implementation of the Labor Code
provisions on holiday pay must be resolved in favor of labor."
By the present petition, petitioners raise the following issues:
I The petition is devoid of merit.
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE
COLLECTIVE BARGAINING AGREEMENT BETWEEN THE PARTIES AND
SUBSTITUTING ITS OWN JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY
THE PARTIES THEMSELVES
II
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF
THE POLICIES ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST
BY THE REISSUANCE OF THE SAID EXPLANATORY BULLETIN
III
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY
BULLETIN EVEN WHILE ADMITTING THAT THE SAID BULLEITN WAS NOT AN
EXAMPLE OF A JUDICIAL, QUASI-JUDICIAL, OR ONE OF THE RULES AND
REGULATIONS THAT [Department of Labor and Employment] DOLE MAY
PROMULGATE
IV
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11,
1993, IN THE GUISE OF PROVIDING GUIDELINES ON ART. 94 OF THE LABOR CODE,
COMMITTED GRAVE ABUSE OF DISCRETION, AS IT LEGISLATED AND
INTERPRETED LEGAL PROVISIONS IN SUCH A MANNER AS TO CREATE
OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW
V
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT
OF LABOR IN REITERATING ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993
AND IN ORDERING THAT THE SAME POLICY OBTAINED FOR APRIL 9, 1998
DESPITE THE RULINGS OF THE SUPREME COURT TO THE CONTRARY
VI
WHETHER OR NOT RESPONDENTS’ ACTS WILL DEPRIVE PETITIONER OF
PROPERTY WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL
AS EQUAL PROTECTION OF LAWS
At the outset, it bears noting that instead of assailing the Court of Appeals Decision
by petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, petitioner lodged the present petition for certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any
alleged errors committed by it in the exercise of its jurisdiction would be errors of
judgment which are reviewable by timely appeal and not by a special civil action
of certiorari. If the aggrieved party fails to do so within the reglementary period,
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and the decision accordingly becomes final and executory, he cannot avail himself
of the writ of certiorari, his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review
under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now
Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is
clear that the decisions, final orders or resolutions of the Court of Appeals in any
case, i.e., regardless of the nature of the action or proceeding involved, may be
appealed to this Court by filing a petition for review, which would be but a
continuation of the appellate process over the original case. Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of judgment or denial
of motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner
must show that he has no plain, speedy and adequate remedy in the ordinary course
of law against its perceived grievance. A remedy is considered "plain, speedy and
adequate" if it will promptly relieve the petitioner from the injurious effects of the
judgment and the acts of the lower court or agency. In this case, appeal was not
only available but also a speedy and adequate remedy.6
The records of the case show that following petitioner’s receipt on August 18, 2000
of a copy of the August 10, 2000 Resolution of the Court of Appeals denying its
Motion for Reconsideration, it filed the present petition for certiorari on September
15, 2000, at which time the Court of Appeals decision had become final and
executory, the 15-day period to appeal it under Rule 45 having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative
that the State shall afford protection to labor.7 Its purpose is not merely "to prevent
diminution of the monthly income of the workers on account of work interruptions.
In other words, although the worker is forced to take a rest, he earns what he should
earn, that is, his holiday pay."8 It is also intended to enable the worker to participate
in the national celebrations held during the days identified as with great historical
and cultural significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day
(last Sunday of August), Bonifacio Day (November 30) and Rizal Day (December 30)
were declared national holidays to afford Filipinos with a recurring opportunity to
commemorate the heroism of the Filipino people, promote national identity, and
deepen the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to
celebrate the contributions of the working class to the development of the nation,
while the religious holidays designated in Executive Order No. 203 allow the worker
to celebrate his faith with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the
enjoyment of ten paid regular holidays.9 The provision is mandatory,10 regardless
of whether an employee is paid on a monthly or daily basis.11Unlike a bonus, which
is a management prerogative,12 holiday pay is a statutory benefit demandable
under the law. Since a worker is entitled to the enjoyment of ten paid regular
holidays, the fact that two holidays fall on the same date should not operate to
reduce to nine the ten holiday pay benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language
of the law is clear and unequivocal, the law must be taken to mean exactly what it
says.13 In the case at bar, there is nothing in the law which provides or indicates
that the entitlement to ten days of holiday pay shall be reduced to nine when two
holidays fall on the same day.
Petitioner’s assertion that Wellington v. Trajano14 has "overruled" the DOLE March
11, 1993 Explanatory Bulletin does not lie. In Wellington, the issue was
whether monthly-paid employees are entitled to an additional day’s pay if a holiday
falls on a Sunday. This Court, in answering the issue in the negative, observed that
in fixing the monthly salary of its employees, Wellington took into account "every
working day of the year including the holidays specified by law and excluding only
Sunday." In the instant case, the issue is whether daily-paid employees are entitled
to be paid for two regular holidays which fall on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation
and interpretation of its provisions, including its implementing rules and regulations,
shall be resolved in favor of labor. For the working man’s welfare should be the
primordial and paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor
Code provides that "Nothing in the law or the rules shall justify an employer in
withdrawing or reducing any benefits, supplements or payments for unworked
regular holidays as provided in existing individual or collective agreement or
employer practice or policy."17
From the pertinent provisions of the CBA entered into by the parties, petitioner had
obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998
CBA incorporates the following provision:
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ARTICLE XIV
PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Year’s Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular
holiday shall be entitled to the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in
holiday payment in addition to normal vacation pay but will not entitle the employee
to another vacation leave.
Under similar circumstances, the COMPANY will give a day’s wage for November 1st
and December 31st whenever declared a holiday. When required to work on said
days, the employee will be paid according to Art. VI, Sec. 3B hereof.18
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.

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FIRST DIVISION
G.R. No. 146775 January 30, 2002
SAN MIGUEL CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS-FORMER THIRTEENTH DIVISION,
HON. UNDERSECRETARY JOSE M. ESPAÑOL, JR., Hon. CRESENCIANO B.
TRAJANO, and HON. REGIONAL DIRECTOR ALLAN M.
MACARAYA, respondents.
DECISION
KAPUNAN, J.:
Assailed in the petition before us are the decision, promulgated on 08 May 2000,
and the resolution, promulgated on 18 October 2000, of the Court of Appeals in CA
G.R. SP-53269.
The facts of the case are as follows:
On 17 October 1992, the Department of Labor and Employment (DOLE), Iligan
District Office, conducted a routine inspection in the premises of San Miguel
Corporation (SMC) in Sta. Filomena, Iligan City. In the course of the inspection, it
was discovered that there was underpayment by SMC of regular Muslim holiday pay
to its employees. DOLE sent a copy of the inspection result to SMC and it was
received by and explained to its personnel officer Elena dela Puerta.1 SMC contested
the findings and DOLE conducted summary hearings on 19 November 1992, 28 May
1993 and 4 and 5 October 1993. Still, SMC failed to submit proof that it was paying
regular Muslim holiday pay to its employees. Hence, Alan M. Macaraya, Director IV
of DOLE Iligan District Office issued a compliance order, dated 17 December 1993,
directing SMC to consider Muslim holidays as regular holidays and to pay both its
Muslim and non-Muslim employees holiday pay within thirty (30) days from the
receipt of the order.
SMC appealed to the DOLE main office in Manila but its appeal was dismissed for
having been filed late. The dismissal of the appeal for late filing was later on
reconsidered in the order of 17 July 1998 after it was found that the appeal was
filed within the reglementary period. However, the appeal was still dismissed for lack
of merit and the order of Director Macaraya was affirmed.
SMC went to this Court for relief via a petition for certiorari, which this Court referred
to the Court of Appeals pursuant to St. Martin Funeral Homes vs. NLRC.2
The appellate court, in the now questioned decision, promulgated on 08 May 2000,
ruled, as follows:
WHEREFORE, the Order dated December 17, 1993 of Director Macaraya and Order
dated July 17, 1998 of Undersecretary Español, Jr. is hereby MODIFIED with regards
the payment of Muslim holiday pay from 200% to 150% of the employee's basic
salary. Let this case be remanded to the Regional Director for the proper
computation of the said holiday pay.
SO ORDERED.3
Its motion for reconsideration having been denied for lack of merit, SMC filed a
petition for certiorari before this Court, alleging that:
PUBLIC RESPONDENTS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION WHEN THEY GRANTED MUSLIM HOLIDAY PAY TO NON-MUSLIM
EMPLOYEES OF SMC-ILICOCO AND ORDERING SMC TO PAY THE SAME
RETROACTIVE FOR ONE (1) YEAR FROM THE DATE OF THE PROMULGATION OF
THE COMPLIANCE ORDER ISSUED ON DECEMBER 17, 1993, IT BEING CONTRARY
TO THE PROVISIONS, INTENT AND PURPOSE OF P.D. 1083 AND PREVAILING
JURISPRUDENCE.
THE ISSUANCE OF THE COMPLIANCE ORDER WAS TAINTED WITH GRAVE ABUSE
OF DISCRETION IN THAT SAN MIGUEL CORPORATION WAS NOT ACCORDED DUE
PROCESS OF LAW; HENCE, THE ASSAILED COMPLIANCE ORDER AND ALL
SUBSEQUENT ORDERS, DECISION AND RESOLUTION OF PUBLIC RESPONDENTS
WERE ALL ISSUED WITH GRAVE ABUSE OF DISCRETION AND ARE VOID AB INITIO.
THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN
IT DECLARED THAT REGIONAL DIRECTOR MACARAYA, UNDERSECRETARY
TRAJANO AND UNDERSECRETARY ESPAÑOL, JR., WHO ALL LIKEWISE ACTED WITH
GRAVE ABUSE OF DISCRETION AND WITHOUT OR IN EXCESS OF THEIR
JURISDICTION, HAVE JURISDICTION IN ISSUING THE ASSAILED COMPLIANCE
ORDER AND SUBSEQUENT ORDERS, WHEN IN FACT THEY HAVE NO JURISDICTION
OR HAS LOST JURISDICTION OVER THE HEREIN LABOR STANDARD CASE.4
At the outset, petitioner came to this Court via a petition for certiorari under Rule
65 instead of an appeal under Rule 45 of the 1997 Rules of Civil Procedure.
In National Irrigation Administration vs. Court of Appeals,5 the Court declared:
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x x x (S)ince the Court of Appeals had jurisdiction over the petition under Rule 65,
any alleged errors committed by it in the exercise of its jurisdiction would be errors
of judgment which are reviewable by timely appeal and not by a special civil action
of certiorari. If the aggrieved party fails to do so within the reglementary period,
and the decision accordingly becomes final and executory, he cannot avail himself
of the writ of certiorari, his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review
under Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now
Rule 45 and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is
clear that decisions, final orders or resolutions of the Court of Appeals in any
case, i.e.,regardless of the nature of the action or proceeding involved, may be
appealed to this Court by filing a petition for review, which would be but a
continuation of the appellate process over the original case. Under Rule 45 the
reglementary period to appeal is fifteen (15) days from notice of judgment or denial
of motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner
must show that he has no plain, speedy and adequate remedy in the ordinary course
of law against its perceived grievance. A remedy is considered "plain, speedy and
adequate" if it will promptly relieve the petitioner from the injurious effects of the
judgment and the acts of the lower court or agency. In this case, appeal was not
only available but also a speedy and adequate remedy.6
Well-settled is the rule that certiorari cannot be availed of as a substitute for a lost
appeal.7 For failure of petitioner to file a timely appeal, the questioned decision of
the Court of Appeals had already become final and executory.
In any event, the Court finds no reason to reverse the decision of the Court of
Appeals.
Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of
Presidential Decree No. 1083,8otherwise known as the Code of Muslim Personal
Laws, which states:
Art. 169. Official Muslim holidays. - The following are hereby recognized as legal
Muslim holidays:
(a) ‘Amun Jadīd (New Year), which falls on the first day of the first lunar month
of Muharram;
(b) Maulid-un-Nabī (Birthday of the Prophet Muhammad), which falls on the twelfth
day of the third lunar month of Rabi-ul-Awwal;
(c) Lailatul Isrā Wal Mi’rāj (Nocturnal Journey and Ascension of the Prophet
Muhammad), which falls on the twenty-seventh day of the seventh lunar month
of Rajab;
(d) ‘Īd-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month
of Shawwal, commemorating the end of the fasting season; and
(e) ‘Īd-ūl-Adhā (Hari Raya Haji),which falls on the tenth day of the twelfth lunar
month of Dhū’l-Hijja.
Art. 170. Provinces and cities where officially observed. - (1) Muslim holidays shall
be officially observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur,
Maguindanao, North Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in
such other Muslim provinces and cities as may hereafter be created;
(2) Upon proclamation by the President of the Philippines, Muslim holidays may also
be officially observed in other provinces and cities.
The foregoing provisions should be read in conjunction with Article 94 of the Labor
Code, which provides:
Art. 94. Right to holiday pay. -
(a) Every worker shall be paid his regular daily wage during regular holidays, except
in retail and service establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate; x x x.
Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that
"(t)he provisions of this Code shall be applicable only to Muslims x x x." However,
there should be no distinction between Muslims and non-Muslims as regards
payment of benefits for Muslim holidays. The Court of Appeals did not err in
sustaining Undersecretary Español who stated:
Assuming arguendo that the respondent’s position is correct, then by the same
token, Muslims throughout the Philippines are also not entitled to holiday pays on
Christian holidays declared by law as regular holidays. We must remind the
respondent-appellant that wages and other emoluments granted by law to the
working man are determined on the basis of the criteria laid down by laws and
certainly not on the basis of the worker’s faith or religion.
At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that "x x x
nothing herein shall be construed to operate to the prejudice of a non-Muslim."
In addition, the 1999 Handbook on Workers’ Statutory Benefits, approved by then
DOLE Secretary Bienvenido E. Laguesma on 14 December 1999 categorically stated:
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Considering that all private corporations, offices, agencies, and entities or and 4 and 5 October 1993. Thus, SMC could not claim that it was not given an
establishments operating within the designated Muslim provinces and cities are opportunity to defend itself.
required to observe Muslim holidays, both Muslim and Christians working within the Finally, as regards the allegation that the issue on Muslim holiday pay was already
Muslim areas may not report for work on the days designated by law as Muslim resolved in NLRC CA No. M-000915-92 (Napoleon E. Fernan vs. San Miguel
holidays.9 Corporation Beer Division and Leopoldo Zaldarriaga),10 the Court notes that the
On the question regarding the jurisdiction of the Regional Director Allan M. case was primarily for illegal dismissal and the claim for benefits was only incidental
Macaraya, Article 128, Section B of the Labor Code, as amended by Republic Act No. to the main case. In that case, the NLRC Cagayan de Oro City declared, in passing:
7730, provides: We also deny the claims for Muslim holiday pay for lack of factual and legal
"Article 128. Visitorial and enforcement power. - basis.1âwphi1 Muslim holidays are legally observed within the area of jurisdiction of
xxx the present Autonomous Region for Muslim Mindanao (ARMM), particularly in the
provinces of Maguindanao, Lanao del Sur, Sulu and Tawi-Tawi.1âwphi1 It is only
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the
upon Presidential Proclamation that Muslim holidays may be officially observed
contrary, and in cases where the relationship of employer-employee still exists, the
outside the Autonomous Region and generally extends to Muslims to enable them
Secretary of Labor and Employment or his duly authorized representatives shall have
the observe said holidays.11
the power to issue compliance orders to give effect to the labor standards provisions
of this Code and other labor legislation based on the findings of labor employment The decision has no consequence to issues before us, and as aptly declared by
and enforcement officers or industrial safety engineers made in the course of the Undersecretary Español, it "can never be a benchmark nor a guideline to the present
inspection. The Secretary or his duly authorized representative shall issue writs of case x x x."12
execution to the appropriate authority for the enforcement of their orders, except in WHEREFORE, in view of the foregoing, the petition is DISMISSED.
cases where the employer contests the findings of the labor employment and SO ORDERED.
enforcement officer and raises issues supported by documentary proofs which were
not considered in the course of inspection.
xxx
In the case before us, Regional Director Macaraya acted as the duly authorized
representative of the Secretary of Labor and Employment and it was within his power
to issue the compliance order to SMC. In addition, the Court agrees with the Solicitor
General that the petitioner did not deny that it was not paying Muslim holiday pay
to its non-Muslim employees. Indeed, petitioner merely contends that its non-Muslim
employees are not entitled to Muslim holiday pay. Hence, the issue could be resolved
even without documentary proofs. In any case, there was no indication that Regional
Director Macaraya failed to consider any documentary proof presented by SMC in
the course of the inspection.
Anent the allegation that petitioner was not accorded due process, we sustain the
Court of Appeals in finding that SMC was furnished a copy of the inspection order
and it was received by and explained to its Personnel Officer. Further, a series of
summary hearings were conducted by DOLE on 19 November 1992, 28 May 1993

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SECOND DIVISION
G.R. No. 114734 March 31, 2000
VIVIAN Y. IMBUIDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, INTERNATIONAL
INFORMATION SERVICES, INC. and GABRIEL LIBRANDO, respondents.
BUENA, J.:
This special civil action for certiorari seeks to set aside the Decision1 of the National
Labor Relations Commission (NLRC) promulgated on September 27, 1993 and its
Order dated January 11, 1994, which denied petitioner's motion for reconsideration.
Petitioner was employed as a data encoder by private respondent International
Information Services, Inc., a domestic corporation engaged in the business of data
encoding and keypunching, from August 26, 1988 until October 18, 1991 when her
services were terminated. From August 26, 1988 until October 18, 1991, petitioner
entered into thirteen (13) separate employment contracts with private respondent,
each contract lasting only far a period of three (3) months. Aside from the basic
hourly rate, specific job contract number and period of employment, each contract
contains the following terms and conditions:
a. This Contract is for a specific project/job contract only and shall be effective for
the period covered as above-mentioned unless sooner terminated when the job
contract is completed earlier or withdrawn by client, or when employee is dismissed
for just and lawful causes provided by law. The happening of any of these events
will automatically terminate this contract of employment.
b. Subject shall abide with the Company's rules and regulations for its employees
attached herein to form an integral part hereof.
c. The nature of your job may require you to render overtime work with pay so as
not to disrupt the Company's commitment of scheduled delivery dates made on said
job contract.2
In September 1991, petitioner and twelve (12) other, employees of private
respondent allegedly agreed to the filing of a petition for certification election
involving the rank-and-file employees of private respondent.3 Thus, on October 8,
1991, Lakas Manggagawa sa Pilipinas (LAKAS) filed a petition for certification
election with the Bureau of Labor Relations (BLR), docketed as NCR-OD-M-9110-
128.4
Subsequently, on October 18, 1991, petitioner received a termination letter from
Edna Kasilag, Administrative Officer of private respondent, allegedly "due to low
volume of work."5
Thus, on May 25, 1992, petitioner filed a complaint for illegal dismissal with prayer
for service incentive leave pay and 13th month differential pay, with the National
Labor Relations Commission, National Capital Region, Arbitration Branch, docketed
as NLRC-NCR Case No. 05-02912-92.6
In her position paper dated August 3, 1992 and filed before labor arbiter Raul T.
Aquino, petitioner alleged that her employment was terminated not due to the
alleged low volume of work but because she "signed a petition for certification
election among the rank and file employees of respondents," thus charging private
respondent with committing unfair labor practices. Petitioner further complained of
non-payment of service incentive leave benefits and underpayment of 13th month
pay.7
On the other hand, private respondent, in its position paper filed on July 16, 1992,
maintained that it had valid reasons to terminate petitioner's employment and
disclaimed any knowledge of the existence or formation of a union among its rank-
and-file employees at the time petitioner's services were terminated.8 Private
respondent stressed that its business ". . . relies heavily on companies availing of its
services. Its retention by client companies with particular emphasis on data encoding
is on a project to project basis,"9 usually lasting for a period of "two (2) to five (5)
months." Private respondent further argued that petitioner's employment was for a
"specific project with a specified period of engagement." According to private
respondent, ". . . the certainty of the expiration of complainant's engagement has
been determined at the time of their (sic) engagement (until 27 November 1991) or
when the project is earlier completed or when the client withdraws," as provided in
the contract. 10 "The happening of the second event [completion of the project] has
materialized, thus, her contract of employment is deemed terminated per the Brent
School ruling." 11 Finally, private respondent averred that petitioner's "claims for
non-payment of overtime time (sic) and service incentive leave [pay] are without
factual and legal basis." 12
In a decision dated August 25, 1992, labor arbiter Raul T. Aquino, ruled in favor of
petitioner, and accordingly ordered her reinstatement without loss of seniority rights
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and privileges, and the payment of backwages and service incentive leave pay. The
dispositive part of the said decision reads:
WHEREFORE, responsive to the foregoing, judgment is hereby rendered ordering
respondents to immediately reinstate complainant [petitioner herein] as a regular
employee to her former position without loss of seniority rights and privileges and
to pay backwages from the time of dismissal up to the date of this decision, the
same to continue until complainant ['s] [petitioner herein] actual reinstatement from
(sic) the service. Respondents are likewise ordered to pay complainant [petitioner
herein] service incentive leave pay computed as follows:
Backwages:
10/18/91 - 8/25/92 = 10.23 mos.
P118.00 x 26 x 10.23 mos. = P31, 385.64
Service Incentive Leave Pay
1989 = P89.00 x 5 days = P445.00
1990 = 106 x 5 days = P530.00
1991 = 118 x 5 days = P590.00
P 1,565.00
Total P 32,950.64
==========
SO ORDERED. 13
In his decision, the labor arbiter found petitioner to be a regular employee, ruling
that "[e]ven if herein complainant [petitioner herein] had been obstensively (sic)
hired for a fixed period or for a specific undertaking, she should be considered as
[a] regular employee of the respondents in conformity with the provisions (sic) laid
down under Article 280 of the Labor Code," 14 after finding that ". . . [i]t is crystal
clear that herein complainant [petitioner herein] performed a job which are (sic)
usually necessary or desirable in the usual business of respondent [s]." 15 The labor
arbiter further denounced ". . . the purpose behind the series of contracts which
respondents required complainant to execute as a condition of employment was to
evade the true intent and spirit of the labor laws for the workingmen . . .
." 16 Furthermore, the labor arbiter concluded that petitioner was illegally dismissed
because the alleged reason for her termination, that is, low volume of work, is "not
among the just causes for termination recognized by law," 17hence, he ordered her
immediate reinstatement without loss of seniority rights and with full backwages.
With regard to the service incentive leave pay, the labor arbiter decided ". . . to
grant the same for failure of the respondents to fully controvert said
claims." 18 Lastly, the labor arbiter rejected petitioner's claim for 13th month pay ".
. . since complainant [petitioner herein] failed to fully substantiate and argued (sic)
the same." 19
On appeal, the NLRC reversed the decision of the labor arbiter in a
decision 20 promulgated on September 27, 1993, the dispositive part of which
reads:
WHEREFORE, the appealed decision is hereby set aside. The complaint for illegal
dismissal is hereby dismissed for being without merit. Complainant's [petitioner
herein] claim for service incentive leave pay is hereby remanded for further
arbitration.
SO ORDERED. 21
The NLRC ruled that "[t]here is no question that the complainant [petitioner herein],
viewed in relation to said Article 280 of the [Labor] Code, is a regular employee
judging from the function and/or work for which she was hired. . . . But this does
not necessarily mean that the complainant [petitioner herein] has to be guaranteed
a tenurial security beyond the period for which she was hired." 22 The NLRC held
that ". . . the complainant [petitioner herein], while hired as a regular worker, is
statutorily guaranteed, in her tenurial security, only up to the time the specific
project for which she was hired is completed." 23 Hence, the NLRC concluded that
"[w]ith the specific project "at RCBC 014" admittedly completed, the complainant
[petitioner herein] has therefore no valid basis in charging illegal dismissal for her
concomittant (sic) dislocation." 24
In an Order dated January 11, 1994, the NLRC denied petitioner's motion for
reconsideration. 25
In this petition for certiorari, petitioner, for and in her behalf, argues that (1) the
public respondent "committed grave abuse of discretion when it ignored the findings
of Labor Arbiter Raul Aquino based on the evidence presented directly before him,
and when it made findings of fact that are contrary to or not supported by
evidence," 26 (2) "[p]etitioner was a "regular employee," NOT a "project employee"

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as found by public respondent NLRC," 27 (3) "[t]he termination of petition (sic) was
tainted with unfair labor practice," 28 and (4) the public respondent "committed
grave abuse of discretion in remanding the awarded service incentive leave pay for
further arbitration." 29
The petition is impressed with merit.
We agree with the findings of the NLRC that petitioner is a project employee. The
principal test for determining whether an employee is a project employee or a
regular employee is whether the project employee was assigned to carry out a
specific project or undertaking, the duration and scope of which were specified at
the time the employee was engaged for that project. 30 A project employee is one
whose employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season. 31 In the
instant case, petitioner was engaged to perform activities which were usually
necessary or desirable in the usual business or trade of the employer, as admittedly,
petitioner worked as a data encoder for private respondent, a corporation engaged
in the business of data encoding and keypunching, and her employment was fixed
for a specific project or undertaking the completion or termination of which had been
determined at the time of her engagement, as may be observed from the series of
employment contracts 32 between petitioner and private respondent, all of which
contained a designation of the specific job contract and a specific period of
employment.1âwphi1.nêt
However, even as we concur with the NLRC's findings that petitioner is a project
employee, we have reached a different conclusion. In the recent case of Maraguinot,
Jr. vs. NLRC, 33 we held that "[a] project employee or a member of a work pool
may acquire the status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after [the] cessation of
a project; 34 and
2) The tasks performed by the alleged "project employee" are vital, necessary and
indispensable to the usual business or trade of the employer. 35
The evidence on record reveals that petitioner was employed by private respondent
as a data encoder, performing activities which are usually necessary or desirable in
the usual business or trade of her employer, continuously for a period of more than
three (3) years, from August 26, 1988 to October 18, 1991 36 and contracted for a
total of thirteen (13) successive projects. We have previously ruled that "[h]owever,
the length of time during which the employee was continuously re-hired is not
controlling, but merely serves as a badge of regular employment." 37Based on the
foregoing, we conclude that petitioner has attained the status of a regular employee
of private respondent.
At this point, we reiterate with emphasis that:
xxx xxx xxx
At this time, we wish to allay any fears that this decision unduly burdens an employer
by imposing a duty to re-hire a project employee even after completion of the project
for which he was hired. The import of this decision is not to impose a positive and
sweeping obligation upon the employer to re-hire project employees. What this
decision merely accomplishes is a judicial recognition of the employment status of a
project or work pool employee in accordance with what is fait accompli, i.e., the
continuous re-hiring by the employer of project or work pool employees who perform
tasks necessary or desirable to the employer's usual business or trade. Let it not be
said that this decision "coddles" labor, for as Lao 38 has ruled, project or work pool
employees who have gained the status of regular employees are subject to the "no
work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and
are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can likewise
be applied to project workers insofar as the effect of temporary cessation of work is
concerned. This is beneficial to both the employer and employee for it prevents the
unjust situation of "coddling labor at the expense of capital" and at the same time
enables the workers to attain the status of regular employees.
The Court's ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector, but, we stress, not at the expense of management.
Lest it be misunderstood, this ruling does not mean that simply because an employee
is a project or work pool employee even outside the construction industry, he is
deemed, ipso jure, a regular employee. All that we hold today is that once a project
or work pool employee has been: (1) continuously, as opposed to intermittently, re-
hired by the same employer for the same tasks or nature of tasks; and (2) these
tasks are vital, necessary and indispensable to the usual business or trade of the
employer, then the employee must be deemed a regular employee, pursuant to
Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow
circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. Policy Department Order No. 19, hence allowing the prevention of
acquisition of tenurial security by project or work pool employees who have already
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gained the status of regular employees by the employer's conduct. 39 (emphasis equivalent period, and it is one of the "benefits" which would have accrued if an
supplied) employee was not otherwise illegally dismissed, it is fair and legal that its
Being a regular employee, petitioner is entitled to security of tenure and could only computation should be up to the date of reinstatement as provided under Section
be dismissed for a just or authorized cause, as provided in Article 279 of the Labor [Article] 279 of the Labor Code, as amended, which reads:
Code, as amended: Art. 279. Security of Tenure. - An employee who is unjustly dismissed from work
Art. 279. Security of Tenure - In cases of regular employment, the employer shall shall be entitled to reinstatement without loss of seniority rights and other privileges
not terminate the services of an employee except for a just cause or when authorized and to his full backwages, inclusive of allowances, and to his other benefits or their
by this Title. An employee who is unjustly dismissed from work shall be entitled to monetary equivalent computed from the time his compensation is withheld from him
reinstatement without loss of seniority rights and other privileges and to his full up to the time of his actual reinstatement." (emphasis supplied).
backwages, inclusive of allowances, and to his other benefits or their monetary WHEREFORE, the instant petition is GRANTED. The assailed decision of the National
equivalent computed from the time his compensation was withheld from him up to Labor Relations Commission in NLRC NCR CA No. 003845-92 dated September 27,
the time of his actual reinstatement. 1993, as well as its Order dated January 11, 1994, are hereby ANNULLED and SET
The alleged causes of petitioner's dismissal (low volume of work and belatedly, ASIDE for having been rendered with grave abuse of discretion, and the decision of
completion of project) are not valid causes for dismissal under Articles 282 and 283 the Labor Arbiter in NLRC NCR Case No. 05-02912-92 is REINSTATED with
of the Labor Code. Thus, petitioner is entitled to reinstatement without loss of MODIFICATION as above-stated, with regard to computation of back wages and
seniority rights and other privileges, and to her full backwages, inclusive of service incentive leave pay.1âwphi1.nêt
allowances, and to her other benefits or their monetary equivalent computed from SO ORDERED.
the time her compensation was withheld from her up to the time of her actual
reinstatement. However, complying with the principles of "suspension of work" and
"no work, no pay" between the end of one project and the start of a new one, in
computing petitioner's backwages, the amounts corresponding to what could have
been earned during the periods from the date petitioner was dismissed until her
reinstatement when private respondent was not undertaking any project, should be
deducted.1âwphi1
With regard to petitioner's claim for service incentive leave pay, we agree with the
labor arbiter that petitioner is entitled to service incentive leave pay, as provided in
Article 95 of the Labor Code, which reads:
Art. 95 - Right to service incentive leave -
(a) Every employee who has rendered at least one year of service shall be entitled
to a yearly service incentive leave of five days with pay.
xxx xxx xxx
Having already worked for more than three (3) years at the time of her unwarranted
dismissal, petitioner is undoubtedly entitled to service incentive leave benefits,
computed from 1989 until the date of her actual reinstatement. As we ruled in the
recent case of Fernandez vs. NLRC, 40 "[s]ince a service incentive leave is clearly
demandable after one year of service - whether continuous or broken - or its

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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23076 February 27, 1969
NICANOR M. BALTAZAR, plaintiff-appellee,
vs.
SAN MIGUEL BREWERY, INC., defendant-appellant.
DIZON, J.:
Appeal taken by San Miguel Brewery, Inc. to reverse the decision of the Court of
First Instance of Manila in Civil Case No. 32478 ordering it to pay appellee Nicanor
M. Baltazar the total amount of P1,680.00 representing his separation pay of one
(1) month and the money value — at the rate of P240.00 monthly — of six months
accumulated sick leave he was entitled to.
It appears that Baltazar was appointed salesman-in-charge of appellant's Dagupan
warehouse on October 1, 1955 with a basic monthly pay of P240.00, P5.00 per diem
and a commission of P.075 per case sold.
On October 9, 1956 sixteen regular workers at appellant's Dagupan warehouse went
on a strike. For the purpose of relieving the tension prevailing at the place — because
it was alleged that the unfair treatment dispensed to the employees by Baltazar was
the cause of the strike — Baltazar was recalled to appellant's Manila office on
October 13 of the same year upon recommendation of its sales supervisor and
industrial relations officer, who found out, after a personal investigation, that the
employees' grievance was well founded. The day following Baltazar's recall to Manila
the strikers returned to work voluntarily.
When Baltazar reported at appellant's main office in Manila on October 15, 1956,
the latter's sales supervisor informed him that he was not to return to Dagupan
anymore. Thereafter, he reported for work at the main office aforesaid from October
16, 1956 until November 2 of the same year, apparently without being given any
specific work or assignment. From November 3, 1956 up to December 19 of the
same year, or a period of more than one and one-half months, he absented himself
from work without prior authority from his superiors and without advising them or
anybody else of the reason for his prolonged absence. For this reason, pursuant
firstly, to existing rules and regulations considering ten unexcused or unauthorized
absences within a calendar year as sufficient ground for an outright dismissal from
employment, and secondly, the provisions of appellant's health, welfare and
retirement plan requiring that sick leave, to be considered authorized or excusable,
must be certified to by the company physician, appellant, by a letter dated December
31, 1956, informed Baltazar that he was dismissed for cause effective November 30
of the same year.
Four months later, or more specifically on May 2, 1957, Baltazar commenced the
present action. After trial upon the issues arising from the parties' pleadings, the
trial court ruled that Baltazar's dismissal was justified, and, as a consequence,
dismissed his complaint. For insufficiency of evidence, the court also dismissed
appellant's counterclaim. But despite the dismissal of Baltazar's complaint and the
finding that his dismissal from employment was for cause, the trial court ordered
appellant to pay him one month separation pay, plus the cash value of six months
accumulated sick leave. So We are now urged to reverse this portion of the decision
upon the following grounds:
I. The trial court erred in requiring the defendant appellant to pay separation pay
after having found and declared as an established fact that the dismissal of plaintiff-
appellee was fully justified.
II. The trial court erred in awarding plaintiff-appellee the money equivalent of an
"accumulated sick leave of six (6) months as terminal leave" despite its express
findings to the effect that (1) sick leave benefits under defendant-appellant's health,
welfare and retirement plan may be enjoyed only if and when the sickness is certified
to by the company physician — a requirement which was admittedly not complied
with, and (2) said benefits are "non-commutative and may not therefore be
commuted to cash".lawphi1.nêt
The trial court found that appellee's absence for forty-eight successive days was
without permission or authority of his superiors and, as a result, ruled that it was
sufficient cause for his dismissal in accordance with the rules and regulations of his
employer. This must be deemed final, because Baltazar did not appeal.
It is settled in this jurisdiction that one not employed for a definite period is not
entitled to one-month notice or to one-month salary in lieu thereof if his dismissal
was for cause (Republic Act No. 1052; Marcaida vs. Philippine Education Company,
53 O.G. No. 23, p. 8559). In the Marcaida case this Court, speaking through the
now Chief Justice Roberto Concepcion, said the following:
Republic Act No. 1052 makes reference to termination of employment, instead of
dismissal, precisely to exclude employees separated from the service for causes
attributable to their own fault.
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Again, Republic Act No. 1052 is limited in its operation, to cases of employment
without definite period. When the employment is for a fixed duration, the employer
may terminate it even before the expiration of the stipulated period, should there
be a substantial breach of his obligations by the employee; (Articles 1169, 1191 and
1198, Civil Code of the Philippines; Pabalan vs. Velez, 22 Phil. 29; Gonzales vs.
Haberer 47 Phil. 380; Hodges vs. Granada, 59 Phil. 429; De la Cruz vs. Legaspi, 51
Off. Gaz. 6212) in which event the latter is not entitled to advance notice or
separation pay. It would, patently, be absurd to grant a right thereto to an employee
guilty of the same breach of obligation, when the employment is without a definite
period, as if he were entitled to greater protection than employees engaged for a
fixed duration, .... It is doubtful whether Congress could validly require the employer
to give the separation pay in question if the employment were terminated due to
the fault of the employee. Indeed, the imposition of said obligation, under such
conditions, would expose Republic Act No. 1052 to the charge that it would
constitute an unreasonable restraint upon the liberty of the employer, and a
deprivation of his property without due process of law.
We rule therefore that appellee is not entitled to one month separation pay.
In connection with the question of whether or not appellee is entitled to the cash
value of six months accumulated sick leave, it appears that while under the last
paragraph of Article 5 of appellant's Rules and Regulations of the Health, Welfare
and Retirement Plan (Exhibit, 3), unused sick leave may be accumulated up to a
maximum of six months, the same is not commutable or payable in cash upon the
employee's option.
In our view, the only meaning and import of said rule and regulation is that if an
employee does not choose to enjoy his yearly sick leave of thirty days, he may
accumulate such sick leave up to a maximum of six months and enjoy this six months
sick leave at the end of the sixth year but may not commute it to cash.
WHEREFORE, the appealed decision is hereby reversed, without special
pronouncement as to costs. It is so ordered.

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Republic of the Philippines pay, service incentive leave pay with full backwages without qualification computed
SUPREME COURT hereunder as follows:
Manila
1. LEIDEN FERNANDEZ:
THIRD DIVISION
G.R. No. 105892 January 28, 1998 a) Separation Pay for 6 years P 8,640.00
LEIDEN FERNANDEZ, BRENDA GADIANO, GLORIA ADRIANO, EMELIA
NEGAPATAN, JESUS TOMONGHA, ELEONOR QUIÑANOLA, ASTERIA b) Service Incentive Leave (6 yrs.) 3,322.50
CAMPO, FLORIDA VILLACERAN, FLORIDA TALLEDO, MARILYN LIM and
JOSEPH CANONIGO, petitioners,
c) Backwages for one year only 34,560.00
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION;
TOTAL P 46,522.50
MARGUERITE1 LHUILLIER AND/OR AGENCIA CEBUANA-H.
LHUILLIER, respondents.
PANGANIBAN, J.:
2. GLORIA ADRIANO:
Is failure to attend hearings before the labor arbiter a waiver of the right to present
evidence? Are moral damages included in the computation of "monetary award" for
a) Separation Pay for 17 years P 28,560.00
purposes of determining the amount of the appeal bond? Is there a limit to the
amount of service incentive leave pay and backwages that may be awarded to an
illegally dismissed employee? b) Service Incentive Leave (17 yrs.) 10,986.25
The Case
c) Backwages for one year only 40,320.00
These are the main questions raised in this petition for certiorari under Rule 65 of
the Rules of Court assailing the March 11, 1992 Decision2 of Respondent National
TOTAL P 79,866.25
Labor Relations Commission (NLRC),3 the dispositive portion of which reads:4
WHEREFORE, premises considered, the appealed decision is hereby declared
VACATED and the entire records of these cases are hereby ordered remanded to the
Regional Arbitration Branch VII for further proceedings. 3. EMELIA NEGAPATAN:

This petition also challenges the NLRC's May 29, 1992 Resolution denying the motion
a) Separation Pay for 24 years P 35,760.00
for reconsideration.
The decision5 vacated by the NLRC and penned by Labor Arbiter Gabino A.
b) Service Incentive Leave (24 yrs.) 13,752.00
Velasquez, Jr. disposed as follows:6
WHEREFORE, judgment is hereby rendered in favor of the complainants and against c) Backwages for one year only 35,760.00
the respondent. The respondent is hereby ordered:
1. To reinstate the complainants to their respective position [sic] at the Agencia TOTAL P 85,272.00
Cebuana with full backwages without qualification; if reinstatement is not feasible,
for one reason or another, to pay to the complainants their respective separation

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4. JESUS P. TOMONGHA: a) Separation Pay for 17 years P 25,160.00

a) Separation Pay for 33 years P 50,655.00 b) Service Incentive Leave (17 yrs.) 9,677.25

b) Service Incentive Leave 19,478.25 c) Backwages for one year only 35,520.00

c) Backwages for one year only 36,840.00 TOTAL P 70,357.25

TOTAL P 106,973.25
8. FLORIDA TALLEDO:

5. ELEONOR QUIÑANOLA: a) Separation Pay for 18 years P 27,450.00

a) Separation Pay for 14 years P 20,860.00 b) Service Incentive Leave (18 yrs.) 10,557.00

b) Service Incentive Leave 8,022.00 c) Backwages for one year only 36,600.00

c) Backwages for one year only 35,760.00 TOTAL P 74,607.00

TOTAL P 64,642.00
9. BRENDA GADIANO:

6. ASTERIA CAMPO: a) Separation Pay for 13 years P 19,597.50

a) Separation Pay for 13 years P 19,240.00 b) Service Incentive Leave (13 yrs.) 7,536.75

b) Service Incentive Leave (13 yrs.) 7,400.00 c) Backwages for one year only 36,180.00

c) Backwages for one year only 35,520.00 TOTAL P 63,313.25

TOTAL P 62,160.25
10. MARILYN LIM:

7. FLORIDA VILLACERAN: a) Separation Pay for 7 years P 12,950.00

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Gadiano (Rec., pp. 79-88) and the other by Marilyn E. Lim and Joseph Canonigo
b) Service Incentive Leave (7 yrs.) 4,980.50
(Exhibit "C-4").

c) Backwages for one year only 44,400.00 3. In their Position Papers, petitioners alleged that they were employed by Lhuillier,
as follows:
TOTAL P 62,330.00 Name Position Date of Latest Date of
Employment Salary/Month Dismissal

11. JOSEPH CANONIGO: 1. Leiden Cashier Dec. 3, 1984 P2,880.00 July 19,
E. 1990
a) Separation Pay for 2 years P 2,700.00 Fernandez

b) Service Incentive Leave (2 yrs.) 1,038.50 2. Gloria B. Appraiser July 10, 3,360.00 July 19,
Adriano 1973 1990
c) Backwages for one year only 32,400.00
3. Emilia Sales Girl March 9, 2,980.00 July 19,
TOTAL P 36,138.50 A. 1966 1990
Negapatan
2) To pay to all complainants the amount of P100,000.00 for moral damages and
the amount of another P100,000.00 for exemplary damages, plus the amount of 4. Jesus P. Office July 1957 3,070.00 July 19,
P98,018.25 as attorney's fees representing 10% of the total award and the amount Tomongha Clerk 1990
of P30,000.00 for litigation expenses.
The totality of the award amounting to P1,078,200.55 must be deposited with this 5. Eleonor Office Dec. 8, 1976 2,980.00 July 21,
Office ten (10) days from receipt of this decision for further disposition. However, A. Clerk 1990
the payment of backwages will be computed as of the actual date of payment Quiñanola
provided it will not exceed a period of three years.
The Facts 6. Asteria Clerk May 27, 2,960.00 July 19,
The factual milieu of this case is recited by the solicitor general in his Comment C. Campo 1977 1990
dated December 21, 1992 as follows:7
7. Florida Sales March 8, 2,960.00 July 19,
1. The instant case stemmed from a consolidated complaint against private
Villaceran Clerk 1973 1990
respondents Agencia Cebuana-H. Lhuillier and/or Margueritte Lhuillier (Lhuillier) for
illegal dismissal (Rec., pp. 56-58). The Agencia Cebuana is a sole proprietorship
operated by Margueritte Lhuillier. 8. Florida Pawnshop June 19, 3,050.00 July 19,
B. Talledo Writer 1972 1990
2. Two (2) Position Papers were filed by petitioners, one by Leiden E. Fernandez,
Gloria B. Adriano, Emilia A. Negapatan, Jesus P. Tomongha, Eleonor A. Quiñanola,
Asteria C. Ocampo [sic], Florida Villaceran, Florida B. Tallado [sic] and Brenda A.

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5. In her Position Paper, Lhuillier, represented initially by Atty. Malcolm V. Seno,

9. Brenda Pawnshop March 7, 3,015.00 July 19,
alleged that:
A. Gadiano Teller 1977 1990
a) In the case of Marilyn Lim, on January 13, 1990, she was informed that an
10. Branch June 1984 3,700.00 Feb. 16, investigation will be conducted by Lhuillier because of the report received by Flora
Marilyn E. Manager 1990 Go, also an employee of Lhuillier, that Lim sold to a company consumer her own
Lim jewelry, in violation of the company house rules; on January 22, 1990, a Notice of
Intended Termination was served upon her requiring her to submit a written
explanation within 48 hours from receipt; Lim did not submit a written explanation
11. Joseph Record June 1988 2,700.00 July 14,
but actively participated in the investigation where she admitted having committed
M. Keeper 1990
the violation complained of; in view of her admission of guilt, the company lawyer
Canonigo
recommended to the management her demotion and transfer without reduction of
Petitioners Fernandez, Adriano, Negapatan, Tomongha, Quiñanola, Campo, salary; after Lim's receipt of a copy of the investigation report, she sent through her
Villaceran, Talledo, and Gadiano further alleged that prior to and during early July lawyer a letter signifying her intention to resign and her willingness to execute a
1990, they "demanded" from Margueritte Lhuillier an increase in their salaries since promissory note for her indebtedness; the company gave Lim a draft of the
her business was making good and that she was evading payment of taxes by promissory note which was never returned by her; on February 24, 1990 she
making false entries in her records of account; that Lhuillier became angry and tendered an irrevocable letter of resignation, hence, she was not terminated; and
threatened them that something would happen to their employment if they would because of the malicious and false complaint filed by Lim, the company was
report her to the BIR; that shortly thereafter, Lhuillier suspected them of stealing compelled to file a counter-complaint for Perjury against her before the Office of the
jewelry from the pawnshop; that on July 19, 1990, Lhuillier verbally informed them City Prosecutor of Cebu City (Rec., pp. 92-93; 97).
not to report for work as their employment had been terminated; that from July 20, b) In the case of Jesus Tomongha, he was found to have stolen "rematado" jewelries
1990 they did not report for work; and on July 23, 1990, they filed the instant worth P70,670.00 sometime in March 1990; instead of attending the investigation
complaint (Rec., pp. 79-88). scheduled for this offense, he abandoned his job although his application for leave
On their part, petitioners Lim and Canonigo alleged that in early January 1990 and of absence was not approved; Lhuillier asked the company lawyer to talk with
in June 1990, respectively, they demanded increases in their salaries since they Tomongha for him to return to work so that he could pay his pecuniary liability out
noted that Lhuillier had a very lucrative business besides evading tax payments by of his salary; Lhuillier made it a pre-condition for his return to work that he executes
making false entries in her records of account; that they also informed her that they a promissory note for his indebtedness; on April 10, 1990, he executed a promissory
intended to join the Associated Labor Union (ALU), which made Lhuillier angry, note and was allowed to return to work; on July 20, 1990, he and the other
causing her to threaten them that should they report her to the BIR and join the petitioners, abandoned their employment; he was not dismissed but he was allowed
ALU something would happen to their employment; that Lhuillier advised them to to return to work and was only made to execute a promissory note when the
tender their resignations as they were reportedly responsible for some anomalies at company found out sometime in March 1990 that he had stolen "rematado" jewelries
the Agencia Cebuana-H Lhuillier; that Lhuillier assured them that they will be given worth P70,670.00 (Rec., pp. 97-101).
separation pay; that they asked Lhuillier that they be allowed to confront the persons c) In the case of the other petitioners, on July 19, 1990, Gloria Adriano was found
who reported to her about their supposed involvement in the alleged anomalies but by Flora Go to have over-declared the weights and values of certain items of jewelry
she ignored it and told them to tender their respective resignations effective pawned to the company, as a result of which, upon investigation, the pawnshop was
February 16, 1990 (for Lim) and July 14, 1990 (for Canonigo); and that they were found to have lost the amount of P174,850.00; a letter dated July 19, 1990 was
not given separation pay (Decision, pp. 6-8; Rec., pp. 256-258). served upon Adriano to explain within 72 hours why she should not be terminated;
on July 20, 1990, Gloria Adriano, Florida Villaceran, Emilia Negapatan, Brenda

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Gadiano, Leiden Fernandez, Jesus Tomongha, Asteria Campo and Florida Talledo
did not report for work although no requests for leave of absence were filed by
them, which absence violated company rules; on July 21, 1990, the said employees
did not report for work; another employee, Eleonor Quiñanola, also did not report
for work although she did not file a request for leave of absence; on July 23, 1990
the said nine (9) employees did not report for work; because of this unusual incident,
the management decided to make an inventory of the transactions in Agencia
Cebuana and the "rematado" diamond-studded jewelry; the inventory showed that
the pawnshop incurred a considerable loss as a result of the anomalous overpricing
of pawned items and the employees immediately responsible were Gloria Adriano,
Florida Talledo and Leiden Fernandez, being the appraiser, writer and prayer,
respectively; the inventory also showed that of the "rematado" diamond-studded
jewelries, items worth P1,592,200.00 were lost for which Florida Villaceran and
Emilia Negapatan were directly responsible, being the employees entrusted with
their safekeeping; a case of Estafa was filed on July 24, 1990 before the Office of
the City Prosecutor of Cebu City against Gloria Adriano, Florida Talledo, Leiden
Fernandez, Asteria Campo, Brenda Gadiano, Florida Villaceran, Emilia Negapatan,
and Jesus Tomongha and three (3) other unknown persons; a case of Theft was
filed on August 16, 1990 with the Office of the City Prosecutor of Cebu City against
Florida Villaceran and Emilia Negapatan; when Lhuillier left for Hongkong on July
19, 1990; she did not terminate the employment of Gloria Adriano nor was she
advised not to report for work, although a letter was served upon her requiring her
to explain within 72 hours why she should not be terminated from her employment;
when Lhuillier arrived from Hongkong, she caused to be served upon the eight (8)
petitioners who joined Adriano, letter dated July 25, 1990 requiring them to explain
the sudden abandonment of their posts; petitioners, except Lim, instead of giving
an explanation, claimed that their employment[s] were terminated on July 19, 1990;
Lhuillier was prevented from pursuing any action in respect of the illegal
abandonment of their work by the nine (9) petitioners because she was served with
summons in the instant case; petitioners did not report for work and voluntarily
abandoned their work on July 19, 1990 in order to dramatize their sympathy for
Gloria Adriano, and they were not dismissed from their employment; their demand
for an award of damages and attorney's fees was unwarranted; petitioners had no
cause of action against Lhuillier because they were not terminated from
employment; and Quiñanola could not have been terminated from employment on
July 21, 1990 because Lhuillier was in Hongkong at that time (Rec., pp. 96-108).
6. Trial on the merits ensued and hearings were scheduled on July 5, 8, and 12,
1991.
7. The hearing scheduled on July 5, 1991 was, however, postponed by agreement
of the parties as shown in the minutes of the proceedings on July 8, 1991:
xxx xxx xxx
REMARKS
This case was scheduled for the cross-examination of the last witnesses (sic),
Marilyn Lim, who is one of the complainants of this (sic) consolidated cases.
The scheduled dates was (sic) July 5, 8, and 12, 1991 which dates were for the
crossexamination (sic) of Marilyn Lim and for the respondents to present their
evidence.
The July 5, 1991 (sic) was postponed upon agreement [sic] of the parties and
counsels and that it was aggreed (sic) the repondents (sic) counsel will cross
examine Marilyn Lim on July 8, 1991 and for the respondents to present their
evidence on July 12, 1991. In as much (sic) as the respondents and their counsel
failed to appear today to cross-examine Marilyn Lim, we moved that the respondent
be declared having waived their rights (sic) to cross-examine Marilyn Lim. (Rec., p.
176).
8. On July 8, 1991, counsel for petitioners filed Complainants' Formal Offer of
Evidence (Rec., pp. 182-187).
9. At the hearing scheduled on July 12, 1991, Atty. Seno and Lhuillier failed to
appear. Thus, counsel for petitioners submitted the instant case for resolution (Rec.,
p.181).
10. On July 18, 1991, a "Ruling" was issued by Labor Arbiter Velasquez, admitting
complainants' exhibits (Rec., pp. 189-190).
11. On July 30, 1991, counsel for petitioners filed an Urgent Motion For Early
Decision (Rec., pp. 191-193).
12. On August 6, 1991, Atty. Seno filed a Comment to the Offer of Exhibits With
Counter-Manifestation stating that:
[T]he failure of undersigned to appear on the date of hearing was for the reason
that his car bogged down, as in fact he called up the Office of the Hearing Officer.
While his absence may be considered a waiver to cross-examine the witness, it
cannot be taken to mean forfeiture of the right to present admissible evidence
against the complainant witness. (Rec., pp. 195-197)
13. On August 9, 1991, Atty. Seno filed his Comment on Complainants' Urgent
Motion For Early Decision praying that Lhuillier be given a period of ten (10) days
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from August 9, 1991 within which to submit additional affidavits and thereafter to
consider the cases submitted for resolution (Rec., pp. 199-200).
14. On August 15, 1991, petitioners filed a "Counter-Comment On Respondent's
Comment of [sic] Motion For Early Decision' alleging that under Rule VII, Section 10
(c) of the Revised Rules of Court of the NLRC which reads:
xxx xxx xxx
c) In case of unjustified non-appearance by the respondent during her/his turn to
present evidence, despite due notice, the case shall be considered submitted for
decision on the basis of the evidence so far presented.
the non-appearance of Lhuillier or its counsel on the scheduled dates of hearing on
July 8 and 12, 1991, was clearly unjustified (Rec., pp. 202-205).
15. On October 14, 1991, Atty. Seno filed a Motion Reiterating The Request For
Submission Of Additional Affidavits therein alleging that Lhuillier's previous motion
to present additional affidavits had not been acted upon; and that he had not
received an order considering the instant case submitted for resolution. With the
motion, Lhuillier submitted the affidavits of additional witnesses, praying that said
supplemental affidavits be admitted and presentation of additional evidence be
allowed (Rec., pp. 207-209).
16. On October 16, 1991, petitioners filed an Opposition On [sic] Respondents'
Request For Submission Of Additional Affidavits And Urgent Motion To Release
Decision, alleging that counsel for Lhuillier was given ample opportunity to present
his evidence; that by his failure to appear at the scheduled hearings without any
reason or prior motion for postponement, he was deemed to have waived his right
to present evidence; and that about the later part of August 1991, upon learning
that Labor Arbiter Velasquez would be transferred to NLRC, Tacloban, they
(petitioners) inquired about the status of the instant case and they were informed
by Labor Arbiter Velasquez that a Decision was already rendered (Rec., pp. 203-
205).
On August 30, 1991, the labor arbiter rendered a decision in favor of petitioners. On
appeal, Respondent NLRC vacated the labor arbiter's order and remanded the case
for further proceedings. It subsequently denied the motion for reconsideration.
Respondent NLRC's Ruling
Ruled the NLRC:8
In resolving this issue [of due process], it is necessary to go over the pertinent
provisions of the 1990 NLRC Rules of Procedure, more particularly Sec. 11, Rule V.
Rule V — Proceedings Before the Labor Arbiters:
Sec. 11. Non-appearance of Parties at Conference/Hearings. — (a) Two (2)
successive absences at a conference/hearing by the complainant or petitioner, who
was duly notified thereof may be sufficient cause to dismiss the case without
prejudice. Where proper justification, however, is shown by proper motion to
warrant the re-opening of the case, the Labor Arbiter shall call a second hearing and
continue the proceedings until the case is finally decided. Dismissal of the case for
the second time due to the unjustified non-appearance of the complainant or
petitioner who was duly notified thereof shall be with prejudice.
b) In case of two (2) successive non-appearances by the respondent, despite due
notice, during the complainant's presentation of evidence, the complainant shall be
allowed to present evidence ex-parte, subject to cross-examination by the
respondent, where proper, at the next hearing. Upon completion of such
presentation of evidence for the complainant, another notice of hearing for the
reception of the respondent's evidence shall be issued, with a warning that failure
of the respondent to appear shall be construed as submission by him of the case for
resolution without presenting his evidence.
c) In case of two (2) successive unjustified non-appearances by the respondent
during his turn to present evidence, despite due notice, the case shall be considered
submitted for decision on the basis of the evidence so far presented.
The established fact is that July 8 and 12, 1991 were the scheduled dates for the
cross-examination of Marilyn Lim, last witness for the complainants and the start of
respondents' presentation of evidence. It is also not disputed that respondent and
counsel failed to appear at the July 8 hearing. A scrutiny of the minutes of the July
8, 1991 hearing would however reveal that date was alloted [sic] purposely for the
cross-examination of Marilyn Lim and that respondents' presentation of evidence
would start on July 12, 1991. (page 176, records) Technically, the Labor Arbiter was
correct in ruling that respondent had waived her right to cross-examine complainant
Marilyn Lim when she failed to appear on July 8, 1991. But definitely, it was error
for him to consider the case submitted for decision when respondent failed to appear
on July 12, 1991. The above-cited rules are clear and explicit. It takes two
successive and unjustified non-appearance on the part of respondent before he or
she can be considered to have waived his/her right to present evidence and
thereafter to consider the case submitted for decision on the basis of the evidence
thus far presented. Respondent's absence on July 12, 1991 was but her first since,
as pointed out, it was on that day that she was supposed to start presenting her
evidence. What the Labor Arbiter should have done was to set another date for the
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reception of respondent's evidence. If she still failed to appear, his reliance on Sec.
11 (c), Rule V of the New Rules of Procedure of the NLRC would have been justified
and this Commission would not hesitate to uphold him on that respect. As it is, the
questioned ruling was, indeed, premature to say the least. While concern for the
less privileged workers and speediin [sic] the disposition of labor cases are highly
commendable, those considerations should not run roughshod over well-established
principles of due process.
It may be argued that the evidence sought to be introduced by respondent are
contained in the additional affidavits which now form part of the records, hence this
Commission can now decide this appeal on the merits. It is with more reason that
this case should be remanded not only to allow respondent to formally present her
evidence, but also to allow complainants to cross-examine and confront their
accusers. (Emphasis supplied.)
Not satisfied, petitioners filed the present petition before us under Rule 65 of the
Rules of Court.9
The Issues
Petitioners submit to this Court the following issues:10
A
The Honorable Commission has committed serious reversible error amounting to a
grave abuse of discretion and in excess of jurisdiction in finding that the private
respondent was not afforded due process by the hearing labor arbiter, particularly
the reception of private respondent's evidence.
B The petition is meritorious. We hold that the private respondents were not denied
The Honorable Commission has committed serious reversible error amounting to a
grave abuse of discretion and in excess of jurisdiction in finding that the declaration
by the hearing labor arbiter submitting these cases for decision on July 12, 1991
was not in accordance with Rule V Section II of the 1990 New Rules of Procedure
of the NLRC (attached hereto as annex "C").
C the total monetary award in their favor was P1,078,200.55, private respondents
The Honorable Commission has committed serious reversible error amounting to a
grave abuse of discretion and in excess of jurisdiction in giving importance to private
respondent's additional alleged affidavits which were filed only on October 14, 1991
(attached hereto as annex "G-1"), by way of attaching the same in private
respondent's motion reiterating request for submission of additional affidavits
(attached hereto as annex "G"), long after the hearing labor arbiter rendered a
decision on August 30, 1992 (attached hereto as annex "E"), contrary to the private
respondent's prayer and commitment (attached hereto as annex "F-1").
D
The Honorable Commission has committed serious reversible error amounting to a
grave abuse of discretion, in substance and in law, in not modifying the appealed
decision of the hearing labor arbiter (attached hereto as annex "E") with respect to
the accuracy of the monetary awards pursuant to the pertinent provisions of the
Labor Code, its implementing rules and regulations and pursuant particularly to the
celebrated case of Roche (Philippines), et als. [sic] vs. NLRC, et als., [sic] G.R. No.
83335, October 12, 1989.
E
The Honorable Commission has no jurisdiction to entertain private respondent's two
appeals.
Put differently but more plainly, the issues in this case are as follows:
1. Did the NLRC acquire jurisdiction over the appeal notwithstanding the alleged
insufficiency of the appeal bond?
2. Were private respondents deprived of due process of law by the labor arbiter?
3. Were petitioners illegally dismissed?
4. Assuming petitioners were illegally dismissed, was the computation of the
backwages, service incentive leave pay and damages valid and correct?
The Court's Ruling
due process of law by the labor arbiter; and that nine of the petitioners were illegally
dismissed, but that Petitioners Lim and Canonigo were not.
First Issue: Insufficiency of Appeal Bond
Petitioners contend that Respondent NLRC did not acquire jurisdiction over the
appeal of private respondents because the appeal bond was insufficient. Although
posted a cash bond in the amount of P752,183.00 only. In computing the monetary
award for the purpose of posting an appeal bond, private respondents relied on Rule
VI, Section 6 of the 1990 New Rules of Procedure of the NLRC and excluded the
award for damages, litigation expenses and attorney's fees. Petitioners argue
however that the said rule cannot prevail over Article 223 of the Labor Code, which
does not provide for such exclusion.
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We agree with private respondents. Article 223 of the Labor Code provides:
xxx xxx xxx
In case of a judgment involving a monetary award, an appeal by the employer may
be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from.
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, even pending appeal. The employee shall either be admitted back to
work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll. The
posting of a bond by the employer shall not stay the execution for reinstatement
provided therein . . . (Emphasis supplied.)
On the other hand, Rule VI, Section 6 of the 1990 NLRC New Rules of
Procedure,11 invoked by private respondent, provides:
Sec. 6. Bond. In case of the decision of a Labor Arbiter involves a monetary award,
an appeal by the employer shall be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company duly accredited by the
Commission or the Supreme Court in an amount equivalent to the monetary award.
The Commission may, in meritorious cases and upon Motion of the Appellant, reduce
the amount of the bond. However, an appeal is deemed perfected upon the posting
of the bond equivalent to the monetary award exclusive of moral and exemplary
damages as well as attorney's fees.
Nothing herein however, shall be construed as extending the period of appeal.
(Emphasis supplied.)
There is no conflict between the two provisions. Article 223 lays down the
requirement that an appeal bond should be filed. The implementing rule, on the
other hand, explains how the appeal bond shall be computed. The rule explicitly
excludes moral and exemplary damages and attorney's fees from the computation
of the appeal bond. This exclusion has been recognized by the Court in a number of
cases. Hence, in Erectors vs. NLRC,12 the Court nullified an NLRC order requiring
the posting of an appeal bond which, among others, "even included in the
computation the award of P400,000.00 for moral and exemplary damages." Indeed,
the said implementing rule is a contemporaneous construction of Article 223 by the
NLRC pursuant to the mandate of the Labor Code; hence, it is accorded great respect
by this Court.13
In line with the desired objective of our labor laws to resolve controversies on their
merits, the Court has held that the filing of a bond in appeals involving monetary
awards should be given liberal construction.14 The rule requiring the employer to
post a cash or surety bond to perfect his appeal assures the workers that they will
receive the money judgment awarded to them upon the dismissal of the employer's
appeal. It also discourages employers from using an appeal to delay or even evade
their obligation to satisfy the just and lawful claims of their employees.15
Hence, deducting from the total monetary award of P1,078,200.55 the amount of
P200,000.00 for moral and exemplary damages, P98,018.25 for attorney's fees and
P30,000.00 for litigation expenses, the amount of the bond should be P750,182.55.
Thus, the appeal bond actually posted in the amount of P752,183 is even more than
the amount of appeal bond that may be required from private respondents under
Respondent NLRC's rules.
Second Issue: No Denial of Due Process
The NLRC ruled that private respondents were denied due process because the labor
arbiter deemed the case submitted for resolution when they failed to attend the
hearings on July 8 and 12, 1991. Under the NLRC Rules of Procedure, a case may
be deemed submitted for decision on the basis of the evidence thus far adduced in
the event respondent incurs two successive absences "during his turn to present
evidence." While the hearing on July 12, 1991 was for the presentation of herein
private respondents' evidence, the NLRC found that the hearing on July 8, 1991 was
scheduled for the cross-examination of petitioners' witness. Since the absences were
not made during respondents' "turn to present evidence," public respondent
remanded the case to the labor arbiter for "further proceedings."
Petitioners dispute the NLRC ruling, contending that the parties in this case were
able to submit their respective position papers together with supporting affidavits
and other documents. They stress that private respondents' failure to attend the
hearings on July 8 and 12, 1991, without any justification or motion for
postponement, warranted the submission of the case for decision pursuant to
Section 11, Rule V of the 1990 New Rules of Procedure of the NLRC. They insist that
the hearing on July 8, 1991 was scheduled to afford private respondents not only
an opportunity "to cross-examine petitioner's last witness, Marilyn Lim, [but also] to
start the presentation of [their] evidence . . ."16
On the other hand, private respondents argue that the labor arbiter erred in
considering the absence of their counsel during the hearings scheduled on July 8
and July 12, 1991 as waiver not only of the right to cross-examine but of the right
to present evidence. They further contend that the labor arbiter released his decision
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notwithstanding the pendency of three unresolved motions.17 These circumstances
clearly show that they were not afforded due process of law.18
To make a clear ruling, we again cite Rule V, Section 11 of the 1990 Rules of
Procedure of Respondent NLRC, which provides:
Sec. 11. Non-appearance of Parties at Conference/Hearings. — (a) Two (2)
successive absences at a conference/hearing by the complainant or petitioner, who
was duly notified thereof, may be sufficient cause to dismiss the case without
prejudice. Where proper justification, however, is shown by proper motion to
warrant the re-opening of the case, the Labor Arbiter shall call a second hearing and
continue the proceedings until the case is finally decided. Dismissal of the case of
the second time due to the unjustified non-appearance of the complainant or
petitioner who was duly notified thereof shall be with prejudice.
(b) In case of two (2) successive non-appearances by the respondent, despite due
notice, during the complainant's presentation of evidence, the complainant shall be
allowed to present evidence ex parte, subject to cross-examination by the
respondent, where proper, at the next hearing. Upon completion of such
presentation of evidence for the complainant, another notice of hearing for the
reception of the respondent's evidence shall be issued, with a warning that failure
of the respondent to appear shall be construed as submission by him of the case for
resolution without presenting his evidence.
(c) In case of two (2) successive unjustified non-appearances by the respondent
during his turn to present evidence, despite due notice, the case shall be considered
submitted for decision on the basis of the evidence so far presented. (Emphasis
supplied).
It is undisputed that private respondents' counsel failed to attend the hearings on
the two aforementioned dates. Moreover, the labor arbiter19 and the NLRC held
that the hearing on July 8, 1991 was only for the cross-examination of herein
petitioners' witness, while that on July 12, 1991 was for the reception of private
respondents' evidence. This notwithstanding, we hold that the NLRC committed
grave abuse of discretion in remanding the case to the labor arbiter.
Private respondents were able to file their respective position papers and the
documents in support thereof, and all these were duly considered by the labor
arbiter.20 Indeed, the requirements of due process are satisfied where the parties
are given the opportunity to submit position papers.21 In any event, Respondent
NLRC and the labor arbiter are authorized under the Labor Code to decide a case on
the basis of the position papers and documents submitted.22 The holding of an
adversarial trial depends on the discretion of the labor arbiter, and the parties cannot
demand it as a matter of right. In other words, the filing of position papers and
supporting documents fulfilled the requirements of due process.23 Therefore, there
was no denial of this right because private respondents were given the opportunity
to present their side.24
Moreover, it should be noted that private respondents did not dispute the order of
the labor arbiter submitting the case for decision immediately after its issuance.
Likewise, they failed to present additional evidence on the date they themselves
specified. It was only on August 6, 1991 that private respondents' counsel, in his
Comments to the Offer of Exhibits25 with counter-manifestation, explained his
failure to appear at the hearing on July 8, 1991. His explanation, quoted below, is
not compelling.26
The failure of the undersigned to appear on the date of hearing was for the reason
that his car bogged down, as in fact he called up the Office of the Hearing Officer.
While his absence may be considered a waiver to cross-examine the witness, it
cannot be taken to mean forfeiture of the right to present admissible evidence
against the complainant-witness.
Three days later on August 9, 1991, private respondents moved that they be given
a "period of ten days from August 9, 1991" — or until August 19, 1991— within
which to submit additional affidavits, "after which, the cases will be deemed
submitted for resolution on the basis of complainants' evidence and respondents'
position paper and the additional affidavits."27 Counsel, however, failed to submit
the supposed evidence on said date. On October 14, 1991, private respondents filed
a Motion Reiterating the Request for Submission of Additional Affidavits.28 Again,
private respondents did not submit the said documents.
As earlier noted, the essence of due process is simply an opportunity to be heard,
to explain one's side, or to seek a reconsideration of the action or ruling complained
of. In the case at bar, private respondents were given ample opportunity to do just
that but they failed, for unknown reasons, to avail themselves of such opportunity.
They themselves moved that they be allowed to present additional affidavits on
August 19, 1991, but they never did; no valid reason was given for their failure to
do so. Their contention that the labor arbiter failed to rule on their motion deserves
scant consideration. It is axiomatic — in fact, it is plainly commonsensical — that
when a counsel asks for an extension of time within which to file a pleading, he
must be ready with that pleading on the date specified in his motion, even absent a
resolution or order disposing of his motion.
We cannot remand the instant case to the labor arbiter for further proceedings.
Respondent NLRC, on the basis of the evidence on record, could have resolved the
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dispute. To remand it to the labor arbiter is to delay needlessly the disposition of
this case, which has been pending since July 23, 1990. It becomes our duty under
the circumstances to determine the validity of the allegations of the parties.
Remanding the case to the labor arbiter will just frustrate speedy justice and, in any
event, would be a futile exercise, as in all probability the case would end up with
this Court. We shall thus rule on the substantial claims of the parties.
Third Issue: Petitioners Were Illegally Dismissed
Private respondents controvert the claim of illegal dismissal by maintaining that
petitioners abandoned their employment. They aver that on July 19, 1990, Petitioner
Gloria Adriano, pawnshop appraiser, over-declared the weights and values of
pawned pieces of jewelry, which allegedly caused a loss of at least P174,850. In a
letter dated July 19, 1990, they required Petitioner Adriano to explain within 72
hours why her employment should not be terminated. On July 20, 1990, however,
Petitioner Adriano together with Petitioners Asteria Campo, Leiden Fernandez,
Brenda Gadiano, Emilia Negapatan, Eleonor Quiñanola, Jesus Tomongha, Florida
Talledo and Florida Villaceran allegedly did not report for work without any excuse.
Thus, private respondents concluded that petitioners abandoned their employment.
They also state that they intended to pursue legal action against the said petitioners
for "illegal abandonment." But before they could do so, they received summons
requiring them to respond to the complaints of illegal dismissal filed by the said nine
petitioners.29
On the other hand, petitioners maintain that on July 19, 1990, Private Respondent
Marguerite Lhuillier, the pawnshop owner, told them not to report for work because
their employment had been terminated. Thus, they did not report for work the
following day, July 20, 1990. On July 23, 1990, they filed their respective complaints
before the Regional Arbitration Board of Respondent NLRC.
In view of the conflicting claims of the parties, we examined the records of this case
and found that private respondents did not abandon their employment; rather, they
were illegally dismissed.
To succeed in pleading abandonment as a valid ground for dismissal, the employer
must prove (1) the intention of an employee to abandon his or her employment and
(2) an overt act from which such intention may be inferred; i.e., the employee
showed no desire to resume his work.30 Mere absence is not sufficient. The
employer must prove a deliberate and unjustified refusal of the employee to resume
his employment without any intention of returning.31 Private respondents failed to
discharge this burden. The claim of abandonment was inconsistent with the
immediate filing of petitioners' complaint for illegal dismissal and prayer for
reinstatement. For how can an inference be made that an employee had no intention
of returning to work, when he filed a complaint for illegal dismissal praying for
reinstatement three days after the alleged abandonment?32 Moreover, considering
that petitioner had been with Pawnshop Lhuillier for several years — ranging from
six (6) years to thirty three (33) years — it is unlikely that they would simply leave
their employment. Clearly, there is no cogent basis for private respondents' theory
that said petitioners abandoned their work. In this light, we sustain the finding of
the labor arbiter that said petitioners were illegally dismissed, with neither just cause
nor due process.
Petitioners Lim and Canonigo Resigned
The foregoing holding cannot apply to Petitioners Marilyn Lim and Joseph Canonigo,
however.
Lim claims that Private Respondent Lhuillier forced her to resign, but at the same
time assured her of separation pay.33 On February 5, 1990, prior to Lim's letter of
resignation dated February 24, 1990,34her lawyer proposed the following to Private
Respondent Lhuillier:35
1. That our client Ms. Marilyn Lim be given immediately a clearance upon resignation
from your good company and payment of separation pay at the rate of one month
per year of service; and
2. That our client is willing to execute a promissory note on her indebtedness, and
will pay upon the same terms prevailing before her resignation. Our client's ability
to settle her indebtedness should be given kind consideration by your company
considering that her eventual resignation will render her jobless for a while. Besides,
per Investigation Report No. 2, Series of 1990, conducted by your Resident Counsel,
Atty. Malcolm V. Seno, our client has impressed your Resident Counsel as a person
of much valor and great determination when she immediately admitted her guilt.
3. That the various checks she endorsed to your company be returned to our client,
so that she could file a case against the issuers or drawers of the same, be it criminal
or civil in nature. (Emphasis supplied).
Petitioner Lim's testimony36 that she has never been informed of any wrongdoing
until her termination is belied by her assertions in the aforequoted letter. Her
admission of the offense charged shows that she was not coerced to resign. Besides,
the fact that her complaint for illegal dismissal was filed long after her resignation
on February 24, 1990 suggests that it was a mere afterthought.
On the other hand, Petitioner Canonigo contends that he was forced to sign his letter
of resignation dated July 14, 1990, because Private Respondent Lhuillier received
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reports from other employees that he was responsible for some anomalies in the
pawnshop. He also stated that he resigned because he was assured of separation
pay.37 Like Petitioner Lim, he did not immediately file a complaint for illegal
dismissal, doing so only on July 23, 1990. From the foregoing facts, we see no
cogent basis for holding that he was forced to resign. On the contrary, we find that
he voluntarily tendered his resignation on the assurance of separation pay. Clearly,
Petitioner Canonigo, like Lim, was not dismissed; rather, he resigned voluntarily.
Fourth Issue: Service Incentive Leave Pay and Damages
In his decision, the labor arbiter granted varying amounts of service incentive leave
pay to the petitioners based on the length of their tenure; i.e., the shortest was six
years and the longest was thirty-three years. While recommending that the labor
arbiter's decision be reinstated substantially, the solicitor general recommended that
the award of service incentive leave be limited to three years. This is based on Article
291 of the Labor Code which provides:
Art. 291. Money Claims. — All money claims arising from employer-employee
relations accruing during the effectivity of this Code shall be filed within three (3)
years from the time the cause of action accrued; otherwise they shall be forever
barred.
xxx xxx xxx
Petitioners counter that Article 291 "speaks clearly on the prescription of filing [an]
action upon monetary claims within three (3) years from the time the cause of action
accrued, but it is not a prescription of a period of time for the computation of
monetary claims."38
The clear policy of the Labor Code is to grant service incentive leave pay to workers
in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations39 provides that "[e]very employee who has
rendered at least one year of service shall be entitled to a yearly service incentive
leave of five days with pay." Service incentive leave is a right which accrues to every
employee who has served "within 12 months, whether continuous or broken
reckoned from the date the employee started working, including authorized
absences and paid regular holidays unless the working days in the establishment as
a matter of practice or policy, or that provided in the employment contracts, is less
than 12 months, in which case said period shall be considered as one year."40 It is
also "commutable to its money equivalent if not used or exhausted at the end of the
year."41 In other words, an employee who has served for one year is entitled to it.
He may use it as leave days or he may collect its monetary value. To limit the award
to three years, as the solicitor general recommends, is to unduly restrict such right.
The law indeed does not prohibit its commutation. Moreover, the solicitor general's
recommendation is contrary to the ruling of the Court in Bustamante et al. vs. NLRC
et al.,42 lifting the three-year restriction on the amount of backwages and other
allowances that may be awarded an illegally dismissed employee, thus:
Therefore, in accordance with R.A. No. 6715, petitioners are entitled to their full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
from the time their actual compensation was withheld from them up to the time of
their actual reinstatement. (Emphasis supplied.).
Since a service incentive leave is clearly demandable after one year of service —
whether continuous or broken — or its equivalent period, and it is one of the
"benefits" which would have accrued if an employee was not otherwise illegally
dismissed, it is fair and legal that its computation should be up to the date of
reinstatement as provided under Section 279 of the Labor Code, as amended, which
reads:
Art. 279. Security of Tenure. — An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalentcomputed from the time his compensation is withheld from him
up to the time of his actual reinstatement. (emphasis supplied).
However, the Implementing Rules clearly state that entitlement to "benefit provided
under this Rule shall start December 16, 1975, the date the amendatory provision
of the [Labor] Code took effect."43Hence, petitioners, except Lim and Canonigo,
should be entitled to service incentive leave pay from December 16, 1975 up to their
actual reinstatement.
Petitioners, citing Roche Philippines et al. vs. NLRC et al.,44 further contend that the
award of damages in the case at bar should be increased, for "there are eleven (11)
complainants/petitioners whose long years of employment was illegally, oppressively
and wantonly terminated by the private
respondent."45
We disagree. Determination of the amount of moral damages and attorney's fees is
best left to the discretion of the labor arbiter.46 Moral damages are recoverable
where the dismissal of the employee was attended by bad faith or fraud, or it
constituted an act oppressive to labor, or it was done in a manner contrary to morals,
good customs or public policy.47 In the case before us, records show that
petitioners' dismissals were done oppressively and in bad faith, for they were just
summarily dismissed without even the benefit of notice and hearing. The well-settled
rule is that the employer shall be sanctioned for noncompliance with the
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requirements of, or for failure to observe, due process in dismissing its their illegal dismissal to the time of their actual reinstatement. Petitioners Lim and
employees.48 Petitioners were likewise subjected to unnecessary embarrassment or Canonigo, whom we find to have voluntarily resigned, are not entitled to any benefit.
humiliation because of the filing of the criminal charge of qualified theft, which was SO ORDERED.
later dismissed49 by the investigating prosecutor.50 It follows then that the award
of attorney's fees is likewise proper, for the "defendant's act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect
his interest."51
Full Backwages for Dismissals
Effected After March 21, 1989
Having determined that petitioners, except Lim and Canonigo, were illegally
dismissed, we next resolve the question of whether Respondent NLRC gravely
abused its discretion in ordering the reinstatement of dismissed employees and the
payment to them of full backwages; or, if reinstatement was no longer feasible,
whether the grant to them of separation pay plus backwages was correct. In several
cases,52 this Court has held that illegally dismissed employees are entitled to
reinstatement and full backwages. If reinstatement is not possible, the employees
are entitled to separation pay and full backwages. Accordingly, the award to
petitioners of backwages for three years should be modified in accordance with
Article 27953 Of the Labor Code, as amended by R.A. 6715, by giving them full
backwages without conditions and limitations, the dismissals having occurred after
the effectivity of the amendatory law on March 21, 1989.54 Thus, the Court held
in Bustamante.55
The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more
benefits to workers than was previously given them under the Mercury Drug rule or
the "deduction of earnings elsewhere" rule. Thus, a closer adherence to the
legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning
exactly that, i.e., without deducting from backwages the earnings derived elsewhere
by the concerned employee during the period of his illegal dismissal.
WHEREFORE, the petition is hereby GRANTED and the assailed Decision and
Resolution are REVERSED and SET ASIDE. The labor arbiter's decision is
REINSTATED with MODIFICATIONS, such that the award of separation pay is
deleted and the service incentive leave pay is computed from December 16, 1975
up to petitioners' actual reinstatement. Full backwages, including the accrued
thirteenth month pay, are also awarded to the nine petitioners — Leiden Fernandez,
Brenda Gadiano, Gloria Adriano, Emelia Negapatan, Jesus Tomongha, Eleonor
Quiñanola, Asteria Campo, Florida Villaceran and Florida Talledo — from the date of

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SECOND DIVISION
G.R. No. 156367 May 16, 2005
AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,
vs.
ANTONIO BAUTISTA, respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision1 and
Resolution2 of the Court of Appeals affirming the Decision3 of the National Labor
Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor
Arbiter (finding respondent entitled to the award of 13th month pay and service
incentive leave pay) by deleting the award of 13th month pay to respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner
Auto Bus Transport Systems, Inc. (Autobus), as driver-conductor with travel routes
Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-Tabuk
via Baguio. Respondent was paid on commission basis, seven percent (7%) of the
total gross income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe,
Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of
Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without
giving any warning.
Respondent averred that the accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not slept for almost
twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work until he fully paid the
amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the
damaged buses and that despite respondent’s pleas for reconsideration, the same
was ignored by management. After a month, management sent him a letter of
termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal
with Money Claims for nonpayment of 13th month pay and service incentive leave
pay against Autobus.
Petitioner, on the other hand, maintained that respondent’s employment was replete
with offenses involving reckless imprudence, gross negligence, and dishonesty. To
support its claim, petitioner presented copies of letters, memos, irregularity reports,
and warrants of arrest pertaining to several incidents wherein respondent was
involved.
Furthermore, petitioner avers that in the exercise of its management prerogative,
respondent’s employment was terminated only after the latter was provided with an
opportunity to explain his side regarding the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented
by the parties, Labor Arbiter Monroe C. Tabingan promulgated a Decision,4 the
dispositive portion of which reads:
WHEREFORE, all premises considered, it is hereby found that the complaint for
Illegal Dismissal has no leg to stand on. It is hereby ordered DISMISSED, as it is
hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to
the complainant the following:
a. his 13th month pay from the date of his hiring to the date of his dismissal,
presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the
respondent, presently computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack
of merit.5
Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision
to the NLRC which rendered its decision on 28 September 2001, the decretal portion
of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly
Sec. 3 provides:
"Section 3. Employers covered. – The Decree shall apply to all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task basis,
performing a specific work, irrespective of the time consumed in the performance
thereof. xxx."
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Records show that complainant, in his position paper, admitted that he was paid on
a commission basis.
In view of the foregoing, we deem it just and equitable to modify the assailed
Decision by deleting the award of 13th month pay to the complainant.
… A careful perusal of said provisions of law will result in the conclusion that the grant
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the
award of 13th month pay. The other findings are AFFIRMED.6
In other words, the award of service incentive leave pay was maintained. Petitioner
thus sought a reconsideration of this aspect, which was subsequently denied in a
Resolution by the NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner sought
the review of said decision with the Court of Appeals which was subsequently denied
by the appellate court in a Decision dated 06 May 2002, the dispositive portion of
which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and
the assailed Decision of respondent Commission in NLRC NCR CA No. 026584-2000
is hereby AFFIRMED in toto. No costs.7
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under Article 291
of the Labor Code, as amended, is applicable to respondent’s claim of service
incentive leave pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper interpretation of Article
95 of the Labor Code vis-à-visSection 1(D), Rule V, Book III of the Implementing
Rules and Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled
to a yearly service incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. – This rule shall apply to all employees except:
… from the principal office and whose hours and days of work cannot be determined
(d) Field personnel and other employees whose performance is unsupervised by the
employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; . . .
of service incentive leave has been delimited by the Implementing Rules and
Regulations of the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave shall not apply to employees classified as "field personnel." The
phrase "other employees whose performance is unsupervised by the employer" must
not be understood as a separate classification of employees to which service
incentive leave shall not be granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the Labor Code as those
"whose actual hours of work in the field cannot be determined with reasonable
certainty."8
The same is true with respect to the phrase "those who are engaged on task or
contract basis, purely commission basis." Said phrase should be related with "field
personnel," applying the rule on ejusdem generis that general and unlimited terms
are restrained and limited by the particular terms that they follow.9 Hence,
employees engaged on task or contract basis or paid on purely commission basis
are not automatically exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel.
Therefore, petitioner’s contention that respondent is not entitled to the grant of
service incentive leave just because he was paid on purely commission basis is
misplaced. What must be ascertained in order to resolve the issue of propriety of
the grant of service incentive leave to respondent is whether or not he is a field
personnel.
According to Article 82 of the Labor Code, "field personnel" shall refer to non-
agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work
in the field cannot be determined with reasonable certainty. This definition is further
elaborated in the Bureau of Working Conditions (BWC), Advisory Opinion to
Philippine Technical-Clerical Commercial Employees Association10 which states that:
As a general rule, [field personnel] are those whose performance of their job/service
is not supervised by the employer or his representative, the workplace being away
with reasonable certainty; hence, they are paid specific amount for rendering
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specific service or performing specific work. If required to be at specific places at
specific times, employees including drivers cannot be said to be field personnel
despite the fact that they are performing work away from the principal office of the
employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said
advisory opinion, no employee would ever be considered a field personnel because
every employer, in one way or another, exercises control over his employees.
Petitioner further argues that the only criterion that should be considered is the
nature of work of the employee in that, if the employee’s job requires that he works
away from the principal office like that of a messenger or a bus driver, then he is
inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a
"field personnel" is not merely concerned with the location where the employee
regularly performs his duties but also with the fact that the employee’s performance
is unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. Thus, in order to conclude whether an employee is a field
employee, it is also necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing, an inquiry must
be made as to whether or not the employee’s time and performance are constantly
supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies,
there are its inspectors assigned at strategic places who board the bus and inspect
the passengers, the punched tickets, and the conductor’s reports. There is also the
mandatory once-a-week car barn or shop day, where the bus is regularly checked
as to its mechanical, electrical, and hydraulic aspects, whether or not there are
problems thereon as reported by the driver and/or conductor. They too, must be at
specific place as [sic] specified time, as they generally observe prompt departure
and arrival from their point of origin to their point of destination. In each and every
depot, there is always the Dispatcher whose function is precisely to see to it that
the bus and its crew leave the premises at specific times and arrive at the estimated
proper time. These, are present in the case at bar. The driver, the complainant
herein, was therefore under constant supervision while in the performance of this
work. He cannot be considered a field personnel.11
We agree in the above disquisition. Therefore, as correctly concluded by the
appellate court, respondent is not a field personnel but a regular employee who
performs tasks usually necessary and desirable to the usual trade of petitioner’s
business. Accordingly, respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of service incentive
leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or
not the three (3)-year prescriptive period under Article 291 of the Labor Code is
applicable to respondent’s claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims arising from employer-
employee relationship shall be filed within three (3) years from the time the cause
of action accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be
answered is when does the cause of action for money claims accrue in order to
determine the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a
right in favor of the plaintiff by whatever means and under whatever law it arises or
is created; (2) an obligation on the part of the named defendant to respect or not
to violate such right; and (3) an act or omission on the part of such defendant
violative of the right of the plaintiff or constituting a breach of the obligation of the
defendant to the plaintiff.12
To properly construe Article 291 of the Labor Code, it is essential to ascertain the
time when the third element of a cause of action transpired. Stated differently, in
the computation of the three-year prescriptive period, a determination must be
made as to the period when the act constituting a violation of the workers’ right to
the benefits being claimed was committed. For if the cause of action accrued more
than three (3) years before the filing of the money claim, said cause of action has
already prescribed in accordance with Article 291.13
Consequently, in cases of nonpayment of allowances and other monetary benefits,
if it is established that the benefits being claimed have been withheld from the
employee for a period longer than three (3) years, the amount pertaining to the
period beyond the three-year prescriptive period is therefore barred by prescription.
The amount that can only be demanded by the aggrieved employee shall be limited
to the amount of the benefits withheld within three (3) years before the filing of the
complaint.14
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It is essential at this point, however, to recognize that the service incentive leave is
a curious animal in relation to other benefits granted by the law to every employee.
In the case of service incentive leave, the employee may choose to either use his
leave credits or commute it to its monetary equivalent if not exhausted at the end
of the year.15 Furthermore, if the employee entitled to service incentive leave does
not use or commute the same, he is entitled upon his resignation or separation from
work to the commutation of his accrued service incentive leave. As enunciated by
the Court in Fernandez v. NLRC:16
The clear policy of the Labor Code is to grant service incentive leave pay to workers
in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations provides that "[e]very employee who has
rendered at least one year of service shall be entitled to a yearly service incentive
leave of five days with pay." Service incentive leave is a right which accrues to every
employee who has served "within 12 months, whether continuous or broken
reckoned from the date the employee started working, including authorized
absences and paid regular holidays unless the working days in the establishment as
a matter of practice or policy, or that provided in the employment contracts, is less
than 12 months, in which case said period shall be considered as one year." It is
also "commutable to its money equivalent if not used or exhausted at the end of the
year." In other words, an employee who has served for one year is entitled to it. He
may use it as leave days or he may collect its monetary value. To limit the award to
three years, as the solicitor general recommends, is to unduly restrict such
right.17 [Italics supplied]
Correspondingly, it can be conscientiously deduced that the cause of action of an
entitled employee to claim his service incentive leave pay accrues from the moment
the employer refuses to remunerate its monetary equivalent if the employee did not
make use of said leave credits but instead chose to avail of its commutation.
Accordingly, if the employee wishes to accumulate his leave credits and opts for its
commutation upon his resignation or separation from employment, his cause of
action to claim the whole amount of his accumulated service incentive leave shall
arise when the employer fails to pay such amount at the time of his resignation or
separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service
incentive leave, we can conclude that the three (3)-year prescriptive period
commences, not at the end of the year when the employee becomes entitled to the
commutation of his service incentive leave, but from the time when the employer
refuses to pay its monetary equivalent after demand of commutation or upon
termination of the employee’s services, as the case may be.
The above construal of Art. 291, vis-à-vis the rules on service incentive leave, is in
keeping with the rudimentary principle that in the implementation and interpretation
of the provisions of the Labor Code and its implementing regulations, the
workingman’s welfare should be the primordial and paramount consideration.18 The
policy is to extend the applicability of the decree to a greater number of employees
who can avail of the benefits under the law, which is in consonance with the avowed
policy of the State to give maximum aid and protection to labor.19
In the case at bar, respondent had not made use of his service incentive leave nor
demanded for its commutation until his employment was terminated by petitioner.
Neither did petitioner compensate his accumulated service incentive leave pay at
the time of his dismissal. It was only upon his filing of a complaint for illegal
dismissal, one month from the time of his dismissal, that respondent demanded from
his former employer commutation of his accumulated leave credits. His cause of
action to claim the payment of his accumulated service incentive leave thus accrued
from the time when his employer dismissed him and failed to pay his accumulated
leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave
pay only commenced from the time the employer failed to compensate his
accumulated service incentive leave pay at the time of his dismissal. Since
respondent had filed his money claim after only one month from the time of his
dismissal, necessarily, his money claim was filed within the prescriptive period
provided for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The
assailed Decision of the Court of Appeals in CA-G.R. SP. No. 68395 is hereby
AFFIRMED. No Costs.
SO ORDERED.
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Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 168120 January 25, 2012
MANSION PRINTING CENTER and CLEMENT CHENG, Petitioners,
vs.
DIOSDADO BITARA, JR. Respondent.
DECISION
PEREZ, J.:
Before us is a petition for review on certiorari seeking to reverse and set aside the
issuances of the Court of Appeals in CA-GR. SP No. 70965, to wit: (a) the
Decision1 dated 18 March 2004 granting the petition for certiorari under Rule 65 of
herein respondent Diosdado Bitara, Jr.; and (b) the Resolution2 dated 10 May 2005
denying the petitioners Motion for Reconsideration of the Decision. The assailed
decision of the Court of Appeals reversed the findings of the National Labor Relations
Commission3 and the Labor Arbiter4 that respondent was validly dismissed from the
service.
The Antecedents
Petitioner Mansion Printing Center is a single proprietorship registered under the
name of its president and co-petitioner Clement Cheng. It is engaged in the printing
of quality self-adhesive labels, brochures, posters, stickers, packaging and the like.5
Sometime in August 1998, petitioners engaged the services of respondent as a
helper (kargador). Respondent was later promoted as the company’s sole driver
tasked to pick-up raw materials for the printing business, collect account receivables
and deliver the products to the clients within the delivery schedules.6
Petitioners aver that the timely delivery of the products to the clients is one of the
foremost considerations material to the operation of the business.7 It being so, they
closely monitored the attendance of respondent. They noted his habitual tardiness
and absenteeism.
Thus, as early as 23 June 1999, petitioners issued a Memorandum8 requiring
respondent to submit a written explanation why no administrative sanction should
be imposed on him for his habitual tardiness.
Several months after, respondent’s attention on the matter was again called to which
he replied:
29 NOV. 1999
MR. CLEMENT CHENG
SIR:
I UNDERSTAND MY TARDINESS WHATEVER REASON I HAVE AFFECTS SOMEHOW
THE DELIVERY SCHEDULE OF THE COMPANY, THUS DISCIPLINARY ACTION WERE
IMPOSED TO ME BY THE MANAGEMENT. AND ON THIS END, ACCEPT MY
APOLOGIES AND REST ASSURED THAT I WILL COME ON TIME (ON OR BEFORE
8:30 AM) AND WILLINGNESS TO EXTEND MY SERVICE AS A COMPANY DRIVER.
WHATEVER HELP NEEDED. (sic)
RESPECTFULLY YOURS,
(SGD.) DIOSDADO BITARA, JR.9
Despite respondent’s undertaking to report on time, however, he continued to
disregard attendance policies. His weekly time record for the first quarter of the year
200010 revealed that he came late nineteen (19) times out of the forty-seven (47)
times he reported for work. He also incurred nineteen (19) absences out of the sixty-
six (66) working days during the quarter. His absences without prior notice and
approval from March 11-16, 2000 were considered to be the most serious infraction
of all11 because of its adverse effect on business operations.
Consequently, Davis Cheng, General Manager of the company and son of petitioner
Cheng, issued on 17 March 2000 another Memorandum12 (Notice to Explain)
requiring respondent to explain why his services should not be terminated. He
personally handed the Notice to Explain to respondent but the latter, after reading
the directive, refused to acknowledge receipt thereof.13 He did not submit any
explanation and, thereafter, never reported for work.
On 21 March 2000, Davis Cheng personally served another Memorandum14 (Notice
of Termination) upon him informing him that the company found him grossly
negligent of his duties, for which reason, his services were terminated effective 1
April 2000.
On even date, respondent met with the management requesting for reconsideration
of his termination from the service. However, after hearing his position, the
management decided to implement the 21 March 2000 Memorandum. Nevertheless,
the management, out of generosity, offered respondent financial assistance in the
amount of ₱6,110.00 equivalent to his one month salary. Respondent demanded
that he be given the amount equivalent to two (2) months’ salary but the
management declined as it believed it would, in effect, reward respondent for being
negligent of his duties.15
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On 27 April 2000, respondent filed a complaint16 for illegal dismissal against the
petitioners before the Labor Arbiter. He prayed for his reinstatement and for the
payment of full backwages, legal holiday pay, service incentive leave pay, damages
and attorney’s fees.17
In his Position Paper18 filed with the Labor Arbiter, respondent claimed that he took
a leave of absence from March 17-23, 200019 due to an urgent family problem. He
returned to work on 24 March 200020 but Davis Cheng allegedly refused him
admission because of his unauthorized absences.21 On 1 April 2000, respondent
was summoned by Davis Cheng who introduced him to a lawyer, who, in turn,
informed him that he will no longer be admitted to work because of his 5-day
unauthorized absences. Respondent explained that he was compelled to
immediately leave for the province on 17 March 200022 due to the urgency of the
matter and his wife informed the office that he will be absent for a week. The
management found his explanation unacceptable and offered him an amount
equivalent to his one (1) month salary as separation pay but respondent refused the
offer because he wanted to keep the job.23 In his Reply to Respondents’ Position
Paper,24 however, respondent averred that he rejected the offer because he wanted
an amount equivalent to one and a half months’ pay.
On 21 December 2000, the Labor Arbiter dismissed the complaint for lack of merit.25
On appeal to the National Labor Relations Commission (hereinafter referred to as
the Commission), the findings of the Labor Arbiter was AFFIRMED en toto. Thus, in
its Resolution of 29 June 2001 in NLRC NCR CA No. 027871-01, the Commission
declared:
Upon Our review of the record of the case, We perceive no abuse of discretion as
to compel a reversal. Appellant failed to adduce convincing evidence to show that
the Labor Arbiter in rendering the assailed decision has acted in a manner
inconsistent with the criteria set forth in the foregoing pronouncement.
Neither are we persuaded to disturb the factual findings of the Labor Arbiter a quo.
The material facts as found are all in accordance with the evidence presented during
the hearing as shown by the record.
WHEREFORE, finding no cogent reason to modify, alter, much less reverse the
decision appealed from, the same is AFFIRMED en toto and the instant appeal
DISMISSED for lack of merit.26
It likewise denied respondent’s Motion for Reconsideration of the Resolution on 21
February 2002.27
Before the Court of Appeals, respondent sought the annulment of the Commission’s
Resolution dated 29 June 2001 and Order dated 21 February 2002 on the ground
that they were rendered with grave abuse of discretion and/or without or in excess
of jurisdiction.28
The Court of Appeals found for the respondent and reversed the findings of the
Commission. The dispositive portion of its Decision dated 18 March 2004 reads:
WHEREFORE, the petition is GRANTED. In lieu of the assailed Resolution and Order
of the respondent NLRC, a NEW DECISION is hereby rendered declaring petitioner
Diosdado Bitara, Jr. to have been Illegally Dismissed and, thus, entitled to the
following:
Reinstatement or if no longer feasible, Separation Pay to be computed from the
commencement of his employment in August 1988 up to the time of his termination
on April 1, 2000, including his imputed service from April 1, 2000 until the finality of
this decision, based on the salary rate prevailing at the said finality;
Backwages, inclusive of allowances and other benefits, computed from April 1, 2000
up to the finality of this decision, without qualification or deduction; and
5-day Service Incentive Leave Pay for every year of service from the commencement
of his employment in August 1988 up to its termination on April 1, 2000.29
On 10 May 2005, the Court of Appeals denied respondent’s Motion for
Reconsideration of the decision for lack of merit. 30
Hence, the instant petition.31
Issue
The core issue in this case is whether or not the Court of Appeals correctly found
that the Commission acted without and/or in excess of jurisdiction and with grave
abuse of discretion amounting to lack or excess of jurisdiction (a) in upholding the
termination of respondent’s employment and (b) in affirming the denial of his claim
for non-payment of holiday pay, service incentive leave pay, moral and exemplary
damages.
Our Ruling
The petition is meritorious.
The special civil action for certiorari seeks to correct errors of jurisdiction and not
errors of judgment.32
xxx The raison d’etre for the rule is when a court exercises its jurisdiction, an error
committed while so engaged does not deprive it of the jurisdiction being exercised
when the error is committed. If it did, every error committed by a court would
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deprive it of its jurisdiction and every erroneous judgment would be a void judgment.
xxx Hence, where the issue or question involved affects the wisdom or legal
soundness of the decision – not the jurisdiction of the court to render said decision
– the same is beyond the province of a special civil action for certiorari. xxx33
xxx [J]udicial review does not go as far as to evaluate the sufficiency of evidence
upon which the Labor Arbiter and NLRC based their determinations, the inquiry being
limited essentially to whether or not said public respondents had acted without or in
excess of its jurisdiction or with grave abuse of discretion.34 The said rule directs
us to merely determine whether there is basis established on record to support the
findings of a tribunal and such findings meet the required quantum of proof, which
in this case, is substantial evidence. Our deference to the expertise acquired by
quasi-judicial agencies and the limited scope granted to us in the exercise of
certiorari jurisdiction restrain us from going so far as to probe into the correctness
of a tribunal’s evaluation of evidence, unless there is palpable mistake and complete
disregard thereof in which case certiorari would be proper.35
It is on the alleged lack of substantial evidence that the Court of Appeals found for
the respondents, thereby reversing the decision of the Commission.
We hold otherwise.
Upon examination of the documents presented by the parties, we are convinced that
the finding of facts on which the conclusions of the Commission and the Labor
Arbiter were based was actually supported by substantial evidence – "that amount
of relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other minds, equally reasonable, might conceivably opine
otherwise."36 (Emphasis supplied.)
I respondent would have it, the wife informed him that respondent had already left
In order to validly dismiss an employee, the employer is required to observe both
substantive and procedural aspects – the termination of employment must be based
on a just or authorized cause of dismissal and the dismissal must be effected after
due notice and hearing.37
Substantive Due Process
We cannot agree with the Court of Appeals that the sole basis of the termination of
respondent’s employment was his absences from March 11-16, 2000.
Indeed, the Notice to Explain38 clearly stated:
We are seriously considering your termination from service, and for this reason you
are directed to submit a written explanation, within seventy-two hours from your
receipt of this notice, why you should not be terminated from service for failure to
report for work without verbal or written notice or permission on March 11, 13, 14,
15 and 16, 2000. xxx (Emphasis supplied.)
To give full meaning and substance to the Notice to Explain, however, the paragraph
should be read together with its preceding paragraph, to wit:
We have time and again, verbally and formally, called your attention to your
negligence from your tardiness and your frequent absences without any notice but
still, you remain to ignore our reminder. As you know, we are in need of a regular
driver and your action greatly affected the operation of our company. (Emphasis
supplied.)
Necessarily, he was considered for termination of employment because of his
previous infractions capped by his recent unauthorized absences from March 11-16,
2000.
That the recent absences were unauthorized were satisfactorily established by
petitioners. Two (2) employees of the company belied the claim of respondent’s wife
Mary Ann Bitara that she called the office on 11 March 2000, and, through a certain
Delia, as allegedly later identified by respondent, informed petitioners that her
husband would take a leave of absence for a week because he went to the
province.39
Delia Abalos, a "binder/finisher" of the company, stated in her Affidavit that she
never received a call from respondent nor his wife regarding his absences from
March 11-16 and 17-23 during the month of March 2000.40 On the other hand,
Ritchie Distor, a messenger of the company, narrated in his Affidavit that, upon
instruction of the Management, he went to respondent’s house on 13 March 2000
to require him to report for work. Instead of relaying the message to him, as
the house but that she did not know where he was going.41
The Court of Appeals relied heavily on our ruling in Stellar Industrial Services, Inc.
vs. NLRC,42 which is not on all fours with the present case. In that case, the
employer dismissed respondent for non-observance of company rules and
regulations. On the basis of the facts presented, this Court honored the questioned
medical certificate justifying the absences he incurred. It further ratiocinated:
xxx [P]rivate respondent’s absences, as already discussed, were incurred with due
notice and compliance with company rules and he had not thereby committed a
"similar offense" as those he had committed in the past [to wit: gambling, for which
he was preventively suspended; habitual tardiness for which he received several
warnings; and violation of company rules for carrying three sacks of rice, for which
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he was required to explain.] xxx To refer to those earlier violations as added grounds
for dismissing him is doubly unfair to private respondent.43 (Emphasis supplied.)
In the present case, however, petitioners have repeatedly called the attention of
respondent concerning his habitual tardiness. The Memorandum dated 23 June 1999
of petitioner Cheng required him to explain his tardiness. Also in connection with a
similar infraction, respondent even wrote petitioner Cheng a letter dated 29
November 1999 where he admitted that his tardiness has affected the delivery
schedules of the company, offered an apology, and undertook to henceforth report
for duty on time. Despite this undertaking, he continued to either absent himself
from work or report late during the first quarter of 2000.
We, therefore, agree with the Labor Arbiter’s findings, to wit:
The imputed absence and tardiness of the complainant are documented. He faltered
on his attendance 38 times of the 66 working days. His last absences on 11, 13, 14,
15 and 16 March 2000 were undertaken without even notice/permission from
management. These attendance delinquencies may be characterized as habitual and
are sufficient justifications to terminate the complainant’s employment.44
On this score, Valiao v. Court of Appeals45 is instructive:
xxx It bears stressing that petitioner’s absences and tardiness were not isolated
incidents but manifested a pattern of habituality. xxx The totality of infractions or
the number of violations committed during the period of employment shall be
considered in determining the penalty to be imposed upon an erring employee. The
offenses committed by him should not be taken singly and separately but in their
totality. Fitness for continued employment cannot be compartmentalized into tight
little cubicles of aspects of character, conduct, and ability separate and independent
of each other.46
There is likewise no merit in the observation of the Court of Appeals that the
petitioners themselves are not certain of the official time of their employees after
pointing out the seeming inconsistencies between the statement of the petitioners
that "there is no need for written rules since even the [respondent] is aware that
his job starts from 8 am to 5 pm"47 and its Memorandum of 23 June 1999, where
it was mentioned that respondent’s official time was from 8:30 a.m. to 5:30 p.m.
On the contrary, it was clearly stated in the Memorandum that the Management
adjusted his official time from 8:00 a.m. to 5:00 p.m. to 8:30 a.m. to 5:30 p.m. to
hopefully solve the problem on his tardiness.48
Neither is there basis to hold that the company tolerates the offsetting of undertime
with overtime services. The Weekly Time Record relied upon by respondent does
not conclusively confirm the alleged practice.
In Valiao,49 we defined gross negligence as "want of care in the performance of
one’s duties"50 and habitual neglect as "repeated failure to perform one’s duties for
a period of time, depending upon the circumstances."51These are not overly
technical terms, which, in the first place, are expressly sanctioned by the Labor Code
of the Philippines, to wit:
ART. 282. Termination by employer. - An employer may terminate an employment
for any of the following causes:
(a) xxx
(b) Gross and habitual neglect by the employee of his duties;
xxx
Clearly, even in the absence of a written company rule defining gross and habitual
neglect of duties, respondent’s omissions qualify as such warranting his dismissal
from the service.
We cannot simply tolerate injustice to employers if only to protect the welfare of
undeserving employees. As aptly put by then Associate Justice Leonardo A.
Quisumbing:
Needless to say, so irresponsible an employee like petitioner does not deserve a
place in the workplace, and it is within the management’s prerogative xxx to
terminate his employment. Even as the law is solicitous of the welfare of employees,
it must also protect the rights of an employer to exercise what are clearly
management prerogatives. As long as the company’s exercise of those rights and
prerogative is in good faith to advance its interest and not for the purpose of
defeating or circumventing the rights of employees under the laws or valid
agreements, such exercise will be upheld.52
And, in the words of then Associate Justice Ma. Alicia Austria-Martinez in Philippine
Long Distance and Telephone Company, Inc. v. Balbastro:53
While it is true that compassion and human consideration should guide the
disposition of cases involving termination of employment since it affects one's source
or means of livelihood, it should not be overlooked that the benefits accorded to
labor do not include compelling an employer to retain the services of an employee
who has been shown to be a gross liability to the employer. The law in protecting
the rights of the employees authorizes neither oppression nor self-destruction of the
employer.54 It should be made clear that when the law tilts the scale of justice in
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favor of labor, it is but a recognition of the inherent economic inequality between
labor and management. The intent is to balance the scale of justice; to put the two
parties on relatively equal positions. There may be cases where the circumstances
warrant favoring labor over the interests of management but never should the scale
be so tilted if the result is an injustice to the employer. Justitia nemini neganda
est (Justice is to be denied to none).55
Procedural Due Process
Procedural due process entails compliance with the two-notice rule in dismissing an
employee, to wit: (1) the employer must inform the employee of the specific acts or
omissions for which his dismissal is sought; and (2) after the employee has been
given the opportunity to be heard, the employer must inform him of the decision to
terminate his employment.56
Respondent claimed that he was denied due process because the company did not
observe the two-notice rule. He maintained that the Notice of Explanation and the
Notice of Termination, both of which he allegedly refused to sign, were never served
upon him.57
The Court of Appeals favored respondent and ruled in this wise:
Furthermore, We believe that private respondents failed to afford petitioner due
process. The allegation of private respondents that petitioner refused to sign the
memoranda dated March 17 and 21, 2000 despite receipt thereof is not only lame
but also implausible. First, the said allegation is self-serving and
unsubstantiated. Second, a prudent employer would simply not accept such mere
refusal, but would exert effort to observe the mandatory requirement of due
process. We cannot accept the self-serving claim of respondents that petitioner
refused to sign both memoranda. Otherwise, We would be allowing employers to do
away with the mandatory twin-notice rule in the termination of employees. We find
more credible the claim of petitioner that he was illegally dismissed on April 1,
2000 when the lawyer of the company informed him, without prior notice and in
derogation of his right to due process, of his termination by offering him a 1-month
salary as separation pay. The petitioner’s immediate filing of a complaint for illegal
dismissal on April 27, 2000 reinforced Our belief that petitioner was illegally
dismissed and was denied due process.58 (Emphasis in the original.)
We rule otherwise.
In Bughaw v. Treasure Island Industrial Corporation,59 this Court, in verifying the
veracity of the allegation that respondent refused to receive the Notice of
Termination, essentially looked for the following: (1) affidavit of service stating the
reason for failure to serve the notice upon the recipient; and (2) a notation to that
effect, which shall be written on the notice itself.60 Thus:
xxx Bare and vague allegations as to the manner of service and the circumstances
surrounding the same would not suffice. A mere copy of the notice of termination
allegedly sent by respondent to petitioner, without proof of receipt, or in the very
least, actual service thereof upon petitioner, does not constitute substantial
evidence. It was unilaterally prepared by the petitioner and, thus, evidently self-
serving and insufficient to convince even an unreasonable mind.61
Davis Cheng, on the other hand, did both. First, he indicated in the notices the
notation that respondent "refused to sign" together with the corresponding dates of
service. Second, he executed an Affidavit dated 29 July 2000 stating that: (1) he is
the General Manager of the company; (2) he personally served each notice upon
respondent, when respondent went to the office/factory on 17 March 2000 and 21
March 2000, respectively; and (3) on both occasions, after reading the contents of
the memoranda, respondent refused to acknowledge receipt thereof. We are, thus,
convinced that the notices have been validly served.
Premises considered, we find that respondent was accorded both substantive and
procedural due process.
II
As to respondent’s monetary claims, petitioners did not deny respondent’s
entitlement to service incentive leave pay as, indeed, it is indisputable that he is
entitled thereto. In Fernandez v. NLRC,62 this Court elucidated:
The clear policy of the Labor Code is to grant service incentive leave pay to workers
in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the
Implementing Rules and Regulations63 provides that "[e]very employee who has
rendered at least one year of service shall be entitled to a yearly service incentive
leave of five days with pay." Service incentive leave is a right which accrues to every
employee who has served "within 12 months, whether continuous or broken
reckoned from the date the employee started working, including authorized
absences and paid regular holidays unless the working days in the establishment as
a matter of practice or policy, or that provided in the employment contracts, is less
than 12 months, in which case said period shall be considered as one year."64 It is
also "commutable to its money equivalent if not used or exhausted at the end of the
year."65 In other words, an employee who has served for one year is entitled to
it. He may use it as leave days or he may collect its monetary value.
xxx66 (Emphasis supplied.)
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Be that as it may, petitioners failed to establish by evidence that respondent had

already used the service incentive leave when he incurred numerous absences
notwithstanding that employers have complete control over the records of the
company so much so that they could easily show payment of monetary claims
against them by merely presenting vouchers or payrolls,67 or any document
showing the off-setting of the payment of service incentive leave with the absences,
as acknowledged by the absentee, if such is the company policy. Petitioners
presented none.
We thus quote with approval the findings of the Court of Appeals on the following:
[P]rivate respondents bear the burden to prove that employees have received these
benefits in accordance with law. It is incumbent upon the employer to present the
necessary documents to prove such claim. Although private respondents labored to
show that they paid petitioner his holiday pay, no similar effort was shown with
regard to his service incentive leave pay. We do not agree with the Labor Arbiter’s
conclusion that petitioner’s service incentive leave pay has been used up by his
numerous absences, there being no proof to that effect.68
As to the payment of holiday pay, we are convinced that respondent had already
received the same based on the cash vouchers on record.1avvphil
Accordingly, we affirm the ruling of the National Labor Relations Commission that
the dismissal was valid. However, respondent shall be entitled to the money
equivalent of the five-day service incentive leave pay for every year of service from
the commencement of his employment in August 1988 up to its termination on 1
April 2000. The Labor Arbiter shall compute the corresponding amount.
WHEREFORE, the Resolution dated 29 June 2001 and the Order dated 21 February
2002 of the National Labor Relations Commission in NLRC NCR CASE No. 027871-
01 are hereby REINSTATED with the MODIFICATION that petitioners
are ORDERED to pay respondent the money equivalent of the five-day service
incentive leave for every year of service covering his employment period from August
1988 to 1 April 2000. This case is hereby REMANDEDto the Labor Arbiter for the
computation of respondent’s service incentive leave pay.
SO ORDERED.

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2. Paterno Llarena Front Desk Clerk

3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
SECOND DIVISION 6. Santos Broñola Roomboy
G.R. No. 157634 May 16, 2005
7. Teodoro Laurenaria Waiter
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO
LAM, petitioners, 8. Eduardo Alamares Roomboy/Waiter
vs. 9. Lourdes Camigla Cashier
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO
ALAMARES, AMADO ALAMARES, EDGARDO TORREFRANCA, LOURDES 10. Chona Bumalay Cashier
CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS 11. Jose Atractivo Technician
GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO,
12. Amado Alamares Dishwasher and Kitchen Helper
JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS
BROÑOLA, respondents. 13. Roger Burce Cook
DECISION 14. Rolando Adana Waiter
PUNO, J.: 15. Miguel Torrefranca Cook
This is a petition for certiorari to reverse and set aside the Decision issued by the
16. Edgardo Torrefranca Cook
Court of Appeals (CA)1 in CA-G.R. SP No. 68642, entitled "Rolando Adana,
Wenefredo Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Due to the expiration and non-renewal of the lease contract for the rented space
Hotel & Restaurant/Pacita O. Po, et al.," and the Resolution2 denying petitioners' occupied by the said hotel and restaurant at Rizal Street, the hotel operations of the
motion for reconsideration. The assailed CA decision reversed the NLRC Decision business were suspended on March 31, 1997.9 The operation of the restaurant was
which had dismissed all of respondents' complaints,3 and reinstated the Joint continued in its new location at Elizondo Street, Legazpi City, while waiting for the
Decision of the Labor Arbiter4 which ruled that respondents were illegally dismissed construction of a new Mayon Hotel & Restaurant at Peñaranda Street, Legazpi
and entitled to their money claims. City.10 Only nine (9) of the sixteen (16) employees continued working in the Mayon
The facts, culled from the records, are as follows:5 Restaurant at its new site.11

Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the
name of petitioner Pacita O. Po,6 whose mother, petitioner Josefa Po Lam, manages
the establishment.7 The hotel and restaurant employed about sixteen (16)
employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant
hired the following people, all respondents in this case, with the following jobs:8
1. Wenefredo Loveres Accountant and Officer-in-charge
On various dates of April and May 1997, the 16 employees filed complaints for
underpayment of wages and other money claims against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal
dismissal, underpayment of wages, nonpayment of holiday and rest day pay; service
incentive leave pay (SILP) and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for
underpayment of wages; nonpayment of cost of living allowance (COLA) and
overtime pay; premium pay for holiday and rest day; SILP; nightshift differential pay
and separation pay plus damages;

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Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of
wages; nonpayment of holiday and rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages;
nonpayment of COLA, overtime, holiday, rest day, SILP and nightshift differential
pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and
SILP and night shift differential pay;
Santos Broñola for illegal dismissal, underpayment of wages, overtime pay, rest day
pay, holiday pay, SILP, and damages;13 and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime
pay; premium pay for holiday and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint
Decision in favor of the employees. The Labor Arbiter awarded substantially all of
respondents' money claims, and held that respondents Loveres, Macandog and
Llarena were entitled to separation pay, while respondents Guades, Nicerio and
Alamares were entitled to their retirement pay. The Labor Arbiter also held that
based on the evidence presented, Josefa Po Lam is the owner/proprietor of Mayon
Hotel & Restaurant and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the
complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this was
denied, they filed a petition for certiorari with the CA which rendered the now
assailed decision.
After their motion for reconsideration was denied, petitioners now come to this
Court, seeking the reversal of the CA decision on the following grounds:
I. The Honorable Court of Appeals erred in reversing the decision of the National
Labor Relations Commission (Second Division) by holding that the findings of fact of
the NLRC were not supported by substantial evidence despite ample and sufficient
evidence showing that the NLRC decision is indeed supported by substantial
evidence;
II. The Honorable Court of Appeals erred in upholding the joint decision of the labor
arbiter which ruled that private respondents were illegally dismissed from their
employment, despite the fact that the reason why private respondents were out of
work was not due to the fault of petitioners but to causes beyond the control of
petitioners.
III. The Honorable Court of Appeals erred in upholding the award of monetary
benefits by the labor arbiter in his joint decision in favor of the private respondentS,
including the award of damages to six (6) of the private respondents, despite the
fact that the private respondents have not proven by substantial evidence their
entitlement thereto and especially the fact that they were not illegally dismissed by
the petitioners.
IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner
of the business establishment, petitioner Mayon Hotel and Restaurant, thus
disregarding the certificate of registration of the business establishment ISSUED by
the local government, which is a public document, and the unqualified admissions
of complainants-private respondents.14
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of
petitioner Mayon Hotel & Restaurant, and the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio
illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of wages,
and nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and
night shift differential pay?
It is petitioners' contention that the above issues have already been threshed out
sufficiently and definitively by the NLRC. They therefore assail the CA's reversal of
the NLRC decision, claiming that based on the ruling in Castillo v. NLRC,15 it is non
sequitur that the CA should re-examine the factual findings of both the NLRC and
the Labor Arbiter, especially as in this case the NLRC's findings are allegedly
supported by substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an appellate agency
reviewing decisions of Labor Arbiters, to disagree with and set aside the latter's
findings.16 But it stands to reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious, oppressive, illogical,
unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the
extraordinary writ of certiorari.17 And when the factual findings of the Labor Arbiter
and the NLRC are diametrically opposed and this disparity of findings is called into
question, there is, necessarily, a re-examination of the factual findings to ascertain
which opinion should be sustained.18 As ruled in Asuncion v. NLRC,19
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Although, it is a legal tenet that factual findings of administrative bodies are entitled
to great weight and respect, we are constrained to take a second look at the facts
before us because of the diversity in the opinions of the Labor Arbiter and the NLRC.
A disharmony between the factual findings of the Labor Arbiter and those of the
NLRC opens the door to a review thereof by this Court.20
The CA, therefore, did not err in reviewing the records to determine which opinion
was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative
bodies like the NLRC are affirmed only if they are supported by substantial evidence
that is manifest in the decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a
decision of a Labor Arbiter. Mere variance in evidentiary assessment between the
NLRC and the Labor Arbiter does not automatically call for a full review of the facts
by this Court. The NLRC's decision, so long as it is not bereft of substantial support
from the records, deserves respect from this Court. As a rule, the original and
exclusive jurisdiction to review a decision or resolution of respondent NLRC in a
petition for certiorari under Rule 65 of the Rules of Court does not include a
correction of its evaluation of the evidence but is confined to issues of jurisdiction
or grave abuse of discretion. Thus, the NLRC's factual findings, if supported by
substantial evidence, are entitled to great respect and even finality, unless petitioner
is able to show that it simply and arbitrarily disregarded the evidence before it or
had misappreciated the evidence to such an extent as to compel a contrary
conclusion if such evidence had been properly appreciated. (citations omitted)22
After careful review, we find that the reversal of the NLRC's decision was in order
precisely because it was not supported by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees, petitioner
Josefa Po Lam is, in fact, the owner of Mayon Hotel & Restaurant. Although the
NLRC reversed this decision, the CA, on review, agreed with the Labor Arbiter that
notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa
Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the proper
respondent in the complaints filed by the employees. The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po,
we cannot fault the labor arbiter in ruling that Josefa Po Lam is the owner of the
subject hotel and restaurant. There were conflicting documents submitted by Josefa
herself. She was ordered to submit additional documents to clearly establish
ownership of the hotel and restaurant, considering the testimonies given by the
[respondents] and the non-appearance and failure to submit her own position paper
by Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter. The
ruling of the Supreme Court in Metropolitan Bank and Trust Company v. Court of
Appeals applies to Josefa Po Lam which is stated in this wise:
When the evidence tends to prove a material fact which imposes a liability on a
party, and he has it in his power to produce evidence which from its very nature
must overthrow the case made against him if it is not founded on fact, and he
refuses to produce such evidence, the presumption arises that the evidence[,] if
produced, would operate to his prejudice, and support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and
restaurant, the labor arbiter relied also on the testimonies of the witnesses, during
the hearing of the instant case. When the conclusions of the labor arbiter are
sufficiently corroborated by evidence on record, the same should be respected by
appellate tribunals, since he is in a better position to assess and evaluate the
credibility of the contending parties.23(citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that
petitioner Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that
the documents they submitted to the Labor Arbiter sufficiently and clearly establish
the fact of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa
Po Lam. They contend that petitioner Josefa Po Lam's participation was limited to
merely (a) being the overseer; (b) receiving the month-to-month and/or year-to-
year financial reports prepared and submitted by respondent Loveres; and (c)
visitation of the premises.24 They also put emphasis on the admission of the
respondents in their position paper submitted to the Labor Arbiter, identifying
petitioner Josefa Po Lam as the manager, and Pacita Po as the owner.25 This, they
claim, is a judicial admission and is binding on respondents. They protest the reliance
the Labor Arbiter and the CA placed on their failure to submit additional documents
to clearly establish ownership of the hotel and restaurant, claiming that there was
no need for petitioner Josefa Po Lam to submit additional documents considering
that the Certificate of Registration is the best and primary evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find the claim
that petitioner Josefa Po Lam is merely the overseer is not borne out by the
evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the
Labor Arbiter. Despite receipt of the Labor Arbiter's notice and summons, other
notices and Orders, petitioner Pacita Po failed to appear in any of the proceedings
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with the Labor Arbiter in these cases, nor file her position paper.26 It was only on
appeal with the NLRC that Pacita Po signed the pleadings.27 The apathy shown by
petitioner Pacita Po is contrary to human experience as one would think that the
owner of an establishment would naturally be concerned when all her employees
file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lam's claim that she is
merely an overseer. The findings of the Labor Arbiter on this question were based
on credible, competent and substantial evidence. We again quote the Joint Decision
on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner]
Josefa Po Lam claims that it is her daughter, Pacita Po, who owns the hotel and
restaurant when the latter purchased the same from one Palanos in 1981, Josefa
failed to submit the document of sale from said Palanos to Pacita as allegedly the
sale was only verbal although the license to operate said hotel and restaurant is in
the name of Pacita which, despite our Order to Josefa to present the same, she
failed to comply (p. 38, tsn. August 13, 1998). While several documentary evidences
were submitted by Josefa wherein Pacita was named therein as owner of the hotel
and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were documentary
evidences also that were submitted by Josefa showing her ownership of said
enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation
and interest in the business as merely to help and assist her daughter as the hotel
and restaurant was near the former's store, the testimonies of [respondents] and
Josefa as well as her demeanor during the trial in these cases proves (sic) that Josefa
Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified that it was Josefa
who exercises all the acts and manifestation of ownership of the hotel and restaurant
like transferring employees from the Greatwall Palace Restaurant which she and her
husband Roy Po Lam previously owned; it is Josefa to whom the employees submits
(sic) reports, draws money for payment of payables and for marketing, attending
(sic) to Labor Inspectors during ocular inspections. Except for documents whereby
Pacita Po appears as the owner of Mayon Hotel and Restaurant, nothing in the record
shows any circumstance or manifestation that Pacita Po is the owner of Mayon Hotel
and Restaurant. The least that can be said is that it is absurd for a person to
purchase a hotel and restaurant in the very heart of the City of Legazpi verbally.
Assuming this to be true, when [petitioners], particularly Josefa, was directed to
submit evidence as to the ownership of Pacita of the hotel and restaurant,
considering the testimonies of [respondents], the former should [have] submitted
the lease contract between the owner of the building where Mayon Hotel and
Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly establish
ownership by the latter of said enterprise. Josefa failed. We are not surprised why
some employers employ schemes to mislead Us in order to evade liabilities. We
therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel
and Restaurant and the proper respondent in these cases.28
Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being
the best proof of ownership, is misplaced. Notwithstanding the certificate of
registration, doubts were cast as to the true nature of petitioner Josefa Po Lam's
involvement in the enterprise, and the Labor Arbiter had the authority to resolve this
issue. It was therefore within his jurisdiction to require the additional documents to
ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the
application of technical rules of procedure may be relaxed in labor cases to serve
the demand of substantial justice.29 The rule of evidence prevailing in court of law
or equity shall not be controlling in labor cases and it is the spirit and intention of
the Labor Code that the Labor Arbiter shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process.30 Labor laws
mandate the speedy administration of justice, with least attention to technicalities
but without sacrificing the fundamental requisites of due process.31
Similarly, the fact that the respondents' complaints contained no allegation that
petitioner Josefa Po Lam is the owner is of no moment. To apply the concept of
judicial admissions to respondents — who are but lowly employees - would be to
exact compliance with technicalities of law that is contrary to the demands of
substantial justice. Moreover, the issue of ownership was an issue that arose only
during the course of the proceedings with the Labor Arbiter, as an incident of
determining respondents' claims, and was well within his jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient
opportunity to be heard on the issue of ownership.33 The essence of due process
in administrative proceedings is simply an opportunity to explain one's side or an
opportunity to seek reconsideration of the action or ruling complained of.34 And
there is nothing in the records which would suggest that petitioners had absolute
lack of opportunity to be heard.35 Obviously, the choice not to present evidence
was made by petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the CA because even when
the case was on appeal with the NLRC, nothing was submitted to negate the Labor
Arbiter's finding that Pacita Po is not the real owner of the subject hotel and
restaurant. Indeed, no such evidence was submitted in the proceedings with the CA
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nor with this Court. Considering that petitioners vehemently deny ownership by
petitioner Josefa Po Lam, it is most telling that they continue to withhold evidence
which would shed more light on this issue. We therefore agree with the CA that the
failure to submit could only mean that if produced, it would have been adverse to
petitioners' case.37
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam
is the owner of petitioner Mayon Hotel & Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal:
respondents Loveres, Llarena, Nicerio, Macandog, Guades, Atractivo and Broñola.38
The Labor Arbiter found that there was illegal dismissal, and granted separation pay
to respondents Loveres, Macandog and Llarena. As respondents Guades, Nicerio and
Alamares were already 79, 66 and 65 years old respectively at the time of the
dismissal, the Labor Arbiter granted retirement benefits pursuant to Article 287 of
the Labor Code as amended.39 The Labor Arbiter ruled that respondent Atractivo
was not entitled to separation pay because he had been transferred to work in the
restaurant operations in Elizondo Street, but awarded him damages. Respondents
Loveres, Llarena, Nicerio, Macandog and Guades were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is
attendant in the case at bar" and that respondents "did not submit any evidence to
that effect, but the finding and conclusion of the Labor Arbiter [are] merely based
on his own surmises and conjectures."41 In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that
none of the above-named respondents were illegally dismissed, or entitled to
separation or retirement pay. According to petitioners, even the Labor Arbiter and
the CA admit that when the illegal dismissal case was filed by respondents on April
1997, they had as yet no cause of action. Petitioners therefore conclude that the
filing by respondents of the illegal dismissal case was premature and should have
been dismissed outright by the Labor Arbiter.42 Petitioners also claim that since the
validity of respondents' dismissal is a factual question, it is not for the reviewing
court to weigh the conflicting evidence.43
We do not agree. Whether respondents are still working for petitioners is a factual
question. And the records are unequivocal that since April 1997, when petitioner
Mayon Hotel & Restaurant suspended its hotel operations and transferred its
restaurant operations in Elizondo Street, respondents Loveres, Macandog, Llarena,
Guades and Nicerio have not been permitted to work for petitioners. Respondent
Alamares, on the other hand, was also laid-off when the Elizondo Street operations
closed, as were all the other respondents. Since then, respondents have not been
permitted to work nor recalled, even after the construction of the new premises at
Peñaranda Street and the reopening of the hotel operations with the restaurant in
this new site. As stated by the Joint Decision of the Labor Arbiter on July 2000, or
more than three (3) years after the complaint was filed:44
[F]rom the records, more than six months had lapsed without [petitioner] having
resumed operation of the hotel. After more than one year from the temporary
closure of Mayon Hotel and the temporary transfer to another site of Mayon
Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the hotel and
restaurant will be transferred has been finally constructed and the same is operated
as a hotel with bar and restaurant nevertheless, none of [respondents] herein who
were employed at Mayon Hotel and Restaurant which was also closed on April 30,
1998 was/were recalled by [petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other
respondents as they had not filed an amended complaint to question the cessation
of their employment after the closure of Mayon Hotel & Restaurant on March 31,
1997.45
The above factual finding of the Labor Arbiter was never refuted by petitioners in
their appeal with the NLRC. It confounds us, therefore, how the NLRC could have
so cavalierly treated this uncontroverted factual finding by ruling that respondents
have not introduced any evidence to show that they were illegally dismissed, and
that the Labor Arbiter's finding was based on conjecture.46 It was a serious error
that the NLRC did not inquire as to the legality of the cessation of employment.
Article 286 of the Labor Code is clear — there is termination of employment when
an otherwise bona fide suspension of work exceeds six (6) months.47 The cessation
of employment for more than six months was patent and the employer has the
burden of proving that the termination was for a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts to exculpate
themselves from the charges. First, in the proceedings with the Labor Arbiter, they
claimed that it could not be illegal dismissal because the lay-off was merely
temporary (and due to the expiration of the lease contract over the old premises of
the hotel). They specifically invoked Article 286 of the Labor Code to argue that the
claim for separation pay was premature and without legal and factual basis.49 Then,
because the Labor Arbiter had ruled that there was already illegal dismissal when
the lay-off had exceeded the six-month period provided for in Article 286, petitioners
raise this novel argument, to wit:
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It is the firm but respectful submission of petitioners that reliance on Article 286 of
the Labor Code is misplaced, considering that the reason why private respondents
were out of work was not due to the fault of petitioners. The failure of petitioners
to reinstate the private respondents to their former positions should not likewise be
attributable to said petitioners as the private respondents did not submit any
evidence to prove their alleged illegal dismissal. The petitioners cannot discern why
they should be made liable to the private respondents for their failure to be
reinstated considering that the fact that they were out of work was not due to the
fault of petitioners but due to circumstances beyond the control of petitioners, which
are the termination and non-renewal of the lease contract over the subject premises.
Private respondents, however, argue in their Comment that petitioners themselves
sought the application of Article 286 of the Labor Code in their case in their Position
Paper filed before the Labor Arbiter. In refutation, petitioners humbly submit that
even if they invoke Article 286 of the Labor Code, still the fact remains, and this
bears stress and emphasis, that the temporary suspension of the operations of the
establishment arising from the non-renewal of the lease contract did not result in
the termination of employment of private respondents and, therefore, the petitioners
cannot be faulted if said private respondents were out of work, and consequently,
they are not entitled to their money claims against the petitioners.50
It is confounding how petitioners have fashioned their arguments. After having
admitted, in effect, that respondents have been laid-off since April 1997, they would
have this Court excuse their refusal to reinstate respondents or grant them
separation pay because these same respondents purportedly have not proven the
illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the blatant attempt to use
technicalities to muddle the issues and defeat the lawful claims of their
employees. First, petitioners admit that since April 1997, when hotel operations
were suspended due to the termination of the lease of the old premises, respondents
Loveres, Macandog, Llarena, Nicerio and Guades have not been permitted to work.
Second, even after six months of what should have been just a temporary lay-off,
the same respondents were still not recalled to work. As a matter of fact, the Labor
Arbiter even found that as of the time when he rendered his Joint Decision on July
2000 — or more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased, notwithstanding
that the new premises had been completed and the same operated as a hotel with
bar and restaurant. This is clearly dismissal — or the permanent severance or
complete separation of the worker from the service on the initiative of the employer
regardless of the reasons therefor.51
On this point, we note that the Labor Arbiter and the CA are in accord that at the
time of the filing of the complaint, respondents had no cause of action to file the
case for illegal dismissal. According to the CA and the Labor Arbiter, the lay-off of
the respondents was merely temporary, pending construction of the new building at
Peñaranda Street.52
While the closure of the hotel operations in April of 1997 may have been temporary,
we hold that the evidence on record belie any claim of petitioners that the lay-off of
respondents on that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be
permanent. First, respondents Loveres, Macandog, Llarena, Guades, Nicerio and
Alamares filed the complaint for illegal dismissal immediately after the closure of the
hotel operations in Rizal Street, notwithstanding the alleged temporary nature of the
closure of the hotel operations, and petitioners' allegations that the employees
assigned to the hotel operations knew about this beforehand. Second, in their
position paper submitted to the Labor Arbiter, petitioners invoked Article 286 of the
Labor Code to assert that the employer-employee relationship was merely
suspended, and therefore the claim for separation pay was premature and without
legal or factual basis.53 But they made no mention of any intent to recall these
respondents to work upon completion of the new premises. Third, the various
pleadings on record show that petitioners held respondents, particularly Loveres, as
responsible for mismanagement of the establishment and for abuse of trust and
confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998, for example,
squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for
abusing her leniency and causing petitioner Mayon Hotel & Restaurant to sustain
"continuous losses until it is closed." She then asserts that respondents "are not
entitled to separation pay for they were not terminated and if ever the business
ceased to operate it was because of losses."54 Again, petitioners make the same
allegation in their memorandum on appeal with the NLRC, where they alleged that
three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel
had been sustaining consistent losses, and these were solely attributed to
respondents, but most especially due to Loveres's mismanagement and abuse of
petitioners' trust and confidence.55 Even the petition filed in this court made
reference to the separation of the respondents due to "severe financial losses and
reverses," again imputing it to respondents' mismanagement.56 The vehemence of
petitioners' accusation of mismanagement against respondents, especially against
Loveres, is inconsistent with the desire to recall them to work. Fourth, petitioners'
memorandum on appeal also averred that the case was filed "not because of the
business being operated by them or that they were supposedly not receiving benefits
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from the Labor Code which is true, but because of the fact that the source of their
livelihood, whether legal or immoral, was stopped on March 31, 1997, when the
owner of the building terminated the Lease Contract."57 Fifth, petitioners had
inconsistencies in their pleadings (with the NLRC, CA and with this Court) in referring
to the closure,58 i.e., in the petition filed with this court, they assert that there is no
illegal dismissal because there was "only a temporary cessation or suspension of
operations of the hotel and restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease contract..."59 And yet, in the
same petition, they also assert that: (a) the separation of respondents was due to
severe financial losses and reverses leading to the closure of the business; and
(b) petitioner Pacita Po had to close shop and was bankrupt and has no liquidity to
put up her own building to house Mayon Hotel & Restaurant.60 Sixth, and finally,
the uncontroverted finding of the Labor Arbiter that petitioners terminated all the
other respondents, by not employing them when the Hotel and Restaurant
transferred to its new site on Peñaranda Street.61 Indeed, in this same
memorandum, petitioners referred to all respondents as "former employees of
Mayon Hotel & Restaurant."62
These factors may be inconclusive individually, but when taken together, they lead
us to conclude that petitioners really intended to dismiss all respondents and merely
used the termination of the lease (on Rizal Street premises) as a means by which
they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997
was merely temporary, it became dismissal by operation of law when petitioners
failed to reinstate respondents after the lapse of six (6) months, pursuant to Article
286 of the Labor Code.
We are not impressed by petitioners' claim that severe business losses justified their
failure to reinstate respondents. The evidence to prove this fact is inconclusive. But
more important, serious business losses do not excuse the employer from complying
with the clearance or report required under Article 283 of the Labor Code and its
implementing rules before terminating the employment of its workers.63 In the
absence of justifying circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their actuations with bad
faith, especially since they claimed that they have been experiencing losses in the
three years before 1997. To say the least, if it were true that the lay-off was
temporary but then serious business losses prevented the reinstatement of
respondents, then petitioners should have complied with the requirements of written
notice. The requirement of law mandating the giving of notices was intended not
only to enable the employees to look for another employment and therefore ease
the impact of the loss of their jobs and the corresponding income, but more
importantly, to give the Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized cause of termination.64
And even assuming that the closure was due to a reason beyond the control of the
employer, it still has to accord its employees some relief in the form of severance
pay.65
While we recognize the right of the employer to terminate the services of an
employee for a just or authorized cause, the dismissal of employees must be made
within the parameters of law and pursuant to the tenets of fair play.66 And in
termination disputes, the burden of proof is always on the employer to prove that
the dismissal was for a just or authorized cause.67 Where there is no showing of a
clear, valid and legal cause for termination of employment, the law considers the
case a matter of illegal dismissal.68
Under these circumstances, the award of damages was proper. As a rule, moral
damages are recoverable where the dismissal of the employee was attended by bad
faith or fraud or constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy.69 We believe that the dismissal
of the respondents was attended with bad faith and meant to evade the lawful
obligations imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from
employment in 1997 as a matter of fact, but without legal redress. This runs counter
to notions of fair play, substantial justice and the constitutional mandate that labor
rights should be respected. If doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter
— the employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause.70 It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably arising from the evidence, or
in the interpretation of agreements and writing should be resolved in the former's
favor.71 The policy is to extend the doctrine to a greater number of employees who
can avail of the benefits under the law, which is in consonance with the avowed
policy of the State to give maximum aid and protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and
Llarena; (Santos Broñola cannot be granted separation pay as he made no such
claim);
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(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time due to respondents, petitioners failed to discharge the burden of proof.79 Indeed,
of dismissal were entitled to their retirement benefits pursuant to Article 287 of the petitioners' failure to submit the necessary documents which as employers are in
Labor Code as amended;73 and their possession, inspite of orders to do so, gives rise to the presumption that their
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, presentation is prejudicial to its cause.80 As aptly quoted by the CA:
Atractivo, and Broñola. [W]hen the evidence tends to prove a material fact which imposes a liability on a
3. Money claims party, and he has it in his power to produce evidence which from its very nature
must overthrow the case made against him if it is not founded on fact, and he
The CA held that contrary to the NLRC's ruling, petitioners had not discharged the
refuses to produce such evidence, the presumption arises that the evidence, if
burden of proving that the monetary claims of the respondents have been
produced, would operate to his prejudice, and support the case of his adversary.81
paid.74 The CA thus reinstated the Labor Arbiter's grant of respondents' monetary
claims, including damages. Petitioners next claim that the cost of the food and snacks provided to respondents
as facilities should have been included in reckoning the payment of respondents'
Petitioners assail this ruling by repeating their long and convoluted argument that
wages. They state that although on the surface respondents appeared to receive
as there was no illegal dismissal, then respondents are not entitled to their monetary
minimal wages, petitioners had granted respondents other benefits which are
claims or separation pay and damages. Petitioners' arguments are not only tiring,
considered part and parcel of their wages and are allowed under existing
repetitive and unconvincing, but confusing and confused — entitlement to labor
laws.82 They claim that these benefits make up for whatever inadequacies there
standard benefits is a separate and distinct concept from payment of separation pay
may be in compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A,
arising from illegal dismissal, and are governed by different provisions of the Labor
which allow the deduction of facilities provided by the employer through an
Code.
appropriate Facility Evaluation Order issued by the Regional Director of the
We agree with the CA and the Labor Arbiter. Respondents have set out with DOLE.84 Petitioners also aver that they give five (5) percent of the gross income
particularity in their complaint, position paper, affidavits and other documents the each month as incentives. As proof of compliance of payment of minimum wages,
labor standard benefits they are entitled to, and which they alleged that petitioners petitioners submitted the Notice of Inspection Results issued in 1995 and 1997 by
have failed to pay them. It was therefore petitioners' burden to prove that they have the DOLE Regional Office.85
paid these money claims. One who pleads payment has the burden of proving it,
The cost of meals and snacks purportedly provided to respondents cannot be
and even where the employees must allege nonpayment, the general rule is that
deducted as part of respondents' minimum wage. As stated in the Labor Arbiter's
the burden rests on the defendant to prove nonpayment, rather than on the plaintiff
decision:86
to prove non payment.75 This petitioners failed to do.
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo)
We also agree with the Labor Arbiter and the CA that the documents petitioners
issued by the DOLE Regional Office whereby the cost of meals given by [petitioners]
submitted, i.e., affidavits executed by some of respondents during an ocular
to [respondents] were specified for purposes of considering the same as part of their
inspection conducted by an inspector of the DOLE; notices of inspection result and
wages, We cannot consider the cost of meals in the Orders as applicable to
Facility Evaluation Orders issued by DOLE, are not sufficient to prove
[respondents]. [Respondents] were not interviewed by the DOLE as to the quality
payment.76 Despite repeated orders from the Labor Arbiter,77 petitioners failed to
and quantity of food appearing in the applications of [petitioners] for facility
submit the pertinent employee files, payrolls, records, remittances and other similar
evaluation prior to its approval to determine whether or not [respondents] were
documents which would show that respondents rendered work entitling them to
indeed given such kind and quantity of food. Also, there was no evidence that the
payment for overtime work, night shift differential, premium pay for work on
quality and quantity of food in the Orders were voluntarily accepted by
holidays and rest day, and payment of these as well as the COLA and the SILP –
[respondents]. On the contrary; while some [of the respondents] admitted that they
documents which are not in respondents' possession but in the custody and absolute
were given meals and merienda, the quality of food serve[d] to them were not what
control of petitioners.78 By choosing not to fully and completely disclose information
were provided for in the Orders and that it was only when they filed these cases
and present the necessary documents to prove payment of labor standard benefits

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that they came to know about said Facility Evaluation Orders (pp. 100; 379[,] vol.
II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied for
evaluation of the facility (food) given to [respondents], testified that she did not
inform [respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August
13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities,
such facilities could not be deducted without compliance with certain legal
requirements. As stated in Mabeza v. NLRC,87 the employer simply cannot deduct
the value from the employee's wages without satisfying the following: (a) proof that
such facilities are customarily furnished by the trade; (b) the provision of deductible
facilities is voluntarily accepted in writing by the employee; and (c) the facilities are
charged at fair and reasonable value. The records are clear that petitioners failed to
comply with these requirements. There was no proof of respondents' written
authorization. Indeed, the Labor Arbiter found that while the respondents admitted
that they were given meals and merienda, the quality of food served to them was
not what was provided for in the Facility Evaluation Orders and it was only when
they filed the cases that they came to know of this supposed Facility Evaluation
Orders.88 Petitioner Josefa Po Lam herself admitted that she did not inform the
respondents of the facilities she had applied for.89
Considering the failure to comply with the above-mentioned legal requirements, the
Labor Arbiter therefore erred when he ruled that the cost of the meals actually
provided to respondents should be deducted as part of their salaries, on the ground
that respondents have availed themselves of the food given by petitioners.90 The
law is clear that mere availment is not sufficient to allow deductions from employees'
wages.
More important, we note the uncontroverted testimony of respondents on record
that they were required to eat in the hotel and restaurant so that they will not go
home and there is no interruption in the services of Mayon Hotel & Restaurant. As
ruled in Mabeza, food or snacks or other convenience provided by the employers
are deemed as supplements if they are granted for the convenience of the employer.
The criterion in making a distinction between a supplement and a facility does not
so much lie in the kind (food, lodging) but the purpose.91 Considering, therefore,
that hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter in the
operations of a small hotel, such as petitioners' business.92 The deduction of the
cost of meals from respondents' wages, therefore, should be removed.
We also do not agree with petitioners that the five (5) percent of the gross income
of the establishment can be considered as part of the respondents' wages. We quote
with approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts
as profit share, the same cannot be considered as part of their wages in determining
their claims for violation of labor standard benefits. Although called profit share[,]
such is in the nature of share from service charges charged by the hotel. This is
more explained by [respondents] when they testified that what they received are
not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93, 94,
103, 104; vol. II, rollo). Also, [petitioners] failed to submit evidence that the
amounts received by [respondents] as profit share are to be considered part of their
wages and had been agreed by them prior to their employment. Further, how can
the amounts receive[d] by [respondents] be considered as profit share when the
same [are] based on the gross receipt of the hotel[?] No profit can as yet be
determined out of the gross receipt of an enterprise. Profits are realized after
expenses are deducted from the gross income.
On the issue of the proper minimum wage applicable to respondents, we sustain the
Labor Arbiter. We note that petitioners themselves have admitted that the
establishment employs "more or less sixteen (16) employees,"93therefore they are
estopped from claiming that the applicable minimum wage should be for service
establishments employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice to say that
this is not a defense to payment of labor standard benefits. The employer cannot
exempt himself from liability to pay minimum wages because of poor financial
condition of the company. The payment of minimum wages is not dependent on the
employer's ability to pay.94
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been
reprehensible. They have terminated the respondents' employment in an
underhanded manner, and have used and abused the quasi-judicial and judicial
processes to resist payment of their employees' rightful claims, thereby protracting
this case and causing the unnecessary clogging of dockets of the Court. They have
also forced respondents to unnecessary hardship and financial expense. Indeed, the
circumstances of this case would have called for exemplary damages, as the
dismissal was effected in a wanton, oppressive or malevolent manner,95 and public
policy requires that these acts must be suppressed and discouraged.96
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Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary

damages of P10,000.00 each to all respondents. While it is true that other forms of
damages under the Civil Code may be awarded to illegally dismissed
employees,97 any award of moral damages by the Labor Arbiter cannot be based
on the Labor Code but should be grounded on the Civil Code.98 And the law is clear
that exemplary damages can only be awarded if plaintiff shows proof that he is
entitled to moral, temperate or compensatory damages.99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and
Broñola specifically claimed damages from petitioners, then only they are entitled to
exemplary damages.sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted
to each respondent. It is settled that in actions for recovery of wages or where an
employee was forced to litigate and incur expenses to protect his rights and interest,
he is entitled to an award of attorney's fees.100 This case undoubtedly falls within
this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17,
2003 of the Court of Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision
of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-
97 is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to
respondents Loveres, Macandog and Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
(3) Removing the deductions for food facility from the amounts due to all
respondents;
(4) Awarding moral damages of P20,000.00 each for respondents Loveres,
Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents
except Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola; and
(6) Granting attorney's fees of P10,000.00 each to all respondents.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total
monetary benefits awarded and due to the employees concerned in accordance with
the decision. The Labor Arbiter is ORDERED to submit his compliance thereon within
thirty (30) days from notice of this decision, with copies furnished to the parties.
SO ORDERED.

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