Sie sind auf Seite 1von 367

University of San Carlos – College of Law Labor Standards Finals Case Digests

Contents
Contents......................................................................................................................................................................................... 1

Philippine Bank of Communications vs NLRC (1986) G.R. L-66598.......................................................................................3

Neri vs NLRC (1993) 224 SCRA 717............................................................................................................................................5

Filipinas Synthetic Fiber Corp., vs NLRC (1996) 257 SCRA 336..............................................................................................6

Maraquinot vs NLRC (1998) 284 SCRA 539...............................................................................................................................7

San Miguel vs Maerc Integrated Services (2003) G.R. 144627..................................................................................................9

Manila Water Co., vs Pena (2004) G.R. 158255...........................................................................................................................9

NHA vs Maceda Security Agency (2005) G.R. 163448...........................................................................................................11

Abella vs PLDT (2005) G.R. 159469...........................................................................................................................................11

San Miguel vs Aballa (2005) G.R. 149011.................................................................................................................................13

Manila Electric Co., vs Benamira (2005) G.R. 145271..............................................................................................................14

DOLE Philppines vs Esteva (2006) G.R. 161115.......................................................................................................................15

San Miguel vs NLRC (2006) G.R. 147566..................................................................................................................................19

Eparwa vs Liceo (2006) G.R. 150402..........................................................................................................................................22

Escario vs NLRC (2000) G.R. 124055.........................................................................................................................................24

Aboitiz vs Dimapatoi (2006) G.R. 148619.................................................................................................................................28

GSIS vs NLRC (2006) G.R. 157647.............................................................................................................................................32

Republic vs Asiapro Cooperative (2007) G.R. 172101.............................................................................................................33

Jaguar Security and Investigation Agency vs Sales (2008) G.R. 162420................................................................................38

Almeda et al., vs Asahi Glass (2008) G.R. 177785....................................................................................................................39

Sasan, Sr et al, vs NLRC and EPCIB (2008) G.R. 176240.........................................................................................................41

Purefoods Corp., vs NLRC et al., (2008) G.R. 172241..............................................................................................................45

Maranaw Hotels and Resort vs CA (2009) G.R. 149660..........................................................................................................48

Cola-Cola Bottler’s Phils., vs Agito et al., (2009) G.R. 179546.................................................................................................49

South Davao Development Co. vs Gamo (2009) G.R. 171814................................................................................................53

Jethro Intelligence & Security Corp., vs Secretary of DOLE (2009) G.R. 172537..................................................................55

Traveno et al., vs Bobongon Banana Growers Multi-purpose Coop et al., (2009) G.R. 164205..........................................56

Aliviado vs Procter and Gamble Phils. Inc., et al (2010) G.R. 160506....................................................................................56

DBP vs NLRC (1995) G.R. 108031..............................................................................................................................................59

Batong Buhay Gold Mines vs Dela Serna (1999) G.R. 86963..................................................................................................62

Barayoga vs Asset Privatization Trust (2005) G.R. 160073.....................................................................................................65

Ma. Cecelia Timbal LlB – 2 Rm 402 |1


University of San Carlos – College of Law Labor Standards Finals Case Digests

Philippine Airlines vs Zamora (2007) G.R. 166996..................................................................................................................69

Philippine Airlines vs Philippine Airlines Employees Association (2007) G.R. 142399......................................................70

Castillo vs Uniwide Warehouse Club (2010) G.R. 169725......................................................................................................71

Bank of the Philippine Islands vs NLRC (1989) G.R. 69746-47..............................................................................................72

Traders Royal Bank Employees Union vs NLRC (1997) G.R. 120592...................................................................................74

Brahm Industries vs NLRC (1997) G.R. 118853.......................................................................................................................78

Heirs of Aniban vs NLRC (1997) G.R. 155034..........................................................................................................................79

Sapio vs Undaloc Construcion et al., (2008) G.R. 155034........................................................................................................80

Atty. Ortiz vs San Miguel Corp., (2008) G.R. 151983-84.........................................................................................................81

Masmud vs NLRC (2009) G.R. 183385......................................................................................................................................84

Bernardo vs. NLRC (1999) G.R. 122917....................................................................................................................................85

Philippine Telegraph & Telephone Co vs NLRC (1997) G.R. 118978....................................................................................89

Del Monte Phils vs Velasco (2007) G.R. 153447.......................................................................................................................90

Ultra Villa Food Haus vs, Geniston (1999) G.R. 120473..........................................................................................................91

Remington Industrial Sales Corp,. vs Castaneda (2007) G.R. 153477....................................................................................93

Tolosa vs NLRC (2008) G.R. 149578..........................................................................................................................................98

Phil Global Communications Inc vs de Vera (2005) G.R. 157214.........................................................................................100

U-Bix Corp. vs Bandiola (2007) G.R. 157168..........................................................................................................................101

Escasinas et al., vs Shangri-la Mactan Island Resort et al., (2009) G.R. 178827..................................................................107

ISS Indochina Corp., vs Ferrer (2005) G.R. 156381................................................................................................................110

People vs Capt. Gasacao (2005) G.R. 168449..........................................................................................................................111

Acuña vs CA (2006) G.R. 159832.............................................................................................................................................114

Asian International Manpower Services vs CA (2006) G.R. 169652....................................................................................116

Sim vs. NLRC (2007) G.R. 157376............................................................................................................................................119

Bahia Shipping Services Inc., vs Chua (2008) G.R. 162195...................................................................................................122

Masangcay vs Trans-Global Maritime Agency Inc., (2008) G.R. 172800.............................................................................123

Magsaysay Maritime Corp., et al., vs Velasquez, et al., (2008) G.R. 179802.......................................................................124

Serrano vs Gallant Maritime Services et al., (2009) G.R. 167614..........................................................................................125

People vs Domingo (2009) G.R. 181475..................................................................................................................................127

Great Southern – Maritime Services Corp vs Surigao (2009) G.R. 183646..........................................................................128

Ma. Cecelia Timbal LlB – 2 Rm 402 |2


University of San Carlos – College of Law Labor Standards Finals Case Digests

Philippine Bank of Communications vs NLRC (1986) G.R. L-66598

FACTS:
Petitioner Philippine Bank of Communications and the Corporate Executive Search Inc. (CESI) entered into a letter
agreement dated January 1976 under which (CESI) undertook to provide "Temporary Services" to petitioner
Consisting of the "temporary services" of eleven (11) messengers. The contract period is described as being "from
January 1976." The petitioner in truth undertook to pay a "daily service rate of P18, " on a per person basis.
Ricardo Orpiada was thus assigned to work with the petitioner bank. As such, he rendered services to the bank,
within the premises of the bank and alongside other people also rendering services to the bank. There was some
question as to when Ricardo Orpiada commenced rendering services to the bank. On or about October 1976, the
petitioner requested (CESI) to withdraw Orpiada's assignment because, in the allegation of the bank, Orpiada's
services "were no longer needed."
Orpiada instituted a complaint in the Department of Labor against the petitioner for illegal dismissal and failure to
pay the 13th month pay provided for in Presidential Decree No. 851. The Office of the Regional Director, Regional
Office No. IV of the Department of Labor, issued an order dismissing Orpiada's complaint for failure of Mr. Orpiada
to show the existence of an employer-employee relationship between the bank and himself.
The Labor Arbiter Dogelio rendered a decision ordering the reinstatement of complainant to the same or equivalent
position with full back wages and to pay the latter's 13th month pay for the year 1976.
On 26 October 1977, the bank appealed the decision of the Labor Arbiter to the respondent NLRC. NLRC
promulgated its decision affirming the award of the Labor Arbiter.

ISSUES:
1. What is the appropriate characterization of the relationship between the bank and (CESI)
2. Whether or not that relationship is one of employer and job (independent) contractor or one of employer
and "labor-only" contractor;

HELD: Articles 106 and 107 of the Labor Code of the Philippines (Presidential Decree No. 442, as amended) provides
as follows:
ART. 106. Contractor or sub-contractor. Whenever an employer 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 subcontractor, if any, shall be
paid in accordance with the provisions in this Code.

In the event that the contractor or sub-contractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or sub-contructor 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.

Ma. Cecelia Timbal LlB – 2 Rm 402 |3


University of San Carlos – College of Law Labor Standards Finals Case Digests

ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any person,
part, nership association or corporation which, not being an employer, contracts with an independent contractor for
the performance of any work, task, job or project. (Emphasis supplied)

Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters into a
contract with a contractor for the performance of work for the employer, does not thereby create an employer-
employes relationship between himself and the employees of the contractor. Thus, the employees of the contractor
remain the contractor's employees and his alone. Nonetheless when a contractor fails to pay the wages of his
employees in accordance with the Labor Code, the employer who contracted out the job to the contractor becomes
jointly and severally liable with his contractor to the employees of the latter "to the extent of the work performed
under the contract" as such employer were the employer of the contractor's employees. The law itself, in other words,
establishes an employer-employee relationship between the employer and the job contractor's employees for a
limited purpose, i.e., in order to ensure that the latter get paid the wages due to them.

A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor-i.e "the person or
intermediary" is considered "merely as an agent of the employer. " The employer is made by the statute responsible to
the employees of the "labor only" contractor as if such employees had been directly employed by the employer. Thus,
where "labor only" contracting exists in a given case, the statute itself implies or establishes an employer-employee
relationship between the employer (the owner of the project) and the employees of the "labor only" contractor, this
time for a comprehensive purpose: "employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code. " The law in effect holds both the employer and the "labor-only" contractor responsible to
the latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.

Both the petitioner bank and (CESI) have insisted that (CESI) was not a "labor only" contractor. Section 9 of Rule VIII
of Book III entitled "Conditions of Employment," of the Omnibus Rules Implementing the Labor Code provides as
follows:

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shag be deemed to
be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and
other materials; and

(2) The workers recruited and placed by such person are performing activities which are to the principal business or
operations of the c workers are habitually employed,

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary 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

(c) For cases not file under this Article, the Secretary of Labor shall determine through appropriate orders whether or
not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions
and restrictions to insure the protection and welfare of the workers. (Emphasis supplied)

In contrast, job contracting-contracting out a particular job to an independent contractor is defined by the
Implementing Rules as follows:

Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met:

Ma. Cecelia Timbal LlB – 2 Rm 402 |4


University of San Carlos – College of Law Labor Standards Finals Case Digests

(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. (Emphasis supplied)

The definition of "labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be read in
conjunction with the definition of job contracting given in Section 8 of the same Rules.

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. There is, of course, nothing
illegal about hiring persons to carry out "a specific project or undertaking the completion or termination of which was
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"

We hold that, in the circumstances 'instances of this case, (CESI) was engaged in "labor-only" or attracting vis-a-vis
the petitioner and in respect Ricardo Orpiada, and that consequently, the petitioner bank is liable to Orpiada as if
Orpiada had been directly, employed not only by (CESI) but also by the bank. It may well be that the bank may in
turn proceed against (CESI) to obtain reimbursement of, or some contribution to, the amounts which the bank will
have to pay to Orpiada; but this it is not necessary to determine here.

Neri vs NLRC (1993) 224 SCRA 717

FACTS:
Petitioners instituted complaints against FEBTC and BCC to compel the bank to accept them as regular employees
and for it to pay the differential between the wages being paid them by BCC and those received by FEBTC employees
with similar length of service. They contended that BCC in engaged in labor-only contracting because it failed to
adduce evidence purporting to show that it invested in the form of tools, equipment, machineries, work premises
and other materials which are necessary in the conduct of its business. Moreover, petitioners argue that they perform
duties which are directly related to the principal business or operation of FEBTC.

ISSUE: Whether or not BCC was engaged in labor-only contracting.

HELD: It is well-settled that there is labor-only contracting where: (a) 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, (b) the workers recruited and placed by such person are performing activities which are directly related
to the principal business of the employer.

BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among
others, because it has established that it has sufficient capitalization. This fact was both determined by the Labor
Arbiter and the NLRC as BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a
highly capitalized venture and cannot be deemed engaged in labor-only contracting.

Ma. Cecelia Timbal LlB – 2 Rm 402 |5


University of San Carlos – College of Law Labor Standards Finals Case Digests

While there may be no evidence that it has investment in the form of tools, equipment, machineries, work premises,
among others, it is enough that it has substantial capital, as was established before the Labor Arbiter as well as the
NLRC. The law does not require both substantial capital and investment in the form of tools, equipment,
machineries, etc. This is clear from the use of the conjunction "or" instead of “and”. Having established that it has
substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it does not fall within
the purview of "labor-only" contracting. There is even no need for it to refute petitioners' contention that the activities
they perform are directly related to the principal business of respondent bank.

On the other hand, the Court has already taken judicial notice of the general practice adopted in several government
and private institutions and industries of hiring independent contractors to perform special services. These services
range from janitorial, security and even technical or other specific services such as those performed by petitioners
Neri and Cabelin. While these services may be considered directly related to the principal business of the employer,
nevertheless, they are not necessary in the conduct of the principal business of the employer.

Filipinas Synthetic Fiber Corp., vs NLRC (1996) 257 SCRA 336

FACTS:
Filipinas Synthetic Fiber Corporation (FILSYN), a domestic corporation engaged in the manufacture of polyester
fiber, contracted with De Lima Trading and General Services (DE LIMA) for the performance of specific janitorial
services at the former's plant in Pursuant to the agreement Felipe Loterte, was deployed at FILSYN to take care of the
plants and maintain general cleanliness around the premises.

Loterte sued FILSYN and DE LIMA for illegal dismissal, underpayment of wages, non-payment of legal holiday pay,
service incentive leave pay and 13th month pay alleging that he was first assigned to perform janitorial work at
FILSYN in 1981 by the La Saga General Services; that the La Saga was changed to DE LIMA on August 1991; that
when a movement to demand increased wages and 13th month pay arose among the workers, he was accused of
having posted in the bulletin board at FILSYN an article attributing to management a secret understanding to block
the demand; and, for denying responsibility, his gate pass was unceremoniously cancelled was subsequently
dismissed.

ISSUE: Whether or not De Lima is an independent job contractor.

HELD: Private respondent DE LIMA is an independent job contractor. Under the Labor Code, two (2) elements must
exist for a finding of labor-only contracting: (a) 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 (b)
the workers recruited and placed by such persons are performing activities directly related to the principal business
of such employer.

These two (2) elements do not exist in the instant case. As pointed out by petitioner, private respondent DE LIMA is a
going concern duly registered with the Securities and Exchange Commission with substantial capitalization of
P1,600,000.00, P400,000.00 of which is actually subscribed. 13 Hence, it cannot be considered as engaged in labor-only
contracting being a highly capitalized venture. 14 Moreover, while the janitorial services performed by Felipe Loterte
pursuant to the agreement between FILSYN and DE LIMA may be considered directly related to the principal
business of FILSYN which is the manufacture of polyester fiber, nevertheless, they are not necessary in its operation.
On the contrary, they are merely incidental thereto, as opposed to being integral, without which production and

Ma. Cecelia Timbal LlB – 2 Rm 402 |6


University of San Carlos – College of Law Labor Standards Finals Case Digests

company sales will not suffer. Judicial notice has already been taken of the general practice in private as well as in
government institutions and industries of hiring janitorial services on an independent contractor basis. Consequently,
DE LIMA being an independent job contractor, no direct employer-employee relationship exists between petitioner
FILSYN and private respondent Felipe Loterte.

With respect to its liability, however, petitioner cannot totally exculpate itself from the fact that respondent DE LIMA
is an independent job contractor. Notwithstanding the lack of a direct employer-employee relationship between
FILSYN and Felipe Loterte, theformer is still jointly and severally liable with respondent DE LIMA for Loterte's
monetary claims under Art. 109 of the Labor Code explicitly provides “every employer or indirect employer shall be
Decision responsible with his contractor or subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct
employers.”

Maraquinot vs NLRC (1998) 284 SCRA 539


FACTS:

Petitioner Alejandro Maraguinot, Jr. maintains that private respondents employed him as part of the filming crew
with a salary of P375.00 per week. About four months later, he was designated Assistant Electrician with a weekly
salary of P400.00, which was increased to P450.00. He was promoted to the rank of Electrician with a weekly salary of
P475.00, which was increased to P539.00.

Petitioner Paulino Enero, on his part, claims that private respondents employed him in as a member of the shooting
crew with a weekly salary of P375.00, which was increased to P425.00 then to P475.00.

Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed
by the cameraman, returning the equipment to Viva Films' warehouse, assisting in the "fixing" of the lighting system,
and performing other tasks that the cameraman and/or director may assign.

Petitioners sought the assistance of their supervisors, Mrs. Alejandria Cesario, to facilitate their request that private
respondents adjust their salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed
petitioners that Mr. Vic del Rosario would agree to increase their salary only if they signed a blank employment
contract. As petitioners refused to sign, private respondents forced Enero to go on leave in then refused to take him
back when he reported for work. Meanwhile, Maraguinot was dropped from the company payroll from 8 to 21 June
1992, but was returned on 22 June 1992. He was again asked to sign a blank employment contract, and when he still
refused, private respondents terminated his services on 20 July 1992. Petitioners thus sued for illegal dismissal.

On the other hand, private respondents assert that they contract persons called "producers" also referred to as
"associate producers" 8 to "produce" or make movies for private respondents; and contend that petitioners are
project employees of the association producers who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private respondents.

ISSUE: WON an employer-employee relationship existed between petitioners and private respondents or any one of
private respondents.

HELD: Assuming that the associate producers are job contractors, they must then be engaged in the business of
making motion pictures. As such, and to be a job contractor under the preceding description, associate producers

Ma. Cecelia Timbal LlB – 2 Rm 402 |7


University of San Carlos – College of Law Labor Standards Finals Case Digests

must have tools, equipment, machinery, work premises, and other materials necessary to make motion pictures.
However, the associate producers here have none of these. Private respondents' evidence reveals that the movie-
making equipment are supplied to the producers and owned by VIVA. These include generators, cables and wooden
platforms, cameras and "shooting equipment;" in fact, VIVA likewise owns the trucks used to transport the
equipment. It is thus clear that the associate producer merely leases the equipment from VIVA.

If private respondents insist that the associate producers are labor contractors, then these producers can only be
"labor-only" contractors. As labor-only contracting is prohibited, the law considers the person or entity engaged in
the same a mere agent or intermediary of the direct employer. But even by the preceding standards, the associate
producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers.
In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew
members from an "available group of free-lance workers which includes the complainants Maraguinot and Enero." 24
And in their Memorandum, private respondents declared that the associate producer "hires the services of . . . 6)
camera crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and
electrician; (e) clapper; etc. . . . ." 25 This clearly showed that the associate producers did not supply the workers
required by the movie project.

The relationship between VIVA and its producers or associate producers seems to be that of agency, as the latter
make movies on behalf of VIVA, whose business is to "make" movies. As such, the employment relationship between
petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct employer.

The employer-employee relationship between petitioners and VIVA can further be established by the "control test."
These four elements are present here.

VIVA's control is evident in its mandate that the end result must be a "quality film acceptable to the company." The
means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished
within schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject to
change to suit the taste of the company; and the Supervising Producer, the "eyes and ears" of VIVA and del Rosario,
intervenes in the movie-making process by assisting the associate producer in solving problems encountered in
making the film.

It may not be validly argued then that petitioners are actually subject to the movie director's control, and not VIVA's
direction. The director merely instructs petitioners on how to better comply with VIVA's requirements to ensure that
a quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a
supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the
employer.

Moreover, appointment slips 28 issued to all crew members state: During the term of this appointment you shall
comply with the duties and responsibilities of your position as well as observe the rules and regulations promulgated
by your superiors and by Top Management.

The words "supervisors" and "Top Management" can only refer to the "supervisors" and "Top Management" of VIVA.
By commanding crew members to observe the rules and regulations promulgated by VIVA, the appointment slips
only emphasize VIVA's control over petitioners.

Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by
VIVA. Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who
hired the crew members; moreover, it is VIVA's corporate name which appears on the heading of the appointment

Ma. Cecelia Timbal LlB – 2 Rm 402 |8


University of San Carlos – College of Law Labor Standards Finals Case Digests

slip. What likewise tells against VIVA is that it paid petitioners' salaries as evidenced by vouchers, containing VIVA's
letterhead, for that purpose. All the circumstances indicate an employment relationship between petitioners and
VIVA alone, thus the inevitable conclusion is that petitioners are employees only of VIVA.

San Miguel vs Maerc Integrated Services (2003) G.R. 144627


FACTS:

In a decision by the court, it Decision petitioner jointly and severally liable with MAERC for the payment of
separation benefits and wage differential of 291 complainants. Petitioner reiterated that no employer- employee
relationship exists between it and the complainants. And that MAERC is an independent contractor hence petitioner
should not be Decision solidarily liable with it. It disputes this court’s finding that MAERC solely engaged the
services of complainants and exercised control over the complainants conduct; that no intervention or influence could
have been extended by it in the selection or hiring of complainants or the majority of them had worked to the
petitioner before it signed a contract with MAERC.

ISSUE: WON employer- employee relationship exists between the parties.

HELD: Petitioner’s contention must be rejected. While the continuity of service rendered by the workers to petitioner
by itself does not signify an employer- employee relationship, it was Decision to be so considering the other
circumstances present. More so, since the workers continued to work for petitioner without break from their former
employer and then as employees of MAERC even before the latter was incorporated. The record adequately supports
the fact that MAERC admitted recruiting workers for petitioner before its incorporation.

Most importantly, petitioner refutes this Court’s conclusion that petitioner exercised control over the workplace. It
stresses that checkers assigned to the workplace did not stay there continuously to merit the conclusion that they
maintained constant presence as Decision by the court.

We disagree. While petitioner’s checkers may not have stayed the full eight hours in the workplace because they had
to leave for their office to make their reports, their attendance need not be continuous to be considered constant and
therefore an indication of control. We find in fact that they maintained sufficient presence at the workplace to be able
to pinpoint the workers whose performance was not at par and to report who they are.

Manila Water Co., vs Pena (2004) G.R. 158255


FACTS:

Petitioner Manila Water Company, Inc. is one of the two private concessionaires contracted by the Metropolitan
Waterworks and Sewerage System (MWSS) to manage the water distribution system in the East Zone of Metro
Manila. Under the Concession Agreement, petitioner undertook to absorb former employees of the MWSS whose
names and positions were in the list furnished by the latter, while the employment of those not in the list was
terminated. Private respondents, being contractual collectors of the MWSS, were among the 121 employees not
included in the list; nevertheless, petitioner engaged their services without written contract for three months. Before
the end of the three-month contract, the 121 collectors incorporated the Association Collectors Group, Inc. (ACGI),
which was contracted by petitioner to collect charges for the Balara Branch. Subsequently, most of the 121 collectors

Ma. Cecelia Timbal LlB – 2 Rm 402 |9


University of San Carlos – College of Law Labor Standards Finals Case Digests

were asked by the petitioner to transfer to the First Classic Courier Services, a newly registered corporation. Only
private respondents remained with ACGI. Private respondents filed a complaint for illegal dismissal and money
claims against petitioner, contending that they were petitioner’s employees as all the methods and procedures of
their collections were controlled by the latter.

Petitioner on the other hand asserts that private respondents were employees of ACGI, an independent contractor. It
maintained that it had no control and supervision over private respondents’ manner of performing their work except
as to the results. Thus, petitioner did not have an employer-employee relationship with the private respondents, but
only a service contractor-client relationship with ACGI.

ISSUE: Whether or not ACGI is an independent contractor;

HELD: ACGI is an independent contractor but a labor- only contractor.

First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises, and other materials, to qualify as an independent contractor. While it has an authorized capital stock of
P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be considered substantial capitalization. The 121
collectors subscribed to four shares each and paid only the amount of P625.00 in order to comply with the
incorporation requirements. Further, private respondents reported daily to the branch office of the petitioner because
ACGI has no office or work premises. In fact, the corporate address of ACGI was the residence of its president, Mr.
Herminio D. Peña. Moreover, in dealing with the consumers, private respondents used the receipts and identification
cards issued by petitioner.

Second, the work of the private respondents was directly related to the principal business or operation of the
petitioner. Being in the business of providing water to the consumers in the East Zone, the collection of the charges
therefore by private respondents for the petitioner can only be categorized as clearly related to, and in the pursuit of
the latter’s business. Lastly, ACGI did not carry on an independent business or undertake the performance of its
service contract according to its own manner and method, free from the control and supervision of its principal,
petitioner. Prior to private respondents’ alleged employment with ACGI, they were already working for petitioner,
subject to its rules and regulations in regard to the manner and method of performing their tasks. This form of
control and supervision never changed although they were already under the seeming employ of ACGI. Petitioner
issued memoranda regarding the billing methods and distribution of books to the collectors; it required private
respondents to report daily and to remit their collections on the same day to the branch office or to deposit them with
Bank of the Philippine Islands; it monitored strictly their attendance as when a collector cannot perform his daily
collection, he must notify petitioner or the branch office in the morning of the day that he will be absent; and
although it was ACGI which ultimately disciplined private respondents, the penalty to be imposed was dictated by
petitioner as shown in the letters it sent to ACGI specifying the penalties to be meted on the erring private
respondents. These are indications that ACGI was not left alone in the supervision and control of its alleged
employees. Consequently, it can be concluded that ACGI was not an independent contractor since it did not carry a
distinct business free from the control and supervision of petitioner.

Under this factual milieu, there is no doubt that ACGI was engaged in labor-only contracting, and as such, is
considered merely an agent of the petitioner. In labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor
as if such employees had been directly employed by the principal employer. Since ACGI is only a labor-only
contractor, the workers it supplied should be considered as employees of the petitioner.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 10


University of San Carlos – College of Law Labor Standards Finals Case Digests

NHA vs Maceda Security Agency (2005) G.R. 163448


FACTS:

On September 17, 1996, respondent MASADA Security Agency entered into a 1-year contract to provide security
services to the various offices and installations of NFA. Upon expiration of said contract, the parties extended the
effectivity thereof on a monthly basis under same terms. Subsequently, the RTWPB issued several wage orders
increasing the daily wage rate. Accordingly, respondent requested NFA for a corresponding upward adjustment in
the monthly contract rate consisting of the increases in the daily minimum wage of the security guards as well as
increases in their overtime pay, holiday pay and rest day pay. It also claimed SSS and Pag- ibig Premiums. NFA
however granted only with respect to the increase in the daily wage by multiplying the amount of the mandated
increase by 30 days and denied the others. Respondent now filed a case with the RTC for recovery of sum of money
against NFA, seeking reimbursement for the other wage- related benefits. NFA however denied that respondent paid
the security guards their wage related benefits and that respondent cannot demand an adjustment on said- related
benefits because it is bound by their contract expressly limiting NFA’s obligation to pay onlY the increment in their
daily wage.

ISSUES:

(1) Whether or not respondent is entitled to recover from NFA the wage related benefits of the security guards;

(2) Whether or not respondent the liability of the principals in service contracts under Section 6 of RA 6727 and
the wage orders issued by the RTWPB is limited only to the increment in the minimum wage;

HELD: Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer. RA 6727
Section 6 however expressly lodged said obligation to the principals or indirect employers in construction projects
and estalblishments providing security, janitorial and similar services , the prescribed increases in the wage rates of
the workers shall be borne by the principals or clients of the service contractors and the contract shall be deemed
amended accordingly.

The term wage in RA 6727 pertained to no other than the statutory minimum which is defined as the lowest wage
rate fixed by law other than an employer can pay his worker. The presumption is that lawmakers are aware that “
wage” means the statutory minimum wage. If their intention was to extend the obligation of the principals in service
contracts to the payment of the increment in the other benefits and remuneration of workers, it would be expressly
specified.

At any rate, however, the interest of the employees will not be adversely affected if the obligation of the principals
under the subject provision will be limited to the increase in the statutory minimum wage. This is so because all
remuneration and benefits other than the increased statutory minimum wage should be shouldered and paid by the
employer or service contractor to the workers concerned. Having discharged its obligation to the respondent, NFA no
longer has the cause of action. The latter’s complaint for collection of remuneration and benefits other than the
increased minimum wage rate should therefore be dismissed.

Abella vs PLDT (2005) G.R. 159469


Facts:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 11


University of San Carlos – College of Law Labor Standards Finals Case Digests

Respondent People’s Security Incorporated entered into an agreement with the PLDT to provide the latter with such
number of qualified uniformed and properly armed security guards for the purpose of guarding and protecting
PLDT’s installations and properties from theft, pilferage, intentional damage, trespass or other unlawful acts. Under
the agreement, it was expressly provided that there shall be no employer-employee relationship between the PLDT
and the security guards, which may be supplied to it by PSI, and that the latter shall have the entire charge, control
and supervision over the work and services of the supplied security guards. It was likewise stipulated therein that
PSI shall also have the exclusive authority to select, engage, and discharge its security guards, with full control over
their wages, salaries or compensation.

Consequently, respondent PSI deployed security guards to the PLDT. The sixty-five (65) security guards supplied by
respondent PSI filed a Complaint for regularization against the PLDT alleging that petitioner security guards have
been employed by the company through the years and that PSI acted as the middleman in the payment of the
minimum pay to the security guards, but no premium for work rendered beyond eight hours was paid to them nor
were they paid their 13th month pay. In sum, the Complaint states that inasmuch as the complainants are under the
direct control and supervision of PLDT. Hence they should be considered as regular employees by the latter.

Issue: WON an employer- employee relationship exists between petitioners and respondent PLDT.

Held: We considered the following factors in considering the existence of an employer-employee relationship: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power to dismiss; and (4) the power to
control the employee’s conduct.

Testimonies during the trial reveal that interviews and evaluation were conducted by PLDT to ensure that the
standards it set are met by the security guards. In fact, PLDT rarely failed to accept security guards referred to by PSI
but on account of height deficiency. The referral is nothing but for possible assignment in a designated client which
has the inherent prerogative to accept and reject the assignee for justifiable grounds or even arbitrarily. We are thus
convinced that the employer-employee relationship is deemed perfected even before the posting of the complainants
with the PLDT, as assignment only comes after employment.

PSI is a legitimate job contractor pursuant to Section 8, Rule VII, Book II of the Omnibus Rules Implementing the
Labor Code. It is a registered corporation duly licensed by the Philippine National Police to engage in security
business. It has substantial capital and investment in the form of guns, ammunitions, communication equipments,
vehicles, office equipments like computer, typewriters, photocopying machines, etc., and above all, it is servicing
clients other than PLDT like PCIBank, Crown Triumph, and Philippine Cable, among others. Here, the security
guards which PSI had assigned to PLDT are already the former’s employees prior to assignment and if the assigned
guards to PLDT are rejected by PLDT for reasons germane to the security agreement, then the rejected or terminated
guard may still be assigned to other clients of PSI as in the case of Jonathan Daguno who was posted at PLDT on 21
February 1996 but was subsequently relieved therefrom and assigned at PCIBank Makati Square effective 10 May
1996. Therefore, the evidence as it stands is at odds with petitioners’ assertion that PSI is an “in-house” agency of
PLDT so as to call for a piercing of veil of corporate identity

It is PSI that determined and paid the petitioners’ wages, salaries, and compensation. As elucidated by the Labor
Arbiter, petitioners’ witness testified that his wages were collected and withdrawn at the office of PSI and PLDT pays
PSI for the security services on a lump-sum basis and that the wages of complainants are only a portion of the total
sum. The signature of the PLDT supervisor in the Daily Time Records does not ipso facto make PLDT the employer
of complainants inasmuch as the Labor Arbiter had found that the record is replete with evidence showing that some
of the Daily Time Records do not bear the signature of a PLDT supervisor yet no complaint was lodged for
nonpayment of the guard’s wages evidencing that the signature of the PLDT’s supervisor is not a condition precedent

Ma. Cecelia Timbal LlB – 2 Rm 402 | 12


University of San Carlos – College of Law Labor Standards Finals Case Digests

for the payment of wages of the guards. Notably, it was not disputed that complainants enjoy the benefits and
incentives of employees of PSI and that they are reported as employees of PSI with the SSS.

Lastly, petitioners capitalize on the delinquency reports prepared by PLDT personnel against some of the security
guards as well as certificates of participation in civil disturbance course, certificates of attendance in first aid training,
certificate of completion in fire brigade training seminar and certificate of completion on restricted land mobile radio
telephone operation to show that the petitioners are under the direct control and supervision of PLDT and that the
latter has, in fact, the power to dismiss them.

The Labor Arbiter found from the evidence that the delinquency reports were nothing but reminders of the
infractions committed by the petitioners while on duty which serve as basis for PLDT to recommend the termination
of the concerned security guard from PLDT. As already adverted to earlier, termination of services from PLDT did
not ipso facto mean dismissal from PSI inasmuch as some of those pulled out from PLDT were merely detailed at the
other clients of PSI as in the case of Jonathan Daguno, who was merely transferred to PCIBank Makati.

San Miguel vs Aballa (2005) G.R. 149011


Facts:

Petitioner San Miguel Corporation entered into a one-year contract with the Sunflower Multi-Purpose Cooperative.
Sunflower undertook and agreed to perform and provide the company on a non exclusive basis for a period of one
year the following: Messengerial, Janitorial, Shrimp harvesting and Sanitation. Pursuant to the contract, Sunflower
engaged private respondents to render services at SMC’s Bacolod Shrimp Processing Plant. The contract was
renewed and private respondentd continued to perform their tasks. Later, private respondents filed a complaint
praying to be declared as regular employees of SMC, with claims of recovery of all benefits and privileges.

Issue: Whether or not Sunflower is engaged in labor only contracting.

Held: The test to determine the existence of independent contractorship is whether one claiming to be an
independent contractor has contracted to do the work according to his own methods and without being subject to the
control of the employer, except only as to the results of the work.

In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to
ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the
job contractor, only for the payment of the employees’ wages whenever the contractor fails to pay the same. Other
than that, the principal employer is not responsible for any claim made by the employees.

In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to
prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and
the latter is responsible to the employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.

The following would show that sunflower is engaged in labor only contracting: What appears is that Sunflower does
not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and
other materials to qualify it as an independent contractor. It is gathered that the lot, building, machineries and all
other working tools utilized by private respondents in carrying out their tasks were owned and provided by SMC.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 13


University of San Carlos – College of Law Labor Standards Finals Case Digests

Sunflower, during the existence of its service contract with respondent SMC, did not own a single machinery,
equipment, or working tool used in the processing plant. Everything was owned and provided by respondent SMC.
The lot, the building, and working facilities are owned by respondent SMC.

And from the job description provided by SMC itself, the work assigned to private respondents was directly related
to the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by private respondents in
shrimp harvesting, receiving and packing formed an integral part of the shrimp processing operations of SMC. As
for janitorial and messengerial services, that they are considered directly related to the principal business of the
employer has been jurisprudentially recognized. Furthermore, Sunflower did not carry on an independent business
or undertake the performance of its service contract according to its own manner and method, free from the control
and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC.

Therefore since Sunflower is labor only contracting, there is the existence of an employer- employee relationship
between SMC and private respondents.

Manila Electric Co., vs Benamira (2005) G.R. 145271


Facts:

The individual respondents are licensed security guards formerly employed by People’s Security, Inc. and deployed
as such at MERALCO’s head office. The security service agreement between PSI and MERALCO was terminated.
Thereafter, 56 of PSI’s security guards, including herein eight individual respondents, filed a complaint for unpaid
monetary benefits against PSI and MERALCO. Meanwhile, the security service agreement between respondent
Armed Security & Detective Agency, Inc., (ASDAI) and MERALCO took effect. Subsequently, the individual
respondents were absorbed by ASDAI and retained at MERALCO’s head office. Later, the security service agreement
between respondent Advance Forces Security & Investigation Services, Inc. (AFSISI) and MERALCO took effect,
terminating the previous security service agreement with ASDAI. The individual respondents amended their
complaint to implead AFSISI as party respondent.

Issue: Whether or not the individual respondents are employees of MERALCO.

Held: No. In this case, the terms and conditions embodied in the security service agreement between MERALCO and
ASDAI expressly recognized ASDAI as the employer of individual respondents. Under the security service
agreement, it was ASDAI which (a) selected, engaged or hired and discharged the security guards; (b) assigned them
to MERALCO according to the number agreed upon; (c) provided the uniform, firearms and ammunition,
nightsticks, flashlights, raincoats and other paraphernalia of the security guards; (d) paid them salaries or wages;
and, (e) disciplined and supervised them or principally controlled their conduct. The agreement even explicitly
provided that “[n]othing herein contained shall be understood to make the security guards under this Agreement,
employees of the COMPANY, it being clearly understood that such security guards shall be considered as they are,
employees of the AGENCY alone.” Clearly, the individual respondents are the employees of ASDAI.

Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an
indication of control. It is simply a security clause designed to prevent the agency from unilaterally removing its
security guards from their assigned posts at MERALCO’s premises to the latter’s detriment.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 14


University of San Carlos – College of Law Labor Standards Finals Case Digests

The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is
likewise not indicative of control as it is not a unilateral right. The agreement provides that the agency is principally
mandated to conduct inspections, without prejudice to MERALCO’s right to conduct its own inspections.

Moreover, ASDAI and AFSISI are not “labor-only” contractors. There is “labor only” contract when the person
acting as contractor is considered merely as an agent or intermediary of the principal who is responsible to the
workers in the same manner and to the same extent as if they had been directly employed by him. On the other
hand, “job (independent) contracting” is present if the following conditions are met: (a) 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 to the result thereof; and (b) the contractor has substantial capital
or investments in the form of tools, equipment, machineries, work premises and other materials which are necessary
in the conduct of his business. Given the above distinction and the provisions of the security service agreements
entered into by petitioner with ASDAI and AFSISI, we are convinced that ASDAI and AFSISI were engaged in job
contracting.

The individual respondents can not be considered as regular employees of the MERALCO for, although security
services are necessary and desirable to the business of MERALCO, it is not directly related to its principal business
and may even be considered unnecessary in the conduct of MERALCO’s principal business, which is the distribution
of electricity.

Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits against ASDAI is
a clear indication that the individual respondents acknowledge that ASDAI is their employer.

The fact that there is no actual and direct employer-employee relationship between MERALCO and the individual
respondents does not exonerate MERALCO from liability as to the monetary claims of the individual respondents.
When MERALCO contracted for security services with ASDAI as the security agency that hired individual
respondents to work as guards for it, MERALCO became an indirect employer of individual respondents pursuant to
Article 107 of the Labor Code.

DOLE Philppines vs Esteva (2006) G.R. 161115


Facts:

Petitioner is a corporation duly organized and existing in accordance with Philippine laws, engaged principally in the
production and processing of pineapple for the export market. Its plantation is located in Polomolok, South Cotabato.

Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO). CAMPCO was organized in
accordance with Republic Act No. 6938, otherwise known as the Cooperative Code of the Philippines, and duly-
registered with the Cooperative Development Authority (CDA) on 6 January 1993. Members of CAMPCO live in
communities surrounding petitioner's plantation and are relatives of petitioner's employees. On 17 August 1993,
petitioner and CAMPCO entered into a Service Contract. The Service Contract referred to petitioner as "the
Company," while CAMPCO was "the Contractor."

Pursuant to the foregoing Service Contract, CAMPCO members rendered services to petitioner. The number of
CAMPCO members that report for work and the type of service they performed depended on the needs of petitioner
at any given time. Although the Service Contract specifically stated that it shall only be for a period of six months, i.e.,

Ma. Cecelia Timbal LlB – 2 Rm 402 | 15


University of San Carlos – College of Law Labor Standards Finals Case Digests

from 1 July to 31 December 1993, the parties had apparently extended or renewed the same for the succeeding years
without executing another written contract. It was under these circumstances that respondents came to work for
petitioner.

The Task Force submitted a report on 3 June 1993 identifying six cooperatives that were engaged in labor-only
contracting, one of which was CAMPCO. The DOLE Regional Office No. XI held a conference on 18 August 1993
wherein the representatives of the cooperatives named by the Task Force were given the opportunity to explain the
nature of their activities in relation to petitioner. On 19 October 1993, Director Parel of DOLE Regional Office No. XI
issued an Order, directing the cooperatives to cease and desist from engaging in labor-only contracting.

On 15 September 1994, DOLE Undersecretary Cresencio B. Trajano, by the authority of the DOLE Secretary, issued an
Order dismissing the appeal of the Cooperatives.

Respondents started working for petitioner at various times in the years 1993 and 1994, by virtue of the Service
Contract executed between CAMPCO and petitioner. All of the respondents had already rendered more than one
year of service to petitioner. While some of the respondents were still working for petitioner, others were put on "stay
home status" on varying dates in the years 1994, 1995, and 1996 and were no longer furnished with work thereafter.
Together, respondents filed a Complaint, on 19 December 1996, with the National Labor Relations Commission
(NLRC), for illegal dismissal, regularization, wage differentials, damages and attorney's fees.

Respondents thus argued that they should be considered regular employees of petitioner given that: (1) they were
performing jobs that were usually necessary and desirable in the usual business of petitioner; (2) petitioner exercised
control over respondents, not only as to the results, but also as to the manner by which they performed their assigned
tasks; and (3) CAMPCO, a labor-only contractor, was merely a conduit of petitioner. As regular employees of
petitioner, respondents asserted that they were entitled to security of tenure and those placed on "stay home status"
for more than six months had been constructively and illegally dismissed. Respondents further claimed entitlement
to wage differential, moral damages, and attorney's fees.

Petitioner, in its Position Paper filed before the NLRC, denied that respondents were its employees.

Petitioner explained that it found the need to engage external services to augment its regular workforce, which was
affected by peaks in operation, work backlogs, absenteeism, and excessive leaves. It used to engage the services of
individual workers for definite periods specified in their employment contracts and never exceeding one year.
However, such an arrangement became the subject of a labor case, in which petitioner was accused of preventing the
regularization of such workers. The Labor Arbiter who heard the case, rendered his Decision 18 on 24 June 1994
declaring that these workers fell squarely within the concept of seasonal workers as envisaged by Article 280 of the
Labor Code, as amended, who were hired by petitioner in good faith and in consonance with sound business
practice; and consequently, dismissing the complaint against petitioner.

The NLRC, in its Resolution, 19 dated 14 March 1995, affirmed in toto the Labor Arbiter's Decision and further found
that the workers were validly and legally engaged by petitioner for "term employment," wherein the parties agreed
to a fixed period of employment, knowingly and voluntarily, without any force, duress or improper pressure being
brought to bear upon the employees and absent any other circumstance vitiating their consent. The said NLRC
Resolution became final and executory on 18 June 1996. Despite the favorable ruling of both the Labor Arbiter and
the NLRC, petitioner decided to discontinue such employment arrangement. Yet, the problem of petitioner as to
shortage of workforce due to the peaks in operation, work backlogs, absenteeism, and excessive leaves, persisted.
Petitioner then found a solution in the engagement of cooperatives such as CAMPCO to provide the necessary
additional services.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 16


University of San Carlos – College of Law Labor Standards Finals Case Digests

Petitioner contended that respondents were owners-members of CAMPCO; that CAMPCO was a duly-organized and
registered cooperative which had already grown into a multi-million enterprise; that CAMPCO was engaged in
legitimate job-contracting with its own owners-members rendering the contract work; that under the express terms
and conditions of the Service Contract executed between petitioner (the principal) and CAMPCO (the contractor), the
latter shall undertake the contract work on its own account, under its own responsibility, and according to its own
manner and method free from the control and direction of the petitioner in all matters connected with the
performance of the work, except as to the result thereof; and since CAMPCO held itself out to petitioner as a
legitimate job contractor, respondents, as owners-members of CAMPCO, were estopped from denying or refuting the
same.

Petitioner further averred that Department Order No. 10, amending the rules implementing Books III and VI of the
Labor Code, as amended, promulgated by the DOLE on 30 May 1997, explicitly recognized the arrangement between
petitioner and CAMPCO as permissible contracting and subcontracting.

The LA and the NLRC decided the case in favor of the Petitioner Company and against the complaint of the private
respondents (employees). On appeal by certiorari, the CA reversed the rulings of the LA and NLRC. Thus, the
petitioner Company appealed to the SC for Petition for Review on Certiorari under Rule 45 of the revised Rules of
Civil Procedure, questioning the decision of the Court of Appeals concerning the herein assailed issues.

Issues:

1. Whether or not department order no. 10, series of 1997 is the applicable regulation in this case. Whether or
not there should be a retroactive application to department order no. 3, series of 2001.
2. Whether or not its retroactive application violated the constitutional provision against impairment of
contracts and deprived petitioner of the due process of the law.

Held: The second assignment of error delves into the significance and application to the case at bar of the two
department orders issued by DOLE. Department Order No. 10, series of 1997, amended the implementing rules of
Books III and VI of the Labor Code, as amended. Under this particular DOLE department order, the arrangement
between petitioner and CAMPCO would qualify as permissible contracting. Department Order No. 3, series of 2001,
revoked Department Order No. 10, series of 1997, and reiterated the prohibition on labor-only contracting.

Attention is called to the fact that the acts complained of by the respondents occurred well before the issuance of the
two DOLE department orders in 1997 and 2001. The Service Contract between DOLE and CAMPCO was executed on
17 August 1993. Respondents started working for petitioner sometime in 1993 and 1994. While some of them
continued to work for petitioner, at least until the filing of the Complaint, others were put on "stay home status" at
various times in 1994, 1995, and 1996. Respondents filed their Complaint with the NLRC on 19 December 1996.

A basic rule observed in this jurisdiction is that no statute, decree, ordinance, rule or regulation shall be given
retrospective effect unless explicitly stated. Since there is no provision at all in the DOLE department orders that
expressly allowed their retroactive application, then the general rule should be followed, and the said orders should
be applied only prospectively.

Which now brings this Court to the question as to what was the prevailing rule on labor-only contracting from 1993
to 1996, the period when the occurrences subject of the Complaint before the NLRC took place.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 17


University of San Carlos – College of Law Labor Standards Finals Case Digests

Article 106 of the Labor Code, as amended, permits legitimate job contracting, but prohibits labor-only contracting.
The said provision reads —

ART. 106. Contractor or subcontractor. — Whenever an employer 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 subcontractor, if any,
shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

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 provision 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 persons 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.

To implement the foregoing provision of the Labor Code, as amended, Sections 8 and 9, Rule VIII, Book III of the
implementing rules, in force since 1976 and prior to their amendment by DOLE Department Order No. 10, series of
1997, provided as follows —

Sec. 8. 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.

Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises
and other materials; and

(2) The workers recruited and placed by such persons are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary 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.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 18


University of San Carlos – College of Law Labor Standards Finals Case Digests

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders
whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the workers.

Since these statutory and regulatory provisions were the ones in force during the years in question, then it was in
consideration of the same that DOLE Regional Director Parel and DOLE Undersecretary Trajano issued their Orders
on 19 September 1993 and 15 September 1994, respectively, both finding that CAMPCO was engaged in labor-only
contracting. Petitioner, in its third assignment of error, questions the weight that the Court of Appeals gave these
orders in its Decision, dated 20 May 2002, and Amended Decision, dated 27 November 2003.

San Miguel vs NLRC (2006) G.R. 147566


Facts:

On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel Corporation-Magnolia Division,
herein referred to as SMC and Philippine Software Services and Education Center herein referred to as PHILSSEC to
compel the said respondents to recognize him as a regular employee. He amended the complaint on 12 November
1990 to include the charge of illegal dismissal because his services were terminated on 31 October 1990.

The complainant's employment record indicates that he rendered service with Lipercon Services from 1 April 1981 to
February 1982 as budget head assigned to SMC-Beer Division, then from July 1983 to April 1985 with Skillpower,
Inc., as accounting clerk assigned to SMC-Magnolia Division, then from October 1988 to 1989 also with Skillpower,
Inc. as acting clerk assigned to SMC-Magnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC
assigned to Magnolia Finance as accounting clerk. The complainant considered himself as an employee of SMC-
Magnolia. Lipercon Services, Skillpower, Inc. and PHILSSEC are labor-only contractors and any one of which had
never been his employer. His dismissal, according to him, was in retaliation for his filing of the complaint for
regularization in service. His dismissal was illegal there being no just cause for the action. He was not accorded due
process neither was his dismissal reported to the Department of Labor and Employment.

PHILSSEC disclaimed liability. As an entity catering (sic) computer systems and program for business enterprises, it
has contracted with SMC-Magnolia to computerize the latter's manual accounting reporting systems of its provincial
sales. PHILSSEC then conducted a three phase analysis of SMC-Magnolia set up: first the computer needs of the firm
was (sic) determined; then, the development of computer systems or program suitable; and, finally, set up the
systems and train the employees to operate the same. In all these phases, PHILSSEC uses its computer system and
technology and provided the necessary manpower to compliment the transfer of the technology to SMC-Magnolia.
Complainant Maliksi was one of those employed by PHILSSEC whose principal function was the manual control of
data needed during the computerization. Like all assigned to the project, the complainant's work was controlled by
PHILSSEC supervisors, his salary paid by the agency and he reported directly to PHILSSEC. The computerization
project was completed on 31 October 1990, and so, the complainant was terminated on the said date.

SMC, on the other hand, submitted its position. In the contract SMC entered with PHILSSEC, the latter undertook to
set up the computerization of the provincial sales reporting system of Magnolia Division. To carry out the task,
PHILSSEC utilized 3 computer programmers and the rest were data encoders. The complainant being one of the
compliments (sic) performed the following functions.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 19


University of San Carlos – College of Law Labor Standards Finals Case Digests

SMC likewise contends that PHILSSEC exercised exclusive managerial prerogative over the complainant as to hiring,
payment of salary, dismissal and most importantly, the control over his work. SMC was interested only in the result
of the work specified in the contract but not as to the means and methods of accomplishing the same. Moreover,
PHILSSEC has substantial capital of its own. It has an IBM system, 3 computers, 17 IBM or IBM-compatible
computers; it has a building where the computer training center and main office are located. What it markets to
clients are computer programs and training systems on computer technology and not the usual labor or manpower
supply to establishment concerns. Moreover, what PHILSSEC set up employing the complainant, among others, has
no relation to the principal business of SMC, which is food and beverage. It was a single relationship between the
people utilized by PHILSSEC and SMC. . .

Issue: Whether or not private respondent Maliksi is an employee of SMC?

Held: Yes. SMC concedes that Maliksi, before his employment with PHILSSEC, worked in SMC from November 1988
to April 1990, but as employee of Skillpower 7 and that he was previously assigned to SMC between 1981 up to
February 1985, "for periods spread apart." The Labor Arbiter found, as earlier stated, that Maliksi rendered service
with Lipercon from 1 April 1981 to February 1982 as budget head assigned to SMC-Beer Division; from July 1983 to
April 1985 with Skillpower as accounting clerk assigned to SMC-Magnolia Division, then from October 1988 to 1989
also with Skillpower as acting clerk assigned to SMC-Magnolia Finance, and from October 1989 to 31 October 1990
with PHILSSEC assigned to Magnolia Finance as accounting clerk. In all, it appears that, while under the employ of
either Lipercon or Skillpower, Maliksi has undisputedly rendered service with SMC for at least three years and seven
months.

The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to be labor-only contractors,
providing as they do manpower services to the public for a fee. The existence of an employer-employee relationship
is factual and we give due deference to the factual findings of both the NLRC and the CA that an employer-employee
relationship existed between SMC (or its subsidiaries) and Maliksi. Indeed, having served SMC for an aggregate
period of more than three (3) years through employment contracts with these two labor contractors, Maliksi should
be considered as SMC's regular employee. The hard fact is that he was hired and re-hired by SMC to perform
administrative and clerical work that was necessary to SMC's business on a daily basis.

It is worth noting that, except for the computerization project of PHILSSEC, petitioner did not make any insinuation
at all that the services of Maliksi with SMC was project-related such that an employment contract with Lipercon and
Skillpower was necessary.

We find respondent Maliksi to be similarly situated with those of the complainants in Madriaga. Indeed, Lipercon
and Skillpower have figured in not just a few of our decisions, so much so that we are inclined to believe that these
two were involved in labor-only contracting with respect to Maliksi. We hold that the finding of the NLRC and the
CA as to SMC's resorting to labor-only contracting is entitled to consideration in its full weight.

With respect to PHILSSEC, there was no need for Maliksi to be employed under the former's computerization
program to be considered a regular employee of SMC at the time. Moreover, SMC itself admits that Maliksi's work
under the computerization program did "not require the operation of a computer system, such as the software
program being developed by PHILSSEC." Given this admission, we are simply at a loss to understand why Maliksi
should be included in the computerization project as a project employee. Not being a computer expert, Maliksi's
inclusion in the project was uncalled for. To our mind, his placement in the project was for the purpose of
circumventing labor laws. The evidence shows that immediately before he entered the PHILSSEC project in October
1989, Maliksi was fresh out of his employment with SMC (through Skillpower) as acting clerk assigned to SMC-
Magnolia Finance (from October 1988 to 1989).

Ma. Cecelia Timbal LlB – 2 Rm 402 | 20


University of San Carlos – College of Law Labor Standards Finals Case Digests

Maliksi's work under the PHILSSEC project was mainly administrative in nature and necessary to the development
of SMC's business. These were:

a. posting manually the daily account balances in the work set;

b. fitting the daily totals into the monthly totals;

c. comparing the manual totals with the computer generated totals;

d. locating the differences between the totals; and,

e. adjusting and correcting errors.

Simply put, the data gathered by SMC on a daily basis through Maliksi's work would be submitted for analysis and
evaluation, thereby allowing SMC to make the necessary business decisions that would enable it to market its
products better, or monitor its sales and collection with efficiency. Without the data gatherer or encoder, no analysis
could occur. SMC would then, for the most part, be kept in the dark.

As to the petitioner's second assigned error, we hold that there is no need to resolve the present case under the
principle that all doubts should be resolved in favor of the workingman. The perceived doubt does not obtain in the
first place.

We understand Maliksi's desperation in making his point clear to SMC, which unduly refuses to acknowledge his
status as a regular employee. Instead, he was juggled from one employment contract to another in a continuous bid
to circumvent labor laws. The act of hiring and re-hiring workers over a period of time without considering them as
regular employees evidences bad faith on the part of the employer. Where, from the circumstances, it is apparent that
periods have been imposed to preclude the acquisition of tenurial security by the employee, the policy, agreement or
practice should be struck down as contrary to public policy, morals, good customs or public order. In point of law,
any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall be liable for the damage.

Ways and means contrived by employers to countermand labor laws granting regular employment status to their
workers are numerous and long. For instance, they toss the poor workers from one job contractor to another, make
them go through endless applications, lining up, paperwork, documentation, and physical examinations; make them
sign five- or ten-month-only job contracts, yet re-hire them after brief "rest periods," but not after requiring them to
go through the whole application and selection process once again; prepare and have them sign waivers, quitclaims,
and the like; refuse to issue them identification cards, receipts or any other concrete proof of employment or
documentary proof of payment of their salaries; fail to enroll them for entitlement to social security and other
benefits; give them positions, titles or designations that connote short-term employment.

Others are more creative: they set up "distributors" or "dealers" which are, in reality, shell or dummy companies. In
this manner, the mother company avoids the employer-employee relations, and is thus shielded from liability from
employee claims in case of illegal dismissal, closure, unfair labor practices and the like. In those instances, the poor
employees, finding the shell or dummy company to be without assets, often end up confused and without recourse
as to whom to run after. They sue the mother company which conveniently sets up the defense of absence of
employer-employee relations. In San Miguel Corporation v. MAERC Integrated Services, Inc., we took note of the
practice of hiring employees through labor contractors that catered exclusively to the employment needs of SMC or
its divisions or other specific business interests, such that after the specific SMC business or division ceases to do
business, the labor contractor likewise ceases its operations.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 21


University of San Carlos – College of Law Labor Standards Finals Case Digests

The contrivances may be many and the schemes ingenious and imaginative. But this Court will not hesitate to put
pen to a line and defend the worker's right to be secure in his (or her) proprietary right to regular employment and
his right to a secure employment, viz, one that is free from fear and doubt, that anytime he could be removed,
retrenched, his contract not renewed or he might not be re-hired. The ramifications may seem trivial, but we cannot
allow the ordinary Filipino worker's right to tenurial security to be put in jeopardy by recurrent but abhorrent
practices that threaten the very lives of those that depend on him.

Considering, however, the supervening event that SMC's Magnolia Division has been acquired by another entity, it
appears that private respondent's reinstatement is no longer feasible. Instead, he should be awarded separation pay
as an alternative. Likewise, owing to petitioner's bad faith, it should be held liable to pay damages for causing undue
injury and inconvenience to the private respondent in its contractual hiring-firing-rehiring scheme.

Eparwa vs Liceo (2006) G.R. 150402


Facts:

On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security Services.
On 21 December 1998, 11 security guards ("security guards") whom Eparwa assigned to LDCU from 1 December 1997
to 30 November 1998 filed a complaint before the National Labor Relations Commission's (NLRC) Regional
Arbitration Branch No. 10 in Cagayan de Oro City. Docketed as NLRC-RABX Case No. 10-01-00102-99, the complaint
was filed against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day,
service incentive leave, night shift differential, overtime pay, and payment for attorney's fees.

LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security guards.
In its decision dated 18 August 1999, the Labor Arbiter found that the security guards are entitled to wage
differentials and premium for holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily liable
pursuant to Article 109 of the Labor Code.

LDCU filed an appeal before the NLRC. LDCU agreed with the Labor Arbiter's decision on the security guards'
entitlement to salary differential but challenged the propriety of the amount of the award. LDCU alleged that security
guards not similarly situated were granted uniform monetary awards and that the decision did not include the basis
of the computation of the amount of the award.

Eparwa also filed an appeal before the NLRC. For its part, Eparwa questioned its liability for the security guards'
claims and the awarded cross-claim amounts.

The Fifth Division of the NLRC resolved Eparwa and LDCU's separate appeals in its Resolution 7 dated 19 January
2000. The NLRC found that the security guards are entitled to wage differentials and premium for holiday and rest
day work. Although the NLRC held Eparwa and LDCU solidarily liable for the wage differentials and premium for
holiday and rest day work, the NLRC did not require Eparwa to reimburse LDCU for its payments to the security
guards. The NLRC also ordered the recomputation of the monetary awards according to the dates actually worked
by each security guard.

Eparwa and LDCU again filed separate motions for partial reconsideration of the 19 January 2000 NLRC Resolution.
LDCU questioned the NLRC's deletion of LDCU's entitlement to reimbursement by Eparwa. Eparwa, on the other
hand, prayed that LDCU be made to reimburse Eparwa for whatever amount it may pay to the security guards.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 22


University of San Carlos – College of Law Labor Standards Finals Case Digests

Issue: Is LDCU alone ultimately liable to the security guards for the wage differentials and premium for holiday and
rest day pay?

Held: For the security guards, the actual source of the payment of their wage differentials and premium for holiday
and rest day work does not matter as long as they are paid. This is the import of Eparwa and LDCU's solidary
liability. Creditors, such as the security guards, may collect from anyone of the solidary debtors. Solidary liability
does not mean that, as between themselves, two solidary debtors are liable for only half of the payment.

LDCU's ultimate liability comes into play because of the expiration of the Contract for Security Services. There is no
privity of contract between the security guards and LDCU, but LDCU's liability to the security guards remains
because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking LDCU for an
adjustment in the contract price because of the expiration of the contract, but Eparwa's liability to the security guards
remains because of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa may
claim reimbursement from LDCU for any payment it may make to the security guards. However, LDCU cannot claim
any reimbursement from Eparwa for any payment it may make to the security guards.

Eparwa and LDCU's Solidary Liability and LDCU's Ultimate Liability

Articles 106, 107 and 109 of the Labor Code read:

Art. 106. Contractor or subcontractor. — Whenever an employer 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 subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

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 provision 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 persons are performing activities which are directly related to the principal business of
the 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.

Article 107. Indirect employer. — The provisions of the immediately preceding Article shall likewise apply to
any person, partnership, association or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.

Article 109. Solidary liability. — The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be
considered as direct employers.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 23


University of San Carlos – College of Law Labor Standards Finals Case Digests

This Court's ruling in Eagle Security Agency, Inc. v. NLRC squarely applies to the present case. In Eagle, we ruled
that:

This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure
compliance of the provisions therein including the statutory minimum wage [Article 99, Labor Code]. The contractor
is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect
employer of the contractor's employees for purposes of paying the employees their wages should the contractor be
unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers' performance
of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution [See
Article II Sec. 18 and Article XIII Sec. 3].

In the case at bar, it is beyond dispute that the security guards are the employees of EAGLE [See Article VII Sec. 2 of
the Contract for Security Services; G.R. No. 81447, Rollo, p. 34]. That they were assigned to guard the premises of
PTSI pursuant to the latter's contract with EAGLE and that neither of these two entities paid their wage and
allowance increases under the subject wage orders are also admitted [See Labor Arbiter's Decision, p. 2; G.R. No.
81447, Rollo, p. 75]. Thus, the application of the aforecited provisions of the Labor Code on joint and several liability
of the principal and contractor is appropriate [See Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, G.R. No.
64204, May 31, 1985, 136 SCRA 669].

Escario vs NLRC (2000) G.R. 124055


Facts:

Petitioners allege that they were employed by CMC as merchandisers. Among the tasks assigned to them were the
withdrawing of stocks from the warehouse, the fixing of prices, price-tagging, displaying of merchandise, and the
inventory of stocks. These were done under the control, management and supervision of CMC. The materials and
equipment necessary in the performance of their job, such as price markers, gun taggers, toys, pentel pen, streamers
and posters were provided by CMC. 'Their salaries were being paid by CMC. According to petitioners, the hiring,
control and supervision of the workers and the payment of salaries, were all coursed by CMC through its agent D.L.
Admark in order for CMC to avoid its liability under the law.

CMC, on the other hand, denied the existence of an employer-employee relationship between petitioner, and itself.
Rather, CMC contended that it is D.L. Admark who is the employer of the petitioners. While CMC is engaged in the
manufacturing of food products and distribution of such to wholesalers and retailers, it is not allowed by law to
engage in retail or direct sales to end consumers. It, however, hired independent job contractors such as D.L.
Admark, to provide the necessary promotional activities for its product lines.

For its part, D.L. Admark asserted that it is the employer of the petitioners. Its primary purpose is to carry on the
business of advertising, promotion and publicity, the sales and merchandising of goods and services and conduct
survey and opinion polls. As an independent contractor it serves several clients among which include Purefoods,
Corona Supply, Splash Cosmetics and herein respondent California Marketing.

On 7 February 1992, petitioners filed a case against CMC before the Labor Arbiter for the regularization of their
employment status. On 29 July 1994, the Labor Arbiter rendered a decision finding that petitioners are the employees
of CMC as they were engaged in activities that are necessary and desirable in the usual business or trade of CMC. In

Ma. Cecelia Timbal LlB – 2 Rm 402 | 24


University of San Carlos – College of Law Labor Standards Finals Case Digests

justifying its ruling, the Labor Arbiter cited the case of Tabas vs. CMC which, likewise, involved private respondent
CMC. In the Tabas case, this Court ruled that therein petitioner merchandisers were employees of CMC, to wit:

There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it contracts out labor in
favor of clients. We hold that it is one not withstanding its vehement claims to the contrary, and notwithstanding the
provision of the contract that it is "an independent contractor." 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. 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 petitioner has been made to
perform activities "which are not directly related to the general business of manufacturing," California's purported
"principal operation activity. The petitioners had been charged with merchandising promotion or sale of the products
of [California] in the different sales outlets in Metro Manila including task and occasional price tagging," 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 itself
have done; Livi as a placement agency, had simply supplied it with manpower necessary to carry out its
(California's) merchandising activities, using its (California's) premises and equipment.

On appeal, the NLRC set aside the decision of the Labor Arbiter. It ruled that no employer-employee relationship
existed between the petitioners and CMC. It, likewise, held that D.L. Admark is a legitimate independent contractor,
hence, the employer of the petitioners. Finding no valid grounds existed for the dismissal of the petitioners by D.L.
Admark, it ordered their reinstatement.

Petitioners are of the position that D.L. Admark is a labor-only contractor and cites this Court's ruling in the case of
Tabas,

Issue: Whether petitioners are employees of CMC or D.L. Admark.

Held: We cannot sustain the contention of the petitioner. In resolving this, it is necessary to determine whether D.L.
Admark is a labor-only contractor or an independent contractor.Petitioners' reliance on the Tabas case is misplaced.
In said case, we ruled that therein contractor Livi Manpower Services was a mere placement agency and had simply
supplied herein petitioner with the manpower necessary to carry out the company's merchandising activity. We,
however, further stated that:

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 client. In other words, CMC can validly farm out its merchandising activities to a legitimate
independent contractor.

There is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to
perform a job, work or service for a principal. In labor-only contracting, the following elements are present:

(a) 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

(b) The workers recruited and placed by such person are performing activities which are directly related to the
principal business of the employer.

In contrast, there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a
subcontractor the performance or completion of a specific job, work or service within a definite or predetermined

Ma. Cecelia Timbal LlB – 2 Rm 402 | 25


University of San Carlos – College of Law Labor Standards Finals Case Digests

period, regardless of whether such job or work or service is to be performed or completed within or outside the
premises of the principal. In this arrangement, the following conditions must concur:

(a) The contractor carries on a distinct and independent business and undertakes the contract work on his
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 his work except as to the results
thereof; and

(b) The contractor has substantial capital or investment in the form of tools, equipment, machineries (sic), work
premises, and other materials which are necessary in the conduct of his business.

In the recent case of Alexander Vinoya vs. NLRC, et al., this Court ruled that in order to be considered an
independent contractor it is not enough to show substantial capitalization or investment in the form of tools,
equipment, machinery and work premises. In addition, the following factors need be considered: (a) whether the
contractor is carrying on an independent business; (b) the nature and extent of the work; (c) the skill required; (d) the
term and duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f) the
control and supervision of the workers; (g) the power of the employer with respect to the hiring, firing and payment
of workers of the contractor; (h) the control of the premises; (i) the duty to supply premises, tools, appliances,
materials, and labor; and (j) the mode, manner and terms of payment. Based on the foregoing criterion, we find that
D.L. Admark is a legitimate independent contractor.

Among the circumstances that tend to establish the status of D.L. Admark as a legitimate job contractor are:

1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional, advertising,
marketing and merchandising activities.

2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the supply of
sales promoting merchandising services rather than one of manpower placement.

3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions,
marketing and merchandising. It had several merchandising contracts with companies like Purefoods, Corona
Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the publication business as evidenced by its
magazine the "Phenomenon."

4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to P6
million and is therefore a highly capitalized venture. It had an authorized capital stock of P500,000.00. It owned
several motor vehicles and other tools, materials and equipment to service its clients. It paid rentals of P30,020 for the
office space it occupied.

Moreover, by applying the four-fold test used in determining employer-employee relationship, the status of D.L.
Admark as the true employer of petitioners is further established. The elements of this test are (1) the selection and
engagement of employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee's conduct.

As regards the first element, petitioners themselves admitted that they were selected and hired by D.L. Admark. As
to the second element, the NLRC noted that D.L. Admark was able to present in evidence the payroll of petitioners,
sample SSS contribution forms filed and submitted by DL Admark to the SSS, and the application for employment by
R. de los Reyes, all tending to show that D.L. Admark was paying for the petitioners' salaries. In contrast, petitioners
did not submit an iota of evidence that it was CMC who paid for their salaries. The fact that the agreement between

Ma. Cecelia Timbal LlB – 2 Rm 402 | 26


University of San Carlos – College of Law Labor Standards Finals Case Digests

CMC and D.L. Admark contains the billing rate and cost breakdown of payment for core merchandisers and
coordinators does not in any way establish that it was CMC who was paying for their salaries. As correctly pointed
out by both CMC 16 and the Office of the Solicitor General, such cost breakdown is a standard content of service
contracts designed to insure that under the contract, employees of the job contractor will receive benefits mandated
by law.

Neither did the petitioners prove the existence of the third element. Again petitioners admitted that it was D.L.
Admark who terminated their employment. To prove the fourth and most important element of control, petitioners
presented the memoranda of CMC's sales and promotions manager. The Labor Arbiter found that these memos
"indubitably show that the complainants were under the supervision and control of the CMC people." However, as
correctly pointed out by the NLRC, a careful scrutiny of the documents adverted to, will reveal that nothing therein
would remotely suggest that CMC was supervising and controlling the work of the petitioners:

The memorandums were addressed to the store or grocery owners telling them about the forthcoming sales
promotions of CMC products. While in one of the memorandums a statement is made that "our merchandisers and
demonstrators will be assigned to pack the premium with your stocks in the shelves . . ., yet it does not necessarily
mean to refer to the complainants, as they claim, since CMC has also regular merchandisers and demonstrators. It
would be different if in the memorandums were sent or given to the complainants and their duties or roles in the said
sales campaign are therein defined. It is also noted that in one of the memorandums it was addressed to: "All regular
merchandisers/demonstrators." . . . we are not convinced that the documents sufficiently prove employer-employee
relationship between complainants and respondents CMC.

The Office of the Solicitor General, likewise notes that the documents fail to show anything that would remotely
suggest control and supervision exercised by CMC over petitioners on the matter on how they should perform their
work. The memoranda were addressed either to the store owners or "regular" merchandisers and demonstrators of
CMC. Thus, petitioners, who filed a complaint for regularization against respondent CMC, thereby, conceding that
they are not regular employees of the latter, cannot validly claim to be the ones referred to in said memos.

Having proven the existence of an employer-employee relationship between D.L. Admark and petitioners, it is no
longer relevant to determine whether the activities performed by the latter are necessary or desirable to the usual
business or trade of CMC.

On the issue of illegal dismissal, we agree with the findings of the NLRC that D.L. Admark "admits having dismissed
the petitioners for allegedly disowning and rejecting them as their employer." Undoubtedly, the reason given is not
just cause to terminate petitioners. D.L. Admark's belated claim that the petitioners were not terminated but simply
did not report to work is not supported by the evidence on record. Moreover, there is no showing that due process
was afforded the petitioners.

Aboitiz vs Dimapatoi (2006) G.R. 148619


Facts:

Petitioner Aboitiz Haulers, Inc. is a domestic corporation principally engaged in the nationwide and overseas
forwarding and distribution of cargoes. Private respondents Monaorai Dimapatoi, Cecilia Agawin, Raul Mamate,
Emmanuel Guerrero and Gemeniano Bigaw worked as checkers in the Mega Warehouse, which is owned by the
petitioner, located at the Tabacalera Compound, United Nations Avenue, Manila.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 27


University of San Carlos – College of Law Labor Standards Finals Case Digests

Respondents maintain that during their employment with the petitioner, they were not paid their regular holiday
pay, night shift differential, 5-day service incentive leave, and overtime premium. They also averred that illegal
deductions were being made on their wages, particularly the contributions for a Mutual Assistance Fund, a Cash
Bond, and claims for damaged and misrouted cargoes incurred by petitioner.

On 17 May 1996, respondent Raul Mamate filed a complaint before the Department of Labor and Employment
(DOLE) for nonpayment of wages and other benefits, as well as illegal deductions. The other respondents filed their
own complaints. Since the claims of the respondents exceeded Five Thousand Pesos (P5,000.00), the case was referred
to the NLRC. Thereafter, respondents filed their complaint for illegal dismissal and other money claims before the
Arbitration Branch of the NLRC.

Petitioner claims that respondents are not its employees, rather they are the employees of Grigio Security Agency and
General Services (Grigio), a manpower agency that supplies security guards, checkers and stuffers. It allegedly
entered into a Written Contract of Service with Grigio on 1 March 1994. By virtue of the aforementioned Written
Contract of Service, Grigio supplied petitioner with security guards, checkers and stuffers for petitioner's Mega
Warehouse. The respondents were among the checkers that were assigned to the petitioner's warehouse.

Petitioner emphasizes that Grigio retained control over the respondents by providing their own supervisors to
oversee Grigio's personnel, as well as time cards to monitor the attendance of its personnel. Petitioner also alleges
that on 9 May 1996, the respondents left the warehouse and did not report to work thereafter. As a result of the
respondents' sudden abandonment of their work, there was no orderly and proper turnover of papers and other
company property in connection with the termination of the Written Contract for Services.

Respondents, on the other hand, claim that most of them worked as checkers in petitioner's warehouse even before 1
March 1994.

Issue: Whether or not Grigio is a "labor-only" contractor.

Held: Grigio is a "labor-only" contractor. The first issue that needs to be resolved is whether Grigio is a "labor-only"
contractor, which is tantamount to a finding that the petitioner is the employer of the respondents. Article 106 of the
Labor Code 24 explains the relations which may arise between an employer, a contractor and the contractor's
employees thus:

ART. 106. Contractor or subcontractor. — Whenever an employer 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 subcontractor, if any,
shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract in the same manner and extent that he is liable to employees directly
employed by him.

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 provision of this Code.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 28


University of San Carlos – College of Law Labor Standards Finals Case Digests

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 persons are performing activities which 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.

The first two paragraphs of Art. 106 set the general rule that a principal is permitted by law to engage the services of
a contractor for the performance of a particular job, but the principal, nevertheless, becomes solidarily liable with the
contractor for the wages of the contractor's employees. The third paragraph of Art. 106, however, empowers the
Secretary of Labor to make distinctions between permissible job contracting and "labor-only" contracting, which is a
prohibited act further defined under the last paragraph. A finding that a contractor is a "labor-only" contractor is
equivalent to declaring that there is an employer-employee relationship between the principal and the employees of
the supposed contractor, and the "labor-only" contractor is considered as a mere agent of the principal, the real
employer. Section 7 of the Rules Implementing Articles 106 to 109 of the Labor Code, as amended, reiterates the rules
in determining the existence of employer-employee relationship between employer, contractor or subcontractor, and
the contractor's or subcontractor's employee.

Section 7. Existence of an employer-employee relationship. — The contractor or subcontractor shall be


considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and
other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any
violation of any provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases, as declared by
a competent authority:

a. where there is a labor-only contracting; or

b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.

In determining whether or not a "labor-only" contracting exists, Art. 106 of the Labor Code and Section 5 of the Rules
Implementing Articles 106 to 109 of the Labor Code, as amended, provides the following criteria: (1) 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 other things; (2) the workers recruited and placed by such persons
are performing activities which are directly related to the principal business of such employer; and (3) the contractor
does not exercise the right to control the performance of the work of the contractual employee. In order that one is
considered by law as a "labor-only" contractor, all three aforementioned criteria need not be present. If the contractor
enters into an arrangement characterized by any one of the criteria provided, this would be a clear case of "labor-only
contracting." The clear phrasing of Section 5 of the Rules Implementing Articles 106 to 109 of the Labor Code, as
amended, support this interpretation.

Section 5. Prohibition against labor-only contracting. — Labor-only contracting is hereby declared prohibited.
For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following
elements are is present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of the principal; or

Ma. Cecelia Timbal LlB – 2 Rm 402 | 29


University of San Carlos – College of Law Labor Standards Finals Case Digests

ii) the contractor does not exercise the right to control over the performance of the work of the contractual
employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end.

The allegation of the petitioner that Grigio is an independent job contractor, and, therefore, this case is one of
permissible job contracting, is without basis. In this case, the respondents' work, as warehouse checkers, is directly
related to the principal business of the petitioner. Petitioner also exercises the right to control and determines not
only the end to be achieved, but also the manner and means to be used in reaching that end. Lastly, petitioner failed
to sufficiently prove that Grigio had "substantial capital or investment."

The respondents, as checkers, were employed to check and inspect these cargoes, a task which is clearly necessary for
the petitioner's business of forwarding and distributing of cargoes. The petitioner did not dispute the fact that the
respondents were hired as checkers as early as 1992. The fact that they were employed before the Written Contract of
Services took effect on 24 February 1994, and continued with their jobs until 1996, after the said contract had already
expired on 24 February 1995, 29 indicates that the respondents' work was indeed necessary for the petitioner's
business. In a similar case, Guarin v. National Labor Relations Commission, the workers' contracts were repeatedly
renewed to perform services necessary for the employer's business. Thus, the Court described the arrangement as
"labor-only" contracting:

The jobs assigned to the petitioners as mechanics, janitors, gardeners, firemen and grasscutters were directly related
to the business of Novelty as a garment manufacturer. In the case of Philippine Bank of Communications vs. NLRC,
146 SCRA 347, we ruled that the work of a messenger is directly related to a bank's operations. In its Comment,
Novelty contends that the services which are directly related to manufacturing garments are sewing, textile cutting,
designs, dying, quality control, personnel, administration, accounting, finance, customs, delivery and similar other
activities; and that allegedly, "it is only by stretching the imagination that one may conclude that the services of
janitors, janitresses, firemen, grasscutters, mechanics and helpers are directly related to the business of manufacturing
garments" (p. 78, Rollo). Not so, for the work of gardeners in maintaining clean and well-kept grounds around the
factory, mechanics to keep the machines functioning properly, and firemen to look out for fires, are directly related to
the daily operations of a garment factory. That fact is confirmed by Novelty's rehiring the workers or renewing the
contract with Lipercon every year from 1983 to 1986, a period of three (3) years.

As Lipercon was a "labor-only" contractor, the workers it supplied Novelty became regular employees of the
latter.Where the employees are tasked to undertake activities usually desirable or necessary in the usual business of
the employer, the contractor is considered as a "labor-only" contractor and such employees are considered as regular
employees of the employer.

In addition, Grigio did not undertake the performance of its service contract according to its own manner and
method, free from the control and supervision of its principal. The work activities, work shifts, and schedules of the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 30


University of San Carlos – College of Law Labor Standards Finals Case Digests

respondents, including the time allowed for "recess" were set under the Written Contract of Services. This clearly
indicates that these matters, which consist of the means and methods by which the work is to be accomplished, were
not within the absolute control of Grigio. By stipulating these matters in a contract, Grigio is constrained to follow
these provisions and would no longer be able to exercise the freedom to alter these work shifts and schedules at its
own convenience. Such being the case, Grigio cannot be considered as an independent job contractor.

Petitioner's allegation that Grigio retained control over the respondents by providing supervisors to monitor the
performance of the respondents cannot be given much weight. Instead of exercising their own discretion or referring
the matter to the officers of Grigio, Grigio's supervisors were obligated to refer to petitioner's supervisors any
discrepancy in the performance of the respondents with their specified duties. The Written Contract of Services
provided that:

5.c. That the GRIGIO personnel, particularly the supervisors, shall perform the following:

The Supervisor for the warehouse operation shall monitor the performance and productivity of all the checkers,
jacklifters, stuffers/strippers, forklift operators, drivers, and helpers. He shall coordinate with AHI's supervisors
regarding the operations at the Warehouse to ensure safety at the place of work. He shall see to it that the cargoes are
not overlanded, shortlanded, delivered at a wrong destination, or misdelivered to consignee's port of destination.
Any discrepancy shall be reported immediately to AHI's Logistic Manager, Mr. Andy Valeroso.

The control exercised by petitioner's supervisors over the performance of respondents was to such extent that
petitioner's Warehouse Supervisor, Roger Borromeo, confidently gave an evaluation of the performance of
respondent Monaorai Dimapatoi, who likewise felt obliged to obtain such Certification from Borromeo.

Petitioner's control over the respondents is evident. And it is this right to control the employee, not only as to the
result of the work to be done, but also as to the means and methods by which the same is to be accomplished, that
constitutes the most important index of the existence of the employer-employee relationship.

Lastly, the law casts the burden on the contractor to prove that it has substantial capital, investment, tools, etc.
Employees, on the other hand, need not prove that the contractor does not have substantial capital, investment, and
tools to engage in job-contracting. In this case, neither Grigio nor the petitioner was able to present any proof that
Grigio had substantial capital. There was no evidence pertaining to its capitalization nor its investment in tools,
equipment or implements actually used in the performance or completion of the job, work, or service that it was
contracted to render. Grigio was merely expected to supply petitioner with manpower to carry out work necessary
for its business, to be carried out in the manner which petitioner provided in the contract.

Thus, Grigio is obviously a "labor-only" contractor since it did not have substantial capital or investment which
relates to the service performed; the respondents performed activities which were directly related to the main
business of the petitioner; and Grigio did not exercise control over the performance of the work of the respondents.
Consequently, the petitioner is considered as the employer of the respondents.

In prohibiting "labor-only" contracting and creating an employer-employee relationship between the principal and
the supposed contractor's employees, the law intends to prevent employers from circumventing labor laws intended
to protect employees. In the case of Aurora Land Projects Corp. v. National Labor Relations Commission, this Court
pronounced:

The question as to 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,

Ma. Cecelia Timbal LlB – 2 Rm 402 | 31


University of San Carlos – College of Law Labor Standards Finals Case Digests

minimum wage, termination pay, and unionism. In light of this observation, it behooves this Court to be ever vigilant
in checking the unscrupulous efforts of some of our entrepreneurs, primarily aimed at maximizing their return on
investments at the expense of the lowly workingman.

GSIS vs NLRC (2006) G.R. 157647


Facts:

Tomas Lanting, doing business under the name and style of Lanting Security and Watchman Agency (LSWA) entered
into a Security Service Contract to provide security guards to the properties of the Government Service Insurance
System (GSIS) at the contract rate of P3,000.00 per guard per month.

During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the contract rate in view
of Section 7 of Wage Order No. 1 and Section 3 of Wage Order No. 2, which were issued by the Regional Tripartite
Wages and Productivity Board-NCR pursuant to Republic Act No. 6727, otherwise known as the Wage
Rationalization Act.

Acting on the request of LSWA, the GSIS, through its Board of Trustees and under Board Resolution No. 207, dated
May 24, 1991, approved the upward adjustments of the contract price from P3,000.00 to P3,716.07 per guard, per
month effective November 1, 1990 to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31, 1991. LSWA
assigned security guards Daniel Fanila, Hector Moreno, Isauro Ferrer, Rubin Wilfredo, Jesus Delima Jr., Maria
Legaspi, Santiago Noto Jr., and Virgilio Soriano (hereafter complainants) to guard one of GSIS's properties.

On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All the complainants, except Virgilio
Soriano, were absorbed by the incoming security agency. On March 7, 1994, complainants filed separate complaints
against LSWA for underpayment of wages and non-payment of labor standard benefits from March 1991 to March
15, 1993. Virgilio Soriano also complained of illegal dismissal.

In its Position Paper, LSWA alleged that complainants were estopped from claiming that they were underpaid
because they were informed that the pay and benefits given to them were based on the contract rate of P103.00 per
eight hours of work or about P3,100.00 per month.

Issue: Whether GSIS is solidarily liable for payment of complainants-respondnents' salary differentials.

Held: Yes. Articles 106 and 107 of the Labor Code provide:

ART. 106. Contractor or subcontractor. — Whenever an employer enters into contract with another person for
the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall
be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 32


University of San Carlos – College of Law Labor Standards Finals Case Digests

ART. 107 Indirect employer. — The provisions of the immediately preceding Article shall likewise apply to
any person, partnership, association or corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.

In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants' salaries by incorporating
in the Security Service Contract the salary rate increases mandated by Wage Order Nos. 1 and 2 by increasing the
contract price from P3,000.00 to P3,176.07 per guard per month effective November 1, 1990 to January 7, 1991, and
P4,200.00 effective January 8, 1991 to May 31, 1991.

In Rosewood Processing, Inc. v. National Labor Relations Commission, 25 the Court explained the rationale for the
joint and several liability of the employer, thus:

The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of
the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of
his or her status as a direct employer, and the principal as the indirect employer of the contractor's employees. This
liability facilitates, if not guarantees, payment of the workers' compensation, thus, giving the workers ample
protection as mandated by the 1987 Constitution. This is not unduly burdensome to the employer. Should the
indirect employer be constrained to pay the workers, it can recover whatever amount it had paid in accordance with
the terms of the service contract between itself and the contractor.

Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed upon the latter because
it would be paying twice for complainants' services. Such fears are unfounded. Under Article 1217 of the Civil Code,
if the GSIS should pay the money claims of complainants, it has the right to recover from LSWA whatever amount it
has paid in accordance with the terms of the service contract between the LSWA and the GSIS. Joint and solidary
liability is simply meant to assure aggrieved workers of immediate and sufficient payment of what is due them. This
is in line with the policy of the State to protect and alleviate the plight of the working class.

Republic vs Asiapro Cooperative (2007) G.R. 172101


Facts:

Respondent Asiapro, as a cooperative, is composed of owners-members.Under its by-laws, owners-members are of


two categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2)
associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges
provided in its by-laws, Its primary objectives are to provide savings and credit facilities and to develop other
livelihood services for its owners-members.In the discharge of the aforesaid primary objectives, respondent
cooperative entered into several Service Contracts with Stanfilco - a division of DOLE Philippines, Inc. and a
company based in Bukidnon.The owners-members do not receive compensation or wages from the respondent
cooperative.Instead, they receive a share in the service surplus which the respondent cooperative earns from different
areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The owners-
members get their income from the service surplus generated by the quality and amount of services they rendered,
which is determined by the Board of Directors of the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent
cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner SSS as
self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161,

Ma. Cecelia Timbal LlB – 2 Rm 402 | 33


University of San Carlos – College of Law Labor Standards Finals Case Digests

as amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of
both the employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A.
Jara, sent a letter to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager
Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco, respondent
cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an employer
of its owners-members working with Stanfilco.Thus, respondent cooperative should register itself with petitioner SSS
as an employer and make the corresponding report and remittance of premium contributions in accordance with the
Social Security Law of 1997.On 9 October 2002, respondent cooperative, through its counsel, sent a reply to petitioner
SSSs letter asserting that it is not an employer because its owners-members are the cooperative itself; hence, it cannot
be its own employer.Again, on 21 October 2002 petitioner SSS sent a letter to respondent cooperative ordering the
latter to register as an employer and report its owners-members as employees for compulsory coverage with the
petitioner SSS.Respondent cooperative continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition before petitioner SSC against the respondent cooperative
and Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to register as an
employer and to report respondent cooperatives owners-members as covered employees under the compulsory
coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of 1997.The same
was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging
that no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no
jurisdiction over the respondent cooperative.Stanfilco, on the other hand, filed an Answer with Cross-claim against
the respondent cooperative.

Issue: Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against
the respondent cooperative.

Held: Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III
of the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to coverage, benefits, contributions
and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x x.(Emphasis
supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1.Jurisdiction. Any dispute arising under the Social Security Act with respect to coverage, entitlement of
benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall
be cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the
Department/Branch/Representative Office concerned had first taken action thereon in writing.(Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is
well within the exclusive domain of the petitioner SSC.It is important to note, though, that the mandatory

Ma. Cecelia Timbal LlB – 2 Rm 402 | 34


University of San Carlos – College of Law Labor Standards Finals Case Digests

coverage under the SSS Law is premised on the existence of an employer-employee relationship except in
cases of compulsory coverage of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to
Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would
depend almost entirely upon the defendant. Moreover, it is well-settled that once jurisdiction is acquired by the
court, it remains with it until the full termination of the case. The said principle may be applied even to quasi-judicial
bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent
cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the
compulsory coverage of the SSS because they are employees of the respondent cooperative.Consequently, the
respondent cooperative being the employer of its owners-members must register as employer and report its owners-
members as covered members of the SSS and remit the necessary premium contributions in accordance with the
Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the
petitioner SSC, the case clearly falls within its jurisdiction.Although the Answer with Motion to Dismiss filed by the
respondent cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee
relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its
jurisdiction over the petition-complaint filed before it.Thus, the petitioner SSC cannot be faulted for initially
assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its
owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the
existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-employee
relationship that exists between the respondent cooperative and its owners-members.

The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the
National Labor Relations Commission (NLRC).Article 217 of the Labor Code enumerating the jurisdiction of the
Labor Arbiters and the NLRC provides that:

ART. 217.JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x

6.Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include
issues on the coverage thereof, because claims are undeniably rooted in the coverage by the system.Hence,
the question on the existence of an employer-employee relationship for the purpose of determining the
coverage of the Social Security System is explicitly excluded from the jurisdiction of the NLRC and falls
within the jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under
the Social Security Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory
coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it
declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may inquire

Ma. Cecelia Timbal LlB – 2 Rm 402 | 35


University of San Carlos – College of Law Labor Standards Finals Case Digests

into the presence or absence of an employer-employee relationship without need of waiting for a prior
pronouncement or submitting the issue to the NLRC for prior determination.Since both the petitioner SSC and the
NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes creating them,
petitioner SSC has the authority to inquire into the relationship existing between the worker and the person or entity
to whom he renders service to determine if the employment, indeed, is one that is excepted by the Social Security
Law of 1997 from compulsory coverage.

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal;
and (4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. The
most important element is the employers control of the employees conduct, not only as to the result of the work to
be done, but also as to the means and methods to accomplish. The power of control refers to the existence of the
power and not necessarily to the actual exercise thereof.It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer has the right to wield that power. All the
aforesaid elements are present in this case.

First.It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive
discretion in the selection and engagement of the owners-members as well as its team leaders who will be
assigned at Stanfilco. Second.Wages are defined as remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other
method of calculating the same, which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for service rendered or to be rendered. In this case, the
weekly stipends or the so-called shares in the service surplus given by the respondent cooperative to its owners-
members were in reality wages, as the same were equivalent to an amount not lower than that prescribed by existing
labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same shall not
be lower than the prevailing rates of wages. It cannot be doubted then that those stipends or shares in the service
surplus are indeed wages, because these are given to the owners-members as compensation in rendering services to
respondent cooperatives client, Stanfilco.Third.It is also stated in the above-mentioned Service Contracts that it is the
respondent cooperative which has the power to investigate, discipline and remove the owners-members and its
team leaders who were rendering services at Stanfilco. Fourth.As earlier opined, of the four elements of the employer-
employee relationship, the control test is the most important.In the case at bar, it is the respondent cooperative
which has the sole control over the manner and means of performing the services under the Service Contracts
with Stanfilco as well as the means and methods of work. Also, the respondent cooperative is solely and entirely
responsible for its owners-members, team leaders and other representatives at Stanfilco. All these clearly prove that,
indeed, there is an employer-employee relationship between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide
that there shall be no employer-employee relationship between the respondent cooperative and its owners-members.
This Court, however, cannot give the said provision force and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent
cooperative and its owners-members.The four elements in the four-fold test for the existence of an employment
relationship have been complied with.The respondent cooperative must not be allowed to deny its employment
relationship with its owners-members by invoking the questionable Service Contracts provision, when in actuality, it
does exist.The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a

Ma. Cecelia Timbal LlB – 2 Rm 402 | 36


University of San Carlos – College of Law Labor Standards Finals Case Digests

contract, when the terms and surrounding circumstances show otherwise.The employment status of a person is
defined and prescribed by law and not by what the parties say it should be.

It is settled that 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, the agreed terms and conditions must not
be contrary to law, morals, customs, public policy or public order. The Service Contract provision in question must
be struck down for being contrary to law and public policy since it is apparently being used by the respondent
cooperative merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by
the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-
Calleja wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons,
partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the
others are its employees x x x.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to
collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of
August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves
members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for
being themselves co-owners of the cooperative.

However, in so far as it involves cooperatives with employees who are not members or co-owners thereof,
certainly such employees are entitled to exercise the rights of all workers to organization, collective
bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present case.The declaration made by the
Court in the aforesaid case was made in the context of whether an employee who is also an owner-member
of a cooperative can exercise the right to bargain collectively with the employer who is the cooperative
wherein he is an owner-member. Obviously, an owner-member cannot bargain collectively with the
cooperative of which he is also the owner because an owner cannot bargain with himself.In the instant case,
there is no issue regarding an owner-members right to bargain collectively with the cooperative.The
question involved here is whether an employer-employee relationship can exist between the cooperative
and an owner-member.In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it
actually recognized that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the
Cooperative Development Authority. It has its Board of Directors, which directs and supervises its business;
meaning, its Board of Directors is the one in charge in the conduct and management of its affairs. With that,
a cooperative can be likened to a corporation with a personality separate and distinct from its owners-
members.Consequently, an owner-member of a cooperative can be an employee of the latter and an
employer-employee relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the
Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460. In its by-
laws, its Board of Directors directs, controls, and supervises the business and manages the property of the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 37


University of San Carlos – College of Law Labor Standards Finals Case Digests

respondent cooperative.Clearly then, the management of the affairs of the respondent cooperative is vested
in its Board of Directors and not in its owners-members as a whole.Therefore, it is completely logical that
the respondent cooperative, as a juridical person represented by its Board of Directors, can enter into an
employment with its owners-members.

In sum, having declared that there is an employer-employee relationship between the respondent
cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-
complaint filed before it by the petitioner SSS

Jaguar Security and Investigation Agency vs Sales (2008) G.R. 162420


Facts:

Petitioner Jaguar Security and Investigation Agency ("Jaguar") is a private corporation engaged in the business of
providing security services to its clients, one of whom is Delta Milling Industries, Inc. ("Delta").

Private respondents Rodolfo Sales, Melvin Tamayo, Dionisio Caranyagan, Jesus Silva, Jr., Jaime Moron and Daneth
Fetalvero were hired as security guards by Jaguar. They were assigned at the premises of Delta in Libis, Quezon City.
Caranyagan and Tamayo were terminated by Jaguar on May 26, 1998 and August 21, 1998, respectively. Allegedly
their dismissals were arbitrary and illegal. Sales, Moron, Fetalvero and Silva remained with Jaguar. All the guard-
employees, claim for monetary benefits such as underpayment, overtime pay, rest day and holiday premium pay,
underpaid 13th month pay, night shift differential, five days service and incentive leave pay. In addition to these
money claims, Caranyagan and Tamayo argue that they were entitled to separation pay and back wages, for the time
they were illegally dismissed until finality of the decision. Furthermore, all respondents claim for moral and
exemplary damages.

On September 18, 1998, respondent security guards instituted the instant labor case before the labor arbiter.

On May 25, 1999, the labor arbiter rendered a decision in favor of private respondents Sales, et al., the dispositive
portion of which provides:

"WHEREFORE, judgment is hereby rendered dismissing the charges of illegal dismissal on the part of the
complainants MELVIN R. TAMAYO and DIONISIO C. CARANYAGAN for lack of merit but ordering respondents
JAGUAR SECURITY AND INVESTIGATION AGENCY and DELTA MILLING INDUSTRIES, INC., to jointly and
severally pay all the six complainants, namely: RODOLFO A. SALES, MELVIN R. TAMAYO, JAIME MORON and
DANETH FETALVERO the following money claims for their services rendered from April 24, 1995 to April 24, 1998:

a) wage differentials
b) overtime pay differentials (4 hours a day)
c) rest day pay
d) holiday pay
e) holiday premium pay
f) 13th month pay differentials
g) five days service incentive leave pay per year subject to the exception earlier cited.

The Research and Information Unit of this Commission is hereby directed to compute and quantify the above awards
and submit a report thereon within 15 days from receipt of this decision.

For purposes of any appeal, the appeal bond is tentatively set at P100,000.00.
All other claims are DISMISSED for lack of merit.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 38


University of San Carlos – College of Law Labor Standards Finals Case Digests

SO ORDERED."

On July 1, 1999, petitioner Jaguar filed a partial appeal questioning the failure of public respondent NLRC to resolve
its cross-claim against Delta as the party ultimately liable for payment of the monetary award to the security guards.

In its Resolution dated September 19, 2000, the NLRC dismissed the appeal, holding that it was not the proper forum
to raise the issue. It went on to say that Jaguar, being the direct employer of the security guards, is the one principally
liable to the employees. Thus, it directed petitioner to file a separate civil action for recovery of the amount before the
regular court having jurisdiction over the subject matter, for the purpose of proving the liability of Delta.

Jaguar sought reconsideration of the dismissal, but the Commission denied the same in its Resolution dated
November 9, 2001.
Petitioner filed a petition for certiorari with the CA, which, in the herein assailed Decision dated October 21, 2002 and
Resolution dated February 13, 2004, dismissed the petition for lack of merit.

Issue: Whether or not petitioner may claim reimbursement from Delta Milling through a cross-claim filed with the
labor court?

Held: The Court ruled in the negative.

The jurisdiction of labor courts extends only to cases where an employer-employee relationship exists.

In the present case, there exists no employer-employee relationship between petitioner and Delta Milling. In its cross-
claim, petitioner is not seeking any relief under the Labor Code but merely reimbursement of the monetary benefits
claims awarded and to be paid to the guard employees. There is no labor dispute involved in the cross-claim against
Delta Milling. Rather, the cross-claim involves a civil dispute between petitioner and Delta Milling. Petitioner's cross-
claim is within the realm of civil law, and jurisdiction over it belongs to the regular courts.

Moreover, the liability of Delta Milling to reimburse petitioner will only arise if and when petitioner actually pays its
employees the adjudged liabilities. Payment, which means not only the delivery of money but also the performance,
in any other manner, of the obligation, is the operative fact which will entitle either of the solidary debtors to seek
reimbursement for the share which corresponds to each of the debtors. In this case, it appears that petitioner has yet
to pay the guard employees.

The petition is DENIED.

Almeda et al., vs Asahi Glass (2008) G.R. 177785


Facts:

This a complaint for illegal dismissal with claims for moral and exemplary damages and attorney’s fees filed by
Almeda, et al against Asahi Glass and San Sebastian Allied Services, Inc. SSASI. Petitioners alleged that Asahi and
SSASI entered into a service contract whereby SSASI undertook to provide Asahi with the necessary manpower for
its operations. Pursuant to such a contract, SSASI employed petitioners Randy Almeda, Edwin Audencial, Nolie
Ramirez and Ernesto Calicagan as glass cutters, and petitioner Reynaldo Calicagan as Quality Controller, all assigned
to work for respondent. Asahi terminated its service contract with SSASI, which in turn, terminated the employment
of petitioners on the same date. Believing that SSASI was a labor-only contractor, and having continuously worked as
glass cutters and quality controllers for the respondent - functions which are directly related to its main line of
business as glass manufacturer - for three to 11 years, petitioners asserted that they should be considered regular

Ma. Cecelia Timbal LlB – 2 Rm 402 | 39


University of San Carlos – College of Law Labor Standards Finals Case Digests

employees of the Asahi; and that their dismissal from employment without the benefit of due process of law was
unlawful.

Asahi claimed that petitioners were employees of SSASI and were merely assigned by SSASI to work for respondent
to perform intermittent services pursuant to an Accreditation Agreement. SSASI averred that it was the one who
hired petitioners and assigned them to work for respondent on occasions that the latter’s work force could not meet
the demands of its customers. Eventually, however, respondent ceased to give job orders to SSASI, constraining the
latter to terminate petitioners’ employment.

Issue: Are Almeda, et al employees of Asahi Glass even considering that they were originally hired by San Sebastian
Allied Services, Inc.?

Held: Yes. Almeda, et al are employees of Asahi Glass.

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or
farm out to a contractor or subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to be performed or completed
within or outside the premises of the principal. A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its own
manner and method, and free from the control and direction of the principal in all matters connected with
the performance of the work except as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits.

On the other hand, labor-only contracting, a prohibited act, is an arrangement in which the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-
only contracting, the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the
job, work or service under its own account and responsibility;

(b) The employees recruited, supplied or placed by such contractor or subcontractor is performing activities
which are directly related to the main business of the principal.

In labor-only contracting, the statutes create an employer-employee relationship for a comprehensive purpose: to
prevent circumvention of labor laws. The contractor is considered as merely the agent of the principal employer
and the latter is responsible to the employees of the labor-only contractor as if such employees are directly
employed by the principal employer. Therefore, if SSASI was a labor-only contractor, then respondent shall be
considered as the employer of petitioners who must bear the liability for the dismissal of the latter, if any.

An important element of legitimate job contracting is that the contractor has substantial capital or investment ,
which respondent failed to prove. There is a dearth of evidence to prove that SSASI possessed substantial capital or
investment when respondent began contractual relations with it more than a decade before 2003. The Court did not

Ma. Cecelia Timbal LlB – 2 Rm 402 | 40


University of San Carlos – College of Law Labor Standards Finals Case Digests

find a single financial statement or record to attest to the economic status and financial capacity of SSASI to venture
into and sustain its own business independent from petitioner.

Furthermore, the Court is unconvinced by respondent’s argument that petitioners were performing jobs that were
not directly related to respondent’s main line of business. Respondent is engaged in glass manufacturing. One of the
petitioners served as a quality controller, while the rest were glass cutters. The only excuse offered by respondent -
that petitioners’ services were required only when there was an increase in the market’s demand with which
respondent could not cope - only prove even more that the services rendered by petitioners were indeed part of the
main business of respondent. It would mean that petitioners supplemented the regular workforce when the latter
could not comply with the market’s demand; necessarily, therefore, petitioners performed the same functions as the
regular workforce. The indispensability of petitioners’ services was fortified by the length and continuity of their
performance, lasting for periods ranging from three to 11 years.

More importantly, the Court finds that the crucial element of control over petitioners rested in respondent. The
power of control refers to the authority of the employer to control the employee not only with regard to the result of
work to be done, but also to the means and methods by which the work is to be accomplished. It should be borne in
mind that the power of control refers merely to the existence of the power and not to the actual exercise thereof. It
is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that
the former has a right to wield the power.

Petitioners followed the work schedule prepared by respondent. They were required to observe all rules and
regulations of the respondent pertaining to, among other things, the quality of job performance, regularity of job
output, and the manner and method of accomplishing the jobs. Other than being the one who hired petitioners, there
was absolute lack of evidence that SSASI exercised control over them or their work.

The fact that it was SSASI which dismissed petitioners from employment is irrelevant. It is hardly proof of control,
since it was demonstrated only at the end of petitioners’ employment. What is more, the dismissal of petitioners by
SSASI was a mere result of the termination by respondent of its contractual relations with SSASI.

SSASI is a labor-only contractor; hence, it is considered as the agent of respondent. Respondent is deemed by law
as the employer of petitioners.

Equally unavailing is respondent’s stance that its relationship with petitioners should be governed by the
Accreditation Agreement stipulating that petitioners were to remain employees of SSASI and shall not become
regular employees of the respondent. A party cannot dictate, by the mere expedient of a unilateral declaration in a
contract, the character of its business, i.e., whether as labor-only contractor or as job contractor, it being crucial that its
character be measured in terms of and determined by the criteria set by statute

Sasan, Sr et al, vs NLRC and EPCIB (2008) G.R. 176240


Facts:

Equitable-PCI Bank (E-PCIBank), a banking entity entered into a Contract for Services with HI, a corporation
primarily engaged in the business of providing janitorial and messengerial services. Pursuant to their contract, HI
shall hire and assign workers to E-PCIBank to perform janitorial/messengerial and maintenance services. The
contract was impliedly renewed year after year. Petitioners were among those employed and assigned to E-PCIBank
at its branch along Gorordo Avenue, Lahug, Cebu City, as well as to its other branches in the Visayas.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 41


University of San Carlos – College of Law Labor Standards Finals Case Digests

On 23 July 2001, petitioners filed with the Arbitration Branch of the NLRC separate complaints against E-PCIBank
and HI for illegal dismissal, with claims for separation pay, service incentive leave pay, allowances, damages,
attorney’s fees and costs; later amended to include a claim for 13th month-pay.

Petitioners claimed that they had become regular employees of E-PCIBank with respect to the activities for which
they were employed, having continuously rendered janitorial and messengerial services to the bank for more than
one year; that E-PCIBank had direct control and supervision over the means and methods by which they were to
perform their jobs; and that their dismissal by HI was null and void because the latter had no power to do so since
they had become regular employees of E-PCIBank.

E-PCIBank averred that it entered into a Contract for Services with HI, an independent job contractor which hired
and assigned petitioners to the bank to perform janitorial and messengerial services thereat. It was HI that paid
petitioners’ wages, monitored petitioners’ daily time records (DTR) and uniforms, and exercised direct control and
supervision over the petitioners and that therefore HI has every right to terminate their services legally. E-PCIBank
could not be held liable for whatever misdeed HI had committed against its employees.

HI asserted that it was an independent job contractor engaged in the business of providing janitorial and related
services to business establishments, and E-PCIBank was one of its clients. Petitioners were its employees, part of its
pool of janitors/messengers assigned to E-PCIBank. The Contract for Services between HI and E-PCIBank expired on
15 July 2000. E-PCIBank no longer renewed said contract with HI. HI designated petitioners to new work
assignments, but the latter refused to comply with the same. Petitioners were not dismissed by HI, whether actually
or constructively, thus, petitioners’ complaints before the NLRC were without basis.

The LA rendered a Decision finding that HI was not a legitimate job contractor on the ground that it did not possess
the required substantial capital or investment to actually perform the job, work, or service under its own account and
responsibility as required under the Labor Code. HI is therefore a labor-only contractor and the real employer of
petitioners is E-PCIBank which is held liable to petitioners.

E-PCIBank and HI appealed the same to the NLRC. HI submitted before the NLRC several documents which it did
not present before the LA. The NLRC took into consideration the documentary evidence presented by HI for the first
time on appeal and, on the basis thereof, declared HI as a highly capitalized venture with sufficient capitalization,
which cannot be considered engaged in “labor-only contracting.”

Issues:

1. W/N HI is a labor-only contactor

2. W/N E-PCIBank should be deemed petitioners’ principal employer

3. W/N petitioners were illegally dismissed from their employment.

Held: HI is a legitimate job contractor.

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm
out to a contractor or subcontractor the performance or completion of a specific job, work or service within a definite
or predetermined period, regardless of whether such job, work or service is to be performed or completed within or

Ma. Cecelia Timbal LlB – 2 Rm 402 | 42


University of San Carlos – College of Law Labor Standards Finals Case Digests

outside the premises of the principal. A person is considered engaged in legitimate job contracting or subcontracting
if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its
own manner and method, and free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the
contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social and
welfare benefits.

In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only
contracting, the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work or service under its own account and responsibility; and

(b) The employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal.

In distinguishing between permissible job contracting and prohibited labor-only contracting, we elucidated
in Vinoya v. National Labor Relations Commission, that it is not enough to show substantial capitalization or
investment in the form of tools, equipment, etc. Other facts that may be considered include the following:
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 specified
pieces 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
premises, tools, appliances, materials and labor; and the mode and manner or terms of payment. Simply
put, the totality of the facts and the surrounding circumstances of the case are to be considered. Each case
must be determined by its own facts and all the features of the relationship are to be considered.

We take note that HI has been issued by the Department of Labor and Employment (DOLE) Certificate of
Registration Numbered VII-859-1297-048, stating among others that it had complied with the requirements as
provided for under the Labor Code, as amended, and its Implementing Rules.

The evidence on record also shows that HI is carrying on a distinct and independent business from E-PCIBank. The
employees of HI are assigned to clients to perform janitorial and messengerial services, clearly distinguishable from
the banking services in which E-PCIBank is engaged.

“Substantial capital or investment” refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipments, implements, machineries and work premises, actually and directly used by the contractor or

Ma. Cecelia Timbal LlB – 2 Rm 402 | 43


University of San Carlos – College of Law Labor Standards Finals Case Digests

subcontractor in the performance or completion of the job, work or service contracted out. An independent
contractor must have either substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others. The law does not require both substantial capital and investment in the form of tools,
equipment, machineries, etc. It is enough that it has substantial capital. In the case of HI, it has proven both.

Once it is established that an entity such as in this case, HI has substantial capital, it was no longer necessary to
adduce further evidence to prove that it does not fall within the purview of “labor-only” contracting. There is even
no need for HI to refute the contention of petitioners that some of the activities they performed such as those of
messengerial services are directly related to the principal business of E- PCIBank.

In any event, we have earlier declared that while these services rendered by the petitioners as janitors, messengers
and drivers are considered directly related to the principal business of a bank, in this case E-PCIBank, nevertheless,
they are not necessary in the conduct of its (E-PCIBANK’s) principal business.

Etched in an unending stream of cases are four standards in determining the existence of an employer-employee
relationship, namely: (a) the manner of selection and engagement of the putative employee; (b) the mode of payment
of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of control of the putative
employee’s conduct. Most determinative among these factors is the so-called “control test.”

All the circumstances establish that HI undertook said contract on its account, under its own responsibility, according
to its own manner and method, and free from the control and direction of E-PCIBank. Where the control of the
principal is limited only to the result of the work, independent job contracting exists. The janitorial service
agreement between E-PCIBank and HI is a case of permissible job contracting.

Considering the foregoing, plus taking judicial notice of the general practice in private, as well as in government
institutions and industries, of hiring an independent contractor to perform special services, ranging from janitorial,
security and even technical services, we can only conclude that HI is a legitimate job contractor. As such legitimate
job contractor, the law creates an employer-employee relationship between HI and petitioners which renders HI
liable for the latter’s claims.

In view of the preceding conclusions, petitioners will never become regular employees of E-PCIBank regardless of
how long they were working for the latter.

Petitioners were not illegally dismissed by HI. Upon the termination of the Contract of Service between HI and E-
PCIBank, petitioners cannot insist to continue to work for the latter. Their pull-out from E-PCIBank did not
constitute illegal dismissal since, first, petitioners were not employees of E-PCIBank; and second, they were pulled out
from said assignment due to the non-renewal of the Contract of Service between HI and E-PCIBank. At the time they
filed their complaints with the Labor Arbiter, petitioners were not even dismissed by HI; they were only “off-detail”
pending their re-assignment by HI to another client. And when they were actually given new assignments by HI
with other clients, petitioners even refused the same.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 44


University of San Carlos – College of Law Labor Standards Finals Case Digests

Purefoods Corp., vs NLRC et al., (2008) G.R. 172241

Facts:

Lolita Neri (Neri) originally filed a claim for nonpayment of additional wage increase, regularization, nonpayment of
service incentive leave, underpayment of 13th month pay, and nonpayment of premium pay for holiday and holiday
pay against Purefoods Corporation (Purefoods). By July 4, 1992, however, Neri was dismissed from her work as a
Deli-Attendant. Subsequently, or on 13 July 1992, eleven (11) other complainants joined forces with Neri and together
they filed an amended complaint, with Neri charging Purefoods with illegal dismissal. All the other complainants,
save for Neri, were still working for Purefoods at the time of the filing of the amended complaint. On August 31,
1993, Labor declared Neri and the complainants as Purefoods' regular employees; and Neri as having been illegally
dismissed and entitled to reinstatement with payment of backwages. Purefoods filed a partial appeal, praying that
the claims of complainants be dismissed for lack of merit, or in the alternative, the case be remanded for formal
hearing on the merits and to implead D.L. Admark as a party-respondent.The NLRC granted the appeal and
remanded the case for further hearings on the factual issues.

The case was remanded to Labor Arbiter, who, after finding that Neri is not an employee of petitioner, but rather of
D.L. Admark, an independent labor contractor, dismissed the complaint. A memorandum on appeal was nominally
filed by all the complainants; the NLRC ruled in complainants' favor and reversed and set aside the labor arbiter's
decision. According to the NLRC, the pieces of evidence on record established the employer-employee relationship
between Purefoods and Neri and the other complainants. Purefoods moved for the reconsideration of the decision
but its motion was denied for lack of merit. Hence, its recourse to the Court of Appeals via a petition for certiorari.

The Court of Appeals, relying on the case of Escario v. NLRC, held that D.L. Admark is a legitimate independent
contractor. However, it ruled that complainants are regular employees of Purefoods. Citing Art. 280 of the Labor
Code, the appellate court found that complainants were engaged to perform activities which are usually necessary or
desirable in the usual business or trade of Purefoods, and that they were under the control and supervision of
Purefoods' supervisors, and not of D.L. Admark's. It noted that in the Promotions Agreements between D.L. Admark
and Purefoods, there was no mention of the list of D.L. Admark employees who will handle particular promotions
for petitioner, and that complainants' periods of employment are not fully covered by the Promotions Agreements.

Issue: Whether or not Neri and the other complainants are employees of PUREFOODS or A.D. ADMARK’S?

Held: The Court agrees with Purefoods' argument that Art. 280 of the Labor Code finds no application in a trilateral
relationship involving a principal, an independent job contractor, and the latter's employees. Indeed, the Court has
ruled that said provision is not the yardstick for determining the existence of an employment relationship because it
merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of
determining the right of an employee to certain benefits, to join or form a union, or to security of tenure; it does not
apply where the existence of an employment relationship is in dispute. It is therefore erroneous on the part of the
Court of Appeals to rely on Art. 280 in determining whether an employer-employee relationship exists between
respondent Neri and Purefoods.

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or
farm out with the contractor or subcontractor the performance or completion of a specific job, work or service within
a definite or predetermined period regardless of whether such job, work or service is to be performed or completed
within or outside the premises of the principal. In this arrangement, the following conditions must be met: (a) the
contractor carries on a distinct and independent business and undertakes the contract work on his 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 his work except as to the results thereof; (b) the contractor has substantial capital or
investment; and (c) the agreement between the principal and contractor or subcontractor assures the contractual employees'

Ma. Cecelia Timbal LlB – 2 Rm 402 | 45


University of San Carlos – College of Law Labor Standards Finals Case Digests

entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of
tenure, and social welfare benefits.

To support its position that respondent is not its employee, Purefoods relies on the following: (i) the Promotions
Agreements it entered into with D.L. Admark; (ii) Department Order No. 10 (Series of 1997) which defines legitimate
contracting or subcontracting; and (iii) Escario v. NLRC wherein the Court declared D.L. Admark as a legitimate labor
contractor.

On the other hand, early on, Neri and the rest of the complainants admitted that they worked for petitioner through
D.L. Admark. However, they also averred that they were under the control and supervision of petitioner's
employees–salesmen, poultry sales managers, deli supervisors–who give them work orders and to whom they
submit weekly inventory reports and monthly competitive sales report. In support of these statements, Neri
appended several documents (various Identification Cards, Certification from Rustan's Supermarkets stating that
respondent Neri is from Purefoods, Memoranda to respondent Neri written by a supervisor from

Purefoods, letters from Purefoods area sales managers introducing complainants as Purefoods Merchandisers).
Purefoods, meanwhile, claims that these documents must be taken in the context of the performance of the service
contracted out–promotion of its products.

In the first place, D.L. Admark's status as a legitimate independent contractor has already been established in Escario
v. NLRC. In the said case, complainants, through D.L. Admark, worked as merchandisers for California
Manufacturing Corporation (CMC). They filed a case before the labor arbiter for the regularization of their
employment status with CMC, and while the case was pending, D.L. Admark sent termination letters to
complainants. The complainants thereafter amended their complaint to include illegal dismissal. The Court
considered the following circumstances as tending to establish D.L. Admark's status as a legitimate job contractor:

1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional,
advertising, marketing and merchandising activities.

2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the supply
of sales promoting merchandising services rather than one of manpower placement.

3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions,
marketing and merchandising. It had several merchandising contracts with companies like Purefoods,
Corona Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the publication business as
evidenced by its magazine the "Phenomenon."

4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to
P6 million and is therefore a highly capitalized venture. It had an authorized capital stock of P500,000.00. It
owned several motor vehicles and other tools, materials and equipment to service its clients. It paid rentals
of P30,020 for the office space it occupied.

Moreover, applying the four-fold test used in determining employer-employee relationship, the Court found that: the
employees therein were selected and hired by D.L. Admark; D.L. Admark paid their salaries, as evidenced by the
payroll prepared by D.L. Admark and sample contribution forms; D.L. Admark had the power of dismissal as it
admitted that it was the one who terminated the employment of the employees; and finally, it was D.L. Admark who
exercised control and supervision over the employees.

Furthermore, it is evident from the Promotions Agreements entered into by Purefoods that D.L. Admark is a
legitimate labor contractor. A sample agreement reads in part:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 46


University of San Carlos – College of Law Labor Standards Finals Case Digests

WHEREAS, The FIRST PARTY is engaged in the general promotion business;

WHEREAS, The SECOND PARTY will launch its "Handog sa Graduates" promotion project;

WHEREAS, The FIRST PARTY has offered its services to the SECOND PARTY, in connection with the said
promotion project, and the latter has accepted the said offer;

NOW, THEREFORE, for and in consideration of the foregoing premises, and of the mutual convenience between
them, the parties have agreed as follows:

1. The FIRST PARTY shall handle and implement the "Handog sa Graduates" promotion project of
the SECOND PARTY, said project to last from February 1, 1992 to July 31, 1992.

2. The FIRST PARTY shall indemnify the SECOND PARTY for any loss or damage to the latter's
properties, if such loss or damage is due to the fault or negligence of the FIRST PARTY or its agents
or employees.

3. There shall be no employer-employee relationship between the FIRST PARTY or its agents or
employees and the SECOND PARTY.

4. In consideration for the services to be rendered by the FIRST PARTY to the SECOND PARTY, the
latter shall pay the former the amount of Two Million Six Hundred Fifty Two Thousand pesos only
(P2,652,000.00) payable as follows:

The agreements confirm that D.L. Admark is an independent contractor which Purefoods had engaged to supply
general promotion services, and not mere manpower services, to it. The provisions expressly permit D.L. Admark
to handle and implement Purefoods' project, and categorically state that there shall be no employer-employee
relationship between D.L. Admark's employees and Purefoods. While it may be true that complainants were required
to submit regular reports and were introduced as Purefoods merchandisers, these are not enough to establish
Purefoods' control over them. Even if the report requirements are somehow considered as control measures, they
were imposed only to ensure the effectiveness of the promotion services rendered by D.L. Admark. It would be a rare
contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in
his performance of the engagement.Indeed, it would be foolhardy for any company to completely give the reins and
totally ignore the operations it has contracted out.

Significantly, the pieces of evidence submitted by Neri do not support her claim of having been a regular employee of
Purefoods. We note that two "Statement of Earnings and Deductions"were issued for the same period, December
1989, and in one "Statement," someone deliberately erased the notation "January 1997," thereby casting doubt on the
authenticity of the said documents. Even the identification cards presented by Neri are neither binding on Purefoods
nor even indicative of her claimed employee status of Purefoods, issued as they were by the supermarkets concerned
and not by Purefoods itself. Moreover, the check voucher issued by Purefoods marked "IN PAYMENT OF DL
ADMARK DELI ATTENDANTS 12.00 PESOS ADJUSTMENT JAN 30, 1991 TO JUNE 22, 1992," signed and received
by Neri, is proof that Purefoods never considered Neri as its own employee, but rather as one of D.L. Admark's deli
attendants.

We also note that Neri herself admitted in her Sinumpaang Salaysay and in the hearings that she applied with D.L.
Admark and that she worked for Purefoods through D.L. Admark. Neri was aware from the start that D.L. Admark
was her employer and not Purefoods. She had kept her contract with D.L. Admark, and inquired about her
employment status with D.L. Admark. It was D.L. Admark, as her employer, which had the final say in, and which
actually effected, her termination.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 47


University of San Carlos – College of Law Labor Standards Finals Case Digests

In view of the foregoing, we hold that Neri is not an employee of Purefoods, but that of D.L. Admark. In the absence
of employer-employee relations between Neri and Purefoods, the complaint for illegal dismissal and other monetary
claims must fail.

Maranaw Hotels and Resort vs CA (2009) G.R. 149660

Facts:

Oabel was hired by petitioner as an extra beverage attendant. He worked in Century Park Hotel, an establishment
owned by the petitioner. Petitioner contracted with Manila Resource Development Corp or MANRED.

Oabel was transferred to MANRED with the latter deporting itself as her employer. Oabel worked as secretary,
public relations, gift shop attendant, waitress and shop attendant. Oabel filed a petition for regularization of
employment. She was dismissed from employment.

Petitioner argues that it entered into a service agreement with MANRED. MANRED maintains that Oabel is its
employee and was willing to reinstate her.

Held: Notably, private respondent’s purported employment with MANRED commenced only in 1996, way after she
was hired by the petitioner as extra beverage attendant on April 24, 1995. There is thus much credence in the private
respondent’s claim that the service agreement executed between the petitioner and MANRED is a mere ploy to
circumvent the law on employment, in particular that which pertains on regularization.

In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not cease with the
end of each event or function and that there is an ever present need for individuals to perform certain tasks necessary
in the petitioner’s business. Thus, although the tasks themselves may vary, the need for sufficient manpower to carry
them out does not. In any event, as borne out by the findings of the NLRC, the petitioner determines the nature of the
tasks to be performed by the private respondent, in the process exercising control.

This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a labor-only
contractor. Concordantly, the real employer of private respondent Oabel is the petitioner.

It appears further that private respondent has already rendered more than one year of service to the petitioner, for
the period 1995-1998, for which she must already be considered a regular employee, pursuant to Article 280 of the
Labor Code:

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
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. (Emphasis supplied)

Ma. Cecelia Timbal LlB – 2 Rm 402 | 48


University of San Carlos – College of Law Labor Standards Finals Case Digests

Cola-Cola Bottler’s Phils., vs Agito et al., (2009) G.R. 179546

Facts:

Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) and
engaged in manufacturing, bottling and distributing soft drink beverages and other allied products.

Respondents filed before the NLRC two complaints against petitioner, Interserve, Peerless Integrated Services, Inc.,
Better Builders, Inc., and Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment of
13th month pay, and damages.

Respondents alleged in their Position Paper that they were salesmen assigned at the Lagro Sales Office of petitioner.
They had been in the employ of petitioner for years, but were not regularized. Their employment was terminated
without just cause and due process. However, they failed to state the reason/s for filing a complaint against
Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and Excellent Partners, Inc.

Petitioner filed its Position Paper (with Motion to Dismiss), where it averred that respondents were employees of
Interserve who were tasked to perform contracted services in accordance with the provisions of the Contract of
Services executed between petitioner and Interserve. Said Contract between petitioner and Interserve, covering the
period of 1 April 2002 to 30 September 2002, constituted legitimate job contracting, given that the latter was a bona fide
independent contractor with substantial capital or investment in the form of tools, equipment, and machinery
necessary in the conduct of its business.

To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence:
(1) the Articles of Incorporation of Interserve; (2) the Certificate of Registration of Interserve with the Bureau of
Internal Revenue; (3) the Income Tax Return, with Audited Financial Statements, of Interserve for 2001; and (4) the
Certificate of Registration of Interserve as an independent job contractor, issued by the Department of Labor and
Employment (DOLE).

As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired
them, paid their wages, and supervised their work, as proven by: (1) respondents’ Personal Data Files in the records
of Interserve; (2) respondents’ Contract of Temporary Employment with Interserve; and (3) the payroll records of
Interserve.

Petitioner, thus, sought the dismissal of respondents’ complaint against it on the ground that the Labor Arbiter did
not acquire jurisdiction over the same in the absence of an employer-employee relationship between petitioner and
the respondents.

Petitioner argues that there could not have been labor-only contracting, since respondents did not perform activities
that were indispensable to petitioner’s principal business. And, even assuming that they did, such fact alone does not
establish an employer-employee relationship between petitioner and the respondents, since respondents were unable
to show that petitioner exercised the power to select and hire them, pay their wages, dismiss them, and control their
conduct.

Issue: WON Interserve is a legitimate job contractor.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 49


University of San Carlos – College of Law Labor Standards Finals Case Digests

Held: Interserve is not a legitimate job contractor.

Article 106. Contractor or subcontractor. - Whenever an employer 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 subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

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 restriction, 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 provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employee 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 persons 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.

The afore-quoted provision recognizes two possible relations among the parties: (1) the permitted legitimate job
contract, or (2) the prohibited labor-only contracting.

A legitimate job contract, wherein an employer enters into a contract with a job contractor for the performance of the
former’s work, is permitted by law. Thus, the employer-employee relationship between the job contractor and his
employees is maintained. In legitimate job contracting, the law creates an employer-employee relationship between
the employer and the contractor’s employees only for a limited purpose, i.e., to ensure that the employees are paid
their wages. The employer becomes jointly and severally liable with the job contractor only for the payment of the
employees’ wages whenever the contractor fails to pay the same. Other than that, the employer is not responsible for
any claim made by the contractor’s employees.

On the other hand, labor-only contracting is an arrangement wherein the contractor merely acts as an agent in
recruiting and supplying the principal employer with workers for the purpose of circumventing labor law provisions
setting down the rights of employees. It is not condoned by law. A finding by the appropriate authorities that a
contractor is a "labor-only" contractor establishes an employer-employee relationship between the principal employer
and the contractor’s employees and the former becomes solidarily liable for all the rightful claims of the employees.

Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, provides the guidelines in
determining whether labor-only contracting exists:

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies, or places workers to perform a job, work or service for a principal, and any of the following elements are

Ma. Cecelia Timbal LlB – 2 Rm 402 | 50


University of San Carlos – College of Law Labor Standards Finals Case Digests

present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control the performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work, or service contracted out.

The "right to control" shall refer to the right reversed to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end. (Emphasis supplied.)

When there is labor-only contracting, Section 7 of the same implementing rules, describes the consequences thereof:

Section 7. Existence of an employer-employee relationship.—The contractor or subcontractor shall be considered the


employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following case, as declared by a
competent authority:

a. where there is labor-only contracting; or

b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.

Labor-only contracting would give rise to: (1) the creation of an employer-employee relationship between the
principal and the employees of the contractor or sub-contractor; and (2) the solidary liability of the principal and the
contractor to the employees in the event of any violation of the Labor Code.

The law clearly establishes an employer-employee relationship between the principal employer and the contractor’s
employee upon a finding that the contractor is engaged in "labor-only" contracting. Article 106 of the Labor Code
categorically states: "There is ‘labor-only’ contracting where the person supplying workers to an employee 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 persons are performing activities which are directly related to the
principal business of such employer." Thus, performing activities directly related to the principal business of the
employer is only one of the two indicators that "labor-only" contracting exists; the other is lack of substantial capital
or investment. The Court finds that both indicators exist in the case at bar.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 51


University of San Carlos – College of Law Labor Standards Finals Case Digests

Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work
premises; and respondents, its supposed employees, performed work which was directly related to the principal
business of petitioner. Interserve falls under the definition of a "labor-only" contractor, under Article 106 of the Labor
Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended.

Interserve is a labor-only contractor under Section 5(ii) of the Rules Implementing Articles 106-109 of the Labor Code,
as amended, since it did not exercise the right to control the performance of the work of respondents.

Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which included the respondents,
would comply with "CLIENT" as well as "CLIENT’s policies, rules and regulations." It even required Interserve
personnel to subject themselves to on-the-spot searches by petitioner or its duly authorized guards or security men
on duty every time the said personnel entered and left the premises of petitioner. Said paragraph explicitly
established the control of petitioner over the conduct of respondents. Although under paragraph 4 of the same
Contract, Interserve warranted that it would exercise the necessary and due supervision of the work of its personnel,
there is a dearth of evidence to demonstrate the extent or degree of supervision exercised by Interserve over
respondents or the manner in which it was actually exercised. There is even no showing that Interserve had
representatives who supervised respondents’ work while they were in the premises of petitioner.

Also significant was the right of petitioner under paragraph 2 of the Contract to "request the replacement of the
CONTRACTOR’S personnel." True, this right was conveniently qualified by the phrase "if from its judgment, the jobs
or the projects being done could not be completed within the time specified or that the quality of the desired result is
not being achieved," but such qualification was rendered meaningless by the fact that the Contract did not stipulate
what work or job the personnel needed to complete, the time for its completion, or the results desired. The said
provision left a gap which could enable petitioner to demand the removal or replacement of any employee in the
guise of his or her inability to complete a project in time or to deliver the desired result. The power to recommend
penalties or dismiss workers is the strongest indication of a company’s right of control as direct
employer.1avvphil.zw+

Paragraph 4 of the same Contract, in which Interserve warranted to petitioner that the former would provide
relievers and replacements in case of absences of its personnel, raises another red flag. An independent job contractor,
who is answerable to the principal only for the results of a certain work, job, or service need not guarantee to said
principal the daily attendance of the workers assigned to the latter. An independent job contractor would surely have
the discretion over the pace at which the work is performed, the number of employees required to complete the
same, and the work schedule which its employees need to follow.

the Contract of Services between Interserve and petitioner did not identify the work needed to be performed and the
final result required to be accomplished. Instead, the Contract specified the type of workers Interserve must provide
petitioner ("Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD") and their qualifications
(technical/vocational course graduates, physically fit, of good moral character, and have not been convicted of any
crime). The Contract also states that, "to carry out the undertakings specified in the immediately preceding
paragraph, the CONTRACTOR shall employ the necessary personnel," thus, acknowledging that Interserve did not
yet have in its employ the personnel needed by petitioner and would still pick out such personnel based on the
criteria provided by petitioner. In other words, Interserve did not obligate itself to perform an identifiable job, work,
or service for petitioner, but merely bound itself to provide the latter with specific types of employees. These
contractual provisions strongly indicated that Interserve was merely a recruiting and manpower agency providing
petitioner with workers performing tasks directly related to the latter’s principal business.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 52


University of San Carlos – College of Law Labor Standards Finals Case Digests

Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer of
respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized
causes, none of which were alleged or proven to exist in this case, the only defense of petitioner against the charge of
illegal dismissal being that respondents were not its employees.

South Davao Development Co. vs Gamo (2009) G.R. 171814

Facts:

Petitioner South Davao Development Company is the operator of a coconut and mango farm in San Isidro, Davao
Oriental and Inawayan/Baracatan, Davao del Sur.

On 1963 petitioner hired respondent Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, petitioner appointed
Gamo as a copra maker contractor. Respondents Ernesto Belleza, Carlos Rojas, Maximo Malinao were all employees
in petitioner’s coconut farm, while respondents Felix Terona, Virgilio Cosep, Maximo Tolda, and Nelson Bagaan were
assigned to petitioner’s mango farm. All of the abovenamed respondents (copra workers) were later transferred by
petitioner to Gamo as the latter’s copraceros.

From 1987 to 1999, Gamo and petitioner entered into a profit-sharing agreement wherein 70% of the net proceeds of
the sale of copra went to petitioner and 30% to Gamo. The copra workers were paid by Gamo from his 30% share.

Petitioner wanted to standardize payments to its "contractors" in its coconut farms. Petitioner proposed a new
payment scheme to Gamo. The new scheme provided a specific price for each copra making activity. Gamo
submitted his counter proposal. Petitioner did not accept Gamo’s counter proposal since it was higher by at least fifty
percent (50%) from its original offer.

Without agreeing to the new payment scheme, Gamo and his copra workers started to do harvesting work. Petitioner
told them to stop. Eventually, petitioner and Gamo agreed that the latter may continue with the harvest provided
that it would be his last "contract" with petitioner. Gamo suggested to petitioner to look for a new "contractor" since
he was not amenable to the new payment scheme.

Gamo and petitioner failed to agree on a payment scheme, thus, petitioner did not renew the "contract" of Gamo.
Gamo and the copra workers alleged that they were illegally dismissed.

On the other hand, respondent Eleonor Cosep (Eleonor) was employed as a mango classifier in the packing house of
petitioner’s mango farm in San Isidro, Davao Oriental. Sometime in October 1999, she did not report for work as she
had wanted to raise and sell pigs instead. Petitioner, through Malone Pacquiao, tried to convince Eleonor to report for
work but to no avail.

Respondents filed a complaint for illegal dismissal against petitioner. They alleged that sometime in December 1999,
petitioner verbally terminated them en masse.

Issues:

(1) whether there is a valid job contracting between petitioner and Gamo; and

Ma. Cecelia Timbal LlB – 2 Rm 402 | 53


University of San Carlos – College of Law Labor Standards Finals Case Digests

(2) whether Eleonor had effectively abandoned her work.

Held: To establish the existence of an independent contractor, we apply the following conditions:

first, 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 to the result thereof; and

second, the contractor has substantial capital or investments in the form of tools, equipment, machineries, work
premises and other materials which are necessary in the conduct of his business.

Gamo and the copra workers did not exercise independent judgment in the performance of their tasks. The tools
used by Gamo and his copra workers like the karit, bolo, pangbunot, panglugit and pangtapok are not sufficient to
enable them to complete the job. Reliance on these primitive tools is not enough. In fact, the accomplishment of their
task required more expensive machineries and equipment, like the trucks to haul the harvests and the drying facility,
which petitioner corporation owns.

SC also ruled that there exist employer- employee relationship applying the 4 fold test especially the control power
exercised by petitioner wherein petitioner corporation transferred the copra workers from their previous assignments
to work as copraceros. It was also in the exercise of the same power that petitioner corporation put Gamo in charge of
the copra workers although under a different payment scheme. Thus, it is clear that an employer-employee
relationship has existed between petitioner corporation and respondents since the beginning and such relationship
did not cease despite their reassignments and the change of payment scheme.

3.) It is well settled that abandonment as a just and valid ground for dismissal requires the deliberate and unjustified
refusal of the employee to return for work. Two elements must be present, namely:

(1) the failure to report for work or absence without valid or justifiable reason, and

(2) a clear intention to sever the employer-employee relationship.

The second element is more determinative of the intent and must be evinced by overt acts. Mere absence, not being
sufficient, the burden of proof rests upon the employer to show that the employee clearly and deliberately intended
to discontinue her employment without any intention of returning. In Samarca v. Arc-Men Industries, Inc, we held
that abandonment is a matter of intention and cannot lightly be presumed from certain equivocal acts.

An employee who takes steps to protest her layoff cannot be said to have abandoned her work because a charge
of abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it
includes a prayer for reinstatement. When Eleonor filed the illegal dismissal complaint, it totally negated petitioner’s
theory of abandonment.

Also, to effectively dismiss an employee for abandonment, the employer must comply with the due process
requirement of sending notices to the employee. In Brahm Industries, Inc. v. NLRC, we ruled that this requirement is
not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern since it
constitutes a safeguard of the highest order in response to man’s innate sense of justice. Petitioner was not able to
send the necessary notice requirement to Eleonor. Based on the foregoing, Eleonor did not abandon her work.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 54


University of San Carlos – College of Law Labor Standards Finals Case Digests

Jethro Intelligence & Security Corp., vs Secretary of DOLE (2009) G.R. 172537

Facts:

Petitioner Jethro Intelligence and Security Corporation (Jethro) is a security service contractor with a security service
contract agreement with co-petitioner Yakult Phils., Inc. (Yakult). On the basis of a complaint filed by respondent
Frederick Garcia (Garcia), one of the security guards deployed by Jethro, for underpayment of wages, legal/special
holiday pay, premium pay for rest day, 13th month pay, and night shift differential, the Department of Labor and
Employment (DOLE)-Regional Office No. IV conducted an inspection at Yakult’s premises in Calamba, Laguna in the
course of which several labor standards violations were noted, including keeping of payrolls and daily time records
in the main office, underpayment of wages, overtime pay and other benefits, and non-registration with the DOLE as
required under Department Order No. 18-02.
Hearings on Garcia’s complaint and on the subsequent complaints of his co-respondents Gil Cordero et al. were
conducted during which Jethro submitted copies of payrolls covering June 16 to 30, 2003, February to May 16-31,
2004, June 16-30, 2003, and February 1-15, 2004. Jethro failed to submit daily time records of the claimants from 2002
to June 2004, however, despite the order for it to do so.
By Order of September 9, 2004, the DOLE Regional Director, noting petitioners’ failure to rectify the violations noted
during the above-stated inspection within the period given for the purpose, found them jointly and severally liable to
herein respondents for the aggregate amount of EIGHT HUNDRED NINE THOUSAND TWO HUNDRED TEN
AND 16/100 PESOS (P809,210.16) representing their wage differentials, regular holiday pay, special day premium
pay, 13th month pay, overtime pay, service incentive leave pay, night shift differential premium and rest day
premium. Petitioners were also ordered to submit proof of payment to the claimants within ten calendar days,
failing which the entire award would be doubled, pursuant to Republic Act No. 8188, and the corresponding writs of
execution and garnishment would be issued.

Issues:
1. Whether the SOLE has no jurisdiction over the case because, following Article 129 of the Labor Code, the
aggregate money claim of each employee exceeded P5,000.00.
2. Whether petitioner Jethro, as the admitted employer of respondents, could not be expected to keep
payrolls and daily time records in Yakult’s premises as its office is in Quezon City, hence, the inspection
conducted in Yakult’s plant had no basis.
3. Whether or not the issuance of the questioned writs of execution and garnishment by the DOLE-Regional
Director was in order.

Held: While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to hear and
decide cases where the aggregate money claims of each employee exceeds P5,000.00, said provisions do not
contemplate nor cover the visitorial and enforcement powers of the Secretary of Labor or his duly authorized
representatives. Rather, said powers are defined and set forth in Article 128 of the Labor Code (as amended by R.A.
No. 7730).

Art. 128 explicitly excludes from its coverage Articles 129 and 217 of the Labor Code by the phrase
“(N)otwithstanding the provisions of Articles 129 and 217 of this Code to the contrary xxx” thereby retaining and
further strengthening the power of the Secretary of Labor or his duly authorized representative to issue compliance
orders to give effect to the labor standards provisions of said Code and other labor legislation based on the findings
of labor employment and enforcement officers or industrial safety engineers made in the course of inspection

In the case at bar, the Secretary of Labor correctly assumed jurisdiction over the case as it does not come under the
exception clause in Art. 128(b) of the Labor Code. While petitioner Jethro appealed the inspection results and there is
a need to examine evidentiary matters to resolve the issues raised, the payrolls presented by it were considered in the
ordinary course of inspection. While the employment records of the employees could not be expected to be found in
Yakult’s premises in Calamba, as Jethro’s offices are in Quezon City, the records show that Jethro was given ample
opportunity to present its payrolls and other pertinent documents during the hearings and to rectify the violations

Ma. Cecelia Timbal LlB – 2 Rm 402 | 55


University of San Carlos – College of Law Labor Standards Finals Case Digests

noted during the ocular inspection. It, however, failed to do so, more particularly to submit competent proof that it
was giving its security guards the wages and benefits mandated by law.

Jethro’s failure to keep payrolls and daily time records in Yakult’s premises was not the only labor standard violation
found to have been committed by it; it likewise failed to register as a service contractor with the DOLE, pursuant to
Department Order No. 18-02 and, as earlier stated, to pay the wages and benefits in accordance with the rates
prescribed by law.
It bears emphasis that the SOLE, under Article 106 of the Labor Code, as amended, exercises quasi-judicial power, at
least to the extent necessary to determine violations of labor standards provisions of the Code and other labor
legislation. He/she or the Regional Directors can issue compliance orders and writs of execution for the enforcement
thereof. The significance of and binding effect of the compliance orders of the DOLE Secretary is enunciated in
Article 128 of the Labor Code.

And Sec. 5, Rule V (Execution) of the Rules on Disposition of Labor Standards Cases in Regional Offices provides that
the filing of a petition for certiorari shall not stay the execution of the appealed order or decision, unless the
aggrieved party secures a temporary restraining order (TRO) from the Court. In the case at bar, no TRO or injunction
was issued, hence, the issuance of the questioned writs of execution and garnishment by the DOLE-Regional Director
was in order.

Traveno et al., vs Bobongon Banana Growers Multi-purpose Coop et al., (2009) G.R. 164205

Facts:

Petitioners asseverated that while they worked under the direct control of supervisors assigned by TACOR and DFI,
these companies used different schemes to make it appear that petitioners were hired through independent
contractors, including individuals, unregistered associations, and cooperatives; that the successive changes in the
names of their employers notwithstanding, they continued to perform the same work under the direct control of
TACOR and DFI supervisors; and that under the last scheme adopted by these companies, the nominal individual
contractors were required to, as they did, join a cooperative and thus became members of respondent Bobongon
Banana Growers Multi-purpose Cooperative.

Issue: WON the relationship that exist between parties is job contracting.

Held: To the Court, the Contract between the Cooperative and DFI, far from being a job contracting arrangement, is
in essence a business partnership that partakes of the nature of a joint venture. The rules on job contracting are,
therefore, inapposite. The Court may not alter the intention of the contracting parties as gleaned from their
stipulations without violating the autonomy of contracts principle under Article 1306 of the Civil Code which gives
the contracting parties the utmost liberality and freedom to establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good custom, public order or public
policy.

Aliviado vs Procter and Gamble Phils. Inc., et al (2010) G.R. 160506

Facts:
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as June
1991, to either May 5, 1992 or March 11, 1993. They all individually signed employment contracts with either Promm-
Gem or SAPS for periods of more or less five months at a time. They were assigned at different outlets, supermarkets
and stores where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 56


University of San Carlos – College of Law Labor Standards Finals Case Digests

SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual
absenteeism, dishonesty or changing day-off without prior notice.

P&G is principally engaged in the manufacture and production of different consumer and health products, which it
sells on a wholesale basis to various supermarkets and distributors. To enhance consumer awareness and acceptance
of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its
products.

In December 1991, petitioners filed a complaint against P&G for regularization, service incentive leave pay and other
benefits with damages. The complaint was later amended to include the matter of their subsequent dismissal.

On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no
employer-employee relationship between petitioners and P&G. He found that the selection and engagement of the
petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods
by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that
Promm-Gem and SAPS were legitimate independent job contractors.

Appealing to the NLRC, petitioners disputed the Labor Arbiter’s findings. On July 27, 1998, the NLRC rendered a
Decision dismissing their appeal. Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However, said
petition was also denied by the CA.

Petitioners filed a motion for reconsideration but the motion was also denied.

Issue: Whether or not Promm-Gem and SAPS are labor-only contractors.

Held: Promm-Gem is an independent contractor however, SAPS is a labor-only contractor.

The pertinent Labor Code provision on the matter states:

ART. 106. Contractor or subcontractor. – Whenever an employer 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 subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.

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.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-
02, distinguishes between legitimate and labor-only contracting:

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 57


University of San Carlos – College of Law Labor Standards Finals Case Digests

contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers.
Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service
to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake
the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor
to accomplish the job, work or service.

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal, and any of the following elements are
present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual
employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as
amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or
subcontractor in the performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end.

Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs,
works or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such
activity is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an
independent contractor because the current labor rules expressly prohibit labor-only contracting.

In the instant case, the financial statements of Promm-Gem show that it has authorized capital stock of P1 million and
a paid-in capital, or capital available for operations, of P500,000.00 as of 1990. It also has long term assets worth
P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and
office space with a floor area of 870 square meters. It also had under its name three registered vehicles which were
used for its promotional/merchandising business. Promm-Gem also has other clients aside from P&G. Under the
circumstances, we find that Promm-Gem has substantial investment which relates to the work to be performed. These
factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02. The records
also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes,
liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is also
relevant to mention that Promm-Gem already considered the complainants working under it as its regular, not
merely contractual or project, employees. This circumstance negates the existence of element (ii) as stated in Section 5
of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates – on the
part of Promm-Gem – bad faith and intent to circumvent labor laws which factors have often been tipping points that

Ma. Cecelia Timbal LlB – 2 Rm 402 | 58


University of San Carlos – College of Law Labor Standards Finals Case Digests

lead the Court to strike down the employment practice or agreement concerned as contrary to public policy, morals,
good customs or public order.

Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.

On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There
is no other evidence presented to show how much its working capital and assets are. Furthermore, there is no
showing of substantial investment in tools, equipment or other assets.

In Vinoya v. National Labor Relations Commission, the Court held that "[w]ith the current economic atmosphere in
the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital
and, as such, PMCI cannot qualify as an independent contractor."Applying the same rationale to the present case, it is
clear that SAPS – having a paid-in capital of only P31,250 - has no substantial capital. SAPS’ lack of substantial capital
is underlined by the records which show that its payroll for its merchandisers alone for one month would already
total P44,561.00. It had 6-month contracts with P&G. Yet SAPS failed to show that it could complete the 6-month
contracts using its own capital and investment. Its capital is not even sufficient for one month’s payroll. SAPS failed
to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue
to sustain its operations independently. Substantial capital refers to capitalization used in the performance or
completion of the job, work or service contracted out. In the present case, SAPS has failed to show substantial capital.

Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an
activity that has already been considered by the Court as doubtlessly directly related to the manufacturing business,
which is the principal business of P&G. Considering that SAPS has no substantial capital or investment and the
workers it recruited are performing activities which are directly related to the principal business of P&G, we find that
the former is engaged in "labor-only contracting".

"Where ‘labor-only’ contracting exists, the Labor Code itself establishes an employer-employee relationship between
the employer and the employees of the ‘labor-only’ contractor." The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of
the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees
had been directly employed by the principal employer.

Consequently, petitioners recruited and supplied by SAPS -- which engaged in labor-only contracting -- are
considered as the employees of P&G while those having worked under, and been dismissed by Promm-Gem, are
considered the employees of Promm-Gem, not of P&G.

DBP vs NLRC (1995) G.R. 108031


Facts:

In September 1983, petitioner Development Bank of the Philippines, as mortgagee of TPWII, foreclosed its plant
facilities and equipment. Nevertheless, TPWII continued its business operations interrupted only by brief shutdowns
for the purpose of servicing its plant facilities and equipment. In January 1986 petitioner took possession of the
foreclosed properties. From then on the company ceased its operations. As a consequence private respondent Leonor
A. Ang was on 15 April 1986 verbally terminated from the service.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 59


University of San Carlos – College of Law Labor Standards Finals Case Digests

After hearing on a complaint for separation pay, 13th month pay, vacation and sick leave pay, salaries and
allowances against TPWII, its General Manager, and petitioner, the Labor Arbiter found TPWII primarily liable to
private respondent but only for her separation pay and vacation and sick leave pay because her claims for unpaid
wages and 13th month pay were later paid after the complaint was filed. The General Manager was absolved of any
liability. But with respect to petitioner, it was held subsidiarily liable in the event the company failed to satisfy the
judgment. The Labor Arbiter rationalized that the right of an employee to be paid benefits due him from the
properties of his employer is superior to the right of the latter's mortgagee, citing this Court's resolution in PNB v.
Delta Motor Workers Union.

On 16 November 1992 public respondent National Labor Relations Commission affirmed the ruling of the Labor
Arbiter.Petitioner argues that the decision of public respondent runs counter to the consistent rulings of this Court in
a long line of cases emphasizing that the applicant of Art. 110 of the Labor Code is contingent upon the institution of
bankruptcy or judicial liquidation proceedings against the employer.

Issue: Whether or not Art. 110 of the Labor Code, as amended, which refers to worker preference in case of
bankruptcy or liquidation of an employer's business, is applicable to the present case notwithstanding the absence of
any formal declaration of bankruptcy or judicial liquidation of TPWII.

Held: Article 110 is applicable NOT applicable in the absence of any formal declaration of bankruptcy or judicial
liquidation of TPWII.We hold that public respondent gravely abused its discretion in affirming the decision of the
Labor Arbiter. Art. 110 should not be treated apart from other laws but applied in conjunction with the pertinent
provisions of the Civil Code and the Insolvency Law to the extent that piece-meal distribution of the assets of the
debtor is avoided. Art. 110, then prevailing, provides:

ARTICLE 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of
an employer's business, his workers shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any provision to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to a
share in the assets of the employer.

Complementing Art. 110, Sec. 10, Rule VIII, Book III, of the Revised Rules and Regulations Implementing
the Labor Code provides:

SECTION 10. Payment of wages in case of bankruptcy. — Unpaid wages earned by the employees
before the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first
preference and shall be paid in full before other creditors may establish any claim to a share in the assets of
the employer.

We interpreted this provision in Development Bank of the Philippines v. Santos to mean that —

. . . a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be
enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this
case absent a formal declaration of bankruptcy or a liquidation order . . .

The rationale is that to hold Art. 110 to be applicable also to extrajudicial proceedings would be putting the worker in
a better position than the State which could only assert its own prior preference in case of a judicial proceeding. Art.
110, which was amended by R.A. 6715 effective 21 March 1989, now reads:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 60


University of San Carlos – College of Law Labor Standards Finals Case Digests

ARTICLE 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of
an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other
monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary
claims shall be paid in full before the claims of the Government and other creditors may be paid.

Obviously, the amendment expanded the concept of "worker preference" to cover not only unpaid wages but also
other monetary claims to which even claims of the Government must be deemed subordinate. The Rules and
Regulations Implementing R.A. 6715, approved 24 May 1989, also amended the corresponding implementing rule,
and now reads:

SECTION 10. Payment of wages and other monetary claims in case of bankruptcy. — In case of
bankruptcy or liquidation of the employer's business, the unpaid wages and other monetary claims of the
employees shall be given first preference and shall be paid in full before the claims of government and other
creditors may be paid.

Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably eliminated, still in
Development Bank of the Philippines v. NLRC , this Court did not alter its original position that the right to
preference given to workers under Art. 110 cannot exist in any effective way prior to the time of its presentation in
distribution proceedings. In effect, we reiterated our previous interpretation in Development Bank of the Philippines
v. Santos where we said:

It (worker preference) will find application when, in proceedings such as insolvency, such unpaid wages shall be
paid in full before the 'claims of the Government and other creditors' may be paid. But, for an orderly settlement of a
debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the
preferences determined in the course of judicial proceedings which have for their object the subjection of the property
of the debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference
of creditors' claims is assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476);
the adjudication made will be binding on all parties-in-interest since those proceedings are proceedings in rem; and
the legal scheme of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and
the Labor Code is preserved in harmony.

In ruling, as we did, in Development Bank of the Philippines v. Santos, we took into account the following
pronouncements:In the event of insolvency, a principal objective should be to effect an equitable distribution of the
insolvent's property among his creditors. To accomplish this there must first be some proceeding where notice to all
of the insolvent's creditors may be given and where the claims of preferred creditors may be bindingly adjudicated.
The rationale therefore has been expressed in the recent case of DBP v. Secretary of Labor (G.R. No. 79351, 28
November 1989), which we quote:

A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first ahead of
other claims which may be established against the debtor. Logically, it becomes material only when the properties
and assets of the debtors are insufficient to pay his debts in full; for if the debtor is amply able to pay his various
creditors in full, how can the necessity exist to determine which of his creditors shall be paid first or whether they
shall be paid out of the proceeds of the sale (of) the debtor's specific property. Indubitably, the preferential right of
credit attains significance only after the properties of the debtor have been inventoried and liquidated, and the claims
held by his various creditors have been established.

In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would be
premature to enforce the worker's preference.The additional ratiocination of public respondent that "under Article

Ma. Cecelia Timbal LlB – 2 Rm 402 | 61


University of San Carlos – College of Law Labor Standards Finals Case Digests

110 of the Labor Code complainant enjoys a preference of credit over the properties of TPWII being held in
possession by DBP," is a dismal misconception of the nature of preference of credit, a subject matter which we have
already discussed in clear and simple terms and even distinguished from a lien in Development Bank of the
Philippines v. NLRC:

. . . A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a
particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their
favor, a preference in application. It is a method adopted to determine and specify the order in which credits should
be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor. . . . In the words of Republic v. Peralta, supra: 'Article 110 of the Labor
Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the
properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall
at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code,
except to the extent that such claims for unpaid wages are already covered by Article 2241, number 6: 'claims for
laborers' wages, on the goods manufactured or the work done'; or by Article 2242, number 3: 'claims of laborers and
other workers engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said
buildings, canals and other works. . . . To the extent that claims for unpaid wages fall outside the scope of Article
2241, number 6, and 2242, number 3, they would come within the ambit of the category of ordinary preferred credits
under Article 2244.

The DBP anchors its claims on a mortgage credit. A mortgage directly and immediately subjects the property upon
which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was
constituted (Article 2176, Civil Code). It creates a real right which is enforceable against the whole world. It is a lien
on an identified immovable property, which a preference is not. A recorded mortgage credit is a special preferred
credit under Article 2242 (5) of the Civil Code on classification of credits. The preference given by Article 110, when
not falling within Article 2241 (6) and Article 2242 (3) of the Civil Code and not attached to any specific property, is
an ordinary preferred credit although its impact is to move it from second priority to first priority in order of
preference established by Article 2244 of the Civil Code.

The present controversy could have been easily settled by public respondent had it referred to ample jurisprudence
which already provides the solution. Stare decisis et non quieta movere. Once a case is decided by this Court as the
final arbiter of any justiciable controversy one way, then another case involving exactly the same point at issue
should be decided in the same manner. Public respondent had no choice on the matter. It could not have ruled any
other way. This Court having spoken in a string of cases against public respondent, its duty is simply to obey judicial
precedents. Any further disregard, if not defiance, of our rulings will be considered a ground to hold public
respondent in contempt.

Batong Buhay Gold Mines vs Dela Serna (1999) G.R. 86963


Facts:

On February 5, 1987, private respondents who are employees of petitioner Batong Buhay Gold Mines, Inc. (BBGMI),
filed a complaint against BBGMI for non-payment of basic pay and allowances pursuant to Wage Orders Nos. 2 and
5, 13th month pay for 1985, 1986 and 1987, non-payment of salaries, vacation and sick leave and salaries of employees
who were placed on forced leave since November 1985.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 62


University of San Carlos – College of Law Labor Standards Finals Case Digests

Upon motion of private respondents, an inspection was conducted on BBGMI. The Regional Director adopted the
recommendation of the Labor Standards and Welfare Officers and he issued an Order dated July 31, 1987 directing
BBGMI to pay to private respondent the sum of P4,818,746.40.

A writ of execution was issued and some of the properties of BBGMI were seized and sold at public auction. Finally,
BBGMI posted a supersedeas bond which restrained further enforcement of the writ of execution. BBGMI appealed
the Order dated July 31, 1987 of the Regional Director to public respondent Undersecretary Labor and Employment
Dionisio dela Serna claiming that the Regional Director had no jurisdiction over the case.

Acting thereon, the public respondent issued an Order dated September 16, 1988 upholding the jurisdiction of the
Regional Director and annulling all the auction sales for nsufficiency of price. Consequently, motions for intervention
were filed by MFT Corp. as the highest bidder in the auction sale conducted on October 29, 1987, and Salter Holdings
Pty. Ltd. claiming that MFT Corp. had already assigned its rights over the subject properties in its favor.

The said motions were granted by the public respondent and in his order dated December 14, 1988 it directed the
exclusion from annulment of the properties sold at the October 29, 1987 auction sale as claimed by the intervenors.
Hence, this petition which questioned the jurisdiction of the Regional Director over the complaint and whether or not
the auction sales conducted are valid.

The Court ruled that the Regional Director has jurisdiction over the BBGMI employees. The subject labor standards
case of the petition arose from the visitorial and enforcement powers by the Regional Director of the Department of
Labor and Employment (DOLE). Labor standards refers to the minimum requirements prescribed by existing laws,
rules and regulations relating to wages, hours of work, cost of living allowance and other monetary and welfare
benefits, including occupational, safety and health standards. Labor standards cases are governed by Article 128 (b)
of the Labor Code.

Issue: Whether or not the auction sales conducted by Special Sheriff Ramos valid to satisfy the judgment award.

Held: The auction sales in the first order were invalid but on different grounds. The auction sale in the second order.
It bears stressing that the writ of execution issued by the Regional Director led to the several auction sales conducted
on September 24, 1987, October 2, 1987, October 23, 1987, October 29, 1987 and October 30, 1987.

In the first Order of public respondent, the five (5) auction sales were declared null and void. As the public
respondent put it, "the scandalously low price for which the personal properties of the respondent were sold leads us
to no other recourse but to invalidate the auction sales conducted by the special sheriff."

In the September 16, 1988 Order of public respondent, the personal properties and corresponding prices for which
they were sold were to satisfy the judgment award in the amount of P4,818,746.00."

As a general rule, findings of fact and conclusion of law arrived at by quasi-judicial agencies are not to be disturbed
absent any showing of grave abuse of discretion tainting the same. But in the case under scrutiny, there was grave
abuse of discretion when the public respondent, without any evidentiary support, adjudged such prices as
"scandalously low". He merely relied on the self-serving assertion by the petitioner that the value of the auctioned
properties was more than the price bid. Obviously, this ratiocination did not suffice to set aside the auction sales. The
presumption of regularity in the performance of official function is applicable here. Conformably, any party alleging
irregularity vitiating auction sales must come forward with clear and convincing proof.

Furthermore, it is a well-settled principle that: "Mere inadequacy of price is not, of itself sufficient ground to set
aside an execution sale where the sale is regular, proper and legal in other respects, the parties stand on an equal

Ma. Cecelia Timbal LlB – 2 Rm 402 | 63


University of San Carlos – College of Law Labor Standards Finals Case Digests

footing, there are no confidential relation between them, there is no element of fraud, unfairness, or oppression, and
there is no misconduct, accident, mistake or surprise connected with, and tending to cause, the inadequacy."

Consequently, in declaring the nullity of the subject auction sales on the ground of inadequacy of price, the public
respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

But, this is not to declare the questioned auction sales as valid. The same are null and void since on the properties of
petitioner involved was constituted a mortgage between petitioner and the Development Bank of the Philippines.

The aforementioned documents were executed between the petitioner and Development Bank of the Philippines
(DBP) even prior to the filing of the complaint of petitioner's employees. The properties having been mortgaged to
DBP, the applicable law is Section 14 of Executive Order No. 81, dated 3 December 1986, otherwise known as the
"The 1986 Revised Charter of the Development Bank of the Philippines," which exempts the properties of petitioner
mortgaged to DBP from attachment or execution sales. Section 14 of E.O. 81, reads:

"SECTION 14. Exemption from Attachment. — The provisions of any law to the contrary notwithstanding,
securities on loans and/or other accommodations granted by the Bank or its predecessor-in-interest shall not be
subject to attachment, execution or any other court process, nor shall they be included in the property of insolvent
persons or institutions, unless all debts and obligations of the Bank or its predecessor-in-interest, penalties, collection
of expenses, and other charges, subject to the provisions of paragraph (e) of Sec. 9 of this Charter."

Private respondents contend that even if subject properties were mortgaged to DBP (now under Asset Privatization
Trust), Article 110 of the Labor Code, as amended by RA 6715, applies just the same. According to them, the said
provision of law grants preference to money claims of workers over and above all credits of the petitioner. This
contention is untenable. In the case of DBP vs. NLRC, the Supreme Court held that the workers preference regarding
wages and other monetary claims under Article 110 of the Labor Code, as amended, contemplates bankruptcy or
liquidation proceedings of the employer's business. What is more, it does not disregard the preferential lien of
mortgagees considered as preferred credits under the provisions of the New Civil Code on the classification,
concurrence and preference of credits.

It is well to remember that the said properties were transferred to the intervenors, when Fidel Bermudez, the highest
bidder at the auction sale, sold the properties to MFT Corporation which, in turn, sold the same properties to Salter
Holdings Pty., Ltd. Public respondent opined that the contract of sale between the intervenors and the highest bidder
should be respected as these sales took place during the interregnum after the auction sale was conducted on October
29, 1987 and before the issuance of the first disputed Order declaring all the auction sales null and void.

On this issue, the Court rules otherwise.As regards personal properties, the general rule is that title, like a stream,
cannot rise higher than its source. Consequently, a seller without title cannot transfer a title better than what he holds.
MFT Corporation and Salter Holdings Pty., Ltd. trace their title from Fidel Bermudez, who was the highest bidder of
a void auction sale over properties exempt from execution. Such being the case, the subsequent sale made by him
(Fidel Bermudez) is incapable of vesting title or ownership in the vendee.

The Order dated December 14, 1988, declaring the October 29, 1987 auction sale as valid, was issued with grave abuse
of discretion amounting to lack or excess of jurisdiction.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 64


University of San Carlos – College of Law Labor Standards Finals Case Digests

Barayoga vs Asset Privatization Trust (2005) G.R. 160073


Facts:

Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development Corporation
(BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines Sur.On December 8, 1986, [Respondent]
Asset Privatization Trust (APT), a public trust was created under Proclamation No. 50, as amended, mandated to take
title to and possession of, conserve, provisionally manage and dispose of non-performing assets of the Philippine
government identified for privatization or disposition.

Pursuant to Section 23 of Proclamation No. 50, former President Corazon Aquino issued Administrative Order No. 14
identifying certain assets of government institutions that were to be transferred to the National Government. Among
the assets transferred was the financial claim of the Philippine National Bank against BISUDECO in the form of a
secured loan. Consequently, by virtue of a Trust Agreement executed between the National Government and APT on
February 27, 1987, APT was constituted as trustee over BISUDECO's account with the PNB.

Sometime later, on August 28, 1988, BISUDECO contracted the services of Philippine Sugar Corporation (Philsucor)
to take over the management of the sugar plantation and milling operations until August 31, 1992. Meanwhile,
because of the continued failure of BISUDECO to pay its outstanding loan with PNB, its mortgaged properties were
foreclosed and subsequently sold in a public auction to APT, as the sole bidder. On April 2, 1991, APT was issued a
Sheriff's Certificate of Sale.

On July 23, 1991, the union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction and
underpayment of wages and other labor standard benefits plus damages. In the meantime, on July 15, 1992, APT's
Board of Trustees issued a resolution accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the
sugar plantation and mill. Again, on September 23, 1992, the board passed another resolution authorizing the
payment of separation benefits to BISUDECO's employees in the event of the company's privatization. Then, on
October 30, 1992, BAPCI purchased the foreclosed assets of BISUDECO from APT and took over its sugar milling
operations under the trade name Peñafrancia Sugar Mill (Pensumil).

On December 17, 1992, the union filed a similar complaint, later to be consolidated with its earlier complaint and
docketed as RAB V Case No. 07-00184-91. On March 2, 1993, it filed an amended complaint, impleading as additional
party respondents APT and Pensumil.

In their Position Paper, the union alleged that when Philsucor initially took over the operations of the company, it
retained BISUDECO's existing personnel under the same terms and conditions of employment. Nonetheless, at the
start of the season sometime in May 1991, Philsucor started recalling workers back to work, to the exception of the
union members. Management told them that they will be re-hired only if they resign from the union. Just the same,
thereafter, the company started to employ the services of outsiders under the 'pakyaw' system.

BISUDECO, Pensumil and APT all interposed the defense of lack of employer-employee relationship.After due
proceedings, on April 30, 1998, Labor Arbiter Fructuoso T. Aurellano disposed as follows:

'WHEREFORE, premises considered, respondent APT is hereby ordered to pay herein complainants of the mandated
employment benefits provided for under Section 27 of Proclamation No. 50 which benefits had been earlier extended
to other employees similarly situated.

The NLRC affirmed APT's liability for petitioners' money claims. While no employer-employee relationship existed
between members of the petitioner union and APT, at the time of the employees' illegal dismissal, the assets of
BISUDECO had been transferred to the national government through APT. Moreover, the NLRC held that APT

Ma. Cecelia Timbal LlB – 2 Rm 402 | 65


University of San Carlos – College of Law Labor Standards Finals Case Digests

should have treated petitioners' claim as a lien on the assets of BISUDECO. The Commission opined that APT should
have done so, considering its awareness of the pending complaint of petitioners at the time BISUDECO sold its assets
to BAPCI, and APT started paying separation pay to the workers.

Finding their computation to be in order, the NLRC awarded to petitioners their money claims for underpayment,
labor-standard benefits, and ECOLA. It also awarded them their back wages, computed at the prevailing minimum
wage, for the period May 1, 1991 (the date of their illegal dismissal) until October 30, 1992 (the sale of BISUDECO
assets to the BAPCI). On the other hand, the NLRC ruled that petitioners were not entitled to separation pay because
of the huge business losses incurred by BISUDECO, which had resulted in its bankruptcy.

Respondent sought relief from the CA via a Petition for Certiorari under Rule 65 of the Rules of Court. The CA ruled
that APT should not be held liable for petitioners' claims for unfair labor practice, illegal dismissal, illegal deduction
and underpayment of wages, as well as other labor-standard benefits plus damages. As found by the NLRC, APT was
not the employer of petitioners, but was impleaded only for possessing BISUDECO's mortgaged properties as trustee
and, later, as the highest bidder in the foreclosure sale of those assets.

Citing Batong Buhay Gold Mines v. Dela Serna, 8 the CA concluded that petitioners' claims could not be enforced
against APT as mortgagee of the foreclosed properties of BISUDECO.

Clarification of the facts according to the SC: It should be stressed at the outset that, pursuant to Administrative
Order No. 14, Series of 1987, PNB's assets, loans and receivables from its borrowers were transferred to APT as
trustee of the national government. Among the liabilities transferred to APT was PNB's financial claim against
BISUDECO, not the latter's assets and chattel. Contrary to petitioners' assertions, BISUDECO remained the owner of
the mortgaged properties in August 1988, when the Philippine Sugar Corporation (Philsucor) undertook the
operation and management of the sugar plantation until August 31, 1992, under a so-called Contract of Lease
between the two corporations. At the time, APT was merely a secured creditor of BISUDECO.

It was only in April 1991 that APT foreclosed the assets and chattels of BISUDECO because of the latter's continued
failure to pay outstanding loan obligations to PNB/APT. The properties were sold at public auction to APT, the
highest bidder, as indicated in the Sheriff's Certificate of Sale issued on April 2, 1991. It was only in September 1992
(after the expiration of the lease/management Contract with Philsucor in August 1992), however, when APT took over
BISUDECO assets, preparatory to the latter's privatization.

In the present case, petitioner-union's members who were not recalled to work by Philsucor in May 1991 seek to hold
APT liable for their monetary claims and allegedly illegal dismissal. Significantly, prior to the actual sale of
BISUDECO assets to BAPCI on October 30, 1992, the APT board of trustees had approved a Resolution on September
23, 1992. The Resolution authorized the payment of separation benefits to the employees of the corporation in the
event of its privatization. Not included in the Resolution, though, were petitioner-union's members who had not been
recalled to work in May 1991.

Issues and Rulings:

I. Whether or not APT is liable to pay petitioners' monetary claims, including back wages from May 1, 1991, to
October 30, 1992 (the date of the sale of BISUDECO assets to BAPCI).

We rule in the negative. The duties and liabilities of BISUDECO, including its monetary liabilities to its employees,
were not all automatically assumed by APT as purchaser of the foreclosed properties at the auction sale. Any
assumption of liability must be specifically and categorically agreed upon. In Sundowner Development Corp. v.
Drilon, the Court ruled that, unless expressly assumed, labor contracts like collective bargaining agreements are not

Ma. Cecelia Timbal LlB – 2 Rm 402 | 66


University of San Carlos – College of Law Labor Standards Finals Case Digests

enforceable against the transferee of an enterprise. Labor contracts are in personam and thus binding only between
the parties.

No succession of employment rights and obligations can be said to have taken place between the two. Between the
employees of BISUDECO and APT, there is no privity of contract that would make the latter a substitute employer
that should be burdened with the obligations of the corporation. To rule otherwise would result in unduly imposing
upon APT an unwarranted assumption of accounts not contemplated in Proclamation No. 50 or in the Deed of
Transfer between the national government and PNB.

Furthermore, under the principle of absorption, a bona fide buyer or transferee of all, or substantially all, the
properties of the seller or transferor is not obliged to absorb the latter's employees. The most that the purchasing
company may do, for reasons of public policy and social justice, is to give preference of reemployment to the selling
company's qualified separated employees, who in its judgment are necessary to the continued operation of the
business establishment.

In any event, the national government (in whose trust APT previously held the mortgage credits of BISUDECO) is
not the employer of petitioner-union's members, who had been dismissed sometime in May 1991, even before APT
took over the assets of the corporation. Hence, under existing law and jurisprudence, there is no reason to expect any
kind of bailout by the national government. Even the NLRC found that no employer-employee relationship existed
between APT and petitioners. Thus, the Commission gravely abused its discretion in nevertheless holding that APT,
as the transferee of the assets of BISUDECO, was liable to petitioners.

A careful reading of the Court's Decision in that case plainly shows that it does not contain the words quoted by
counsel for petitioners. At this juncture, we admonish their counsel of his bounden duty as an officer of the Court to
refrain from misquoting or misrepresenting the text of its decisions. Ever present is the danger that, if not faithfully
and exactly quoted, they may lose their proper and correct meaning, to the detriment of other courts, lawyers and the
public who may thereby be misled.

In that case, contrary to the assertions of petitioners, the Court held as follows:

"There can be no controversy for it is a principle well-recognized, that it is within the employer's legitimate sphere of
management control of the business to adopt economic policies or make some changes or adjustments in their
organization or operations that would insure profit to itself or protect the investment of its stockholders. As in the
exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell
or dispose all or substantially all of its assets and properties which may bring about the dismissal or termination of its
employees in the process. Such dismissal or termination should not however be interpreted in such a manner as to
permit the employer to escape payment of termination pay. . . . .

"In a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated by
good faith as an element of exemption from liability. Indeed, an innocent transferee of a business establishment has
no liability to the employees of the transferor to continue employing them. Nor is the transferee liable for past unfair
labor practices of the previous owner, except, when the liability therefor is assumed by the new employer under the
contract of sale, or when liability arises because of the new owner's participation in thwarting or defeating the rights
of the employees."

In other words, the liabilities of the previous owner to its employees are not enforceable against the buyer or
transferee, unless (1) the latter unequivocally assumes them; or (2) the sale or transfer was made in bad faith. Thus,

Ma. Cecelia Timbal LlB – 2 Rm 402 | 67


University of San Carlos – College of Law Labor Standards Finals Case Digests

APT cannot be held responsible for the monetary claims of petitioners who had been dismissed even before it
actually took over BISUDECO's assets.

II. Whether or not the claims of herein petitioners can be enforced against the foreclosed properties of
BISUDECO.

No. It should be remembered that APT merely became a transferee of BISUDECO's assets for purposes of
conservation because of its lien on those assets — a lien it assumed as assignee of the loan secured by the corporation
from PNB. Subsequently, APT, as the highest bidder in the auction sale, acquired ownership of the foreclosed
properties.

Relevant to this transfer of assets is Article 110 of the Labor Code, as amended by Republic Act No. 6715, which
reads:

"Article 110. Worker's preference in case of bankruptcy. — In the event of bankruptcy or liquidation of the employer's
business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims shall be
paid in full before the claims of the Government and other creditors may be paid."

This Court has ruled in a long line of cases that under Articles 2241 and 2242 of the Civil Code, a mortgage credit is a
special preferred credit that enjoys preference with respect to a specific/determinate property of the debtor. On the
other hand, the worker's preference under Article 110 of the Labor Code is an ordinary preferred credit. While this
provision raises the worker's money claim to first priority in the order of preference established under Article 2244 of
the Civil Code, the claim has no preference over special preferred credits.

Thus, the right of employees to be paid benefits due them from the properties of their employer cannot have any
preference over the latter's mortgage credit. In other words, being a mortgage credit, APT's lien on BISUDECO's
mortgaged assets is a special preferred lien that must be satisfied first before the claims of the workers.

Development Bank of the Philippines v. NLRC explained the rationale of this ruling as follows:

". . . . A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a
particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not
constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their
favor, a preference in application. It is a method adopted to determine and specify the order in which credits should
be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the
discharge of the funds of the judgment debtor. . . ."

Furthermore, workers' claims for unpaid wages and monetary benefits cannot be paid outside of a bankruptcy or
judicial liquidation proceedings against the employer. 26 It is settled that the application of Article 110 of the Labor
Code is contingent upon the institution of those proceedings, during which all creditors are convened, their claims
ascertained and inventoried, and their preferences determined. Assured thereby is an orderly determination of the
preference given to creditors' claims; and preserved in harmony is the legal scheme of classification, concurrence and
preference of credits in the Civil Code, the Insolvency Law, and the Labor Code.

The Court hastens to add that the present Petition was brought against APT alone. In holding that the latter, which
has never really been an employer of petitioners, is not liable for their claims, this Court is not reversing or ruling
upon their entitlement to back wages and other unpaid benefits from their previous employer.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 68


University of San Carlos – College of Law Labor Standards Finals Case Digests

Philippine Airlines vs Zamora (2007) G.R. 166996


Facts:

On 1 February 2005, the Court of Appeals promulgated an Amended Decision modifying its 13 August 2004 Decision
but at the same time resolving petitioner PAL's Motion for Reconsideration in this wise: WHEREFORE, this Court's
August 13, 2004 decision is hereby AMENDED, the dispositive portion to read as follows:

WHEREFORE, in view of the foregoing, the petition is GRANTED. The NLRC resolution dated April 27,
2001 is MODIFIED. Considering that petitioner is a detention prisoner making reinstatement impossible,
PAL is hereby ordered to pay petitioner Zamora his separation pay, in lieu of reinstatement, to be computed
at one month salary for every year of service from February 9, 1981 and backwages to be computed from
December 19, 1995, both up to October 1, 2000, the date of his incarceration.

Considering that PAL is still under receivership, the monetary claims of petitioner Zamora must be presented to the
PAL Rehabilitation Receiver, subject to the rules on preference of credits. The Court of Appeals took into account
respondent Zamora's incarceration when it recalled its order of reinstatement. Anent its earlier pronouncement
against the suspension of the proceedings of the case owing to the present rehabilitation of petitioner PAL, the
appellate court only had this to say:

However, since PAL is still under receivership, the provisions of PD 902-A, should apply. The enforcement of the
monetary claims of petitioner should be brought before the PAL Rehabilitation Receiver for proper disposition.

Issue: WON respondent Zamora’s monetary claim should be presented to the PAL rehabilitation receiver, subject to
the rules on preference of credits.

Held: No. The relevant law dealing with the suspension of actions for claims against corporations is Presidential
Decree No. 902-A, 52 as amended. The term "claim," as contemplated in Sec. 6 (c) of Presidential Decree No. 902-A,
refers "to debts or demands of a pecuniary nature. It means 'the assertion of a right to have money paid.

It is plain from the foregoing provisions of law that "upon the appointment [by the SEC] of a management committee
or a rehabilitation receiver," all actions for claims against the corporation pending before any court, tribunal or board
shall ipso jure be suspended

The law is clear: upon the creation of a management committee or the appointment of a rehabilitation receiver, all
claims for actions "shall be suspended accordingly." No exception in favor of labor claims is mentioned in the law.
Since the law makes no distinction or exemptions, neither should this Court.

Otherwise stated, no other action may be taken in, including the rendition of judgment during the state of suspension
— what are automatically stayed or suspended are the proceedings of an action or suit and not just the payment of
claims during the execution stage after the case had become final and executory.

The suspension of action for claims against a corporation under rehabilitation receiver or management committee
embraces all phases of the suit, be it before the trial court or any tribunal or before this Court. Furthermore, the
actions that are suspended cover all claims against a distressed corporation whether for damages founded on a
breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature. As to the
appellate court's amended directive that "the monetary claims of petitioner Zamora must be presented to the PAL
Rehabilitation Receiver, subject to the rules on preference of credits," the same is erroneous for there has been no
declaration of bankruptcy or judicial liquidation. Thus, the rules on preference of credits do not apply.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 69


University of San Carlos – College of Law Labor Standards Finals Case Digests

Philippine Airlines vs Philippine Airlines Employees Association (2007) G.R. 142399


Facts:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended, seeking to set aside the 30
April 1999 Decision, and 10 March 2000 Resolution of the Court of Appeals, in CA-G.R. SP No. 50161 entitled,
"Philippine Airlines, Inc. v. National Labor Relations Commission and Philippine Airlines Employees Association
(PALEA)." In the assailed decision, the Court of Appeals dismissed the petition filed by herein petitioner Philippine
Airlines, Inc. (PAL); accordingly, the appellate court affirmed the 28 January 1998 Decision and 23 June 1998
Resolution, of the First Division of the National Labor Relations Commission (NLRC), reversing and setting aside the
12 March 1990 Decision, of the Labor Arbiter in NLRC NCR No. 00-03-01134-89, and ordering the herein PAL to "pay
the 13th month pay or mid-year bonus of the (concerned) members (of PALEA).

Issue: Can a court or quasi-judicial agency amend or alter a Collective Bargaining Agreement by expanding its
coverage to non-regular employees who are not covered by the bargaining unit?

Held: All told, this Court is constrained to suspend the progress, development and other proceedings in the present
petition.We take note, however, that the Securities and Exchange Commission (SEC) had mandated the rehabilitation
of PAL. On 17 May 1999, the SEC approved the "Amended and Restated Rehabilitation Plan" of PAL and appointed a
"permanent rehabilitation receiver for the latter." To date, PAL is still undergoing rehabilitation.

The pertinent law concerning the suspension of actions for claims against corporations is Presidential Decree No. 902-
A, as amended.The underlying principle behind the suspension of claims pending rehabilitation proceedings was
explained in the case of BF Homes, Incorporated v. Court of Appeals. This Court clarified that:In light of these
powers, the reason for suspending actions for claims against the corporation should not be difficult to discover. It is
not really to enable the management committee or the rehabilitation receiver to substitute the defendant in any
pending action against it before any court, tribunal, board or body. Obviously, the real justification is to enable the
management committee or rehabilitation receiver to effectively exercise its/his powers free from any judicial or extra-
judicial interference that might unduly hinder or prevent the "rescue" of the debtor company. To allow such other
action to continue would only add to the burden of the management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending claims against the corporation instead of being directed
toward its restructuring and rehabilitation.

The Court holds that rendition of judgment while petitioner is under a state of receivership could render violence to
the rationale for suspension of payments in Section 6 (c) of P.D. 902-A, if the judgment would result in the granting of
private respondent's claim to separation pay, thus defeating the basic purpose behind Section 6 (c) of P.D. 902-A
which is to prevent dissipation of the distressed company's resources.

In another PAL case, specifically, Philippine Airlines, Inc. v. Court of Appeals, this Court again resolved to grant
PAL's Motion for Suspension of Proceedings by reason of the SEC Orders dated 23 June 1998 and 1 July 1998,
appointing an Interim Rehabilitation Receiver and enjoining the suspension of all claims for payment against PAL,
respectively. Therein it was declared that this Court is "not prepared to depart from the well-established doctrines"
essentially maintaining that all actions for claims against a corporation pending before any court, tribunal or board
shall ipso jure be suspended in whatever stage such actions may be found upon the appointment by the SEC of a
management committee or a rehabilitation receiver.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 70


University of San Carlos – College of Law Labor Standards Finals Case Digests

And, most recently, is the case of Philippine Airlines v. Zamora, we held in simple terms that:

Otherwise stated, no other action may be taken in, including the rendition of judgment during the state of suspension
— what are automatically stayed or suspended are the proceedings of an action or suit and not just the payment of
claims during the execution stage after the case had become final and executory.

The suspension of action for claims against a corporation under rehabilitation receiver or management committee
embraces all phases of the suit, be it before the trial court or any tribunal or before this Court. Furthermore, the
actions that are suspended cover all claims against a distressed corporation whether for damages founded on a
breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature. In actual fact,
allowing such actions to proceed would only increase the work-load of the management committee or the
rehabilitation receiver, whose precious time and effort would be dissipated and wasted in defending suits against the
corporation, instead of being channeled toward restructuring and rehabilitation.

Castillo vs Uniwide Warehouse Club (2010) G.R. 169725


Facts:

This case stems from a complaint filed by Castillo against Uniwide and its President Jimmy Gow for payment of
Saturdays worked for the year 2001; holiday pay; separation pay; actual, moral and exemplary damages; and
attorney’s fees. Two months after the filing of the complaint however, the respondents moved to dismiss said
complaint on the ground that it petitioned the SEC for suspension of payments and approval of its rehabilitation
plan. It appears that on June 29, 1999, the SEC had ruled favorably on the petition and ordered that all claims, actions
and proceedings against herein respondents pending before any court, tribunal, board, office, body or commission be
suspended, and that following the appointment of an interim receiver, the suspension order had been extended to
until February 7, 2000. On April 11, 2000, the SEC declared the Uniwide Group of Companies to be in a state of
suspension of payments and approved its rehabilitation plan. Labor Arbiter and NLRC denied the motion of
respondent. Respondent then filed a petition under Rule 65 with the Court of Appeals which found merit in the
petition and reversed the resolutions of the NLRC affirming the Labor Arbiter.

Held: Petioner argues that suspension of the proceedings is not in order, because his claim against respondent and
the latter’s corresponding liability are yet to be determined. Respondents countered by saying that the CA was
correct since it was among those actions for claims that are automatically suspended on the appointment of a
management committee or receiver according to Se. 6 of PD 902-A. Respondents advance the notion that while said
Section 6 expressly referred to suspension of pending claims, the clear and unmistakable intention of the law is to bar
the filing of any such claims in order to maintain parity of status among the different creditors of the distressed
corporation at least while the rehabilitation efforts are ongoing. To begin with, corporate rehabilitation connotes the
restoration of the debtor to a position of successful operation and solvency, if it is shown that its continued operation
is economically feasible and its creditors can recover by way of the present value of payments projected in the
rehabilitation plan, more if the corporation continues as a going concern than if it is immediately liquidated. It
Whether or not the proceeding can be validly suspended. Contemplates a continuance of corporate life and activities
in an effort to restore and reinstate the corporation to its former position of successful operation and solvency, the
purpose being to enable the company to gain a new lease on life and allow its creditors to be paid their claims out of
its earnings. An essential function of corporate rehabilitation is the mechanism of suspension of all actions and claims
against the distressed corporation, which operates upon the due appointment of a management committee or
rehabilitation receiver. P.D. No. 902-A, as amended. Section 6(c) of the law mandates that, upon appointment of a

Ma. Cecelia Timbal LlB – 2 Rm 402 | 71


University of San Carlos – College of Law Labor Standards Finals Case Digests

management committee, rehabilitation receiver, board, or body, all actions for claims against corporations,
partnerships or associations under management or receivership pending before any court, tribunal, board, or body
shall be suspended. In a plethora of cases, the Court has upheld the suspension of proceedings regaring claims
against distressed coprations pursuant to PD902-A. The actions that were suspended cover all claims against a
distressed corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits
or any other claims of a pecuniary nature. More importantly, the new rules on corporate rehabilitation, as well as the
interim rules, provide an all-encompassing definition of the term and, thus, include all claims or demands of
whatever nature or character against a debtor or its property, whether for money or otherwise. There is no doubt that
petitioner’s claim in this case, arising as it does from his alleged illegal dismissal, is a claim covered by the suspension
order issued by the SEC, as it is one for pecuniary consideration. Jurisprudence is settled that the suspension of
proceedings referred to in the law uniformly applies to “all actions for claims” filed against a corporation,
partnership or association under management or receivership, without distinction, except only those expenses
incurred in the ordinary course of business. In the oft-cited case of Rubberworld (Phils.) Inc. v. NLRC, the Court
noted that aside from the given exception, the law is clear and makes no distinction as to the claims that are
suspended once a management committee is created or a rehabilitation receiver is appointed. Since the law makes no
distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. Philippine
Airlines, Inc. v. Zamora declares that the automatic suspension of an action for claims against a corporation under a
rehabilitation receiver or management committee embraces all phases of the suit, that is, the entire proceedings of an
action or suit and not just the payment of claims. It must be conceded that the date when the claim arose, or when the
action was filed, has no bearing at all in deciding whether the given action or claim is covered by the stay or
suspension order. What matters is that as long as the corporation is under a management committee or a
rehabilitation receiver, all actions for claims against it, whether for money or otherwise, must yield to the greater
imperative of corporate revival, excepting only, as already mentioned, claims for payment of obligations incurred by
the corporation in the ordinary course of business. In the instant case, a Certification issued by the SEC and signed by
its General Counsel states that as of August 17, 2006, the petition of Uniwide Sales, Inc. for declaration of suspension
of payments and rehabilitations was still pending with it, and that the company was still under its rehabilitation
proceedings. Hence, since petitioner’s claim was one for wages accruing from the time of dismissal, as well as for
benefits and damages, the same should have been suspended pending the rehabilitation proceedings. In other words,
the Labor Arbiter should have abstained from resolving the illegal dismissal case and, instead, directed petitioner to
present his claim to the rehabilitation receiver duly appointed by the SEC, inasmuch as the stay or suspension order
was effective and it subsisted from issuance until the dismissal of the petition for rehabilitation or the termination of
the rehabilitation proceedings. The Court of Appeals was thus correct in directing the suspension of the proceedings.

Bank of the Philippine Islands vs NLRC (1989) G.R. 69746-47


Facts:

On March 22, 1983, the NLRC resolved the bargaining deadlock between BPI and its employees by fixing the wage
increases and other economic benefits and ordering them to be embodied in a new collective bargaining agreement to
be concluded by BPIEU-Metro Manila and ALU with BPI. It did not decide the intra-union dispute, however, holding
that this was under the original jurisdiction of the med-arbiter and the exclusive appellate jurisdiction of the Bureau
of Labor Relations.

Following the promulgation by the NLRC of its decision of March 23, 1983, in Certified Cases Nos. 0279 and 0281,
private respondent Ignacio Lacsina filed a motion for the entry of attorney's lien for legal services to be rendered by

Ma. Cecelia Timbal LlB – 2 Rm 402 | 72


University of San Carlos – College of Law Labor Standards Finals Case Digests

him as counsel of BPIEU in the negotiation of the new collective bargaining agreement with BPI.The basis of this
motion was a resolution dated August 26, 1982, signed by members of the BPI Employees Union, providing for the
terms and conditions, including attorney’s fees and his authority to check-off with the company.

Accordingly, BPI deducted the amount of P200.00 from each of the employees who had signed the authorization.
Upon learning about this, the petitioners (ALU and BPIEU-ALU) challenged the said order, on the ground that it was
not authorized under the Labor Code.

On April 15, 1983, the NLRC issued a resolution setting aside the order and requiring BPI to safe-keep the amounts
sought to be deducted "until the rights thereto of the interested parties shall have been determined in appropriate
proceedings. Subsequently, the NLRC issued an en banc resolution dated September 27, 1983, ordering the release
to Lacsina of the amounts deducted "except with respect to any portion thereof as to which no individual signed
authorization has been given by the members concerned or where such authorization has been withdrawn.

The petitioners now impugn this order as contrary to the provisions and spirit of the Labor Code. While conceding
that Lacsina is entitled to payment for his legal services, they argue that this must be made not by the individual
workers directly, as this is prohibited by law, but by the union itself from its own funds. In support of this
contention, they invoke Article 222(b) of the Labor Code, providing as follows:

Art. 222. Appearances and Fees.

(b) No attorney's fees, negotiation fees or similar charges of any kind arising from any collective bargaining
negotiations or conclusions of the collective agreement shall be imposed on any individual member of the contracting
union: Provided, however, that attorneys fees may be charged against union funds in an amount to be agreed upon
by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void.

They also cite the case of Pacific Banking Corporation v. Clave, where the lawyer's fee was taken not from the total
economic benefits received by the workers but from the funds of their labor union.

Issue: Is the mentioned Resolution signed by the BPI employees granting attorney’s fees to Lacsina to be deducted
from the employees’ wages valid?

Held: Yes. The Court reads the afore-cited provision as prohibiting the payment of attorney's fees only when it is
effected through forced contributions from the workers from their own funds as distinguished from the union funds.

The purpose of the provision is to prevent imposition on the workers of the duty to individually contribute their
respective shares in the fee to be paid the attorney for his services on behalf of the union in its negotiations with the
management. The obligation to pay the attorney's fees belongs to the union and cannot be shunted to the workers as
their direct responsibility. Neither the lawyer nor the union itself may require the individual workers to assume the
obligation to pay the attorney's fees from their own pockets. So categorical is this intent that the law also makes it
clear that any agreement to the contrary shall be null and void ab initio.

We see no such imposition in the case at bar. A reading of the above-cited resolution will clearly show that the
signatories thereof have not been in any manner compelled to undertake the obligation they have there assumed. On
the contrary, it is plain that they were voluntarily authorizing the check-off of the attorney's fees from their payment
of benefits and the turnover to Lacsina of the amounts deducted, conformably to their agreement with him. There is
no compulsion here. And significantly, the authorized deductions affected only the workers who adopted and signed
the resolution and who were the only ones from whose benefits the deductions were made by BPI. No similar
deductions were taken from the other workers who did not sign the resolution and so were not bound by it.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 73


University of San Carlos – College of Law Labor Standards Finals Case Digests

That only those who signed the resolution could be subjected to the authorized deductions was recognized and made
clear by the order itself of the NLRC. It was there categorically declared that the check-off could not be made where
"no individual signed authorization has been given by the members concerned or where such authorization has been
withdrawn."

The Pacific Banking Corporation case is not applicable to the present case because there was there no similar
agreement as that entered into between Lacsina and the signatories of the resolution in question. Absent such an
agreement, there was no question that the basic proscription in Article 222 would have to operate. It is noteworthy,
though, that the Court there impliedly recognized arrangements such as the one at bar with the following significant
observation:

Moreover, the case is covered squarely by the mandatory and explicit prescription of Art. 222 which is another
guarantee intended to protect the employee against unwarranted practices that would diminish his compensation
without his knowledge and consent.

A similar recognition was made in Galvadores v. Trajano, where the payment of the attorney's fees from the wages of
the employees was not allowed because: "No check-offs from any amount due to employees may be effected without
individual written authorities duly signed by the employees specifically stating the amount, purpose and beneficiary
of the deduction. The required individual authorizations in this case are wanting."

Finally, we hold that the agreement in question is in every respect a valid contract as it satisfies all the elements
thereof and does not contravene law, morals, good customs, public order, or public policy. On the contrary, it enables
the workers to avail themselves of the services of the lawyer of their choice and confidence under terms mutually
acceptable to the parties and, hopefully, also for their mutual benefit.

Traders Royal Bank Employees Union vs NLRC (1997) G.R. 120592


Facts:

Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A. Cruz, head of the
E.N.A. Cruz and Associates law firm, entered into a retainer agreement on February 26, 1987 whereby the former
obligated itself to pay the latter a monthly retainer fee of P3,000.00 in consideration of the law firm's undertaking to
render the services enumerated in their contract. During the existence of that agreement, petitioner union referred to
private respondent the claims of its members for holiday, mid-year and year-end bonuses against their employer,
Traders Royal Bank (TRB). These employees obtained favorable decision from their complaint which went through
the SC.

The Supreme Court, in its decision promulgated on August 30, 1990, modified the decision of the NLRC by deleting
the award of mid-year and year-end bonus differentials while affirming the award of holiday pay differential. The
bank voluntarily complied with such final judgment and determined the holiday pay differential to be in the amount
of P175,794.32. Petitioner never contested the amount thus found by TRB. The latter duly paid its concerned
employees their respective entitlement in said sum through their payroll. After private respondent received the above
decision of the Supreme Court on September 18, 1990, he notified the petitioner union, the TRB management and the
NLRC of his right to exercise and enforce his attorney's lien over the award of holiday pay differential through a
letter dated October 8, 1990.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 74


University of San Carlos – College of Law Labor Standards Finals Case Digests

Thereafter, on July 2, 1991, private respondent filed a motion before Labor Arbiter Lorenzo for the determination of
his attorney's fees, praying that ten percent (10%) of the total award for holiday pay differential computed by TRB at
P175,794.32, or the amount of P17,579.43, be declared as his attorney's fees, and that petitioner union be ordered to
pay and remit said amount to him. The LA and the NLRC affirmed Atty. Cruz’ motion.

Petitioner union filed a comment and opposition to said motion on July 15, 1991. Petitioner maintains that the NLRC
committed grave abuse of discretion amounting to lack of jurisdiction in upholding the award of attorney's fees in the
amount of P17,574.43, or ten percent (10%) of the P175,794.32 granted as holiday pay differential to its members, in
violation of the retainer agreement; and that the challenged resolution of the NLRC is null and void, for the reasons
hereunder stated.

Although petitioner union concedes that the NLRC has jurisdiction to decide claims for attorney's fees, it contends
that the award for attorney' s fees should have been incorporated in the main case and not after the Supreme Court
had already reviewed and passed upon the decision of the NLRC. Since the claim for attorney's fees by private
respondent was neither taken up nor approved by the Supreme Court, no attorney's fees should have been allowed
by the NLRC. Thus, petitioner posits that the NLRC acted without jurisdiction in making the award of attorney's fees,
as said act constituted a modification of a final and executory judgment of the Supreme Court which did not award
attorney's fees. It then cited decisions of the Court declaring that a decision which has become final and executory can
no longer be altered or modified even by the court which rendered the same.

Issue: Whether or not Atty. Cruz is entitled to 10 % of the judgment award as his attorney’s fees even if it was not
taken up in the main decision of the SC.

Held: Yes, not in the concept contemplatedin Article 111 of the Labor Code. The Labor Arbiter erroneously set the
amount of attorney's fees on the basis of Art. 111 of the Labor Code; a hearing should have been conducted for the
proper determination of attorney's fees.

There are two commonly accepted concepts of attorney's fees, the so-called ordinary and extraordinary. In its
ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by his client for the legal services
he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with
the client.

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the
losing party in a litigation. The basis of this is any of the cases provided by law where such award can be made, such
as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they have
agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.

It is the first type of attorney's fees which private respondent demanded before the labor arbiter. Also, the present
controversy stems from petitioner's apparent misperception that the NLRC has jurisdiction over claims for attorney's
fees only before its judgment is reviewed and ruled upon by the Supreme Court, and that thereafter the former may
no longer entertain claims for attorney's fees. It will be noted that no claim for attorney's fees was filed by private
respondent before the NLRC when it acted on the money claims of petitioner, nor before the Supreme Court when it
reviewed the decision of the NLRC. It was only after the High Tribunal modified the judgment of the NLRC
awarding the differentials that private respondent filed his claim before the NLRC for a percentage thereof as
attorney's fees.

It would obviously have been impossible, if not improper, for the NLRC in the first instance and for the Supreme
Court thereafter to make an award for attorney's fees when no claim therefor was pending before them. Courts

Ma. Cecelia Timbal LlB – 2 Rm 402 | 75


University of San Carlos – College of Law Labor Standards Finals Case Digests

generally rule only on issues and claims presented to them for adjudication. Accordingly, when the labor arbiter
ordered the payment of attorney's fees, he did not in any way modify the judgment of the Supreme Court.

A CLAIM FOR ATTORNEY'S FEES MAY BE ASSERTED EITHER IN THE VERY ACTION IN WHICH THE
SERVICES OF A LAWYER HAD BEEN RENDERED OR IN A SEPARATE ACTION - It is well settled that a claim for
attorney's fees may be asserted either in the very action in which the services of a lawyer had been rendered or in a
separate action. Attorney's fees cannot be determined until after the main litigation has been decided and the subject
of the recovery is at the disposition of the court. The issue over attorney's fees only arises when something has been
recovered from which the fee is to be paid. While a claim for attorney's fees may be filed before the judgment is
rendered, the determination as to the propriety of the fees or as to the amount thereof will have to be held in
abeyance until the main case from which the lawyer's claim for attorney's fees may arise has become final. Otherwise,
the determination to be made by the courts will be premature. Of course, a petition for attorney's fees may be filed
before the judgment in favor of the client is satisfied or the proceeds thereof delivered to the client. It is apparent
from the foregoing discussion that a lawyer has two options as to when to file his claim for professional fees. Hence,
private respondent was well within his rights when he made his claim and waited for the finality of the judgment for
holiday pay differential, instead of filing it ahead of the award's complete resolution. To declare that a lawyer may
file a claim for fees in the same action only before the judgment is reviewed by a higher tribunal would deprive him
of his aforestated options and render ineffective the foregoing pronouncements of this Court.

The provisions of the contract entered into between petitioner and respondents are clear and need no further
interpretation; all that is required to be done in the instant controversy is its application. The P3,000.00 which
petitioner pays monthly to private respondent does not cover the services the latter actually rendered before the labor
arbiter and the NLRC in behalf of the former. As stipulated in Part C of the agreement, the monthly fee is intended
merely as a consideration for the law firm's commitment to render the services enumerated in Part A (General
Services) and Part B (Special Legal Services) of the retainer agreement.

The difference between a compensation for a commitment to render legal services and a remuneration for legal
services actually rendered can better be appreciated with a discussion of the two kinds of retainer fees a client may
pay his lawyer. These are a general retainer, or a retaining fee, and a special retainer.

RETAINER FEES, GENERAL RETAINER AND A SPECIAL RETAINER— A general retainer, or retaining fee, is the
fee paid to a lawyer to secure his future services as general counsel for any ordinary legal problem that may arise in
the routinary business of the client and referred to him for legal action. The future services of the lawyer are secured
and committed to the retaining client. For this, the client pays the lawyer a fixed retainer fee which could be monthly
or otherwise, depending upon their arrangement. The fees are paid whether or not there are cases referred to the
lawyer. The reason for the remuneration is that the lawyer is deprived of the opportunity of rendering services for a
fee to the opposing party or other parties. In fine, it is a compensation for lost opportunities. A special retainer is a fee
for a specific case handled or special service rendered by the lawyer for a client. A client may have several cases
demanding special or individual attention. If for every case there is a separate and independent contract for
attorney's fees, each fee is considered a special retainer.

THE P3,000.00 MONTHLY FEE PROVIDED IN THE RETAINER AGREEMENT BETWEEN THE UNION AND THE
LAW FIRM REFERS TO A GENERAL RETAINER OR A RETAINING FEE. — The P3,000.00 which petitioner pays
monthly to private respondent does not cover the services the latter actually rendered before the labor arbiter and the
NLRC in behalf of the former. As stipulated in Part C of the agreement, the monthly fee is intended merely as a
consideration for the law firm's commitment to render the services enumerated in Part A (General Services) and Part
B (Special Legal Services) of the retainer agreement. Evidently, the P3,000.00 monthly fee provided in the retainer

Ma. Cecelia Timbal LlB – 2 Rm 402 | 76


University of San Carlos – College of Law Labor Standards Finals Case Digests

agreement between the union and the law firm refers to a general retainer, or a retaining fee, as said monthly fee
covers only the law firm's pledge, or as expressly stated therein, its "commitment to render the legal services
enumerated." The fee is not payment for private respondent's execution or performance of the services listed in the
contract, subject to some particular qualifications or permutations stated there. We have already shown that the
P3,000.00 is independent and different from the compensation which private respondent should receive in payment
for his services. While petitioner and private respondent were able to fix a fee for the latter's promise to extend
services, they were not able to come into agreement as to the law firm's actual performance of services in favor of the
union. Hence, the retainer agreement cannot control the measure of remuneration for private respondent's services.

PRIVATE RESPONDENT'S ENTITLEMENT TO AN ADDITIONAL REMUNERATION FOR SPECIAL SERVICES


RENDERED IN THE INTEREST OF PETITIONER IS BASED ON QUASI-CONTRACT. — The fact that petitioner and
private respondent failed to reach a meeting of the minds with regard to the payment of professional fees for special
services will not absolve the former of civil liability for the corresponding remuneration therefor in favor of the latter.
Obligations do not emanate only from contracts. One of the sources of extra-contractual obligations found in our
Civil Code is the quasi-contract premised on the Roman maxim that nemo cum alterius detrimento locupletari
protest. As embodied in our law, certain lawful, voluntary and unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another. A quasi-
contract between the parties in the case at bar arose from private respondent's lawful, voluntary and unilateral
prosecution of petitioner's cause without awaiting the latter's consent and approval. Petitioner cannot deny that it did
benefit from private respondent's efforts as the law firm was able to obtain an award of holiday pay differential in
favor of the union. It cannot even hide behind the cloak of the monthly retainer of P3,000.00 paid to private
respondent because, as demonstrated earlier, private respondent's actual rendition of legal services is not
compensable merely by said amount.

THE LABOR ARBITER ERRONEOUSLY SET THE AMOUNT OF ATTORNEY'S FEES ON THE BASIS OF ART. 111
OF THE LABOR CODE; A HEARING SHOULD HAVE BEEN CONDUCTED FOR THE PROPER DETERMINATION
OF ATTORNEY'S FEES. - Here, then, is the flaw we find in the award for attorney's fees in favor of private
respondent. Instead of adopting the above guidelines, the labor arbiter forthwith but erroneously set the amount of
attorney's fees on the basis of Article 111 of the Labor Code. He completely relied on the operation of Article 111
when he fixed the amount of attorney's fees at P17,574.43. As already stated, Article 111 of the Labor Code regulates
the amount recoverable as attorney's fees in the nature of damages sustained by and awarded to the prevailing party.
It may not be used therefore, as the lone standard in fixing the exact amount payable to the lawyer by his client for
the legal services he rendered. Also, while it limits the maximum allowable amount of attorney's fees, it does not
direct instantaneous and automatic award of attorney's fees in such maximum limit. It, therefore, behooves the
adjudicator in questions and circumstances similar to those in the case at bar, involving a conflict between lawyer and
client, to observe the above guidelines in cases calling for the operation of the principles of quasi-contract and
quantum meruit, and to conduct a hearing for the proper determination of attorney's fees. The criteria found in the
Code of Professional Responsibility are to be considered, and not disregarded, in assessing the proper amount. Here,
the records do not reveal that the parties were duly heard by the labor arbiter on the matter and for the resolution of
private respondent's fees.

As already stated, Article 111 of the Labor Code regulates the amount recoverable as attorney's fees in the nature of
damages sustained by and awarded to the prevailing party. It may not be used therefore, as the lone standard in
fixing the exact amount payable to the lawyer by his client for the legal services he rendered. Also, while it limits the
maximum allowable amount of attorney's fees, it does not direct the instantaneous and automatic award of attorney's
fees in such maximum limit.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 77


University of San Carlos – College of Law Labor Standards Finals Case Digests

It, therefore, behooves the adjudicator in questions and circumstances similar to those in the case at bar, involving a
conflict between lawyer and client, to observe the above guidelines in cases calling for the operation of the principles
of quasi-contract and quantum meruit, and to conduct a hearing for the proper determination of attorney's fees. The
criteria found in the Code of Professional Responsibility are to be considered, and not disregarded, in assessing the
proper amount. Here, the records do not reveal that the parties were duly heard by the labor arbiter on the matter
and for the resolution of private respondent's fees.

It is axiomatic that the reasonableness of attorney's fees is a question of fact. Ordinarily, therefore, we would have
remanded this case for further reception of evidence as to the extent and value of the services rendered by private
respondent to petitioner. However, so as not to needlessly prolong the resolution of a comparatively simple
controversy, we deem it just and equitable to fix in the present recourse a reasonable amount of attorney's fees in
favor of private respondent. For that purpose, we have duly taken into account the accepted guidelines therefor and
so much of the pertinent data as are extant in the records of this case which are assistive in that regard. On such
premises and in the exercise of our sound discretion, we hold that the amount of P10,000.00 is a reasonable and fair
compensation for the legal services rendered by private respondent to petitioner before the labor arbiter and the
NLRC.

Brahm Industries vs NLRC (1997) G.R. 118853


Facts:

On 8 February 1994 Labor Arbiter Fatima J. Franco ruled that complainants Roberto M. Durian and Jone M.
Comendador were illegally dismissed by BRAHM and accordingly ordered the latter to: (a) reinstate complainants to
their former positions or equivalent positions without loss of seniority rights, but if reinstatement was no longer
possible, to pay them separation pay equivalent to one (1) month for every year of service; (b) pay Roberto M. Durian
the amount of Forty-Eight Thousand Thirty-Eight Pesos and Twenty-Five Centavos (P48,038.25) representing his back
wages; and, Jone M. Comendador the amount of Sixty Thousand Four Hundred Seventy-Four Pesos and Ninety-Two
Centavos (P60,474.92) representing his back wages, 13th month pay and service incentive leave pay; and, (c) pay
complainants the amount equivalent to 10% of the total award as attorney's fees.

Upon appeal by BRAHM, the NLRC affirmed the decision of the Labor Arbiter, subject to the modification that the
attorney's fees awarded be reduced to five percent (5%) of the total monetary award.BRAHM now argues that the
NLRC gravely abused its discretion when it held that: (a) private respondents Roberto M. Durian and Jone M.
Comendador were regular employees and not merely contractual employees hired on a per project basis; (b) they
were illegally dismissed; and, (c) they were entitled to attorney's fees despite the fact that the award lacks factual and
legal basis.

Issue: Whether or not private respondents are entitled to attorney’s fees.

Held: Yes. With regard to the propriety of the award of attorney's fees in favor of private respondents, petitioner
contends that it was erroneous for the NLRC to merely reduce the award of attorney's fees when it should have been
completely deleted. Petitioner claims that the award is baseless since the matter of attorney's fees was touched only
once in the dispositive portion of the Labor Arbiter's decision and no discussion or reason was stated therefor.

This argument is unfounded. A perusal of the decision shows that the reason for the award of attorney's fees is
clearly and unequivocally set forth in the body of the Labor Arbiter's decision, to witHaving been compelled to

Ma. Cecelia Timbal LlB – 2 Rm 402 | 78


University of San Carlos – College of Law Labor Standards Finals Case Digests

litigate, complainants should be paid an amount equivalent to ten percent (10%) of the total award as and for
attorney's fees." It used as basis Art. 2208 of the Civil Code which allows attorney's fees to be awarded by a court
when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of
an unjustified act or omission of the party from whom it is sought.

However, nothing precludes the appellate courts from reducing the award of attorney's fees when it is found to be
unconscionable or excessive under the circumstances. Thus, we agree with the NLRC's ruling that the award of
attorney's fees is proper on account of complainants' being compelled to litigate their claims against respondent. The
amount is however reduced to five percent (5%) of the adjudged relief, it appearing that the substantial portion of the
award refers to complainants' back wages and not to withheld salaries.

Finally, this Court has consistently held that findings of fact of administrative agencies and quasi-judicial bodies
which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not
only respect but even finality and are binding upon this Court unless there is grave abuse of discretion or where it is
clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record. Petitioner failed to
convince us that we should depart from this time-honored rule.

Heirs of Aniban vs NLRC (1997) G.R. 155034

Facts:

Reynaldo Aniban was employed by the Philippine Transmarine Carriers, Inc. (TRANSMARINE) acting in behalf of
its foreign principal Norwegian Ship Management A/S (NORWEGIAN) as radio operator on board the vessel
"Kassel." Aniban died due to myocardial infarction during the period of his employment. A claim was made for
additional death benefits under the Collective Bargaining Agreement between Associated Marine Officers and
Seamen's Union of the Philippines and NORWEGIAN. The claim was rejected on the ground that myocardial
infarction was not an occupational disease. However, on 11 January 1994 the POEA ruled that myocardial infarction
was an occupational disease in the case of R/O Aniban and granted the prayer of his heirs for payment of death
benefits under the POEA Standard Employment Contract as well as under the Collective Bargaining Agreement plus
attorney's fees of US$6,700.00 equivalent to 10% of the total award.

On appeal, the NLRC reversed the POEA and denied the claim on the ground that it was the Employees'
Compensation Commission (ECC) which had original jurisdiction to hear and determine the claim for death benefits.
NLRC likewise deleted he award of attorney’s fees on the ground that there was no unlawful withholding of wages.

A motion to reconsider the decision of the NLRC was denied; hence, this petition by the heirs of Aniban. The
Supreme Court ruled that the Employees Compensation Commission may not be considered as having jurisdiction
over money claims, albeit death compensation benefits of overseas contract workers. Article 180 of the Labor Code
provides that the Commission exercises appellate jurisdiction only over decisions rendered either by the GSIS or the
SSS in the exercise of their respective original and exclusive jurisdictions. On the issue of whether the death of Aniban
due to myocardial infarction is compensable, the Court ruled that it is compensable. Although the physical exertion
involved in carrying out the functions of a radio operator may have been quite minimal, the pressure and strain that
went with the position should be considered. Furthermore, the Court stressed that probability and not the ultimate
degree of certainty is the test of proof in compensation.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 79


University of San Carlos – College of Law Labor Standards Finals Case Digests

Issue: WON attorney’s fees can be awarded in a case not involving unlawful withholding of wages.

Held: Yes. ARTICLE 111 OF THE LABOR CODE DOES NOT LIMIT THE AWARD OF ATTORNEY'S FEES TO
CASES OF UNLAWFUL WITHHOLDING OF WAGES ONLY; WHAT THE PROVISION EXPLICITLY PROHIBITS IS
THE AWARD OF ATTORNEY'S FEES WHICH EXCEEDED 10% OF THE AMOUNT OF WAGES RECOVERED. —
On the award of attorney's fees which NLRC deleted on the ground that there was no unlawful withholding of
wages, suffice it to say that Art.111 of the Labor Code does not limit the award of attorney's fees to cases of unlawful
withholding of wages only. What it explicitly prohibits is the award of attorney's fees which exceed 10% of the
amount of wages recovered. Thus, under the circumstances, attorney's fees are recoverable for the services rendered
by petitioner's counsel to compel Aniban's employer to pay its monetary obligations under the CBA. However the
amount of P50,000.00 claimed as attorney's fees in this case is the reasonable compensation based on the records and
not the maximum 10% of the total award as granted by POEA. The reduction of unreasonable attorney's fees is within
our regulatory powers.

Sapio vs Undaloc Construcion et al., (2008) G.R. 155034


Facts:

The controversy started with a complaint filed by petitioner against Undaloc Construction and/or Engineer Cirilo
Undaloc for illegal dismissal, underpayment of wages and nonpayment of statutory benefits. Respondent Undaloc
Construction, a single proprietorship owned by Cirilo Undaloc, is engaged in road construction business in Cebu
City.

Petitioner avers that he was paid a daily salary way below the minimum wage provided for by law. 14 His claim of
salary differential represents the difference between the daily wage he actually received and the statutory minimum
wageTo counter petitioner's assertions, respondents submitted typewritten and signed payroll sheets from 2
September to 8 December 1996, from 26 May to 15 June 1997, and from 12 January to 31 May 1998. 15 These payroll
sheets clearly indicate that petitioner did receive a daily salary of P141.00.

Banking on the fact that the December 1995 payroll sheet was written in pencil, the Labor Arbiter concluded that the
entries were susceptible to change or erasure and that that susceptibility in turn rendered the other payroll sheets
though typewritten less credible.

Thereupon, the Labor Arbiter proceeded to grant petitioner's salary differential to the tune of P24,902.88. Attorney's
fee of P3,000.00 was also awarded. Respondents appealed the award of salary differential to the National Labor
Relations Commission (NLRC). In a Decision dated 28 August 2000, the NLRC sustained the findings of the Labor
Arbiter.

The Court of Appeals did not subscribe to the common findings of the Labor Arbiter and the NLRC. The appellate
court pointed out that allegations of fraud in the preparation of payroll sheets must be substantiated by evidence and
not by mere suspicions or conjectures. Thus, it deleted the award of salary differential and attorney's fees.

Issue: Whether or not the award petitioner-employee Saipo is entitled to salary differential and attorney’s fees.

Held: Yes. It is elementary in this jurisdiction that whoever alleges fraud or mistake affecting a transaction must
substantiate his allegation, since it is presumed that a person takes ordinary care of his concerns and private
transactions have been fair and regular. Persons are presumed to have taken care of their business.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 80


University of San Carlos – College of Law Labor Standards Finals Case Digests

Absent any indication sufficient enough to support a conclusion, we cannot uphold the findings of the Labor Arbiter
and the NLRC. The conclusion of the Labor Arbiter that entries in the December 1995 payroll sheet could have been
altered is utterly baseless.

While we adhere to the position of the appellate court that the "tendency" to alter the entries in the payrolls was not
substantiated, we cannot however subscribe to the total deletion of the award of salary differential and attorney's
fees, as it so ruled.The Labor Arbiter granted a salary differential of P24,902.88.

The Labor Arbiter erred in his computation. He fixed the daily wage rate actually received by petitioner at P105.00
without taking into consideration the P141.00 rate indicated in the typewritten payroll sheets submitted by
respondents. Moreover, the Labor Arbiter misapplied the wage orders when he wrongly categorized respondent as
falling within the first category. Based on the stipulated number of employees and audited financial statements,
respondents should have been covered by the second category.

To avoid further delay in the disposition of this case which is not in consonance with the objective of speedy justice,
we have to adjudge the rightful computation of the salary differential based on the applicable wage orders. After all,
the supporting records are complete.

The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00. However, pursuant to Section
12 of Republic Act (R.A.) No. 6727, as amended by R.A. No. 8188. Respondents are required to pay double the
amount owed to petitioner, bringing their total liability to P13,156.00.

The award of attorney's fees is warranted under the circumstances of this case. Under Article 2208 of the New Civil
Code, attorney's fees can be recovered in actions for the recovery of wages of laborers and actions for indemnity
under employer's liability laws but shall not exceed 10% of the amount awarded. The fees may be deducted from the
total amount due the winning party.

Atty. Ortiz vs San Miguel Corp., (2008) G.R. 151983-84


Facts:

Petitioner is a member of the Philippine Bar who represented the complainants in NLRC Cases No. V0255-94 and No.
V-0068-95 instituted against herein private respondent San Miguel Corporation sometime in 1992 and 1993. Private
respondent, on the other hand, is a corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines. It is primarily engaged in the manufacture and sale of food and beverage particularly
beer products. In line with its business, it operates breweries and sales offices throughout the Philippines. The
complainants in NLRC Cases No. V-0255-94 and No. V-0068-95 was employees at private respondents Sales Offices in
the provinces. NLRC Case No. V-0255-94 (Aguirre Cases) In 1992, several employees from the Bacolod, Cadiz, and
Himamaylan Beer Sales Offices filed with the Labor Arbiter separate complaints against private respondent for illegal
dismissal with prayer for reinstatement with backwages; elevation of employment status from casual-temporary to
regular- permanent reckoned after six months from the start of complainants employment; underpayment of salaries;
non-payment of holiday pay, service incentive leave pay, allowances and sick leaves; nonpayment of benefits under
the existing Collective Bargaining Agreements (CBA); attorneys fees; moral, exemplary and other damages; and
interest. The foregoing complaints were consolidated and initially docketed as RAB Cases No. 06-01-10031-92; 06-01-
10048-92; 06-01-10049-92; 06-0210210-92; 06-02-10211-92; and 06-03-10255-92 (hereinafter collectively referred to as
theAguirre Cases). After conducting a full-blown trial, the parties were given the opportunity to submit their

Ma. Cecelia Timbal LlB – 2 Rm 402 | 81


University of San Carlos – College of Law Labor Standards Finals Case Digests

respective memoranda. Subsequently, the cases were submitted for resolution. On 30 June 1994, Labor Arbiter
Reynaldo J. Gulmatico (Labor Arbiter Gulmatico) rendered a Decision in the Aguirre Cases finding all the
complainants to have been illegally dismissed. He ordered complainants reinstatement to their previous or
equivalent positions without loss of seniority rights. He also ordered private respondent to pay the complainants (1)
full backwages and other CBA benefits in the total amount of P6,197,952.88; (2) rice subsidy or its monetary
equivalent; and (3) attorneys fees equivalent to 10% of the monetary award or in the amount of P619,795.28. Labor
Arbiter Gulmatico, however, dismissed complainants claim for overtime pay, holiday pay, 13th month pay
differential, service incentive leave pay, moral damages and all other claims for lack of merit. Unsatisfied with Labor
Arbiter Gulmaticos monetary and economic awards, complainants appealed to the NLRC, where the Aguirre Cases
were collectively docketed as NLRC Case No. V-0255-94. The NLRC would later render a Decision dated 21 July 1995
in the Aguirre Cases affirming the Decision of Labor Arbiter Gulmatico, with the following modifications: (1)
granting sales commission to the complainants and adopting their computation thereof in their Appeal
Memorandum[8] filed before the NLRC; (2) adjusting and/or reducing the amounts awarded to complainants Alfredo
Gadian, Jr., Renato Junsay, Agustines Llacuna, and Florencio de la Piedra depending on the dates they were
employed; (3) determining that Modesto Jabaybay, who died on 28 December 1993, was to receive only the amount of
P356,128.02; (4) declaring that all the complainants except Romeo Magbanua, who withdrew his complaint, were
entitled to whatever benefits were given under the CBA; and (5) that complainants Romeo Magbanua and Modesto
Jabaybay shall no longer be reinstated. Private respondent moved for the reconsideration of the aforesaid 21 July 1995
NLRC Decision, but its motion was denied by the NLRC in its Resolution dated 27 February 1996. NLRC Case No. V-
0068-95 (Toquero Case) While the Aguirre Cases were still pending resolution by Labor Arbiter Gulmatico, three
other employees at the San Carlos Sales Office filed with the Labor Arbiter a similar complaint for illegal dismissal
against private respondent in 1993. Their complaint was docketed as RAB Case No. 06-0710404-93 (hereinafter
referred to as the Toquero Case). On 26 December 1994, Labor Arbiter Ray Allan T. Drilon (Labor Arbiter Drilon)
rendered his Decision in the Toquero Case also ruling that the three complainants were illegally dismissed. Thus, he
ordered the complainants immediate reinstatement to their former positions without loss of seniority rights. He
ordered private respondent to pay complainants (1) backwages and other benefits in the amount of P572,542.50; (2)
all benefits, privileges and rights enjoyed by the private respondents regular employees in the total amount of
P339,055.00; (3) a total of 159 sacks of rice ration; (4) sales commissions based on the monthly sales of beer sold by
their office for the last three years; and (5) attorneys fees in the amount of P91,159.75. Again, the complainants were
not contented with Labor Arbiter Drilons Decision, and they appealed their case to the NLRC which was then
docketed as NLRC Case No. V-0068-95. On 25 July 1995, the NLRC rendered a Decision modifying the 26 December
1994 Decision of Labor Arbiter Drilon by ordering the private respondent to pay the complainants the following: (1)
additional awards of sales commission; (2) tailoring allowance; (3) monetary equivalent of their uniform for two years
consisting of 24 sets of t-shirts and 6 pairs of pants; and (4) attorneys fees of 10% of the total monetary award or
P198,296.95. In its Resolution dated 9 October 1995, the NLRC partially granted private respondents motion for
reconsideration by allowing the deduction from the award of backwages any earnings of complainants elsewhere
during the pendency of their case. CA-G.R. SP No. 54576-77 Failing to get a favorable ruling from the NLRC in both
the Aguirre and Toquero Cases, private respondent elevated the NLRC Decisions to this Court via a Petition for
Certiorari, where they were docketed as G.R. No. 124426 and G.R. No. 122975, respectively. On 15 July 1996, this
Court issued a Resolution consolidating the two cases.In another Resolution dated 30 June 1999; this Court referred
the said cases to the Court of Appeals conforming to its ruling in St. Martin Funeral Home v. NLRC and Bienvenido
Aricayos. The Court of Appeals accepted the consolidated cases in its Resolution dated 7 September 1999, and
docketed the same as CA-G.R. SP No. 54576-77. While the private respondents Petitions for Certiorari were pending
before the Court of Appeals, all but one of the remaining complainants in the Aguirre and Toquero Cases appeared
on various dates before Labor Arbiters Gulmatico and Drilon, and in the presence of two witnesses, signed separate
Deeds of Release, Waiver and Quitclaim in favor of private respondent. Based on the Deeds they executed, the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 82


University of San Carlos – College of Law Labor Standards Finals Case Digests

complainants agreed to settle their claims against private respondent for amounts less than what the NLRC actually
awarded. Private respondent withheld 10% of the total amount agreed upon by the parties in the said Deeds as
attorneys fees and handed it over to petitioner. Private respondent then attached the Deeds of Release, Waiver and
Quitclaim to its Manifestation and Motion filed before the appellate court. On 22 August 2001, the Court of Appeals
rendered a Decision in CA-G.R. SP No. 54576-77 affirming the NLRC Decision dated 21 July 1995 and Resolution
dated 27 February 1996 in the Aguirre Cases, only insofar as it concerned complainant Alfredo Gadian, Jr.
(complainant Gadian), the only complainant who did not execute a Deed of Release, Waiver and Quitclaim. With
respect to the other complainants in the Aguirre and Toquero Cases, their complaints were dismissed on account of
their duly executed Deeds of Release, Waiver and Quitclaim. Private respondent moved for the partial
reconsideration of the 22 August 2001 Decision of the Court of Appeals, seeking the reversal and setting aside of the
22 August 2001 Decision of the Court of Appeals in CA-G.R. SP. No. 54576-77, which affirmed the 21 July 1995
Decision and 27 February 1996 Resolution of the NLRC in the Aguirre Cases, insofar as complainant Gadian was
concerned; and the dismissal of complainant Gadians complaint against private respondent for lack of merit.
Complainant Gadian and his counsel, herein petitioner, for their part, likewise moved for the partial reconsideration
of the same Decision of the appellate court praying that the award of attorneys fees of 10% should be based on the
monetary awards adjudged by the NLRC. In a Resolution dated9 January 2002, the appellate court denied both
motions. G.R. No. 151421 and No. 151427 Private respondent appealed before this Court by filing a Petition for
Review, docketed as G.R. No. 151421 and No. 151427. However, private respondents Petition was denied due course
by this Court in a Resolution dated 18 March 2002 for failure of the private respondent to show that a reversible error
had been committed by the appellate court.

Held: This Court has consistently ruled that a question of law exists when there is a doubt or controversy as to what
the law is on a certain state of facts. On the other hand, there is a question of fact when the Whether petitioner is
entitled to additional attorneys fees on top of what was already doubt or difference arises as to the alleged truth or
falsehood of the alleged facts. For a question to be one of law, it must involve no examination of the probative value
of the evidence presented by the litigants or any of them.[35] The test of whether a question is one of law or of fact is
not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can
determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law;
otherwise, it is a question of fact. In the case at bar, the core issue presented by the petitioner is with respect to the
amount of attorneys fees to which he should be entitled: whether he is entitled to the amount of attorneys fees as
adjudged by the NLRC in its Decisions in the Aguirre and Toquero Cases or only to the 10% of the amounts actually
paid to his clients, the complainants who signed the Deeds of Release, Waiver and Quitclaim. The aforesaid issue
evidently involves a question of law. In determining whether the petitioner should be entitled to the attorneys fees
stated in the NLRC Decisions, this Court does not need to go over the pieces of evidence submitted by the parties in
the proceedings below to determine their probative value. What it needs to do is ascertain and apply the relevant law
and jurisprudence on the award of attorneys fees to the prevailing parties in labor cases. Article 111 of the Labor
Code, as amended, specifically provides: ART. 111. ATTORNEYS FEES. - (a) In cases of unlawful withholding of
wages the culpable party may be assessed attorneys fees equivalent to ten percent of the amount of wages recovered.
(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the
recovery of the wages, attorneys fees which exceed ten percent of the amount of wages recovered. (Emphasis
supplied.)

Masmud vs NLRC (2009) G.R. 183385


Facts:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 83


University of San Carlos – College of Law Labor Standards Finals Case Digests

On July 9, 2003, Evangelina Masmud’s (Evangelina) husband, the late Alexander J. Masmud (Alexander), filed a
complaint3 against First Victory Shipping Services and Angelakos (Hellas) S.A. for non-payment of permanent
disability benefits, medical expenses, sickness allowance, moral and exemplary damages, and attorney’s fees.
Alexander engaged the services of Atty. Rolando B. Go, Jr. (Atty. Go) as his counsel. In consideration of Atty. Go’s
legal services, Alexander agreed to pay attorney’s fees on a contingent basis, as follows: twenty percent (20%) of total
monetary claims as settled or paid and an additional ten percent (10%) in case of appeal. It was likewise agreed that
any award of attorney’s fees shall pertain to respondent’s law firm as compensation. On November 21, 2003, the
Labor Arbiter (LA) rendered a Decision granting the monetary claims of Alexander. The dispositive portion of the
decision, as quoted in the CA Decision, reads: WHEREFORE, foregoing considered, judgment is rendered finding the
[First Victory Shipping Services and Angelakos (Hellas) S.A.] jointly and severally liable to pay [Alexander’s] total
permanent disability benefits in the amount of US$60,000.00 and his sickness allowance of US$2,348.00, both in
Philippine currency at the prevailing rate of exchange at the time of payment; and to pay further the amount of
P200,000.00 as moral damages,P100,000.00 as exemplary damages and attorney’s fees equivalent to ten percent (10%)
of the total monetary award. [Alexander’s] claim for payment of medical expenses is dismissed for lack of basis. SO
ORDERED. Alexander’s employer filed an appeal before the National Labor Relations Commission (NLRC). During
the pendency of the proceedings before the NLRC, Alexander died. After explaining the terms of the lawyer’s fees to
Evangelina, Atty. Go caused her substitution as complainant. On April 30, 2004, the NLRC rendered a Decision
dismissing the appeal of Alexander’s employer. The employer subsequently filed a motion for reconsideration. The
NLRC denied the same in an Order dated October 26, 2004. On appeal before the CA, the decision of the LA was
affirmed with modification. The award of moral and exemplary damages was deleted.5 Alexander’s employers filed a
petition for certiorari6 before this Court. On February 6, 2006, the Court issued a Resolution dismissing the case for
lack of merit. Eventually, the decision of the NLRC became final and executory. Atty. Go moved for the execution of
the NLRC decision, which was later granted by the LA. The surety bond of the employer was garnished. Upon
motion of Atty. Go, the surety company delivered to the NLRC Cashier, through the NLRC Sheriff, the check
amounting toP3,454,079.20. Thereafter, Atty. Go moved for the release of the said amount to Evangelina. On January
10, 2005, the LA directed the NLRC Cashier to release the amount of P3,454,079.20 to Evangelina. Out of the said
amount, Evangelina paid Atty. Go the sum of P680,000.00. Dissatisfied, Atty. Go filed a motion to record and enforce
the attorney’s lien alleging that Evangelina reneged on their contingent fee agreement. Evangelina paid only the
amount of P680,000.00, equivalent to 20% of the award as attorney’s fees, thus, leaving a balance of 10%, plus the
award pertaining to the counsel as attorney’s fees. In response to the motion filed by Atty. Go, Evangelina filed a
comment with motion to release the amount deposited with the NLRC Cashier. In her comment, Evangelina
manifested that Atty. Go’s claim for attorney’s fees of 40% of the total monetary award was null and void based on
Article 111 of the Labor Code. In effect, petitioner seeks affirmance of her conviction that the legal compensation of a
lawyer in a labor proceeding should be based on Article 111 of the Labor Code. There are two concepts of attorney's
fees. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer by his client for the
legal services rendered to the latter. On the other hand, in its extraordinary concept, attorney's fees may be awarded
by the court as indemnity for damages to be paid by the losing party to the prevailing party, such that, in any of the
cases provided by law where such award can be made, e.g., those authorized in Article 2208 of the Civil Code, the
amount is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the
lawyer as additional compensation or as part thereof. Here, we apply the ordinary concept of attorney’s fees, or the
compensation that Atty. Go is entitled to receive for representing Evangelina, in substitution of her husband, before
the labor tribunals and before the court. Evangelina maintains that Article 111 of the Labor Code is the law that
should govern Atty. Go’s compensation as her counsel and assiduously opposes their agreed retainer contract. Article
111 of the said Code provides: ART. 111. Attorney's fees. — (a) In cases of unlawful withholding of wages the
culpable party may be assessed attorney's fees equivalent to ten percent of the amount of the wages recovered.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 84


University of San Carlos – College of Law Labor Standards Finals Case Digests

Held: Contrary to Evangelina’s proposition, Article 111 of the Labor Code deals with the extraordinary concept of
attorney’s fees. It regulates the amount recoverable as attorney's fees in the nature of damages sustained by and
awarded to the prevailing party. It may not be used as the standard in fixing the amount payable to the lawyer by his
client for the legal services he rendered. In this regard, Section 24, Rule 138 of the Rules of Court should be observed
in determining Atty. Go’s compensation. Considering that Atty. Go successfully represented his client, it is only
proper that he should receive adequate compensation for his efforts. Even as we agree with the reduction of the
award of attorney's fees by the CA, the fact that a lawyer plays a vital role in the administration of justice emphasizes
the need to secure to him his honorarium lawfully earned as a means to preserve the decorum and respectability of
the legal profession. A lawyer is as much entitled to judicial protection against injustice or imposition of fraud on the
part of his client as the client is against abuse on the part of his counsel. The duty of the court is not alone to ensure
that a lawyer acts in a proper and lawful manner, but also to see that a lawyer is paid his just fees. With his capital
consisting of his brains and with his skill acquired at tremendous cost not only in money but in expenditure of time
and energy, he is entitled to the protection of any judicial tribunal against any attempt on the part of his client to
escape payment of his just compensation. It would be ironic if after putting forth the best in him to secure justice for
his client; he himself would not get his due. WHEREFORE, in view of the foregoing, the Decision dated October 31,
2007 and the Resolution dated June 6, 2008 of the Court of Appeals in CA-G.R. SP No. 96279 are hereby AFFIRMED.

Bernardo vs. NLRC (1999) G.R. 122917


Facts:

Complainants numbering 43 are deaf-mutes who were hired on various periods from 1988 to 1993 by respondent Far
East Bank and Trust Co. as Money Sorters and Counters through a uniformly worded agreement called 'Employment
Contract for Handicapped Workers.'

Petitioners maintain that they should be considered regular employees, because their task as money sorters and
counters was necessary and desirable to the business of respondent bank. They further allege that their contracts
served merely to preclude the application of Article 280 and to bar them from becoming regular employees.

Private respondent, on the other hand, submits that petitioners were hired only as "special workers and should not in
any way be considered as part of the regular complement of the Bank." Rather, they were "special" workers under
Article 80 of the Labor Code. Private respondent contends that it never solicited the services of petitioners, whose
employment was merely an "accommodation" in response to the requests of government officials and civic-minded
citizens. They were told from the start, "with the assistance of government representatives," that they could not
become regular employees because there were no plantilla positions for "money sorters," whose task used to be
performed by tellers. Their contracts were renewed several times, not because of need "but merely for humanitarian
reasons." Respondent submits that "as of the present, the 'special position' that was created for the petitioners no
longer exists in private respondent bank, after the latter had decided not to renew anymore their special employment
contracts."

In affirming the ruling of the labor arbiter that herein petitioners could not be deemed regular employees under
Article 280 of the Labor Code, as amended, Respondent Commission ratiocinated as follows:

"We agree that Art. 280 is not controlling herein. We give due credence to the conclusion that complainants were
hired as an accommodation to [the] recommendation of civic oriented personalities whose employment[s] were

Ma. Cecelia Timbal LlB – 2 Rm 402 | 85


University of San Carlos – College of Law Labor Standards Finals Case Digests

covered by . . . Employment Contract[s] with special provisions on duration of contract as specified under Art. 80.
Hence, as correctly held by the Labor Arbiter a quo, the terms of the contract shall be the law between the parties."

The NLRC also declared that the Magna Carta for Disabled Persons was not applicable, "considering the prevailing
circumstances/milieu of the case."

Issues:

1. Whether or not petitioners have become regular employees.

2. Whether or not the provisions of the Magna Carta for the Disabled (Republic Act No. 7277), on proscription
against discrimination against disabled persons is applicable in this case.

Held: Yes. The petition is meritorious. However, only the employees, who worked for more than six months and
whose contracts were renewed are deemed regular. Hence, their dismissal from employment was illegal.

The facts, viewed in light of the Labor Code and the Magna Carta for Disabled Persons, indubitably show that the
petitioners, except sixteen of them, should be deemed regular employees. As such, they have acquired legal rights
that this Court is duty-bound to protect and uphold, not as a matter of compassion but as a consequence of law and
justice.

The uniform employment contracts of the petitioners stipulated that they shall be trained for a period of one month,
after which the employer shall determine whether or not they should be allowed to finish the 6-month term of the
contract. Furthermore, the employer may terminate the contract at any time for a just and reasonable cause. Unless
renewed in writing by the employer, the contract shall automatically expire at the end of the term.

According to private respondent, the employment contracts were prepared in accordance with Article 80 of the Labor
Code, which provides:

"ARTICLE 80. Employment agreement. — Any employer who employs handicapped workers shall enter into an
employment agreement with them, which agreement shall include:

(a) The names and addresses of the handicapped workers to be employed;

(b) The rate to be paid the handicapped workers which shall be not less than seventy five (75%) per cent of the
applicable legal minimum wage;

(c) The duration of employment period; and

(d) The work to be performed by handicapped workers.

The employment agreement shall be subject to inspection by the Secretary of Labor or his duly authorized
representatives."The stipulations in the employment contracts indubitably conform with the aforecited provision.
Succeeding events and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons), however, justify the
application of Article 280 of the Labor Code.

Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the
contracts of 37 of them. In fact, two of them worked from 1988 to 1993. Verily, the renewal of the contracts of the
handicapped workers and the hiring of others lead to the conclusion that their tasks were beneficial and necessary to

Ma. Cecelia Timbal LlB – 2 Rm 402 | 86


University of San Carlos – College of Law Labor Standards Finals Case Digests

the bank. More important, these facts show that they were qualified to perform the responsibilities of their positions.
In other words, their disability did not render them unqualified or unfit for the tasks assigned to them.

QUALIFIED DISABLED PERSONS REMOVE CONTRACT FROM AMBIT OF ARTICLE 80 OF LABOR


CODE. - In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee
should be given the same terms and conditions of employment as a qualified able-bodied person. Section 5
of the Magna Carta provides:

"SECTION 5. Equal Opportunity for Employment. — No disabled person shall be denied access to opportunities
for suitable employment. A qualified disabled employee shall be subject to the same terms and conditions of
employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a qualified
able bodied person."

The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the
ambit of Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus
covered by Article 280 of the Labor Code, which provides:

"ARTICLE 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.

"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 as regular employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists."

TEST WHETHER EMPLOYEE IS REGULAR - The test of whether an employee is regular was laid down in De Leon
v. NLRC , in which this Court held:

"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 the 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 one year, even if the
performance is not continuous and merely intermittent, the law deems 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."

Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of respondent bank.
With the exception of sixteen of them, petitioners performed these tasks for more than six months.

As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making
permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments,
ad infinitum." The contract signed by petitioners is akin to a probationary employment, during which the bank
determined the employees' fitness for the job. When the bank renewed the contract after the lapse of the six-month

Ma. Cecelia Timbal LlB – 2 Rm 402 | 87


University of San Carlos – College of Law Labor Standards Finals Case Digests

probationary period, the employees thereby became regular employees. No employer is allowed to determine
indefinitely the fitness of its employees.

As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is, their services may be
terminated only for a just or authorized cause. Because respondent failed to show such cause, these twenty-seven
petitioners are deemed illegally dismissed and therefore entitled to back wages and reinstatement without loss of
seniority rights and other privileges. Considering the allegation of respondent that the job of money sorting is no
longer available because it has been assigned back to the tellers to whom it originally belonged, petitioners are hereby
awarded separation pay in lieu of reinstatement.

Because the other sixteen worked only for six months, they are not deemed regular employees and hence not entitled
to the same benefits.

EMPLOYMENT CONTRACT WITH FIXED TERM; RULING IN BRENT CASE NOT APPLICABLE IN
CASE AT BAR - Respondent bank, citing Brent School v. Zamora, in which the Court upheld the validity of
an employment contract with a fixed term, argues that the parties entered into the contract on equal footing.
It adds that the petitioners had in fact an advantage, because they were backed by then DSWD Secretary
Mita Pardo de Tavera and Representative Arturo Borjal.

We are not persuaded. The term limit in the contract was premised on the fact that the petitioners were disabled, and
that the bank had to determine their fitness for the position. Indeed, its validity is based on Article 80 of the Labor
Code. But as noted earlier, petitioners proved themselves to be qualified disabled persons who, under the Magna
Carta for Disabled Persons, are entitled to terms and conditions of employment enjoyed by qualified able-bodied
individuals; hence, Article 80 does not apply because petitioners are qualified for their positions. The validation of the
limit imposed on their contracts, imposed by reason of their disability, was a glaring instance of the very mischief
sought to be addressed by the new law.

·Employment contract; impressed with public interest; parties are not at liberty to insulate themselves. - Moreover, it
must be emphasized that a contract of employment is impressed with public interest. Provisions of applicable
statutes are deemed written into the contract, and the "parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting with each other." Clearly, the
agreement of the parties regarding the period of employment cannot prevail over the provisions of the Magna Carta
for Disabled Persons, which mandate that petitioners must be treated as qualified able-bodied employees.

Respondent's reason for terminating the employment of petitioners is instructive. Because the Bangko Sentral ng
Pilipinas (BSP) required that cash in the bank be turned over to the BSP during business hours from 8:00 a.m. to 5:00
p.m., respondent resorted to nighttime sorting and counting of money. Thus, it reasons that this task "could not be
done by deaf mutes because of their physical limitations as it is very risky for them to travel at night." We find no
basis for this argument. Travelling at night involves risks to handicapped and able-bodied persons alike. This excuse
cannot justify the termination of their employment.

EMPLOYMENT; CHARACTER OF EMPLOYMENT; HOW DETERMINED - Respondent argues that


petitioners were merely "accommodated" employees. This fact does not change the nature of their
employment. As earlier noted, an employee is regular because of the nature of work and the length of
service, not because of the mode or even the reason for hiring them.

Equally unavailing are private respondent's arguments that it did not go out of its way to recruit petitioners, and that
its plantilla did not contain their positions. In L. T . Datu v. NLRC, the Court held that "the determination of whether

Ma. Cecelia Timbal LlB – 2 Rm 402 | 88


University of San Carlos – College of Law Labor Standards Finals Case Digests

employment is casual or regular does not depend on the will or word of the employer, and the procedure of
hiring . . . but on the nature of the activities performed by the employee, and to some extent, the length of
performance and its continued existence."

Private respondent argues that the petitioners were informed from the start that they could not become
regular employees. In fact, the bank adds, they agreed with the stipulation in the contract regarding this point. Still,
we are not persuaded.

In this light, we iterate our ruling in Romares v. NLRC :

Article 280 was emplaced in our statute books to prevent the circumvention of the employee's right to be secure in his
tenure by indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of
regular employment defined therein. Where an employee has been engaged to perform activities which are usually
necessary or desirable in the usual business of the employer, such employee is deemed a regular employee and is
entitled to security of tenure notwithstanding the contrary provisions of his contract of employment.

"At this juncture, the leading case of Brent School, Inc. v. Zamora proves instructive. As reaffirmed in subsequent
cases, this Court has upheld the legality of fixed-term employment. It ruled that the decisive determinant in 'term
employment' should not be the activities that the employee is called upon to perform but the day certain agreed upon
the parties for the commencement and termination of their employment relationship. But this Court went on to say
that where from the circumstances it is apparent that the periods have been imposed to preclude acquisition of
tenurial security by the employee, they should be struck down or disregarded as contrary to public policy and
morals."

In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the working class, but
also the concern of the State for the plight of the disabled. The noble objectives of Magna Carta for Disabled Persons
are not based merely on charity or accommodation, but on justice and the equal treatment of qualified persons,
disabled or not. In the present case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work. The
eloquent proof of this statement is the repeated renewal of their employment contracts. Why then should they be
dismissed, simply because they are physically impaired? The Court believes, that, after showing their fitness for the
work assigned to them, they should be treated and granted the same rights like any other regular employees.

Philippine Telegraph & Telephone Co vs NLRC (1997) G.R. 118978

Facts:

Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone Company
(hereafter, PT&T) invokes the alleged concealment of civil status and defalcation of company funds as grounds to
terminate the services of an employee. That employee, herein private respondent Grace de Guzman, contrarily
argues that what really motivated PT&T to terminate her services was her having contracted marriage during her
employment, which is prohibited by petitioner in its company policies. She thus claims that she was discriminated
against in gross violation of law, such a proscription by an employer being outlawed by Article 136 of the Labor
Code.

Issue: WON the policy of not accepting or considering as disqualified from work any woman worker who contracts
marriage is valid?

Ma. Cecelia Timbal LlB – 2 Rm 402 | 89


University of San Carlos – College of Law Labor Standards Finals Case Digests

Held: Petitioner’s policy of not accepting or considering as disqualified from work any woman worker who contracts
marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by our labor
laws and by no less than the Constitution.

The Constitution, cognizant of the disparity in rights between men and women in almost all phases of social and
political life, provides a gamut of protective provisions. Acknowledged as paramount in the due process scheme is
the constitutional guarantee of protection to labor and security of tenure. Thus, an employer is required, as a
condition sine qua non prior to severance of the employment ties of an individual under his employ, to convincingly
establish, through substantial evidence, the existence of a valid and just cause in dispensing with the services of such
employee, one’s labor being regarded as constitutionally protected property. The government, to repeat, abhors any
stipulation or policy in the nature of that adopted by petitioner PT&T. The Labor Code states, in no uncertain terms,
as follows:

“ART. 136. Stipulation against marriage. - It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman shall not get married, or to stipulate expressly or
tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage.”

In the case at bar, it can easily be seen from the memorandum sent to private respondent by the branch supervisor of
the company, with the reminder, that “you’re fully aware that the company is not accepting married women
employee (sic), as it was verbally instructed to you.” Again, in the termination notice sent to her by the same branch
supervisor, private respondent was made to understand that her severance from the service was not only by reason
of her concealment of her married status but, over and on top of that, was her violation of the company’s policy
against marriage (“and even told you that married women employees are not applicable [sic] or accepted in our
company.”

Petitioner’s policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman
to be free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults
good morals and public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege
that by all accounts inheres in the individual as an intangible and inalienable right. Hence, while it is true that the
parties to a contract may establish any agreements, terms, and conditions that they may deem convenient, the same
should not be contrary to law, morals, good customs, public order, or public policy. Carried to its logical
consequences, it may even be said that petitioner’s policy against legitimate marital bonds would encourage illicit or
common-law relations and subvert the sacrament of marriage.

Del Monte Phils vs Velasco (2007) G.R. 153447


Facts:

Velasco started working with Del Monte Philippines (petitioner) on October 21, 1976 as a seasonal employee and was
regularized on May 1, 1977. Her latest assignment was as Field Laborer. On June 16, 1987, respondent was warned in
writing due to her absences. On May 4, 1991, respondent, thru a letter, was again warned in writing by petitioner
about her absences without permission and a forfeiture of her vacation leave entitlement for the year 1990-1991 was
imposed against her. On September 14, 1992, another warning letter was sent to respondent regarding her absences
without permission during the year 1991-1992. Her vacation entitlement for the said employment year affected was
consequently forfeited.

In view of the said alleged absences without permission, on September 17, 1994, a notice of hearing was sent to
respondent notifying her of the charges filed against her for violating the Absence Without Official Leave rule: that is

Ma. Cecelia Timbal LlB – 2 Rm 402 | 90


University of San Carlos – College of Law Labor Standards Finals Case Digests

for excessive absence without permission on August 15-18, 29-31 and September 1-10, 1994. Respondent having failed
to appear on September 23, 1994 hearing, another notice of hearing was sent to her resetting the investigation on
September 30, 1994. It was again reset to October 5, 1994. After hearing, the petitioner terminated the services of
respondent effective January 16, 1994 due to excessive absences without permission.

Issue: WON the employment of respondent had been terminated on account of her pregnancy, and therefore violates
the Labor Code which prohibits an employer to discharge an employee on account of the latter's pregnancy.

Held: Respondent's sickness was pregnancy-related and, therefore, the petitioner cannot terminate respondent's
services because in doing so, petitioner will, in effect, be violating the Labor Code which prohibits an employer to
discharge an employee on account of the latter's pregnancy. Article 137 of the Labor Code provides: that it shall be
unlawful for any employer: (1) To deny any woman employee the benefits provided for in this Chapter or to
discharge any woman employed by him for the purpose of preventing her from enjoying any of the benefits provided
under this Code; (2) To discharge such woman on account of her pregnancy, while on leave or in confinement due to
her pregnancy; or (3) To discharge or refuse the admission of such woman upon returning to her work for fear that
she may again be pregnant.

Respondent was able to subsequently justify her absences in accordance with company rules and policy; that the
respondent was pregnant at the time she incurred the absences; that this fact of pregnancy and its related illnesses
had been duly proven through substantial evidence; that the respondent attempted to file leaves of absence but the
petitioner's supervisor refused to receive them; that she could not have filed prior leaves due to her continuing
condition; and that the petitioner, in the last analysis, dismissed the respondent on account of her pregnancy, a
prohibited act.

Petitioner terminated the services of respondent on account of her pregnancy which justified her absences and, thus,
committed a prohibited act rendering the dismissal illegal.

Ultra Villa Food Haus vs, Geniston (1999) G.R. 120473


Facts:

Private respondent Renato Geniston was employed by petitioner Ultra Villa Food House and/or its alleged owner
Rosie Tio. Private respondent alleged that he was employed as a "do it all guy" acting as waiter, driver and
maintenance man, in said restaurant. During the elections of May 11, 1992, private respondent acted as Poll Watcher.
The counting of votes lasted until 3:00 p.m. the next day, May 12. Private respondent did not report for work on both
days on account of his poll watching. As a result, his employment was terminated by petitioner Tio on the ground of
abandonment.

Private respondent filed a case of illegal dismissal against petitioners. Petitioner Tio maintained that private
respondent was her personal driver, not an employee of Ultra Villa Food Haus and denied dismissing private
respondent whom she claimed abandoned his job.

The Labor Arbiter found that private respondent was indeed petitioner's personal driver. The Labor Arbiter
concluded that private respondent, being a personal driver, was not entitled to overtime pay, premium pay, service
incentive leave and 13th month pay.On appeal, the NLRC reversed the decision of the labor arbiter and ordered the
reinstatement of private respondent and payment of backwages, overtime pay, premium pay for holiday and rest
days, etc. The NLRC also granted private respondent separation pay in lieu of reinstatement on account of the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 91


University of San Carlos – College of Law Labor Standards Finals Case Digests

establishment's closure but denied his prayer for moral, actual and exemplary damages, and attorney's fees.
Petitioner moved for reconsideration but was denied.

Issues:

(1) Whether private respondent was an employee of the Ultra Villa Food Haus or the personal driver of
petitioner; and

(2) Whether private respondent was illegally dismissed from employment.

Held:

I. THE LABOR ARBITER CORRECTLY RULED THAT PRIVATE RESPONDENT WAS PETITIONER'S PERSONAL
DRIVER AND NOT AN EMPLOYEE OF THE SUBJECT ESTABLISHMENT. — We find that private respondent was
indeed the personal driver of petitioner, and not an employee of the Ultra Villa Food Haus. There is substantial
evidence to support such conclusion, namely:

(1) Private respondent's admission during the mandatory conference that he was petitioner's personal driver.

(2) Copies of the Ultra Villa Food Haus payroll which do not contain private respondent's name.

(3) Affidavits of Ultra Villa Food Haus employees attesting that private respondent was never an employee of said
establishment.

(4) Petitioner Tio's undisputed allegation that she works as the branch manager of the CFC Corporation whose office
is located in Mandaue City. This would support the Labor Arbiter's observation that private respondents' position as
driver would be "incongruous" with his functions as a waiter of Ultra Villa Food Haus.

(5) The Joint Affidavit of the warehouseman and warehouse checker of the CFC Corporation stating that: Renato
Geniston usually drive[s] Mrs. Tio from her residence to the office. Thereafter, Mr. Geniston will wait for Mrs. Tio in
her car. Most of the time, Renato Geniston slept in the car of Mrs. Tio and will be awakened only when the latter will
leave the office for lunch. Mr. Geniston will again drive Mrs. Tio to the office at around 2:00 o'clock in the afternoon
and thereafter the former will again wait for Mrs. Tio at the latter's car until Mrs. Tio will again leave the office to
make her rounds at our branch office at the downtown area. In contrast, private respondent has not presented any
evidence other than his self-serving allegation to show that he was employed in the Ultra Villa Food Haus.

On this issue, therefore, the evidence weighs heavily in petitioner's favor. The Labor Arbiter thus correctly ruled that
private respondent was petitioner's personal driver and not an employee of the subject establishment. Accordingly,
the terms and conditions of private respondent's employment are governed by Chapter III, Title III, Book III of the
Labor Code as well as by the pertinent provisions of the Civil Code.

PETITIONER IS NOT OBLIGED UNDER THE LAW TO GRANT PRIVATE RESPONDENT OVERTIME PAY,
HOLIDAY PAY, PREMIUM PAY AND SERVICE INCENTIVE LEAVE.

Chapter III, Title III, Book III, however, is silent on the grant of overtime pay, holiday pay, premium pay and service
incentive leave to those engaged in the domestic or household service.

Moreover, the specific provisions mandating these benefits are found in Book III, Title I of the Labor Code, and
Article 82, which defines the scope of the application of these provisions, expressly excludes domestic helpers from
its coverage:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 92


University of San Carlos – College of Law Labor Standards Finals Case Digests

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.

The limitations set out in the above article are echoed in Book III of the Omnibus Rules Implementing the Labor
Code. Clearly then, petitioner is not obliged by law to grant private respondent any of these benefits.

II. PRIVATE RESPONDENT IS ENTITLED TO BE INDEMNIFIED FOR HIS UNJUST DISMISSAL AND FOR
PETITIONER'S FAILURE TO COMPLY WITH THE REQUIREMENTS OF DUE PROCESS IN EFFECTING HIS
DISMISSAL.

To constitute abandonment, two requisites must concur: (1) the failure to report to work or absence without valid or
justifiable reason, and (2) a clear intention to sever the employer-employee relationship as manifested by some overt
acts, with the second requisite as the more determinative factor.

The burden of proving abandonment as a just cause for dismissal is on the employer. Petitioner failed to discharge
this burden. The only evidence adduced by petitioner to prove abandonment is her affidavit. It is quite unbelievable
that private respondent would leave a stable and relatively well paying job as petitioner's family driver to work as an
election watcher.

Though the latter may pay more in a day, elections in this country are so far in between that it is unlikely that any
person would abandon his job to embark on a career as an election watcher, the functions of which are seasonal and
temporary in nature. Consequently, we do not find private respondent to have abandoned his job. His dismissal from
petitioner's employ being unjust, petitioner is entitled to an indemnity under Article 149 of the Labor Code.

Petitioner likewise concedes that she failed to comply with due process in dismissing private respondent since
private respondent had already abandoned his job. As we have shown earlier however, petitioner's theory of
abandonment has no leg to stand on, and with it, her attempts to justify her failure to accord due process must also
fall. Accordingly, private respondent is ordered to pay private respondent the sum of P1,000.00.

Remington Industrial Sales Corp,. vs Castaneda (2007) G.R. 153477


Facts:

Erlinda alleged that she started working in August 1983 as company cook with a salary of Php 4,000.00 for
Remington, a corporation engaged in the trading business; that she worked for six (6) days a week, starting as early
as 6:00 a.m. because she had to do the marketing and would end at around 5:30 p.m., or even later, after most of the
employees, if not all, had left the company premises; that she continuously worked with Remington until she was
unceremoniously prevented from reporting for work when Remington transferred to a new site in Edsa, Caloocan
City.

She averred that she reported for work at the new site in Caloocan City on January 15, 1998, only to be informed that
Remington no longer needed her services. Erlinda believed that her dismissal was illegal because she was not given
the notices required by law; hence, she filed her complaint for reinstatement without loss of seniority rights, salary
differentials, service incentive leave pay, 13th month pay and 10% attorney's fees.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 93


University of San Carlos – College of Law Labor Standards Finals Case Digests

Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a domestic helper, not a regular
employee; Erlinda worked as a cook and this job had nothing to do with Remington's business of trading in
construction or hardware materials, steel plates and wire rope products. It also contended that contrary to Erlinda's
allegations that she worked for eight (8) hours a day, Erlinda's duty was merely to cook lunch and "merienda", after
which her time was hers to spend as she pleased. Remington also maintained that it did not exercise any degree of
control and/or supervision over Erlinda's work as her only concern was to ensure that the employees' lunch and
"merienda" were available and served at the designated time. Remington likewise belied Erlinda's assertion that her
work extended beyond 5:00 p.m. as she could only leave after all the employees had gone.

The truth, according to Remington, is that Erlinda did not have to punch any time card in the way that other
employees of Remington did; she was free to roam around the company premises, read magazines, and to even nap
when not doing her assigned chores. Remington averred that the illegal dismissal complaint lacked factual and legal
bases. Allegedly, it was Erlinda who refused to report for work when Remington moved to a new location in
Caloocan City.

LA and NLRC decided the case in favor of the complainant. Petitioner appealed to the CA. While the petition was
pending with the Court of Appeals, the NLRC rendered another Decision in the same case on August 29, 2001, which
included the retirement pay not included in their first decision. Petitioner challenged the second decision of the
NLRC, including the resolution denying its motion for reconsideration, through a second

Issues and Rulings: The petition must fail.

I. Whether or not respondent is petitioner's regular employee or a domestic helper.

We affirm that respondent was a regular employee of the petitioner and that the latter was guilty of illegal dismissal.

Petitioner relies heavily on the affidavit of a certain Mr. Antonio Tan and contends that respondent is the latter's
domestic helper and not a regular employee of the company since Mr. Tan has a separate and distinct personality
from the petitioner. It maintains that it did not exercise control and supervision over her functions; and that it
operates as a trading company and does not engage in the restaurant business, and therefore respondent's work as a
cook, which was not usually necessary or desirable to its usual line of business or trade, could not make her its
regular employee.This contention fails to impress.

In Apex Mining Company, Inc. v. NLRC, this Court held that a househelper in the staff houses of an industrial
company was a regular employee of the said firm. We ratiocinated that:Under Rule XIII, Section 1(b), Book 3 of the
Labor Code, as amended, the terms "househelper" or "domestic servant" are defined as follows:

"The term 'househelper' as used herein is synonymous to the term 'domestic servant' and shall refer to any person,
whether male or female, who renders services in and about the employer's home and which services are usually
necessary or desirable for the maintenance and enjoyment thereof, and ministers exclusively to the personal comfort
and enjoyment of the employer's family."

The foregoing definition clearly contemplates such househelper or domestic servant who is employed in the
employer's home to minister exclusively to the personal comfort and enjoyment of the employer's family. Such
definition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and similar
househelps.

The criteria is the personal comfort and enjoyment of the family of the employer in the home of said employer. While
it may be true that the nature of the work of a househelper, domestic servant or laundrywoman in a home or in a

Ma. Cecelia Timbal LlB – 2 Rm 402 | 94


University of San Carlos – College of Law Labor Standards Finals Case Digests

company staffhouse may be similar in nature, the difference in their circumstances is that in the former instance they
are actually serving the family while in the latter case, whether it is a corporation or a single proprietorship engaged
in business or industry or any other agricultural or similar pursuit, service is being rendered in the staffhouses or
within the premises of the business of the employer. In such instance, they are employees of the company or
employer in the business concerned entitled to the privileges of a regular employee.

Petitioner contends that it is only when the househelper or domestic servant is assigned to certain aspects of the
business of the employer that such househelper or domestic servant may be considered as such an employee. The
Court finds no merit in making any such distinction. The mere fact that the househelper or domestic servant is
working within the premises of the business of the employer and in relation to or in connection with its business, as
in its staffhouses for its guest or even for its officers and employees, warrants the conclusion that such househelper or
domestic servant is and should be considered as a regular employee of the employer and not as a mere family
househelper or domestic servant as contemplated in Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended.

In the case at bar, the petitioner itself admits in its position paper that respondent worked at the company premises
and her duty was to cook and prepare its employees' lunch and merienda. Clearly, the situs, as well as the nature of
respondent's work as a cook, who caters not only to the needs of Mr. Tan and his family but also to that of the
petitioner's employees, makes her fall squarely within the definition of a regular employee under the doctrine
enunciated in the Apex Mining case. That she works within company premises, and that she does not cater
exclusively to the personal comfort of Mr. Tan and his family, is reflective of the existence of the petitioner's right of
control over her functions, which is the primary indicator of the existence of an employer-employee relationship.

Moreover, it is wrong to say that if the work is not directly related to the employer's business, then the person
performing such work could not be considered an employee of the latter. The determination of the existence of an
employer-employee relationship is defined by law according to the facts of each case, regardless of the nature of the
activities involved. Indeed, it would be the height of injustice if we were to hold that despite the fact that respondent
was made to cook lunch and merienda for the petitioner's employees, which work ultimately redounded to the
benefit of the petitioner corporation, she was merely a domestic worker of the family of Mr. Tan.

We note the findings of the NLRC, affirmed by the Court of Appeals, that no less than the company's corporate
secretary has certified that respondent is a bonafide company employee; she had a fixed schedule and routine of
work and was paid a monthly salary of P4,000.00; she served with the company for 15 years starting in 1983, buying
and cooking food served to company employees at lunch and merienda, and that this service was a regular feature of
employment with the company. Indubitably, the Court of Appeals, as well as the NLRC, correctly held that based on
the given circumstances, the respondent is a regular employee of the petitioner.

II. Whether or not respondent was illegally dismissed.

Petitioner contends that there was abandonment on respondent's part when she refused to report for work when the
corporation transferred to a new location in Caloocan City, claiming that her poor eyesight would make long distance
travel a problem. Thus, it cannot be held guilty of illegal dismissal.

On the other hand, the respondent claims that when the petitioner relocated, she was no longer called for duty and
that when she tried to report for work, she was told that her services were no longer needed. She contends that the
petitioner dismissed her without a just or authorized cause and that she was not given prior notice, hence rendering
the dismissal illegal.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 95


University of San Carlos – College of Law Labor Standards Finals Case Digests

We rule for the respondent. As a regular employee, respondent enjoys the right to security of tenure under Article 279
38 of the Labor Code and may only be dismissed for a just or authorized cause, otherwise the dismissal becomes
illegal and the employee becomes entitled to reinstatement and full backwages computed from the time
compensation was withheld up to the time of actual reinstatement.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. It is a form of
neglect of duty; hence, a just cause for termination of employment by the employer under Article 282 of the Labor
Code, which enumerates the just causes for termination by the employer. For a valid finding of abandonment, these
two factors should be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2)
a clear intention to sever employer-employee relationship, with the second as the more determinative factor which 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. This, the
petitioner failed to do in the case at bar.

Alongside the petitioner's contention that it was the respondent who quit her employment and refused to return to
work, greater stock may be taken of the respondent's immediate filing of her complaint with the NLRC. Indeed, an
employee who loses no time in protesting her layoff cannot by any reasoning be said to have abandoned her work,
for it is well-settled that the filing of an employee of a complaint for illegal dismissal with a prayer for reinstatement
is proof enough of her desire to return to work, thus, negating the employer's charge of abandonment.

In termination cases, the burden of proof rests upon the employer to show that the dismissal is for a just and valid
cause; failure to do so would necessarily mean that the dismissal was illegal. The employer's case succeeds or fails on
the strength of its evidence and not on the weakness of the employee's defense. If doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.

III. Whether the second NLRC decision promulgated during the pendency of the first petition for certiorari has basis
in law.

The petitioner contends that the respondent's motion for reconsideration, upon which the second NLRC decision was
based, was not under oath and did not contain a certification as to why it was not decided on time as required under
the New Rules of Procedure of the NLRC. Furthermore, the former also raises for the first time the contention that
respondent's motion was filed beyond the ten (10)-calendar day period required under the same Rules, since the
latter received a copy of the first NLRC decision on December 6, 2000, and respondent filed her motion only on
December 18, 2000. Thus, according to petitioner, the respondent's motion for reconsideration was a mere scrap of
paper and the second NLRC decision has no basis in law. We do not agree.

It is well-settled that the application of technical rules of procedure may be relaxed to serve the demands of
substantial justice, particularly in labor cases. Labor cases must be decided according to justice and equity and the
substantial merits of the controversy. Rules of procedure are but mere tools designed to facilitate the attainment of
justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than
promote substantial justice, must always be avoided.

This Court has consistently held that the requirement of verification is formal, and not jurisdictional. Such
requirement is merely a condition affecting the form of the pleading, non-compliance with which does not
necessarily render it fatally defective. Verification is simply intended to secure an assurance that the allegations in the
pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading
is filed in good faith. The court may order the correction of the pleading if verification is lacking or act on the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 96


University of San Carlos – College of Law Labor Standards Finals Case Digests

pleading although it is not verified, if the attending circumstances are such that strict compliance with the rules may
be dispensed with in order that the ends of justice may thereby be served.

Anent the argument that respondent's motion for reconsideration, on which the NLRC's second decision was based,
was filed out of time, such issue was only brought up for the first time in the instant petition where no new issues
may be raised by a party in his pleadings without offending the right to due process of the opposing party.

Nonetheless, the petitioner asserts that the respondent received a copy of the NLRC's first decision on December 6,
2000, and the motion for reconsideration was filed only on December 18, 2000, or two (2) days beyond the ten (10)-
calendar day period requirement under the New Rules of Procedure of the NLRC and should not be allowed. This
contention must fail.

Under Article 223 of the Labor Code, the decision of the NLRC shall be final and executory after ten (10) calendar
days from the receipt thereof by the parties.

While it is an established rule that the perfection of an appeal in the manner and within the period prescribed by law
is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of rendering the judgment
final and executory, it is equally settled that the NLRC may disregard the procedural lapse where there is an
acceptable reason to excuse tardiness in the taking of the appeal. Among the acceptable reasons recognized by this
Court are (a) counsel's reliance on the footnote of the notice of the decision of the Labor Arbiter that "the aggrieved
party may appeal . . . within ten (10) working days"; (b) fundamental consideration of substantial justice; (c)
prevention of miscarriage of justice or of unjust enrichment, as where the tardy appeal is from a decision granting
separation pay which was already granted in an earlier final decision; and (d) special circumstances of the case
combined with its legal merits or the amount and the issue involved.

We hold that the particular circumstances in the case at bar, in accordance with substantial justice, call for a
liberalization of the application of this rule. Notably, respondent's last day for filing her motion for reconsideration
fell on December 16, 2000, which was a Saturday. In a number of cases, we have ruled that if the tenth day for
perfecting an appeal fell on a Saturday, the appeal shall be made on the next working day. The reason for this ruling
is that on Saturdays, the office of the NLRC and certain post offices are closed. With all the more reason should this
doctrine apply to respondent's filing of the motion for reconsideration of her cause, which the NLRC itself found to
be impressed with merit. Indeed, technicality should not be permitted to stand in the way of equitably and
completely resolving the rights and obligations of the parties for the ends of justice are reached not only through the
speedy disposal of cases but, more importantly, through a meticulous and comprehensive evaluation of the merits of
a case.

Finally, as to petitioner's argument that the NLRC had already lost its jurisdiction to decide the case when it filed its
petition for certiorari with the Court of Appeals upon the denial of its motion for reconsideration, suffice it to state
that under Section 7 of Rule 65 of the Revised Rules of Court, the petition shall not interrupt the course of the
principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the
public respondent from further proceeding with the case. Thus, the mere pendency of a special civil action for
certiorari, in connection with a pending case in a lower court, does not interrupt the course of the latter if there is no
writ of injunction. Clearly, there was no grave abuse of discretion on the part of the NLRC in issuing its second
decision which modified the first, especially since it failed to consider the respondent's motion for reconsideration
when it issued its first decision.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 97


University of San Carlos – College of Law Labor Standards Finals Case Digests

Tolosa vs NLRC (2008) G.R. 149578


Facts:

Petitioner was the widow of Capt. Virgilio Tolosa who was hired by Qwana-Kaiun, through its manning agent, Asia
Bulk, to be the master of the Vessel named M/V Lady Dona. His contract officially began on November 1, 1992, as
supported by his contract of employment when he assumed command of the vessel in Yokohama, Japan. The vessel
departed for Long Beach California, passing by Hawaii in the middle of the voyage. At the time of embarkation,
CAPT. TOLOSA was allegedly shown to be in good health.

During 'channeling activities' upon the vessel's departure from Yokohama sometime on November 6, 1992, CAPT.
TOLOSA was drenched with rainwater. The following day, November 7, 1992, he had a slight fever and in the
succeeding twelve (12) days, his health rapidly deteriorated resulting in his death on November 18, 1992.

When petitioner filed a complaint with the POEA, transferred to the DOLE, NLRC, the Labor Arbiter ruled in her
favor. The NLRC, affirmed by the Court of Appeals, however, ruled that the labor commission had no jurisdiction
over the subject matter filed by petitioner. Hence, this appeal.

Summary of Ruling: The Court affirmed the appealed decision. Petitioner's action was recovery of damages based on
a quasi-delict or tort, not adjudication of a labor dispute to which jurisdiction of labor tribunals is limited. Petitioner
is actually suing shipmates Garate and Asis for gross negligence, and the said shipmates have no employer-employee
relations with Capt. Tolosa. While labor arbiters and the NLRC have jurisdiction to award not only relief provided by
labor laws, but also damages under the Civil Code, these relief must still be based on an action that has reasonable
causal connection with matters

Issues and Rulings:

1. Whether or not the NLRC has jurisdiction over the case (whether the labor arbiter and the NLRC had jurisdiction
over petitioner's action).

Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the failure of private
respondents — as employers of her husband (Captain Tolosa) — to provide him with timely, adequate and
competent medical services under Article 161 of the Labor Code:

"ART 161. Assistance of employer. — It shall be the duty of any employer to provide all the necessary
assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick
employee in case of emergency."

Likewise, she contends that Article 217 (a) (4) of the Labor Code vests labor arbiters and the NLRC with jurisdiction
to award all kinds of damages in cases arising from employer-employee relations.

Petitioner also alleges that the "reasonable causal connection" rule should be applied in her favor. Citing San Miguel
Corporation v. Etcuban, she insists that a reasonable causal connection between the claim asserted and the employer-
employee relation confers jurisdiction upon labor tribunals. She adds that she has satisfied the required conditions: 1)
the dispute arose from an employer-employee relation, considering that the claim was for damages based on the
failure of private respondents to comply with their obligation under Article 161 of the Labor Code; and 2) the dispute
can be resolved by reference to the Labor Code, because the material issue is whether private respondents complied
with their legal obligation to provide timely, adequate and competent medical services to guarantee Captain Tolosa's
occupational safety. We disagree.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 98


University of San Carlos – College of Law Labor Standards Finals Case Digests

We affirm the CA's ruling that the NLRC and the labor arbiter had no jurisdiction over petitioner's claim for damages,
because that ruling was based on a quasi delict or tort per Article 2176 of the Civil Code.

REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; LABOR TRIBUNALS; ACTION BASED ON QUASI
DELICT THAT DOES NOT INVOLVE LABOR DISPUTE, NOT INCLUDED - Time and time again, we have held that
the allegations in the complaint determine the nature of the action and, consequently, the jurisdiction of the courts.
After carefully examining the complaint/position paper of petitioner, we are convinced that the allegations therein
are in the nature of an action based on a quasi delict or tort. It is evident that she sued Pedro Garate and Mario Asis
for gross negligence.

Petitioner's complaint/position paper refers to and extensively discusses the negligent acts of shipmates Garate and
Asis, who had no employer-employee relation with Captain Tolosa. The labor arbiter himself classified petitioner's
case as "a complaint for damages, blacklisting and watchlisting (pending inquiry) for gross negligence resulting in
the death of complainant's husband, Capt. Virgilio Tolosa."

We stress that the case does not involve the adjudication of a labor dispute, but the recovery of damages based on a
quasi delict. The jurisdiction of labor tribunals is limited to disputes arising from employer-employee relations, as we
ruled in Georg Grotjahn GMBH & Co. v. Isnani:

"Not every dispute between an employer and employee involves matters that only labor arbiters and the NLRC can
resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and the NLRC
under Article 217 of the Labor Code is limited to disputes arising from an employer-employee relationship which can
only be resolved by reference to the Labor Code, other labor statutes, or their collective bargaining agreement."

The pivotal question is whether the Labor Code has any relevance to the relief sought by petitioner. From her paper,
it is evident that the primary reliefs she seeks are as follows:

(a) loss of earning capacity denominated therein as "actual damages" or "lost income" and

(b) blacklisting. The loss she claims does not refer to the actual earnings of the deceased, but to his earning capacity
based on a life expectancy of 65 years. This amount is recoverable if the action is based on a quasi delict as provided
for in Article 2206 of the Civil Code, 18 but not in the Labor Code.

DAMAGES PROVIDED BY THE CIVIL CODE; AWARD PROPER IF RELIEF SOUGHT HAS CAUSAL RELATIONS
WITH LABOR MATTERS - While it is true that labor arbiters and the NLRC have jurisdiction to award not only
reliefs provided by labor laws, but also damages governed by the Civil Code, these reliefs must still be based on an
action that has a reasonable causal connection with the Labor Code, other labor statutes, or collective bargaining
agreements.

The central issue is determined essentially from the relief sought in the complaint. In San Miguel Corporation v.
NLRC, this Court held:"It is the character of the principal relief sought that appears essential in this connection.
Where such principal relief is to be granted under labor legislation or a collective bargaining agreement, the case
should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages might be
asserted as an incident to such claim."

The labor arbiter found private respondents to be grossly negligent. He ruled that Captain Tolosa, who died at age
58, could expect to live up to 65 years and to have an earning capacity of US$176,400.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 99


University of San Carlos – College of Law Labor Standards Finals Case Digests

LOSS OF EARNING CAPACITY; NOT TO BE EQUATED WITH LABOR BENEFITS COGNIZED IN LABOR
DISPUTES - It must be noted that a worker's loss of earning capacity and blacklisting are not to be equated with
wages, overtime compensation or separation pay, and other labor benefits that are generally cognized in labor
disputes. The loss of earning capacity is a relief or claim resulting from a quasi delict or a similar cause within the
realm of civil law.

Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection with any of the
claims provided for in the article in order to be cognizable by the labor arbiter. Only if there is such a connection with
the other claims can the claim for damages be considered as arising from employer-employee relations. In the present
case, petitioner's claim for damages is not related to any other claim under Article 217, other labor statutes, or
collective bargaining agreements.

Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or specify a
claim or relief. This provision is only a safety and health standard under Book IV of the same Code. The enforcement
of this labor standard rests with the labor secretary. Thus, claims for an employer's violation thereof are beyond the
jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the labor standard provided for in Article
161 by suing for damages before the labor arbiter.

REGULAR COURTS HAVE AUTHORITY OVER ACTION FOR DAMAGES PREDICATED ON QUASI DELICT
AND HAS NO CONNECTION WITH LABOR-RELATED CLAIMS - It is not the NLRC but the regular courts that
have jurisdiction over actions for damages, in which the employer-employee relation is merely incidental, and in
which the cause of action proceeds from a different source of obligation such as a tort. Since petitioner's claim for
damages is predicated on a quasi delict or tort that has no reasonable causal connection with any of the claims
provided for in Article 217, other labor statutes, or collective bargaining agreements, jurisdiction over the action lies
with the regular courts — not with the NLRC or the labor arbiters.

2. Whether or not Evelyn is entitled to the monetary awards granted by the labor arbiter (whether the monetary
award granted by the labor arbiter has already reached finality).

ISSUES NOT RAISED IN COURTS A QUO CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL — Petitioner
contends that the labor arbiter's monetary award has already reached finality, since private respondents were not
able to file a timely appeal before the NLRC.

This argument cannot be passed upon in this appeal, because it was not raised in the tribunals a quo. Well-settled is
the rule that issues not raised below cannot be raised for the first time on appeal. Thus, points of law, theories, and
arguments not brought to the attention of the Court of Appeals need not — and ordinarily will not — be considered
by this Court. Petitioner's allegation cannot be accepted by this Court on its face; to do so would be tantamount to a
denial of respondents' right to due process.

Furthermore, whether respondents were able to appeal on time is a question of fact that cannot be entertained in a
petition for review under Rule 45 of the Rules of Court. In general, the jurisdiction of this Court in cases brought
before it from the Court of Appeals is limited to a review of errors of law allegedly committed by the court a quo.

Phil Global Communications Inc vs de Vera (2005) G.R. 157214


Facts:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 100


University of San Carlos – College of Law Labor Standards Finals Case Digests

De Vera and petitioner company entered into a contract where respondent was to attend to the medical needs of
petitioner s employees while being paid a retainer fee of P4,000 per month. Later, De Vera was informed y petitioner
that the retainership will be discontinued. Respondent filed a case for illegal dismissal.

Issue: Whether or not de Vera is an employee of PhilComm or an independent contractor.

Held: Applying the four fold test, de Vera is not an employee. There are several indicators apart from the fact that the
power to terminate the arrangement lay on both parties: from the time he started to work with petitioner, he never
was included in its payroll; was never deducted any contribution for remittance to the Social Security System (SSS);
he was subjected by petitioner to the ten (10%) percent withholding tax for his professional fee, in accordance with
the National Internal Revenue Code, matters which are simply inconsistent with an employer-employee relationship;
the records are replete with evidence showing that respondent had to bill petitioner for his monthly professional fees.
It simply runs against the grain of common experience to imagine that an ordinary employee has yet to bill his
employer to receive his salary. Finally, the element of control is absent. Petition granted.

U-Bix Corp. vs Bandiola (2007) G.R. 157168


Facts:

Sometime in April 1995, Bandiola was employed by U-BIX to install furniture for its customers. On 13 April 1997,
Bandiola and two other U-BIX employees were involved in a vehicular accident on their way to Baguio, where they
were assigned by U-BIX to install furniture for an exhibit. As a result of the accident, Bandiola sustained a fracture on
his left leg. Bandiola and his co-employees were initially brought to the Rosario District Hospital. The next day, 14
April 1997, they were transferred to the Philippine Orthopedic Hospital (Orthopedic). After his broken leg was
cemented, Bandiola was advised to go back for further medical treatment. U-BIX paid for the medical expenses
incurred in both mentioned hospitals.

When Bandiola asked for additional financial assistance for further expenses in the treatment of his leg which even
needed to be casted in fiberglass, U-BIX allegedly refused. On September 1998, Bandiola filed a Complaint before the
Labor Arbiter, where he alleged underpayment of salary; non-payment of overtime pay; premium pay for work
performed on holidays and rest days; separation pay; service incentive leave pay; 13th month pay; and the payment
of actual, moral and exemplary damages.

In its Decision, dated 16 September 1998, Labor Arbiter allowed Bandiola's claim for salary differential, service
incentive leave pay and 13th month pay due to U-BIX's failure to present payrolls or similar documents. Incidentally,
the award of these claims is no longer questioned in the present petition. The other claims, particularly those for
medical expenses that Bandiola allegedly incurred and for moral and exemplary damages, were dismissed. Bandiola
asserts that U-BIX failed to extend to him any financial assistance after he was injured in the performance of his
duties, and that as a result, he suffered physical pain, mental torture, fright, sleepless nights, and serious anxiety. He
claims that this entitles him to moral and exemplary damages.

Bandiola filed an appeal before the NLRC. NLRC amended the Decision rendered by the Labor Arbiter ruling that U-
BIX should reimburse Bandiola the amount for the medical expenses he incurred in connection with his fractured leg;
and further ruled that U-BIX is liable to pay Bandiola P25,000.00 in moral damages and P25,000.00 in exemplary
damages for refusing to reimburse Bandiola for the medical expenses he incurred after it failed to report to the Social
Security System (SSS) the injuries sustained by Bandiola

Ma. Cecelia Timbal LlB – 2 Rm 402 | 101


University of San Carlos – College of Law Labor Standards Finals Case Digests

It affirmed Bandiola's entitlement to reimbursement of his medical expenses, but reduced the amount to P7,742.50,
the amount of actual damages he was able to prove. It also affirmed without modification the award of moral and
exemplary damages, and the monetary award granted by the Labor Arbiter

Issue: WON petitioner U-BIX should reimburse respondent Bandiola for alleged medical expenses of P7,742.50 and
pay for moral damages of P25,000.00 and exemplary damages of P25,000.00 to said respondent Bandiola.

Held: Yes. Contrary to the arguments put forward by U-BIX, it is liable to reimburse Bandiola the amount of
P7,742.50 for medical expenses because its failure to comply with its duty to record and report Bandiola's injury to
the SSS precluded Bandiola from making any claims. Moreover, U-BIX, by its own admission, reimbursed its other
employees who were involved in the same accident for their medical expenses. Clearly, the reimbursement of
medical expenses for injuries incurred in the course of employment is part of the benefits enjoyed by U-BIX's
employees. The only justification for its refusal to reimburse Bandiola was that he intended to defraud the company
by presenting spurious receipts amounting to P7,742.50 that were allegedly issued four months before their
presentation.

EMPLOYEES COMPENSATION FOR WORK-RELATED INJURIES, DISABILITIES AND DEATHS - Articles 205 and
206 of the Labor Code set the reportorial requirements in cases when an employee falls sick or suffers an injury
arising in the course of employment. An injury is said to arise "in the course of employment" when it takes place
within the period of employment, at a place where the employee may reasonably be, and while he is fulfilling his
duties or is engaged in doing something incidental thereto. 20 The aforecited provisions of the Labor Code provide
that:

ART 205. RECORD OF DEATH OR DISABILITY

(a) All employers shall keep a logbook to record chronologically the sickness, injury or death of their
employees, setting forth therein their names, dates and places of the contingency, nature of the contingency and
absences. Entries in the logbook shall be made within five days from notice or knowledge of the occurrence of
contingency. Within five days after entry in the logbook, the employer shall report to the System only those
contingencies he deems to be work-connected.

(b) All entries in the employers logbook shall be made by the employer or any of his authorized official after
verification of the contingencies or the employees absences for a period of a day or more. Upon request by the
System, the employer shall furnish the necessary certificate regarding information about any contingency appearing
in the logbook, citing the entry number, page number and date. Such logbook shall be made available for inspection
to the duly authorized representatives of the System.

ART 206. NOTICE OF SICKNESS, INJURY OR DEATH

Notice of sickness, injury or death shall be given to the employer by the employee or by his dependents or anybody
on his behalf within five days from the occurrence of the contingency. No notice to the employer shall be required if
the contingency is known to the employer or his agents or representatives.

GENERAL RULE AND EXCEPTION ON NOTIFICATION - As a general rule, the injured employee must notify his
employer, who is obligated to enter the notice in a logbook within five days after notification. Within five days after
making the entry, the employer of a private company reports the work-related sickness or injury to the SSS. The
claim is forwarded to the SSS, which decides on the validity of the claim. When the SSS denies the claim, the denial
may be appealed to the Employees' Compensation Commission (ECC) within 30 days.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 102


University of San Carlos – College of Law Labor Standards Finals Case Digests

However, the law provides an exception to the rule requiring an employee to notify his or her employer of his
injuries. Under Section B of ECC Board Resolution No. 2127, issued on 5 August 1982, notice of injury, sickness or
death of the employee need not be given to the employer in any of the following situations:

(1) When the employee suffers the contingency within the employer's premises;

(2) When the employee officially files an application for leave of absence by reason of the contingency from
which he suffers;

(3) When the employer provides medical services and/or medical supplies to the employee who suffers from
the contingency; and

(4) When the employer can be reasonably presumed to have had knowledge of the employee's contingency, in
view of the following circumstances:

(4.1) The employee was performing an official function for the employer when the contingency occurred;

(4.2) The employee's contingency has been publicized through mass media outlets; or

(4.3) The specific circumstances of the occurrence of the contingency have been such that the employer can be
reasonably presumed to have readily known it soon thereafter; or

(4.4) Any other circumstances that may give rise to a reasonable presumption that the employer has been aware
of the contingency.

In the present case, there is no dispute that Bandiola's leg injury was sustained in the course of his employment with
U-BIX. At the time of the accident, Bandiola was on the way to Baguio, where he was ordered by U-BIX to install
furniture for an exhibit. Moreover, U-BIX was aware that Bandiola, as well as his other co-employees, were injured
during the accident. U-BIX admitted to providing Bandiola and his co-employees with medical assistance and it even
sent its representative, Rey Reynes, to Rosario District Hospital, where they were confined, and had them transferred
to the Orthopedic. U-BIX was also aware that the Orthopedic instructed Bandiola to return for further medical
treatment. It is implicit that Bandiola needed further treatment for his broken leg and was, thus, incapacitated to
work.

Given the foregoing circumstances, U-BIX had the legal obligation to record pertinent information in connection with
the injuries sustained by Bandiola in its logbook within five days after it had known about the injuries; and to report
the same to the SSS within five days after it was recorded in the logbook, in accordance with Articles 205 and 206 of
the Labor Code. Had U-BIX performed its lawful duties, the SSS, or the ECC on appeal, could have properly
considered whether or not Bandiola was entitled to reimbursement for his medical expenses, as well as disability
benefits while he was unable to work. However, U-BIX did not present any evidence showing that it had complied
with these legal requirements. It had not even replied to Bandiola's allegations in his Position Paper, dated 13 April
1998, that its employees were not even members of the SSS.

HISTORY AND IMPORTANCE OF “EMPLOYEES COMPENSATION” - As early as 1938, this Court emphasized, in
the case of Murillo v. Mendoza, 22 that labor laws have demonstrated an impetus towards ensuring that employees
are compensated for work-related injuries. The law has since treated such compensation as a right, which the
employees can claim, instead of an act of charity to be given at the employer's discretion.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 103


University of San Carlos – College of Law Labor Standards Finals Case Digests

The intention of the Legislature in enacting the Workmen's Compensation Act was to secure workmen and their
dependents against becoming objects of charity, by making a reasonable compensation for such accidental calamities
as are incidental to the employment. Under such act injuries to workmen and employees are to be considered no
longer as results of fault or negligence, but as the products of the industry in which the employee is concerned.
Compensation for such injuries is, under the theory of such statute, like any other item in the cost of production or
transportation, and ultimately charged to the consumer. The law substitutes for liability for negligence an entirely
new conception; that is, that if the injury arises out of and in the course of the employment, under the doctrine of
man's humanity to man, the cost of compensation must be one of the elements to be liquidated and balanced in the
course of consumption. In other words, the theory of law is that, if the industry produces an injury, the cost of that
injury shall be included in the cost of the product of the industry.

In De Jesus v. Employee's Compensation Commission, this Court further noted that while the present law protects
employers from spurious and long overdue claims, it stresses at the same time that the claims for compensation are to
be promptly and properly addressed. More importantly, employers no longer need to determine the validity of a
claim or to defend themselves from spurious claims. Their duties are thus limited to paying the monthly premiums
and reporting the sickness, injury or death for which compensation is due.

The new law establishes a state insurance fund built up by the contributions of employers based on the salaries of
their employees. The injured worker does not have to litigate his right to compensation. No employer opposes his
claim. There is no notice of injury nor requirement of controversion. The sick worker simply files a claim with a new
neutral Employees' Compensation Commission which then determines on the basis of the employee's supporting
papers and medical evidence whether or not compensation may be paid. The payment of benefits is more prompt.
The cost of administration is low. The amount of death benefits has also been doubled.

On the other hand, the employer's duty is only to pay the regular monthly premiums to the scheme. It does not look
for insurance companies to meet sudden demands for compensation payments or set up its own funds to meet these
contingencies. It does not have to defend itself from spuriously documented or long past claims.

The new law applies the social security principle in the handling of workmen's compensation. The Commission
administers and settles claims from a fund under its exclusive control. The employer does not intervene in the
compensation process and it has no control, as in the past, over payment of benefits. . . . .

Since there is no employer opposing or fighting a claim for compensation, the rules on presumption of
compensability and controversion cease to have importance. The lopsided situation of an employer versus one
employee, which called for equalization through the various rules and concepts favoring the claimant, is now absent.

By failing to report Bandiola's injury to the SSS, U-BIX disregarded the law and its purpose; that is, to provide a
proper and prompt settlement of his claims. Instead, U-BIX arrogated upon itself the duty of determining which
medical expenses are proper for reimbursement. In doing so, it could unnecessarily delay and unjustifiably refuse to
reimburse Bandiola for medical expenses even if they were adequately supported by receipts, as was done in this
instance. The expense and delay undergone by Bandiola since 1997 in obtaining reimbursement for his medical
expenses of P7,742.50 very clearly defeat the purpose of the law.

BURDEN OF PROOF ON THE DEFENDANT OF A CLAIM - U-BIX does not question its liability to pay for medical
expenses incurred in connection with the 13 April 1997 accident; it admits that it paid for all the medical expenses of
its other employees, who were involved in the accident. It refused, however, to reimburse Bandiola for further
medical expenses on the ground that the receipts were counterfeit and belatedly presented to U-BIX.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 104


University of San Carlos – College of Law Labor Standards Finals Case Digests

Bandiola presented eight receipts with a total amount of P7,742.50 issued by MCP and his attending physician, Dr.
Celestino Musngi. The amounts indicated therein range from P200.00 to P2,936.00. The receipts were issued on 24
April 1997 and 6 May 1997, or around the time the accident occurred on 13 April 1997. From the face of the receipts,
there is no showing that these documents are false or falsified. U-BIX could have easily confirmed with MCP or Dr.
Celestino Musngi, who issued said receipts, the authenticity of the documents. However, it failed to allege that it took
any steps to check the authenticity of the receipts. It also failed to present any evidence that these receipts are fake.
Absent any proof, no weight can be attached to the allegation that the receipts are spurious.

The party who alleges the fact has the burden of proving it. The burden of proof is assigned to the defendant of a
claim when he or she alleges an affirmative defense, which is not a denial of an essential ingredient in the
complainant's cause of action — the existence of the receipts, in the present case — but is one which, if established,
will be a good defense, i.e., an avoidance of the claim. One who alleges an affirmative defense that is denied by the
complainant — the falsity of the receipts, in this case — has the burden of proving it. Unless the party asserting the
affirmative of an issue sustains the burden of proof, his or her cause will not succeed. If he or she fails to establish the
facts of which the matter asserted is predicated, the complainant is entitled to a verdict or decision in his or her favor.
In this case, U-BIX's affirmative defense that the receipts are spurious is rejected due to utter lack of proof.

U-BIX asserts that no demand was made by the petitioner and that it only came to know of Bandiola's medical
expenses when it received the Summons to attend a preliminary conference before the Labor Arbiter. For his part,
Bandiola insists that before filing the case with the NLRC, he approached U-BIX three times for financial assistance in
connection with his medical expenses, but he was refused. Bandiola identified the persons he spoke to as Rey Reynes
and a certain Ms. Clarisse. U-BIX alleges that it sent Rey Reynes to look for Bandiola in the address recorded in their
office files, but that he no longer resided therein. Bandiola contested this allegation by stating that he had not
changed his residence. As of 20 September 2006, Bandiola still resided at the same address, Sampaloc Site II-B,
Barangay B.F. Homes, Parañaque City, as evidenced by the Certificate of Indigency issued by Barangay BF Homes
Chairperson Florencia N. Amurao.

U-BIX maintains that Bandiola kept the company in the dark regarding his medical expenses because he intended to
file a baseless suit aimed at extorting money from the company. This Court finds it implausible that a worker who
received less than minimum wage would choose to initiate legal proceedings before even seeking to collect from his
employer. To automatically presume that Bandiola intended to defraud the company despite the absence of
supporting evidence would constitute a hasty and unsubstantiated generalization, which displays a prejudice against
ordinary workers, such as Bandiola.

U-BIX's continued and stubborn refusal to reimburse Bandiola's medical expenses was made evident during the
mandatory conference before the Labor Arbiter when it refused to recognize the receipts shown to it. If U-BIX had
refused to take cognizance of the receipts presented during a quasi-judicial proceeding before a public officer, then it
would have been more likely that it ignored, if not flat-out refused, to consider the said receipts when the same were
presented by a lowly employee.

Under the facts of the case, Bandiola is entitled to moral and exemplary damages. There is no question that moral
damages may be awarded in cases when a wrongful act or omission has caused the complainant mental anguish,
fright and serious anxiety.

Articles 2217 and 2219, in connection with Article 21 of the Civil Code, read:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 105


University of San Carlos – College of Law Labor Standards Finals Case Digests

Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of the defendant's wrongful act for omission.

Art. 2219. Moral damages may be recovered in the following and analogous cases:

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

Art. 21. Any person who willfully 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.

U-BIX failed to perform its legal obligation to report to the SSS the injuries suffered by Bandiola, and, thereafter,
failed to extend the same "financial aid" it extended to other employees who were involved in the same accident.
After it was shown the receipts for the medical expenses Bandiola paid for in connection with the injuries, U-BIX
unreasonably refused to reimburse him for the expenses. It is not difficult to accept Bandiola's claim that he suffered
mental anguish, serious anxiety and fright when U-BIX left him without any options for financial support while he
was suffering from and rendered incapacitated by work-related injuries. He was severely distressed by his plight that
he felt that he could no longer continue to work for U-BIX. U-BIX's unjustified and continued refusal to reimburse
Bandiola after it failed to report his injury to the SSS, despite the receipts he presented, demonstrates bad faith. By
singling out Bandiola from its other employees, who were reimbursed for their medical expenses, and forcing him to
litigate for ten years in order to claim the unsubstantial amount of P7,742.50, U-BIX was clearly indulging in
malicious conduct.

AWARD ON MORAL DAMAGES - As regards the award of moral damages, this Court has ruled that there is no
hard and fast rule in determining the fair amount for moral damages, since each case must be governed by its own
peculiar circumstances. It should enable the injured parties to obtain means, diversions or amusements that will serve
to alleviate the moral sufferings the injured party has undergone by reason of defendant's culpable action. In other
words, the award of moral damages is aimed at a restoration within the limits of the possible, of the spiritual and/or
psychological status quo ante; and therefore it must be proportionate to the suffering inflicted. Therefore, in light of
the sufferings sustained by Bandiola, this Court sustains the award of P25,000.00 as moral damages.

Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example or correction for
public good. It reads:

Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.

Exemplary damages are designed to permit the courts to mould behavior that has socially deleterious consequences,
and their imposition is required by public policy to suppress the wanton acts of the offender.

The Labor Code provides for the medical expenses, as well as disability benefits of workers suffering from work-
related injuries and recognizes such compensation as their right. Indeed, a system has been put in place for the
prompt collection of the benefits, which are given by law to injured employees. All that U-BIX was required to do was
to report the injury; it need not have defended itself from what it perceived to be spurious claims. Instead, it took
upon itself the duty of determining the validity of Bandiola's claims and unjustifiably refused to reimburse his
properly receipted medical expenses. The prolonged litigation of his valid claims is not the only miserable situation
which the present labor laws sought to prevent, but the pathetic situation wherein a laborer is placed at the mercy of
his or her employer for recompense that is his or hers by right. Exemplary damages are, thus, rightfully imposed
against U-BIX.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 106


University of San Carlos – College of Law Labor Standards Finals Case Digests

Escasinas et al., vs Shangri-la Mactan Island Resort et al., (2009) G.R. 178827
Facts:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996,
respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-la’s
Mactan Island Resort (Shangri-la) in Cebu of which she was a retained physician.

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) a complaint for regularization,
underpayment of wages, non-payment of holiday pay, night shift differential and 13th month pay differential against
respondents, claiming that they are regular employees of Shangri-la. Shangri-la claimed, however, that petitioners
were not its employees but of respondent doctor, that Article 157 of the Labor Code, as amended, does not make it
mandatory for a covered establishment to employ health personnel, that the services of nurses is not germane nor
indispensable to its operations, and that respondent doctor is a legitimate individual contractor who has the power to
hire, fire and supervise the work of nurses under her.

The Labor Arbiter (LA) declared petitioners to be regular employees of Shangri-la, noting that the petitioners usually
perform work which is necessary and desirable to Shangri-la’s business, and thus ordered Shangri-la to grant them
the wages and benefits due them as regular employees from the time their services were engaged.

Upon appeal, the NLRC declared that no employer-employee relationship existed between Shangri-la and
petitioners. It ruled that contrary to the finding of the LA, even if Art. 280 of the Labor Code states that if a worker
performs work usually necessary or desirable in the business of an employer, he cannot be automatically deemed a
regular employee, and that the Memorandum of Agreement between the respondent and the respondent doctor
amply shows that respondent doctor was in fact engaged by Shangri-la on retainer basis, under which she could hire
her own nurses and other clinic personnel.

The Court of Appeals (CA) affirmed the NLRC decision, concluding that all aspects of employment of petitioners
being under the supervision and control of respondent doctor and since Shangri-la is not principally engaged in the
business of providing medical or healthcare services, petitioners could not be regarded as regular employees of
Shangri-la.
Issues:

1. Whether or not Article 157 of the Labor Code make it mandatory for covered establishment to employ health
personnel;
2. Whether or not there exists an employer-employee relationship between Shangri-la and petitioners.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 107


University of San Carlos – College of Law Labor Standards Finals Case Digests

Held: The Court holds that, contrary to petitioners’ postulation, Art. 157 does not require the engagement of full-time
nurses as regular employees of a company employing not less than 50 workers. Thus, the Article provides:

ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to furnish his employees
in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more
than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the
services of a graduate first-aider shall be provided for the protection of the workers, where no registered nurse is
available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required
where the number of employees does not exceed fifty (50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when
the number of employees exceeds two hundred (200) but not more than three hundred (300); and

(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an
infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the number
of employees exceeds three hundred (300).

In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot
stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time
basis, and not less than eight [8] hours in the case of those employed on full-time basis. Where the undertaking is
nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations
as the Secretary of Labor may prescribe to
insure immediate availability of medical and dental treatment and attendance in case of emergency.

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to “furnish” its
employees with the services of a full-time registered nurse, a part-time physician and dentist, and an emergency
clinic which means that it should provide or make available such medical and allied services to its employees, not
necessarily to hire or employ a service provider. As held in Philippine Global Communications vs. De Vera:

x x x while it is true that the provision requires employers to engage the services of medical practitioners in
certain establishments depending on the number of their employees, nothing is there in the law which says that
medical practitioners so engaged be actually hired as employees, adding that the law, as written, only requires
the employer “to retain”, not employ, a part-time physician who needed to stay in the premises of the non-
hazardous workplace for two (2) hours.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 108


University of San Carlos – College of Law Labor Standards Finals Case Digests

The term “full-time” in Art. 157 cannot be construed as referring to the type of employment of the person
engaged to provide the services, for Article 157 must not be read alongside Art. 280 in order to vest employer-
employee relationship on the employer and the person so engaged. So De Vera teaches:

x x For, we take it that any agreement may provide that one party shall render services for and in behalf of
another, no matter how necessary for the latter’s business, even without being hired as an employee. This set-up
is precisely true in the case of an independent contractorship as well as in an agency agreement. Indeed, Article
280 of the Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of an
employment relationship. As it is, the provision merely distinguishes between two (2) kinds of employees, i.e.,
regular and casual. x x x

The phrase “services of a full-time registered nurse” should thus be taken to refer to the kind of services that the
nurse will render in the company’s premises and to its employees, not the manner of his engagement.

The existence of an independent and permissible contractor relationship is generally established by considering the
following determinants: whether 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.

On the other hand, existence of an employer- employee relationship is established by the presence of the following
determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by
whatever means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall
consideration.

Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent contractor.
That Shangri-la provides the clinic premises and medical supplies for use of its employees and guests does not
necessarily prove that respondent doctor lacks substantial capital and investment. Besides, the maintenance of a clinic
and provision of medical services to its employees is required under Art. 157, which are not directly related to
Shangri-la’s principal business – operation of hotels and restaurants.

As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS contributions and
other benefits of the staff; group life, group personal accident insurance and life/death insurance for the staff with
minimum benefit payable at 12 times the employee’s last drawn salary, as well as value added taxes and withholding
taxes, sourced from her P60,000.00 monthly retainer fee and 70% share of the service charges from Shangri-la’s guests
who avail of the clinic services. It is unlikely that respondent doctor would report petitioners as workers, pay their

Ma. Cecelia Timbal LlB – 2 Rm 402 | 109


University of San Carlos – College of Law Labor Standards Finals Case Digests

SSS premium as well as their wages if they were not indeed her employees.

With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a document, “Clinic
Policies and Employee Manual” claimed to have been prepared by respondent doctor exists, to which petitioners
gave their conformity and in which they acknowledged their co-terminus employment status. It is thus presumed
that said document, and not the employee manual being followed by Shangri-la’s regular workers, governs how they
perform their respective tasks and responsibilities. In fine, as Shangri-la does not control how the work should be
performed by petitioners, it is not petitioners’ employer.

ISS Indochina Corp., vs Ferrer (2005) G.R. 156381


Facts:

Respondents, in their complaint, alleged that petitioner hired them as construction workers for its Taiwan-based
principal/employer Formosa Plastics Corporation. Pursuant to the parties' contracts of employment, each respondent
would receive a monthly salary of NT$15,360.00. Their employment covered a period of one (1) year or from May 1,
1997 to May 1, 1998.

On May 1, 1997, respondents, along with other Filipino contract workers, were deployed to Taiwan. But upon their
arrival, only 20 workers, excluding respondents, were employed as construction workers at Formosa Plastics
Corporation. Aggrieved, they sought assistance from Manila Economic and Cultural Office (MECO) officials who
directed them to sign separate affidavits alleging that they were assigned, not as construction workers for Formosa
Plastics Corporation, but as cable tray/pipe tract workers at Shin Kwan Enterprise Co., Ltd.

On May 17, 1997, they were repatriated to the Philippines. They alleged that they were forced to resign since "they
were left out from among those workers who were considered for employment."Subsequetly, a complaint was filed
by private respondents for illegal dismissal, payment of salaries, refund of placement fee, damages and attorney's
fees filed with the Office of the Labor Arbiter against JSS Indochina Corporation, petitioner, docketed as NLRC NCR
OFW Case (L) 97-05-3715.

Petitioner denied the allegations in the complaint, claiming that, assisted by MECO officials, respondents pre-
terminated their respective contracts of employment as they refused to work after being assigned as cable tray/pipe
tract workers by Formosa Plastics Corporation to 33 KV Worksite being administered by Shin Kwan Construction
Company Limited.

Issue: Whether or not respondents were illegally dismissed from employment by petitioner.

Held: We take this opportunity to stress the need for strict enforcement of the law and the rules and regulations
governing Filipino contract workers abroad. Many hapless citizens of this country who have sought foreign
employment to earn a few dollars to ensure for their families a life worthy of human dignity and provide proper
education and a decent future for their children have found themselves enslaved by foreign masters, harassed or
abused and deprived of their employment for the slightest cause. No one should be made to unjustly profit from
their suffering. Hence, recruiting agencies must not only faithfully comply with Government-prescribed
responsibilities; they must impose upon themselves the duty, borne out of a social conscience, to help citizens of this

Ma. Cecelia Timbal LlB – 2 Rm 402 | 110


University of San Carlos – College of Law Labor Standards Finals Case Digests

country sent abroad to work for foreign principals. They must keep in mind that this country is not exporting slaves
but human beings, and above all, fellow Filipinos seeking merely to improve their lives.

There is no question that petitioner violated its contract with respondents. As found by the Labor Arbiter, the NLRC
and the Appellate Court, petitioner did not assign them as construction workers for Formosa Plastics Corporation.
Instead, they were directed to work as cable tray/pipe tract workers at Shin Kwan Enterprise Co., Ltd.

The Labor Arbiter found that respondents' "decision to resign from their employment were made by force of
circumstances not attributable to their own fault," and "it was not their fault that they were left out from among those
workers who were considered for employment by the foreign employer." Likewise, the NLRC held that respondents'
"decision to go home to the Philippines was justified in view of the evident breach of contract" by petitioner, as "it
clearly appeared that upon their arrival at the jobsite, there was no employer on hand." Clearly, both labor tribunals
correctly concluded, as affirmed by the Court of Appeals, that they were forced to resign and to pre-terminate their
employment contracts in view of petitioner's breach of their provisions. Undoubtedly, the termination of
respondents' services is without just or valid cause.

Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act, provides:

"SECTION 10. Money Claims. —

In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract,
the worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year
of the unexpired term, whichever is less.

Verily, as correctly held by the Court of Appeals, respondents who were unjustly dismissed from work are actually
entitled to an amount representing their three (3) months salary considering that their employment contract has a
term of exactly one (1) year; plus a full refund of their placement fee, with no ceiling, with interest at 12% per annum.

In Olarte vs. Nayona, we ordered petitioner Olarte to pay respondent Nayona, an illegally dismissed overseas
contract worker, an amount corresponding to her 3 months salary and to reimburse her placement fee of P23,000.00,
with legal interest of 12% per annum.

People vs Capt. Gasacao (2005) G.R. 168449


Facts:

Appellant was the Crewing Manager of Great Eastern Shipping Agency Inc., a licensed local manning agency, while
his nephew and co-accused, Jose Gasacao, was the President. As the crewing manager, appellant's duties included
receiving job applications, interviewing the applicants and informing them of the agency's requirement of payment
of performance or cash bond prior to deployment.

On August 4, 2000, appellant and Jose Gasacao were charged with Large Scale Illegal Recruitment defined under
Section 6, paragraphs (a), (l) and (m) of Republic Act (RA) No. 8042 or the Migrant Workers and Overseas Filipinos
Act of 1995, and penalized under Section 7 (b) of the same law, before the RTC of Quezon City.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 111


University of San Carlos – College of Law Labor Standards Finals Case Digests

Only the appellant was arrested while Jose Gasacao remained at large. When arraigned, appellant pleaded not guilty
to the offense charged. Thereafter, trial on the merits ensued. On March 5, 2001, the RTC of Quezon City, Branch 218,
rendered its Joint Decision convicting appellant of Large Scale Illegal Recruitment in Crim. Case No. Q-00-94240 and
acquitting him of the charge in Crim. Case No. Q-00-94241.

Conformably with our pronouncement in People v. Mateo, 6 which modified pertinent provisions of the Rules of
Court insofar as they provide for direct appeals from the RTC to the Supreme Court in cases where the penalty
imposed is death, reclusion perpetua or life imprisonment, as in this case, as well as this Court's Resolution dated
September 19, 1995, we resolved on February 2, 2005 to transfer the case to the Court of Appeals for appropriate
action and disposition.

Issue: WON an error attended the trial court's findings, as affirmed by the Court of Appeals, that appellant was
guilty beyond reasonable doubt of the crime of large scale illegal recruitment.

Held:

ILLEGAL RECRUITMENT

Sec. 6. DEFINITIONS. — For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract services, promising or
advertising for employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of
authority contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the
Labor Code of the Philippines: Provided, that such non-licensee or non-holder who, in any manner, offers or
promises for a fee employment abroad to two or more persons shall be deemed so engaged. It shall likewise include
the following acts, whether committed by any persons, whether a non-licensee, non-holder, licensee or holder of
authority.

(a) To charge or accept directly or indirectly any amount greater than the specified in the schedule of allowable
fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than that
actually received by him as a loan or advance;

(l) Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and

(m) Failure to reimburse expenses incurred by the workers in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place without the
worker's fault. Illegal recruitment when committed by a syndicate or in large scale shall be considered as offense
involving economic sabotage.

Illegal recruitment is deemed committed by a syndicate carried out by a group of three (3) or more persons
conspiring or confederating with one another. It is deemed committed in large scale if committed against three (3) or
more persons individually or as a group.

REPUBLIC ACT NO. 8042 (THE MIGRANT WORKERS AND OVERSEAS FILIPINO ACT OF 1995); LICENSE
DIFFERENTIATED FROM AUTHORITY - A license is a document issued by the Department of Labor and
Employment (DOLE) authorizing a person or entity to operate a private employment agency, while an authority is a
document issued by the DOLE authorizing a person or association to engage in recruitment and placement activities
as a private recruitment entity. However, it appears that even licensees or holders of authority can be held liable for
illegal recruitment should they commit any of the above-enumerated acts.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 112


University of San Carlos – College of Law Labor Standards Finals Case Digests

Thus, it is inconsequential that appellant committed large scale illegal recruitment while Great Eastern Shipping
Agency, Inc. was holding a valid authority. We thus find that the court below committed no reversible error in not
appreciating that the manning agency was a holder of a valid authority when appellant recruited the private
complainants.

There is no merit in appellant's contention that he could not be held liable for illegal recruitment since he was a mere
employee of the manning agency, pursuant to Section 6 of RA No. 8042 which provides:

The persons criminally liable for the above offenses are the principals, accomplices and accessories. In case of
juridical persons, the officers having control, management or direction of their business shall be liable.

ILLEGAL RECRUITMENT IN LARGE SCALE, CREWING MANAGER OF A SHIPPING AGENCY PROMISED THE
COMPLAINANTS THAT THEY WILL BE DEPLOYED ABROAD AFTER THEY HAVE PAID THE CASH BOND —
Contrary to appellant's claim, he is not a mere employee of the manning agency but the crewing manager. As such,
he receives job applications, interviews applicants and informs them of the agency's requirement of payment of
performance or cash bond prior to the applicant's deployment. As the crewing manager, he was at the forefront of the
company's recruitment activities.

The testimonies of the private complainants clearly established that appellant is not a mere employee of Great
Eastern Shipping Agency Inc. As the crewing manager, it was appellant who made representations with the private
complainants that he can secure overseas employment for them upon payment of the cash bond.

It is well settled that to prove illegal recruitment, it must be shown that appellant gave complainants the distinct
impression that he had the power or ability to send complainants abroad for work such that the latter were convinced
to part with their money in order to be employed. 10 Appellant's act of promising the private complainants that they
will be deployed abroad within three months after they have paid the cash bond clearly shows that he is engaged in
illegal recruitment.

AN EMPLOYEE OF A COMPANY OR CORPORATION ENGAGED THEREIN MAY BE HELD LIABLE AS


PRINCIPAL TOGETHER WITH HIS EMPLOYER. — The trial court's appreciation of the complainants' testimonies
deserves the highest respect since it was in a better position to assess their credibility.

Even assuming that appellant was a mere employee, such fact is not a shield against his conviction for large scale
illegal recruitment. In the case of People vs. Cabais, we have held that an employee of a company or corporation
engaged in illegal recruitment may be held liable as principal, together with the employer, if it is shown that he
actively and consciously participated in the recruitment process.

Clearly, the acts of appellant vis-à-vis the private complainants, either as the crewing manager of Great Eastern
Shipping Agency Inc. or as a mere employee of the same, constitute acts of large scale illegal recruitment which
should not be countenanced.

We find no reason to deviate from the findings of the trial court that appellant is guilty beyond reasonable doubt of
large scale illegal recruitment. It was established that he promised overseas employment to five applicants, herein
private complainants. He interviewed and required them to complete and submit documents purportedly needed for
their employment. Although he informed them that it is optional, he collected cash bonds and promised their
deployment notwithstanding the proscription against its collection under Section 60 of the Omnibus Rules and
Regulations Implementing R.A. No. 8042 13 which state that:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 113


University of San Carlos – College of Law Labor Standards Finals Case Digests

SEC. 60. Prohibition on Bonds and Deposits. — In no case shall an employment agency require any bond or cash
deposit from the worker to guarantee performance under the contract or his/her repatriation.

Acuña vs CA (2006) G.R. 159832


Facts:

Petitioners are Filipino overseas workers deployed by private respondent Join International Corporation (JIC), a
licensed recruitment agency, to its principal, 3D Pre-Color Plastic, Inc., (3D) in Taiwan, Republic of China, under a
uniformly-worded employment contract for a period of two years. Herein private respondent Elizabeth Alañon is the
president of Join International Corporation.

Sometime in September 1999, petitioners filed with private respondents applications for employment abroad. After
their papers were processed, petitioners claimed they signed a uniformly-worded employment contract with private
respondents which stipulated that they were to work as machine operators with a monthly salary of NT$15,840.00,
exclusive of overtime, for a period of two years.

On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the job site, a factory
owned by 3D, they were made to sign another contract which stated that their salary was only NT$11,840.00. They
were likewise informed that the dormitory which would serve as their living quarters was still under construction.
They were requested to temporarily bear with the inconvenience but were assured that their dormitory would be
completed in a short time.

Petitioners alleged that they were brought to a "small room with a cement floor so dirty and smelling with foul odor".
Forty women were jampacked in the room and each person was given a pillow. Since the ladies' comfort room was
out of order, they had to ask permission to use the men's comfort room. Petitioners claim they were made to work
twelve hours a day, from 8:00 p.m. to 8:00 a.m.

The petitioners averred that on December 16, 1999, due to unbearable working conditions, they were constrained to
inform management that they were leaving. They booked a flight home, at their own expense. Before they left, they
were made to sign a written waiver. In addition, petitioners were not paid any salary for work rendered on December
11-15, 1999.

Immediately upon arrival in the Philippines, petitioners went to private respondents' office, narrated what happened,
and demanded the return of their placement fees and plane fare. Private respondents refused.

On December 28, 1999, private respondents offered a settlement. Petitioner Mendez received P15,080. The next day,
petitioners Acuña and Ramones went back and received P13,640 10 and P16,200, respectively. They claim they signed
a waiver, otherwise they would not be refunded.

On January 14, 2000, petitioners Acuña and Mendez invoking Republic Act No. 8042 filed a complaint for illegal
dismissal and non-payment/underpayment of salaries or wages, overtime pay, refund of transportation fare,
payment of salaries/wages for 3 months, moral and exemplary damages, and refund of placement fee before the
National Labor Relations Commission (NLRC).

Ma. Cecelia Timbal LlB – 2 Rm 402 | 114


University of San Carlos – College of Law Labor Standards Finals Case Digests

Issue: Whether or not petitioners were illegally dismissed under Rep. Act No. 8042, thus entitling them to benefits
plus damages.

Held: No illegal dismissal. As we have held previously, constructive dismissal covers the involuntary resignation
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.

In this case, the appellate court found that petitioners did not deny that the accommodations were not as homely as
expected. In the petitioners' memorandum, they admitted that they were told by the principal, upon their arrival, that
the dormitory was still under construction and were requested to bear with the temporary inconvenience and the
dormitory would soon be finished. We likewise note that petitioners did not refute private respondents' assertion that
they had deployed approximately sixty other workers to their principal, and to the best of their knowledge, no other
worker assigned to the same principal has resigned, much less, filed a case for illegal dismissal.

To our mind these cited circumstances do not reflect malice by private respondents nor do they show the principal's
intention to subject petitioners to unhealthy accommodations. Under these facts, we cannot rule that there was
constructive dismissal.

Overtime Pay.Private respondents also claim that petitioners were not entitled to overtime pay, since they had
offered no proof that they actually rendered overtime work. Petitioners, on the other hand, say that they could not
show any documentary proof since their employment records were all in the custody of the principal employer. It
was sufficient, they claim, that they alleged the same with particularity.

It is a time-honored rule that in controversies between a worker and his employer, doubts reasonably arising from
the evidence, or in the interpretation of agreements and writing should be resolved in the worker's favor. 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.
Accordingly, we rule that private respondents are solidarily liable with the foreign principal for the overtime pay
claims of petitioners.

Moral and exemplary damages.On the award of moral and exemplary damages, we hold that such award lacks legal
basis. Moral and exemplary damages are recoverable only where the dismissal of an 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. The person claiming moral damages must prove the existence of bad faith by clear and convincing
evidence, for the law always presumes good faith. Petitioners allege they suffered humiliation, sleepless nights and
mental anguish, thinking how they would pay the money they borrowed for their placement fees. Even so, they
failed to prove bad faith, fraud or ill motive on the part of private respondents. Moral damages cannot be awarded.
Without the award of moral damages, there can be no award of exemplary damages, nor attorney's fees.

Quitclaims are valid.Quitclaims executed by the employees are commonly frowned upon as contrary to public policy
and ineffective to bar claims for the full measure of the workers' legal rights, considering the economic disadvantage
of the employee and the inevitable pressure upon him by financial necessity. Nonetheless, the so-called "economic
difficulties and financial crises" allegedly confronting the employee is not an acceptable ground to annul the
compromise agreement unless it is accompanied by a gross disparity between the actual claim and the amount of the
settlement.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 115


University of San Carlos – College of Law Labor Standards Finals Case Digests

A perusal of the records reveals that petitioners were not in any way deceived, coerced or intimidated into signing a
quitclaim waiver in the amounts of P13,640, P15,080 and P16,200 respectively. Nor was there a disparity between the
amount of the quitclaim and the amount actually due the petitioners.

According to the Bangko Sentral Treasury Department, the prevailing exchange rates on December 1999 was NT$1 to
P1.268805. Hence, after conversion to Philippine pesos, the amount of the quitclaim paid to petitioners was actually
higher than the amount due them.

Asian International Manpower Services vs CA (2006) G.R. 169652


Facts:

Proxy Maid Services Centre (Proxy), a Hong Kong based recruitment agency hired her through AIMS, a recruitment
entity in the Philippines. On February 10, 2000, she signed an employment contract to work as a domestic helper of
Low See Ting who later cancelled the contract sometime in March 2000. Nevertheless, Lacerna heeded AIMS's advice
to proceed to Hong Kong on the assurance that she will be provided with an employment abroad. Upon arrival at
Proxy's office on April 1, 2000, Lacerna was fetched by her employer, Tan Kmin Shwe Lin Charmain (Charmain).
However, the latter dismissed her in a Notification dated May 2, 2000 citing as reason the "difficulty in
communication."

On May 20, 2000, Proxy transferred Lacerna to Tam Ching-yee, Donna. On June 30, 2000 she was dismissed by Donna
without stating the reason for her termination. Neither did Proxy explain why she was dismissed. On July 1, 2000,
Lacerna agreed to take a three-day trial period with another employer, Daisy Lee. However, before she could sign her
contract with the latter, the Hong Kong government denied her request for change of employer and advised her to
submit a fresh application with her country of origin.

Following the denial of her work permit, Lacerna returned to the Philippines on July 13, 2000 but was informed by
AIMS that Daisy Lee is no longer interested in hiring her. Lacerna demanded the return of her placement fee but was
denied, hence, she filed the instant illegal dismissal case.AIMS, on the other hand, alleged that Lacerna resigned after
working for five days as a domestic helper of Low See Ting from April 1, 2000 to April 5, 2000, as evidenced by her
resignation letter. Proxy paid her wages and fare for a return ticket to the Philippines but she refused to be
repatriated. Thereafter, with the assistance of Proxy, she was hired in the household of Charmain. Unfortunately, the
latter dismissed Lacerna on the ground of difficulty in communication. On May 8, 2000, the Hong Kong Immigration
Department granted her an extension of time to stay in Hong Kong with a warning that the same is her last chance to
stay in the country. When Lacerna requested another extension, the same was denied and she was directed to leave
Hong Kong.

In her Reply, Lacerna insisted that her first employer was Charmain because she never worked for Low See Ting,
who as early as March 2000, cancelled the contract before she flew to Hong Kong. She added that the signature
appearing in the resignation letter and receipt of payment for the period April 1 to 5, 2000 is not her handwriting.

Issue: Was Lacerna illegally dismissed? If yes, may AIMS be held liable for the monetary claims of Lacerna

Held: On both issues, the Court rules in the affirmative.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 116


University of San Carlos – College of Law Labor Standards Finals Case Digests

There is no dispute that the last employer of Lacerna was Donna and not Daisy Lee because the Hong Kong
government directed her repatriation before she could sign her contract with the latter. In dismissing her, Donna
gave no reason for her termination. Neither did Proxy explain the ground for her dismissal. And where there is no
showing of a clear, valid, and legal cause for the termination, the law considers the matter, a case of illegal dismissal.
In termination cases involving Filipino workers recruited for overseas employment, the burden of proving just or
authorized cause for termination rests with the foreign based employer/principal and the local based entity which
recruited the worker both being solidarily liable for liabilities arising from the illegal dismissal of the worker. In this
case, the Court of Appeals correctly declared Lacerna's termination illegal since no reason was given to justify her
termination.

AIMS argued that it cannot be held liable for the monetary claims of Lacerna because its contract was limited only to
Lacerna's employment with Low See Ting. When she resigned as domestic helper of the latter, the contract was
allegedly extinguished making AIMS no longer privy to the subsequent employment contract entered into by Proxy
and Lacerna.

However, the records of the Immigration Department of Hong Kong belie the contention of AIMS that Lacerna was
employed by Low See Ting. The Immigration Department noted that the application of Lacerna was her second
request for change of employer. She filed the first application after her contract was pre-terminated on May 4, 2000.
This refers to the pre-termination by Charmain in the Notification of Cancellation of Employment Contract dated
May 2, 2000. However, the prospective employer subject of said first application backed out, hence, Lacerna
submitted a second application for change of employer which was granted with a warning that the same will be her
last chance to stay in Hong Kong. Said second application landed her a job in the household of Donna on May 20,
2000. When the latter dismissed Lacerna on June 30, 2000, she applied for the third time to change employer but was
denied by the Immigration Department which directed her to leave Hong Kong.

The Hong Kong Immigration Department gave Lacerna only two chances to change employer. The subject of the first
was the prospective employer who backed out, and the second was Donna. If we follow the version of AIMS, then the
sequence of her employment would have been that with: (1) Low See Ting, (2) Charmain, (3) prospective employer
who backed out, and (4) Donna.

However Lacerna's employment with Low See Ting is not supported by the records of the Immigration Department.
If Low See Ting was the first employer, then Lacerna's two chances to change employer would have ended on her
prospective employer who backed out and would not have enabled her to work for Charmain and Donna.

Clearly, the version of AIMS does not jibe with the official records of the Hong Kong government. Hence, between
the alleged Lacerna's resignation letter to Low See Ting and the letters of the Hong Kong Immigration Department
showing that Lacerna could not have been employed by her, credence must be given to the said official records,
especially so that AIMS never assailed their authenticity.

Moreover, even granting that Lacerna truly resigned as domestic helper of Low See Ting, the liability of AIMS was
not extinguished. The contract of Lacerna as approved by the Philippine Overseas Employment Administration
(POEA) reveals that Proxy was her designated principal employer; the agreed salary was HK$3,670.00 a month; and
the contract duration was for two years. Since AIMS was the local agency which recruited Lacerna for Proxy, it is
solidarily liable with the latter for liabilities arising from her illegal dismissal. To detach itself from the liability of
Proxy, AIMS must show by clear and convincing evidence that its contract is limited to Lacerna's employment by
Low See Ting.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 117


University of San Carlos – College of Law Labor Standards Finals Case Digests

However, aside from its bare allegation, AIMS presented no proof to corroborate its claim. On the contrary, it appears
that in transferring Lacerna from one employer to another, Proxy did not demand a new placement fee from Lacerna.
This only shows that Proxy's conduct was in accordance with the original contract executed with AIMS and not on an
entirely new and separate agreement entered into in Hong Kong.

This interpretation is in accord with the rule that all doubts in the construction of labor contracts should be resolved
in favor of the working class. The Constitution mandates the protection of labor and the sympathetic concern of the
State for the workers conformably to the social justice policy.

Verily, to absolve AIMS from liability based on its unsubstantiated claim that it is not privy to the subsequent
employment provided by Proxy for Lacerna would be to undermine the avowed policy of the State. The joint and
solidary liability imposed by law against recruitment agencies and foreign employers is meant to assure the
aggrieved worker of immediate and sufficient payment of what is due him. Thus, Section 10 of R.A. No. 8042,
provides:

SEC. 10. Money Claims. — he liability of the principal/employer and the recruitment/placement agency for
any and all claims under this section shall be joint and several. This provision shall be incorporated in the
contract for overseas employment and shall be a condition precedent for its approval. The performance
bond to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical
being, the corporate officers and directors and partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation or partnership for the aforesaid claims and damages.

Such liabilities shall continue during the entire period or duration of the employment contract and shall not be
affected by any substitution, amendment or modification made locally or in a foreign country of the said contract.In
case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, the
worker shall be entitled to the full reimbursement of his placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of the employment contract or for three (3) months for every year
of the unexpired term, whichever is less

The illegal dismissal of Lacerna entitles her to the full reimbursement of placement fee with interest at twelve percent
(12%) per annum, plus salaries for the unexpired portion of her employment contract or for three months for every
year of the unexpired term, whichever is less. Thus, the Court of Appeals was correct in ordering AIMS to pay
HK$11,010.00 corresponding to three months of her salary or its equivalent in the Philippine Peso at the time of
payment, plus placement fee of P18,0000.00.

No moral and exemplary damages.The Court of Appeals, however, erred in awarding moral and exemplary damages
inasmuch as Lacerna failed to prove that AIMS and Proxy are guilty of bad faith. While it is true that they were not
able to justify Lacerna's dismissal, the same does not automatically amount to bad faith. Moral and exemplary
damages cannot be based solely upon the premise that the employer dismissed the employee without cause or due
process. The termination must be attended with bad faith, or fraud, or was oppressive to labor or done in a manner
contrary to morals, good customs or public policy and that social humiliation, wounded feelings, or grave anxiety
resulted therefrom. Similarly, exemplary damages are recoverable only when the dismissal was effected in a wanton,
oppressive or malevolent manner. To merit the award of these damages, additional facts showing bad faith are
necessary but Lacerna failed to plead and prove the same in this case. Hence, the awards of moral and exemplary
damages should be deleted.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 118


University of San Carlos – College of Law Labor Standards Finals Case Digests

The award of attorney's fees is sustained.In actions for recovery of wages or where an employee was forced to litigate
and thus incurred expenses to protect his rights and interests, a maximum of ten percent (10%) of the total monetary
award by way of attorney's fees is justified under Article 111 of the Labor Code, Section 8, Rule VIII, Book III of its
Implementing Rules, and paragraph 7, Article 2208 of the Civil Code. There need not be any showing that the
employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful
wages were not paid accordingly and that the employee was forced to file a case, as in the instant case.

Sim vs. NLRC (2007) G.R. 157376


Facts:

Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor Arbiter, alleging that she was initially
employed by Equitable PCI-Bank (respondent) in 1990 as Italian Remittance Marketing Consultant to the Frankfurt
Representative Office. Eventually, she was promoted to Manager position, until September 1999, when she received a
letter from Remegio David — the Senior Officer, European Head of PCIBank, and Managing Director of PCIB-Europe
— informing her that she was being dismissed due to loss of trust and confidence based on alleged mismanagement
and misappropriation of funds.

Respondent denied any employer-employee relationship between them, and sought the dismissal of the
complaint.On September 3, 2001, the Labor Arbiter rendered its Decision dismissing the case for want of jurisdiction
and/or lack of merit. On appeal, the National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's
Decision and dismissed petitioner's appeal for lack of merit.

Without filing a motion for reconsideration with the NLRC, petitioner went to the Court of Appeals (CA) via a
petition for certiorari under Rule 65 of the Rules of Court. In a Resolution dated October 29, 2002, the CA dismissed
the petition due to petitioner's non-filing of a motion for reconsideration with the NLRC

Issues and Rulings:

I. Whether or not labor relations system in the Philippines has extra-territorial jurisdiction.

The Court notes, however, a palpable error in the Labor Arbiter's disposition of the case, which was affirmed by the
NLRC, with regard to the issue on jurisdiction. It was wrong for the Labor Arbiter to rule that "labor relations system
in the Philippines has no extra-territorial jurisdiction."

Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter and the National Labor Relations
Commission, viz.:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. —

(a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to
hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural
or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

Ma. Cecelia Timbal LlB – 2 Rm 402 | 119


University of San Carlos – College of Law Labor Standards Finals Case Digests

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of
pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations, including those of persons in domestic or household service,
involving an amount of exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim
for reinstatement.

(b) The commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipinos Act of 1995,
provides:

SECTION 10. Money Claims. — Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee
relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims
for actual, moral, exemplary and other forms of damages.

Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 provides that the Labor Arbiters
of the NLRC shall have the original and exclusive jurisdiction to hear and decide all claims arising out of employer-
employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment
including claims for actual, moral, exemplary and other forms of damages, subject to the rules and procedures of the
NLRC.

Under these provisions, it is clear that labor arbiters have original and exclusive jurisdiction over claims arising from
employer-employee relations, including termination disputes involving all workers, among whom are overseas
Filipino workers. In Philippine National Bank v. Cabansag, the Court pronounced: . . Whether employed locally or
overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social legislation, contract
stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic public policy of the
State to afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race
or creed, and regulate the relations between workers and employers. For the State assures the basic rights of all
workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work
[Article 3 of the Labor Code of the Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that laws
"which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or
judgments promulgated, or by determination or conventions agreed upon in a foreign country."

In any event, since the CA did not commit any error in dismissing the petition before it for failure to file a prior
motion for reconsideration with the NLRC, and considering that the Labor Arbiter and the NLRC's factual findings as
regards the validity of petitioner's dismissal are accorded great weight and respect and even finality when the same
are supported by substantial evidence, the Court finds no compelling reason to relax the rule on the filing of a motion
for reconsideration prior to the filing of a petition for certiorari.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 120


University of San Carlos – College of Law Labor Standards Finals Case Digests

II. Whether or not a prior motion for reconsideration is indispensable for the filing of a petition for certiorari under
Rule 65 of the Rules of Court with the CA.

Under Rule 65, the remedy of filing a special civil action for certiorari is available only when there is no appeal; or
any plain, speedy, and adequate remedy in the ordinary course of law. A "plain" and "adequate remedy" is a motion
for reconsideration of the assailed order or resolution, the filing of which is an indispensable condition to the filing of
a special civil action for certiorari. This is to give the lower court the opportunity to correct itself.

There are, of course, exceptions to the foregoing rule, to wit:

(a) where the order is a patent nullity, as where the court a quo has no jurisdiction;

(b) where the questions raised in the certiorari proceedings have been duly raised and passed upon by the
lower court, or are the same as those raised and passed upon in the lower court;

(c) where there is an urgent necessity for the resolution of the question and any further delay would prejudice
the interests of the Government or of the petitioner or the subject matter of the action is perishable;

(d) where, under the circumstances, a motion for reconsideration would be useless;

(e) where petitioner was deprived of due process and there is extreme urgency for relief;

(f) where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial
court is improbable;

(g) where the proceedings in the lower court are a nullity for lack of due process;

(h) where the proceeding was ex parte or in which the petitioner had no opportunity to object; and

(i) where the issue raised is one purely of law or public interest is involved.

Petitioner, however, failed to qualify her case as among the few exceptions. In fact, the Court notes that the petition
filed before the CA failed to allege any reason why a motion for reconsideration was dispensed with by petitioner. It
was only in her motion for reconsideration of the CA's resolution of dismissal and in the petition filed in this case that
petitioner justified her non-filing of a motion for reconsideration.

It must be emphasized that a writ of certiorari is a prerogative writ, never demandable as a matter of right, never
issued except in the exercise of judicial discretion. Hence, he who seeks a writ of certiorari must apply for it only in
the manner and strictly in accordance with the provisions of the law and the Rules. Petitioner may not arrogate to
himself the determination of whether a motion for reconsideration is necessary or not. To dispense with the
requirement of filing a motion for reconsideration, petitioner must show a concrete, compelling, and valid reason for
doing so, which petitioner failed to do. Thus, the Court of Appeals correctly dismissed the petition.

Petitioner also contends that the issue at bench is purely a question of law, hence, an exception to the rule. A reading
of the petition filed with the CA shows otherwise. The issues raised in this case are mixed questions of fact and law.
There is a question of fact when doubt or difference arises as to the truth or falsehood of the alleged facts, and there is
a question of law where the doubt or difference arises as to what the law is on a certain state of facts.

Petitioner, aside from questioning the ruling of the NLRC sustaining the Labor Arbiter's view that it does not have
any jurisdiction over the case, also questions the NLRC's ruling affirming the Labor Arbiter's conclusion that she was

Ma. Cecelia Timbal LlB – 2 Rm 402 | 121


University of San Carlos – College of Law Labor Standards Finals Case Digests

validly dismissed by respondent. The legality of petitioner's dismissal hinges on the question of whether there was an
employer-employee relationship, which was denied by respondent; and, if in the affirmative, whether petitioner,
indeed, committed a breach of trust and confidence justifying her dismissal. These are mixed questions of fact and
law and, as such, do not fall within the exception from the filing of a motion for reconsideration.

Consequently, the CA was not in error when it dismissed the petition. More so since petitioner failed to show any
error on the part of the Labor Arbiter and the NLRC in ruling that she was dismissed for cause.

The rule is that the Court is bound by the findings of facts of the Labor Arbiter or the NLRC, unless it is shown that
grave abuse of discretion or lack or excess of jurisdiction has been committed by said quasi-judicial bodies. The Court
will not deviate from said doctrine without any clear showing that the findings of the Labor Arbiter, as affirmed by
the NLRC, are bereft of sufficient substantiation.

Petitioner does not deny having withdrawn the amount of P3, 000,000.00 lire from the bank's account. What
petitioner submits is that she used said amount for the Radio Pilipinas sa Roma radio program of the company.
Respondent, however, countered that at the time she withdrew said amount, the radio program was already off the
air. Respondent is a managerial employee. Thus, loss of trust and confidence is a valid ground for her dismissal. The
mere existence of a basis for believing that a managerial employee has breached the trust of the employer would
suffice for his/her dismissal.

Bahia Shipping Services Inc., vs Chua (2008) G.R. 162195


Facts:

Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia Shipping Services, Inc., as a
restaurant waiter on board a luxury cruise ship liner M/S Black Watch pursuant to a Philippine Overseas
Employment Administration (POEA) approved employment contract dated October 9, 1996 for a period of nine (9)
months from October 18, 1996 to July 17, 1997. On October 18, 1996, the private respondent left Manila for Heathrow,
England to board the said sea vessel where he will be assigned to work. On February 15, 1997, the private respondent
reported for his working station one and one-half hours late. On February 17, 1997, the master of the vessel served to
the private respondent an official warning-termination form pertaining to the said incident. On March 8, 1997, the
vessel's master, ship captain Thor Fleten conducted an inquisitorial hearing to investigate the said incident.
Thereafter, on March 9, 1997, private respondent was dismissed from the service on the strength of an unsigned and
undated notice of dismissal. An alleged record or minutes of the said investigation was attached to the said dismissal
notice.

On March 24, 1997, the private respondent filed a complaint for illegal dismissal and other monetary claims. The
private respondent alleged that he was paid only US$300.00 per month as monthly salary for five (5) months instead
of US$410.00 as stipulated in his employment contract. Thus, he claimed that he was underpaid in the amount of
US$110.00 per month for that same period of five (5) months. He further asserted that his salaries were also deducted
US$20.00 per month by the petitioner for alleged union dues.

Issue: WON respondent is entitled to overtime pay which was incorporated in his award for the unexpired portion of
the contract despite the fact that he did not render overtime work.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 122


University of San Carlos – College of Law Labor Standards Finals Case Digests

Held: The inclusion of his "guaranteed overtime" pay into his monthly salary as basis in the computation of his
salaries for the entire unexpired period of his contract has no factual or legal basis and the same should have been
disallowed.

Petitioner contends that there is no factual or legal basis for the inclusion of said amount because, after respondent's
repatriation, he could not have rendered any overtime work. This time, petitioner's contention is well-taken.

The Court had occasion to rule on a similar issue in Stolt-Nielsen Marine Services (Phils.), Inc. v. National Labor Relations
Commission, where the NLRC was questioned for awarding to an illegally dismissed overseas worker fixed overtime
pay equivalent to the unexpired portion of the latter's contract. In resolving the question, the Court, citing Cagampan
v. National Labor Relations Commission, held that although an overseas employment contract may guarantee the right
to overtime pay, entitlement to such benefit must first be established, otherwise the same cannot be allowed.

Masangcay vs Trans-Global Maritime Agency Inc., (2008) G.R. 172800


Facts:

Ventnor is a foreign company based in Liberia and engaged in maritime commerce. It is represented in the
Philippines by its manning agent, and co-respondent herein, Trans-Global, a corporation organized and existing
under Philippine laws. Petitioner Marciano Masangcay was hired by Ventnor, through its manning agent, Trans-
Global, as an oiler on M/T Eastern Jewel, an oil tanker. While on board M/T Eastern Jewel, Masangcay noticed a
“reddish discoloration of his urine upon urination. This happened several times and later became associated with
bouts of left lower abdominal pain radiating to the loin area. Masangcay was brought to the Fujairah Hospital,
United Arab Emirates, because of lower abdominal pain and left loin pain with difficulty in urinating. Better removal
of the right pelvi-ureteric calculus was the recommended treatment but Masangcay refused surgical intervention and
insisted on being repatriated back to the Philippines instead. Upon his arrival in Manila, Masangcay was
immediately referred to Trans-Global’s designated physician. Masangcay was hospitalized at the Makati Medical
Center for treatment. The removal of the non-functioning right kidney was advised but Masangcay refused.
Masangcay was then referred to Dr. Reynaldo C. de la Cruz of the National Kidney and Transplant Institute (NKTI)
for a second opinion. An operation was made and proved successful. Dr. dela Cruz pronounced that Masangcay was
fit to resume work as all his laboratory examinations showed normal results. Accordingly, Trans-Global’s designated
physician, declared Masangcay fit to go back to work after a regular medical examination. Trans-Global, in behalf of
Ventnor, paid Masangcay his full 120 days Sick Leave Pay as well as all his medical and hospital expenses and
professional fees of his attending physicians. Masangcay was asked to report back to the office of Trans-Global for
deployment line-up. When Masangcay reported to the premises of Trans-Global, however, he was informed by the
Port Captain that he can no longer be deployed due to negative reports about him coming from its principal, Ventnor.
Masangcay instituted a complaint against Trans-Global and Ventnor, including Trans-Global’s President, Michael
Estaniel, before the National Labor Relations Commission (NLRC) for the payment of disability benefit, damages and
attorney’s fees. Masangcay alleged that his illness was contracted during the term of his Contract of Employment.
Labor Arbiter found Masangcay’s complaint meritorious and ordered Trans-Global, Ventnor, and Estaniel to pay
Masangcay for disability benefit. On appeal to the NLRC, the Commission affirmed the decision of the labor arbiter.
The Court of Appeals granted the petition for certiorari of TransGlobal and Ventnor. It nullified and set aside the
challenged Resolutions of the NLRC for having been issued in grave abuse of discretion amounting to lack or excess
of jurisdiction. Hence, this petition for review on certiorari under Rule 45 of the Revised Rules of Court.

Issue: WON Masangcay is entitled to disability benefits on account of his present condition.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 123


University of San Carlos – College of Law Labor Standards Finals Case Digests

Held: We rule in the negative. Under Sec. 20(b), paragraph 6, of the 2000 POEA Amended Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels: permanent total or
partial disability suffered by a seafarer during the term of his contract must be caused by work-related illness or
injury. To be entitled to compensation and benefits under said provision, it is not sufficient to establish that the
seafarer’s illness or injury has rendered him permanently or partially disabled, but it must also be shown that there is
a causal connection between the seafarer’s illness or injury and the work for which he had been contracted for.
Accordingly, in order to hold Trans-Global and Ventnor liable for payment of his claims, Masangcay must prove that
he is suffering from permanent total or partial disability due to a work-related illness occurring during the term of his
contract. Proof that he not only acquired or contracted his illness during the term of his employment contract is
clearly not enough; Masangcay must also present evidence that such infirmity was work-related, or at the very least
aggravated by the conditions of the work for which he was contracted for. The burden is clearly upon Masangcay to
present substantial evidence, or such relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion, showing a reasonable connection that the nature of his employment or working conditions between the
conditions of his work and his illness; or that the risk of contracting the same was increased by his working
conditions. This, he did not do. Masangcay does not even assert that his illness is work-related and/or was, at the
minimum, aggravated by his working conditions at the M/T Eastern Jewel. There is no substantiation that the
progression of his ailment was brought about largely by the conditions of his job as an oiler. His medical history
and/or records prior to his deployment as an oiler in M/T Eastern Jewel were neither presented nor alluded to in
order to demonstrate that the working conditions on board said vessel increased the risk of contracting renal failure,
chronic or otherwise. But even assuming that Masangcay is suffering from chronic renal failure, it still does not
entitle him to compensation and benefits for a permanent disability. Chronic renal failure, is neither listed as a
disability under Sec. 32 of the 2000 POEA Amended Standard Terms and Conditions Governing the Employment of
Filipino Seafarers on Board Ocean-Going Vessels; nor an occupational disease under Sec. 32-A thereof. But other than
Masangcay’s bare avowal of entitlement just because an illness became manifest during his contract of employment,
there is nothing on record to substantiate the same and would have justified an award of compensation on top of the
aid or assistance already extended to him by Trans-Global and Ventnor. The dispute could have easily been resolved
had the parties stayed true to the provisions of Sec. 20(b), paragraph 3 of the 2000 POEA Amended Standard Terms
and Conditions: If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed
jointly between the Employer and the seafarer. The third doctor’s decision shall be final and binding on both parties.
Without the opinion of a third doctor, we are constrained to make a ruling based on the evidences submitted by the
parties and made part of the records of this case, which included the medical certifications of their respective
physicians. Masangcay makes no allegation, much less presents no proof, that the illness was caused or aggravated
by his employment. The evidence on record is totally bare of essential facts on how he contracted or developed such
disease and on how and why his working conditions increased the risk of contracting the same.

Magsaysay Maritime Corp., et al., vs Velasquez, et al., (2008) G.R. 179802


Facts:

Respondent Jaime M. Velasquez was hired by petitioner Magsaysay Maritime Corporation as second cook for its
foreign principal, co-petitioner ODF Jell ASA. While on duty as second cook on board the vessel M/T Bow Favour,
respondent suffered high fever and was unable to work. He took fever relieving medicine but his condition
worsened. By the fourth day, his body temperature reached 40.9°C. Respondent was brought to a hospital in
Singapore where he was confined. Thereafter, he was repatriated to the Philippines. Respondent alleged that upon
his repatriation, he was not confined to St. Luke’s Medical Center as he expected. He claimed that he was compelled

Ma. Cecelia Timbal LlB – 2 Rm 402 | 124


University of San Carlos – College of Law Labor Standards Finals Case Digests

to seek medical treatment from an independent doctor. He consulted a certain Dr. Efren Vicaldo who diagnosed him
to be suffering from staphylococcal bacteremia, multiple metastatic abcesses, pleural effusion and hypertension and
declared his disability as Impediment Grade 1 (120%). Dr. Vicaldo further concluded that respondent was “unfit to
resume work as seaman in any capacity.” Hence, respondent filed a claim for disability benefits, illness allowance/
reimbursement of medical expenses, damages and attorney’s fees but petitioners refused to pay. The Labor Arbiter
rendered a decision in favor of respondent. The NLRC rendered a decision reversing that of the Labor Arbiter and
dismissed respondent’s complaint for lack of merit. CA set aside the decision of the NLRC and reinstated that of the
Labor Arbiter.

Issue: WON the CA committed reversible error when it upheld the findings of respondent’s private physician rather
than the findings of the company-designated physician.

Held: CA committed reversible error in ignoring the medical assessment of the company-designated physician. The
POEA Contract is clear in its provisions when it provided who should determine the disability grading or fitness to
work of seafarers. The POEA contract recognizes only the disability grading provided by the company-designated
physicians. Section 20 B.3 of the POEA clearly illustrate that respondent’s disability can only be assessed by the
company-designated physician. If the companydesignated physician declares him fit to work, then the seaman is
bound by such declaration.

The parties are both bound by the provisions of the POEA Contract which declares that the degree of disability or
fitness to work of a seafarer should be assessed by the company-designated physician. Jurisprudence is replete with
pronouncements that it is the company-designated physician’s findings which should form the basis of any disability
claim of the seafarer. In this particular case, respondent refused to accept the assessment made by the company-
designated physician that he is fit to work. It is beyond cavil that it is the company-designated physician who is
entrusted with the task of assessing the seaman’s disability. However, when the seaman’s private physician disagrees
with the assessment of the company-designated physician, as here, a third doctor’s opinion may be availed of in
determining his disability. This however was not resorted to by the parties. As such, the credibility of the findings of
company-designated doctors was properly evaluated by the NLRC.

The company-designated physician cleared respondent for work resumption upon finding that his infection has
subsided after successful medication. We agree with the NLRC that the doctor more qualified to assess the disability
grade of the respondent seaman is the doctor who regularly monitored and treated him. The company-designated
physician possessed personal knowledge of the actual condition of respondent. Since the company-designated
physician in this case deemed the respondent as fit to work, then such declaration should be given credence,
considering the amount of time and effort the company doctor gave to monitoring and treating respondent’s
condition. It is undisputed that the recommendation of Dr. Vicaldo was based on a single medical report which
outlined the alleged findings and medical history of respondent despite the fact that Dr. Vicaldo treated or examined
respondent only once. As between the findings of the company-designated physician (Dr. Alegre) and the physician
appointed by respondent (Dr. Vicaldo), the former deserves to be given greater evidentiary weight.

Serrano vs Gallant Maritime Services et al., (2009) G.R. 167614


Facts:

Antonio M. Serrano was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. under a
Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following

Ma. Cecelia Timbal LlB – 2 Rm 402 | 125


University of San Carlos – College of Law Labor Standards Finals Case Digests

terms and conditions: Duration of contract Position Basic monthly salary Hours of work Overtime Vacation leave
with pay 12 months Chief Officer US$1,400.00 48.0 hours per week US$700.00 per month 7.00 days per month On
March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment contract
for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and representation of
MSI that he would be made Chief Officer by the end of April 1998. MSI did not deliver on their promise to make
petitioner Chief Officer. Hence, Soriano refused to stay on as Second Officer and was repatriated to the Philippines on
May 26, 1998.

Soriano’s employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at the
time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract,
leaving an unexpired portion of nine (9) months and twenty-three (23) days. He filed with the Labor Arbiter (LA) a
Complaint against respondents for constructive dismissal and for payment of his money claims in the total amount of
US$26,442.73 as well moral and exemplary damages and attorney’s fees.

He got a favourable decision with the Labor Arbiter in the amount of US$ 8,770.00. In awarding Soriano a lump-sum
salary of US$8,770.00, the LA based his computation on the salary period of three months only -- rather than the
entire unexpired portion of nine months and 23 days of petitioner's employment contract - applying the subject
clause. However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's “[b]asic salary,
US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay =
US$2,590.00/compensation per month.” MSI appealed to the National Labor Relations Commission (NLRC) to
question the finding of the LA that petitioner was illegally dismissed. Soriano also appealed to the NLRC on the sole
issue that the LA erred in not applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor
Relations Commission that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of
their contracts. In a Decision dated June 15, 2000, the NLRC modified the LA Decision, ordering MSI to pay Soriano,
jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of payment the following:
1. 2. 3. Three (3) months salary $1,400 x 3 Salary differential 45.00 10% Attorney’s fees424.50 US$4,200.00 US$4,245.00
TOTAL US$4,669.50 The NLRC corrected the LA's computation of the lump-sum salary awarded to Soriano by
reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042 “does not provide for the
award of overtime pay, which should be proven to have been actually performed, and for vacation leave pay.”
Soriano filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject
clause. The NLRC denied the motion.

Issue: WON Serrano is entitled to his salaries for the entire unexpired portion of his employment contract consisting
of nine months and 23 days.

Held: Yes, Soriano is entitled to his salaries for the entire unexpired portion of his employment contract consisting of
nine months and 23 days computed at the rate of US$1,400.00 per month. In sum, prior to R.A. No. 8042, OFWs and
local workers with fixed-term employment who were illegally discharged were treated alike in terms of the
computation of their money claims: they were uniformly entitled to their salaries for the entire unexpired portions of
their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally
dismissed OFWs with an unexpired portion of one year or more in their employment contract have since been
differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on
local workers with fixed-term employment. The Court concludes that the subject clause contains a suspect
classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally
discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their
contracts, but none on the claims of other OFWs or local workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a peculiar disadvantage.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 126


University of San Carlos – College of Law Labor Standards Finals Case Digests

People vs Domingo (2009) G.R. 181475


Facts:

In or about the month of November 1999 to January 20, 2000, in the Municipality of Malolos, province of Bulacan,
Philippines, Domingo, being a non-licensee or non-holder of authority from the Department of Labor and
Employment to recruit and/or place workers under local or overseas employment, did then and there willfully and
feloniously, with false pretenses, undertake illegal recruitment, placement or deployment of Wilson A. Manzo, and 22
other individuals.

This offense involved economic sabotage, as it was committed in large scale. The Informations for 23 counts of Estafa,
all of which were similarly worded but varying with respect to the name of each complainant and the amount which
each purportedly gave to Domingo. That in or about the month of November, 1999 to January, 2000, in the
municipality of Malolos, province of Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the
above-named accused, by means of deceit, false pretenses and fraudulent manifestations, and with intent of gain, did
then and there willfully, unlawfully and feloniously defraud one [Wilson A. Manzo] by then and there falsely
representing that he has the power and capacity to recruit and employ persons in Saipan and could facilitate the
necessary papers in connection therewith if given the necessary amount, and by means of deceit of similar import,
when in truth and in fact, as the accused knew fully well his representation was false and fraudulent and designed to
inveigle [Wilson A. Manzo] to give, as in fact the latter gave and delivered the amount of [P14,000.00] to him, which
the accused misappropriated to himself, to the damage and prejudice of Wilson A. Manzo in the said amount of
[P14,000.00]. Rogelio Cambay: Domingo recruited him for a painting job in Marianas Island for which he paid him
the amount of P15,000 in two installments – P2,500 during his medical examination at Newton Clinic in Makati City,
and the balance of P12,500 before the scheduled departure on January 25, 2000.

On his scheduled departure, appellant did not show up at their meeting place in Malolos, Bulacan, hence, the around
one hundred people who waited for him organized a search party to look for him in Zambales. Appellant was
arrested on February 25, 2000 at the Balintawak tollgate. Verification with the Department of Labor and Employment
showed that appellant was not a licensed recruiter. Florentino Ondra: He was recruited by Domingo for employment
as laborer in Saipan, for which he gave P14,700 representing expenses for passporting, NBI clearance, and medical
examination. Dionisio Aguilar: In September, 1999, he met Domingo thru a friend whereupon he was interviewed,
tested for a hotel job, and scheduled for medical examination. He gave P30,000 to Domingo inside the latter’s car on
November, 1999 after his medical examination. While he was twice scheduled for departure, it did not materialize.
Ma. Leah Vivas: After meeting Domingo thru Eddie Simbayan on October 19, 1999, she applied for a job as a
domestic helper in Saipan, for which she paid appellant P10,000, but like the other complainants, she was never
deployed. Simeon Cabigao: He was recruited by Domingo in September, 1999 for employment as carpenter in Saipan
with a guaranteed salary of $375 per month. For the promised employment, he paid Domingo P3,000 for medical fee,
and an additional P9,000, supposedly to bribe the examining physician because, per information of Domingo, he
(Cabigao) was found to have an ailment. He was scheduled for departure on February 23, 2000, but the same never
took place. He was among those who looked for appellant in Zambales. Cabigao later recanted this testimony, per his
affidavit dated March 3, 2003. Testifying anew, this time for the defense, he averred that the one who actually
recruited him and his co-complainants and received their money was Danilo Gimeno (Gimeno), and that they only
agreed among themselves to file a case against appellant because Gimeno was nowhere to be found. Domingo’s
Argument: Domingo, denying all the accusations against him, claimed as follows: He was a driver hired by the real
recruiter, Gimeno, whom he met inside the Victory Liner Bus bound for Manila in September, 2000. It was Gimeno

Ma. Cecelia Timbal LlB – 2 Rm 402 | 127


University of San Carlos – College of Law Labor Standards Finals Case Digests

who undertakes recruitment activities in Dakila, Malolos, Bulacan at the residence of Eddie Simbayan, and that the
other cases for illegal recruitment filed against him before other courts have all been dismissed. Domingo likewise
presented as witnesses Enrico Espiritu and Roberto Castillo who corroborated his claim that it was Gimeno who
actually recruited them, and that the filing of the complaint against appellant was a desperate attempt on their part to
get even because Gimeno could not be located.

Issue: Whether or not Domingo is guilty of Illegal Recruitment despite that there is no evidence showing that he
actually received money from complainants.

Held: Y es, Domingo is guilty of Illegal Recruitment. The term “recruitment and placement” is defined under Article
13(b) of the Labor Code of the Philippines as follows: (b) “Recruitment and placement” refers to any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers, and includes referrals,
contract services, promising or advertising for employment, locally or abroad, whether for profit or not. Provided,
That any person or entity which, in any manner, offers or promises for a fee employment to two or more persons
shall be deemed engaged in recruitment and placement. On the other hand, Article 38, paragraph (a) of the Labor
Code, as amended, under which the accused stands charged, provides: Art. 38. Illegal Recruitment. - (a) Any
recruitment activities, including the prohibited practices enumerated under Article 34 of this Code, to be undertaken
by non-licensees or non-holders of authority shall be deemed illegal and punishable under Article 39 of this Code.
The Ministry of Labor and Employment or any law enforcement officer may initiate complaints under this Article. (b)
Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving
economic sabotage and shall be penalized in accordance with Article 39 hereof. Illegal recruitment is deemed
committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with
one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first
paragraph hereof. Illegal recruitment is deemed committed in large scale if committed against three (3) or more
persons individually or as a group.

From the foregoing provisions, it is clear that any recruitment activities to be undertaken by nonlicensee or non-
holder of authority shall be deemed illegal and punishable under Article 39 of the Labor Code of the Philippines.
Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or
as a group. To prove illegal recruitment in large scale, the prosecution must prove three essential elements, to wit: (1)
the person charged undertook a recruitment activity under Article 13(b) or any prohibited practice under Article 34 of
the Labor Code; (2) he/she did not have the license or the authority to lawfully engage in the recruitment and
placement of workers; and (3) he/she committed the prohibited practice against three or more persons individually or
as a group. No receipt or document in which appellant acknowledged receipt of money for the promised jobs was
adduced in evidence does not free him of liability. For even if at the time appellant was promising employment no
cash was given to him, he is still considered as having been engaged in recruitment activities, since Article 13(b) of
the Labor Code states that the act of recruitment may be for profit or not. It suffices that appellant promised or
offered employment for a fee to the complaining witnesses to warrant his conviction for illegal recruitment.

Great Southern – Maritime Services Corp vs Surigao (2009) G.R. 183646


Facts:

On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and Promotion, Inc.[2]
(Becmen) to serve as assistant nurse in Al-Birk Hospital in the Kingdom of Saudi Arabia (KSA), for a contract
duration of three years, with a corresponding salary of US$247.00 per month. Over a year later, she died allegedly of

Ma. Cecelia Timbal LlB – 2 Rm 402 | 128


University of San Carlos – College of Law Labor Standards Finals Case Digests

poisoning. Jasmin’s body was repatriated to Manila on September 3, 1998. The following day, the City Health Officer
of Cabanatuan City conducted an autopsy and the resulting medical report indicated that Jasmin died under violent
circumstances, and not poisoning as originally found by the KSA examining physician. On March 11, 1999, Jasmin’s
remains were exhumed and examined by the National Bureau of Investigation (NBI). The toxicology report of the
NBI, however, tested negative for non-volatile, metallic poison and insecticides On November 22, 1999, the
Cuaresmas filed a complaint against Becmen and its principal in the KSA, Rajab & Silsilah Company (Rajab),
claiming death and insurance benefits, as well as moral and exemplary damages for Jasmin’s death.

In their complaint, the Cuaresmas claim that Jasmin’s death was work-related, having occurred at the employer’s
premises that under Jasmin’s contract with Becmen, she is entitled to “iqama insurance” coverage; that Jasmin is
entitled to compensatory damages in the amount of US$103,740.00, which is the sum total of her monthly salary of
US$247.00 per month under her employment contract, multiplied by 35 years (or the remaining years of her
productive life had death not supervened at age 25, assuming that she lived and would have retired at age 60). In
their position paper, Becmen and Rajab insist that Jasmin committed suicide, citing a prior unsuccessful suicide
attempt sometime in March or April 1998 and relying on the medical report of the examining physician of the Al-Birk
Hospital. They likewise deny liability because the Cuaresmas already recovered death and other benefits totaling
P130,000.00 from the OWWA. They insist that the Cuaresmas are not entitled to “iqama insurance” because this refers
to the “issuance” – not insurance – of iqama, or residency/work permit required in the KSA. On February 28, 2001,
the Labor Arbiter rendered a Decision dismissing the complaint for lack of merit. On appeal, the National Labor
Relations Commission (Commission) reversed the decision of the Labor Arbiter. Relying on the findings of the City
Health Officer of Cabanatuan City and the NBI as contained in their autopsy and toxicology report, respectively, the
Commission, via its November 22, 2002 Resolution declared that, based on substantial evidence adduced, Jasmin was
the victim of compensable work-connected criminal aggression. The appellate court affirmed the NLRC’s findings
that Jasmin’s death was compensable, the same having occurred at the dormitory, which was contractually provided
by the employer. Thus her death should be considered to have occurred within the employer’s premises, arising out
of and in the course of her employment.

Issue: Whether the Cuaresmas are entitled to monetary claims, by way of benefits and damages, for the death of their
daughter Jasmin.

Held: Yes, they are. Rajab & Silsilah Company, White Falcon Services, Inc., Becmen Service Exporter and Promotion,
Inc., and their corporate directors and officers are found jointly and solidarily liable The Court cannot subscribe to
the idea that Jasmin committed suicide while halfway into her employment contract. It is beyond human
comprehension that a 25-year old Filipina, in the prime of her life and working abroad with a chance at making a
decent living with a high-paying job which she could not find in her own country, would simply commit suicide for
no compelling reason. Rajab & Silsilah Company, White Falcon Services, Inc., Becmen Service Exporter and
Promotion, Inc They have placed their own financial and corporate interests above their moral and social obligations,
and chose to secure and insulate themselves from the perceived responsibility of having to answer for and indemnify
Jasmin’s heirs for her death. Under Republic Act No. 8042 (R.A. 8042), or the Migrant Workers and Overseas Filipinos
Act of 1995, [22] the State shall, at all times, uphold the dignity of its citizens whether in country or overseas, in
general, and Filipino migrant workers, in particular. The State shall provide adequate and timely social, economic
and legal services to Filipino migrant workers. The rights and interest of distressed overseas Filipinos, in general, and
Filipino migrant workers, in particular, documented or undocumented, are adequately protected and safeguarded.
Becmen and White Falcon, as licensed local recruitment agencies, miserably failed to abide by the provisions of R.A.
8042. Recruitment agencies are expected to extend assistance to their deployed OFWs, especially those in distress.
Instead, they abandoned Jasmin’s case and allowed it to remain unsolved to further their interests and avoid
anticipated liability which parents or relatives of Jasmin would certainly exact from them. They willfully refused to

Ma. Cecelia Timbal LlB – 2 Rm 402 | 129


University of San Carlos – College of Law Labor Standards Finals Case Digests

protect and tend to the welfare of the deceased Jasmin, treating her case as just one of those unsolved crimes that is
not worth wasting their time and resources on. The evidence does not even show that Becmen and Rajab lifted a
finger to provide legal representation and seek an investigation of Jasmin’s case. Worst of all, they unnecessarily
trampled upon the person and dignity of Jasmin by standing pat on the argument that Jasmin committed suicide,
which is a grave accusation given its un-Christian nature.

Clearly, Rajab, Becmen and White Falcon’s acts and omissions are against public policy because they undermine and
subvert the interest and general welfare of our OFWs abroad, who are entitled to full protection under the law. They
set an awful example of how foreign employers and recruitment agencies should treat and act with respect to their
distressed employees and workers abroad. Their shabby and callous treatment of Jasmin’s case; their uncaring
attitude; their unjustified failure and refusal to assist in the determination of the true circumstances surrounding her
mysterious death, and instead finding satisfaction in the unreasonable insistence that she committed suicide just so
they can conveniently avoid pecuniary liability; placing their own corporate interests above of the welfare of their
employee’s – all these are contrary to morals, good customs and public policy, and constitute taking advantage of the
poor employee and her family’s ignorance, helplessness, indigence and lack of power and resources to seek the truth
and obtain justice for the death of a loved one. Whether employed locally or overseas, all Filipino workers enjoy the
protective mantle of Philippine labor and social legislation, contract stipulations to the contrary notwithstanding.
This pronouncement is in keeping with the basic public policy of the State to afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations between
workers and employers.

21. PNOC-ENERGY DEVELOPMENT CORPORATION vs. NLRC

222 SCRA 831

Facts: In November, 1987, while holding the position of Geothermal Construction Secretary, Engineering and Construction
Department, at Tongonan Geothermal Project, Ormoc City, Manuel S. Pineda decided to run for councilor of the Municipality of
Kananga, Leyte, in the local elections scheduled in January, 1988, and filed the corresponding certificate of candidacy for the
position. Objection to Pineda’s being a candidate while retaining his job in the PNOC-EDC was shortly thereafter registered by
Mayor Arturo Cornejos of Kananga, Leyte.

Section 66 of the Election Code provides among others that officers and employees of GOCCs are considered as ipso facto
resigned upon the filing of their certificate of candidacy.

It was the argument of Pineda that PNOC-EDC was not created through a special law, it is not covered by the Civil Service Law
and, therefore, not contemplated under Section 66 of the Election Code.

Issue: Whether or not an employee in a government- owned or controlled corporation without an original charter falls within
the scope of Section 66 of the Omnibus Election Code.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 130


University of San Carlos – College of Law Labor Standards Finals Case Digests

Held: Yes. If a corporation’s capital stock is owned by the Government, or it is operated and managed by officers charged with
the mission of fulfilling the public objectives for which it has been organized, it is a government-owned or controlled corporation
even if organized under the Corporation Code and not under a special statute. Employees thereof, even if not covered by the
Civil Service but by the Labor Code, are nonetheless “employees in government-owned or controlled corporation,” and come
within the letter of Section 66 of the Omnibus Election Code, declaring them ipso facto resigned from their office upon the filing
of their certificate of candidacy.

21. PNOC-Energy Development Corp. vs. NLRC

FACTS Petition for certiorari to set aside resolution

Danilo Mercado – employed by PNOC – EDC on 1979

From clerk to shipping clerk at cebu office

transferred to dumaguete, negros oriental 1984

6/30/85 – dismissed on 1985

due to serious act of dishonesty committed:

shingles – 1,680 = 1000

rubber stamps – 28.66 80.00

discount given by supplier 70.00 = not repaved

7/23/85 – complaint for illegal dismissal

March 1986 – after both parties submitted their position papers labor arbiter ruled in favor of Mercado

NLRC – dismissed appeal for lack of merit

ISSUES

whether or not matters of employment affecting PNOC-EDC are within labor and NLRC jurisdiction.

PET ____ that the decision was rendered when the 1973 consti was in effect. Which states that gout owned ___ are within civil
service law.1

Supplanted by the new constitution. Thus, PNOC EDC being incorporated under gen. corp. law is subj. to labor code

Even if the 1973 was still in effect NLRC still has jurisdiction, bec. It is 1987 consti that is in place at time of the decision.

assuming the affirmative, whether or not NLRC is justified with its order.

ground of dishonesty = without basis

denial of __ process = without merit both submitted position papers

Ma. Cecelia Timbal LlB – 2 Rm 402 | 131


University of San Carlos – College of Law Labor Standards Finals Case Digests

court ruled that agencies which acquired expertise accorded respect and finality. Courts do not review suffiency of evi. But is
limited to issues of jurisdiction or grave abuse of discretion.

DISPO: Petition denied. NLRC resolution affirmed

30. (Emmanuel S. Hugo, et.al. vs. Light Rail Transit Authority,

RESPONDENT Light Rail Transit Authority (LRTA) entered into an agreement with Metro Transit Organization, Inc. (Metro) for the
management and operation of its Metro Manila Light Rail Transit System. Metro hired its own employees, including petitioners.
In their complaint for illegal dismissal and unfair labor practice against Metro, petitioners impleaded the LRTA. Can LRTA be held
liable to the employees of Metro?

Ruling: No.

Employees of petitioner Metro cannot be considered as employees of petitioner LRTA.

The employees hired by Metro are covered by the Labor Code and are under the jurisdiction of the Department of Labor and
Employment, whereas the employees of petitioner LRTA, a government-owned and controlled corporation with an original
charter, are covered by civil service rules. Herein private respondent workers cannot have the best of two worlds, e.g., be
considered government employees of petitioner LRTA, yet allowed to strike as private employees under our labor laws.

In the instant case, petitioner Metro, formerly Meralco Transit Organization, Inc., was originally owned by the Manila Electric
Company and registered with the Securities and Exchange Commission more than a decade before the labor dispute. It then
entered into a 10-year agreement with petitioner LRTA in 1984.

And, even if petitioner LRTA eventually purchased Metro in 1989, both parties maintained their separate and distinct juridical
personality and allowed the agreement to proceed. In 1990, this court, in Light Rail Transit Authority v. Commission on Audit
(G.R. No. 88365, Jan. 9, 1990), even upheld the validity of the agreement.

Consequently, the agreement was extended beyond its 10-year period. In 1995, Metro’s separate juridical identity was again
recognized when it entered into a collective bargaining agreement with the workers’ union. All these years, Metro’s distinct
corporate personality continued quiescently, separate and apart from the juridical personality of petitioner LRTA.

In sum, petitioner LRTA cannot be held liable to the employees of petitioner Metro.

GSIS vs Jean Raoet

The deceased Henry Zarate was a native of Pangasinan who joined the Bureau of Fire Protection as a fireman on June 1, 1978.
He was promoted to the rank of Fireman First Class, Fire Corporal and, finally, Senior Fire Officer on July 1, 1992. Five years
later, on June 15, 1997, while he was assigned at the Pinagkaisahan Fire Sub-Station in Cubao, Quezon City, he met a traffic
accident that cost him his life. As found by the ECC, Zarate went to Rosario, La Union on June 15, which was a Sunday, to visit his
ailing mother. In order to report to his station the next day, Monday, he headed back to Metro Manila on the same day, June 15,
aboard a Philippine Rabbit bus with plate number CVE-786. At around 2:45 P.M., at Kilometer 80, North Expressway, Cacutud,
Angeles City, Pampanga, the bus he was riding on collided with a Swagman Travel Shuttle bus. He sustained severe injuries and
was rushed to the Angeles University Foundation. He was pronounced dead on arrival.

Zarate’s demise was recorded in the sub-station’s log book in the following morning of June 16. The entry stated that SFO2 H.
Zarate met a vehicular accident while on off-duty status. A subsequent investigation conducted by the Inspectorate Section of
the Bureau confirmed that although off-duty, he was on his way back to Metro Manila from his mother’s residence at La Union
when the accident occurred. It was acknowledged that Zarate had the permission of his superior to take the trip to La Union on
condition that he returned the next day. He was fated to meet his end on the same day. While his mother pleaded to him to
stay a little longer, he insisted on returning to be on time for duty on Monday. Had he heeded the advice of his mother, he
would still be alive today.[3

Henry’s wife, Felicitas, filed a claim for death benefits with the GSIS, under Presidential Decree No. 626. The GSIS denied the
claim by ruling as follows:

The death of the late Henry Zarate did not arise out of nor was it in the course of his employment. Records also disclosed, that
the accident occurred while the subject employee was on off-duty status[.][4]

Ma. Cecelia Timbal LlB – 2 Rm 402 | 132


University of San Carlos – College of Law Labor Standards Finals Case Digests

Felicitas appealed the GSIS ruling to the ECC. In its decision dated

October 22, 2002,[5] the ECC dismissed Felicitas’ appeal on the ground that Henry’s death was indeed not work-related. Said
the ECC:

To be compensable, an injury must have resulted from an accident arising out of and in the course of employment. It
must be shown that it must be sustained within the scope of employment while an employee was performing an act reasonably
necessary or incidental thereto or while following the order of his superior. Indeed, the standard of work-connection must be
satisfied even by one who invokes the 24-hour duty doctrine.[6]

It reasoned out that Henry had gone to La Union to visit his ailing mother and was on his way back to Manila when he figured in
the accident that killed him. To the ECC, “It is clear that the accident transpired while he was not in the actual performance of
his occupation as Fireman x x x the circumstances in the present case do not call for the application of the 24-hour duty doctrine
because the deceased was neither at his assigned workplace nor in pursuit of orders of his superior.”[7]

Felicitas next brought her case on appeal to the CA pursuant to Rule 43 of the Rules of Court. The CA, in its assailed decision[8]
of October 12, 2005, reversed the ECC ruling. It maintained that there was a reasonable work connection in Henry’s death and
that it is the policy of the law to extend state insurance benefits to as many qualified employees as possible.

The ECC challenges the CA decision in this petition, and submits the following:

Issue

The Honorable Court of Appeals committed a reversible error in granting the respondent’s claim for death benefits under P.D.
No. 626, as amended, disregarding the fact that the cause of the death of the respondent’s late husband, SFO2 Henry Zarate,
did not arise out of and in the course of employment.[9]

The Court’s Ruling

We dismiss the petition for lack of merit and, accordingly, affirm the CA’s decision.

We note that at the time of his death, Henry was a Senior Fire Officer in Quezon City and had occupied this position for five
years. A fireman’s work is essentially to prevent and suppress all destructive fires on buildings, houses and other structures, land
transportation vehicles and equipment.[10] Henry’s position as Senior Fire Officer necessarily included duties more difficult
than those of an ordinary fireman.

Henry’s place of work was the Pinagkaisahan Fire Substation in Cubao, Quezon City, located just five minutes away from the
bustling heart of Quezon City - the Araneta Center, the Gateway Mall, the Ali Mall, and the intersection of the Light Rail Transit
System (LRT) and the Metro Rail Transit System (MRT). There are several high-rise commercial buildings, a public school, a
market, and bus stations in the immediate vicinity. Thousands of commuters get off at the MRT/LRT intersection during the
morning and afternoon rush hours. In case of a fire or an accident, the responses required would be more complicated and
more challenging than what one might expect in a smaller city or rural municipality. A Senior Fire Officer knows the extent of
the responsibilities of this position, i.e., that he should be at peak condition when he reports for duty and be ready to efficiently
respond as dictated by his duties. We expect no less from Henry who bothered to secure the permission of his superior officer
to visit his mother, and who rushed back on the very same day to return to his base.

Henry’s mother lived in Rosario, La Union whose approximate road distance from Quezon City is 220 kilometers. Given this
distance, the travel time from Quezon City to Rosario, La Union, by public land transport, is at least five hours.

It is not disputed that Henry visited his mother because she was then ill. Likewise, it is not also disputed that he did not simply
leave Quezon City for his visit; he asked for his superior’s permission, which was given on condition that he returned the next
day.[11] Hence, on that fateful Sunday, June 15, 1997, Henry had his superior’s authority to travel and knew that he had to
report fresh the following day. Instead of opting to travel to Quezon City on the very same day he was to report for work, Henry
returned on the very day of his visit so he could properly report on Monday. In doing this, he did not heed his mother’s plea to
stay a little longer. These were the facts that the CA considered and positively appreciated.

In the assailed decision, the CA appropriately took note of our rulings on the payment of compensation on returning to and
from work situations. Notably, the CA took note of Valeriano v. ECC,[12] where we stated that if it can proven that at the time of
injury, the employee was acting within the scope of his employment and performing an act reasonably necessary in his work, his
injury is compensable. Valeriano was a fire truck driver who was on his way home, after having dinner with a friend in a
restaurant, when the vehicle they were riding figured in a head-on collision, resulting in his death. His widow was denied death
benefits because Valeriano was coming from a private dinner on his way home and no immediate relationship to work was
established.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 133


University of San Carlos – College of Law Labor Standards Finals Case Digests

The CA also considered GSIS v. CA,[13] a case where a policeman’s widow was denied death benefits because at the time of his
death, the policeman was ferrying passengers for a fee. We did not apply the 24-hour duty doctrine that the ECC cited in its
consideration of Henry’s case, as this is applicable to policemen only when death is caused by circumstances that are basically
police service in character. In this cited case, ferrying passengers for a fee was foreign to the duties that a policeman regularly
performs.

The CA cited and relied on our ruling in Vano v. GSIS[14] because of the similarity of the obtaining factual situations. Vano was a
letter carrier who died as a result of a motorcycle accident while he was on his way from his hometown in Bohol to Tagbilaran
City where he worked. The Court found that Vano’s death was compensable as an employment accident because Vano was
then on his way to work. In Henry’s case, the CA granted death benefits on the reasoning that Henry lost his life while traveling
from the home of his mother which he had been allowed to visit (and which was no less a home to him) and was on his way
back to Quezon City, in compliance with the timeline his superior gave him.

We fully agree with the CA’s finding: Henry should already be deemed en route to the performance of his duty when his
accidental death occurred. He was on his way back to Manila in order to be on time and be ready for work the next day as
Senior Fire Officer of the Pinagkaisahan Fire Substation in Cubao. He was traveling with his superior’s permission and was
complying with the condition that he return the next day. Under these facts, Henry was in the course of complying with his
superior’s order when he met his fatal accident. To be sure, he was not in an actual firefighting or accident situation when he
died, but returning to work as instructed by his superior is no less equivalent to compensable performance of duty under
Section 1, Rule III of the ECC Rules.

In so ruling, we are mindful that Presidential Decree No. 626 on employees’ compensation is a legislation aimed at furthering
the Labor Code’s benevolent policy of affording protection to labor.[15] Consistent with the law’s intent, we must give the law
on employee compensation a liberal reading, to the point of ruling in favor of labor and of the grant of employee compensation
even in marginal situations for as long as a reasonable work connection may be found.[16] This stance is justified no less by
Article 4 of the Labor Code which decrees that all doubts in the implementation and interpretation of the provisions of the
Labor Code shall be resolved in favor of the employee.

WHEREFORE, premises considered, we hereby DENY the petition for review on certiorari, and, accordingly, AFFIRM the decision
of the Court of Appeals dated October 12, 2005 in CA-G.R. SP No. 73993. No costs.

SO ORDERED.

32. ARCO Metal Products vs SAMARM-NAFLU

Facts: Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of
petitioner’s rank and file employees. Sometime in December 2003, petitioner paid the 13th month pay, bonus, and leave
encashment of three union members in amounts proportional to the service they actually rendered in a year, which is less than
a full twelve (12) months. Respondent protested the prorated scheme, claiming that on several occasions petitioner did not
prorate the payment of the same benefits to seven (7) employees who had not served for the full 12 months. According to
respondent, the prorated payment violates the rule against diminution of benefits under Article 100 of the Labor Code.

Thus, they filed a complaint before the National Conciliation and Mediation Board (NCMB).

Issue: Whether or not the grant of 13th month pay, bonus, and leave encashment in full regardless of actual service rendered
constitutes voluntary employer practice and, consequently, whether or not the prorated payment of the said benefits constitute
diminution of benefits under Article 100 of the Labor Code.

Ruling: Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or eliminated by
the employer. The principle of non-diminution of benefits is founded on the Constitutional mandate to "protect the rights of
workers and promote their welfare and to afford labor full protection. Said mandate in turn is the basis of Article 4 of the Labor
Code which states that all doubts in the implementation and interpretation of this Code, including its implementing rules and
regulations shall be rendered in favor of labor.

Jurisprudence is replete with cases which recognize the right of employees to benefits which were voluntarily given by the
employer and which ripened into company practice. Thus in DavaoFruits Corporation v. Associated Labor Unions, et al. where an

Ma. Cecelia Timbal LlB – 2 Rm 402 | 134


University of San Carlos – College of Law Labor Standards Finals Case Digests

employer had freely and continuously included in the computation of the 13th month pay those items that were expressly
excluded by the law, we held that the act which was favorable to the employees though not conforming to law had thus ripened
into a practice and could not be withdrawn, reduced, diminished, discontinued or eliminated. In Sevilla Trading Company v.
Semana, we ruled that the employer’s act of including non-basic benefits in the computation of the 13th month pay was a
voluntary act and had ripened into a company practice which cannot be peremptorily withdrawn.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and consistently
granting full benefits to its employees regardless of the length of service rendered. True, there were only a total of seven
employees who benefited from such a practice, but it was an established practice nonetheless. Jurisprudence has not laid down
any rule specifying a minimum number of years within which a company practice must be exercised in order to constitute
voluntary company practice. Thus, it can be six (6) years, three (3) years, or even as short as two (2) years. Petitioner cannot
shirk away from its responsibility by merely claiming that it was a mistake or an error, supported only by an affidavit of its
manufacturing group head. Hence, petition was denied

33. PENAFLOR vs Outdoor Clothing

PETITIONER Manalo Peñaflor was hired as probationary HRD Manager of respondent Outdoor Clothing on Sept. 2, 1999. On
March 13, 2000, more than six months thereafter, he learned that respondent’s president, Nathaniel Syfu, appointed Edwin
Buenaobra to his
position. Claiming he was discriminated against at work, Peñaflor tendered an irrevocable resignation effective March 15, 2000.
Subsequently, he filed a complaint for illegal dismissal, alleging he had been constructively dismissed. Did the complaint
prosper?

Ruling: Yes.

While the letter states that Peñaflor’s resignation was irrevocable, it does not necessarily signify that it was also voluntarily
executed. Precisely because of the attendant hostile and discriminatory working environment, Peñaflor decided to permanently
sever his ties with Outdoor Clothing.

This falls squarely within the concept of constructive dismissal that jurisprudence defines, among others, as involuntarily
resignation due to the harsh, hostile, and unfavorable conditions set by the employer. It arises when a clear discrimination,
insensibility, or disdain by an employer exists and has become unbearable to the employee. The gauge for constructive dismissal
is whether a reasonable person in the employee’s position would feel compelled to give up his employment under the prevailing
circumstances. With the appointment of Buenaobra to the position he then still occupied, Peñaflor felt that he was being eased
out and this perception made him decide to leave the company.

The fact of filing a resignation letter alone does not shift the burden of proving that the employee’s dismissal was for a just and
valid cause from the employer to the employee. In Mora v. Avesco, G.R. No. 177414, Nov. 14, 2008, 571 SCRA 226, we ruled that
should the employer interpose the defense of resignation, it is still incumbent upon the employer to prove that the employee
voluntarily resigned.

To our mind, Outdoor Clothing did not discharge this burden by belatedly presenting the three memoranda it relied on. If these
memoranda were authentic, they would have shown that Peñaflor’s resignation preceded the appointment of Buenaobra. Thus,
they would be evidence supporting the claim of voluntariness of Peñaflor’s resignation and should have been presented early.
Any lawyer or layman by simple logic can be expected to know this. Outdoor Clothing, however, raised them only before the
NLRC when they had lost the case before the labor arbiter and now attributed the failure to its former counsel. (Manolo A.
Peñaflor vs. Outdoor Clothing Manufacturing Corporation, et. al., G.R. No. 177114, April 13, 2010).

34. HILARIO S. RAMIREZ VS. COURT OF APPEALS

FACTS:

Respondent Mario Valcueba filed a Complaint for illegal dismissal and nonpayment of wage differential, 13th month
pay differential, holiday pay, premium pay for holidays and rest days, and service incentive leaves with claims for moral and
exemplary damages and attorney’s fees, against Hilario Ramirez. Valcueba claimed that Ramirez hired him as mechanic and was
paid per day from 1999 to 2006. On Feb. 27, 2006, Valcueba was advised not to return to work unless he would agree to work
on a pakyaw basis. On the other hand, Ramirez contended that Valcueba fails to obey the former’s lawful order when he had an
emergency call and requested Valcueba to report to Calawisan Station to repair a taxi unit of Ramirez since the mechanic

Ma. Cecelia Timbal LlB – 2 Rm 402 | 135


University of San Carlos – College of Law Labor Standards Finals Case Digests

assigned in the said station was absent. Ramirez insisted that he did not terminate the complainant, it was the latter who
abandoned his job following his absence the following day after the emergency call without any leave of absence. The Labor
Arbiter rendered a decision finding Ramirez not guilty of illegal dismissal and awarded complainant for 13th month pay and
wage differential for a total of P45, 825.98 and the reinstatement of complainant. Ramirez filed a memorandum of appeal with
urgent motion to reduce bond before the NLRC. For failure to post a reasonable amount and to offer meritorious grounds, NLRC
dismissed his appeal. He went to the Court of Appeals. The Court of Appeals dismissed the Petition outright for failure of
Ramirez to properly verify his petition and to state material dates. Hence, this petition.

ISSUE: Whether or not Ramirez has complied with the requirements to perfect his appeal.

HELD: Under Rule VI of the New Rules of Procedure of NLRC which explicitly reaffirms the jurisdictional principle in Art. 223 of
the Labor Code, appeals involving monetary awards are perfected only upon compliance with the following mandatory
requisites, namely: (1) payment of the appeal fees; (2) filing of the memorandum of appeal; and (3) payment of the required
cash or surety bond. The posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards
from the decision of the labor arbiter. Clearly, the filing of the bond is not only mandatory but also a jurisdictional requirement
that must be complied with in order to confer jurisdiction upon the NLRC. Non-compliance with the requirement renders the
decision of the Labor Arbiter final and executory. While the bond may be reduced upon motion by the employer, this is subject
to the conditions that (1) the motion to reduce the bond shall be based on meritorious grounds; and (2) a reasonable amount in
relation to the monetary award is posted by the appellant; otherwise, the filing of the motion to reduce bond shall not stop the
running of the period to perfect an appeal. The NLRC was justified in denying the motion for there was no meritorious grounds
offered by the appellant and the P10, 000.00 bond posted by the latter is not a reasonable amount in relation to the monetary
award of P45, 825.98.

Ramirez’s failure to verify and state material dates as required under the rules warranted the outright dismissal of his petition
before the Court of Appeals. In an actions filed under Rule 65, the petition shall further indicate the material dates showing
when notice of the judgment or final order or resolution subject thereof was received, when a motion for new trial or
reconsideration, if any, was filed and when notice of the denial thereof was received. Failure to comply shall be a ground for
dismissal.

Hence, the Supreme Court finds no sufficient justification to set aside the NLRC and Court of Appeals resolutions. Thus, the
decision of the Labor Arbiter is already final and executory and binding upon this Court.

35. OLISA vs ESCARIO

Conformably with the long honored principle of a fair day’s wage for a fair day’s labor, employees dismissed for joining an illegal
strike are not entitled to backwages for the period of the strike even if they are reinstated by virtue of their being merely
members of the striking union who did not commit any illegal act during the strike.

The petitioners were among the regular employees of respondent Pinakamasarap Corporation (PINA), a corporation engaged in
manufacturing and selling food seasoning. They were members of petitioner Malayang Samahan ng mga Manggagawa sa
Balanced Foods (Union).

At 8:30 in the morning of March 13, 1993, all the officers and some 200 members of the Union walked out of PINA’s premises
and proceeded to the barangay office to show support for Juanito Cañete, an officer of the Union charged with oral defamation
by Aurora Manor, PINA’s personnel manager, and Yolanda Fabella, Manor’s secretary.[3] It appears that the proceedings in the
barangay resulted in a settlement, and the officers and members of the Union all returned to work thereafter.

As a result of the walkout, PINA preventively suspended all officers of the Union because of the March 13, 1993 incident. PINA
terminated the officers of the Union after a month.

On April 14, 1993, PINA filed a complaint for unfair labor practice (ULP) and damages. The complaint was assigned to then Labor
Arbiter Raul Aquino, who ruled in his decision dated July 13, 1994 that the March 13, 1993 incident was an illegal walkout
constituting ULP; and that all the Union’s officers, except Cañete, had thereby lost their employment.[4]

On April 28, 1993, the Union filed a notice of strike, claiming that PINA was guilty of union busting through the constructive
dismissal of its officers.[5] On May 9, 1993, the Union held a strike vote, at which a majority of 190 members of the Union voted
to strike.[6] The strike was held in the afternoon of June 15, 1993.[7]

PINA retaliated by charging the petitioners with ULP and abandonment of work, stating that they had violated provisions on
strike of the collective bargaining agreement (CBA), such as: (a) sabotage by the insertion of foreign matter in the bottling of
company products; (b) decreased production output by slowdown; (c) serious misconduct, and willful disobedience and
insubordination to the orders of the Management and its representatives; (d) disruption of the work place by invading the
premises and perpetrating commotion and disorder, and by causing fear and apprehension; (e) abandonment of work since

Ma. Cecelia Timbal LlB – 2 Rm 402 | 136


University of San Carlos – College of Law Labor Standards Finals Case Digests

June 28, 1993 despite notices to return to work individually sent to them; and (f) picketing within the company premises on
June 15, 1993 that effectively barred with the use of threat and intimidation the ingress and egress of PINA’s officials,
employees, suppliers, and customers. [8]

On September 30, 1994, the Third Division of the National Labor Relations Commission (NLRC) issued a temporary restraining
order (TRO), enjoining the Union’s officers and members to cease and desist from barricading and obstructing the entrance to
and exit from PINA’s premises, to refrain from committing any and all forms of violence, and to remove all forms of obstructions
such as streamers, placards, or human barricade.[9]

On November 29, 1994, the NLRC granted the writ of preliminary injunction.[10]

On August 18, 1998, Labor Arbiter Jose G. de Vera (LA) rendered a decision, to wit:

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the subject strike to be
illegal.

The complainant’s prayer for decertification of the respondent union being outside of the jurisdiction of this Arbitration
Branch may not be given due course.

And finally, the claims for moral and exemplary damages for want of factual basis are dismissed.

SO ORDERED.

On appeal, the NLRC sustained the finding that the strike was illegal, but reversed the LA’s ruling that there was abandonment,
viz:

However, we disagree with the conclusion that respondents’ union members should be considered to have abandoned their
employment.

Under Article 264 of the Labor Code, as amended, the union officers who knowingly participate in the illegal strike may be
declared to have lost their employment status. However, mere participation of a union member in the illegal strike does not
mean loss of employment status unless he participates in the commission of illegal acts during the strike. While it is true that
complainant thru individual memorandum directed the respondents to return to work (pp. 1031-1112, Records) there is no
showing that respondents deliberately refused to return to work. A worker who joins a strike does so precisely to assert or
improve the terms and conditions of his work. If his purpose is to abandon his work, he would not go to the trouble of joining a
strike (BLTB v. NLRC, 212 SCRA 794).

WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED in that complainant company is directed to
reinstate respondents named in the complaint to their former positions but without backwages. In the event that reinstatement
is not feasible complainant company is directed to pay respondents separation pay at one (1/2) half month per year of service.

SO ORDERED.[12]

Following the denial of their motion for reconsideration, the petitioners assailed the NLRC’s decision through a petition for
certiorari in the Court of Appeals (CA), claiming that the NLRC gravely abused its discretion in not awarding backwages pursuant
to Article 279 of the Labor Code, and in not declaring their strike as a good faith strike.

On August 18, 2003, the CA affirmed the NLRC.[13] In denying the petitioners’ claim for full backwages, the CA applied the third
paragraph of Article 264(a) instead of Article 279 of the Labor Code, explaining that the only instance under Article 264 when a
dismissed employee would be reinstated with full backwages was when he was dismissed by reason of an illegal lockout; that
Article 264 was silent on the award of backwages to employees participating in a lawful strike; and that a reinstatement with full
backwages would be granted only when the dismissal of the petitioners was not done in accordance with Article 282 (dismissals
with just causes) and Article 283 (dismissals with authorized causes) of the Labor Code.

The CA disposed thus:[14]

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit and the assailed 29 November 2001 Decision of
respondent Commission in NLRC NRC CA No. 009701-95 is hereby AFFIRMED in toto. No costs.

SO ORDERED.[15]

On October 13, 2003, the CA denied the petitioners’ motion for reconsideration.[16]

Hence, this appeal via petition for review on certiorari.

Issue

Ma. Cecelia Timbal LlB – 2 Rm 402 | 137


University of San Carlos – College of Law Labor Standards Finals Case Digests

The petitioners posit that they are entitled to full backwages from the date of dismissal until the date of actual
reinstatement due to their not being found to have abandoned their jobs. They insist that the CA decided the question in a
manner contrary to law and jurisprudence.

Ruling

We sustain the CA, but modify the decision on the amount of the backwages in order to accord with equity and jurisprudence.

Third Paragraph of Article 264 (a),

Labor Code, is Applicable

The petitioners contend that they are entitled to full backwages by virtue of their reinstatement, and submit that applicable to
their situation is Article 279, not the third paragraph of Article 264(a), both of the Labor Code.

We do not agree with the petitioners.

Article 279 provides:

Article 279. 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 this 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.

By its use of the phrase unjustly dismissed, Article 279 refers to a dismissal that is unjustly done, that is, the employer dismisses
the employee without observing due process, either substantive or procedural. Substantive due process requires the attendance
of any of the just or authorized causes for terminating an employee as provided under Article 278 (termination by employer), or
Article 283 (closure of establishment and reduction of personnel), or Article 284 (disease as ground for termination), all of the
Labor Code; while procedural due process demands compliance with the twin-notice requirement.[17]

In contrast, the third paragraph of Article 264(a) states:

Art. 264. Prohibited activities. – (a) xxx

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to reinstatement
with full backwages. Any union officer who knowingly participates in an illegal strike and any worker or union officer who
knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status;
Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his
employment, even if a replacement had been hired by the employer during such lawful strike.

xxx

Contemplating two causes for the dismissal of an employee, that is: (a) unlawful lockout; and (b) participation in an illegal strike,
the third paragraph of Article 264(a) authorizes the award of full backwages only when the termination of employment is a
consequence of an unlawful lockout. On the consequences of an illegal strike, the provision distinguishes between a union
officer and a union member participating in an illegal strike. A union officer who knowingly participates in an illegal strike is
deemed to have lost his employment status, but a union member who is merely instigated or induced to participate in the illegal
strike is more benignly treated. Part of the explanation for the benign consideration for the union member is the policy of
reinstating rank-and-file workers who are misled into supporting illegal strikes, absent any finding that such workers committed
illegal acts during the period of the illegal strikes.[18]

The petitioners were terminated for joining a strike that was later declared to be illegal. The NLRC ordered their reinstatement
or, in lieu of reinstatement, the payment of their separation pay, because they were mere rank-and-file workers whom the
Union’s officers had misled into joining the illegal strike. They were not unjustly dismissed from work. Based on the text and
intent of the two aforequoted provisions of the Labor Code, therefore, it is plain that Article 264(a) is the applicable one.

II

Petitioners not entitled to backwages

despite their reinstatement:

A fair day’s wage for a fair day’s labor

Ma. Cecelia Timbal LlB – 2 Rm 402 | 138


University of San Carlos – College of Law Labor Standards Finals Case Digests

The petitioners argue that the finding of no abandonment equated to a finding of illegal dismissal in their favor. Hence, they
were entitled to full backwages.

The petitioners’ argument cannot be sustained.

The petitioners’ participation in the illegal strike was precisely what prompted PINA to file a complaint to declare them, as
striking employees, to have lost their employment status. However, the NLRC ultimately ordered their reinstatement after
finding that they had not abandoned their work by joining the illegal strike. They were thus entitled only to reinstatement,
regardless of whether or not the strike was the consequence of the employer’s ULP,[19] considering that a strike was not a
renunciation of the employment relation.[20]

As a general rule, backwages are granted to indemnify a dismissed employee for his loss of earnings during the whole period
that he is out of his job. Considering that an illegally dismissed employee is not deemed to have left his employment, he is
entitled to all the rights and privileges that accrue to him from the employment.[21] The grant of backwages to him is in
furtherance and effectuation of the public objectives of the Labor Code, and is in the nature of a command to the employer to
make a public reparation for his illegal dismissal of the employee in violation of the Labor Code.[22]

That backwages are not granted to employees participating in an illegal strike simply accords with the reality that they do not
render work for the employer during the period of the illegal strike.[23] According to G&S Transport Corporation v. Infante:[24]

With respect to backwages, the principle of a “fair day’s wage for a fair day’s labor” remains as the basic factor in determining
the award thereof. If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer
was able, willing and ready to work but was illegally locked out, suspended or dismissed or otherwise illegally prevented from
working. xxx In Philippine Marine Officers’ Guild v. Compañia Maritima, as affirmed in Philippine Diamond Hotel and Resort v.
Manila Diamond Hotel Employees Union, the Court stressed that for this exception to apply, it is required that the strike be
legal, a situation that does not obtain in the case at bar. (emphasis supplied)

The petitioners herein do not deny their participation in the June 15, 1993 strike. As such, they did not suffer any loss of
earnings during their absence from work. Their reinstatement sans backwages is in order, to conform to the policy of a fair day’s
wage for a fair day’s labor.

Under the principle of a fair day’s wage for a fair day’s labor, the petitioners were not entitled to the wages during the period of
the strike (even if the strike might be legal), because they performed no work during the strike. Verily, it was neither fair nor just
that the dismissed employees should litigate against their employer on the latter’s time.[25] Thus, the Court deleted the award
of backwages and held that the striking workers were entitled only to reinstatement in Philippine Diamond Hotel and Resort,
Inc. (Manila Diamond Hotel) v. Manila Diamond Hotel Employees Union,[26] considering that the striking employees did not
render work for the employer during the strike.

III

Appropriate Amount for Separation Pay

Is One Month per Year of Service


The petitioners were ordered reinstated because they were union members merely instigated or induced to participate in the
illegal strike. By joining the strike, they did not renounce their employment relation with PINA but remained as its employees.

The absence from an order of reinstatement of an alternative relief should the employer or a supervening event not within the
control of the employee prevent reinstatement negates the very purpose of the order. The judgment favorable to the employee
is thereby reduced to a mere paper victory, for it is all too easy for the employer to simply refuse to have the employee back. To
safeguard the spirit of social justice that the Court has advocated in favor of the working man, therefore, the right to
reinstatement is to be considered renounced or waived only when the employee unjustifiably or unreasonably refuses to return
to work upon being so ordered or after the employer has offered to reinstate him.[27]

However, separation pay is made an alternative relief in lieu of reinstatement in certain circumstances, like: (a) when
reinstatement can no longer be effected in view of the passage of a long period of time or because of the realities of the
situation; (b) reinstatement is inimical to the employer’s interest; (c) reinstatement is no longer feasible; (d) reinstatement does
not serve the best interests of the parties involved; (e) the employer is prejudiced by the workers’ continued employment; (f)
facts that make execution unjust or inequitable have supervened; or (g) strained relations between the employer and employee.
[28]

Here, PINA manifested that the reinstatement of the petitioners would not be feasible because: (a) it would “inflict disruption
and oppression upon the employer”; (b) “petitioners [had] stayed away” for more than 15 years; (c) its machines had

Ma. Cecelia Timbal LlB – 2 Rm 402 | 139


University of San Carlos – College of Law Labor Standards Finals Case Digests

depreciated and had been replaced with newer, better ones; and (d) it now sold goods through independent distributors,
thereby abolishing the positions related to sales and distribution.[29]

Under the circumstances, the grant of separation pay in lieu of reinstatement of the petitioners was proper. It is not disputable
that the grant of separation pay or some other financial assistance to an employee is based on equity, which has been defined
as justice outside law, or as being ethical rather than jural and as belonging to the sphere of morals than of law.[30] This Court
has granted separation pay as a measure of social justice even when an employee has been validly dismissed, as long as the
dismissal has not been due to serious misconduct or reflective of personal integrity or morality.[31]

What is the appropriate amount for separation pay?

In G & S Transport,[32] the Court awarded separation pay equivalent to one month salary per year of service considering that 17
years had passed from the time when the striking employees were refused reinstatement. In Association of Independent Unions
in the Philippines v. NLRC,[33] the Court allowed separation pay equivalent to one month salary per year of service considering
that eight years had elapsed since the employees had staged their illegal strike.

Here, we note that this case has dragged for almost 17 years from the time of the illegal strike. Bearing in mind PINA’s
manifestation that the positions that the petitioners used to hold had ceased to exist for various reasons, we hold that
separation pay equivalent to one month per year of service in lieu of reinstatement fully aligns with the aforecited rulings of the
Court on the matter.

WHEREFORE, we affirm the decision dated August 18, 2003 of the Court of Appeals, subject to the modification to the effect
that in lieu of reinstatement the petitioners are granted backwages equivalent of one month for every year of service

SO ORDERED.

36. Phil Telephone and Telegraph vs NLRC

PT&T (Philippine Telegraph & Telephone Company) initially hired Grace de Guzman specifically as “Supernumerary Project
Worker”, for a fixed period from November 21, 1990 until April 20, 1991 as reliever for C.F. Tenorio who went on maternity
leave. She was again invited for employment as replacement of Erlina F. Dizon who went on leave on 2 periods, from June 10,
1991 to July 1, 1991 and July 19, 1991 to August 8, 1991.

On September 2, 1991, de Guzman was again asked to join PT&T as a probationary employee where probationary period will
cover 150 days. She indicated in the portion of the job application form under civil status that she was single although she had
contracted marriage a few months earlier. When petitioner learned later about the marriage, its branch supervisor, Delia M.
Oficial, sent de Guzman a memorandum requiring her to explain the discrepancy. Included in the memorandum, was a
reminder about the company’s policy of not accepting married women for employment. She was dismissed from the company
effective January 29, 1992. Labor Arbiter handed down decision on November 23, 1993 declaring that petitioner illegally
dismissed De Guzman, who had already gained the status of a regular employee. Furthermore, it was apparent that she had
been discriminated on account of her having contracted marriage in violation of company policies.

ISSUE: Whether the alleged concealment of civil status can be grounds to terminate the services of an employee.
HELD;

Article 136 of the Labor Code, one of the protective laws for women, explicitly prohibits discrimination merely by reason of
marriage of a female employee. It is recognized that company is free to regulate manpower and employment from hiring to
firing, according to their discretion and best business judgment, except in those cases of unlawful discrimination or those
provided by law.

PT&T’s policy of not accepting or disqualifying from work any woman worker who contracts marriage is afoul of the right against
discrimination provided to all women workers by our labor laws and by our Constitution. The record discloses clearly that de
Guzman’s ties with PT&T were dissolved principally because of the company’s policy that married women are not qualified for
employment in the company, and not merely because of her supposed acts of dishonesty.

The government abhors any stipulation or policy in the nature adopted by PT&T. As stated in the labor code:

“ART. 136. Stipulation against marriage. — It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman shall not get married, or to stipulate expressly or tacitly that upon getting married, a
woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice
a woman employee merely by reason of marriage.”

Ma. Cecelia Timbal LlB – 2 Rm 402 | 140


University of San Carlos – College of Law Labor Standards Finals Case Digests

The policy of PT&T is in derogation of the provisions stated in Art.136 of the Labor Code on the right of a woman to be free from
any kind of stipulation against marriage in connection with her employment and it likewise is contrary to good morals and public
policy, depriving a woman of her freedom to choose her status, a privilege that is inherent in an individual as an intangible and
inalienable right. The kind of policy followed by PT&T strikes at the very essence, ideals and purpose of marriage as an
inviolable social institution and ultimately, family as the foundation of the nation. Such policy must be prohibited in all its
indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the land not only for order but also
imperatively required.

36. Philippine Telegraph and Telephone Company vs. NLRC

Grace De Guzman (PET)

Employed by REP. as a reliever for a fix period ( 1990 – 1991)

For Several times was to be reliever on the same basis

Sept. 2, 1991, asked again as a probationary EE fro 150 days

Filled Out farn as single and civil status

throughly got married on may 1991

Upon knowledge a marriage, resp. sent a memorandum reminding her of no marriage policy. (for women). Replied she was
unaware. Jan 1992, dismissed. Filed complaint of illegal dismissal on NAT’L labor relations commission in baguio city.

At preliminary conference, de Guzman admitted failed remittance. Promi

LABOR - Guilty of illegal dismissal; Ground of dismissal insufficient and discrimination

NLRC - Affirmed with MADI, Suspended for 3 months for her acts of dishonesty; Motion for reco denied.

RULINGS:

state recognizes rule of women in nation-building and ensure equality bet men and women

corrective labor and social laws

leads to art. 136 of labor code

prohibits discri by reason marriage of a female EE.

petitioner outright violation of labor

laws and consti against discri

dismissal due to concealment of status remittance and not bec. of marriage

matter of remittance deemed settled in the promi made

made clear in the memo

Gained regular status when performed activities necessary and essential to the usual made and business

3 month sus. Would be unfair to return without sanction ( back wage – minus 3 months)

contends verbal agreement. Terminate once married

the variables is sex, without makes it discri and unlawful

why not woman all women - irrelevant

assaults good morals, policy and freedom of women and strikes at the very essence of marriage, its

Ma. Cecelia Timbal LlB – 2 Rm 402 | 141


University of San Carlos – College of Law Labor Standards Finals Case Digests

having and purpose

DISPO: PET Dismissed: Double cost against petitioner

37. BAGUIO vs NLRC

Baguio Country Club vs NLRCPetitioner Baguio Country Club Corporation (corporation) is a recreational establishmentcertified
by the ministry of labor and employment as an “entertainment-service” establishment.Private respondent Jimmy Calamba was
employed by corporation on a day to day basis invarious capacities as laborer and diswasher for a period of ten months.
Calamba was hired againas a gardener and rehired as such when he was dismissed by the petitioner corporation.Calamba filed a
complaint against petitioner corporation with the ministry of labor (DOLE) for unfair labor practice, illegal dismissal and non-
payment of 13th

month pay. The executive labor arbiter ruled in favor of Calamba, declaring the latter as a regular employee and
orderingpetitioner corporation to reinstate Calamba to the position of gardener without loss of seniorityand with full
backwages, benefits and privileges from the time of his dismissal up to thereinstatement including 13th

month pay.Petitioner corporation filed an appeal to the NLRC contending that Calamba was a contractualemployee whose
employment was for a fixed and specific period as set forth and evidenced byCalamba’s contracts of employment. However, the
NLRC dismissed the appeal for lack of merit.The latter argued that Calamba having rendered services as laborer, gardener,and
dishwasher for more than one year, was a regular employee at the time his employment was terminated.Hence, this
petition.Issue: whether or not Calamba is a regular employee at the time his employment was terminated.Ruling: YESThe court
held that an employment shall be deemed to be regular where the employee has beenengaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer. Also, 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
andcontinuing need for its performance as sufficient evidence of the necessity if not indespensabilityof that activity to the
business. Hence, the employment is also considered regular, but ony withrespect to such activity and while such activity
exists.In the case at bar, the records reveal that Calamba was repeatedly re-hired to perform tasksranging from dishwasing and
gardening, aside from performing maintenace work. Such repeatedrehiring and the continuing need for his service are sufficient
evidence of the necessity andindespensability of his service to the petitioner’s business or trade.Owing to Calamba’s length of
service with the petitioner’s corporation, he bacame a regular employee, by operation of law, one year after he was employed

38. DBP vs NLRC

On November 14, 1986, the private respondents filed with the Provincial Extension Office of the Department of Labor and
Employment (DOLE) in Daet, Camarines Norte seventeen individual complaints against RHI for unpaid wages and separation pay.
These complaints were thereafter endorsed to the Regional Arbitration Branch (Branch V of Legaspi City) of the National Labor
Relations Commission (NLRC) since the petitioners had already been terminated from employment.

In its position paper dated March 1987, RHI alleged that it had ceased to operate in 1983 due to the government ban against
tree-cutting. It further alleged that in May 24, 1981, its sawmill was totally burned resulting in enormous losses and that due to
its financial setbacks, RHI failed to pay its loan with the DBP. RHI contended that since DBP foreclosed its mortgaged assets on
September 24, l985, then any adjudication of monetary claims in favor of its former employees must be satisfied against DBP.

On April 29, 1987, the private respondents filed a motion to implead DBP. On July 13, 1987, DBP filed its opposition to said
motion.

On October 28, 1988, Executive Labor Arbiter Gelacio Rivera rendered a joint decision on the complaints, the relevant and
dispositive portions of which read:

To say that workers of bankrupt or insolvent employers must first file an insolvency or bankruptcy proceeding against the latter
before their unpaid workers may be satisfied will cause additional burden, unnecessary expenses, unwanted hardship which are
conditions not so intended under the Social Justice policy of the State. . . . .

. . . To require petitioners to file insolvency proceedings against RHI and later file against DBP their claims is to prolong the agony
of petitioners. To give a technical and legal meaning to the words of Art. 110 is to subvert the rights of the petitioners. We hold
therefore that as against the contention of respondent DBP, Art. 4 of the Labor Code is the answer. The social justice clause of
the Constitution is our guide.

xxx xxx xxx

Ma. Cecelia Timbal LlB – 2 Rm 402 | 142


University of San Carlos – College of Law Labor Standards Finals Case Digests

WHEREFORE, premises considered, judgment is hereby rendered in favor of petitioners and adversely against respondent
Republic Hardwood, Inc. and Development Bank of the Philippines, ordering the latter to jointly and severally pay petitioners the
amount of P59,610.00 as separation pay within ten (10) days upon receipt of this Decision through this Regional Arbitration
Branch. Further, respondents are ordered to pay the amount of P308.00 as deposit fee pursuant to PD 1177 under Budget
Circular No. 304 and Secs. 4 and 8 of Batas Pambansa Blg. 230. (Rollo, pp. 38, 40-41)

DBP appealed to the NLRC which rendered a decision on April 15, 1991 affirming the labor arbiter’s judgment. DBP filed a
motion for reconsideration which was likewise dismissed by the NLRC on May 17, 1991.

Hence, this petition for certiorari.

The petitioner alleges that the NLRC committed grave abuse of discretion in issuing the assailed decision dated April 15, 1991
and its resolution of May 17, 1991 and raises the following issues:

1. Whether or not the Joint Decision of Executive Labor Arbiter Gelacio L. Rivera is violative of procedural due process on the
part of DBP;

2. Whether or not the complainant-private respondents are entitled to separation pay;

3. Whether or not there was retroactive application of Executive Order No. 81 in this case;

4. Whether or not Executive Labor Arbiter Gelacio L. Rivera and the NLRC correctly applied Article 110 of the Labor Code in this
case; and

5. Whether or not there is a basis for the NLRC (Labor Arbiter Rivera) to order the payment of deposit fee. (Rollo, pp. 17-18)

DBP asserts that it was deprived of due process since there was no formal order impleading it in the complaints against RHI.
Moreover, DBP points out, the cases were never set for hearing thus depriving it of the opportunity to peruse the documentary
evidence of the complainants and to confront the complainants’ witnesses. Additionally, DBP was not given an opportunity to
present its own evidence.

There is no merit to this contention of DBP. Denial of due process means the total lack of opportunity to be heard. There is no
denial of due process where a party is given an opportunity to be heard and to present his case. The petitioner in this case filed
an opposition to the motion to implead it as a party defendant. It likewise filed a motion for reconsideration of the labor
arbiter’s decision. Thereafter, DBP filed an appeal with the NLRC and, later on, a motion for reconsideration of the NLRC
decision. The petitioner, thus, was given ample opportunity to present its case. It was not denied due process.

There is no merit to DBP’s contention that the workers are not entitled to separation pay. Despite the enormous losses incurred
by RHI due to the fire that gutted the sawmill in 1981 and despite the logging ban in 1983, the uncontroverted claims for
separation pay show that most of the private respondents still worked up to the end of 1985 (See Rollo, p. 39). RHI would still
have continued its business had not the petitioner foreclosed all of its assets and properties on September 24, 1985. Thus, the
closure of RHI’s business was not primarily brought about by serious business losses. Such closure was a consequence of DBP’s
foreclosure of RHI’s assets. We therefore apply Article 283 which provides:
. . . in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. . . .

However, because of the petitioner’s assertion that the labor arbiter and respondent NLRC incorrectly applied the provisions of
Article 110 of the Labor Code, we are constrained to grant the petition forcertiorari.

Article 110, prior to its amendment by Republic Act No. 6715, reads:

Art. 110. Worker preference in case of bankruptcy. ? In the event of bankruptcy or liquidation of an employer’s business, his
workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy
or liquidation, any provision of law to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors
may establish any claim to a share in the assets of the employer.

Section 10, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor Code states:

Sec. 10. Payment of wages in case of bankruptcy. ? Unpaid wages earned by the employees before the declaration of bankruptcy
or judicial liquidation of the employer’s business shall be given first preference and shall be paid in full before other creditors
may establish any claim to a share in the assets of the employer.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 143


University of San Carlos – College of Law Labor Standards Finals Case Digests

In Republic v. Peralta, 150 SCRA 37 (1987), the Court held that the term “wages” includes separation pay. But the Court
declared:

Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather, Article 110 must be
read in relation to the provisions of the Civil Code concerning the classification, concurrence and preference of credits, which
provisions find particular application in insolvency proceedings where the claims of all creditors, preferred or non-preferred,
may be adjudicated in a binding manner.

We have repeatedly stressed that before the workers’ preference provided by Article 110 may be invoked, there must first be a
declaration of bankruptcy or a judicial liquidation of the employer’s business. (See DBP v. Minister of Labor, 195 SCRA 463
[1991]; DBP v. NLRC, 186 SCRA 841 [1990]; DBP v. NLRC, 183 SCRA 328 [1990]; DBP v. Secretary of Labor, 179 SCRA 630 [1989];
DBP v. Santos, 171 SCRA 138 [1989]; Republic v. Peralta, supra).

In DBP v. Santos, supra, the Court discussed the import of Article 110 and Section 10 of Rule VIII, Book III and stated:

It is quite clear from the provisions that a declaration of bankruptcy or a judicial liquidation must be present before the worker’s
preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the
respondents in this case absent a formal declaration of bankruptcy or a liquidation order.

xxx xxx xxx

Moreover, the reason behind the necessity for a judicial proceeding or a proceeding in rem before the concurrence and
preference of credits may be applied was explained by this Court in the case of Philippines Savings Bank v. Lantin (124 SCRA 476
[1983]). We said:

The proceedings in the court below do not partake of the nature of the insolvency proceedings or settlement of a decedent’s
estate. The action filed by Ramos was only to collect the unpaid cost of the construction of the duplex apartment. It is far from
being a general liquidation of the estate of the Tabligan spouses.

Insolvency proceedings and settlement of a decedent’s estate are both proceedings in rem which are binding against the whole
world. All persons having interest in the subject matter involved, whether they were notified or not, are equally bound.
Consequently, a liquidation of similar import or other equivalent general liquidation must also necessarily be a proceeding in
rem so that all interested persons whether known to the parties or not may be bound by such proceeding.

In the case at bar, although the lower court found that “there were no known creditors other than the plaintiff and the
defendant herein”, this can not be conclusive. It will not bar other creditors in the event they show up and present their claims
against the petitioner bank, claiming that they also have preferred liens against the property involved. Consequently, Transfer
Certificate of Title No. 101864 issued in favor of the bank which is supposed to be indefeasible would remain constantly
unstable and questionable. Such could not have been the intention of Article 2243 of the Civil Code although it considers claims
and credits under Article 2242 as statutory liens. Neither does the De Barreto case . . . .

The claims of all creditors whether preferred or non-preferred, the identification of the preferred ones and the totality of the
employer’s asset should be brought into the picture. There can then be an authoritative, fair, and binding adjudication instead of
the piece meal settlement which would result from the questioned decision in this case. (At pp. 144-145).

The NLRC, therefore, committed grave abuse of discretion when it affirmed the labor arbiter’s ruling that the workers’
preference espoused in Article 110 may be applied even in the absence of a declaration of bankruptcy or a liquidation order.

We must also emphasize that DBP’s lien on RHI’s mortgaged assets, being a mortgage credit, is a special preferred credit under
Article 2242 of the Civil Code while the workers’ preference is an ordinary preferred credit under Article 2244.

Thus, in DBP v. NLRC, (supra) it was held:

4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not
attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid
wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the insolvent’s assets. It is a right to a first preference in
the discharge of the funds of the judgment debtor.

In the words of Republic v. Peralta, supra.

Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon
all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall at

Ma. Cecelia Timbal LlB – 2 Rm 402 | 144


University of San Carlos – College of Law Labor Standards Finals Case Digests

all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the
extent that such claims for unpaid wages are already covered Article 2241, number 6: “claims for laborers” wages, on the goods
manufactured or the work done; or by Article 2242, number 3: “claims of laborers and other workers engaged in the
construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works. To the
extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3, they would come
within the ambit of the category of ordinary preferred credits under Article 2244.

5. The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted (Article 2176,
Civil Code). It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property,
which a preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on
classification of credits. The preference given by Article 110, when not falling within Article 2241 (6) and Article 2242 (3) of the
Civil Code and not attached to any specific property, is an ordinary preferred credit although its impact is to move it from second
priority to first priority in the order of preference established by Article 2244 of the Civil Code (Republic v. Peralta, supra).

Clearly, even if DBP and the private respondents assert their preferred credits in a judicial proceeding, the former’s claim must
first be satisfied.

Article 110 of the Labor Code has been amended by R.A. No. 6715 and now reads:

Art. 110. Worker preference in case of bankruptcy. ? In the event of bankruptcy or liquidation of an employer’s business, his
workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the
contrary notwithstanding. Such unpaid wages, and monetary claims shall be paid in full before the claims of the Government
and other creditors may be paid. (Emphasis ours.)

We ruled in DBP v. NLRC, supra, that the amendment “expands worker preference to cover not only unpaid wages but also other
monetary claims to which even claims of the Government must be deemed subordinate.” Hence, under the new law, even
mortgage credits are subordinate to workers’ claims.

In this connection, respondent NLRC ruled:

Lastly, while we are cognizant of the pronouncement of the Supreme Court with respect to Art. 110 and while we hold in
respect said pronouncements, we are of the earnest view that considering that Art. 110 has been amended by RA 6715,
complainants’ preference over government claims and other creditors be adhered to. (Rollo, p. 65)

R.A. No. 6715, however, took effect only on March 21, 1989. The amendment cannot therefore be retroactively applied to, nor
can it affect, the mortgage credit which was secured by the petitioner several years prior to its effectivity.

This was our pronouncement in DBP v. NLRC, supra:

6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean “absolute preference,” the same
should be given only prospective effect in line with the cardinal rule that laws shall have no retroactive effect, unless the
contrary is provided (Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on
non-impairment of the obligation of contracts (Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP’s
mortgage credit antedated by several years the amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to
wipe out the mortgage in DBP’s favor and expose it to a risk which it sought to protect itself against by requiring a collateral in
the form of real property.

The public respondent, therefore, committed grave abuse of discretion when it retroactively applied the amendment introduced
by R.A. No. 6715 to the case at bar.

With the foregoing discussion, we no longer find it necessary to discuss the two other issues raised by the petitioner.

WHEREFORE, the petition is hereby GRANTED. The assailed decision of public respondent National Labor Relations Commission
dated April 15, 1991 and its resolution dated May 17, 1991 are SET ASIDE. The temporary restraining order issued by the Court
on July 29, 1991 is made PERMANENT.

39. NERI vs NLRC

Respondents are sued by two employees of Building Care Corporation, which provides janitorial and other specific services to
various firms, to compel Far Bast Bank and Trust Company to recognize them as its regular employees and be paid the same
wages which its employees receive.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 145


University of San Carlos – College of Law Labor Standards Finals Case Digests

Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial capitalization of P1
Million or a stockholders equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC was only job contracting and that
consequently its employees were not employees of Far East Bank and Trust Company (FEBTC, for brevity). on appeal, this factual
finding was affirmed by respondent National Labor Relations Commission (NLRC, for brevity). Nevertheless, petitioners insist
before us that BCC is engaged in "labor-only" contracting hence, they conclude, they are employees of respondent FEBTC.

Petitioners Virginia G. Neri and Jose Cabelin applied for positions with, and were hired by, respondent BCC, a corporation
engaged in providing technical, maintenance, engineering, housekeeping, security and other specific services to its clientele.
They were assigned to work in the Cagayan de Oro City Branch of respondent FEBTC on 1 May 1979 and 1 August 1980,
respectively, Neri an radio/telex operator and Cabelin as janitor, before being promoted to messenger on 1 April 1989.

On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration Branch No. 10 of the
Department of Labor and Employment to compel the bank to accept them as regular employees and for it to pay the differential
between the wages being paid them by BCC and those received by FEBTC employees with similar length of service.

On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit. 1 Respondent BCC was considered an
independent contractor because it proved it had substantial capital. Thus, petitioners were held to be regular employees of BCC,
not FEBTC. The dismissal was appealed to NLRC which on 28 September 1990 affirmed the decision on appeal. 2 On 22 October
1990, NLRC denied reconsideration of its affirmance, 3prompting petitioners to seek redress from this Court.

Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it failed to adduce evidence purporting
to show that it invested in the form of tools, equipment, machineries, work premises and other materials which are necessary in
the conduct of its business. Moreover, petitioners argue that they perform duties which are directly related to the principal
business or operation of FEBTC. If the definition of "labor-only" contracting 4 is to be read in conjunction with job
contracting, 5 then the only logical conclusion is that BCC is a "labor only" contractor. Consequently, they must be deemed
employees of respondent bank by operation of law since BCC is merely an agent of FEBTC following the doctrine laid down
in Philippine Bank of Communications v. National Labor Relations Commission 6 where we ruled that where "labor-only"
contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the
employees of the "labor-only" contractor; hence, FEBTC should be considered the employer of petitioners who are deemed its
employees through its agent, "labor-only" contractor BCC.

We cannot sustain the petition.

Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among
others, because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC
had a capital stock of P1 million fully subscribed and paid for. 7 BCC is therefore a highly capitalized venture and cannot be
deemed engaged in "labor-only" contracting.

It is well-settled that there is "labor-only" contracting where: (a) 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, (b) the
workers recruited and placed by such person are performing activities which are directly related to the principal business of the
employer. 8
Article 106 of the Labor Code defines "labor-only" contracting thus —

Art. 106. Contractor or subcontractor. — . . . . 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 by such persons are performing activities which are directly related to the principal business
of such employer . . . . (emphasis supplied).

Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital. While there may
be no evidence that it has investment in the form of tools, equipment, machineries, work premises, among others, it is enough
that it has substantial capital, as was established before the Labor Arbiter as well as the NLRC. In other words, the law does not
require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of
the conjunction "or". If the intention was to require the contractor to prove that he has both capital and the requisite
investment, then the conjunction "and" should have been used. But, having established that it has substantial capital, it was no
longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-only" contracting.
There is even no need for it to refute petitioners' contention that the activities they perform are directly related to the principal
business of respondent bank.

Be that as it may, the Court has already taken judicial notice of the general practice adopted in several government and private
institutions and industries of hiring independent contractors to perform special services. 9These services range from

Ma. Cecelia Timbal LlB – 2 Rm 402 | 146


University of San Carlos – College of Law Labor Standards Finals Case Digests

janitorial, 10 security 11 and even technical or other specific services such as those performed by petitioners Neri and Cabelin.
While these services may be considered directly related to the principal business of the employer, 12 nevertheless, they are not
necessary in the conduct of the principal business of the employer.

In fact, the status of BCC as an independent contractor was previously confirmed by this Court in Associated Labor Unions-TUCP
v. National Labor Relations Commission, 13 where we held thus —

The public respondent ruled that the complainants are not employees of the bank but of the company contracted to serve the
bank. Building Care Corporation is a big firm which services, among others, a university, an international bank, a big local bank,
a hospital center, government agencies, etc. It is a qualified independent contractor. The public respondent correctly ruled
against petitioner's contentions . . . . (Emphasis supplied).

Even assuming ex argumenti that petitioners were performing activities directly related to the principal business of the bank,
under the "right of control" test they must still be considered employees of BCC. In the case of petitioner Neri, it is admitted
that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job
description shows that what was sought to be controlled by FEBTC was actually the end-result of the task, e.g., that the daily
incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register.
The guidelines were laid down merely to ensure that the desired end-result was achieved. It did not, however, tell Neri how the
radio/telex machine should be operated. In the Shipside case, 14 we ruled —

. . . . If in the course of private respondents' work (referring to the workers), SHIPSIDE occasionally issued instructions to them,
that alone does not in the least detract from the fact that only STEVEDORES is the employer of the private respondents, for in
legal contemplation, such instructions carry no more weight than mere requests, the privity of contract being between SHIPSIDE
and STEVEDORES . . . .

Besides, petitioners do not deny that they were selected and hired by BCC before being assigned to work in the Cagayan de Oro
Branch of FFBTC. BCC likewise acknowledges that petitioners are its employees. The record is replete with evidence disclosing
that BCC maintained supervision and control over petitioners through its Housekeeping and Special Services Division:
petitioners reported for work wearing the prescribed uniform of BCC; leaves
of absence were filed directly with BCC; and, salaries were drawn only from BCC. 15

As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that she was employed by the latter. On the
other hand, on 24 May 1988, Cabelin filed a complaint for underpayment of wages, non-integration of salary adjustments
mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as for illegal deduction 16against BCC alone which was provisionally
dismissed on 19 August 1988 upon Cabelin's manifestation that his money claim was negligible. 17

More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to reassign
petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin was promoted to messenger because
the FEBTC branch manager promised BCC that two (2) additional janitors would be hired from the company if the promotion
was to be effected. 18 Furthermore, BCC was to be paid in lump sum unlike in the situation in Philippine Bank of
Communications 19 where the contractor, CESI, was to be paid at a daily rate on a per person basis. And, the contract therein
stipulated that the CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and
Cabelin were to perform specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC
"carries an independent business" and undertaken the performance of its contract with various clients according to its "own
manner and method, free from the control and supervision" of its principals in all matters "except as to the results thereof." 20

Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case. Therein, the Court ruled
that CESI was a "labor-only" contractor because upholding the contract between the contractor and the bank would in effect
permit employers to avoid the necessity of hiring regular or permanent employees and would enable them to keep their
employees indefinitely on a temporary or casual basis, thus denying them security of tenure in their jobs. This of course violates
the Labor Code. BCC has not committed any violation. Also, the former case was for illegal dismissal; this case, on the other
hand, is for conversion of employment status so that petitioners can receive the same salary being given to regular employees
of FEBTC. But, as herein determined, petitioners are not regular employees of FEBTC but of BCC. At any rate, the finding that
BCC in a qualified independent contractor precludes us from applying the Philippine Bank of Communications doctrine to the
instant petition.

The determination of employer-employee relationship involves factual findings. 21 Absent any grave abuse of discretion, and we
find none in the case before us, we are bound by the findings of the Labor Arbiter as affirmed by respondent NLRC.

IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED.

SO ORDERED.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 147


University of San Carlos – College of Law Labor Standards Finals Case Digests

40. Dumlao vs. De Guzman

FACTS: Petitioner: LVN PICTURES INC. AND SAMPAGUITA

Respondent: Philippine Musician Guild

* Petition for review by certiorari of an order of the court of industrial relations certifying the guild as the SOLE and
exclusive bargaining agency of all the musicians working with said companies, including premiere productions.

PETS: contends that they have no musicians as employees and that. The musical numbers of the films are furnished by
independent contractors.

Court of industrial relation: sustained said theory motion for reconsideration denied by court and bank.

ISSUES

whether or not petition for certification cannot be entertained when existence of employer – employee relationship between
the parties is contested.

not supported by any authority or legal provision

so long as, after due hearing the parties are found to bear such relationship, it is proper to pass upon the merits for
certifaication.

whether or not certification is improper in the present case bec. A.) the petition does not alleged and no evidence was
presented that the allege musicians. Employees of the respondent constitute a proper bargaining unit. B.) and that the said
musicians-EES represent a majority of the other numerous employees of the film companies.

absence of express allegation is not fatal in certification as it is not a “litigation” in its common term, but merely an investigation
as to ascertain the desires of the employees as to the matter of their representation

it is alleged in the petition that the guild is a duly registered labor organization and 96% of the musicians playing for the musical
recordings for film companies member of the guild.

More over, court of industrial relations has a wide discretion to determine upon an appropriate bargaining unit. And such
decision has almost complete finality, unless action s arbitrary or capricious.

MAIN ISSUE

whether or not the musicias in question re employee of the film companies.

The relation BET. The business of the petitioners and musicians are not casual. As the work of the musicians is an integral part of
the entire motion picture.

The ____ for employer – employee relationship is “where the person for whom the services are performed reserves a right to
control not only the end but also the means to be used in reaching such end. It may exist not withstanding the intervention of
an alleged independent contractor who may hire and fire its workers.

DISPO

Order appealed affirmed

Ma. Cecelia Timbal LlB – 2 Rm 402 | 148


University of San Carlos – College of Law Labor Standards Finals Case Digests

Cost against petitioners.

- Employment contract; stages. Contracts undergo three distinct stages, to wit: negotiation; perfection or birth; and
consummation. Negotiation begins from the time the prospective contracting parties manifest their interest in the contract and
ends at the moment of agreement of the parties. Perfection or birth of the contract takes place when the parties agree upon
the essential elements of the contract. Consummation occurs when the parties fulfill or perform the terms agreed upon in the
contract, culminating in the extinguishment thereof. Under Article 1315 of the Civil Code, a contract is perfected by mere
consent and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also
to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. An employment
contract, like any other contract, is perfected at the moment (1) the parties come to agree upon its terms; and (2) concur in the
essential elements thereof: (a) consent of the contracting parties, (b) object certain which is the subject matter of the contract
and (c) cause of the obligation. In the present case, C.F. Sharp, on behalf of its principal, International Shipping Management,
Inc., hired Agustin and Minimo as Sandblaster/Painter for a 3-month contract, with a basic monthly salary of US$450.00. Thus,
the object of the contract is the service to be rendered by Agustin and Minimo on board the vessel while the cause of the
contract is the monthly compensation they expect to receive. These terms were embodied in the Contract of Employment
which was executed by the parties. The agreement upon the terms of the contract was manifested by the consent freely given
by both parties through their signatures in the contract. Neither parties disavow the consent they both voluntarily gave. Thus,
there is a perfected contract of employment. C.F. Sharp & Co. Inc. and John J. Rocha vs. Pioneer Insurance and Surety
Corporation, et al., G.R. No. 179469, February 15, 2012.

FACTORS:

42. Rosario Brothers Inc. vs. Ople

FACTS:

Petitioner: Rosario Bros Inc.

Respondents: tailors, pressers, stit__chers and similar workers

Some worked since 1969 until separation 1928.

Sept 1977 – Respondent filed complaint for 13th pay and emergency allowance with dept. of labor ( now ministry )

Dec. 1977 – Labor arbiter dismissed complaint upon finding that complaints are not EES.

Jan 1978 – Respondent were dismissed

respondent filed for illegal dismissal with ministry of labor

NCRC – Affirmed decision of labor arbiter and dismissed complaint.

Minister of labor – upon appeal

reversed NCRC decision:

complaints are EES

Petitioner-respondent-to pay 13th month pay and emergency allowances.

Thereafter, respondent filed for issuance of writ of execution of the decision of minister of labor which was granted and partially
implemented.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 149


University of San Carlos – College of Law Labor Standards Finals Case Digests

Labor arbiter issued an order to compute the balance of priv. respondents.

March 4, 1980. a report was submitted pursuant thereto

Thereafter, a writ of execution was issued for the satisfaction of the said amount.

Hence, petition for certiorari, praying, among the others, to annul and set aside the decision of minister of labor and to dismiss
the claims of the priv. respondents.

ISSUES:

Whether or not petition was filed too late.

the decision of minister of labor has already become final

decision has already been partially implemented

[Merits: Devoid of merit]

whether or not there exist an employer- employee rel. elements to determine its existence:

Selection and engagement of the EE.

hiring is the done by PET, through the master cutter

payment wages

received weekly salaries on piece-work basis

power dismissal

violation of memoranda ground of dismissal

Jan 2, 1998 resps were dismissed

power to control employee’s conduct

required to work mon – sat

worked on job orders

observer cleanliness

subj. to quality control

Were allowed to register with GSIS as employees of petitioner

Findings of administrative agencies which have acquired expertise bec. Their jurisdiction are confined to specific matters are
generally accorded respect and finality.

DISPO

PET. Dismissed for lack of merit

43. CONSULTA vs CA Case Digest

[G.R. No. 145443. March 18, 2005]

Ma. Cecelia Timbal LlB – 2 Rm 402 | 150


University of San Carlos – College of Law Labor Standards Finals Case Digests

RAQUEL P. CONSULTA, petitioner, vs. COURT OF APPEALS, PAMANA PHILIPPINES, INC., RAZUL Z. REQUESTO, and ALETA
TOLENTINO, respondents.

FACTS: Consulta was Managing Associate of Pamana. On 1987 she was issued a certification authorizing her to negotiate for and
in behalf of PAMANA with the Federation of Filipino Civilian Employees Association. Consulta was able to secure an account with
FFCEA in behalf of PAMANA. However, Consulta claimed that PAMANA did not pay her commission for the PPCEA account and
filed a complaint for unpaid wages or commission.

ISSUE: Whether or not Consulta was an employee of PAMANA.

HELD: The SC held that Pamana was an independent agent and not an employee.

The power of control in the four fold test is missing. The manner in which Consulta was to pursue her tasked activities was not
subject to the control of PAMANA. Consulta failed to show that she worked definite hours. The amount of time, the methods
and means, the management and maintenance of her sales division were left to her sound judgment.

Finally, Pamana paid Consulta not for labor she performed but only for the results of her labor. Without results, Consulta’s labor
was her own burden and loss. Her right to compensation, or to commission, depended on the tangible results of her work -
whether she brought in paying recruits.

The fact that the appointment required Consulta to solicit business exclusively for Pamana did not mean Pamana exercised
control over the means and methods of Consulta’s work as the term control is understood in labor jurisprudence. Neither did it
make Consulta an employee of Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being
connected with any other company, for as long as the business or company did not compete with Pamana’s business. The
exclusivity clause was a reasonable restriction to prevent similar acts prejudicial to Pamana’s business interest. Article 1306 of
the Civil Code provides that “[t]he contracting parties may establish such stipulation, clauses, terms and conditions as they may
deem convenient, provided that they are not contrary to law, morals, good customs, public order, or public policy.

There being no employer-employee relationship between Pamana and Consulta, the Labor Arbiter and the NLRC had no
jurisdiction to entertain and rule on Consulta’s money claim. Consulta’s remedy is to file an ordinary civil action to litigate her
claim

Petition is dismissed.

44. *Existence of employer-employee relationship essential to the exercise of the right of self-organization for purposes of
collective bargaining

Besa v. Trajano

(G.R. No. 72409 December 29, 1986)

Facts:

January, 1985, private respondent Kaisahan ng Mangagawang Pilipino, a legitimate labor union duly registered with the Ministry
of Labor and Employment, iled a Petition for Certification Election in the National Labor Relations Division of the National
Capital Region. Petitioner opposed it alleging that 1. There is no employer-employee relationship between Besa's and the
petitioners-signatories to the petition; 2. The subject of the present petition had previously been decided by the defunct Court
of Industrial Relations, and is therefore barred under the principle of res judicata; 3. The petition fails to comply with the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 151


University of San Carlos – College of Law Labor Standards Finals Case Digests

mandatory formal requirements under Sec. 2, Book V, of the Omnibus Rules Implementing the Labor Code; and 4. This Hon.
Commission has no jurisdiction over the subject matter and parties to the petition.

Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27, 1985, issued an
order declaring that there was an employer-employee relationship between the parties and directed that an election be
conducted. Petitioner appealed the order to the Director of BLR, but it was dismissed. Thus the Petition of the Union (KAMPIL)
before the Med-Arbiter for the holding of the certification election was granted.

Issue:

Whether or not there is employer-employee relationship between Besa and the petitioner-signatories to the petition.

Ruling:

No. The records of the case reveal that an employer-employee relationship does not exist between the 17 shoeshiners and
petitioner. The shoe shiner is distinct from a piece worker because while the latter is paid for work accomplished, he does not,
however, contribute anything to the capital of the employer other than his service. It is the employer of the piece worker who
pays his wages, while the shoe shiner in this instance is paid directly by his customer. The piece worker is paid for work
accomplished without regard or concern to the profit as derived by his employer, but in the case of the shoe shiners, the
proceeds derived from the trade are always divided share and share alike with respondent BESA. The shoe shiner can take his
share of the proceeds everyday if he wanted to or weekly as is the practice of qqqBesas The employer of the piece worker
supervises and controls his work, but in the case of the shoe shiner, respondent BESA does not exercise any degree of control or
supervision over their person and their work. All these are not obtaining in the case of a piece worker as he is in fact an
employee in contemplation of law, distinct from the shoe shiner.

Entitlement of the minimum requirements of the law particularly on wages and allowances presupposes the existence of
employer-employee relationship which is determined by the concurrence of the following conditions: 1. right to hire; 2.
payment of wages; 3. right to fire; and 4. control and supervision. The most important condition to be considered is the exercise
of control and supervision over the employees. these shoe shiners are not employees of the company, but are partners instead.
This is due to the fact that the owner/manager does not exercise control and supervision over the shoe shiners. That the shiners
have their own customers from whom they charge the fee and divide the proceeds equally with the owner, which make the
owner categorized them as on purely commission basis.

45. Brotherhood Labor Unity Movement of the Phil. v. Zamora

Facts:

The petitioners are workers who have been employed at the San Miguel Parola Glass Factory as “pahinantes” or “kargadors” for
almost seven years. They worked exclusively at the SMC plant, never having been assigned to other companies or departments
of San Miguel Corp, even when the volume of work was at its minimum. Their work was neither regular nor continuous,
depending on the volume of bottles to be loaded and unloaded, as well as the business activity of the company. However, work
exceeded the eight-hour day and sometimes, necessitated work on Sundays and holidays. -for this, they were neither paid
overtime nor compensation.

Sometime in 1969, the workers organized and affiliated themselves with Brotherhood Labor Unity Movement (BLUM). They
wanted to be paid to overtime and holiday pay. They pressed the SMC management to hear their grievances. BLUM filed a
notice of strike with the Bureau of Labor Relations in connection with the dismissal of some of its members. San Miguel refused
to bargain with the union alleging that the workers are not their employees but the employees of an independent labor
contracting firm, Guaranteed Labor Contractor.

The workers were then dismissed from their jobs and denied entrance to the glass factory despite their regularly reporting for
work. A complaint was filed for illegal dismissal and unfair labor practices.

Issue:

Whether or not there was employer-employee (ER-EE)relationship between the workers and San Miguel Corp.

Held:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 152


University of San Carlos – College of Law Labor Standards Finals Case Digests

YES. In determining if there is an existence of the (ER-EE) relationship, the four-fold test was used by the Supreme Court. These
are:

· The selection and engagement of the employee

· Payment of wages

· Power of dismissal

· Control Test- the employer’s power to control the employee with respect to the means and methods by which work is to
be accomplished

In the case, the records fail to show that San Miguel entered into mere oral agreements of employment with the workers.
Considering the length of time that the petitioners have worked with the company, there is justification to conclude that they
were engaged to perform activities necessary in the usual business or trade. Despite past shutdowns of the glass plant, the
workers promptly returned to their jobs. The term of the petitioner’s employment appears indefinite and the continuity and
habituality of the petitioner’s work bolsters the claim of an employee status.

As for the payment of the workers’ wages, the contention that the independent contractors were paid a lump sum representing
only the salaries the workers where entitled to have no merit. The amount paid by San Miguel to the contracting firm is no
business expense or capital outlay of the latter. What the contractor receives is a percentage from the total earnings of all the
workers plus an additional amount from the earnings of each individual worker.

The power of dismissal by the employer was evident when the petitioners had already been refused entry to the premises. It is
apparent that the closure of the warehouse was a ploy to get rid of the petitioners, who were then agitating the company for
reforms and benefits.

The inter-office memoranda submitted in evidence prove the company’s control over the workers. That San Miguel has the
power to recommend penalties or dismissal is the strongest indication of the company’s right of control over the workers as
direct employer.

*SC ordered San Miguel to reinstate the petitioners with 3 years backwages.

Alipio Ruga, et. al. vs. NLRC, et. al

Chester Cabalza recommends his visitors to please read the original & full text of the case cited. Xie xie!

Employee-Employer Relationship

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR FRANCISCO, PHILIP
CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE GUZMAN,
respondents

Facts:

Petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels owned and operated by private
respondent De Guzman Fishing Enterprises which is primarily engaged in the fishing business with port and office at Camaligan,
Camarines Sur. Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose
Parma patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor
Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on
percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed upon, they received
thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil
consumed during the fishing trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot,

Ma. Cecelia Timbal LlB – 2 Rm 402 | 153


University of San Carlos – College of Law Labor Standards Finals Case Digests

chief engineer and master fisherman received a minimum income of P350.00 per week while the assistant engineer, second
fisherman, and fisherman-winchman received a minimum income of P260.00 per week.

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private
respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that they sold some of
their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that the same was a
countermove to their having formed a labor union and becoming members of Defender of Industrial Agricultural Labor
Organizations and General Workers Union (DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal charges were
formally filed against them.

Notwithstanding, private respondent refused to allow petitioners to return to the fishing vessel to resume their work on the
same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-payment of 13th month pay,
emergency cost of living allowance and service incentive pay, with the then Ministry (now Department) of Labor and
Employment, Regional Arbitration Branch No. V, Legaspi City, Albay. They uniformly contended that they were arbitrarily
dismissed without being given ample time to look for a new job.

Issue:

Whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are employees of its owner-operator,
De Guzman Fishing Enterprises.

Ruling:

Disputing the finding of public respondent that a "joint fishing venture" exists between private respondent and petitioners,
petitioners claim that public respondent exceeded its jurisdiction and/or abused its discretion when it added facts not contained
in the records when it stated that the pilot-crew members do not receive compensation from the boat-owners except their
share in the catch produced by their own efforts; that public respondent ignored the evidence of petitioners that private
respondent controlled the fishing operations; that public respondent did not take into account established jurisprudence that
the relationship between the fishing boat operators and their crew is one of direct employer and employee.

We have consistently ruled that 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. 8 The employment relation arises from contract of hire, express or implied. 9 In the absence of
hiring, no actual employer-employee relation could exist.

From the four (4) elements mentioned, we have generally 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. The test calls merely for the existence of the right to control the manner of doing the work, not the actual
exercise of the right.

The petition is GRANTED. The questioned resolution of the National Labor Relations Commission dated May 30,1985 is hereby
REVERSED and SET ASIDE. Private respondent is ordered to reinstate petitioners to their former positions or any equivalent
positions with 3-year backwages and other monetary benefits under the law. No pronouncement as to costs.

47. FULL CASE

PARADISE SAUNA, MASSAGE CORPORATION and JUANITO UY, plaintiff-appellee,


vs.
ALEJANDRO NG AND THE INTERMEDIATE APPELLATE COURT, defendants-appellants.

Augusto J. Salas for plaintiff-appellee.

Armado Marcelo for defendant-appellant.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 154


University of San Carlos – College of Law Labor Standards Finals Case Digests

GUTIERREZ, JR., J.:

Whether or not the contract between the petitioners and the private respondent is a lease or a management contract is the
issue in this petition for review. The petitioners assail the decision of the then Intermediate Appellate Court in AC-G.R. CV No.
65264 which affirmed in toto the judgment of the Court of First Instance of Manila, Branch XII declaring the said contract as one
of lease.

The disputed letter-contract signed by petitioner Juanito Uy in his capacity as President of the petitioner corporation reads:

Mr. Alejandro Ng
No. 8-A Boston Street
Quezon City

Dear Mr. Ng,

By authority of the Board of Directors, you are hereby appointed to MANAGE and ADMINISTER the PARADISE SAUNA and
MASSAGE CORPORATION effective January 1, 1976, under a commission basis over and above the amount of EIGHT THOUSAND
PESOS (P8,000.00) which should be remitted to us not later than the first five (5) days of each month starting January 1, 1976.

In addition, you are to fulfill the following terms and conditions:

1. You are to remit the amount of Sixteen Thousand Pesos (Pl6,000.00) immediately after accepting this appointment as a
guarantee bond for the faithful performance of your duties and responsibilities. However, this amount shall be returned to you
after the duration of your appointment which will be up to September 30, 1979. Otherwise, it will be forfeited if you do not
comply with all your duties and responsibilities.

2. Further, all government licenses, permits, utilities and services in the premises such as water, gas, electricity, telephone,
additional air conditioning units and the installation and repairs thereof and all other repairs therein during your management
shall be for your account;

3. The sole control and management of the premises shall belong to you and you are not responsible to Anybody nor to Any
Board of Directors except to me alone;

4. You are empowered to make any renovation, repairs and improvements but expenses shall be for your account as well as to
change or add personnels therein;

5. Please take all good care of all the equipment and facilities presently existing therein and see to it that they are always in
good working condition; Otherwise, the. loss and damage on any of this equipment and facilities shall be borne by you;

6. In case, however, that you will not be in a position to continue Managing and Administering the business profitably due to any
Government Rules, Decree or Regulations or Force Majeure this appointment shall be suspended for a period of 3 months for
the purpose of determining whether or not you can still continue managing the same.
Hoping that you find the same satisfactory and good luck.

(Sgd) JUANITO A. UY
President/Director (Rollo, P. 35)

This case arose from the petitioners' act of allegedly terminating the respondent's appointment as manager-administrator as a
result of his alleged failure to comply with the terms and conditions of his appointment. The termination took effect on January
15,1977.

Private respondent Ng, on January 21, 1977 filed with the Court of First Instance of Manila, Branch XII, a case for specific
performance and damages with prayer for a writ of preliminary mandatory injunction and attorney's fees against the petitioner.
The case was docketed as Civil Case No. 106511.

On January 28, 1977, the private respondent amended his complaint to one for breach of contract with damages with the same
prayer for a writ of preliminary injunction and attorney's fees.

The amended complaint alleged, among others, that on December 30, 1975, the petitioners agreed to lease in favor of the
private respondent their business called "Paradise Sauna and Massage Corporation" located at E. Rodriguez, Sr. Avenue, Quezon
City and that they entered into a contract whereby the latter shall have full control and management of the said business
effective January 1, 1976 until September 30,1979; that as lessee of the said business with full and sole control thereof, private

Ma. Cecelia Timbal LlB – 2 Rm 402 | 155


University of San Carlos – College of Law Labor Standards Finals Case Digests

respondent's principal obligation consists of only paying the petitioners the sum of eight thousand pesos (P8,000.00 ) not later
than the first five (5) days of each month as rentals and remitting to the latter the sum of sixteen thousand pesos ( P16,000.00 )
as guarantee bond; that as such lessee, the private respondent assumed control and management of the petitioner's business
on January 1, 1976, hired and paid personnel to beef up its operations and tried religiously to comply with his obligations like
paying for his account all government licenses, permits, utilities and services in the premises such as water, gas, electricity and
telephone; that the private respondent paid all the monthly rentals due the petitioners until December 1976; that the petitioner
refused to accept the rental for January 1977 and asked the private respondent to vacate and leave the premises instead
thereby terminating his services and forfeiting his guarantee bond of sixteen thousand pesos ( P16,000.00 ); that on January 16,
1977, the petitioners, assisted by Metrocom soldiers, entered the private respondent's office and through intimidations, forcibly
ejected him from the premises, assumed full control and supervision of the business and put another person in his place who
immediately took possession of all cash sales for the day; that the private respondent returned to the business premises the
following day but he was refused entry and there was a notice to all the employees in front of the premises signed by the
petitioners to the effect that the private respondent's services had been terminated and that another person had been
appointed to take his place; that for having breached their contract, the private respondent suffered damages in the amount of
not less than P100,000.00 representing unrealized profits from the operation of the business, forfeiture of the guarantee bond
and value of his personal properties placed in the business which the petitioners appropriated to themselves; that the private
respondent shall prove further actual damages in the course of the trial resulting from the petitioners' failure to reinstate the
former immediately; and that the private respondent is entitled to moral damages in the amount of P50,000.00 and attorney's
fees in the amount of P30,000.00.

In their answer, the petitioners counter-alleged, among others, that the petitioner corporation is the operator of the sauna bath
and massage establishment in question, that petitioner Uy was the former manager and administrator of the said establishment
which was then fully equipped and staffed with more than thirty (30) personnel consisting of hospitality attendants and boy-
helpers; that the petitioner corporation is paying P4,000.00 as lease rentals for the premises occupied by it, that in his capacity
as President-Director of the petitioner corporation and in his desire to expand the operations of the same, petitioner Uy
relinquished his position as manager-administrator of the said establishment in favor of the private respondent as evidenced by
the letter dated December 30, 1975 addressed to the latter; that private respondent's appointment as manager-administrator
was terminated on January 15, 1977 for violations of the terms and conditions of his appointment, namely, failure to pay water
and electric bills, failure to pay the salaries of the employees of the petitioner corporation, failure to supply the provisions
necessary for the conduct of the petitioners' sauna and massage business like lotion, towels and blankets, failure to perform
efficiently as manager-administrator of the petitioner corporation by managing the Rajah Sauna Bath in Ermita, Manila
simultaneously with his management of the petitioner corporation and by inducing the petitioners' customers to patronize the
said Rajah Sauna Bath instead of the petitioner corporation.

After trial, the lower court, on December 23, 1978 rendered judgment in favor of the private respondent with the following
dispositive portion:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment:

(a) declaring the letter-contract, Exhibit A, as a contract of lease covering the paradise sauna bath and massage clinic, and not a
contract of employment ;
(b) directing defendants to forthwith return the management and operation of the paradise sauna bath and massage clinic to
the plaintiff, so that plaintiff can operate and manage the same for the unexpired term of the lease of Two (2) Years, Eight (8)
Months and Fifteen (15) days;

(c) declaring the forfeiture by defendants of the plaintiffs deposit of P16,000.00 as null and void and declaring it as subsisting for
the purpose of which it was put up by plaintiff, if Exhibit A is made to continue, as decreed in par. (b) hereof, otherwise, if or for
any reason Exhibit A can not continue to be in force, directing defendants to jointly and severally pay to plaintiff the said sum of
P16,000.00;

(d) directing the defendants to account for and return to the plaintiff all the articles listed in Exhibit R, consisting of pages 1, 2
and 3, or in default thereof, to jointly and severally pay to the plaintiff in the following manner and in the following amount, as
far as it is practicable, to wit:

(1) P4,650.00 — for the cost of two television (sic) and the refrigerator, with an allowance of 30% for depreciation costs, with
interest thereon at the legal rate from date of this decision until it is fully paid;

(2) P11,540.30 — Cost price of certain items listed in page l of Exhibit R as recited elsewhere in the body of this decision, with
interest thereon at the legal rate from the date of this decision until it is fully paid;

Ma. Cecelia Timbal LlB – 2 Rm 402 | 156


University of San Carlos – College of Law Labor Standards Finals Case Digests

(e) directing the defendants to account for and to return to the plaintiff one rice cooker, one gas lantern, one medicine cabinet
with assorted medicines, one Akai Tape Recorder, Sixteen glass tumblers, five coffee cups, four intercom, two telephone hands
(sic), one Video, one color vibrator, eight drawerlocks, one electric fan with stand, one steel cabinet with lock, 40 pieces
nameplates with pictures, 30 cans Acaho, and two speakers with cabinet, all of which are listed on page 1 of Exhibit R, and in
default of such delivery, directing defendants to pay jointly and severally the reasonable value thereof taking into consideration
the present costs of such items, with allowances of at least thirty per cent for their depreciation costs, with interests thereon at
6% per annum from date of this decision until it is fully paid;

(f) directing defendants to account for and return to plaintiffs all the articles listed in page 2 of Exhibit R, or in default thereof,
directing defendants to pay jointly and severally to plaintiff the sum of P l,313.42, with interest thereon at 6% per annum from
the date of this decision, until it is fully paid;

(g) directing the defendants to account for and return to plaintiff all of Items 1 to 17 listed on page 2 of Exh. R, or in default
thereof, to pay jointly and severally the plaintiff the sum of P2,968.03, with interest thereon of 6% per annum from date of this
decision until it is fully paid;

(h) directing the defendants to account for and return to plaintiff all of the last six items listed on page 2 of Exhibit R, or in
default thereof, to pay jointly and severally the plaintiff the total costs of P7,999.55, with an allowance of 30% for their
depreciation costs, and with interest thereon at 6% per annum until it is fully paid;

(i) directing the defendants to account for and return to plaintiff all the articles listed on page 3 of Exhibit R, or in default
thereof, to jointly and severally pay to the plaintiff the cost price of P1,313.43, with interest thereon at the legal rate from date
of this decision until it is fully paid;

(j) directing the defendants to pay jointly and severally to the plaintiff the sums of P50,000.00 as moral damages and P50,000 as
exemplary damages;

(k) directing the plaintiff to pay defendants the sum of P28,572.45, with legal interest thereon from date of this decision until it
is fully paid. This sum shall be set off and made to reduce plaintiffs entitlement as awarded by this Court;

(l) dismissing all other claims which the parties have against each other for lack of merit;

Costs against defendants. (Pp. 111 to 114, Record on Appeal). (At pp. 24-27, Rollo)

On appeal, the then Intermediate Appellate Court, on November 29, 1983, affirmed in toto the decision of the trial court. The
subsequent motion for reconsideration by the petitioners was denied. Hence, this petition which presents three main
arguments.

Firstly, the petitioners contend that the respondent Court sanctioned a legal error made by the trial court which is the
reformation of Exhibit A from a management contract to a lease contract contrary to Art. 1367 of the New Civil Code. In support
of their contention, they averred that when respondent Ng filed an action for specific performance then for breach of contract
later, he should have been presumed to have admitted the due execution and contents of the letter-contract marked as Exhibit
A whereby he was appointed as manager-administrator of the petitioner corporation and he should never have been allowed to
deny the contents thereof for purposes of reforming the said instrument. Article 1367 of the Civil Code states that:

Art. 1367—When one of the parties has brought an action to enforce the instrument, he cannot subsequently ask for its
reformation.

The above quoted provision of law invoked by the petitioners cannot apply to respondent Ng's case. When Ng amended his
original complaint for specific performance which calls for an enforcement of Exhibit A to one for breach of contract, he did so
as a matter of right since no responsive pleading had been filed yet by the petitioners. The original complaint was filed on
January 21, 1977 and was amended on January 28, 1977. The answer of the petitioners to the original complaint was filed only
on February 4, 1977. Under Section 2, Rule 10 of the Revised Rules of Court, "a party may amend his pleading once as a matter
of course at any time before a responsive pleading is served . . . ." When a pleading is amended, the original one is deemed
abandoned. Hence, the amended pleading replaces the original one which no longer forms part of the record and the trial of
the case is made on the basis of the amended pleading only (see Ruymann and Farris v. Director of Lands et al., 34 Phil. 428
[1916]). In the case at bar, respondent Ng, in his amended complaint brought an action for breach of contract not to enforce his
rights as manager-administrator but as lessee of the petitioner corporation. In the course of the trial, parol evidence was
introduced to prove that the contract in question was not a management contract as it appeared on its face but a lease contract.

Rule 130, Sec. 7 of the Revised Rules of Court provides that:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 157


University of San Carlos – College of Law Labor Standards Finals Case Digests

Sec. 7. Evidence of written agreements.— When the terms of an agreement have been reduced to writing, it is to be considered
as containing all such terms, and, therefore, there can be, between the parties and their successors-in-interest, no evidence of
the terms of the agreement other than the contents of the writing, except in the following cases:

(a) Where a mistake or imperfection of the writing, or its failure to express the true intent and agreement of the parties, or the
validity of the agreement is put in issue by the pleadings;

(b) When there is an intrinsic ambiguity in the writing.

The term "agreement" includes wills. (Emphasis supplied)

In the instant case, the failure of a contract to express the true intent and agreement of the parties is raised. The fact that the
allegations of respondent Ng with respect to his rights as lessee of the petitioner corporation were made on the basis of' Exhibit
A which was marked as Annex "A" in the amended complaint meets the procedural requirement that said failure be put in issue
by the pleadings.

In ruling that the subject contract is a lease contract and not a management contract, we adopt the findings of fact made by the
trial court and affirmed by the respondent court.

The claim of the petitioners that respondent Ng is their manager-administrator is untenable since it fails to pass the control test
pertinent to the existence of an employer-employee relationship. The control test asks whether the employer controls or has
reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which
the said work is to be accomplished (Social Security System v. Court of Appeals, 156 SCRA 383 [1987]). Such control by the
petitioners over respondent Ng is lacking. Exhibit A is in the nature of a lease contract under Art. 1643 of the Civil Code which
states that:

Art. 1643. In the lease of things, one of the parties binds himself to give to another the enjoyment or use of a thing for a price
certain, and for a period which may be definite or indefinite. However, no lease for more than ninety-nine (99) years shall be
valid.

We find no reason to disturb the findings of the two courts below that the disputed contract is a lease contract. The reasons
given are:

(1) The respondent paid the petitioners a fixed P8,000.00 monthly even when the business suffers a loss. The P8,000.00 was
paid at the start of the month with no attention paid to operating expenses, profits, and losses.

(2) The monthly receipts received by the petitioners from Alejandro Ng state that they were given for rentals from January to
October 1976. The receipts for November and December substitute the word "commission" for "rental". The respondent
explained the change by stating that petitioner Uy changed the receipt as he realized that subleasing the premises to Ng was a
violation of the contract with the owner and the latter might discover the violation. The receipts were prepared by the
petitioners but signed in the presence of the respondent when payment was made.

(3) The respondent was responsible for all licenses, permits, utilities and services, including the installation and repair of all
equipment such as airconditioning units. He had sole control and management and did not report to anybody.
Anent the argument that the respondent Court, in holding petitioner Uy severally liable with the petitioner corporation,
departed from the rule that a stockholder or officer of a corporation has a personality distinct from the corporation, we hold
that the corporate entity theory cannot apply in the instant case where it is being invoked as a cloak or shield for illegality.
(see Tan Boon Bee & Co., Inc. v. Judge Jarencio, 163 SCRA 205 [1988]), There is proof obtaining in the case at bar as to the real
nature of Exhibit A. Thus, being a party to a simulated contract of management, petitioner Uy cannot be permitted to escape
liability under the said contract by using the corporate entity theory. This is one instance when the veil of corporate entity has to
be pierced to avoid injustice and inequity.

Lastly, the petitioners argue that the respondent Court's award of moral and exemplary damages was contrary to law as there
was no showing of bad faith. In this case, the petitioners' manner of barring respondent Ng from his place of business with the
use of Metrocom soldiers instead of availing of the proper legal action constituted bad faith as contemplated by law considering
that the petitioners were aware of the real nature of the contract in question. The amount of P8,000.00 given monthly to the
petitioners was received as "rentals" and not as "commissions." Only the later receipts indicated that the P8,000.00 was for
payment of "commission" and respondent Ng explained that the change in the phraseology of the receipts was due to the fact
that petitioner Uy wanted them to be so written since subleasing would constitute a violation of the latter's contract with the
owner of the business premises. Moral damages are recoverable in cases of breach of contract where the defendant acted
fraudulently or in bad faith (Art. 2220, New Civil Code). Exemplary damages, as well may be awarded in contracts if the
defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner (Art. 2232, New Civil Code).

Ma. Cecelia Timbal LlB – 2 Rm 402 | 158


University of San Carlos – College of Law Labor Standards Finals Case Digests

We feel, however, that the amount of moral and exemplary damages may be reduced considering the circumstances of the case.
Mr. Uy was unhappy about the continued life of the lease arrangement and Mr. Ng was aware of this. In some instances, rental
payments were not made promptly at the start of the month. Three checks initially bounced. Damage to the central
airconditioning system and other equipment was not repaired. Mr. Ng also operated another massage and sauna parlor—The
Rajah Sauna Bath in Ermita—and Mr. Uy was convinced that personnel and customers of Paradise Sauna were being enticed by
the respondent to the other place thus eroding the goodwill and patronage of the complaining establishment. All of these,
however, mitigate but do not justify the acts accompanying the termination of the contract.

WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is DISMISSED. The judgment appealed from is AFFIRMED with
the MODIFICATION that the award of moral and exemplary damages is hereby reduced to a total of P20,000. The term of the
lease having expired, the order to return the massage clinic to the private respondent is DELETED.

SO ORDERED.

LABOR CASE DIGEST


TERMINATION - JUST CAUSE

Serious Misconduct
Maribago Resort vs. Dual, July 20, 2010
G.R. No. 180660 July 20, 2010

Facts: On January 5, 2005, a group of Japanese guests and their companions dined at Maribago
Beach Resort’s Poolbar/Restaurant. Captain waiter Alvin Hiyas took their dinner orders
comprising of 6 sets of lamb and 6 sets of fish. As per company procedure, Hiyas forwarded one
copy of the order slip to the kitchen and another copy to Nito Dual. Pursuant to the order slip,
fourteen (14) sets of dinner were prepared by the chef. Hiyas and waiter Genaro Mission, Jr.
served 12 set dinners to the guests, and another 2 sets to their guides free of charge (total of 14
sets of dinner). After consuming their dinner, the guests paid the amount indicated in their bill
and thereafter left in a hurry. The receipt show that only P3,036.00 was remitted by cashier Dual
corresponding to 6 sets of dinner. A discrepancy was found between the order slip and the
receipt issued which prompted petitioner Maribago to ask for an explanation from Dual and the
waiters why they should not be penalized. Clarificatory hearings were made and it was found
out that the guests gave P10,500.00 to Mission as payment for the bill of P10,100.00. It was
discovered later that only P3,036.00 was entered by Dual in the cash register. The rest of the
payment was missing. The original transaction receipt for P10,100.00 was likewise missing and
in its place, only a transaction receipt for P3.036.00 was registered. Upon verification, it was
also found out that the order slip was tampered by Alcoseba to make it appear that only six (6)
set dinners were ordered. Respondent Dual was found guilty of dishonesty for his fabricated
statements and for asking one of the waiters (Mission) to corroborate his allegations. He was
terminated for dishonesty based on his admission that he altered the order slip.
Dual then filed a complaint for illegal dismissal. The Labor Arbiter found that respondent’s
termination was without valid cause and ruled that respondent is entitled to separation pay.
The NLRC set aside the Labor Arbiter’s decision and dismissed the complaint. The Court of
Appeals however reversed the decision and resolution of the NLRC. Finding no sufficient valid

Ma. Cecelia Timbal LlB – 2 Rm 402 | 159


University of San Carlos – College of Law Labor Standards Finals Case Digests

cause to justify respondent’s dismissal, the Court of Appeals ordered petitioner to pay
respondent full backwages and separation pay. Thus a petition for review under Rule 45 was
filed in the SC.
ISSUE: Whether or not respondent was illegally dismissed.
HELD: No. Petitioner’s evidence proved that respondent is guilty of dishonesty and of stealing
money entrusted to him as cashier. Instead of reporting P10,100.00 as payment by the guests
for their dinner, respondent cashier only reported P3,036.00 as shown by the receipt which he
admitted to have issued. Respondent’s acts constitute serious misconduct which is a just cause
for termination under the law. Theft committed by an employee is a valid reason for his
dismissal by the employer. Although as a rule this Court leans over backwards to help workers
and employees continue with their employment or to mitigate the penalties imposed on them,
acts of dishonesty in the handling of company property, petitioner’s income in this case, are a
different matter.

Nagkakaisang Lakas ng Mangagawa sa Keihin v. Keihin Phils Corp., GR No. 171115, August 9,
2010
DEL CASTILLO, J.:
Petitioner Helen Valenzuela (Helen) was a production associate in respondent Keihin Philippines
Corporation (Keihin), a company engaged in the production of intake manifold and throttle
body used in motor vehicles manufactured by Honda.
It is a standard operating procedure of Keihin to subject all its employees to reasonable search
before they leave the company premises. On September 5, 2003, while Helen was about to
leave the company premises, she saw a packing tape near her work area and placed it inside her
bag because it would be useful in her transfer of residence. When the lady guard on duty
inspected Helen’s bag, she found the packing tape inside her bag. The guard confiscated it and
submitted an incident report dated September 5, 2003 to the Guard-in-Charge, who, in turn,
submitted a memorandum regarding the incident to the Human Resources and Administration
Department on the same date.
The following day, or on September 6, 2003, respondent company issued a show cause notice to
Helen accusing her of violating F.2 of the company’s Code of Conduct, which says, "Any act
constituting theft or robbery, or any attempt to commit theft or robbery, of any company
property or other associate’s property. Penalty: D (dismissal)." Helen’s supervisor, called her to
his office and directed her to explain in writing why no disciplinary action should be taken
against her.
Helen, in her explanation, admitted the offense and even manifested that she would accept
whatever penalty would be imposed upon her. She, however, did not reckon that respondent
company would terminate her services for her admitted offense.
On September 26, 2003, Helen received a notice of disciplinary action informing her that Keihin
has decided to terminate her services. On October 15, 2003, petitioners filed a
complaint against respondent for illegal dismissal, non-payment of 13th month pay, with a
prayer for reinstatement and payment of full backwages, as well as moral and exemplary
damages. Petitioners alleged that Helen’s act of taking the packing tape did not constitute

Ma. Cecelia Timbal LlB – 2 Rm 402 | 160


University of San Carlos – College of Law Labor Standards Finals Case Digests

serious misconduct, because the same was done with no malicious intent. Keihin, on the other
hand, maintained that Helen was guilty of serious misconduct because there was a deliberate
act of stealing from the company.
The Labor Arbiter rendered his Decision dismissing the complaint of illegal dismissal. He
brushed aside petitioners’ argument that the penalty imposed on Helen was disproportionate
to the offense committed, and held that she indeed committed a serious violation of the
company’s policies amounting to serious misconduct. The Labor Arbiter further held that Keihin
observed the requirements of procedural due process in implementing the dismissal of
Helen. He ruled that the following circumstances showed that the company observed the
requirements of procedural due process: a) there was a show cause letter informing Helen of
the charge of theft and requiring her to submit an explanation; b) there was an administrative
hearing giving her an opportunity to be heard; and c) the respondent company furnished her
with notice of termination stating the facts of her dismissal, the offense for which she was
found guilty, and the grounds for her dismissal.20
On appeal, the NLRC dismissed the appeal of the petitioners and affirmed in toto the Decision
of the Labor Arbiter. It held that petitioners admitted in their Position Paper that Helen took the
packing tape strewn on the floor near her production line within the company premises. By the
strength of petitioners’ admission, the NLRC held that theft is a valid reason for Helen’s
dismissal.
However, in a Resolution dated November 2, 2005, the CA dismissed the petition outright for
not having been filed by an indispensable party in interest under Section 2, Rule 3 of the Rules
of Court.
ISSUE:
1. Whether, in taking the packing tape for her own personal use, Helen committed serious
misconduct, which is a just cause for her dismissal from service. (substantive aspect of the case)
2. Whether the petition of petitioners is out rightly dismissible for not having been filed by an
indispensable party in interest (procedural aspect of the case)
HELD:
1. Yes. Article 282 of the Labor Code enumerates the just causes for termination. Misconduct is
defined as "the transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment." For serious misconduct to justify dismissal under the law, "(a) it must be serious, (b)
must relate to the performance of the employee’s duties; and (c) must show that the employee
has become unfit to continue working for the employer."
In the case at bar, Helen took the packing tape with the thought that she could use it for her
own personal purposes. When Helen was asked to explain in writing why she took the tape, she
stated, "Kumuha po ako ng isang packing tape na gagamitin ko sa paglilipat ng gamit ko sa bago
kong lilipatang bahay." In other words, by her own admission, there was intent on her part to
benefit herself when she attempted to bring home the packing tape in question.
It is noteworthy that prior to this incident, there had been several cases of theft and vandalism
involving both respondent company’s property and personal belongings of other employees. In
order to address this issue of losses, respondent company issued two memoranda
implementing an intensive inspection procedure and reminding all employees that those who
will be caught stealing and performing acts of vandalism will be dealt with in accordance with

Ma. Cecelia Timbal LlB – 2 Rm 402 | 161


University of San Carlos – College of Law Labor Standards Finals Case Digests

the company’s Code of Conduct. Despite these reminders, Helen took the packing tape and was
caught during the routine inspection. All these circumstances point to the conclusion that it was
not just an error of judgment on the part of Helen, but a deliberate act of theft of company
property.
The petitioners also argue that the penalty of dismissal is too harsh and disproportionate to the
offense committed since the value of the thing taken is very minimal. Petitioners cite the case
of Caltex Refinery Employees Association v. National Labor Relations Commission where Arnelio
M. Clarete (Clarete) was found to have willfully breached the trust and confidence reposed in
him by taking a bottle of lighter fluid. In said case, we refrained from imposing the supreme
penalty of dismissal since the employee had no violations "in his eight years of service and the
value of the lighter fluid is very minimal compared to his salary.
After a closer study of both cases, we are convinced that the case of Caltex is different from the
case at hand. Although both Clarete and Helen had no prior violations, the former had a clean
record of eight years with his employer. On the other hand, Helen was not even on her second
year of service with Keihin when the incident of theft occurred. And what further distinguishes
the instant case from Caltex is that respondent company was dealing with several cases of theft,
vandalism, and loss of company and employees’ property when the incident involving Helen
transpired.
Regarding the requirement of procedural due process in dismissal of employees, petitioners
argue that the first notice failed to explain the charge being leveled against Helen. According to
the petitioners, the notice was vague and lacked sufficient definitiveness.
2. It is clear that petitioners failed to include the name of the dismissed employee Helen
Valenzuela in the caption of their petition for certiorari filed with the CA as well as in the body
of the said petition. Instead, they only indicated the name of the labor union Nagkakaisang
Lakas ng Manggagawa sa Keihin (NLMK-OLALIA) as the party acting on behalf of Helen. As a
result, the CA rightly dismissed the petition based on a formal defect.
Under Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final
determination can be had of an action shall be joined as plaintiffs or defendants." If there is a
failure to implead an indispensable party, any judgment rendered would have no
effectiveness.31 It is "precisely ‘when an indispensable party is not before the court (that) an
action should be dismissed.’ The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties
but even to those present."32 The purpose of the rules on joinder of indispensable parties is a
complete determination of all issues not only between the parties themselves, but also as
regards other persons who may be affected by the judgment. A decision valid on its face cannot
attain real finality where there is want of indispensable parties.

Loss of Trust and Confidence


Century Canning Corp., et. al. v. Ramil, GR No. 171630, August 8, 2010

FACTS:

Petitioner Century Canning Corporation, a company engaged in canned food manufacturing,


employed respondent Vicente Randy Ramil in August 1993 as technical specialist. Prior to his

Ma. Cecelia Timbal LlB – 2 Rm 402 | 162


University of San Carlos – College of Law Labor Standards Finals Case Digests

dismissal, his job included, among others, the preparation of the purchase requisition (PR)
forms and capital expenditure (CAPEX) forms, as well as the coordination with the purchasing
department regarding technical inquiries on needed products and services of petitioner's
different departments.

On 3 March, 1999, respondent prepared a CAPEX form for external fax modems and terminal
server, per order of Technical Operations Manager Jaime Garcia, Jr. and endorsed it to Marivic
Villanueva, Secretary of Executive Vice-President Ricardo T. Po, for the latter's signature. The
CAPEX form, however, did not have the complete details and some required signatures. The
following day, with the form apparently signed by Po, respondent transmitted it to Purchasing
Officer Lorena Paz in Taguig Main Office. Paz processed the paper and found that some details
in the CAPEX form were left blank. She also doubted the genuineness of the signature of Po, as
appearing in the form. Paz then transmitted the CAPEX form to Purchasing Manager Virgie
Garcia and informed her of the questionable signature of Po. Consequently, the request for the
equipment was put on hold due to Po's forged signature. However, due to the urgency of
purchasing badly needed equipment, respondent was ordered to make another CAPEX form,
which was immediately transmitted to the Purchasing Department.

Suspecting him to have committed forgery, respondent was asked to explain in writing the
events surrounding the incident. He vehemently denied any participation in the alleged forgery.
Respondent was, thereafter, suspended on 21 April 1999. Subsequently, he received a Notice of
Termination from Armando C. Ronquillo, on 20 May 1999, for loss of trust and confidence.

Respondent, on May 24, 1999, filed a Complaint for illegal dismissal, non-payment of overtime
pay, separation pay, moral and exemplary damages and attorney's fees against petitioner and its
officers before the Labor Arbiter (LA).

LA Potenciano S. Canizares rendered a Decision dismissing the complaint for lack of merit.
Aggrieved by the LA's finding, respondent appealed to the National Labor Relations Commission
(NLRC). The NLRC First Division in its Decision set aside the ruling of LA Canizares. The NLRC
declared respondent's dismissal to be illegal and directed petitioner to reinstate respondent
with full backwages and seniority rights and privileges. It found that petitioner failed to show
clear and convincing evidence that respondent was responsible for the forgery of the signature
of Po in the CAPEX form.

Petitioner filed a motion for reconsideration. To respondent's surprise and dismay, the NLRC
reversed itself and rendered a new Decision upholding LA Canizares' dismissal of his complaint.
Respondent filed a motion for reconsideration, which was denied by the NLRC.

Frustrated by this turn of events, respondent filed a petition for certiorari with the Court of
Appeals (CA). The CA rendered judgment in favor of respondent and reinstated the earlier
decision of the NLRC. It ordered petitioner to reinstate respondent, without loss of seniority
rights and privileges, and to pay respondent full backwages from the time his employment was
terminated up to the time of the finality of its decision. The CA, likewise, remanded the case to

Ma. Cecelia Timbal LlB – 2 Rm 402 | 163


University of San Carlos – College of Law Labor Standards Finals Case Digests

the LA for the computation of backwages of the respondent. Hence, this petition for review on
certiorari.

ISSUE:

Whether or not respondent was validly dismissed.

RULING:
Yes.
Petitioner's main allegation is that there are factual and legal grounds constituting substantial
proof that respondent was clearly involved in the forgery of the CAPEX form. Petitioner insists
that the mere existence of a basis for believing that respondent employee has breached the
trust and confidence of his employer suffices for his dismissal. Finally, petitioner maintains that
aside from respondent's involvement in the forgery of the CAPEX form, his past violations of
company rules and regulations are more than sufficient grounds to justify his termination from
employment.

However, the record of the case is bereft of evidence that would clearly establish Ramil's
involvement in the forgery. They did not even submit any affidavit of witness or present any
during the hearing to substantiate their claim against Ramil.

Respondent alleged in his position paper that after preparing the CAPEX form on 3 March 1999,
he endorsed it to Marivic Villanueva for the signature of the Executive Vice-President Ricardo T.
Po. The next day, respondent received the CAPEX form containing the signature of Po. Petitioner
never controverted these allegations in the proceedings before the NLRC and the CA despite its
opportunity to do so. Petitioner's belated allegations in its reply filed before this Court that
Marivic Villanueva denied having seen the CAPEX form cannot be given credit. Points of law,
theories, issues and arguments not brought to the attention of the lower court, administrative
agency or quasi-judicial body need not be considered by a reviewing court, as they cannot be
raised for the first time at that late stage. When a party deliberately adopts a certain theory
and the case is decided upon that theory in the court below, he will not be permitted to change
the same on appeal, because to permit him to do so would be unfair to the adverse party.

Thus, if respondent retrieved the form on March 4, 1999 with the signature of Po, it can be
correctly inferred that he is not the forger. Had the CAPEX form been returned to respondent
without Po's signature, Villanueva or any officer of the petitioner's company could have readily
noticed the lack of signature, and could have easily attested that the form was unsigned when it
was released to respondent.

Furthermore, while employers are allowed a wider latitude of discretion in terminating the
services of employees who perform functions which by their nature require the employers' full
trust and confidence and the mere existence of basis for believing that the employee has

Ma. Cecelia Timbal LlB – 2 Rm 402 | 164


University of San Carlos – College of Law Labor Standards Finals Case Digests

breached the trust of the employer is sufficient, this does not mean that the said basis may be
arbitrary and unfounded.

The right of an employer to dismiss an employee on the ground that it has lost its trust and
confidence in him must not be exercised arbitrarily and without just cause. Loss of trust and
confidence, to be a valid cause for dismissal, must be based on a willful breach of trust and
founded on clearly established facts. The basis for the dismissal must be clearly and
convincingly established, but proof beyond reasonable doubt is not necessary. It must rest on
substantial grounds and not on the employer’s arbitrariness, whim, caprice or suspicion;
otherwise, the employee would eternally remain at the mercy of the employer.

G.R. No. 164640 June 13, 2008


CYNTHIA GANA, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, ABOITIZ HAULERS, INC., and CARL
**
WOZNIAK, respondents.
AUSTRIA-MARTINEZ, J.:
FACTS: On December 1, 1996, Cynthia Gana (petitioner) commenced her employment as
marketing manager of Total Distribution and Logistics System, Inc. (TDLSI), another sister
company of Aboitiz Transport, Aboitiz Container and Aboitiz Haullers, respondent company. As
marketing manager, petitioner received a monthly salary of P20,000.00 plus a monthly
allowance of P15,000.00; and she availed herself of the company car plan.
On August 15, 1997, petitioner was transferred from TDLSI to respondent company retaining
the same position as marketing manager.
On April 21, 1998, petitioner was required by private respondent Carl Wozniak (Wozniak), the
Senior Vice-President and General Manager of Aboitiz Haulers, to explain in writing why she
should not be penalized for having violated company rules on offenses against company
interest. Wozniak directed her to appear in an investigation to be conducted by the company
and defend herself with respect to the electronic mails (e-mails) she sent to an official of
Trans-America, divulging various confidential information about the business operations and
transactions of Aboitiz Container which are detrimental to the said company.
On April 24, 1998, petitioner, through her counsel, sent a letter to Wozniak denying the charges
against her.
In a letter dated May 22, 1998, Wozniak informed petitioner that her explanations during the
investigation with respect to the charges leveled against her were found to be unacceptable;
that she was found guilty of Betrayal of Confidential Information which constitutes sufficient
reason for the company to lose the high degree of trust and confidence which it reposed upon
her as its manager; and that as a result, her employment with respondent company has been
terminated.
Petitioner then filed a Complaint for illegal dismissal with the National Labor Relations
Commission (NLRC) in Quezon City. On June 14, 1999, the Labor Arbiter (LA) rendered a
Decision finding respondent company guilty of illegally dismissing petitioner.
On appeal, the NLRC set aside the Decision of the LA. Petitioner filed a Motion for
Reconsideration but the same was denied by the NLRC in its Order promulgated on May 3,

Ma. Cecelia Timbal LlB – 2 Rm 402 | 165


University of San Carlos – College of Law Labor Standards Finals Case Digests

2002.
Petitioner then filed a petition for certiorari with the CA questioning the Decision and Order of
the NLRC.On April 30, 2004, the CA promulgated its presently assailed Decision dismissing the
petition for certiorari and affirming the questioned Decision and Order of the NLRC.
Petitioner filed a Motion for Reconsideration but it was denied by the CA in its Resolution dated
July 26, 2004.
ISSUE: Whether Petitioner is illegally dismissed.
HELD:
HELD: NO. Petitioner relies on the conclusion of the LA that there is no sufficient evidence to
justify petitioner's termination from employment on the ground of loss of trust and confidence.
However, evidence shows otherwise. The LA cited private respondent's letter terminating
petitioner from her employment to prove that respondent company failed to show sufficient
evidence to establish the charges against petitioner. Contrary to the conclusion of the LA, it is
very clear in the said letter that respondent company enumerated the facts and circumstances
upon which petitioner's termination was based. Pertinent portions of the letter are as follows:
Last April 22, 1998, an investigation was conducted in order to give you the chance to present
your side of matters that were contained in the letter to explain dated April 21, 1998 that was
sent to you and which you received last April 21, 1998 also.
During the said investigation, it was established that:
a) You sent email messages/reports to Leslie Leow of Transamerica last March 9, 1998 and
March 25, 1998 regarding the company's internal problems with the truckers, depot and special
permit to load (spl) and the rates charge[d] by ACSI to its customers.
b) You sent again email message last April 16, 1998 to Leslie Leow concerning the complaints of
Mr. Carmelo Garcia regarding the company's poor services which puts the company's credibility
to deliver good service in question.
c) You have literally provided Transamerica information about the inefficiencies and inflexibility
of the company in catering to the needs of the customer.
d) The Officers of the company only learned of the complaints of Mr. Carmelo Garcia because of
your email messages to Transamerica.
e) You declared that your loyalty is to Transamerica and not to your employer, AHI.
The settled rule is that the mere existence of a basis for believing that a managerial employee
has breached the trust of the employer justifies dismissal.
Petitioner does not deny having sent the subject e-mails to Trans-America. The Court finds no
error in the conclusion of the CA that petitioner's intention in sending these e-mails was to
inform Trans-America of the supposed inefficiency in the operations of respondent company as
well as the company's poor services to its clients. These pieces of information necessarily
diminish the credibility of respondent company and besmirch its reputation. In fact, Trans-
America wrote Wozniak expressing its disappointment in the services that the Aboitiz
companies were rendering.
Hence, respondent company cannot be faulted for having lost its trust and confidence in
petitioner and in refusing to retain her as its employee considering that her continued
employment is patently inimical to respondent company's interest. The law, in protecting the
rights of labor, authorizes neither oppression nor self-destruction of an employer company
which itself is possessed of rights that must be entitled to recognition and respect.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 166


University of San Carlos – College of Law Labor Standards Finals Case Digests

Santos vs. Shing Hung Plastics Co., Inc., Sept. 29, 2008

MICHAEL V. SANTOS, Petitioner,- versus -SHING HUNG PLASTICS, CO., INC. and NATIONAL
LABOR RELATIONS COMMISSION, Respondents.
Facts:
Respondent Shing Hung Plastics Co., Inc. hired Michael V. Santos (petitioner) as administrative
assistant whose responsibilities included purchasing equipment and supplies of the corporation.
He was, by Memorandum, asked to explain within 24 hours why, in the purchase of silkscreen
and paint thinner from JPN, Inc., only acknowledgment receipts, instead of official receipts,
were received and recorded by the corporation’s accounting department.
Petitioner explained that the purchase of the above-stated items were urgent, and the thinner
was purchased from JPN Inc., instead of the corporation’s then supplier Alto Chemicals, because
the former charged a lower price.
On March 11, 2002, Chueh ordered him to rent a forklift and crane to move a 26-ton machinery
of the corporation, hence, he asked the firm Bormahueco for a quotation thereof. The quotation
given by Bormahueco was found to be too high by Chueh who thus ordered him to get one from
another firm. Roos Industrial Construction, Inc. (Roos) quoted a lower rental rate of P28,000,
hence, he, on the instruction of Chan and Chueh, asked the accounting department to issue a
check for the purpose.
On April 2, 2002, he was informed of the termination of his employment on account of "money
involvement with suppliers like JPN and Roos etc."
The corporation went on to claim as follows:
Upon investigation by Chueh, it was found out that petitioner manipulated the price of
purchased items and earned commissions therefrom; that petitioner had been an employee of
JPN, Inc. "but was forced to resign due to some irregularities" and that petitioner refused to sign
the termination letter and to receive his salary and other benefits, and had not been reporting
for work since April 3, 2002.
By Decision of January 30, 2004, the Labor Arbiter found petitioner to have been illegally
dismissed. He thus ordered the corporation to reinstate petitioner and pay his full backwages,
unpaid salary, moral and exemplary damages, and attorney’s fees.
On appeal, the National Labor Relations Commission (NLRC), by Resolution of August 20, 2004,
found petitioner’s dismissal for just cause but that due process requirements were not complied
with. The NLRC thus set aside the Labor Arbiter’s decision but awarded petitioner "one (1)
month salary as indemnity, and his unpaid salary."
Issue: Whether petitioner was dismissed for just cause.
Held: Yes.By its evidence, the corporation duly established the acts imputed to petitioner which
rendered him unworthy of the trust and confidence demanded of his position.
Petitioner further claimed that JPN, Inc. sold thinner at P500 per gallon lower than the P1,500
price of the corporation’s usual supplier, Alto Chemicals. The corporation controverted this
claim, however, by presenting a document from Alto Chemicals quoting the price of thinner at
P300 per gallon.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 167


University of San Carlos – College of Law Labor Standards Finals Case Digests

In administrative proceedings, the law does not require proof beyond reasonable doubt.
Substantial evidence suffices. The Court finds that the corporation had established reasonable
grounds-bases of its decision finding petitioner unworthy of the trust and confidence his
position demands.
Petitioner, at all events, argues that respondent failed to prove its claim that he is a confidential
employee, hence, his tenure depended not on the trust and confidence he enjoyed from it. He
advances that he is "not involved in the labor relation matter[s] in the respondent company."
Petitioner’s position fails. For the purpose of applying the provisions of the Labor Code on who
may join unions of the rank-and-file employees, jurisprudence defines "confidential employees"
as those who "assist or act in a confidential capacity to persons who formulate, determine, and
effectuate management policies in the field of labor relations." However, for the purpose of
applying the Labor Code provision on loss of confidence as a just cause for the dismissal of an
employee, jurisprudence teaches that:
x x x [L]oss of confidence should ideally apply only to cases involving employees occupying
positions of trust and confidence or to those situations where the employee is routinely charged
with the care and custody of the employer’s money or property. To the first class belong
managerial employees, i.e., those vested with the powers or prerogatives to lay down
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees or effectively recommend such managerial actions; and [to] the second
class belong cashiers, auditors, property custodians, etc., or those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of money or property.
(Emphasis and underscoring supplied)
As stated early on, petitioner’s duties included purchasing supplies and equipment of the
corporation.
Enriquez vs. BPI, February 12, 2008
Enriquez vs. BPI
Feb 12, 2008
FACTS:
Enriquez and Sia were the branch manager and assistant branch manager,
respectively of the BPI- Bacolod Singcang Branch. Enriquez had been an employee thereon for
32 years and Sia for 29 years.
On December 27,2002, their branch experienced a heavy volume of transactions owing
to the fact that it was the last banking day of the year. When banking hours came to a close,
teller Geraldine Descartin (Descartin) purportedly discovered that she had a cash shortage of
P36,000.00. It was later admitted by a co-teller Fregil that the shortage was incurred because
Descartin had temporarily borrowed the money that week to pay her financial obligations but
intended to return the same on the first week of January. Teller Fregil reported the matter to Sia
and Enriquez, both of whom suggested that teller Descartin fill the shortage with a loan from
her family. Teller Descartin replied that her family did not have the money, she instead
borrowed the amount from her in-laws. Thus, at 5:21 p.m., teller Descartin posted the unsigned
withdrawal slip for the amount of P36,000.00 against the joint account of her parents-in-law. As
the amount exceeded the floor limit for tellers which would require the approval of a superior
officer, either Enriquez or Sia approved the transaction at 5:22 p.m. as reflected on the account

Ma. Cecelia Timbal LlB – 2 Rm 402 | 168


University of San Carlos – College of Law Labor Standards Finals Case Digests

records. Teller Descartin thereafter left the bank to secure the signature of her mother-in-law
Remedios and returned at past 7:00 p.m. with the signed withdrawal slip.
An investigation was made by the BPI head office and petitioners were directed to show
cause to explain in writing why they should not be sanctioned for conflict of interest and breach
of trust. Later on, petitioners were dismissed from employment on grounds of breach of trust
and confidence and dishonesty.
Hence, a complaint was filed for illegal dismissal. The Labor Arbiter rendered a decision
that petitioners had been illegally dismissed ordering respondents to pay full backwages and
moral and exemplary damages amounting to more than 7million pesos. On appeal, The NLRC
reversed the decision but ordered respondents to give petitioners financial assistance
equivalent to one-half month’s pay for every year of service.

ISSUE:
Whether or not petitioners were illegally dismissed.

HELD: No. There is no denying that loss of trust and confidence is a valid ground for termination
of employment. Hence, the basic requisite for dismissal on the ground of loss of confidence is
that the employee concerned holds a position of trust and confidence or is routinely charged
with the care and custody of the employer’s money or property. Moreover, the breach must be
related to the performance of the employee’s function. Also, it must be shown that the
employee is a managerial employee, since the term “trust and confidence” is restricted to said
class of employees. The failure of petitioners to report the cash shortage of teller Descartin,
even if done in good faith, nonetheless resulted in their abetting the dishonesty committed by
the latter. Under the personnel policies of respondent bank, this act of petitioners justifies their
dismissal even on the first offense. Even assuming the version of petitioners as the truth, the
fact remains that they willfully decided against reporting the shortage that occurred. As a result,
in either situation, petitioners’ acts have caused respondents to have a legitimate reason to lose
the trust reposed in them as senior managerial employees. Their participation in the cover-up of
the misconduct of teller Descartin makes them unworthy of the trust and confidence demanded
by their positions.
Willful Disobedience
Tongko vs. The Manufacturer’s Life Insurance Co., Inc. November 7, 2008
G.R. No. 167622, November 07, 2008

Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in
life insurance business. Renato A. Vergel De Dios was, during the period material, its President
and Chief Executive Officer. Gregorio V. Tongko started his professional relationship with
Manulife on July 1, 1977 by virtue of a Career Agent's Agreement (Agreement) he executed with
Manulife.

In the Agreement, it is provided that:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 169


University of San Carlos – College of Law Labor Standards Finals Case Digests

It is understood and agreed that the Agent is an independent contractor and nothing contained
herein shall be construed or interpreted as creating an employer-employee relationship
between the Company and the Agent.

The Company may terminate this Agreement for any breach or violation of any of the provisions
hereof by the Agent by giving written notice to the Agent within fifteen (15) days from the time
of the discovery of the breach. No waiver, extinguishment, abandonment, withdrawal or
cancellation of the right to terminate this Agreement by the Company shall be construed for any
previous failure to exercise its right under any provision of this Agreement.

Either of the parties hereto may likewise terminate his Agreement at any time without cause, by
giving to the other party fifteen (15) days notice in writing.

In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In
1990, he became a Branch Manager. As the CA found, Tongko's gross earnings from his work at
Manulife, consisting of commissions, persistency income, and management overrides. The
problem started sometime in 2001, when Manulife instituted manpower development
programs in the regional sales management level. Relative thereto, De Dios addressed a letter
dated November 6, 2001 to Tongko regarding an October 18, 2001 Metro North Sales Managers
Meeting. Stating that Tongko’s Region was the lowest performer (on a per Manager basis) in
terms of recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.
Other issues were:"Some Managers are unhappy with their earnings and would want to revert
to the position of agents." And "Sales Managers are doing what the company asks them to do
but, in the process, they earn less." Tongko was then terminated.

Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife
for illegal dismissalIn the Complaint. In a Decision dated April 15, 2004, Labor Arbiter dismissed
the complaint for lack of an employer-employee relationship.

The NLRC's First Division, while finding an employer-employee relationship between Manulife
and Tongko applying the four-fold test, held Manulife liable for illegal dismissal. Thus, Manulife
filed an appeal with the CA. Thereafter, the CA issued the assailed Decision dated March 29,
2005, finding the absence of an employer-employee relationship between the parties and
deeming the NLRC with no jurisdiction over the case. Hence, Tongko filed this petition.

Issue:
1. WON Tongko was an employee of Manulife
2. WON Tongko was illegally dismissed.
Held:
1. Yes
In the instant case, Manulife had the power of control over Tongko that would make him its
employee. Several factors contribute to this conclusion.

In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 170


University of San Carlos – College of Law Labor Standards Finals Case Digests

The Agent hereby agrees to comply with all regulations and requirements of the Company as
herein provided as well as maintain a standard of knowledge and competency in the sale of the
Company's products which satisfies those set by the Company and sufficiently meets the
volume of new business required of Production Club membership.Under this provision, an
agent of Manulife must comply with three (3) requirements: (1) compliance with the regulations
and requirements of the company; (2) maintenance of a level of knowledge of the company's
products that is satisfactory to the company; and (3) compliance with a quota of new
businesses.

Among the company regulations of Manulife are the different codes of conduct such as the
Agent Code of Conduct, Manulife Financial Code of Conduct, and Manulife Financial Code of
Conduct Agreement, which demonstrate the power of control exercised by the company over
Tongko. The fact that Tongko was obliged to obey and comply with the codes of conduct was
not disowned by respondents.

Thus, with the company regulations and requirements alone, the fact that Tongko was an
employee of Manulife may already be established. Certainly, these requirements controlled the
means and methods by which Tongko was to achieve the company's goals.

More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform
administrative duties that establishes his employment with Manulife.

Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a
certain number of agents, in addition to his other administrative functions, leads to no other
conclusion that he was an employee of Manulife.

2. Yes

In its Petition for Certiorari dated January 7, 2005[26] filed before the CA, Manulife argued that
even if Tongko is considered as its employee, his employment was validly terminated on the
ground of gross and habitual neglect of duties, inefficiency, as well as willful disobedience of the
lawful orders of Manulife. Manulife stated:

In the instant case, private respondent, despite the written reminder from Mr. De Dios refused
to shape up and altogether disregarded the latter's advice resulting in his laggard performance
clearly indicative of his willful disobedience of the lawful orders of his superior. As private
respondent has patently failed to perform a very fundamental duty, and that is to yield
obedience to all reasonable rules, orders and instructions of the Company, as well as gross
failure to reach at least minimum quota, the termination of his engagement from Manulife is
highly warranted and therefore, there is no illegal dismissal to speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a
single iota of evidence to support its claims. Manulife did not even point out which order or rule
that Tongko disobeyed. More importantly, Manulife did not point out the specific acts that
Tongko was guilty of that would constitute gross and habitual neglect of duty or disobedience.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 171


University of San Carlos – College of Law Labor Standards Finals Case Digests

Manulife merely cited Tongko's alleged "laggard performance," without substantiating such
claim, and equated the same to disobedience and neglect of duty.

Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the
burden of proving the validity of the termination of employment rests on the employer. Failure
to discharge this evidential burden would necessarily mean that the dismissal was not justified,
and, therefore, illegal.

The Labor Code provides that an employer may terminate the services of an employee for just
cause and this must be supported by substantial evidence. The settled rule in administrative and
quasi-judicial proceedings is that proof beyond reasonable doubt is not required in determining
the legality of an employer's dismissal of an employee, and not even a preponderance of
evidence is necessary as substantial evidence is considered sufficient. Substantial evidence is
more than a mere scintilla of evidence or relevant evidence as a reasonable mind might accept
as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably
opine otherwise.

Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife
even failed to identify the specific acts by which Tongko's employment was terminated much
less support the same with substantial evidence. To repeat, mere conjectures cannot work to
deprive employees of their means of livelihood. Thus, it must be concluded that Tongko was
illegally dismissed.

Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko
not being its employee is not entitled to such notices. Since we have ruled that Tongko is its
employee, however, Manulife clearly failed to afford Tongko said notices. Thus, on this ground
too, Manulife is guilty of illegal dismissal.

SOCIAL JUSTICE SOCIETY (SJS) vs. DANGEROUS DRUGS BOARD and PHILIPPINE DRUG
ENFORCEMENT AGENCY (PDEA),
G.R. No. 157870, 3 November 2008
VELASCO, JR., J.:

FACTS:

The constitutionality of Section 36 of Republic Act No. (RA) 9165, otherwise known as the
Comprehensive Dangerous Drugs Act of 2002, insofar as it requires mandatory drug testing of
candidates for public office, students of secondary and tertiary schools, officers and employees
of public and private offices, and persons charged before the prosecutor's office with certain
offenses, among other personalities, is put in issue.

As far as pertinent, the challenged section reads as follows:

Ma. Cecelia Timbal LlB – 2 Rm 402 | 172


University of San Carlos – College of Law Labor Standards Finals Case Digests

SEC. 36. Authorized Drug Testing. - Authorized drug testing shall be done by any government
forensic laboratories or by any of the drug testing laboratories accredited and monitored by the
DOH to safeguard the quality of the test results. The drug testing shall employ, among others,
two (2) testing methods, the screening test which will determine the positive result as well as
the type of drug used and the confirmatory test which will confirm a positive screening test. The
following shall be subjected to undergo drug testing:

(d) Officers and employees of public and private offices. - Officers and employees of public and
private offices, whether domestic or overseas, shall be subjected to undergo a random drug test
as contained in the company's work rules and regulations, for purposes of reducing the risk in
the workplace. Any officer or employee found positive for use of dangerous drugs shall be dealt
with administratively which shall be a ground for suspension or termination, subject to the
provisions of Article 282 of the Labor Code and pertinent provisions of the Civil Service Law;

ISSUE:
Whether or not paragraph (d) Sec. 36 of RA 9165 is unconstitutional?

RULING:
Yes.
The first factor to consider in the matter of reasonableness is the nature of the privacy interest
upon which the drug testing, which effects a search within the meaning of Sec. 2, Art. III of the
Constitution, intrudes. In this case, the office or workplace serves as the backdrop for the
analysis of the privacy expectation of the employees and the reasonableness of drug testing
requirement. The employees' privacy interest in an office is to a large extent circumscribed by
the company's work policies, the collective bargaining agreement, if any, entered into by
management and the bargaining unit, and the inherent right of the employer to maintain
discipline and efficiency in the workplace. Their privacy expectation in a regulated office
environment is, in fine, reduced; and a degree of impingement upon such privacy has been
upheld.

Sec. 36 of RA 9165 contains provisions specifically directed towards preventing a situation that
would unduly embarrass the employees or place them under a humiliating experience. While
every officer and employee in a private establishment is under the law deemed forewarned that
he or she may be a possible subject of a drug test, nobody is really singled out in advance for
drug testing. The goal is to discourage drug use by not telling in advance anyone when and who
is to be tested. And as may be observed, Sec. 36(d) of RA 9165 itself prescribes what is a
narrowing ingredient by providing that the employees concerned shall be subjected to "random
drug test as contained in the company's work rules and regulations for purposes of reducing the
risk in the work place."

The random drug testing shall be undertaken under conditions calculated to protect as much as
possible the employee's privacy and dignity. As to the mechanics of the test, the law specifies

Ma. Cecelia Timbal LlB – 2 Rm 402 | 173


University of San Carlos – College of Law Labor Standards Finals Case Digests

that the procedure shall employ two testing methods, i.e., the screening test and the
confirmatory test, doubtless to ensure as much as possible the trustworthiness of the results.
But the more important consideration lies in the fact that the test shall be conducted by trained
professionals in access - controlled laboratories monitored by the Department of Health (DOH)
to safeguard against results tampering and to ensure an accurate chain of custody. All told,
therefore, the intrusion into the employees' privacy, under RA 9165, is accompanied by proper
safeguards, particularly against embarrassing leakages of test results, and is relatively minimal.

Taking into account the foregoing factors, i.e., the reduced expectation of privacy on the part of
the employees, the compelling state concern likely to be met by the search, and the well -
defined limits set forth in the law to properly guide authorities in the conduct of the random
testing, we hold that the challenged drug test requirement is, under the limited context of the
case, reasonable and, ergo, constitutional.

G.R. No. 164774 April 12, 2006


STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners,
vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
PUNO, J.:
FACTS: Petitioner Star Paper Corporation (the company) is a corporation engaged in trading –
principally of paper products. Josephine Ongsitco is its Manager of the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
Respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella
(Estrella) were all regular employees of the company.
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco
advised the couple that should they decide to get married, one of them should resign pursuant
to a company policy promulgated in 1995, viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the]
3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female) developed
a friendly relationship during the course of their employment and then decided to get married,
one of them should resign to preserve the policy stated above.
Simbol resigned on June 20, 1998 pursuant to the company policy.
Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee,
whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to
company policy, one must resign should they decide to get married. Comia resigned on June 30,
2000.
Estrella was hired on July 29, 1994. She met Luisito Zuñiga (Zuñiga), also a co-worker. Petitioners
stated that Zuñiga, a married man, got Estrella pregnant. The company allegedly could have
terminated her services due to immorality but she opted to resign on December 21, 1999.
The respondents each signed a Release and Confirmation Agreement. They stated therein that
they have no money and property accountabilities in the company and that they release the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 174


University of San Carlos – College of Law Labor Standards Finals Case Digests

latter of any claim or demand of whatever nature.


Respondents offer a different version of their dismissal. Simbol and Comia allege that they did
not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to
respondent Estrella, she alleges that she had a relationship with co-worker Zuñiga who
misrepresented himself as a married but separated man. After he got her pregnant, she
discovered that he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an accident and was
advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She
returned to work on December 21, 1999 but she found out that her name was on-hold at the
gate. She was denied entry. She was directed to proceed to the personnel office where one of
the staff handed her a memorandum. The memorandum stated that she was being dismissed
for immoral conduct. She refused to sign the memorandum because she was on leave for
twenty-one (21) days and has not been given a chance to explain. The management asked her
to write an explanation. However, after submission of the explanation, she was nonetheless
dismissed by the company. Due to her urgent need for money, she later submitted a letter of
resignation in exchange for her thirteenth month pay.
Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation
pay and attorney’s fees. They averred that the aforementioned company policy is illegal and
contravenes Article 136 of the Labor Code. They also contended that they were dismissed due
to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of
merit. On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on
January 11, 2002.
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution
dated August 8, 2002. They appealed to respondent court via Petition for Certiorari. In its
assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision.
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:
ISSUE: Whether the subject 1995 policy/regulation is violative of the constitutional rights
towards marriage and the family of employees and of Article 136 of the Labor Code
HELD: YES.These courts find the no-spouse employment policy invalid for failure of the
employer to present any evidence of business necessity other than the general perception that
spouses in the same workplace might adversely affect the business. They hold that the absence
of such a bona fide occupational qualification invalidates a rule denying employment to one
spouse due to the current employment of the other spouse in the same office. Thus, they rule
that unless the employer can prove that the reasonable demands of the business require a
distinction based on marital status and there is no better available or acceptable policy which
would better accomplish the business purpose, an employer may not discriminate against an
employee based on the identity of the employee’s spouse. This is known as the bona fide
occupational qualification exception.
To justify a bona fide occupational qualification, the employer must prove two factors: (1) that
the employment qualification is reasonably related to the essential operation of the job
involved; and, (2) that there is a factual basis for believing that all or substantially all persons
meeting the qualification would be unable to properly perform the duties of the job.
We do not find a reasonable business necessity in the case at bar.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 175


University of San Carlos – College of Law Labor Standards Finals Case Digests

Petitioners’ sole contention that "the company did not just want to have two (2) or more of its
employees related between the third degree by affinity and/or consanguinity" is lame. That the
second paragraph was meant to give teeth to the first paragraph of the questioned rule is
evidently not the valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were found fit
for the job, but were asked to resign when they married a co-employee. Petitioners failed to
show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an
employee of the Repacking Section, could be detrimental to its business operations. Neither did
petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a
Production Helper in the Selecting Department, who married Howard Comia, then a helper in
the cutter-machine. The policy is premised on the mere fear that employees married to each
other will be less efficient. If we uphold the questioned rule without valid justification, the
employer can create policies based on an unproven presumption of a perceived danger at the
expense of an employee’s right to security of tenure.
The failure of petitioners to prove a legitimate business concern in imposing the questioned
policy cannot prejudice the employee’s right to be free from arbitrary discrimination based
upon stereotypes of married persons working together in one company. Thus, for failure of
petitioners to present undisputed proof of a reasonable business necessity, we rule that the
questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to
whether respondents Simbol and Comia resigned voluntarily has become moot and academic.
As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact
that her resignation letter was written in her own handwriting. Both ruled that her resignation
was voluntary and thus valid. The respondent court failed to categorically rule whether Estrella
voluntarily resigned but ordered that she be reinstated along with Simbol and Comia.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her
alleged immoral conduct. At first, she did not want to sign the termination papers but she was
forced to tender her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got impregnated
by a married man and she could not stand being looked upon or talked about as immoral is
incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have
gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the employee is compelled by
personal reason(s) to dissociate himself from employment. It is done with the intention of
relinquishing an office, accompanied by the act of abandonment. Thus, it is illogical for Estrella
to resign and then file a complaint for illegal dismissal. Given the lack of sufficient evidence on
the part of petitioners that the resignation was voluntary, Estrella’s dismissal is declared illegal.

Gross and Habitual Neglect of Duty


School of the Holy Spirit of Quezon City vs. Taguiam, GR NO. 165565, July 14, 2008
SECOND DIVISION

[G.R. No. 165565, July 14, 2008]

Ma. Cecelia Timbal LlB – 2 Rm 402 | 176


University of San Carlos – College of Law Labor Standards Finals Case Digests

SCHOOL OF THE HOLY SPIRIT OF QUEZON CITY AND/OR SR. CRIS PINA A. TOLENTINO, S.SP.S.,
PETITIONERS, VS. CORAZON P. TAGUIAM, RESPONDENT.

DECISION

QUISUMBING, J.:

Facts:

Respondent Corazon P. Taguiam was the Class Adviser of Grade 5-Esmeralda of the petitioner,
School of the Holy Spirit of Quezon City. On March 10, 2000, the class president, wrote a letter
to the grade school principal requesting permission to hold a year-end celebration at the school
grounds. The principal authorized the activity and allowed the pupils to use the swimming pool.
In this connection, respondent distributed the parent's/guardian's permit forms to the pupils.

Respondent admitted that Chiara Mae Federico's permit form was unsigned. Nevertheless, she
concluded that Chiara Mae was allowed by her mother to join the activity since her mother
personally brought her to the school with her packed lunch and swimsuit.

Before the activity started, respondent warned the pupils who did not know how to swim to
avoid the deeper area. However, while the pupils were swimming, two of them sneaked out.
Respondent went after them to verify where they were going.

Unfortunately, while respondent was away, Chiara Mae drowned.

Petitioners issued a Notice of Administrative Charge to respondent for alleged gross negligence
and required her to submit her written explanation. Thereafter, petitioners conducted a
clarificatory hearing which respondent attended. Respondent also submitted her Affidavit of
Explanation.

Petitioners dismissed respondent on the ground of gross negligence resulting to loss of trust
and confidence.

In dismissing the complaint, the Labor Arbiter declared that respondent was validly terminated
for gross neglect of duty. He opined that Chiara Mae drowned because respondent had left the
pupils without any adult supervision. He also noted that the absence of adequate facilities
should have alerted respondent before allowing the pupils to use the swimming pool. The
Labor Arbiter further concluded that although respondent's negligence was not habitual, the
same warranted her dismissal since death resulted therefrom.

Respondent appealed to the NLRC which, however, affirmed the dismissal of the complaint.

Aggrieved, respondent instituted a petition for certiorari before the Court of Appeals, which

Ma. Cecelia Timbal LlB – 2 Rm 402 | 177


University of San Carlos – College of Law Labor Standards Finals Case Digests

ruled in her favor. The appellate court observed that there was insufficient proof that
respondent's negligence was both gross and habitual

Issue: Whether respondent's dismissal on the ground of gross negligence resulting to loss of
trust and confidence was valid.

Held: Under Article 282 of the Labor Code, gross and habitual neglect of duties is a valid ground
for an employer to terminate an employee. Gross negligence implies a want or absence of or a
failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Habitual neglect implies
repeated failure to perform one's duties for a period of time, depending upon the
circumstances.

Our perusal of the records leads us to conclude that respondent had been grossly
negligent. First , it is undisputed that Chiara Mae's permit form was unsigned. Yet, respondent
allowed her to join the activity because she assumed that Chiara Mae's mother has allowed her
to join it by personally bringing her to the school with her packed lunch and swimsuit.

The purpose of a permit form is precisely to ensure that the parents have allowed their child to
join the school activity involved. Respondent cannot simply ignore this by resorting to
assumptions. Respondent admitted that she was around when Chiara Mae and her mother
arrived. She could have requested the mother to sign the permit form before she left the school
or at least called her up to obtain her conformity.

Second, it was respondent's responsibility as Class Adviser to supervise her class in all activities
sanctioned by the school. Thus, she should have coordinated with the school to ensure that
proper safeguards, such as adequate first aid and sufficient adult personnel, were present
during their activity. She should have been mindful of the fact that with the number of pupils
involved, it would be impossible for her by herself alone to keep an eye on each one of them.

As it turned out, since respondent was the only adult present, majority of the pupils were left
unsupervised when she followed the two pupils who sneaked out. In the light of the odds
involved, respondent should have considered that those who sneaked out could not have left
the school premises since there were guards manning the gates. The guards would not have
allowed them to go out in their swimsuits and without any adult accompanying them. But
those who stayed at the pool were put at greater risk, when she left them unattended by an
adult.

Notably, respondent's negligence, although gross, was not habitual. In view of the considerable
resultant damage, however, we are in agreement that the cause is sufficient to dismiss
respondent. This is not the first time that we have departed from the requirements laid down
by the law that neglect of duties must be both gross and habitual. In Philippine Airlines, Inc. v.
NLRC, we ruled that Philippine Airlines (PAL) cannot be legally compelled to continue with the

Ma. Cecelia Timbal LlB – 2 Rm 402 | 178


University of San Carlos – College of Law Labor Standards Finals Case Digests

employment of a person admittedly guilty of gross negligence in the performance of his duties
although it was his first offense. In that case, we noted that a mere delay on PAL's flight
schedule due to aircraft damage entails problems like hotel accommodations for its passengers,
re-booking, the possibility of law suits, and payment of special landing fees not to mention the
soaring costs of replacing aircraft parts. In another case, Fuentes v. National Labor Relations
Commission, we held that it would be unfair to compel Philippine Banking Corporation to
continue employing its bank teller. In that case, we observed that although the teller's
infraction was not habitual, a substantial amount of money was lost. The deposit slip had
already been validated prior to its loss and the amount reflected thereon is already considered
as current liabilities in the bank's balance sheet. Indeed, the sufficiency of the evidence as well
as the resultant damage to the employer should be considered in the dismissal of the
employee. In this case, the damage went as far as claiming the life of a child.

Analogous Cases
John Hancock Life Insurance Corp. vs. Davis, September 3, 2008
G.R. No. 169549 September 3, 2008
FACTS:
Respondent Cantre, an agency administration officer of petitioner corporation was
accused of qualified theft for stealing Patricia Yuseco’s credit card which the latter used to
purchase items in various stores in the City of Manila. The NBI identified Cantre in a security
video obtained from Abenson’s Robinsons Place where a proposed transaction was disapproved
for giving the wrong information upon verification. However, the complaint was dismissed by
the prosecutor because the affidavits presented by the NBI was not properly verified.
Meanwhile, petitioner placed respondent under preventive suspension and instructed
her to cooperate with its ongoing investigation. Instead of doing so, however, respondent filed a
complaint for illegal dismissal alleging that petitioner terminated her employment without
cause.
The Labor Arbiter found that the respondent committed serious misconduct thus there was a
valid cause for dismissal. Respondent appealed to the NLRC which affirmed the assailed
decision. The CA found that the labor arbiter and NLRC merely adopted the findings of the NBI
regarding respondent's culpability. Because the affidavits of the witnesses were not verified,
they did not constitute substantial evidence. The labor arbiter and NLRC should have assessed
evidence independently as "unsubstantiated suspicions, accusations and conclusions of
employers (did) not provide legal justification for dismissing an employee."
ISSUE: Whether or not there is a valid cause for termination
HELD: Yes. Article 282 of the Labor Code provides:

Article 282. Termination by Employer. - An employer may terminate an employment for any of
the following causes:

(a) Serious misconduct or willful disobendience by the employee of the lawful orders of his
employer or his representatives in connection with his work;

Ma. Cecelia Timbal LlB – 2 Rm 402 | 179


University of San Carlos – College of Law Labor Standards Finals Case Digests

(e) Other causes analogous to the foregoing.

Misconduct involves "the transgression of some established and definite rule of action,
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not
mere error in judgment." For misconduct to be serious and therefore a valid ground for
dismissal, it must be:

1. of grave and aggravated character and not merely trivial or unimportant and

2. connected with the work of the employee.

In this case, petitioner dismissed respondent based on the NBI's finding that the latter stole and
used Yuseco's credit cards. But since the theft was not committed against petitioner itself but
against one of its employees, respondent's misconduct was not work-related and therefore, she
could not be dismissed for serious misconduct.

Nonetheless, Article 282(e) of the Labor Code talks of other analogous causes or those which
are susceptible of comparison to another in general or in specific detail. For an employee to be
validly dismissed for a cause analogous to those enumerated in Article 282, the cause must
involve a voluntary and/or willful act or omission of the employee.

A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting
to an employee's moral depravity. Theft committed by an employee against a person other than
his employer, if proven by substantial evidence, is a cause analogous to serious misconduct.

Yrasuegui vs. PAL October 17, 2008


G.R. No. 168081, October 17, 2008

ARMANDO G. YRASUEGUI VS. PHILIPPINE AIRLINES, INC

REYES, R.T., J.:

Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines,
Inc. (PAL). He stands five feet and eight inches (5'8") with a large body frame. The proper weight
for a man of his height and body structure is from 147 to 166 pounds, the ideal weight being
166 pounds, as mandated by the Cabin and Crew Administration Manual of PAL.

The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an
extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight
concerns. Apparently, petitioner failed to meet the company's weight standards, prompting
another leave without pay from March 5, 1985 to November 1985.After meeting the required
weight, petitioner was allowed to return to work. But petitioner's weight problem recurred. He
again went on leave without pay from October 17, 1988 to February 1989.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 180


University of San Carlos – College of Law Labor Standards Finals Case Digests

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with
company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was
formally requested to trim down to his ideal weight and report for weight checks on several
dates. He was also told that he may avail of the services of the company physician should he
wish to do so. He was advised that his case will be evaluated on July 3, 1989.

On February 25, 1989, petitioner underwent weight check. It was discovered that he gained,
instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the
limit. Consequently, his off-duty status was retained.

On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his
residence to check on the progress of his effort to lose weight. Petitioner weighed 217 pounds,
gaining 2 pounds from his previous weight. After the visit, petitioner made a commitment to
reduce weight in a letter addressed to Cabin Crew Group Manager Augusto Barrios.

Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner
remained overweight. On January 3, 1990, he was informed of the PAL decision for him to
remain grounded until such time that he satisfactorily complies with the weight standards.
Again, he was directed to report every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was given one more month to
comply with the weight requirement. As usual, he was asked to report for weight check on
different dates. He was reminded that his grounding would continue pending satisfactory
compliance with the weight standards.

Again, petitioner failed to report for weight checks, although he was seen submitting his
passport for processing at the PAL Staff Service Division.

On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight
check would be dealt with accordingly. He was given another set of weight check dates. Again,
petitioner ignored the directive and did not report for weight checks. On June 26, 1990,
petitioner was required to explain his refusal to undergo weight checks.When petitioner tipped
the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still way over his ideal
weight of 166 pounds.

From then on, nothing was heard from petitioner until he followed up his case requesting for
leniency on the latter part of 1992. He weighed at 219 pounds on August 20, 1992 and 205
pounds on November 5, 1992.

On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for
violation of company standards on weight requirements. He was given ten (10) days from
receipt of the charge within which to file his answer and submit controverting evidence.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 181


University of San Carlos – College of Law Labor Standards Finals Case Digests

On December 7, 1992, petitioner submitted his Answer. Notably, he did not deny being
overweight. What he claimed, instead, is that his violation, if any, had already been condoned
by PAL since "no action has been taken by the company" regarding his case "since 1988." He
also claimed that PAL discriminated against him because "the company has not been fair in
treating the cabin crew members who are similarly situated."

On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was
undergoing a weight reduction program to lose at least two (2) pounds per week so as to attain
his ideal weight.

On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his
ideal weight, "and considering the utmost leniency" extended to him "which spanned a period
covering a total of almost five (5) years," his services were considered terminated "effective
immediately."

His motion for reconsideration having been denied,petitioner filed a complaint for illegal
dismissal against PAL.

Labor Arbiter, NLRC and CA Dispositions

On November 18, 1998, Labor Arbiter ruled that petitioner was illegally dismissed. The Labor
Arbiter held that the weight standards of PAL are reasonable in view of the nature of the job of
petitioner. However, the weight standards need not be complied with under pain of dismissal
since his weight did not hamper the performance of his duties. Assuming that it did, petitioner
could be transferred to other positions where his weight would not be a negative
factor. Notably, other overweight employees, i.e., Mr. Palacios, Mr. Cui, and Mr. Barrios, were
promoted instead of being disciplined.

According to the NLRC, "obesity, or the tendency to gain weight uncontrollably regardless of the
amount of food intake, is a disease in itself." As a consequence, there can be no intentional
defiance or serious misconduct by petitioner to the lawful order of PAL for him to lose weight.

Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However,
it found as unnecessary the Labor Arbiter holding that petitioner was not remiss in the
performance of his duties as flight steward despite being overweight. According to the NLRC,
the Labor Arbiter should have limited himself to the issue of whether the failure of petitioner to
attain his ideal weight constituted willful defiance of the weight standards of PAL.

PAL moved for reconsideration to no avail. Thus, PAL elevated the matter to the Court of
Appeals (CA) via a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure. The
CA reversed the NLRC. The CA opined that there was grave abuse of discretion on the part of
the NLRC because it "looked at wrong and irrelevant considerations" in evaluating the evidence
of the parties.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 182


University of San Carlos – College of Law Labor Standards Finals Case Digests

Our Ruling
The obesity of petitioner is a ground for dismissal under Article 282(e) of the Labor Code.

In the case at bar, the evidence on record militates against petitioner's claims that obesity is a
disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is
possible for him to lose weight given the proper attitude, determination, and self-discipline.
Indeed, during the clarificatory hearing on December 8, 1992, petitioner himself claimed that
"[t]he issue is could I bring my weight down to ideal weight which is 172, then the answer is yes.
I can do it now."

True, petitioner claims that reducing weight is costing him "a lot of expenses." However,
petitioner has only himself to blame. He could have easily availed the assistance of the company
physician, per the advice of PAL. He chose to ignore the suggestion. In fact, he repeatedly failed
to report when required to undergo weight checks, without offering a valid explanation. Thus,
his fluctuating weight indicates absence of willpower rather than an illness.

In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight
attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his
dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As
the CA correctly puts it, "[v]oluntariness basically means that the just cause is solely attributable
to the employee without any external force influencing or controlling his actions. This element
runs through all just causes under Article 282, whether they be in the nature of a wrongful
action or omission. Gross and habitual neglect, a recognized just cause, is considered voluntary
although it lacks the element of intent found in Article 282(a), (c), and (d)."

The dismissal of petitioner can be predicated on the bona fide occupational qualification
defense.

Employment in particular jobs may not be limited to persons of a particular sex, religion, or
national origin unless the employer can show that sex, religion, or national origin is an actual
qualification for performing the job. The qualification is called a bona fide occupational
qualification (BFOQ). In the United States, there are a few federal and many state job
discrimination laws that contain an exception allowing an employer to engage in an otherwise
unlawful form of prohibited discrimination when the action is based on a BFOQ necessary to the
normal operation of a business or enterprise.

Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute
providing for it. Further, there is no existing BFOQ statute that could justify his dismissal.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 183


University of San Carlos – College of Law Labor Standards Finals Case Digests

Both arguments must fail.

First, the Constitution, the Labor Code, and RA No. 7277 or the Magna Carta for Disabled
Persons contain provisions similar to BFOQ.

Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British
Columbia Government and Service Employee's Union (BCGSEU), this Court held that in order to
justify a BFOQ, the employer must prove that (1) the employment qualification is reasonably
related to the essential operation of the job involved; and (2) that there is factual basis for
believing that all or substantially all persons meeting the qualification would be unable to
properly perform the duties of the job.

In short, the test of reasonableness of the company policy is used because it is parallel to
BFOQ. BFOQ is valid "provided it reflects an inherent quality reasonably necessary for
satisfactory job performance."

Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting
statute. Too, the Labor Arbiter, NLRC, and CA are one in holding that the weight standards of PAL
are reasonable. A common carrier, from the nature of its business and for reasons of public
policy, is bound to observe extraordinary diligence for the safety of the passengers it
transports. It is bound to carry its passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.

The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only
logical to hold that the weight standards of PAL show its effort to comply with the exacting
obligations imposed upon it by law by virtue of being a common carrier.

Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made
known to him prior to his employment. He is presumed to know the weight limit that he must
maintain at all times. In fact, never did he question the authority of PAL when he was repeatedly
asked to trim down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that
what is agreed upon shall be done. Kung ang tao ay tapat kanyang tutuparin ang
napagkasunduan.

Too, the weight standards of PAL provide for separate weight limitations based on height and
body frame for both male and female cabin attendants. A progressive discipline is imposed to
allow non-compliant cabin attendants sufficient opportunity to meet the weight standards.
Thus, the clear-cut rules obviate any possibility for the commission of abuse or arbitrary action
on the part of PAL.

Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 184


University of San Carlos – College of Law Labor Standards Finals Case Digests

Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced
from the language of Article 279 of the Labor Code that "[a]n 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." Luckily for petitioner, this is not an ironclad rule.

Exceptionally, separation pay is granted to a legally dismissed employee as an act "social


justice," or based on "equity." In both instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) does not reflect on the moral character of the employee.

Here, We grant petitioner separation pay equivalent to one-half (1/2) month's pay for every
year of service. It should include regular allowances which he might have been receiving. We
are not blind to the fact that he was not dismissed for any serious misconduct or to any act
which would reflect on his moral character. We also recognize that his employment with PAL
lasted for more or less a decade.

Sexual Harassment
Domingo vs. Rayala, February 18, 2008
MA. LOURDES T. DOMINGO v. ROGELIO I. RAYALA
G.R. No. 155831, 18 February 2008
NACHURA, J.:

FACTS:

On 16 November 1998, Ma. Lourdes T. Domingo, then Stenographic Reporter III at the NLRC,
filed a Complaint for sexual harassment against Rayala before Department of Labor and
Employment (DOLE). To support the Complaint, Domingo executed an Affidavit narrating the
incidences of sexual harassment complained of.
Accordingly, the following acts were committed by Rayala: holding and squeezing Domingo’s
shoulders, running his fingers across her neck and tickling her ear, having inappropriate
conversations with her, giving her money allegedly for school expenses with a promise of future
privileges, and making statements with unmistakable sexual overtones.

After the last incident, Domingo filed for leave of absence and asked to be immediately
transferred. Thereafter, she filed the Complaint for sexual harassment on the basis of
Administrative Order No. 250, in the Department of Labor and Employment.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 185


University of San Carlos – College of Law Labor Standards Finals Case Digests

Upon receipt of the Complaint, the DOLE Secretary referred the Complaint to the Office of the
President (OP), Rayala being a presidential appointee. The OP, through then Executive Secretary
Ronaldo Zamora, ordered Secretary Laguesma to investigate the allegations in the Complaint
and create a committee for such purpose. On December 4, 1998, Secretary Laguesma
constituted a Committee on Decorum and Investigation (Committee) for that purpose.

Later the Committee found Rayala guilty of the offense charged and recommended the
imposition of the minimum penalty provided under AO 250, which is suspension for six (6)
months and one (1) day.

Rayala filed a Motion for Reconsideration, which the OP denied. He then filed a Petition for
Certiorari and Prohibition with Prayer for Temporary Restraining Order under Rule 65 of the
Revised Rules on Civil Procedure before the Supreme Court. However, the same was dismissed
for disregarding thehierarchy of courts. Another Motion for Reconsideration was filed which led
to the referral of the Supreme Court of the petition to the Court of Appeals (CA) for appropriate
action.

The Court of Appeals dismissed the petition and held that there was sufficient evidence on
record to create moral certainty that Rayala committed the acts he was charged with. Rayala
filed a Petition for Review before the Supreme Court.

ISSUE:

Whether or not Rayala committed sexual harassment.

RULING:
Yes.
That Rayala committed the acts complained of – and was guilty of sexual harassment – is the
common factual finding of not just one, but three independent bodies: the Committee, the
Office of the President and the Court of Appeals.

Rayala insists, however, that his acts do not constitute sexual harassment, because Domingo did
not allege in her complaint that there was a demand, request, or requirement of a sexual favor
as a condition for her continued employment or for her promotion to a higher position.

The law penalizing sexual harassment in our jurisdiction is RA 7877. Section 3 thereof defines
work-related sexual harassment in this wise:

Sec. 3. Work, Education or Training-related Sexual Harassment Defined. – Work, education or


training-related sexual harassment is committed by an employer, manager, supervisor, agent of
the employer, teacher, instructor, professor, coach, trainor, or any other person who, having

Ma. Cecelia Timbal LlB – 2 Rm 402 | 186


University of San Carlos – College of Law Labor Standards Finals Case Digests

authority, influence or moral ascendancy over another in a work or training or education


environment, demands, requests or otherwise requires any sexual favor from the other,
regardless of whether the demand, request or requirement for submission is accepted by the
object of said Act.

(a) In a work-related or employment environment, sexual harassment is committed when:

(1) The sexual favor is made as a condition in the hiring or in the employment, re-
employment or continued employment of said individual, or in granting said individual
favorable compensation, terms, conditions, promotions, or privileges; or the refusal to grant the
sexual favor results in limiting, segregating or classifying the employee which in a way would
discriminate, deprive or diminish employment opportunities or otherwise adversely affect said
employee;

(2) The above acts would impair the employee’s rights or privileges under existing labor laws;
or

(3) The above acts would result in an intimidating, hostile, or offensive environment for the
employee.

It is true that this provision calls for a “demand, request or requirement of a sexual favor.” But it
is not necessary that the demand, request or requirement of a sexual favor be articulated in a
categorical oral or written statement. It may be discerned, with equal certitude, from the acts
of the offender. Holding and squeezing Domingo’s shoulders, running his fingers across her
neck and tickling her ear, having inappropriate conversations with her, giving her money
allegedly for school expenses with a promise of future privileges, and making statements with
unmistakable sexual overtones – all these acts of Rayala resound with deafening clarity the
unspoken request for a sexual favor.

Likewise, contrary to Rayala’s claim, it is not essential that the demand, request or requirement
be made as a condition for continued employment or for promotion to a higher position. It is
enough that the respondent’s acts result in creating an intimidating, hostile or offensive
environment for the employee. That the acts of Rayala generated an intimidating and hostile
environment for Domingo is clearly shown by the common factual finding of the Investigating
Committee, the OP and the CA that Domingo reported the matter to an officemate and, after
the last incident, filed for a leave of absence and requested transfer to another unit.

Redundancy
AMA Computer College v. Garcia, April 14, 2008

Smart Communications vs. Astorga, January 28, 2008


DECISION

Ma. Cecelia Timbal LlB – 2 Rm 402 | 187


University of San Carlos – College of Law Labor Standards Finals Case Digests

NACHURA, J.:
Facts:
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).
SMART launched an organizational realignment to achieve more efficient operations. This was
made known to the employees on February 27, 1998. Part of the reorganization was the
outsourcing of the marketing and sales 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 do the sales and marketing work, SMART abolished the CSMG/FSD,
Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would
be recommended by SMART. SMART then conducted a performance evaluation of CSMG
personnel and those who garnered the highest ratings were favorably recommended to SNMI.
Astorga landed last in the performance evaluation, thus, she was not recommended by SMART.
SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but
she refused the offer because the position carried lower salary rank and rate.
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.
The termination of her employment prompted Astorga to file a Complaint 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.
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.
The Labor Arbiter ordered that the dismissal of Astorga is illegal and unjust.
On appeal the National Labor Relations Commission (NLRC) sustained Astorga’s dismissal.
Declaring the abolition of CSMG and the creation of SNMI to do the sales and marketing
services for SMART as a valid organizational action. It overruled the Labor Arbiter’s ruling that
SNMI is an in-house agency, holding that it lacked legal basis.
Astorga filed a motion for reconsideration, but the NLRC denied it.
Astorga then went to the CA via certiorari. 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.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 188


University of San Carlos – College of Law Labor Standards Finals Case Digests

Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, the CA
partially granted astorga’s motion while SMART was denied.
Issue: Whether Astorga’s dismissal based on redundancy is valid?
Held:
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.
It is 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.
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, 1998 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.
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

Ma. Cecelia Timbal LlB – 2 Rm 402 | 189


University of San Carlos – College of Law Labor Standards Finals Case Digests

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. In DAP Corporation v. CA, 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.

Constructive Dismissal
Uniwide Sales Warehouse Club vs. NLRC, February 29, 2008
G.R. No. 154503 February 29, 2008
FACTS:
Amalia Kawada, a Full Assistant Store Manager received a Memorandum issued by the
Store Manager Apduhan summarizing the various reported incidents signifying unsatisfactory
performance on the latter's part which include the commingling of good and damaged items,
sale of a voluminous quantity of damaged toys and ready-to-wear items at unreasonable prices,
and failure to submit inventory reports. Another Memorandum was issued which claimed that
the answers given by the private respondent were all hypothetical and did not answer directly
the allegations attributed to her. Apduhan sent another Memorandum seeking from the private
respondent an explanation regarding the incidents reported by Uniwide employees and security
personnel for alleged irregularities committed by the private respondent such as allowing the
entry of unauthorized persons inside a restricted area during non-office hours, falsification of or
inducing another employee to falsify personnel or company records, sleeping and allowing a
non-employee to sleep inside the private office, unauthorized search and bringing out of
company records, purchase of damaged home furnishing items without the approval from
superior, taking advantage of buying damaged items in large quantity, alteration of approval
slips for the purchase of damaged items and abandonment of work. In a letter, private
respondent answered the allegations made against her.

Ma. Cecelia Timbal LlB – 2 Rm 402 | 190


University of San Carlos – College of Law Labor Standards Finals Case Digests

On July 27, 1998, private respondent sought medical help from the company physician, Dr.
Zambrano, due to complaints of dizziness. Finding private respondent to be suffering from
hypertension, Dr. Zambrano advised her to take five days sick leave.
Subsequently, private respondent was able to obtain from Dr. Zambrano a certificate of fitness
to work, which she presented to Apduhan the following day. It turned out that Dr. Zambrano
inadvertently wrote "Menia," the surname of the company nurse, in the medical certificate
instead of private respondent's surname. Thereafter, private respondent claims that Apduhan
shouted at her and prevented her from resuming work because she was not the person referred
to in the medical certificate. After private respondent left Apduhan's office, Apduhan's assistant
approached the private respondent to get the certification so that it may be photocopied. When
she refused to give the certification, private respondent claims that Apduhan once again
shouted at her which caused her hypertension to recur and eventually caused her to collapse.
Private respondent's head hit the edge of the table before she fell down on the ground for
which she suffered contusions at the back of her head.
On August 2, 1998, Apduhan issued a Memorandum, advising Kawada of a hearing scheduled
on August 12, 1998 and warning her that failure to appear shall constitute as waiver and the
case shall be submitted for decision based on available papers and evidence.
On August 3, 1998, private respondent filed a case for illegal dismissal before the Labor Arbiter
(LA).
On August 8, 1998, Apduhan sent a letter addressed to private respondent, which the latter
received on even date, advising private respondent to report for work, as she had been absent
since August 1, 1998; and warning her that upon her failure to do so, she shall be considered to
have abandoned her job.
On September 1, 1998, Apduhan issued a Memorandum stating that since private respondent
was unable to attend the scheduled August 12, 1998 hearing, the case was evaluated on the
basis of the evidence on record; and enumerating the pieces of evidence of the irregularities
and violations of company rules committed by private respondent, the latter's defenses and the
corresponding findings by Uniwide. Kawada was thereafter terminated from her employment
on the grounds of violations of Company Rules, Abandonment of Work and loss of trust and
confidence.
The Labor Arbiter denied the complaint of Kawada for lack of merit while the NLRC on appeal
reversed the decision of the Labor Arbiter ordering UNiwide to pay separation pay, backwages
and moral and exemplary damages. According to the NLRC, private respondent was subjected to
inhuman and anti-social treatment oppressive to labor. Private respondent received successive
memoranda from Apduhan accusing the former of different infractions, some of which offenses
complainant was informed of only a year after the alleged commission. Further, Apduhan's ill
will and motive to edge private respondent out of her employ was displayed by Apduhan's
stubborn refusal to allow private respondent to continue her work on the flimsy excuse that the
medical certificate did not bear her correct surname, while Apduhan knew for a fact that the
same could not have referred to another person but to private respondent.
Also, the NLRC observed that private respondent was not afforded due process by petitioners
because the former was not given an opportunity to a fair hearing in that the investigation was
conducted after private respondent had been constructively dismissed; and that there was no

Ma. Cecelia Timbal LlB – 2 Rm 402 | 191


University of San Carlos – College of Law Labor Standards Finals Case Digests

point for private respondent to still attend the investigation set on August 12, 1998 after her
constructive dismissal on July 31, 1998 and after she had already filed her complaint.
ISSUE:
Whether or not resondent was constructively dismissed.

HELD: No. Case law defines constructive dismissal as a cessation of work because continued
employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank
or diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee.

The test of constructive dismissal is whether a reasonable person in the employee's position
would have felt compelled to give up his position under the circumstances. It is an act
amounting to dismissal but made to appear as if it were not. In fact, the employee who is
constructively dismissed may be allowed to keep on coming to work. Constructive dismissal is
therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the employer.
The Court finds that private respondent's allegation of harassment is a specious statement
which contains nothing but empty imputation of a fact that could hardly be given any
evidentiary weight by this Court. Private respondent's bare allegations of constructive dismissal,
when uncorroborated by the evidence on record, cannot be given credence.
The right to impose disciplinary sanctions upon an employee for just and valid cause, as well as
the authority to determine the existence of said cause in accordance with the norms of due
process, pertains in the first place to the employer. Precisely, petitioners gave private
respondent successive memoranda so as to give the latter an opportunity to controvert the
charges against her. Clearly, the memoranda are not forms of harassment, but petitioners'
compliance with the requirements of due process.
The July 31, 1998 confrontation where Apduhan allegedly shouted at private respondent which
caused the latter's hypertension to recur and eventually caused her to collapse cannot by itself
support a finding of constructive dismissal by the NLRC and the CA. Even if true, the act of
Apduhan in shouting at private respondent was an isolated outburst on the part of Apduhan
that did not show a clear discrimination or insensibility that would render the working condition
of private respondent unbearable.

On petitioners' claim of abandonment by private respondent, well-settled is the rule that to


constitute abandonment of work, two elements must concur: (1) the employee must have failed
to report for work or must have been absent without valid or justifiable reason, and (2) there
must have been a clear intention on the part of the employee to sever the employer-employee
relationship manifested by some overt act. The employer has the burden of proof to show the
employee's deliberate and unjustified refusal to resume his employment without any intention
of returning. Mere absence is not sufficient. There must be an unequivocal intent on the part of
the employee to discontinue his employment.

Private respondent's failure to report for work despite the August 8, 1998 letter sent by
Apduhan to private respondent advising the latter to report for work is not sufficient to

Ma. Cecelia Timbal LlB – 2 Rm 402 | 192


University of San Carlos – College of Law Labor Standards Finals Case Digests

constitute abandonment. It is a settled rule that failure to report for work after a notice to
return to work has been served does not necessarily constitute abandonment.

Private respondent mistakenly believed that the successive memoranda sent to her from March
1998 to June 1998 constituted discrimination, insensibility or disdain which was tantamount to
constructive dismissal. Thus, private respondent filed a case for constructive dismissal against
petitioners and consequently stopped reporting for work.
The Court finds that petitioners were not able to establish that private respondent deliberately
refused to continue her employment without justifiable reason. To repeat, the Court will not
make a drastic conclusion that private respondent chose to abandon her work on the basis of
her mistaken belief that she had been constructively dismissed by Uniwide.

Nonetheless, the Court agrees with the findings of the LA that the termination of private
respondent was grounded on the existence of just cause under Article 282 (c) of the Labor Code
or willful breach by the employee of the trust reposed on him by his employer or a duly
authorized representative.

Private respondent occupies a managerial position. As a managerial employee, mere existence


of a basis for believing that such employee has breached the trust of his employer would suffice
for his dismissal.

Penaflor vs. Outdoor Clothing Manufacturing Corp., January 21, 2010


G.R. No. 177114 January 21, 2010
MANOLO A. PEÑAFLOR vs.
OUTDOOR CLOTHING MANUFACTURING CORPORATION, NATHANIEL T. SYFU, President,
MEDYLENE M. DEMOGENA, Finance Manager, and PAUL U. LEE, Chairman
BRION, J.;
Peñaflor was hired on September 2, 1999 as probationary Human Resource Department (HRD)
Manager of respondent Outdoor Clothing Manufacturing Corporation (Outdoor Clothing or the
company). As HRD head, Peñaflor was expected to (1) secure and maintain the right quality
and quantity of people needed by the company; (2) maintain the harmonious relationship
between the employees and management in a role that supports organizational goals and
individual aspirations; and (3) represent the company in labor cases or proceedings. Two staff
members were assigned to work with him to assist him in undertaking these functions.
Peñaflor claimed that his relationship with Outdoor Clothing went well during the first few
months of his employment; he designed and created the company’s Policy Manual, Personnel
Handbook, Job Expectations, and Organizational Set-Up during this period. His woes began
when the company’s Vice President for Operations, Edgar Lee (Lee), left the company after a
big fight between Lee and Chief Corporate Officer Nathaniel Syfu (Syfu). Because of his close
association with Lee, Peñaflor claimed that he was among those who bore Syfu’s ire.
When Outdoor Clothing began undertaking its alleged downsizing program due to negative
business returns, Peñaflor alleged that his department had been singled out. On the pretext of
retrenchment, Peñaflor’s two staff members were dismissed, leaving him as the only member of

Ma. Cecelia Timbal LlB – 2 Rm 402 | 193


University of San Carlos – College of Law Labor Standards Finals Case Digests

Outdoor Clothing’s HRD and compelling him to perform all personnel-related work. He worked
as a one-man department, carrying out all clerical, administrative and liaison work; he
personally went to various government offices to process the company’s papers.
When an Outdoor Clothing employee, Lynn Padilla (Padilla), suffered injuries in a bombing
incident, the company required Peñaflor to attend to her hospitalization needs; he had to
work outside office premises to undertake this task. As he was acting on the company’s
orders, Peñaflor considered himself to be on official business, but was surprised when the
company deducted six days’ salary corresponding to the time he assisted Padilla. According to
Finance Manager Medylene Demogena (Demogena), he failed to submit his trip ticket, but
Peñaflor belied this claim as a trip ticket was required only when a company vehicle was used
and he did not use any company vehicle when he attended to his off-premises work.
After Peñaflor returned from his field work on March 13, 2000, his officemates informed him
that while he was away, Syfu had appointed Nathaniel Buenaobra (Buenaobra) as the new
HRD Manager. This information was confirmed by Syfu’s memorandum of March 10, 2000 to
the entire office stating that Buenaobra was the concurrent HRD and Accounting
Manager. Peñaflor was surprised by the news; he also felt betrayed and discouraged. He tried to
talk to Syfu to clarify the matter, but was unable to do so. Peñaflor claimed that under these
circumstances, he had no option but to resign. He submitted a letter to Syfu declaring his
irrevocable resignation from his employment with Outdoor Clothing effective at the cl