G.R. No.
L-22008 November 3, 1924 been adopted in the reasonable and lawful exercise of the police power of the
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,
vs.
JULIO POMAR, defendant-appellant.
Araneta and Zaragoza for appellant.
Attorney-General Villa-Real for appellee.
JOHNSON, J.:
The only question presented by this appeal is whether or not the provisions of
sections 13 and 15 of Act No. 3071 are a reasonable and lawful exercise of the
police power of the state.
It appears from the record that on the 26th day of October, 1923, the
prosecuting attorney of the City of Manila presented a complaint in the Court
of First Instance, accusing the defendant of a violation of section 13 in
connection with section 15 of Act No. 3071 of the Philippine Legislature. The
complaint alleged:
That on or about the 27th day of August, 1923, and sometime prior
thereto, in the City of Manila, Philippine Islands, the said accused,
being the manager and person in charge of La Flor de la Isabela, a
tobacco factory pertaining to La Campania General de Tabacos de
Filipinas, a corporation duly authorized to transact business in said
city, and having, during the year 1923, in his employ and service
as cigar-maker in said factory, a woman by the name of Macaria
Fajardo, whom he granted vacation leave which began on the 16th
day of July, 1923, by reason of her pregnancy, did then and there
willfully, unlawfully, and feloniously fail and refuse to pay to said
woman the sum of eighty pesos (P80), Philippine currency, to
which she was entitled as her regular wages corresponding to thirty
days before and thirty days after her delivery and confinement
which took place on the 12th day of August, 1923, despite and
over the demands made by her, the said Macaria Fajardo, upon
said accused, to do so.
To said complaint, the defendant demurred, alleging that the facts therein
contained did not constitute an offense. The demurrer was overruled,
whereupon the defendant answered and admitted at the trial all of the
allegations contained in the complaint, and contended that the provisions of
said Act No. 3071, upon which the complaint was based were illegal,
unconstitutional and void.
Upon a consideration of the facts charged in the complaint and admitted by
the defendant, the Honorable C. A. Imperial, judge, found the defendant guilty
of the alleged offense described in the complaint, and sentenced him to pay a
fine of P50, in accordance with the provisions of section 15 of said Act, to
suffer subsidiary imprisonment in case of insolvency, and to pay the costs.
From that sentence the defendant appealed, and now makes the following
assignments of error: That the court erred in overruling the demurrer; in
convicting him of the crime charged in the information; and in not declaring
section 13 of Act No. 3071, unconstitutional:
Section 13 of Act No. 3071 is as follows:
Every person, firm or corporation owning or managing a factory,
shop or place of labor of any description shall be obliged to grant
to any woman employed by it as laborer who may be pregnant,
thirty days vacation with pay before and another thirty days after
confinement: Provided, That the employer shall not discharge such
laborer without just cause, under the penalty of being required to
pay to her wages equivalent to the total of two months counted
from the day of her discharge.
Section 15 of the same Act is as follows:
Any person, firm or corporation violating any of the provisions of
this Act shall be punished by a fine of not less than fifty pesos nor
more than two hundred and fifty, or by imprisonment for not less
than ten days nor more than six months, or both, in the discretion
of the court.
In the case of firms or corporations, the presidents, directors or
managers thereof or, in their default, the persons acting in their
stead, shall be criminally responsible for each violation of the
provisions of this Act.
Said section 13 was enacted by the Legislature of the Philippine Islands in the
exercise of its supposed police power, with the praiseworthy purpose of
safeguarding the health of pregnant women laborers in "factory, shop or place
of labor of any description," and of insuring to them, to a certain extent,
reasonable support for one month before and one month after their delivery.
The question presented for decision by the appeal is whether said Act has
state.
In determining whether a particular law promulgated under the police power
of the state is, in fact, within said power, it becomes necessary first, to
determine what that power is, its limits and scope. Literally hundreds of
decisions have been promulgated in which definitions of the police power
have been attempted. An examination of all of said decisions will show that
the definitions are generally limited to particular cases and examples, which
are as varied as they are numerous.
By reason of the constant growth of public opinion in a developing
civilization, the term "police power" has never been, and we do not believe
can be, clearly and definitely defined and circumscribed. One hundred years
ago, for example, it is doubtful whether the most eminent jurist, or court, or
legislature would have for a moment thought that, by any possibility, a law
providing for the destruction of a building in which alcoholic liquors were
sold, was within a reasonable and lawful exercise of the police power.
(Mugler vs. Kansas, 123 U. S., 623.) The development of civilization, the
rapidly increasing population, the growth of public opinion, with a desire on
the part of the masses and of the government to look after and care for the
interests of the individuals of the state, have brought within the police power
of the state many questions for regulation which formerly were not so
considered. In a republican form of government public sentiment wields a
tremendous influence upon what the state may or may not do, for the
protection of the health and public morals of the people. Yet, neither public
sentiment, nor a desire to ameliorate the public morals of the people of the
state will justify the promulgation of a law which contravenes the express
provisions of the fundamental law of the people — the constitutional of the
state.
A definition of the police power of the state must depend upon the particular
law and the particular facts to which it is to be applied. The many definitions
which have been given by the highest courts may be examined, however, for
the purpose of giving us a compass or guide to assist us in arriving at a correct
conclusion in the particular case before us. Sir William Blackstone, one of the
greatest expounders of the common law, defines the police power as "the due
regulation and domestic order of the kingdom, whereby the inhabitants of a
state, like members of a well-governed family, are bound to conform their
general behavior to the rules of propriety, good neighborhood, and good
manners, and to be decent, industrious, and inoffensive in their respective
stations." (4 Blackstone's Commentaries, 162.)
Mr. Jeremy Bentham, in his General View of Public Offenses, gives us the
following definition: "Police is in general a system of precaution, either for
the prevention of crimes or of calamities. Its business may be distributed into
eight distinct branches: (1) Police for the prevention of offenses; (2) police for
the prevention of calamities; (3) police for the prevention of endemic
diseased; (4) police of charity; (5) police of interior communications; (6)
police of public amusements; (7) police for recent intelligence; (8) police for
registration."
Mr. Justice Cooley, perhaps the greatest expounder of the American
Constitution, says: "The police power is the power vested in the legislature by
the constitution to make, ordain, and establish all manner of wholesome and
reasonable laws, statutes, and ordinances, either with penalties or without, not
repugnant to the constitution, as they shall judge to be for the good and
welfare of the commonwealth, and of the subject of the same. . . ." (Cooley's
Constitutional Limitations, p. 830.)
In the case of Commonwealth of Massachusetts vs. Alger (7 Cushing, 53), we
find a very comprehensive definition of the police power of the state. In that
case it appears that the colony of Massachusetts in 1647 adopted an Act to
preserve the harbor of Boston and to prevent encroachments therein. The
defendant unlawfully erected, built, and established in said harbor, and
extended beyond said lines and into and over the tide water of the
Commonwealth a certain superstructure, obstruction and encumbrance. Said
Act provided a penalty for its violation of a fine of not less than $1,000 nor
more than $5,000 for every offense, and for the destruction of said buildings,
or structures, or obstructions as a public nuisance. Alger was arrested and
placed on trial for violation of said Act. His defense was that the Act of 1647
was illegal and void, because if permitted the destruction of private property
without compensation. Mr. Justice Shaw, speaking for the court in that said,
said: "We think it is a settled principle, growing out of the nature of well-
ordered civil society, that every holder of property, however absolute and
unqualified may be his title, holds it under the implied liability that his use of
it may be so regulated, that it shall not be injurious to the equal environment
of others having an equal right to the enjoyment of their property nor injurious
to the rights of the community. All property in this commonwealth, as well
that in the interior as that bordering on tide waters, is derived directly or
indirectly from the government and held subject to those general regulations,
which are necessary to the common good and general welfare. Rights of
property, like all other social and conventional rights, are subject to such
reasonable limitations in their enjoyment, as shall prevent them from being
injurious, and to such reasonable restraints and regulations established by law,
as the legislature, under the governing and controlling power vested in
them by the constitution, may think necessary and expedient." Mr. Justice
Shaw further adds: ". . . The power we allude to is rather the police power, the
power vested in the legislature by the constitution, to make, ordain and
establish all manner of wholesome and reasonable laws, statutes and
1
ordinances, either with penalties or without, not repugnant to the constitution,
as they shall judge to be for the good and welfare of the commonwealth, and
of the subjects of the same."
This court has, in the case of Case vs. Board of Health and Heiser (24 Phil.,
250), in discussing the police power of the state, had occasion to say: ". . . It is
a well settled principle, growing out of the nature of well-ordered and
civilized society, that every holder of property, however absolute and
unqualified may be his title, holds it under the implied liability that his use of
it shall not be injurious to the equal enjoyment of others having an equal right
to the enjoyment of their property, nor injurious to the rights of the
community. All property in the state is held subject to its general regulations,
which are necessary to the common good and general welfare. Rights of
property, like all other social and conventional rights, are subject to such
reasonable limitations in their enjoyment as shall prevent them from being
injurious, and to such reasonable restraints and regulations, established by
law, as the legislature, under the governing and controlling power vested in
them by the constitution, may think necessary and expedient. The state, under
the police power is possessed with plenary power to deal with all matters
relating to the general health, morals, and safety of the people, so long as it
does not contravene any positive inhibition of the organic law and providing
that such power is not exercised in such a manner as to justify the interference
of the courts to prevent positive wrong and oppression."
Many other definitions have been given not only by the Supreme Court of the
United States but by the Supreme Court of every state of the Union. The
foregoing definitions, however, cover the general field of all of the definitions,
found in jurisprudence. From all of the definitions we conclude that it is much
easier to perceive and realize the existence and sources of the police power
than to exactly mark its boundaries, or prescribe limits to its exercise by the
legislative department of the government.
The most recent definition which has been called to our attention is that found
in the case of Adkins vs. Children's Hospital of the District of Columbia (261
U. S., 525). In that case the controversy arose in this way: A children's
hospital employed a number of women at various rates of wages, which were
entirely satisfactory to both the hospital and the employees. A hotel company
employed a woman as elevator operator at P35 per month and two meals a day
under healthy and satisfactory conditions, and she did not risk to lose her
position as she could not earn so much anywhere else. Her wages were less
than the minimum fixed by a board created under a law for the purpose of
fixing a minimum wage for women and children, with a penalty providing a
punishment for a failure or refusal to pay the minimum wage fixed. The wage
paid by the hotel company of P35 per month and two meals a day was less
than the minimum wage fixed by said board. By reason of the order of said
board, the hotel company, was about to discharge her, as it was unwilling to
pay her more and could not give her employment at that salary without risking
the penalty of a fine and imprisonment under the law. She brought action to
enjoin the hotel company from discharging her upon the ground that the
enforcement of the "Minimum Wage Act" would deprive her of her
employment and wages without due process of law, and that she could not get
as good a position anywhere else. The constitutionality of the Act was
squarely presented to the Supreme Court of the United States for decision.
The Supreme Court of the United States held that said Act was void on the
ground that the right to contract about one's own affairs was a part of the
liberty of the individual under the constitution, and that while there was no
such thing as absolute freedom of contract, and it was necessary subject to a
great variety of restraints, yet none of the exceptional circumstances, which at
times justify a limitation upon one's right to contract for his own services,
applied in the particular case.
In the course of the decision in that case (Adkins vs. Children's Hospital of the
District of Columbia, 261 U. S., 525), Mr. Justice Sutherland, after a
statement of the fact and making reference to the particular law, said:
The statute now under consideration is attacked upon the ground
that it authorizes an unconstitutional interference with the freedom
of contract including within the guarantees of the due process
clause of the 5th Amendment. That the right to contract about one's
affairs is a part of the liberty of the individual protected by this
clause is settled by the decision of this court, and is no longer open
to question. Within this liberty are contracts of employment of
labor. In making such contracts, generally speaking, the parties
have an equal right to obtain from each other the best terms they
can as the result of private bargaining. (Allgeyer vs.Louisiana, 165
U. S., 578; 591; Adair vs. United States, 208 U. S., 161;
Muller vs. Oregon, 208 U. S., 412, 421.)
xxx xxx xxx
The law takes account of the necessities of only one party to the
contract. It ignores the necessities of the employer by compelling
him to pay not less than a certain sum, not only whether the
employee is capable of earning it, but irrespective of the ability of
his business to sustain the burden, generously leaving him, of
course, the privilege of abandoning his business as an alternative
for going on at a loss. Within the limits of the minimum sum, he is
precluded, under penalty of fine and imprisonment, from adjusting
compensation to the differing merits of his employees. It compels
him to pay at least the sum fixed in any event, because the
employee needs it, but requires no service of equivalent value from
the employee. It (the law) therefore undertakes to solve but one-
half of the problem. The other half is the establishment of a
corresponding standard of efficiency; and this forms no part of the
policy of the legislation, although in practice the former half
without the latter must lead to ultimate failure, in accordance with
the inexorable law that no one can continue indefinitely to take out
more than he puts in without ultimately exhausting the supply. The
law . . . takes no account of periods of distress and business
depression, or crippling losses, which may leave the employer
himself without adequate means of livelihood. To the extent that
the sum fixed exceeds the fair value of the services rendered, it
amounts to a compulsory exaction from the employer for the
support of a partially indigent person, for whose condition there
rests upon him no peculiar responsibility, and therefore, in effect,
arbitrarily shifts to his shoulders a burden which, if it belongs to
anybody, belongs to society as a whole.
The failure of this state which, perhaps more than any other, puts
upon it the stamp of invalidity is that it exacts from the employer
an arbitrary payment for a purpose and upon a basis having no
casual connection with his business, or the contract, or the work
the employee engages to do. The declared basis, as already pointed
out, is not the value of the service rendered, but the extraneous
circumstances that the employee needs to get a prescribed sum of
money to insure her subsistence, health and morals. . . . The
necessities of the employee are alone considered, and these arise
outside of the employment, are the same when there is no
employment, and as great in one occupation as in another. . . . In
principle, there can be no difference between the case of selling
labor and the case of selling goods. If one goes to the butcher, the
baker, or grocer to buy food, he is morally entitled to obtain the
worth of his money, but he is not entitle to more. If what he gets is
worth what he pays, he is not justified in demanding more simply
because he needs more; and the shopkeeper, having dealt fairly and
honestly in that transaction, is not concerned in any peculiar sense
with the question of his customer's necessities. Should a statute
undertake to vest in a commission power to determine the quantity
of food necessary for individual support, and require the
shopkeeper, if he sell to the individual at all, to furnish that
quantity at not more than a fixed maximum, it would undoubtedly
fall before the constitutional test. The fallacy of any argument in
support of the validity of such a statute would be quickly exposed.
The argument in support of that now being considered is equally
fallacious, though the weakness of it may not be so plain. . . .
It has been said that the particular statute before us is required in the interest
of social justice for whose end freedom of contract may lawfully be subjected
to restraint. The liberty of the individual to do as he pleases, even in innocent
matters, is not absolute. That liberty must frequently yield to the common
good, and the line beyond which the power of interference may not be pressed
is neither definite nor unalterable, may be made to move, within limits not
well defined, with changing needs and circumstances.
The late Mr. Justice Harlan, in the case of Adair vs. United States (208 U. S.,
161, 174), said that the right of a person to sell his labor upon such terms as he
deems proper is, in its essence, the same as the right of the purchaser of labor
to prescribe the conditions upon which he will accept such labor from the
person offering to sell. In all such particulars the employer and the employee
have equality of right, and any legislation that disturbs that equality is an
arbitrary interference with the liberty of contract, which no government can
legally justify in a free land, under a constitution which provides that no
person shall be deprived of his liberty without due process of law.
Mr. Justice Pitney, in the case of Coppage vs. Kansas (235 U. S., 1, 14),
speaking for the Supreme Court of the United States, said: ". . . Included in the
right of personal liberty and the right of private property — partaking of the
nature of each — is the right to make contracts for the acquisition of property.
Chief among such contracts is that of personal employment, by which labor
and other services are exchange for money or other forms of property. If this
right be struck down or arbitrarily interfered with, there is a substantial
impairment of liberty in the long established constitutional sense. The right is
as essential to the laborer as to the capitalist, to the poor as to the rich; for the
vast majority of persons have no other honest way to begin to acquire
property, save by working for money."
The right to liberty includes the right to enter into contracts and to terminate
contracts. In the case of Gillespie vs.People (118 Ill., 176, 183-185) it was
held that a statute making it unlawful to discharge an employee because of his
connection with any lawful labor organization, and providing a penalty
therefor, is void, since the right to terminate a contract, subject to liability to
respond in a civil action for an unwarranted termination, is within the
protection of the state and Federal constitutions which guarantee that no
person shall be deprived of life, liberty or property without due process of
law. The court said in part: ". . . One citizen cannot be compelled to give
employment to another citizen, nor can anyone be compelled to be employed
against his will. The Act of 1893, now under consideration, deprives the
employer of the right to terminate his contract with his employee. The right to
terminate such a contract is guaranteed by the organic law of the state. The
2
legislature is forbidden to deprive the employer or employee of the exercise of
that right. The legislature has no authority to pronounce the performance of an
innocent act criminal when the public health, safety, comfort or welfare is not
interfered with. The statute in question says that, if a man exercises his
constitutional right to terminate a contract with his employee, he shall,
without a hearing, be punished as for the commission of a crime.
xxx xxx xxx
Liberty includes not only the right to labor, but to refuse to labor,
and, consequently, the right to contract to labor or for labor, and to
terminate such contracts, and to refuse to make such contracts. The
legislature cannot prevent persons, who are sui juris, from
laboring, or from making such contracts as they may see fit to
make relative to their own lawful labor; nor has it any power by
penal laws to prevent any person, with or without cause, from
refusing to employ another or to terminate a contract with him,
subject only to the liability to respond in a civil action for an
unwarranted refusal to do that which has been agreed upon. Hence,
we are of the opinion that this Act contravenes those provisions of
the state and Federal constitutions, which guarantee that no person
shall be deprived of life, liberty or property without due process of
law.
The statute in question is exactly analogous to the "Minimum Wage Act"
referred to above. In section 13 it will be seen that no person, firm, or
corporation owning or managing a factory shop, or place of labor of any
description, can make a contract with a woman without incurring the
obligation, whatever the contract of employment might be, unless he also
promise to pay to such woman employed as a laborer, who may become
pregnant, her wages for thirty days before and thirty days after confinement.
In other words, said section creates a term or condition in every contract made
by every person, firm, or corporation with any woman who may, during the
course of her employment, become pregnant, and a failure to include in said
contract the terms fixed to a fine and imprisonment. Clearly, therefore, the law
has deprived, every person, firm, or corporation owning or managing a
factory, shop or place of labor of any description within the Philippine Islands,
of his right to enter into contracts of employment upon such terms as he and
the employee may agree upon. The law creates a term in every such contract,
without the consent of the parties. Such persons are, therefore, deprived of
their liberty to contract. The constitution of the Philippine Islands guarantees
to every citizen his liberty and one of his liberties is the liberty to contract.
It is believed and confidently asserted that no case can be found, in civilized
society and well-organized governments, where individuals have been
deprived of their property, under the police power of the state, without
compensation, except in cases where the property in question was used for the
purpose of violating some legally adopted, or constitutes a nuisance. Among
such cases may be mentioned: Apparatus used in counterfeiting the money of
the state; firearms illegally possessed; opium possessed in violation of law;
apparatus used for gambling in violation of law; buildings and property used
for the purpose of violating laws prohibiting the manufacture and sale of
intoxicating liquors; and all cases in which the property itself has become a
nuisance and dangerous and detrimental to the public health, morals and
general welfare of the state. In all of such cases, and in many more which
might be cited, the destruction of the property is permitted in the exercise of
the police power of the state. But it must first be established that such property
was used as the instrument for the violation of a valid existing law.
(Mugler vs. Kansas, 123 U. S., 623; Slaughter-House Cases, 16 Wall., [U. S.],
36; Butchers' Union, etc., Co. vs.Crescent City, etc., Co., 111 U. S., 746 John
Stuart Mill — "On Liberty," 28, 29.)
Without further attempting to define what are the peculiar subjects or limits of
the police power, it may safely be affirmed, that every law for the restraint and
punishment of crimes, for the preservation of the public peace, health, and
morals, must come within this category. But the state, when providing by
legislation for the protection of the public health, the public morals, or the
public safety, is subject to and is controlled by the paramount authority of the
constitution of the state, and will not be permitted to violate rights secured or
guaranteed by that instrument or interfere with the execution of the powers
and rights guaranteed to the people under their law — the constitution.
(Mugler vs. Kansas, 123 U. S., 623.)
The police power of the state is a growing and expanding power. As
civilization develops and public conscience becomes awakened, the police
power may be extended, as has been demonstrated in the growth of public
sentiment with reference to the manufacture and sale of intoxicating liquors.
But that power cannot grow faster than the fundamental law of the state, nor
transcend or violate the express inhibition of the people's law — the
constitution. If the people desire to have the police power extended and
applied to conditions and things prohibited by the organic law, they must first
amend that law.1awphil.net
It will also be noted from an examination of said section 13, that it takes no
account of contracts for the employment of women by the day nor by the
piece. The law is equally applicable to each case. It will hardly be contended
that the person, firm or corporation owning or managing a factory, shop or
place of labor, who employs women by the day or by the piece, could be
compelled under the law to pay for sixty days during which no services were
rendered.
It has been decided in a long line of decisions of the Supreme Court of the
United States, that the right to contract about one's affairs is a part of the
liberty of the individual, protected by the "due process of law" clause of the
constitution. (Allgeyer vs. Louisiana, 165 U. S., 578, 591; New York Life Ins.
Co. vs. Dodge, 246 U. S., 357, 373, 374; Coppage vs. Kansas, 236 U. S., 1,
10, 14; Adair vs. United States, 208 U. S., 161; Lochner vs. New York, 198 U.
S.; 45, 49; Muller vs. Oregon, 208 U. S., 412, 421.)
The rule in this jurisdiction is, that the contracting parties may establish any
agreements, terms, and conditions they may deem advisable, provided they
are not contrary to law, morals or public policy. (Art. 1255, Civil Code.)
For all of the foregoing reasons, we are fully persuaded, under the facts and
the law, that the provisions of section 13, of Act No. 3071 of the Philippine
Legislature, are unconstitutional and void, in that they violate and are contrary
to the provisions of the first paragraph of section 3 of the Act of Congress of
the United States of August 29, 1916. (Vol. 12, Public Laws, p. 238.)
Therefore, the sentence of the lower court is hereby revoked, the complaint is
hereby dismissed, and the defendant is hereby discharged from the custody of
the law, with costs de oficio. So ord
G.R. No. 81958 June 30, 1988
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS,
INC., petitioner,
vs.
HON. FRANKLIN M. DRILON as Secretary of Labor and Employment,
and TOMAS D. ACHACOSO, as Administrator of the Philippine
Overseas Employment Administration, respondents.
Gutierrez & Alo Law Offices for petitioner.
SARMIENTO, J.:
The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for
short), a firm "engaged principally in the recruitment of Filipino workers,
male and female, for overseas placement," 1 challenges the Constitutional
validity of Department Order No. 1, Series of 1988, of the Department of
Labor and Employment, in the character of "GUIDELINES GOVERNING
THE TEMPORARY SUSPENSION OF DEPLOYMENT OF FILIPINO
DOMESTIC AND HOUSEHOLD WORKERS," in this petition for certiorari
and prohibition. Specifically, the measure is assailed for "discrimination
against males or females;" 2 that it "does not apply to all Filipino workers but
only to domestic helpers and females with similar skills;" 3 and that it is
violative of the right to travel. It is held likewise to be an invalid exercise of
the lawmaking power, police power being legislative, and not executive, in
character.
In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of
the Constitution, providing for worker participation "in policy and decision-
making processes affecting their rights and benefits as may be provided by
law." 4 Department Order No. 1, it is contended, was passed in the absence of
prior consultations. It is claimed, finally, to be in violation of the Charter's
non-impairment clause, in addition to the "great and irreparable injury" that
PASEI members face should the Order be further enforced.
On May 25, 1988, the Solicitor General, on behalf of the respondents
Secretary of Labor and Administrator of the Philippine Overseas Employment
Administration, filed a Comment informing the Court that on March 8, 1988,
the respondent Labor Secretary lifted the deployment ban in the states of Iraq,
Jordan, Qatar, Canada, Hongkong, United States, Italy, Norway, Austria, and
Switzerland. * In submitting the validity of the challenged "guidelines," the
Solicitor General invokes the police power of the Philippine State.
It is admitted that Department Order No. 1 is in the nature of a police power
measure. The only question is whether or not it is valid under the Constitution.
The concept of police power is well-established in this jurisdiction. It has been
defined as the "state authority to enact legislation that may interfere with
personal liberty or property in order to promote the general welfare." 5 As
defined, it consists of (1) an imposition of restraint upon liberty or property,
(2) in order to foster the common good. It is not capable of an exact definition
but has been, purposely, veiled in general terms to underscore its all-
comprehensive embrace.
"Its scope, ever-expanding to meet the exigencies of the times, even to
anticipate the future where it could be done, provides enough room for an
efficient and flexible response to conditions and circumstances thus assuring
the greatest benefits." 6
It finds no specific Constitutional grant for the plain reason that it does not
owe its origin to the Charter. Along with the taxing power and eminent
domain, it is inborn in the very fact of statehood and sovereignty. It is a
3
fundamental attribute of government that has enabled it to perform the most
vital functions of governance. Marshall, to whom the expression has been
credited, 7 refers to it succinctly as the plenary power of the State "to govern
its citizens." 8
"The police power of the State ... is a power coextensive with self- protection,
and it is not inaptly termed the "law of overwhelming necessity." It may be
said to be that inherent and plenary power in the State which enables it to
prohibit all things hurtful to the comfort, safety, and welfare of society." 9
It constitutes an implied limitation on the Bill of Rights. According to
Fernando, it is "rooted in the conception that men in organizing the state and
imposing upon its government limitations to safeguard constitutional rights
did not intend thereby to enable an individual citizen or a group of citizens to
obstruct unreasonably the enactment of such salutary measures calculated to
ensure communal peace, safety, good order, and welfare." 10 Significantly, the
Bill of Rights itself does not purport to be an absolute guaranty of individual
rights and liberties "Even liberty itself, the greatest of all rights, is not
unrestricted license to act according to one's will." 11 It is subject to the far
more overriding demands and requirements of the greater number.
Notwithstanding its extensive sweep, police power is not without its own
limitations. For all its awesome consequences, it may not be exercised
arbitrarily or unreasonably. Otherwise, and in that event, it defeats the purpose
for which it is exercised, that is, to advance the public good. Thus, when the
power is used to further private interests at the expense of the citizenry, there
is a clear misuse of the power. 12
In the light of the foregoing, the petition must be dismissed.
As a general rule, official acts enjoy a presumed vahdity. 13 In the absence of
clear and convincing evidence to the contrary, the presumption logically
stands.
The petitioner has shown no satisfactory reason why the contested measure
should be nullified. There is no question that Department Order No. 1 applies
only to "female contract workers," 14 but it does not thereby make an undue
discrimination between the sexes. It is well-settled that "equality before the
law" under the Constitution 15does not import a perfect Identity of rights
among all men and women. It admits of classifications, provided that (1) such
classifications rest on substantial distinctions; (2) they are germane to the
purposes of the law; (3) they are not confined to existing conditions; and (4)
they apply equally to all members of the same class. 16
The Court is satisfied that the classification made-the preference for female
workers — rests on substantial distinctions.
As a matter of judicial notice, the Court is well aware of the unhappy plight
that has befallen our female labor force abroad, especially domestic servants,
amid exploitative working conditions marked by, in not a few cases, physical
and personal abuse. The sordid tales of maltreatment suffered by migrant
Filipina workers, even rape and various forms of torture, confirmed by
testimonies of returning workers, are compelling motives for urgent
Government action. As precisely the caretaker of Constitutional rights, the
Court is called upon to protect victims of exploitation. In fulfilling that duty,
the Court sustains the Government's efforts.
The same, however, cannot be said of our male workers. In the first place,
there is no evidence that, except perhaps for isolated instances, our men
abroad have been afflicted with an Identical predicament. The petitioner has
proffered no argument that the Government should act similarly with respect
to male workers. The Court, of course, is not impressing some male
chauvinistic notion that men are superior to women. What the Court is saying
is that it was largely a matter of evidence (that women domestic workers are
being ill-treated abroad in massive instances) and not upon some fanciful or
arbitrary yardstick that the Government acted in this case. It is evidence
capable indeed of unquestionable demonstration and evidence this Court
accepts. The Court cannot, however, say the same thing as far as men are
concerned. There is simply no evidence to justify such an inference. Suffice it
to state, then, that insofar as classifications are concerned, this Court is
content that distinctions are borne by the evidence. Discrimination in this case
is justified.
As we have furthermore indicated, executive determinations are generally
final on the Court. Under a republican regime, it is the executive branch that
enforces policy. For their part, the courts decide, in the proper cases, whether
that policy, or the manner by which it is implemented, agrees with the
Constitution or the laws, but it is not for them to question its wisdom. As a co-
equal body, the judiciary has great respect for determinations of the Chief
Executive or his subalterns, especially when the legislature itself has
specifically given them enough room on how the law should be effectively
enforced. In the case at bar, there is no gainsaying the fact, and the Court will
deal with this at greater length shortly, that Department Order No. 1
implements the rule-making powers granted by the Labor Code. But what
should be noted is the fact that in spite of such a fiction of finality, the Court is
on its own persuaded that prevailing conditions indeed call for a deployment
ban.
There is likewise no doubt that such a classification is germane to the purpose
behind the measure. Unquestionably, it is the avowed objective of Department
Order No. 1 to "enhance the protection for Filipino female overseas
workers" 17 this Court has no quarrel that in the midst of the terrible
mistreatment Filipina workers have suffered abroad, a ban on deployment will
be for their own good and welfare.
The Order does not narrowly apply to existing conditions. Rather, it is
intended to apply indefinitely so long as those conditions exist. This is clear
from the Order itself ("Pending review of the administrative and legal
measures, in the Philippines and in the host countries . . ."18), meaning to say
that should the authorities arrive at a means impressed with a greater degree of
permanency, the ban shall be lifted. As a stop-gap measure, it is possessed of
a necessary malleability, depending on the circumstances of each case.
Accordingly, it provides:
9. LIFTING OF SUSPENSION. — The Secretary of
Labor and Employment (DOLE) may, upon
recommendation of the Philippine Overseas
Employment Administration (POEA), lift the
suspension in countries where there are:
1. Bilateral agreements or understanding with the
Philippines, and/or,
2. Existing mechanisms providing for sufficient
safeguards to ensure the welfare and protection of
Filipino workers. 19
The Court finds, finally, the impugned guidelines to be applicable to all
female domestic overseas workers. That it does not apply to "all Filipina
workers" 20 is not an argument for unconstitutionality. Had the ban been given
universal applicability, then it would have been unreasonable and arbitrary.
For obvious reasons, not all of them are similarly circumstanced. What the
Constitution prohibits is the singling out of a select person or group of persons
within an existing class, to the prejudice of such a person or group or resulting
in an unfair advantage to another person or group of persons. To apply the
ban, say exclusively to workers deployed by A, but not to those recruited by
B, would obviously clash with the equal protection clause of the Charter. It
would be a classic case of what Chase refers to as a law that "takes property
from A and gives it to B." 21 It would be an unlawful invasion of property
rights and freedom of contract and needless to state, an invalid
act. 22 (Fernando says: "Where the classification is based on such distinctions
that make a real difference as infancy, sex, and stage of civilization of
minority groups, the better rule, it would seem, is to recognize its validity only
if the young, the women, and the cultural minorities are singled out for
favorable treatment. There would be an element of unreasonableness if on the
contrary their status that calls for the law ministering to their needs is made
the basis of discriminatory legislation against them. If such be the case, it
would be difficult to refute the assertion of denial of equal protection." 23 In
the case at bar, the assailed Order clearly accords protection to certain women
workers, and not the contrary.)
It is incorrect to say that Department Order No. 1 prescribes a total ban on
overseas deployment. From scattered provisions of the Order, it is evident that
such a total ban has hot been contemplated. We quote:
5. AUTHORIZED DEPLOYMENT-The deployment of
domestic helpers and workers of similar skills defined
herein to the following [sic] are authorized under these
guidelines and are exempted from the suspension.
5.1 Hirings by immediate
members of the family of Heads
of State and Government;
5.2 Hirings by Minister, Deputy
Minister and the other senior
government officials; and
5.3 Hirings by senior officials of
the diplomatic corps and duly
accredited international
organizations.
5.4 Hirings by employers in
countries with whom the
Philippines have [sic] bilateral
labor agreements or
understanding.
xxx xxx xxx
7. VACATIONING DOMESTIC HELPERS AND
WORKERS OF SIMILAR SKILLS--Vacationing
domestic helpers and/or workers of similar skills shall
be allowed to process with the POEA and leave for
4
 worksite only if they are returning to the same
employer to finish an existing or partially served
employment contract. Those workers returning to
worksite to serve a new employer shall be covered by
the suspension and the provision of these guidelines.
xxx xxx xxx
9. LIFTING OF SUSPENSION-The Secretary of Labor
and Employment (DOLE) may, upon recommendation
of the Philippine Overseas Employment Administration
(POEA), lift the suspension in countries where there
are:
1. Bilateral agreements or
understanding with the
Philippines, and/or,
2. Existing mechanisms
providing for sufficient
safeguards to ensure the welfare
and protection of Filipino
workers. 24
xxx xxx xxx
The consequence the deployment ban has on the right to travel does not
impair the right. The right to travel is subject, among other things, to the
requirements of "public safety," "as may be provided by law." 25 Department
Order No. 1 is a valid implementation of the Labor Code, in particular, its
basic policy to "afford protection to labor," 26 pursuant to the respondent
Department of Labor's rule-making authority vested in it by the Labor
Code. 27 The petitioner assumes that it is unreasonable simply because of its
impact on the right to travel, but as we have stated, the right itself is not
absolute. The disputed Order is a valid qualification thereto.
Neither is there merit in the contention that Department Order No. 1
constitutes an invalid exercise of legislative power. It is true that police power
is the domain of the legislature, but it does not mean that such an authority
may not be lawfully delegated. As we have mentioned, the Labor Code itself
vests the Department of Labor and Employment with rulemaking powers in
the enforcement whereof. 28
The petitioners's reliance on the Constitutional guaranty of worker
participation "in policy and decision-making processes affecting their rights
and benefits" 29 is not well-taken. The right granted by this provision, again,
must submit to the demands and necessities of the State's power of regulation.
The Constitution declares that:
Sec. 3. The State shall afford full protection to labor,
local and overseas, organized and unorganized, and
promote full employment and equality of employment
opportunities for all. 30
"Protection to labor" does not signify the promotion of employment alone.
What concerns the Constitution more paramountly is that such an employment
be above all, decent, just, and humane. It is bad enough that the country has to
send its sons and daughters to strange lands because it cannot satisfy their
employment needs at home. Under these circumstances, the Government is
duty-bound to insure that our toiling expatriates have adequate protection,
personally and economically, while away from home. In this case, the
Government has evidence, an evidence the petitioner cannot seriously dispute,
of the lack or inadequacy of such protection, and as part of its duty, it has
precisely ordered an indefinite ban on deployment.
The Court finds furthermore that the Government has not indiscriminately
made use of its authority. It is not contested that it has in fact removed the
prohibition with respect to certain countries as manifested by the Solicitor
General.
The non-impairment clause of the Constitution, invoked by the petitioner,
must yield to the loftier purposes targetted by the Government. 31 Freedom of
contract and enterprise, like all other freedoms, is not free from restrictions,
more so in this jurisdiction, where laissez faire has never been fully accepted
as a controlling economic way of life.
This Court understands the grave implications the questioned Order has on the
business of recruitment. The concern of the Government, however, is not
necessarily to maintain profits of business firms. In the ordinary sequence of
events, it is profits that suffer as a result of Government regulation. The
interest of the State is to provide a decent living to its citizens. The
Government has convinced the Court in this case that this is its intent. We do
not find the impugned Order to be tainted with a grave abuse of discretion to
warrant the extraordinary relief prayed for.
WHEREFORE, the petition is DISMISSED. No costs.
SO ORDERED.
G.R. No. L-26298 September 28, 1984
CMS ESTATE, INC., petitioner,
vs.
SOCIAL SECURITY SYSTEM and SOCIAL SECURITY
COMMISSION, respondents.
Sison Dominguez & Cervantes for petitioner.
The Legal Counsel for respondent SSS.
CUEVAS, J.:
This appeal by the CMS Estate, Inc. from the decision rendered by the Social
Security Commission in its Case No. 12, entitled "CMS Estate, Inc. vs. Social
Security System, declaring CMS subject to compulsory coverage as of
September 1, 1957 and "directing the Social Security System to effect such
coverage of the petitioner's employees in its logging and real estate business
conformably to the provision of Republic Act No. 1161, as amended was
certified to Us by the defunct Court of Appeals 1 for further disposition
considering that purely questions of law are involved.
Petitioner is a domestic corporation organized primarily for the purpose of
engaging in the real estate business. On December 1, 1952, it started doing
business with only six (6) employees. It's Articles of Incorporation was
amended on June 4, 1956 in order to engage in the logging business. The
Securities and Exchange Commission issued the certificate of filing of said
amended articles on June 18, 1956. Petitioner likewise obtained an ordinary
license from the Bureau of Forestry to operate a forest concession of 13,000
hectares situated in the municipality of Baganga, Province of Davao.
On January 28, 1957, petitioner entered into a contract of management with
one Eufracio D. Rojas for the operation and exploitation of the forest
concession The logging operation actually started on April 1, 1957 with four
monthly salaried employees. As of September 1, 1957, petitioner had 89
employees and laborers in the logging operation. On December 26, 1957,
petitioner revoked its contract of management with Mr. Rojas.
On August 1, 1958, petitioner became a member of the Social Security
System with respect to its real estate business. On September 6, 1958,
petitioner remitted to the System the sum of P203.13 representing the initial
premium on the monthly salaries of the employees in its logging business.
However, on October 9, 1958, petitioner demanded the refund of the said
amount, claiming that it is not yet subject to compulsory coverage with
respect to its logging business. The request was denied by respondent System
on the ground that the logging business was a mere expansion of petitioner's
activities and for purposes of the Social Security Act, petitioner should be
considered a member of the System since December 1, 1952 when it
commenced its real estate business.
On November 10, 1958, petitioner filed a petition with the Social Security
Commission praying for the determination of the effectivity date of the
compulsory coverage of petitioner's logging business.
After both parties have submitted their respective memoranda, the
Commission issued on January 14, 1960, Resolution No. 91, 2 the dispositive
portion of which reads as follows:
Premises considered, the instant petition is hereby
denied and petitioner is hereby adjudged to be subject
to compulsory coverage as of Sept. 1, 1957 and the
Social Security System is hereby directed to effect such
coverage of petitioner's employees in its logging and
real estate business conformably to the provisions of
Rep. Act No. 1161, as amended.
SO ORDERED.
Petitioner's motion for reconsideration was denied in Resolution No. 609 of
the Commission.
These two (2) resolutions are now the subject of petitioner's appeal. Petitioner
submits that respondent Commission erred in holding —
(1) that the contributions required of employers and
employees under our Social Security Act of 1954 are
not in the nature of excise taxes because the said Act
5
 was allegedly enacted by Congress in the exercise of
the police power of the State, not of its taxing power;
(2) that no contractee — independent contractor
relationship existed between petitioner and Eufracio D.
Rojas during the time that he was operating its forest
concession at Baganga, Davao;
(3) that a corporation which has been in operation for
more than two years in one business is immediately
covered with respect to any new and independent
business it may subsequently engage in;
(4) that a corporation should be treated as a single
employing unit for purposes of coverage under the
Social Security Act, irrespective of its separate,
unrelated and independent business established and
operated at different places and on different dates; and
(5) that Section 9 of the Social Security Act on the
question of compulsory membership and employers
should be given a liberal interpretation.
Respondent, on the other hand, advances the following propositions, inter
alia:
(1) that the Social Security Act speaks of compulsory
coverage of employers and not of business;
(2) that once an employer is initially covered under the
Social Security Act, any other business undertaken or
established by the same employer is likewise subject in
spite of the fact that the latter has not been in operation
for at least two years;
(3) that petitioner's logging business while actually of a
different, distinct, separate and independent nature from
its real estate business should be considered as an
operation under the same management;
(4) that the amendment of petitioner's articles of
incorporation, so as to enable it to engage in the logging
business did not alter the juridical personality of
petitioner; and
(5) the petitioner's logging operation is a mere
expansion of its business activities.
The Social Security Law was enacted pursuant to the policy of the
government "to develop, establish gradually and perfect a social security
system which shall be suitable to the needs of the people throughout the
Philippines, and shall provide protection against the hazards of disability,
sickness, old age and death" (Sec. 2, RA 1161, as amended). It is thus clear
that said enactment implements the general welfare mandate of the
Constitution and constitutes a legitimate exercise of the police power of the
State. As held in the case of Philippine Blooming Mills Co., Inc., et al. vs.
SSS 3 —
Membership in the SSS is not a result of bilateral,
concensual agreement where the rights and obligations
of the parties are defined by and subject to their will,
RA 1161 requires compulsory coverage of employees
and employers under the System. It is actually a legal
imposition on said employers and employees, designed
to provide social security to the workingmen.
Membership in the SSS is therefore, in compliance with
the lawful exercise of the police power of the State, to
which the principle of non-impairment of the obligation
of contract is not a proper defense.
xxx xxx xxx
The taxing power of the State is exercised for the purpose of raising revenues.
However, under our Social Security Law, the emphasis is more on the
promotion of the general welfare. The Act is not part of out Internal Revenue
Code nor are the contributions and premiums therein dealt with and provided
for, collectible by the Bureau of Internal Revenue. The funds contributed to
the System belong to the members who will receive benefits, as a matter of
right, whenever the hazards provided by the law occur.
All that is required of appellant is to make monthly
contributions to the System for covered employees in
its employ. These contributions, contrary to appellant's
contention, are not 'in the nature of taxes on
employment.' Together with the contributions imposed
upon employees and the Government, they are intended
for the protection of said employees against the hazards
of disability, sickness, old age and death in line with the
constitutional mandate to promote social justice to
insure the well-being and economic security of all the
people.4
Because of the broad social purpose of the Social Security Act, all doubts in
construing the Act should favor coverage rather than exemption.
Prior to its amendment, Sec. 9 of the Act provides that before an employer
could be compelled to become a member of the System, he must have been in
operation for at least two years and has at the time of admission at least six
employees. It should be pointed out that it is the employer, either natural, or
judicial person, who is subject to compulsory coverage and not the business. If
the intention of the legislature was to consider every venture of the employer
as the basis of a separate coverage, an express provision to that effect could
have been made. Unfortunately, however, none of that sort appeared provided
for in the said law.
Should each business venture of the employer be considered as the basis of
the coverage, an employer with more than one line of business but with less
than six employees in each, would never be covered although he has in his
employ a total of more than six employees which is sufficient to bring him
within the ambit of compulsory coverage. This would frustrate rather than
foster the policy of the Act. The legislative intent must be respected. In the
absence of an express provision for a separate coverage for each kind of
business, the reasonable interpretation is that once an employer is covered in a
particular kind of business, he should be automatically covered with respect to
any new name. Any interpretation which would defeat rather than promote the
ends for which the Social Security Act was enacted should be eschewed. 5
Petitioner contends that the Commission cannot indiscriminately combine for
purposes of coverage two distinct and separate businesses when one has not
yet been in operation for more than two years thus rendering nugatory the
period for more than two years thus rendering nugatory the period of
stabilization fixed by the Act. This contention lacks merit since the
amendatory law, RA 2658, which was approved on June 18, 1960, eliminated
the two-year stabilization period as employers now become automatically
covered immediately upon the start of the business.
Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now
provides:
Sec. 10. Effective date of coverage. — Compulsory
coverage of the employer shall take effect on the first
day of his operation, and that of the employee on the
date of his employment. (Emphasis supplied)
As We have previously mentioned, it is the intention of the law to cover as
many persons as possible so as to promote the constitutional objective of
social justice. It is axiomatic that a later law prevails over a prior statute and
moreover the legislative in tent must be given effect. 6
Petitioner further submits that Eufrancio Rojas is an independent contractor
who engages in an independent business of his own consisting of the
operation of the timber concession of the former. Rojas was appointed as
operations manager of the logging consession; 7 he has no power to appoint or
hire employees; as the term implies, he only manages the employees and it is
petitioner who furnishes him the necessary equipment for use in the logging
business; and he is not free from the control and direction of his employer in
matter connected with the performance of his work. These factors clearly
indicate that Rojas is not an independent contractor but merely an employee of
petitioner; and should be entitled to the compulsory coverage of the Act.
The records indubitably show that petitioner started its real estate business on
December 1, 1952 while its logging operation was actually commenced on
April 1, 1957. Applying the provision of Sec. 10 of the Act, petitioner is
subject to compulsory coverage as of December 1, 1952 with respect to the
real estate business and as of April 1, 1957 with respect to its logging
operation.
WHEREFORE, premises considered, the appeal is hereby DISMISSED. With
costs against petitioner.
SO ORDERED.
G.R. No. L-24396 July 29, 1968
SANTIAGO P. ALALAYAN, ET AL., suing in his behalf and for the
benefit of all other persons having common or general interest with him
in accordance with Sec. 12, Rule 3, Rules of Court, petitioners-appellants,
vs.
NATIONAL POWER CORPORATION and ADMINISTRATOR OF
ECONOMIC COORDINATION, respondents-appellees.
6
Alafriz Law Offices for petitioners-appellants. delivery"; a letter of June 22, 1962 of respondent National Power Corporation
The Government Corporate Counsel and Office of the Solicitor General for to petitioner approving his 17.5% rate increase of power so that beginning
respondents-appellees. July 1, 1962, the demand charge would be P10.00 per kilowatt per month and
the energy charge would be P0.02 per kilowatt hour; a letter of August 15,
1962, wherein respondent National Power Corporation notified petitioner that
FERNANDO, J.:
it deferred the effectivity of the new rates, but it will be enforced on
November 1, 1962; a letter of June 25, 1963 enforcing respondent National
This declaratory relief proceeding was started in the lower court by Power Corporation deferring once again the effectivity of the new rates until
petitioners, Alalayan and Philippine Power and Development Company, both January 1, 1964; as well as the congressional transcripts on House Bill No.
franchise holders of electric plants in Laguna, to test the validity of a section 5377 and Senate Bill No. 613, now Republic Act No. 3043.15
of an amendatory act,1 empowering respondent National Power Corporation
"in any contract for the supply of electric power to a franchise holder,"
In an order of November 5, 1964, the lower court gave the parties a period of
receiving at least 50% of its electric power and energy from it to require as a
twenty days within which to submit simultaneously their respective
condition that such franchise holder "shall not realize a net profit of more than
memoranda. After the submission thereof, the lower court, in a decision of
twelve percent annually of its investments plus two-month operating
January 30, 1965, sustained the validity and constitutionality of the challenged
expenses." Respondent, under such provision, could likewise "renew all
provision. Hence, this appeal.
existing contracts with franchise holders for the supply of electric power and
energy," so that the provisions of the Act could be given effect. 2 This statutory
provision was assailed on the ground that, being a rider, it is violative of the As was set forth earlier, this appeal cannot prosper. We share the view of the
constitutional provision requiring that a bill, which may be enacted into law, lower court that the provision in question cannot be impugned either on the
cannot embrace more than one subject, which shall be expressed in its title, 3 as ground of its being violative of the constitutional requirement that a bill
well as the due process guarantee, the liberty to contract of petitioners being cannot embrace more than one subject to be expressed in its title or by virtue
infringed upon. The lower court sustained its validity. We sustain the lower of its alleged failure to satisfy the due process criterion.
court in this appeal.
1. We consider first the objection that the statute in question is violative of the
In the petition for declaratory relief, after the usual allegations as to parties, it constitutional provision that no bill "which may be enacted into law shall
was stated that respondent National Power Corporation "has for some years embrace more than one subject which shall be expressed in [its] title ... "16This
now been, and still is, by virtue of similar, valid and existing contracts entered provision is similar to those found in many American State Constitutions. It is
into by it with one hundred and thirty seven (137) natural persons and aimed against the evils of the so-called omnibus bills and log-rolling
corporations distributed all over the country, supplying, distributing, servicing legislation as well as surreptitious or unconsidered enactments.17 Where the
and selling electric power and energy at fixed rites schedules to the latter who subject of a bill is limited to a particular matter, the lawmakers along with the
have for some years now been and still are, legally engaged in resupplying, people should be informed of the subject of proposed legislative measures.
redistributing, reservicing and reselling the said electric power and energy to This constitutional provision thus precludes the insertion of riders in
individual customers within the coverage of their respective legislation, a rider being a provision not germane to the subject matter of the
franchises."4 Petitioners are included among the said 197 natural persons and bill. Petitioner Alalayan asserts that the provision objected to is such a rider.
entities.5 Then, reference was made to the particular contracts petitioners
entered into with respondent, the contracts to continue indefinitely unless and
To lend approval to such a plea is to construe the above constitutional
until either party would give to the other two years previous notice in writing
provision as to cripple or impede proper legislation. To impart to it a meaning
of its intention to terminate the same.6After which, it was noted that on June
which is reasonable and not unduly technical, it must be deemed sufficient
18, 1960, an act authorizing the increase of the capital stock of the National
that the title be comprehensive enough reasonably to include the general
Power Corporation to P100 million took effect.7 A year later, on June 17,
object which the statute seeks to effect without expressing each and every end
1961, it was alleged that the challenged legislation became a law, purportedly
and means necessary for its accomplishment. Thus, mere details need not be
to increase further the authorized capital stock, but including the alleged rider
set forth. The legislature is not required to make the title of the act a complete
referred to above, which, in the opinion of petitioners, transgressed the
index of its contents. The provision merely calls for all parts of an act relating
constitutional provision on the subject matter and title of bills as well as the
to its subject finding expression in its title.18 More specifically, if the law
due process clause.8 Mention was then made of the National Power
amends a section or part of a statute, it suffices if reference be made to the
Corporation approving a rate increase of at least 17.5%, the effectivity of
legislation to be amended, there being no need to state the precise nature of
which, was at first deferred to November 1, 1962, then subsequently to
the amendment.19
January 15, 1963, with the threat that in case petitioners would fail to sign the
revised contract providing for the increased rate, respondent National Power
Corporation would then cease "to supply, distribute and service electric power It was in 1938, in Government v. Hongkong & Shanghai Bank,20 where, for
and energy to them."9 the first time after the inauguration of the Commonwealth, this Court passed
upon a provision of that character. We held there that the Reorganization
Law,21providing for the mode in which the total annual expenses of the
That would be, in the opinion of petitioners, violative of their rights,
Bureau of Banking could be reimbursed through assessment levied upon all
proceeding from legislation suffering from constitutional infirmities.10 A
banking institutions subject to inspection by the Bank Commissioner was not
declaration of unconstitutionality was therefore sought by them. It was
violative of such a requirement in the Jones Law, the previous organic act.
prayed: "(1) To give due course to this petition; (2) To issue a writ of
Justice Laurel, however, vigorously dissented, his view being that while the
preliminary injunction, upon the posting of the requisite bond, enjoining
main subject of the act was reorganization, the provision assailed did not deal
respondent NPC from carrying or prosecuting its threat to enforce the
with reorganization but with taxation. This case of Government v. Hongkong
provisions of the rider or Section 3 of Republic Act No. 3043 ... in the manner
& Shanghai Bank was decided by a bare majority of four justices against
stated in paragraph 18 of this petition until this Honorable Court shall have
three. Thereafter, it would appear that the constitutional requirement is to be
finally decided or disposed, by final judgment, of the issues raised in this
given the liberal test as indicated in the majority opinion penned by Justice
petition; (3) After due hearing, to declare the rider or Section 3 of Republic
Abad Santos, and not the strict test as desired by the minority headed by
Act No. 3043 null and void for being illegal and unconstitutional, and to issue
Justice Laurel.
a permanent injunction requiring respondent NPC to refrain from enforcing or
implementing the provisions of the same law."11
Such a trend is made manifest in the cases beginning with Sumulong v.
Commission on Elections,22 up to and including Felwa v. Salas,23 a 1966
Soon after, petitioner Philippine Power and Development Company moved
decision, the opinion coming from Chief Justice Concepcion. There is nothing
that insofar as it was concerned, the case be dismissed, which motion was
in Lidasan v. Commission on Elections,24 where a statute25 was annulled on
granted by the lower court on January 25, 1963.12 The sole petitioner is
this ground, to indicate the contrary. As aptly expressed by Justice Sanchez:
therefore Santiago P. Alalayan, suing in his behalf and for the benefit of all
"Of course, the Constitution does not require Congress to employ in the title
other persons having common or general interest with him. Respondent
of an enactment, language of such precision as to mirror, fully index or
National Power Corporation filed an opposition on February 15, 1963,
catalogue all the contents and the minute details therein. It suffices if the title
opposing the issuance of a writ for preliminary injunction. 13 On March 21,
should serve the purpose of the constitutional demand that it inform the
1963, the lower court, considering that there was "no sufficient ground for the
legislators, the persons interested in the subject of the bill, and the public, of
issuance of the writ for preliminary injunction," denied the same. 14
the nature, scope and consequences of the proposed law and its operation. And
this, to lead them to inquire into the body of the bill, study and discuss the
There was in the answer, dated March 29, 1963, an admission of the main same, take appropriate action thereon, and, thus, prevent surprise or fraud
facts alleged, with a denial of the legal conclusion which petitioner would upon the legislators."
deduce therefrom, respondent National Power Corporation upholding the
validity of the challenged provision. Then, came a partial stipulation of facts
We thus hold that there is no violation of the constitutional provision which
submitted on October 1, 1964, consisting of a resolution of the Philippine
requires that any bill enacted into law shall embrace only one subject to be
Electric Plant Owners Association to take the necessary steps to stop
expressed in the title thereof.
respondent National Power Corporation from enforcing its announced
increase, samples of contracts between electric plant operators on the one
hand and respondent National Power Corporation on the other, the contract 2. Nor is petitioner anymore successful in his plea for the nullification of the
with petitioner Alalayan, dated May 26, 1956, showing that he did purchase challenged provision on the ground of his being deprived of the liberty to
and take power and energy as follows: "Sixty (60) kilowatts and of not less contract without due process of law.
than 140,000 kilowatt-hours in any contract year at the rate of P120.00 per
kilowatt per year" payable in twelve equal monthly installments, "plus an
It is to be admitted of course that property rights find shelter in specific
energy charge of P0.013 per kilowatt hour, payable on the basis of monthly
constitutional provisions, one of which is the due process clause. It is equally

7
certain that our fundamental law framed at a time of "surging unrest and
dissatisfaction",26 when there was the fear expressed in many quarters that a
constitutional democracy, in view of its commitment to the claims of property,
would not be able to cope effectively with the problems of poverty and misery
that unfortunately afflict so many of our people, is not susceptible to the
indictment that the government therein established is impotent to take the
necessary remedial measures. The framers saw to that. The welfare state
concept is not alien to the philosophy of our Constitution.27 It is implicit in
quite a few of its provisions. It suffices to mention two.
There is the clause on the promotion of social justice to ensure the well-being
and economic security of all the people,28 as well as the pledge of protection
to labor with the specific authority to regulate the relations between
landowners and tenants and between labor and capital. 29 This particularized
reference to the rights of working men whether in industry and agriculture
certainly cannot preclude attention to and concern for the rights of consumers,
who are the objects of solicitude in the legislation now complained of. The
police power as an attribute to promote the common weal would be diluted
considerably of its reach and effectiveness if on the mere plea that the liberty
to contract would be restricted, the statute complained of may be characterized
as a denial of due process. The right to property cannot be pressed to such an
unreasonable extreme.
It is understandable though why business enterprises, not unnaturally evincing
lack of enthusiasm for police power legislation that affect them adversely and
restrict their profits could predicate alleged violation of their rights on the due
process clause, which as interpreted by them is a bar to regulatory measures.
Invariably, the response from this Court, from the time the Constitution was
enacted, has been far from sympathetic. Thus, during the Commonwealth, we
sustained legislation providing for collective bargaining,30 security of
tenure,31 minimum wages,32 compulsory arbitration,33 and tenancy
regulation.34 Neither did the objections as to the validity of measures
regulating the issuance of securities35 and public services36 prevail.
For it is to be remembered that the liberty relied upon is not freedom of the
mind, which occupies a preferred position, nor freedom of the person, but the
liberty to contract, associated with business activities, which, as has been so
repeatedly announced, may be subjected, in the interest of the general welfare
under the police power, to restrictions varied in character and wide ranging in
scope as long as due process is observed. In Calalang v. Williams, 37 this Court
found no objection to an enactment limiting the use of and traffic in the
national roads and streets as against the assertion that the exercise of such an
authority amounted to an unlawful interference with legitimate business and
abridgment of personal liberty. The opinion by Justice Laurel explains why
such an argument was far from persuasive. Thus: "In enacting said law,
therefore, the National Assembly was prompted by considerations of public
convenience and welfare. It was inspired by a desire to relieve congestion of
traffic, which is, to say the least, a menace to public safety. Public welfare,
then, lies at the bottom of the enactment of said law, and the state in order to
promote the general welfare may interfere with personal liberty, with
property, and with business and occupations. Persons and property may be
subjected to all kinds of restraints and burdens, in order to secure the general
comfort, health, and prosperity of the state ... "38 The above doctrine, valid
then and equally valid now, constituted more than sufficient justification for
statutes curtailing the liberty enjoyed by business enterprises, whether
conducted by natural or juridical persons, to satisfy the needs of public
welfare.
So it continues to be under the Republic. This Court has invariably given the
seal of approval to statutes intended to improve the lot of tenants,39 who
thereafter were given the option to transform their relationship with
landowners to one of lease, which grant of authority was sustained in
1964.40 Retail trade was nationalized, the measure receiving judicial approval
as against due process objection,41 a decision foreshadowed earlier with the
favorable action taken on legislation granting preference to Filipino citizens in
the lease of public market stalls.42 It is easily understandable why the
regulation of practice of medicine;43 limitation of the hours of
labor;44 imposition of price control;45requirement of separation pay for one
month46 as well as a social security scheme47 cannot be impugned as
unconstitutional. While not exhaustive, the above decisions manifest in no
certain terms the inherent difficulty of assailing regulatory legislation based
on alleged denial of due process.
It would thus appear that unless this Court is prepared to overturn a doctrine
so firmly adhered to in a number of cases notable for the unanimity of their
response to an objection similar to the one here raised, petitioner Alalayan
cannot prevail. Certainly, this Court is not prepared to take that step. For in
the face of a constitutional provision that allows deprivation of liberty,
including liberty of contract, as long as due process is observed, the alleged
nullity of a legislative act of this character can only be shown if in fact there is
such a denial. The relevant question then is, what does due process require?
The holding of this Court in Ermita-Malate Hotel and Motel Operators Asso.
v. City Mayor,48 sheds some light. Thus: "There is no controlling and precise
definition of due process. It furnishes though a standard to which
governmental action should conform in order that deprivation of life, liberty
or property, in each appropriate case, be valid. What then is the standard of
due process which must exist both as a procedural and as substantive requisite
to free the challenged ordinance, or any governmental action for that matter,
from the imputation of legal infirmity sufficient to spell its doom? It is
responsiveness to the supremacy of reason, obedience to the dictates of
justice. Negatively put, arbitrariness is ruled out and unfairness avoided. To
satisfy the due process requirement, official action, to paraphrase Cardozo,
must not outrun the bounds of reason and result in sheer oppression. Due
process is thus hostile to any official action marred by lack of reasonableness.
Correctly has it been identified as freedom from arbitrariness. It is the
embodiment of the sporting idea of fair play. It exacts fealty "to those
strivings for justice" and judges the act of officialdom of whatever branch "in
the light of reason drawn from considerations of fairness that reflect
[democratic] traditions of legal and political thought." It is not a narrow or
"technical conception with fixed content unrelated to time, place and
circumstances," decisions based on such a clause requiring a "close and
perceptive inquiry into fundamental principles of our society." Questions of
due process are not to be treated narrowly or pedantically in slavery to form or
phrases." .
The due process objection is sought to be bolstered by an allegation that such
power conferred in the challenged legislation to limit the net profits to "12%
annually of [petitioner's] investments plus two-month operating expenses" has
a confiscatory aspect. This argument has the ring of futility. Precisely,
in Manila Electric Co. v. Public Service Commission,49 this Court in an
opinion by the present Chief Justice upheld such a figure as against the
contention that it was rather too generous to the public utility. To speak of it
as confiscatory then is to employ the language by hyperbole. Moreover, in the
absence any evidence to demonstrate the alleged confiscatory effect of the
provision in question, there would be no basis for its nullification, in view of
the well-known presumption of validity that every statute has in its favor.50
In the light of the above, there is thus clearly no occasion for yielding assent
to the claim of petitioner that the legislation assailed contravenes the due
process clause. 1äwphï1.ñët
3. While not explicitly avowed by petitioner, there is the intimation that to
apply the challenged legislation to contracts then in existence would be an
infringement of the constitutional prohibition against any law impairing the
obligation of contracts.51 No such fear need be entertained. A citation from a
1940 decision of this Court, in Pangasinan Transportation Co. v. Public
Service Commission,52 is particularly relevant. In the language of Justice
Laurel, speaking for the Court: "Upon the other hand, statutes enacted for the
regulation of public utilities, being a proper exercise by the state of its police
power, are applicable not only to those public utilities coming into existence
after its passage, but likewise to those already, existence established and in
operation."53 Such a doctrine was followed in the case of a tenancy legislation,
the Congress undoubtedly having in mind and not having failed to take notice
"of the existence of contracts" which stipulated a division of the crops on a
50-50 basis and therefore must have intended to regulate the same. There was
thus no impairment of an obligation of contract, such an enactment under the
police power being remedial in nature, the non-applicability of which to
existing conditions would be self-defeating in character.54
In Abe v. Foster Wheeler Corp.,55 Justice Barrera, speaking for the Court, took
note of the contention "that as the contracts of employment were entered into
at a time when there was no law granting the workers said right, the
application as to them of the subsequent enactment restoring the same right
constitutes an impairment of their contractual obligations." Then he, made
clear why the Court was of a contrary view as, "the constitutional guaranty of
non-impairment ... is limited by the exercise of the police power of the State,
in the interest of public health, safe, morals and general welfare." Thus was
reaffirmed what previously had been announced as the rule. Such a doctrine
was reiterated early this year in Philippine American Life Insurance Co. v.
Auditor General,56 where this Court found no objection to the applicability of
the Margin Law,57 even if it be assumed that a reinsurance treaty was already
in existence and had imposed the corresponding obligation on the parties prior
to its enactment.
This is not to say that in each and every case the invocation of the protection
of the non-impairment clause would be unavailing once the legislation
complained of is shown to be an exercise of the police power. Otherwise, that
would render nugatory the constitutional guarantee of non-impairment, and
for that matter both the equal protection and due process clauses which
equally serve to protect property rights. Here, as in other cases where
governmental authority may trench upon property rights, the process of
balancing, adjustment or harmonization is called for.
Rutter v. Esteban58 lends support to such an approach. In that leading case, the
continued operation and enforcement of the Moratorium Act59 which allowed
an eight-year period of grace for the payment of pre-war obligations on the
part of debtors who suffered as a consequence of World War II was, in a 1953
decision, held "unreasonable and oppressive, and should not be prolonged a
minute longer" for being violative of the constitutional provision prohibiting
the impairment of the obligation of the contracts "and, therefore, ... should be
declared null and void and without effect."60 As of the date of its enactment in
1948, the police power could be relied upon to sustain its validity, in view of
the serious economic condition faced by the country upon liberation and the
state of penury that then afflicted a greater portion of the Filipino people. By
1953 however, the Moratorium Act could be rightfully considered as an
infringement of the non-impairment clause, as the economy had in the
meanwhile considerably changed for the better.
8
There is no clearer instance then of the process of harmonization and
balancing which is incumbent upon the judiciary to undertake whenever a
regulatory measure under the police power is assailed as violative of
constitucess or equal protection, all of which are intended to safeguard
property rights. Three leading decisions of the United States Supreme Court,
Home Building & Loan Astional guarantees, whether of non-impairment,
due prosociation v. Blaisdell,61 Nebbia v. New York,62 and Norman v.
Baltimore and Ohio Railroad Co.,63 speak similarly.
Even if, therefore, reliance be had on the non-impairment clause by petitioner
and the process of adjustment or harmonization be undertaken to ascertain
whether the applicability of the statutory provision assailed to existing
contracts would run counter to such a guarantee, still the same conclusion
emerges. There is a failure to make out a case for its invalidity.
WHEREFORE, there being no showing that Section 3 of Republic Act No.
3043 is unconstitutional, the decision of the lower court, dismissing the
petition, is affirmed. With costs against petitioner Alalayan.
G.R. No. 96169 September 24, 1991
EMPLOYERS CONFEDERATION OF THE PHILIPPINES, petitioner,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND
REGIONAL TRIPARTITE WAGES AND PRODUCTIVITY BOARD-
NCR, TRADE UNION CONGRESS OF THE
PHILIPPINES, respondents.
Sycip Salazar, Hernandez & Gatmaitan for petitioner.
Gilbert P. Lorenzo for private respondent.
SARMIENTO, J.:
The petition is given due course and the various pleadings submitted being
sufficient to aid the Court in the proper resolution of the basic issues raised in
this case, we decide it without further ado.
The Employers Confederation of the Philippines (ECOP) is questioning the
validity of Wage Order No. NCR-01-A dated October 23, 1990 of the
Regional Tripartite Wages and Productivity Board, National Capital Region,
promulgated pursuant to the authority of Republic Act No. 6727, "AN ACT
TO RATIONALIZE WAGE POLICY DETERMINATION BY
ESTABLISHING THE MECHANISM AND PROPER STANDARDS
THEREFORE, AMENDING FOR THE PURPOSE ARTICLE 99 OF, AND
INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126, AND 127
INTO, PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE
KNOWN AS THE LABOR CODE OF THE PHILIPPINES, FIXING NEW
WAGE RATES, PROVIDING WAGE INCENTIVES FOR INDUSTRIAL
DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES,"
was approved by the President on June 9, 1989. Aside from providing new
wage rates,1 the "Wage Rationalization Act" also provides, among other
things, for various Regional Tripartite Wages and Productivity Boards in
charge of prescribing minimum wage rates for all workers in the various
regions2 and for a National Wages and Productivity Commission to review,
among other functions, wage levels determined by the boards. 3
On October 15, 1990, the Regional Board of the National Capital Region
issued Wage Order No. NCR-01, increasing the minimum wage by P17.00
daily in the National Capital Region.4 The Trade Union Congress of the
Philippines (TUCP) moved for reconsideration; so did the Personnel
Management Association of the Philippines (PMAP).5 ECOP opposed.
On October 23, 1990, the Board issued Wage Order No. NCR-01-A amending
Wage Order No. NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all workers and
employees in the private sector in the National Capital Region
already receiving wages above the statutory minimum wage rates
up to one hundred and twenty-five pesos (P125.00) per day shall
also receive an increase of seventeen pesos (P17.00) per day.
ECOP appealed to the National Wages and Productivity Commission. On
November 6, 1990, the Commission promulgated an Order, dismissing the
appeal for lack of merit. On November 14, 1990, the Commission denied
reconsideration.
The Orders of the Commission (as well as Wage Order No. NCR-01-A) are
the subject of this petition, in which. ECOP assails the board's grant of an
"across-the-board" wage increase to workers already being paid more than
existing minimum wage rates (up to P125. 00 a day) as an alleged excess of
authority, and alleges that under the Republic Act No. 6727, the boards may
only prescribe "minimum wages," not determine "salary ceilings." ECOP
likewise claims that Republic Act No. 6727 is meant to promote collective
bargaining as the primary mode of settling wages, and in its opinion, the
boards can not preempt collective bargaining agreements by establishing
ceilings. ECOP prays for the nullification of Wage Order No. NCR 01-A and
for the "reinstatement" of Wage Order No. NCR-01.
The Court directed the Solicitor General to comment on behalf of the
Government, and in the Solicitor General's opinion, the Board, in prescribing
an across-the-board hike did not, in reality, "grant additional or other benefits
to workers and employees, such as the extension of wage increases to
employees and workers already receiving more than minimum wages ..."6 but
rather, fixed minimum wages according to the "salary-ceiling method."
ECOP insists, in its reply, that wage is a legislative function, and Republic Act
No. 6727 delegated to the regional boards no more "than the power to grant
minimum wage adjustments"7 and "in the absence of clear statutory
authority,"8 the boards may no more than adjust "floor wages."9
The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is
intended to correct "wage distortions" and the salary-ceiling method (of
determining wages) is meant, precisely, to rectify wage distortions.10
The Court is inclined to agree with the Government. In the National Wages
and Productivity Commission's Order of November 6, 1990, the Commission
noted that the determination of wages has generally involved two methods, the
"floor-wage" method and the "salary-ceiling" method. We quote:
Historically, legislation involving the adjustment of the minimum
wage made use of two methods. The first method involves the
fixing of determinate amount that would be added to the prevailing
statutory minimum wage. The other involves "the salary-ceiling
method" whereby the wage adjustment is applied to employees
receiving a certain denominated salary ceiling. The first method
was adopted in the earlier wage orders, while the latter method was
used in R.A. Nos. 6640 and 6727. Prior to this, the salary-ceiling
method was also used in no less than eleven issuances mandating
the grant of cost-of-living allowances (P.D. Nos. 525, 1123, 1614,
1634, 1678, 1713 and Wage Order Nos. 1, 2, 3, 5 and 6). The shift
from the first method to the second method was brought about by
labor disputes arising from wage distortions, a consequence of the
implementation of the said wage orders. Apparently, the wage
order provisions that wage distortions shall be resolved through the
grievance procedure was perceived by legislators as ineffective in
checking industrial unrest resulting from wage order
implementations. With the establishment of the second method as a
practice in minimum wage fixing, wage distortion disputes were
minimized.11
As the Commission noted, the increasing trend is toward the second mode, the
salary-cap method, which has reduced disputes arising from wage distortions
(brought about, apparently, by the floor-wage method). Of course, disputes are
appropriate subjects of collective bargaining and grievance procedures, but as
the Commission observed and as we are ourselves agreed, bargaining has
helped very little in correcting wage distortions. Precisely, Republic Act No.
6727 was intended to rationalize wages, first, by providing for full-time
boards to police wages round-the-clock, and second, by giving the boards
enough powers to achieve this objective. The Court is of the opinion that
Congress meant the boards to be creative in resolving the annual question of
wages without labor and management knocking on the legislature's door at
every turn. The Court's opinion is that if Republic No. 6727 intended the
boards alone to set floor wages, the Act would have no need for a board but an
accountant to keep track of the latest consumer price index, or better, would
have Congress done it as the need arises, as the legislature, prior to the Act,
has done so for years. The fact of the matter is that the Act sought a "thinking"
group of men and women bound by statutory standards. We quote:
ART. 124. Standards / Criteria for Minimum Wage Fixing. — The
regional minimum wages to be established by the Regional Board
shall be as nearly adequate as is economically feasible to maintain
the minimum standards of living necessary for the health,
efficiency and general well-being of the employees within the
framework of the national economic and social development
program. In the determination of such regional minimum wages,
the Regional Board shall, among other relevant factors, consider
the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
9
 (g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of
emphasis employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the
imperatives of economic and social development.12
The Court is not convinced that the Regional Board of the National Capital
Region, in decreeing an across-the-board hike, performed an unlawful act of
legislation. It is true that wage-fixing, like rate constitutes an act Congress;13 it
is also true, however, that Congress may delegate the power to fix
rates14 provided that, as in all delegations cases, Congress leaves sufficient
standards. As this Court has indicated, it is impressed that the above-quoted
standards are sufficient, and in the light of the floor-wage method's failure, the
Court believes that the Commission correctly upheld the Regional Board of
the National Capital Region.
Apparently, ECOP is of the mistaken impression that Republic Act No. 6727
is meant to "get the Government out of the industry" and leave labor and
management alone in deciding wages. The Court does not think that the law
intended to deregulate the relation between labor and capital for several
reasons: (1) The Constitution calls upon the State to protect the rights of
workers and promote their welfare;15 (2) the Constitution also makes it a duty
of the State "to intervene when the common goal so demands" in regulating
property and property relations;16 (3) the Charter urges Congress to give
priority to the enactment of measures, among other things, to diffuse the
wealth of the nation and to regulate the use of property; 17 (4) the Charter
recognizes the "just share of labor in the fruits of production;"18 (5) under the
Labor Code, the State shall regulate the relations between labor and
management;19 (6) under Republic Act No. 6727 itself, the State is interested
in seeing that workers receive fair and equitable wages;20and (7) the
Constitution is primarily a document of social justice, and although it has
recognized the importance of the private sector,21 it has not embraced fully the
concept of laissez faire22 or otherwise, relied on pure market forces to govern
the economy; We can not give to the Act a meaning or intent that will conflict
with these basic principles.
It is the Court's thinking, reached after the Court's own study of the Act, that
the Act is meant to rationalize wages, that is, by having permanent boards to
decide wages rather than leaving wage determination to Congress year after
year and law after law. The Court is not of course saying that the Act is an
effort of Congress to pass the buck, or worse, to abdicate its duty, but simply,
to leave the question of wages to the expertise of experts. As Justice Cruz
observed, "[w]ith the proliferation of specialized activities and their attendant
peculiar problems, the national legislature has found it more necessary to
entrust to administrative agencies the power of subordinate legislation' as it is
caned."23
The Labor Code defines "wage" as follows:
"Wage" paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms
of money, whether fixed or ascertained on a time, task, piece, 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 services rendered or to be rendered and includes the fair and
reasonably value, as determined by the Secretary of Labor, of
board, lodging, or other facilities customarily furnished by the
employer to the employee. "Fair and reasonable value" shall not
include any profit to the employer or to any person affiliated with
the employer.24
The concept of "minimum wage" is, however, a different thing, and certainly,
it means more than setting a floor wage to upgrade existing wages, as ECOP
takes it to mean. "Minimum wages" underlies the effort of the State, as
Republic Act No. 6727 expresses it, "to promote productivity-improvement
and gain-sharing measures to ensure a decent standard of living for the
workers and their families; to guarantee the rights of labor to its just share in
the fruits of production; to enhance employment generation in the countryside
through industry dispersal; and to allow business and industry reasonable
returns on investment, expansion and growth,"25 and as the Constitution
expresses it, to affirm "labor as a primary social economic force."26 As the
Court indicated, the statute would have no need for a board if the question
were simply "how much". The State is concerned, in addition, that wages are
not distributed unevenly, and more important, that social justice is subserved.
It is another question, to be sure, had Congress created "roving" boards, and
were that the case, a problem of undue delegation would have ensued; but as
we said, we do not see a Board (National Capital Region) "running riot" here,
and Wage Order No. NCR-01-A as an excess of authority.
It is also another question whether the salary-cap method utilized by the Board
may serve the purposes of Republic Act No. 6727 in future cases and whether
that method is after all, a lasting policy of the Board; however, it is a question
on which we may only speculate at the moment. At the moment, we find it to
be reasonable policy (apparently, it has since been Government policy); and if
in the future it would be perceptibly unfair to management, we will take it up
then.
WHEREFORE, premises considered, the petition is DENIED. No
pronouncement as to costs.
IT IS SO ORDERED.
G.R. No. 88979 February 7, 1992
LYDIA O. CHUA, petitioner,
vs.
THE CIVIL SERVICE COMMISSION, THE NATIONAL
IRRIGATION ADMINISTRATION and THE DEPARTMENT OF
BUDGET AND MANAGEMENT, respondents.
PADILLA, J.:
Pursuant to the policy of streamlining and trimming the bureaucracy, Republic
Act No. 6683 was approved on 2 December 1988 providing for benefits for
early retirement and voluntary separation from the government service as well
as for involuntary separation due to reorganization. Deemed qualified to avail
of its benefits are those enumerated in Sec. 2 of the Act, as follows:
Sec. 2. Coverage. — This Act shall cover all appointive
officials and employees of the National Government,
including government-owned or controlled corporations
with original charters, as well as the personnel of all
local government units. The benefits authorized under
this Act shall apply to all regular, temporary, casual and
emergency employees, regardless of age, who have
rendered at least a total of two (2) consecutive years of
government service as of the date of separation.
Uniformed personnel of the Armed Forces of the
Philippines including those of the PC-INP are excluded
from the coverage of this Act.
Petitioner Lydia Chua believing that she is qualified to avail of the benefits of
the program, filed an application on 30 January 1989 with respondent
National Irrigation Administration (NIA) which, however, denied the same;
instead, she was offered separation benefits equivalent to one half (1/2) month
basic pay for every year of service commencing from 1980. A recourse by
petitioner to the Civil Service Commission yielded negative results. 1 Her
letter for reconsideration dated 25 April 1989 pleaded thus:
xxx xxx xxx
With due respect, I think the interpretation of the
Honorable Commissioner of RA 6683 does not
conform with the beneficent purpose of the law. The
law merely requires that a government employee
whether regular, temporary, emergency, or casual,
should have two consecutive years of government
service in order to be entitled to its benefits. I more than
meet the requirement. Persons who are not entitled are
consultants, experts and contractual(s). As to the budget
needed, the law provides that the Department of Budget
and Management will shoulder a certain portion of the
benefits to be allotted to government corporations.
Moreover, personnel of these NIA special projects art
entitled to the regular benefits, such (sic) leaves,
compulsory retirement and the like. There is no reason
why we should not be entitled to RA 6683.
xxx xxx xxx 2
Denying the plea for reconsideration, the Civil Service Commission (CSC)
emphasized:
xxx xxx xxx
We regret to inform you that your request cannot be
granted. The provision of Section 3.1 of Joint DBM-
CSC Circular Letter No. 89-1 does not only require an
applicant to have two years of satisfactory service on
the date of separation/retirement but further requires
said applicant to be on a casual, emergency, temporary
or regular employment status as of December 2, 1988,
the date of enactment of R.A. 6683. The law does not
contemplate contractual employees in the coverage.
10
 Inasmuch as your employment as of December 31,
1988, the date of your separation from the service, is
co-terminous with the NIA project which is contractual
in nature, this Commission shall sustain its original
decision.
xxx xxx xxx3
In view of such denial, petitioner is before this Court by way of a special civil
action for certiorari, insisting that she is entitled to the benefits granted under
Republic Act No. 6683. Her arguments:
It is submitted that R.A. 6683, as well as Section 3.1 of
the Joint DBM-CSC Circular Letter No. 89-1 requires
an applicant to be on a casual, emergency, temporary or
regular employment status. Likewise, the provisions of
Section 23 (sic) of the Joint DBM-CSC Circular Letter
No. 88-1, implementing guidelines of R.A. No. 6683,
provides:
"2.3 Excluded from the benefits
under R.A. No. 6683 are the
following:
a) Experts and Consultants hired
by agencies for a limited period
to perform specific activities or
services with a definite expected
output: i.e. membership in Task
Force, Part-Time,
Consultant/Employees.
b) Uniformed personnel of the
Armed Forces of the Philippines
including those of the Philippine
Constabulary and Integrated
National Police (PC-INP).
c) Appointive officials and
employees who retire or elect to
be separated from the service for
optional retirement with gratuity
under R.A. No. 1616, 4968 or
with pension under R.A. No.
186, as amended by R.A. No.
6680 or P.D. No. 1146, an
amended, or vice- versa.
d) Officials and employees who
retired voluntarily prior to the
enactment of this law and have
received the corresponding
benefits of that
retirement/separation.
e) Officials and employees with
pending cases punishable by
mandatory separation from the
service under existing civil
service laws, rules and
regulations; provided that if such
officials and employees apply in
writing within the prescriptive
period for the availment of the
benefits herein authorized, shall
be allowed only if acquitted or
cleared of all charges and their
application accepted and
approved by the head of office
concerned."
Based on the above exclusions, herein petitioner does
not belong to any one of them. Ms. Chua is a full time
employee of NIA entitled to all the regular benefits
provided for by the Civil Service Commission. She held
a permanent status as Personnel Assistant A, a position
which belongs to the Administrative Service. . . . If
casuals and emergency employees were given the
benefit of R.A. 6683 with more reason that this
petitioner who was holding a permanent status as
Personnel Assistant A and has rendered almost 15 years
of faithful, continuous service in the government should
be similarly rewarded by the beneficient (sic) purpose
of the law. 4
The NIA and the Civil Service Commission reiterate in their comment
petitioner's exclusion from the benefits of Republic Act No. 6683, because:
1. Petitioner's employment is co-terminous with the project per appointment
papers kept by the Administrative Service in the head office of NIA (the
service record was issued by the Watershed Management and Erosion Control
Project (WMECP), Pantabangan, Nueva Ecija). The project, funded by the
World Bank, was completed as of 31 December 1988, after which petitioner's
position became functus officio.
2. Petitioner is not a regular and career employee of NIA — her position is not
included in its regular plantilla. She belongs to the non-career service (Sec. 6,
P.D. No. 807) which is inherently short-lived, temporary and transient; on the
other hand, retirement presupposes employment for a long period. The most
that a non-career personnel can expect upon the expiration of his employment
is financial assistance. Petitioner is not even qualified to retire under the GSIS
law.
3. Assuming arguendo that petitioner's appointment is permanent, security of
tenure is available only for the term of office (i.e., duration of project).
4. The objective of Republic Act No. 6683 is not really to grant separation or
retirement benefits but reorganization 5to streamline government functions.
The application of the law must be made consistent with the purpose for
which it was enacted. Thus, as the expressed purpose of the law is to
reorganize the government, it will not have any application to special projects
such as the WMECP which exists only for a short and definite period. This
being the nature of special projects, there is no necessity for offering its
personnel early retirement benefits just to induce voluntary separation as a
step to reorganization. In fact, there is even no need of reorganizing the
WMECP considering its short and limited life-span. 6
5. The law applies only to employees of the national government,
government-owned or controlled corporations with original charters and local
government units.
Due to the impossibility of reconciling the conflicting interpretations of the
parties, the Court is called upon to define the different classes of employees in
the public sector (i.e. government civil servants).
Who are regular employees? The Labor Code in Art. 280 (P.D. No. 492, as
amended) deems an employment 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. No equivalent definition can be found
in P.D.No. 807 (promulgated on 6 October 1975, which superseded the Civil
Service Act of 1965 — R.A. No. 2260) or in the Administrative Code of 1987
(Executive Order No. 292 promulgated on 25 July 1987). The Early
Retirement Law itself (Rep. Act No. 6683) merely includes such class of
employees (regular employees) in its coverage, unmindful that no such specie
is employed in the public sector.
The appointment status of government employees in the career service is
classified as follows:
1. permanent — one issued to a person who has met the requirements of the
position to which appointment is made, in accordance with the provisions of
the Civil Service Act and the Rules and Standards promulgated in pursuance
thereof; 7
2. temporary — In the absence of appropriate eligibles and it becomes
necessary in the public interest to fill a vacancy, a temporary appointment
should be issued to a person who meets all the requirements for the position to
which he is being appointed except the appropriate civil service eligibility:
Provided, That such temporary appointment shall not exceed twelve months,
but the appointee may be replaced sooner if a qualified civil service eligible
becomes available. 8
The Administrative Code of 1987 characterizes the Career Service as:
(1) Open Career positions for appointment to which
prior qualification in an appropriate examination is
required;
(2) Closed Career positions which are scientific, or
highly technical in nature; these include the faculty and
academic staff of state colleges and universities, and
scientific and technical positions in scientific or
research institutions which shall establish and maintain
their own merit systems;
(3) Positions in the Career Executive Service; namely,
Undersecretary, Assistant Secretary, Bureau Director,
Assistant Bureau Director, Regional Director, Assistant
Regional Director, Chief of Department Service and
other officers of equivalent rank as may be identified by
the Career Executive Service Board, all of whom are
appointed by the President.
11
 (4) Career officers, other than those in the Career
Executive Service, who are appointed by the President,
such as the Foreign Service Officers in the Department
of Foreign Affairs;
(5) Commission officers and enlisted men of the Armed
Forces which shall maintain a separate merit system;
(6) Personnel of government-owned or controlled
corporations, whether performing governmental or
proprietary functions, who do not fall under the non-
career service; and
(7) Permanent laborers, whether skilled, semi-skilled,
or unskilled. 9
The Non-Career Service, on the other hand, is characterized by:
. . . (1) entrance on bases other than those of the usual
tests of merit and fitness utilized for the career service;
and (2) tenure which is limited to a period specified by
law, or which is coterminous with that of the appointing
authority or subject to his pleasure, or which is limited
to the duration of a particular project for which purpose
employment was made.
Included in the non-career service are:
1. elective officials and their personal or confidential
staff;
2. secretaries and other officials of Cabinet rank who
hold their positions at the pleasure of the President and
their personal confidential staff(s);
3. Chairman and Members of Commissions and boards
with fixed terms of office and their personal or
confidential staff;
4. contractual personnel or those whose employment in
the government is in accordance with a special contract
to undertake a specific work or job requiring special or
technical skills not available in the employing agency,
to be accomplished within a specific period, which in
no case shall exceed one year and performs or
accomplishes the specific work or job, under his own
responsibility with a minimum of direction and
supervision from the hiring agency.
5. emergency and seasonal personnel. 10
There is another type of non-career employee:
Casual — where and when employment is not
permanent but occasional, unpredictable, sporadic and
brief in nature (Caro v. Rilloroza, 102 Phil. 70; Manuel
v. P.P. Gocheco Lumber Co., 96 Phil. 945)
Consider petitioner's record of service:
Service with the government commenced on 2
December 1974 designated as a laborer
holding emergency status with the NIA — Upper
Pampanga River Project, R & R Division. 11 From 24
March 1975 to 31 August 1975, she was a research aide
with temporary status on the same project. On 1
September 1975 to 31 December 1976, she was with
the NIA-FES III; R & R Division, then on 1 January
1977 to 31 May 1980, she was with NIA — UPR IIS
(Upper Pampanga River Integrated Irrigation Systems)
DRD. On 1 June 1980, she went to NIA — W.M.E.C.P.
(Watershed Management & Erosion Control Project)
retaining the status of temporary employee. While with
this project, her designation was changed to personnel
assistant on 5 November 1981; starting 9 July 1982, the
status became permanent until the completion of the
project on 31 December 1988. The appointment
paper 12attached to the OSG's comment lists her status
as co-terminus with the Project.
The employment status of personnel hired under foreign — assisted projects is
considered co-terminous, that is, they are considered employees for the
duration of the project or until the completion or cessation of said project
(CSC Memorandum Circular No. 39, S. 1990, 27 June 1990).
Republic Act No. 6683 seeks to cover and benefits regular, temporary,
casual and emergency employees who have rendered at least a total of two (2)
consecutive years government service.
Resolution No. 87-104 of the CSC, 21 April 1987, provides:
WHEREAS, pursuant to Executive Order No. 966
dated June 22, 1984, the Civil Service Commission is
charged with the function of determining creditable
services for retiring officers and employees of the
national government;
WHEREAS, Section 4 (b) of the same Executive Order
No. 966 provides that all previous services by an
officer/employee pursuant to a duly approved
appointment to a position in the Civil Service are
considered creditable services, while Section 6 (a)
thereof states that services rendered on contractual,
emergency or casual status are non-creditable services;
WHEREAS, there is a need to clarify the aforesaid
provisions inasmuch as some contractual, emergency or
casual employment are covered by contracts or
appointments duly approved by the Commission.
NOW, therefore, the Commission resolved that services
rendered on contractual, emergency or casual status,
irrespective of the mode or manner of payment therefor
shall be considered as creditable for retirement
purposes subject to the following conditions: (emphasis
provided)
1. These services are supported
by approved appointments,
official records and/or other
competent evidence.
Parties/agencies concerned shall
submit the necessary proof of
said services;
2. Said services are on full time
basis and rendered prior to June
22, 1984, the effectivity date of
Executive Order No. 966; and
3. The services for the three (3)
years period prior to retirement
are continuous and fulfill the
service requirement for
retirement.
What substantial differences exist, if any, between casual, emergency,
seasonal, project, co-terminous or contractual personnel? All are tenurial
employees with no fixed term, non-career, and temporary. The 12 May 1989
CSC letter of denial 13 characterized herein petitioner's employment as co-
terminous with the NIA project which in turn was contractual in nature. The
OSG says petitioner's status is co-terminous with the Project. CSC
Memorandum Circular No. 11, series of 1991 (5 April 1991) characterizes the
status of a co-terminous employee —
(3) Co-terminous status shall be issued to a person
whose entrance in the service is characterized by
confidentiality by the appointing authority or that which
is subject to his pleasure or co-existent with his tenure.
The foregoing status (co-terminous) may be further
classified into the following:
a) co-terminous with the
project — When the appointment
is co-existent with the duration of
a particular project for which
purpose employment was made
or subject to the availability of
funds for the same;
b) co-terminous with the
appointing authority — when
appointment is co-existent with
the tenure of the appointing
authority.
c) co-terminous with the
incumbent — when appointment
is co-existent with the appointee,
in that after the resignation,
12
 separation or termination of the
services of the incumbent the
position shall be deemed
automatically abolished; and
d) co-terminous with a specific
period, e.g. "co-terminous for a
period of 3 years" — the
appointment is for a specific
period and upon expiration
thereof, the position is deemed
abolished.
It is stressed, however, that in the last two
classifications (c) and (d), what is termed co-terminous
is the position, and not the appointee-employee.
Further, in (c) the security of tenure of the appointee is
guaranteed during his incumbency; in (d) the security of
tenure is limited to a specific period.
A co-terminous employee is a non-career civil servant,
like casual and emergency employees. We see no solid reason why the latter
are extended benefits under the Early Retirement Law but the former are not.
It will be noted that Rep. Act No. 6683 expressly extends its benefits for early
retirement to regular, temporary, casual and emergency employees. But
specifically excluded from the benefits are uniformed personnel of the AFP
including those of the PC-INP. It can be argued that, expressio unius est
exclusio alterius. The legislature would not have made a specific enumeration
in a statute had not the intention been to restrict its meaning and confine its
terms and benefits to those expressly mentioned 14 or casus omissus pro
omisso habendus est — A person, object or thing omitted from an
enumeration must be held to have been omitted intentionally. 15 Yet adherence
to these legal maxims can result in incongruities and in a violation of the equal
protection clause of the Constitution.
The case of Fegurin, et al. v. NLRC, et al., 16 comes to mind where, workers
belonging to a work pool, hired and re-hired continuously from one project to
another were considered non-project-regular and permanent employees.
Petitioner Lydia Chua was hired and re-hired in four (4) successive projects
during a span of fifteen (15) years. Although no proof of the existence of a
work pool can be assumed, her service record cannot be disregarded.
Art. III, Sec. 1 of the 1987 Constitution guarantees: "No person shall be
deprived of life, liberty, or property without due process of law, nor shall any
person be denied the equal protection of the laws."
. . . In Felwa vs. Salas, L-26511, Oct. 29, 1966, We
ruled that the equal protection clause applies only to
persons or things identically situated and does not bar a
reasonable classification of the subject of legislation,
and a classification is reasonable where (1) it is based
on substantial distinctions which make real differences;
(2) these are germane to the purpose of the law; (3) the
classification applies not only to present conditions but
also to future conditions which are substantially
identical to those of the present; (4) the classification
applies only to those who belong to the same class. 17
Applying the criteria set forth above, the Early Retirement Law would violate
the equal protection clause were we to sustain respondents' submission that
the benefits of said law are to be denied a class of government employees who
are similarly situated as those covered by said law. The maxim of Expressio
unius est exclusio alterius should not be the applicable maxim in this case but
the doctrine of necessary implication which holds that:
No statute can be enacted that can provide all the details
involved in its application. There is always an omission
that may not meet a particular situation. What is
thought, at the time of enactment, to be an all-
embracing legislation may be inadequate to provide for
the unfolding events of the future. So-called gaps in the
law develop as the law is enforced. One of the rules of
statutory construction used to fill in the gap is the
doctrine of necessary implication. The doctrine states
that what is implied in a statute is as much a part
thereof as that which is expressed. Every statute is
understood, by implication, to contain all such
provisions as may be necessary to effectuate its object
and purpose, or to make effective rights, powers,
privileges or jurisdiction which it grants, including all
such collateral and subsidiary consequences as may be
fairly and logically inferred from its terms. Ex
necessitate legis. And every statutory grant of power,
right or privilege is deemed to include all incidental
power, right or privilege. This is so because the greater
includes the lesser, expressed in the Maxim, in eo plus
sit, simper inest et minus. 18
During the sponsorship speech of Congressman Dragon (re: Early Retirement
Law), in response to Congressman Dimaporo's interpellation on coverage
of state university employees who are extended appointments for one (1) year,
renewable for two (2) or three (3) years, 19 he explained:
This Bill covers only those who would like to go on
early retirement and voluntary separation. It is
irrespective of the actual status or nature of the
appointment one received, but if he opts to retire under
this, then he is covered.
It will be noted that, presently Pending in Congress, is House Bill No. 33399
(a proposal to extend the scope of the Early Retirement Law). Its wording
supports the submission that Rep. Act No. 6683 indeed overlooked a qualified
group of civil servants. Sec. 3 of said House bill, on coverage of early
retirement, would provide:
Sec. 3. Coverage. — It will cover all employees of the
national government, including government-owned or
controlled corporations, as well as the personnel of all
local government units. The benefits authorized under
this Act shall apply to all regular, temporary,
casual, emergency and contractual employees,
regardless of age, who have rendered at least a total of
two (2) consecutive years government service as of the
date of separation. The term "contractual employees" as
used in this Act does not include experts and
consultants hired by agencies for a limited period to
perform specific activities or services with definite
expected output.
Uniformed personnel of the Armed Forces of the
Philippines, including those of the PC-INP are excluded
from the coverage of this Act. (emphasis supplied)
The objective of the Early Retirement or Voluntary Separation Law is to trim
the bureaucracy, hence, vacated positions are deemed abolished upon
early/voluntary retirement of their occupants. Will the inclusion of co-
terminous personnel (like the petitioner) defeat such objective? In their case,
upon termination of the project and separation of the project personnel from
the service, the term of employment is considered expired, the officefunctus
officio. Casual, temporary and contractual personnel serve for shorter periods,
and yet, they only have to establish two (2) years of continuous service to
qualify. This, incidentally, negates the OSG's argument that co-terminous or
project employment is inherently short-lived, temporary and transient,
whereas, retirement presupposes employment for a long period. Here,
violation of the equal protection clause of the Constitution becomes glaring
because casuals are not even in the plantilla, and yet, they are entitled to the
benefits of early retirement. How can the objective of the Early Retirement
Law of trimming the bureaucracy be achieved by granting early retirement
benefits to a group of employees (casual) without plantilla positions? There
would, in such a case, be no abolition of permanent positions or streamlining
of functions; it would merely be a removal of excess personnel; but the
positions remain, and future appointments can be made thereto.
Co-terminous or project personnel, on the other hand, who have rendered
years of continuous service should be included in the coverage of the Early
Retirement Law, as long as they file their application prior to the expiration of
their term, and as long as they comply with CSC regulations promulgated for
such purpose. In this connection, Memorandum Circular No. 14, Series of
1990 (5 March 1990) implementing Rep. Act No. 6850, 20 requires, as a
condition to qualify for the grant of eligibility, an aggregate or total of seven
(7) years of government service which need not be continuous, in the career or
non-career service, whether appointive, elective, casual, emergency, seasonal,
contractual or co-terminous including military and police service, as
evaluated and confirmed by the Civil Service Commission. 21 A similar
regulation should be promulgated for the inclusion in Rep. Act No. 6683
of co-terminous personnel who survive the test of time. This would be in
keeping with the coverage of "all social legislations enacted to promote the
physical and mental well-being of public servants"22 After all, co-terminous
personnel, are also obligated to the government for GSIS contributions,
medicare and income tax payments, with the general disadvantage of
transience.
In fine, the Court believes, and so holds, that the denial by the respondents
NIA and CSC of petitioner's application for early retirement benefits under
Rep. Act No. 6683 is unreasonable, unjustified, and oppressive, as petitioner
had filed an application for voluntary retirement within a reasonable period
and she is entitled to the benefits of said law. While the application was filed
after expiration of her term, we can give allowance for the fact that she
originally filed the application on her own without the assistance of counsel.
In the interest of substantial justice, her application must be granted; after all
she served the government not only for two (2) years — the minimum
requirement under the law but for almost fifteen (15) years in four (4)
successive governmental projects.
WHEREFORE, the petition is GRANTED.
13
Let this case be remanded to the CSC-NIA for a favorable disposition of The Labor Arbiter found that the circumstances of the case negate the
petitioner's application for early retirement benefits under Rep. Act No. 6683, existence of a sufficient justifiable cause for dismissal and ordered the
in accordance with the pronouncements in this decision. payment of separation pay and backwages as well as actual and moral
damages. The dispositive portion of the decision reads:
SO ORDERED.
WHEREFORE, premises considered, respondent San
Miguel Corporation is hereby adjudged to pay
G.R. No. 87673 January 24, 1992
complainant Milagros Dolores, the total sum of Two
Hundred Eight Thousand One Hundred Fifty Seven
MILAGROS I. DOLORES, petitioner, Pesos (P208,157.00) computed as follows:
vs.
NATIONAL LABOR RELATIONS COMMISSION (FIFTH
Separation pay (P7,715/mo. x 21
DIVISION), SAN MIGUEL CORPORATION and PETRONILO O.
years/2) = P81,007.00
JULIANO, respondents.
(Limited) Backwages for 10
mons. = 77,150.00
G.R. No. 88088 January 24, 1992 Damages (actual and moral) =
50,000.00
—————
SAN MIGUEL CORPORATION, petitioner, P208,157.00

vs. SO ORDERED.

THE HON. NATIONAL LABOR RELATIONS COMMISSION and (pp. 38-19 of Rollo in G.R. 87673)
MILAGROS I. DOLORES, respondents.

Both parties appealed to the NLRC which rendered the now questioned
Siguion Reyna, Montecillo & Ongsiako for SMC and P. Juliano.
decision sustaining the Labor Arbiter but deleted the award of actual and
moral damages, the decretal portion of which reads:

WHEREFORE, in view of the foregoing, the Decision

PARAS, J.: dated June 30, 1988 is hereby AFFIRMED excepting
the award of actual and moral damages.
These petitions were consolidated pursuant to the resolution of this Court
dated June 5, 1989 (p. 83, Rollo, in G.R. No. 87673). Both petitions seek to SO ORDERED.
annul the decision * of the Fifth Division of the National Labor Relations
Commission (NLRC for brevity) dated January 31, 1989 which affirmed with (p. 52 of Rollo in G.R. No. 87673)
modification the decision of Labor Arbiter Pacita del Rosario dated June 30,
1988 in NLRC-NCR Case No. 2-420-87 entitled "Milagros I. Dolores vs. San
Miguel Corporation and Petronilo O. Juliano", and the subsequent resolution Both parties filed a motion for reconsideration which was denied in a
of the same Commission dated March 8, 1989 which denied the respective resolution dated March 8, 1989 which reads:
Motions for Reconsideration of the parties.
After due consideration of Complainant's and
The antecedent facts of this case are as follows: Respondent's Motions for Reconsideration dated
February 17, 1989 and February 27, 1989 respectively,
this Commission (Fifth Division) resolved to deny the
Milagros I. Dolores was hired by San Miguel Corporation (hereinafter same for lack of merit.
referred to as SMC for brevity) as Chemist on August 21, 1965. She was
promoted to Senior Chemist on October 1, 1973, then to Senior Research
Chemist on December 1, 1976 and finally, to Head, Technical Information, No further motion for reconsideration shall be
Corporate Research and Development (CR & D) on October 29, 1984. During entertained. (p. 53 of Rollo, in G.R. 87673)
her stint, she received merit increases due to her satisfactory job performance
and the latest salary increase in the amount of P1,285.00 a month was given to
Milagros I. Dolores received the March 8, 1989 Resolution of the NLRC on
her on January, 1986 for her technical competence and dedication as borne out
March 31, 1989 and filed the petition which was docketed as G.R. No. 87673.
by her 1985 Performance Appraisal. At the time of her termination on
On the other hand, SMC received the resolution on April 18, 1989 and
December 1, 1986, she was receiving a monthly salary of P7,715.00.
likewise filed a petition for review which was docketed as G.R. No. 88088. As
aforementioned, this Court, on June 5, 1989, resolved to consolidate the
On September 16, 1986, she filed an application for leave of absence for two petitions (p. 83 of Rollo in G.R. No. 87673).
(2) months, specifically from September 30 to November 28, 1986 in order to
attend a six (6) week course in French language at the Alliance de Franciase
On July 31, 1989, the Second Division of this Court resolved to dismiss both
de Paris (France) at her own expense. Pursuant to company rules and
petitions for failure to sufficiently show that the respondent NLRC committed
regulations, she submitted two (2) Personnel Leave Authority forms
grave abuse of discretion in rendering the questioned judgment (p. 99
corresponding to: (1) 14 days vacation from September 30 to October 16,
of Rollo, in G.R. No. 87673; p. 179 of Rollo in G.R. No. 88088).
1986 (regular annual leave); and (2) 34 1/2 days leave with permission
without pay (LWOP) from October 17 to November 28, 1986. She submitted
a formal request together with the said Personnel Leave Authority forms to Both Milagros I. Dolores and SMC filed a motion for reconsideration of the
her immediate superior Dr. Petronilo O. Juliano, Asst. Vice-President and July 31, 1989 resolution of this Court. On October 9, 1989, this Court granted
Director, CR & D, and furnished copies of said request to Mr. Manuel the motions, reinstated both petitions and required the parties to file their
Mendez, Vice-President and Manager who is the immediate superior of Dr. consolidated replies (p. 150 of Rollo in G.R. 87673; p. 180 of Rollo in G.R.
Juliano, and Mr. J. Punsalang, MSE, Personnel Officer. No. 88088).

On September 22, 1986, Dr. Juliano issued a memo limiting Ms. Dolores' The petitions were given due course.
leave to one (1) calendar month due to the anticipated heavy workload on the
last quarter of the year and returned her Personnel Leave Authority forms to
The issue before this Court is whether or not public respondent NLRC erred in
be revised accordingly. On the same day, she submitted a request for
finding the dismissal of Dolores to be without basis, in awarding separation
reconsideration together with the two (2) Personnel Leave Authority forms to
pay, in lieu of reinstatement, limited backwages and in deleting the award of
Dr. Juliano because the duration of her intended study would exceed one (1)
damages in favor of Dolores.
month. On September 30, 1986, Ms. Dolores left for Paris, France without
receiving any formal denial to her request for reconsideration and promptly
returned to Manila on November 30, 1986. The following is the Labor Arbiter Atty. Pacita G. del Rosario's study and
evaluation of this case:
On her first working day on December 2, 1986, Mr. Conradino Santos,
Administrative Supervisor, CR & D, presented to her Dr. Juliano's letter dated At this point, deep analysis and consideration of the
November 25, 1986 informing her of her termination effective December 1, factors surrounding the complainant's termination is in
1986 for alleged continuous absence without permission but with retirement order. We are cognizant of the fact that when
benefits. complainant filed her application for leave, it was for
the purpose of pursuing her studies in the French
language — a study that would take two (2) months,
On February 4, 1987, Milagros Dolores filed a complaint before the NLRC
thus necessitating an equivalent period of leave; it was
challenging the propriety of her dismissal which was docketed as NLRC-NCR
a laudable purpose, so to speak; a purpose that was
No. 2-420-87.

14
 beneficial to the respondent company too, for unrefuted
is complainant's claim that her knowledge of the French
language came in quite handy in her work as Head,
Technical Information Corporate Research &
Development and the respondent company has saved
some, as it was spared from paying for translation
services.
Unrefuted likewise were the averments of the
complainant: (a) that this was her first leave after four
(4) years and as per Personnel Policies and Procedure
(which has not been superseded nor modified) she was
entitled for a three (3)-month leave if it was for a
"study" purpose; and (b) that she trained a technical
information researcher for four (4) months to take over
her technical duties while she was on leave, an action
apparently made, to lay the ground work for her leave.
Likewise is the complainant's allegation that after filing
her Motion for Reconsideration of the approved one-
month leave, she failed to get any answer/result on the
same, so, went ahead and left for a two-month study.
Apparently, complainant presumed in good faith, that
since there was no direct refusal from her immediate
superior as regards her Motion for Reconsideration,
(although respondent claims that she received the final
refusal annotated on top of her Motion for
Reconsideration) she left the country. Then
complainant returned and still reported for work the
very next day, only to be furnished with the
Memorandum of Termination. It should be noted that
the said Memorandum is dated November 25, 1986 and
her termination effective December 1, 1986. The haste
with which her dismissal was effected cannot be
overlooked not to speak of the untold miseries and
shock it must have caused herein complainant.
All these factors, taken in their proper context and
buttressed by the denial of the employee's privilege to a
maximum three-month leave as provided for in the
Personnel Policies and Procedures Manual, negates the
existence of a sufficient, justifiable cause for dismissal.
However, the only discordant factor of note to an
otherwise clear picture of an arbitrary termination of
service is the fact that herein complainant is a top
managerial official of the company, one of the several
employees on whose shoulders rests the burden of
running efficiently and smoothly the respondent's
business. She was the Head of the Technical
Information, Corporate Research & Development. Like
any other top managerial employee, she is tasked with a
greater sense of responsibility and concern . . . a higher
degree of dedication to the job unlike other ordinary
employees. In this aspect, complainant was wanting.
Even assuming that respondent did not furnish
complainant with a copy of the annotation denial on top
of her Motion for Reconsideration as attested by the
lack of her signature thereon, she should not have
presumed this as acquiescence to her said Motion. It
behooves upon her, as a top executive, to find out the
final action on her Motion for Reconsideration and
clear with her immediate superior any obstacle,
immediate or otherwise, which may possibly occur
during her projected two-month leave. Training for four
(4) months of a replacement is not a sufficient measure.
Complainant knew beforehand that she'll be gone for
two months and only a month's leave was approved by
her immediate superior, the least that could be done was
to check with her superior (who works in the same
department with her) before leaving (Rollo, G.R. No.
87673, pp. 34-36).
Significantly, from the above findings of the Labor Arbiter herself, it was
established that petitioner employee is one of the top ranking officials of the
company, tasked with greater responsibility and a higher degree of dedication
to the job unlike the other ordinary employees to whom the first group of
factors would perhaps apply. Prudence dictates that she should not have taken
for granted that her motion for reconsideration would be favorably acted upon.
She took chances and now she has nobody to blame but herself for the
consequences.
By and large, it appears that this is not a simple case of contributory
negligence on the part of petitioner Dolores but an infraction of the rules and
regulations for which as a top managerial employee she should be the first to
respect. Instead she blatantly disregarded the rules, absented herself without
permission from her superior, which is a valid ground for the imposition of
disciplinary action including if warranted the extreme penalty of dismissal.
Employers, generally, are allowed a wider latitude of discretion in terminating
the employment of managerial personnel which by their nature requires the
employer's trust and confidence in a greater degree than in the ordinary rank
and file employees. Considering the fact that she was holding a managerial
position, her refusal to abide by the lawful orders of her employers would lead
to erosion of trust and confidence reposed on her. Loss of confidence is a
valid ground for dismissing an employee and proof beyond reasonable doubt
is not required. All that is needed is for the employer to establish a sufficient
basis for the dismissal of an employee. (Cruz v. Medina, 177 SCRA 565-566
[1989])
Furthermore, when an employee accepts a promotion to a managerial position
or to an office requiring full trust and confidence she gives up some of the
rigid guarantees available to an ordinary worker. Infraction which if
committed by others would be overlooked or condoned or penalties mitigated
may be visited with more serious disciplinary action (Metro Drug Corporation
vs. NLRC, 143 SCRA 132 [July 28, 1986]).
Dolores' plea that under company rules, she is entitled to three months leave
without pay is likewise unavailing as such privilege is not absolute but
discretionary. In her case the limitation to one month leave was based on the
anticipated heavy workload which is unquestionably a valid ground.
There is no question that petitioner Dolores is guilty of breach of trust and
violation of company rules, the penalty of which ranges from reprimand to
dismissal, depending on the gravity of the offense. (Manila Electric Co. v.
NLRC, 175 SCRA 277 [1989])
Nonetheless, considering petitioner Dolores' 21 years of service with San
Miguel Corp. and it appearing that this is her first offense which incidentally
was beneficial to the employer for unrefuted is her claim that her study of the
French language spared the company from paying for translation services, it
appears that the penalty of dismissal would be too harsh under the
circumstances. This Court has held time and again, in a number of decisions,
that notwithstanding the existence of a valid cause for dismissal, such as
breach of trust by an employee, nevertheless dismissal should not be imposed
as it is too severe a penalty if the latter has been employed for a considerable
length of time in the service of her employer (Manila Electric Co. v.
NLRC, supra). More equitably therefore, she should be granted reinstatement
but without damages, considering the good faith of the employer in dismissing
the employee; (ibid.) otherwise, it would have the effect of rewarding rather
than punishing the erring employee for her offense.
Neither can San Miguel Corp. be liable for actual and moral damages in the
absence of proof that there was malice or bad faith on the part of the former in
terminating the services of the latter (Suaris v. BPI, 176 SCRA 689 [1989]).
As earlier discussed, several telex messages and letters were sent to her
addresses both here in the Philippines and abroad as early as October 21, 1986
warning her that her permission for leave had expired. It is indeed difficult to
believe that she did not receive any of these notices. Be that as it may, it will
be recalled that she left for France thinking that permission had been granted
for two months.
PREMISES CONSIDERED, the assailed decision of the National Labor
Relations Commission is MODIFIED by allowing reinstatement with
backwages for two years but without damages.
SO ORDERED.
G.R. No. 106107 June 2, 1994
AGUSTIN CHU, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and VICTORIAS
MILLING COMPANY, INC. respondents.
Legaspi, Rufon, Necesario & Asso. Law Office for petitioner.
Decena, Tabat, Jardaleza & Tañoso Law Office for private respondent.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to
reverse and set aside the Decision of the Fourth Division of the National
Labor Relations Commission (NLRC) in Case No. 06-02-10081-89 which
dismissed petitioner’s appeal and its Resolution dated March 20, 1992, which
denied petitioner’s motion for reconsideration.
We dismiss the petition.
I
15
Petitioner retired from the service of private respondent upon reaching the age
of sixty under its regular retirement program. He was granted an extention of
service by the Board of Directors of private respondent under a "Special
Contract of Employment." The contract provided, inter alia, that its term was
for a period of one year commencing on August 1, 1988; that petitioner was
employed as Head of the Warehousing, Sugar, Shipping and Marine
Department; and that he was to receive a basic salary of P6,941.00 per month.
Private respondent issued Memorandum No. 1012-PS dated December 12,
1988 and Memorandum No. 1028-PS dated January 16, 1989, both providing
for a rotation of the personnel and other organizational changes. Pursuant to
the memoranda, petitioner was transferred to the Sugar Sales Department.
Petitioner protested his transfer and requested a reconsideration thereof, which
was denied. Consequently, on February 27, 1989, petitioner filed a complaint
for illegal dismissal, contending that he was constructively dismissed from his
employment (RAB IV Case No. 06-02-10081-89).
In support of his decision holding that there was no constructive dismissal of
petitioner, the Labor Arbiter said that: (1) petitioner was transferred to the
Sugar Sales Department from the Warehousing, Sugar, Shipping and Marine
Department, both of which are under the Sugar Sales Area; (2) petitioner’s
transfer was without change in rank or salary; (3) petitioner’s designation in
either department was the same; (4) the personnel rotation was pursuant to
organizational changes done in the valid exercise of management
prerogatives; (5) there was no bad faith in the transfer of petitioner, as other
employees similarly situated as he were likewise affected; and (6) petitioner
failed to show that he was prejudiced by the changes or transferred to a
demeaning or humiliating position.
Petitioner appealed to the NLRC which, in a resolution dated January 13,
1992, affirmed the Labor Arbiter’s decision. In a resolution dated March 20,
1992, the NLRC denied petitioner’s motion for reconsideration.
II
In this petition, petitioner contends that there was no valid exercise of
management prerogative because: (1) his transfer violated the "Special
Contract of Employment" which was the law between the parties; and (2) said
transfer was unreasonable and caused inconvenience to him.
Petitioner argues that private respondent’s prerogative to transfer him was
limited by the "Special Contract of Employment," which was the "law"
between the parties. Thus, petitioner urges that private respondent, by
employing him specifically as Head of the Warehousing, Sugar, Shipping, and
Marine Department, waived its prerogative to reassign him within the term of
the contract to another department.
We disagree.
An owner of a business enterprise is given considerable leeway in managing
his business because it is deemed important to society as a whole that he
should succeed. Our law, therefore, recognizes certain rights as inherent in the
management of business enterprises. These rights are collectively called
management prerogatives or acts by which one directing a business is able to
control the variables thereof so as to enhance the chances of making a profit.
"Together, they may be taken as the freedom to administer the affairs of a
business enterprise such that the costs of running it would be below the
expected earnings or receipts. In short, the elbow room in the quest for
profits" (Fernandez and Quiason, The Law on Labor Relations, 1963 ed., p.
43).
One of the prerogatives of management, and a very important one at that, is
the right to transfer employees in their work station. In Philippine Japan
Active Carbon Corporation v. National Labor Relations Commission, 171
SCRA 164 (1989), we held:
It is the employer’s prerogative, based on its assessment
and perception of its employees’ qualifications,
aptitudes, and competence to move them around in the
various areas of its business operations in order to
ascertain where they will function with maximum
benefit to the company. An employee’s right to security
of tenure does not give him such a vested right in his
position as would deprive the company of its
prerogative to change his assignment or transfer him
where he will be most useful. When his transfer is not
unreasonable, nor inconvenient, nor prejudicial to him,
and it does not involve a demotion in rank or a
diminution of his salaries, benefits, and other privileges,
the employee may not complain that it amounts to a
constructive dismissal.
In Abbot Laboratories (Phils.) Inc. v. NLRC, 154 SCRA 713 (1987), we also
held in referring to the prerogative of transfer of employees, that:
This is a function associated with the employer’s
inherent right to control and manage effectively its
enterprise. Even as the law is solicitous of the welfare
of employees, it must also protect the right of an
employer to exercise what are clearly management
prerogatives. The free will of management to conduct
its own business affairs to achieve its purpose cannot be
denied.
Of course, like other prerogatives, the right to transfer or re-assign is subject
to limitations arising under the law, contract or general principles of fair play
and justice (Abbot Laboratories (Phil.) Inc. v. NLRC, 154 SCRA 713 [1987]).
Jurisprudence proscribes transfers or re-assignments of employees when such
acts are unreasonable and cause inconvenience or prejudice to them
(Philippine Japan Active Carbon Corporation v. NLRC, supra).
We find nothing in the "Special Contract of Employment" invoked by
petitioner wherein private respondent had waived its right to transfer or re-
assign petitioner to any other position in the company. Before such right can
be deemed to have been waived or contracted away, the stipulation to that
effect must be clearly stated so as to leave no room to doubt the intentions of
the parties. The mere specification in the employment contract of the position
to be held by the employee is not such stipulation.
As held in Philippine Japan Active Carbon Corporation v. National Labor
Relations Commission, supra:
An employee’s right to security of tenure does not give
him such a vested right in his position as would deprive
the company of its prerogatives to change his
assignment or transfer him where he will be most
useful.
Petitioner’s bare assertion that the transfer was unreasonable and caused him
inconvenience cannot override the fact, as found by the Labor Arbiter and
respondent Commission, that the rotation was made in good faith and was not
discriminatory, and that there was no demotion in rank or a diminution of his
salary, benefits and privileges.
WHEREFORE, the petition for certiorari is DISMISSED.
SO ORDERED.
G.R. No. 73053 September 15, 1989
DR. CARMELITA U. CRUZ, petitioner,
vs.
HON. GUILLERMO C. MEDINA, HON. GABRIEL M. GATCHALIAN
and ROOSEVELT COLLEGES, INC., respondents.
FERNAN, C.J.:
Petitioner, by way of a special civil action for certiorari, seeks to annul and
set aside the resolution of the National Labor Relations Commission (NLRC)
affirming the decision of the Labor Arbiter, dismissing petitioner's complaint
for illegal dismissal from employment and for damages.
Petitioner Dr. Carmelita U. Cruz is a 1968 mathematics graduate of the
University of the Philippines. She earned a doctoral degree in Mathematics
Education from Centro Escolar University in 1977. She wrote several books in
mathematics and statistics and likewise attended numerous seminars,
workshops and conferences, either as a delegate, resource person or
consultant. She rose from the ranks, starting out as a high school teacher in
1958 to college instructor and eventually Dean, until her services were
terminated in 1984 by her employer and herein private respondent, Roosevelt
Colleges, Inc.
The whole controversy started when in October 1983, Agro-Industrial
Management and Consultancy, Inc. (AIMCON) submitted a proposal to
Roosevelt Colleges, Inc., to start a Distance Study Program leading to a
Degree of Master of Arts in Education Teaching Elementary Agriculture
(MAETEA). Roosevelt Colleges, Inc., in accepting the proposal, designated
petitioner, being the Dean of the Institute of Education and Graduate School,
to head the committee to work for the approval of the program with the
Ministry of Education, Culture & Sports (MECS). The program which is a
joint venture between AIMCON and Roosevelt Colleges, will have its own
operational budget and a Board of Trustees composed of two representatives
from Roosevelt Colleges, the College President and one other person. In view
of this, petitioner was offered the post of Deputy Director as well as the
second seat allotted to Roosevelt Colleges in the Program's Board of Trustees.
The Ministry of Education however, issued the authority to operate the
Program on the condition that such shall only be an extension of the Graduate
School of Roosevelt Colleges. The masteral degree was changed to Master of
16
Arts in Education, Major in Elementary Agriculture (MEAMEA). Considering
that she was already the Dean of Graduate School, a post higher than the
Program's director, the offer to make petitioner as Deputy Director did not
push through. During that time petitioner was receiving P4,330.50, including
P1,747.50 representing remuneration for six (6) teaching loads. 1
On September 26, 1984, pursuant to Resolution No. 5 of the Board of
Trustees, the President of Roosevelt Colleges, Romeo P. de la Paz, sent
petitioner a letter informing her, as follows:
... the issue concerning the amount of remuneration or
honorarium to be added to what you are presently
receiving in view of the institution of the Agro-Forestry
Program in the Institute of Education was discussed by
the board yesterday. The final decision is given below:
1) You will be given monthly honorarium equivalent to
the amount you are now receiving for teaching 6 loads.
2) This amount is chargeable to the Agro-Forestry
Program and to be drawn from the Cashier's Office in
Sumulong.
3) This shall take effect as soon as the monthly
remuneration you are receiving for teaching 6 loads
ends.
4) Effective the second semester of SY 84-85 you are
not allowed to accept teaching assignment be it in the
undergraduate or graduate programs.
5) It is expected that you will devote more time to
effective and efficient administration and supervision of
the Institute of Education including the Agro-Forestry
Program. ... 2
In response to the above letter, petitioner Dr. Cruz sent a letter dated October
1, 1984, stating that:
... with a few considerations to reckon with, I think it
would be better that I, much to my regret, be no longer
involved in the Agro-Forestry Program. ...3
In addition, she expressed her wish to retain her teaching loads citing
professional reasons as well as her desire to be in constant contact with her
students.
On October 8, 1984, President de la Paz informed Dr. Cruz of the Resolution
of the Board, to wit: (a) that Dr. Cruz be required to appear in its next meeting
to be held on 30 October 1984; (b) that Dr. Cruz is expected to continue
functioning as Dean of Education including the new Agro-Forestry Program
under the Institute of Education; and (c) that Dr. Cruz be directed to send to
the Board within twenty-four (24) hours upon receipt of this communication
her reply to these resolutions. 4 Dr. Cruz manifested her willingness to appear
before the Board. In the meanwhile, President de la Paz informed the Board
that he will go on leave until the issue in connection with Dr. Cruz shall have
been resolved.
The Board held several meetings to thresh out this problem. During these
meetings, Dr. Cruz reiterated her desire to retain her teaching loads in lieu of
handling the Agro-Forestry Program. The Board on the other hand, remained
firm on its stand to enforce Resolution No. 5. Several attempts were made to
amicably settle the issue, but to no avail. A deadlock occurred. On October
19, 1984, the Board issued Dr. Cruz a letter terminating her services, the text
to wit:
Even before the receipt of your letter of October 16, 1984, the Board was
aware of your intractable stand not to be involved in the Agro-forestry
Program unless your teaching loads are retained.
The Board has been too patient with you aside from the
fact that Dr. Isidro was unofficially designated to talk to
you and clarify things to avoid misunderstanding. You
are aware that the course of Master of Arts in Education
in Teaching Elementary Agriculture is a part of the
Graduate School of Education including the Institute of
Education wherein you are the Dean. Your refusal to
accept involvement in the said program, unavoidable as
it is, is a defiant disregard of the Board's action, and
leaves us no other recourse except to terminate your
relationship with the school effective immediately. 5
On November 16, 1984, Dr. Cruz filed a complaint for illegal dismissal in the
National Labor Relations Commission (NLRC), National Capital Region. This
case was assigned to Labor Arbiter Apolinar L. Sevilla. The parties were
required to submit their respective position papers, supplemental pleadings
and supporting documents, after which the case was deemed submitted for
decision. On Mach 19, 1985, Labor Arbiter Sevilla rendered a
decisions 6finding petitioner guilty of insubordination and thus dismissed
petitioner's complaint for illegal dismissal for lack of merit. Dr. Cruz appealed
to the National Labor Relations Commission which on June 26, 1985
promulgated a Resolution 7 dismissing petitioner's appeal and affirming the
Labor Arbiter's decision in toto. Not satisfied, petitioner filed a Motion for
Reconsiderations 8 on September 30, 1985 which was likewise denied on
October 3, 1985. 9Petitioner then filed a special civil action
for certiorari 10 before Us on December 13, 1985. This was dismissed for lack
of merit by the First Division in a Court resolution 11 dated July 7, 1986.
Still not satisfied, petitioner filed a Motion for Reconsideration 12 on August
8, 1986. On October 27, 1986, the Second Division to which the case was
raffled on August 29, 1986 granted the motion for reconsideration and gave
due course to the petition. 13 Said Second Division eventually became the
present Third Division.
Petitioner raises the following issues:
1) Whether or not the June 26, 1985 Resolution of the
NL RC is replete with factual findings unsupported by
substantial and credible evidence; and, therefore, not
binding on and subject to review by the Honorable
Supreme Court;
2) Whether or not the 26 years of petitioner's
continuous, efficient and devoted service to the private
respondent should be taken into account in deciding the
case;
3) Whether or not the alleged loss of trust and
confidence on the petitioner was validly justified so as
to warrant her dismissal vis-a-vis her recent promotion
and manifestation to handle the Program even without
pay;
4) Whether or not the petitioner could be dismissed
from her position as Professor III, an ordinary
employee when the basis of her dismissal was loss of
trust and confidence on her as a Dean or managerial
employee;
5) Whether or not the petitioner was guilty of
insubordination;
6) Whether or not the petitioner is entitled to a writ
of certiorari, annulling the NLRC Resolutions, and
7) Whether or not the petitioner is entitled to damages
and for how much. 14
The primordial issue in this case is whether or not petitioner is guilty of
insubordination resulting in loss of confidence sufficient to warrant a
dismissal.
Before attempting to resolve this issue, the employment status of petitioner
must first be looked into. Petitioner contends that she was divested of her
Deanship of the Graduate School and retained as Dean in the Institute of
Education. This is of no moment. The fact remains that she was a Dean, a
position which is on the managerial level. In the case of Metro Drug
Corporation v. NLRC, 15 this Court held that managerial personnel and other
employees occupying positions of trust and confidence are entitled to security
of tenure, fair standards of employment and the protection of labor laws.
While it is true that the decision to dismiss or lay-off an employee is
management's prerogative, it must be made without abuse of discretion, for
what is at stake is not only the employee's position but also his means of
livelihood. 16
However, the rules on termination of employment, penalties for infractions
and resort to concerted actions in so far as managerial employees are
concerned are not necessarily the same as those for ordinary
employees. 17Employers, generally, are allowed a wider latitude of discretion
in terminating the employment of managerial personnel or those of similar
rank performing functions which by their nature require the employer's trust
and confidence, than in the case of ordinary rank and file employees. 18
With these principles in mind, we find no grave abuse of discretion committed
by public respondents in ruling petitioner's dismissal legal. Considering the
fact that she was holding a managerial position, her refusal to abide by the
lawful orders of her employers would lead to the erosion of the trust and
confidence reposed on her. Loss of confidence is a valid ground for
dismissing an employee and proof beyond reasonable doubt is not required.
All that is needed is for the employer to establish a sufficient basis for the
dismissal of an employee. The grant of teaching loads was only a privilege
since as Dean, her first and primary function was to administer the particular
college under her care and authority. Hence, the decision of Roosevelt
17
Colleges to take away her six (6) teaching loads so that she can handle the
Agro-Forestry Program, with the same pay is found to be reasonable and
lawful. In the case of Philippine Japan Active Carbon Corporation and
Tokuichi Satofuka v. NLRC & Olga Quinanola, 19 We held that:
It is the employer's prerogative, based on its assessment
and perception of its employees' qualifications,
aptitudes, and competence, to move them around in the
various areas of its business operations in order to
ascertain where they will function with maximum
benefit to the company. An employee's right to security
of tenure does not give him such a vested right in his
position as would deprive the company of its
prerogative to change his assignment or transfer him
where he will be most useful. When his transfer is not
unreasonable, nor inconvenient, or prejudicial to him,
and it does not involve a demotion in rank or a
diminution of his salaries, benefits, and other privileges,
the employee may not complain that it amounts to a
constructive dismissal.
While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every dispute
will be automatically decided in favor of labor. Management also has rights,
which, as such, are entitled to respect and enforcement in the interest of
simple fair play. Although the Supreme Court has inclined more often than
not toward the worker and has upheld his cause in his conflicts with the
employer, such favoritism has not blinded the Court to the rule that justice is
in every case for the deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine. 20
But considering that petitioner Cruz had spent the best years of her
professional life in the service of the employer and that her work as a Dean
and teacher was, as manifested by the Faculty Evaluation Results By
Students," 21beyond reproach, the ends of social and compassionate justice
would be served if she will be given some equitable relief.
The grant of equitable relief in the form of separation pay finds support in a
number of decisions promulgated by this Court. In the case of Eduardo V.
Reyes v. Minister of Labor and PACWOOD, Inc., 22 this Court adopted the
ruling inBaby Bus, Inc. vs. Minister of Labor, 23 to wit:
... it does not necessarily follow that if there is no illegal
dismissal, then no award of separation pay may be
made.
and in the case of San Miguel Corporation v. Deputy Minister of Labor and
Employment 24 where this Court held that:
... the trust and confidence in the private respondent
having been lost, the respondent Regional Director
acted correctly in allowing termination of employment
but with retirement or separation benefits.
Furthermore, in the case of Soco v. Mercantile Corporation of Davao, 25 We
held that:
Where an employee who had been dismissed for
violation of company rules had been employed for 18
years, he may be afforded some equitable relief due to
the past services rendered by him by granting him
separation pay equivalent to one month salary for his
every year of service to the company.
WHEREFORE, the decision of the National Labor Relations Commission
(NLRC) is hereby affirmed with the modification that petitioner, Dr.
Carmelita U. Cruz is hereby adjudged entitled to separation pay equivalent to
one (1) month latest salary for every year of service. No pronouncement as to
costs.
SO ORDERED.
G.R. No. 92859 February 1, 1993
SAN MIGUEL CORPORATION, petitioner,
vs.
REYNALDO R. UBALDO and EMMANUEL NOEL A. CRUZ, in their
capacities as Chairman and Member, respectively, of the Voluntary
Arbitration Panel, MESSRS. FERNANDO CODILLO, GERARDO
CARDENO, RENATO L. SAGARIO, RAMON P. GUARINO AND
ILAW AT BUKLOD NG MGA MANGGAGAWA (IBM), respondents.
Angara Abello, Concepcion, Regala & Cruz for petitioner
E.N.A. Cruz & Associates for respodent Noel A. Cruz.
CAMPOS, JR., J.:
To what extent may the scales of justice be tilted in favor of labor? This is the
question that is to be resolved in this petition.
This Petition for Certiorari assails as tainted with grave abuse of discretion
the Award of the Voluntary Arbitration Panel, dated March 9, 1990, which
ordered the reinstatement of private respondents Fernando Codillo, Gerardo S.
Cardeno, Renato L. Sagario and Ramon P. Guarino to their former positions
without loss of seniority rights and with financial assistance equivalent to
three (3) months pay.
Private respondents were regular daily-paid workers of petitioner San Miguel
Corporation (SMC, for brevity) as "Finished Goods Palletizers" at its
B-Meg Feeds Plant, Balintawak, Quezon City. Their duties included, but were
not limited to, removing feed sacks from the moving conveyor and piling the
feed sacks on pallets which were subsequently transported by forklifts. As
found by the Arbitration Panel , it has been the usual practice of the SMC to
assign six (6) "Finished Goods Palletizers" so that they can take turns in
resting while the manual labor continues until the completion of a cycle.
The SMC subsequently reduced the palletizers from six (6) to four (4). The
remaining four are the herein private respondents, who allege that said
manpower reduction resulted in heavier workload and less-than-adequate rest
periods.
Consequently, private respondents, through their Union, the Ilaw at Buklod ng
mga Manggagawa (IBM, for brevity), on July 13, 1987, filed a grievance
protest against Messrs. Manuel Querol, Head of Logistics Department and
Leodegario David, Personnel Manager, for unfair labor practice, Collective
Bargaining Agreement (CBA for brevity) violation, and non-payment of
overtime pay, among others.
At the grievance meeting, the IBM requested that the usual complement of six
palletizers be restored. The SMC then promised that it would review the
manning standard and other relevant considerations arising therefrom.
Eight months passed, still the SMC did nothing to alleviate private
respondents' condition, with the exception only of payment of their overtime
claims, which, however was only settled on September 30, 1988, four months
after their dismissal. Moreover, the normal complement of six (6) was not
restored.
It was this inaction by the SMC, according to private respondents, which
resulted in the improper piling of feed sacks, slowdown of work and private
respondents' "signing-off" fifteen (15) to twenty (20) minutes before time-off,
the latter having started on February 22, 1988.
The SMC maintains that the estimated damages to the company because of
private respondents' inefficiency, amounted to well over P190,000.00. This
figure was based on the breakages and wastage of feeds, additional manpower
requirements prompted by the need to hire casuals to pick up the mess
intentionally made by private respondents, and other expenses in connection
with the repacking of the feeds.
The SMC stated in its petition that despite the verbal warnings made by their
immediate supervisor, Mr. Dante M. Aguinaldo, private respondents
continued committing said violations. Not only did they fail to heed these
warnings, they also ignored the notices sent by the company giving them the
opportunity to explain why they should not be disciplinarily dealt with.
On March 16, 1988, notices of investigation were immediately given to
private respondents with their corresponding schedules for investigation.
However, they all failed to appear.
Despite said failure, they were afforded another schedule on March 23, 1988,
still they were absent. On a third chance given them on April 4, 1988, only
their Union representatives were present and on behalf of private respondents,
they asked for a resetting.
Thus, on April 18, 1988, private respondents, together with their Union
representatives, finally appeared before the Investigation Committee. The
Union raised the following technicalities:
i) improper service of notices to explain/notices of investigation;
ii) prescription of the company's right to investigate; and
iii) lack of job description.
These were, however, found by the Investigation Committee to be without
valid basis.
18
The investigation was then reset to May 2, 1988. It was only the Union that
was present. Three witnesses testified, to wit:
i) Mr. Aguinaldo, the warehouse (immediate)
supervisor of the private respondents, testified that he
witnessed the commission of all of the offenses charged
against them, which according to him, was intentionally
committed by the same.
ii) Mr. Querol, the warehouse superintendent, testified
that he received reports of the private respondents'
offenses from Mr. Aguinaldo, which consequently
would cause the petitioner P190,000.00 as damages.
iii) Mr. Arenque, the security investigator of the
petitioner, testified that he witnessed the improper
piling and slowdown committed by private respondents
and the nature of damages resulting therefrom.
Private respondents failed to controvert the evidences presented by the SMC
and categorically refused to present and explain their side.
On May 9, 1988, the SMC evaluated the private respondents' respective cases
and decided to dismiss them based on the evidence on record. This prompted
the IBM to file a grievance protest against management in accordance with the
CBA.
Inasmuch as no settlement was reached regarding the issue of dismissal, the
IBM, for and in behalf of private respondents, brought the case for voluntary
arbitration. Composing the panel were public respondents Reynaldo R.
Ubaldo from the Department of Labor and Employment, public respondent
Emmanuel Noel A. Cruz from the private respondent IBM's side, and Atty.
Emiterio C. Manibog, Jr. from the petitioner's side.
The parties were required to submit their respective position papers, since the
initial conferences before the panel did not result in any settlement.
In due time, the panel issued an Award, dated March 9, 1990, the dispositive
portion of which reads:
WHEREFORE, premises considered and as above
qualified, the Management of B-Meg Plant. San Miguel
Corporation is hereby directed to reinstate
FERNANDO L. CODILLO, RENATO L. SAGARIO,
GERARDO S. CARDENO and RAMON P.
GUARINO to their former positions without loss of
seniority rights and with financial assistance equivalent
to three (3) months pay. Their absence from work
between 28 May 1988 to 9 March 1990 is to be treated
as suspension.
All other claims of the Union and the charge of unfair
labor practice are hereby dismissed for lack of merit.
SO ORDERED.1
Atty. Emiterio C. Manibog, Jr. dissented from the opinion of the public
respondents, insofar as the reinstatement of the private respondents is
concerned. He is of the view that because of the finding that the employees
committed acts constituting just cause for dismissal, they may not be
reinstated but may only be granted separation pay if the grounds for dismissal
are those other than serious misconduct or those reflecting on the employees'
moral character.2
Hence, this petition questioning the above-cited Award.
Petitioner would have Us nullify the Award rendered by the Arbitration Panel
on the ground of grave abuse of discretion, amounting to lack of jurisdiction.
We agree with petitioner. The Award cannot be justified because the
dismissals were just and valid.
Regulation of manpower by the company clearly falls within management
prerogative. In a number of cases, this Court had defined a valid exercise of
management prerogative as encompassing hiring, work assignments, working
methods, time, place and manner of work, tools to be used, processes to be
followed, supervision of workers, working regulations, transfer of employees,
work supervision, lay-off of workers, and the discipline, dismissal and recall
of workers. Except as provided for, or limited by, special laws, an employer is
free to regulate, according to his own discretion and judgment, all aspects of
employment. 3
Private respondents would however make Us believe that there was an illegal
dismissal in the case at bar. They contend that the violations were committed
because of petitioner's failure to provide a timely, reasonable and immediate
solution to the problem of personnel complement.
Quoting the words of this Court in a recent case:
To sanction disregard or disobedience by employees of
a rule or order laid down by management, on the
pleaded theory that the rule or order is unreasonable,
illegal, or otherwise irregular for one reason or another,
would be disastrous to the discipline and order that it is
in the interest of both employer and his employees to
preserve and maintain in the working establishment and
without which no meaningful operation and progress is
possible. Deliberate disregard or disobedience of rules,
defiance of management authority cannot be
countenanced. This is not to say that the employees
have no remedy against rules or orders they regard as
unjust or illegal. They may object thereto, ask to
negotiate thereon, bring proceedings for redress against
the employer before the Ministry of Labor. But until
and unless the rules or orders are declared to be illegal
or improper by competent authority, the employees
ignore or disobey them at their peril. 4
With a view of maintaining the viability of a business enterprise, the
employees are expected to recognize the rules or orders which have not been
declared to be illegal or improper by competent authority. In the case at bar,
the private respondents committed acts contrary to the rules and regulations
set out by the company, which eventually caused serious damage to the
establishment.
It is a recognized principle that company policies and regulations are, unless
shown to be grossly oppressive or contrary to law, generally binding and valid
on the parties and must be complied with until finally revised or amended
unilaterally or preferably through negotiation or by competent authority. 5
Private respondents, relying heavily on the case of Manila Electric Company
vs. NLRC,6 assert that the preservation of the lives of the citizens is a basic
duty of the State, more vital than the preservation of corporate profits.
How far then should this Court's liberality towards labor be stretched?
While it is true that what is at stake here is not only private respondents'
positions but also their means of livelihood, this Court gives equal importance
to the plight of an entrepreneur whose main objective is to generate profits. In
the process, he may adopt or even devise means designed toward that purpose.
In Abbott Laboratories (Phils.) Inc. vs.NLRC,7 the Court had stated, to wit:
. . . Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer
to exercise what are clearly management prerogatives.
The free will of management to conduct its own
business affairs to achieve its purpose cannot denied.
Moreover, time and again, this Court has upheld a company's management
prerogatives so long as they are exercised in good faith for the advancement
of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements. 8
Deliberate disregard or disobedience of rules by the employees cannot be
countenanced. Whatever maybe the justification behind the violations is
immaterial at this point, because the fact still remains that an infraction of the
company rules has been committed.
Under the Labor Code, the employer may terminate an employment on the
ground of serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with his
work.9Infractions of company rules and regulations have been declared to
belong to this category and thus are valid causes for termination of
employment by the employer. 10
Willful disobedience of the employer's lawful orders, as a just cause for the
dismissal of an employee, envisages the concurrence of at least two requisites:
(1) the employee's assailed conduct must have been willful or intentional, the
willfulness being characterized by a "wrongful and perverse attitude"; (2) the
order violated must have been reasonable, lawful, made known to the
employee and must pertain to the duties which he had been engaged to
discharge.11 Both requisites are present in the instant case.
The employer cannot be compelled to continue the employment of a person
who was found guilty of maliciously committing acts which are detrimental to
his interests. It will be highly prejudicial to the interests of the employer to
impose on him the charges that warranted his dismissal from employment.
Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remain in the service. It may encourage him to do even worse and
will render a mockery of the rules of discipline that employees are required to
19
observe.12 This Court was more emphatic in holding that in protecting the
rights of the laborer, it cannot authorize the oppression or self-destruction of
the employer.13 Therefore, the Award, with respect to the order of
reinstatement of herein private respondents, is not proper.
In reference to the financial assistance, the same should not have been
awarded. The employer may not be required to give the dismissed employee
separation pay, or financial assistance, or whatever name it is called, on the
ground of social justice where the employee is validly dismissed for serious
misconduct.14
WHEREFORE, the petition is hereby GRANTED. The questioned decision of
the Voluntary Arbitration Panel is SET ASIDE. The private respondents are
hereby held to have been validly dismissed for serious misconduct.
SO ORDERED.
G.R. No. 103575. April 5, 1993.
BUSINESSDAY INFORMATION SYSTEMS AND SERVICES, INC.,
AND RAUL LOCSIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NEMESIO MOYA
ALFREDO AMANTE, EDWIN BERSAMINA, SAMUEL CUELA,
ROMEO DELA CRUZ, MANUEL DE JESUS, SEVERINO DELA
CRUZ, DANILO ESPIRITU, ANGEL FLORES, DANILO
FRANCISCO, FLORENCIO GLORIOSO, GERARDO MANUEL,
ARMANDO MENDOZA, PEDRO MORELOS, ALEXON ORBETA,
ROMEO PEREZ, ALFREDO SABANDO, NESTOR SANTOS,
ALFREDO SEPTRIMO, OSCAR SEVILLA, EDUARDO SIOSON,
REYMUNDO TIONGCO, TERESITA REYES, CARMENCITA
CARPIO, GENARO NABUTAS, DANILO NAMPLATA, AND
ROLANDO GAMIT, respondents.
Quisumbing, Torres & Evangelista for petitioners.
Reynaldo M. Maraan for private respondents.
SYLLABUS
1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF
EMPLOYMENT; EMPLOYER MAY NOT, IN THE GUISE OF
EXERCISING MANAGEMENT PREROGATIVES, PAY SEPARATION
BENEFITS UNEQUALLY; CASE AT BAR. — Petitioners' right to terminate
employees on account of retrenchment to prevent losses or closure of business
operations, is recognized by law, but it may not pay separation benefits
unequally for such discrimination breeds resentment and ill-will among those
who have been treated less generously than others. "Granting that the 16 May
1988 termination was a retrenchment scheme, and the 31 July 1988 and the 28
February 1989 were due to closure, the law requires the granting of the same
amount of separation benefits to the affected employees in any of the cases.
The respondent argued that the giving of more separation benefit to the second
and third batches of employees separated was their expression of gratitude and
benevolence to the remaining employees who have tried to save and make the
company viable in the remaining days of operations. This justification is not
plausible. there are workers in the first batch who have rendered more years of
service and could even be said to be more efficient than those separated
subsequently, yet, they did not receive the same recognition. Understandably,
their being retained longer in their job and be not included in the batch that
was first terminated, was a concession enough and may already be considered
as favor granted by the respondents to the prejudice of the complainants. As it
happened, there are workers in the first batch who have rendered more years
in service but received lesser separation pay, because of that arrangement
made by the respondents in paying their termination benefits . . ." Clearly,
there was impermissible discrimination against the private respondents in the
payment of their separation benefits. The law requires an employer to extend
equal treatment to its employees. It may not, in the guise of exercising
management prerogatives, grant greater benefits to some and less to others.
Management prerogatives are not absolute prerogatives but are subject to legal
limits, collective bargaining agreements, or general principles of fair play and
justice (UST vs. NLRC, 190 SCRA 758). Article 283 of the Labor Code, as
amended, protects workers whose employment is terminated because of
closure of the establishment or reduction of personnel (Abella vs. NLRC, 152
SCRA 141, 145).
2. ID.; ID.; CORPORATE OFFICER NOT PERSONALLY LIABLE FOR
MONEY CLAIMS OF DISCHARGED CORPORATE EMPLOYEES;
EXCEPTION. — A corporate officer is not personally liable for the money
claims of discharged corporate employees unless he acted with evident malice
and bad faith in terminating their employment. There is no evidence in this
case that Locsin acted in bad faith or with malice in carrying out the
retrenchment and eventual closure of the company (Garcia vs. NLRC, 153
SCRA 640), hence, he may not be held personally and solidarily liable with
the company for the satisfaction of the judgment in favor of the retrenched
employees.
3. ID.; GRANT OF BONUS; A PREROGATIVE, NOT AN OBLIGATION,
OF EMPLOYER; ENTIRELY DEPENDENT ON FINANCIAL
CAPABILITY OF EMPLOYER TO GIVE IT. — It is settled do trine that the
grant of a bonus is a prerogative, not an obligation, of the employer (Traders
Royal Bank vs. NLRC, 189 SCRA 274). The matter of giving a bonus over
and above the worker's lawful salaries and allowances is entirely dependent on
the financial capability of the employer to give it. The fact that the company's
business was no longer profitable (it was in fact moribund) plus the fact that
the private respondents did not work up to the middle of the year (they were
discharge in May 1988) were valid reasons for not granting them a mid-year
bonus. Requiring the company to pay a mid-year bonus to them also would in
effect penalize the company for its generosity to those workers who remained
with the company "till the end" of its days. (Traders Royal Bank vs. NLRC,
supra.) The award must therefore be deleted.
DECISION
GRIÑO-AQUINO, J p:
In this petition for certiorari, the Businessday Information Systems and
Services Inc. (or BSSI for brevity) and its president/manager, Raul Locsin,
seek to annul and set aside the decision dated February 13, 1991 of the
National Labor Relations Commission (NLRC) which affirmed the Labor
Arbiter's finding that they (petitioners) are liable to pay the private
respondents separation pay differentials and mid-year bonus.
BSSI was engaged in the manufacture and sale of computer forms. Due to
financial reverses, its creditors, the Development Bank of the Philippines
(DBP) and the Asset Privatization Trust (APT), took possession of its assets,
including a manufacturing plant in Marilao, Bulacan.
As a retrenchment measure, some plant employees, including the private
respondents, were laid off on May 16, 1988, after prior notice, and were paid
separation pay equivalent to one-half (1/2) month pay for every year of
service. Upon receipt of their separation pay, the private respondents signed
individual releases and quitclaims in favor of BSSI.
BSSI retained some employees in an attempt to rehabilitate its business as a
trading company.
However, barely two and a half months later, these remaining employees were
likewise discharged because the company decided to cease business
operations altogether. Unlike the private respondents, that batch of employees
received separation pay equivalent to a full month's salary for every year of
service plus mid-year bonus.
Protesting against the discrimination in the payment of their separation
benefits, the twenty-seven (27) private respondents filed three (3) separate
complaints against the BSSI and Raul Locsin. These cases were later
consolidated.
At the conciliation proceedings before Labor Arbiter Manuel P. Asuncion,
petitioners denied that there was unlawful discrimination in the payment of
separation benefits to the employees. They argued that the first batch of
employees was paid "retrenchment" benefits mandated by law, while the
remaining employees were granted higher "separation" benefits because their
termination was on account of the closure of the business.
Based on the pleadings of the parties, Labor Arbiter Asuncion rendered a
decision on April 25, 1989 in favor of the complainants, now private
respondents, the dispositive portion of which reads:
"WHEREFORE, the respondents are hereby ordered to pay the complainants
their separation pay differentials and mid-year bonus for the year 1988." (p-
38, Rollo).
Upon appeal by the company to the NLRC, the Second Division on February
13, 1991, affirmed the decision of the Labor Arbiter.
Petitioners' motion for reconsideration of the resolution having been denied,
they have taken the present recourse.
In case of retrenchment of a company to prevent losses and closure of
business operation, the law 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 operations of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses
20
or financial reverses, the separation pay shall be equivalent to one (1) month
pay or at least one half (l /2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (1) whole
year." (Labor Code; emphasis supplied.)
Undoubtedly, petitioners' right to terminate employees on account of
retrenchment to prevent losses or closure of business operations, is recognized
by law, but it may not pay separation benefits unequally for such
discrimination breeds resentment and ill-will among those who have been
treated less generously than others.
The following observations of the Commission are relevant:
"The respondents cited financial business difficulties to justify their
termination of the complainants' employment on 16 May 1988. They were
given one-half (1/2) month of their salary for every year of service. Due to
continuing losses, which is a sign that business, after the termination did not
improve, they closed operations on 31 July 1989, where they dismissed the
second batch of employees who were given one (1) month pay for every year
they served. The third batch of employees were terminated on 28 February
1989, who were likewise given one (1) monthly pay for every year of service.
The business climate obtaining on 16 May 1988 when the complainants were
terminated did not at all defer (sic) improvement-wise, with that of 31 July
1988 nor to 28 February 1989. The internal between the dates of termination
was so close to each other, so that, no improvement in business maybe likely
expected. In fact, the respondents suffered continuous losses, hence, there is
no difference in the circumstances of the business to distinguish.
"Granting that the 16 May 1988 termination was a retrenchment scheme, and
the 31 July 1988 and the 28 February 1989 were due to closure, the law
requires the granting of the same amount of separation benefits to the affected
employees in any of the cases. The respondent argued that the giving of more
separation benefit to the second and third batches of employees separated was
their expression of gratitude and benevolence to the remaining employees who
have tried to save and make the company viable in the remaining days of
operations. This justification is not plausible. There are workers in the first
batch who have rendered more years of service and could even be said to be
more efficient than those separated subsequently, yet they did not receive the
same recognition. Understandably, their being retained longer in their job and
be not included in the batch that was first terminated, was a concession
enough and may already be considered as favor granted by the respondents to
the prejudice of the complainants. As it happened, there are workers in the
first batch who have rendered more years in service but received lesser
separation pay, because of that arrangement made by the respondents in
paying their termination benefits . . ."
(pp. 36-37, Rollo)
Clearly, there was impermissible discrimination against the private
respondents in the payment of their separation benefits. The law requires an
employer to extend equal treatment to its employees. It may not, in the guise
of exercising management prerogatives, grant greater benefits to some and
less to others. Management prerogatives are not absolute prerogatives but are
subject to legal limits, collective bargaining agreements, or general principles
of fair play and justice (UST vs. NLRC, 190 SCRA 758). Article 283 of the
Labor Code, as amended, protects workers whose employment is terminated
because of closure of the establishment or reduction of personnel (Abella vs.
NLRC, 152 SCRA 141, 145).
With regard to the private respondents' claim for the mid-year bonus, it is
settled doctrine that the grant of a bonus is a prerogative, not an obligation, of
the employer (Traders Royal Bank vs. NLRC, 189 SCRA 274). The matter of
giving a bonus over and above the worker's lawful salaries and allowances is
entirely dependent on the financial capability of the employer to give it. The
fact that the company's business was no longer profitable (it was in fact
moribund) plus the fact that the private respondents did not work up to the
middle of the year (they were discharged in May 1988) were valid reasons for
not granting them a mid-year bonus. Requiring the company to pay a mid-year
bonus to them also would in effect penalize the company for its generosity to
those workers who remained with the company till the end" of its days.
(Traders Royal Bank vs. NLRC, supra.) The award must therefore be deleted.
There is merit in the contention of petitioner Raul Locsin that the complaint
against him should be dismissed. A corporate officer is not personally liable
for the money claims of discharged corporate employees unless he acted with
evident malice and bad faith in terminating their employment. There is no
evidence in this case that Locsin acted in bad faith or with malice in carrying
out the retrenchment and eventual closure of the company (Garcia vs. NLRC,
153 SCRA 640), hence, he may not be held personally and solidarily liable
with the company for the satisfaction of the judgment in favor of the
retrenched employees.
WHEREFORE, the resolution of the NLRC ordering the petitioner company
to pay separation pay differentials to the private respondents is AFFIRMED.
However, the award of mid-year bonus to them is hereby deleted and set
aside. Petitioner Raul Locsin is absolved from any personal liability to the
respondent employees. No costs.
SO ORDERED.
G.R. No. 76219 May 27, 1991
GTE DIRECTORIES CORPORATION, petitioner,
vs.
HON. AUGUSTO S. SANCHEZ and GTE DIRECTORIES
CORPORATION EMPLOYEES UNION, respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Ignacio P. Lacsina for respondent Union.
NARVASA, J.:
GTE Directories Corporation (hereafter, simply GTE) is a foreign corporation
engaged in the Philippines in the business of publishing the PLDT (Philippine
Long Distance Telephone Company) telephone directories for Metro Manila
and several provinces.
The record shows that initially, the practice was for its sales representatives to
be given work assignments within specific territories by the so-called "draw
method." These sales territories were so plotted or mapped out as to have "an
equal number of advertisers as well as . . . revenue. . ." Within these
territories, the sales representatives therein assigned were given quotas; i.e.,
they had to "achieve a certain amount of revenue or advertisements sold,
decreased, increased or cancelled within a given period of time."
A territory was not fully released to the salesperson for handling at one time,
but assigned in increments or partial releases of account. Now, increments
were given by the so-called "Grid System," grids (divisions or sections) within
each territory usually numbering five (i.e., Grids I to V). Each grid was
assigned a fixed closing dated. At such closing date, a salesperson should have
achieved a certain amount of the revenue target designated for his grid;
otherwise, he loses the forthcoming grid or forfeits the remaining grids not yet
received. The Grid System was installed for the following reasons: (1) to give
all salespersons an opportunity to contact advertisers within a reasonable
period; (2) to assure GTE that it will get its share of advertising budget from
clients as early as possible; and (3) to ensure an even flow of work throughout
the company.
This practice was observed from 1980 until sometime in June, 1984 when
GTE realized that competition among media for a share of the advertising
revenue had become so keen as to require quick reaction. GTE therefore
launched an aggressive campaign to get what it considered to be its rightful
share of the advertising budget of its clientele before it could be allocated to
other media (newspaper, television, radio, etc.) It adopted a new strategy by
which:
(1) all its sales representatives were required, as in the past, to
achieve specified revenue targets (advertisements sold) within pre-
determined periods;
(2) in cases of cancelled revenue accounts or advertisements, it
required all its salespersons to re-establish contact and renew the
same within a fixed period;
(3) if the cancelled revenue accounts were not renewed within the
assigned period, said accounts were declared, for a set period,
OPEN TERRITORY to all sales representatives including the one
who reported the cancellation;
(4) if not renewed during said open territory period, said cancelled
accounts were deemed no longer "open territory," and the same
could be referred for handling to contractual salespersons and/or
outside agencies.
A new "Sales Evaluation and Production Policy" was thereafter drawn up.
GTE informed all its sales representatives of the new policy in a
Memorandum dated October 12, 1984. The new policy was regarded as an
improvement over the previous Sales Production Policy, which solely
considered quota attainment and handling in the Sales Report for the purpose
of evaluating performance.
It appears that the new policy did not sit well with the union. It demanded that
it be given 15 days "to raise questions or objections to or to seek
reconsideration of the sales and administrative practices issued by the
Company on June 14, 1984." This, GTE granted, and by letter dated October
26, 1984, the union submitted its proposals for "revisions, corrections and
deletions of some policies incorporated in the Sales Administrative Practices
issued on June 14, 1984 including the new policies recently promulgated by
Management."
GTE next formulated a new set of "Sales Administrative Practices," pursuant
to which it issued on July 9, 1985, a memorandum requiring all Premise Sales
Representatives (PSRs) to submit individual reports reflecting target revenues
as of deadlines, set at August 2, 1985. This was superseded by another
21
memorandum dated July 16, 1985, revising the previous schedules on the
basis of "the consensus reached after several discussions with your DSMs, as
well as, most of you," and pointing out that "the amount required on the 1st
deadline (P30,000) . . . has been reduced further (to P20,000) having taken
into consideration that most of your accounts you have already on hand are
with your respective "prep artists""
On August 5, 1985, GTE's Sales Manager sent another Memorandum to "all
premise sales personnel." That memorandum observed that most of them had
omitted to submit reports regarding "the target of P20,000.00 revenue handled
on . . . (the) first Grid deadline of August 2, 1985" notwithstanding that
"several consultations/discussions . . . (had) been held with your DSMs, as
well as yourselves in different and separate occasions," and "these
schedules/targets were drawn up by no less than you, collectively," and
notwithstanding that "this has been a practice of several years." It closed with
the expressed expectation that the sales reports would be submitted "no later
than 2:00 P.M. reflecting P20,000.00 revenue handled, as per memo re: Grid
Deadlines dated July 16, 1985."
But as before, the sales representatives did not submit the reports. Instead their
union, GTE Directories Corporation Employees Union (hereafter, simply the
union), sent a letter to the Sales Manager dated August 5, 1985. 1 The letter
stated that in fact "only one out of nineteen sales representatives met the
P20,000 revenue handled on our first grid deadline of August 2;" that the
schedule was not "drawn (up) as a result of an agreement of all concerned"
since GTE had failed to get "affirmative responses" from "clustered groups of
SRs;" that the union could not "Comprehend how cancelling non-cancelling
accounts help production;" and that its members would fail "expectations of
cancelling . . . non-cancelling accounts" since it "would result to further
reduction of our pay which (they) believe is the purpose of your discriminate
and whimsical memo."
The following day, on August 6, 1985, the union filed in behalf of the sales
representatives, a notice of strike grounded on alleged unfair labor practices of
GTE consisting of the following:
1. Refusal to bargain on unjust sales policies particularly on the
failure to meet the 75% of the average sales production for two
consecutive years;
2. Open territory of accounts;
3. Illegal suspension of Brian Pineda, a union officer; and
4. Non-payment of eight days' suspension pay increase.
In due course, the Bureau of Labor Relations undertook to conciliate the
dispute.
On the same day, August 6, 1985, GTE sent still another memorandum to
sixteen (16) of its premise sales representatives, this time through its Director
for Marketing & Sales, requiring submission of "individual reports reflecting
target revenues as of grid deadlines . . . not later than 4:00 P.M. . . ."2 No
compliance was made. GTE thereupon suspended its sales representatives
"without pay effective August 12, 1985 for five (5) working days" and warned
them that their failure to submit the requisite reports by August 19, 1985
would merit "more drastic disciplinary actions." Still, no sales representative
complied with the requirement to submit the reports ("list of accounts to be
cancelled"). So, by memorandum of the Marketing Director dated August 19,
1985, all the sales representatives concerned were suspended anew "effective
August 20, 1985 until you submit the . . . (report)."
Finally, GTE gave its sales representatives an ultimatum. By memorandum
dated August 23, 1985, individually addressed to its sales representatives,
GTE required them, for the last time, to submit the required reports ("list of
accounts to be cancelled") within twenty-four (24) hours from receipt of the
memorandum; otherwise, they would be terminated "for cause." Again not
one sales representatives submitted a report. Instead, on August 29, 1985, the
Union President sent an undated letter to GTE (addressed to its Director for
Marketing & Sales) acknowledging receipt of the notice of their suspension
on August 19, 1985 in view of their "continued refusal to submit the list of
accounts to be cancelled," professing surprise at being "served with a
contradictory notice, giving us this time 24 hours to submit the required list,
without the suspension letter, which we consider as still in force, being first
recalled or withdrawn," asking that they be informed which of the two
directives should be followed, and reserving their "right to take such action
against you personally for your acts of harassment and intimidation which are
clearly designed to discourage our legitimate union activities in protesting
management's continious (sic) unfair labor practices."
Consequently, by separate letters dated August 29, 1985 individually received,
GTE terminated the employment of the recalcitrant sales representatives,
numbering fourteen, with the undertaking to give them "separation pay, upon
proper clearance and submission of company documents, material etc., in . . .
(their) possession." Among those dismissed were the union's president and
third vice president, and several members of its board of directors. On
September 2, 1985, the union declared a strike in which about 60 employees
participated.
During all this time, conciliation efforts were being exerted by the Bureau of
Labor Relations, including attempts to prevent the imposition of sanctions by
GTE on its employees, and the strike itself. When these proved futile, Acting
Labor Minister Vicente Leogardo, Jr. issued an Order dated December 6, 1985
assuming jurisdiction over the dispute. The order made the following
disposition, to wit:
WHEREFORE, this Office hereby assumes jurisdiction over the
labor dispute at G.T.E. Directories, pursuant to Article 264 (g) of
the Labor Code of the Philippines, as amended. Accordingly, all
striking workers including those who were dismissed during the
conciliation proceedings, except those who have already resigned,
are hereby directed to return to work and the management of
G.T.E. Directories to accept all returning employees under the
same terms and conditions prevailing previous to the strike notice
and without prejudice to the determination of the obligation and
rights of the parties or to the final outcome of this dispute. The
Bureau of Labor Relations is hereby directed to hear the dispute
and submit its recommendations within 15 days upon submission
of the case for resolution.
All concerned including the military and police authorities are
hereby requested to assist in the implementation of this Order."
The Acting Secretary opined that the dispute "adversely affects the national
interest," because:
1) GTE, a "100% foreign owned" company, had, as publisher of "PLDT's
Metro Manila and provincial directories . . . earned a total of P127,038,463
contributing close to P10 million in income tax alone to the Philippine
government," and that "major contribution to the national economy . . . (was)
being threatened because of the strike;" and
2) "top officers of the union were dismissed during the conciliation process
thereby compounding the dispute,"
Reconsideration of this Order was sought by GTE by motion filed on
December 16, 1985, on the ground that—
1) "the basis for assumption of jurisdiction is belied by the facts
and records of the case and hence, unwarranted;"
2) "national interest is not adversely affected to warrant
assumption of jurisdiction by (the) Office of the Minister of Labor
and Employment;" and
3) "assumption of jurisdiction by the . . . Minister . . . without prior
consultation with the parties violates the company's right to due
process of law."
GTE however reiterated its previously declared "position that with or without
the order now being questioned, it will accept all striking employees back to
work except the fourteen (14) premise sales representatives who were
dismissed for cause prior to the strike."
By Resolution of then Labor Minister Blas Ople dated January 20, 1986,
GTE's motion for reconsideration was denied. The order noted inter alia that
GTE had "accepted back to work all the returning workers except fourteen
(14) whom it previously dismissed insisting that they were legally dismissed
for violation of company rules and, therefore, are not included and may not be
reinstated on the basis of a return-to-work order," and that "they were
dismissed for their alleged failure to comply with the reportorial requirement
under the Sales and Administrative Practices in effect since 1981 but which
for the present is the subject of negotiations between the parties." The Order
then —
1) adverted to the "general rule (that) promulgations of company policies and
regulations are basic management prerogatives although the principle of
collective bargaining encompasses almost all relations between the employer
and its employees which are best threshed out through negotiations, . . . (and
that) it is recognized that company policies and regulations are, unless shown
to be grossly oppressive or contrary to law, generally binding and valid on the
parties until finally revised or amended unilaterally or preferably through
negotiations or by competent authorities;"
2) affirmed the "recognized principle of law that company policies and
regulations are, unless shown to be grossly oppressive or contrary to law,
generally binding (and) valid on the parties and must be complied with until
finally revised or amended unilaterally or preferably through negotiations or
by competent authorities;" and
3) closed by pointing out that "as a basic principle, the matter of the
acceptability of company policies and rules is a proper subject of collective
negotiations between the parties or arbitration if necessary."
22
In a clarificatory Order dated January 21, 1986, Minister Ople reiterated the
proposition that "promulgations of company policies and regulations are basic
management prerogatives," and that "unless shown to be grossly oppressive or
contrary to law," they are "generally binding and valid on the parties and must
be complied with until finally revised or amended unilaterally or preferably,
through negotiations or by competent authorities."
Adjudication of the dispute on the merits was made on March 31, 1986 by
Order of Minister Ople's successor, Augusto Sanchez. The Order —
1) pointed out "that the issue central to the labor dispute revolves around
compliance with existing company policies, rules and regulations specifically
the sales evaluation and production policy which was amended by the October
12, 1984 memorandum and the grid schedule;"
2) declared that because fourteen (14) sales representatives — who after
reinstatement pursuant to the order of January 20, 1986 had been placed "on
forced leave with pay —"were actually dismissed for failure to comply with
the reporting requirements under the "Sales Administration Practices" which
was (sic) then the subject of negotiations between the parties at the Bureau of
Labor Relations," it was only fair that they 'be reinstated . . .with back wages
since they were terminated from employment based on a policy . . . still being
negotiated to avoid precisely a labor-management dispute from arising"
therefrom;"
3) pronounced the union's action relative to the allegedly illegal dismissal of
one Brian Pineda to be "barred by extinctive prescription" in accordance with
the CBA then in force; and
4) on the foregoing premises adjudicated the dispute as follows:
1. The union and management of G.T.E. Directories Corporation
are directed to negotiate and effect a voluntary settlement on the
questioned Grid schedule, the Sales Evaluation and Production
Policy;
2. Management is ordered to reinstate the fourteen (14) employees
with full back wages from the time they were dismissed up to the
time that they were on forced leave with pay."
Both the Union and GTE moved for reconsideration of the Order.
The Union contended that:
1) GTE should have been adjudged guilty of unfair labor practice and other
unlawful acts;
2) its strike should have been declared lawful;
3) GTE's so-called "bottom-third" policy, as well as all sales and
administrative practices related thereto, should have been held illegal; and
4) GTE should have been commanded: (a) to pay all striking employees their
usual salaries, allowances, commission and other emoluments corresponding
to the period of their strike; (b) to release to its employees the 8-days pay
increase unlawfully withheld from them; (c) to lift the suspension imposed on
Brian Pineda and restore to him the pay withheld corresponding to the
suspension period; (d) to pay the sales representatives all their lost income
corresponding to the period of their suspensions, and dismissal, including
commissions that they might have earned corresponding to their one-week
forced leave.
GTE for its part, argued that the termination of the employment of its fourteen
(14) premise sales representatives prior to the strike should have been upheld.
It also filed an opposition to the union's motion for reconsideration.
The motions were resolved in a "Decision" handed down by Minister Sanchez
on June 6, 1986. The Minister stated that he saw no need to change his rulings
as regards Pineda's suspension, the question on GTE's sales and administrative
policies, and the matter of back wages. However, as regards "the other issues
raised by the union," the Minister agreed "with the company that these were
not adequately threshed out in the earlier proceedings . . . (for) (w)hile it is
true that the union had already presented evidence to support its contention,
the company should be given the opportunity to present its own evidence."
Accordingly, he directed the Bureau of Labor Relations to hear said "other
issues raised by the union and to submit its findings and recommendations
thereon within 20 days from submission of the case for decision."
Again GTE moved for reconsideration; again it was rebuffed. The Labor
Minister denied its motion by Order dated October 1, 1986. In that order, the
Minister, among other things—
1) invoked Section 6, Rule XIII of the Rules and Regulations Implementing
the Labor Code, pertinently reading as follows:
During the proceedings, the parties shall not do any act which may
disrupt or impede the early settlement of the dispute. They are
obliged, as part of their duty to bargain collectively in good faith,
to participate fully and promptly in the conciliation proceedings
called by the Bureau or the Regional Office.
and pointed out that "in dismissing 14 salesmen . . . for alleged violations of
the reportorial requirements of its sales policies which was then the subject of
conciliation proceedings between them, (GTE) acted evidently in bad faith;
hence the status quo prior to their dismissal must be restored . . . (and) their
reinstatement with backwages is in order up to the time they were on forced
leave. . . ;"
2) declared that because he had "ordered the parties to negotiate and effect a
voluntary settlement of the questioned Grid Schedule, the Sales Evaluation
and Productions Policy, it would be unripe and premature for us to rule on the
legality or illegality on the company's sales policies at this instance;"
3) opted, however, to himself resolve "the so-called 'other issues"' which he
had earlier directed the Bureau of Labor Relations to first hear and resolve (in
the Decision of June 6, 1986, supra), i.e., GTE's liability for unfair labor
practice, the legality of the strike and the strikers' right to be paid their wages
while on strike, his ruling thereon being as follows:
While the company, in merely implementing its challenged sales
policies did not ipso facto commit an unfair labor practice, it did so
when it in mala fide dismissed the fourteen salesmen, all union
members, while conciliation proceedings were being conducted on
disputes on its very same policies, especially at that time when a
strike notice was filed on the complaint of the union alleging that
said sales policies are being used to bust the union; thus
precipitating a lawful strike on the part of the latter. A strike is
legal if it was provoked by the employer's failure to abide by the
terms and conditions of its collective bargaining agreement with
the union, by the discrimination employed by it with regard to the
hire and tenure of employment, and the dismissal of employees
due to union activities as well as the company's refusal to bargain
collectively in good faith (Cromwell Commercial Co., Inc. vs.
Cromwell Employees and Laborers Union, 19 SCRA 398). The
same rule applies if employer was guilty of bad faith delay in
reinstating them to their position (RCPI vs. Phil. Communications
Electronics & Electricity Workers Federation, 58 SCRA 762).
While as a rule strikers are not entitled to backpay for the strike
period (J.P. Heilbronn Co. vs. NLU, 92 Phil. 575) strikers may be
properly awarded backwages where the strike was precipitated by
union busting activities of the employer (Davao Free Workers,
Front, et al. vs, CIR, 60 SCRA 408), as in the case at bar. . . .
The Minister accordingly annulled and set aside his order for the Bureau of
Labor Relations to conduct hearings on said issues since he had already
resolved them, and affirmed his Order of March 31, 1986—"directing Union
and Management to negotiate a voluntary settlement on the company sales
policies and reinstating the fourteen employees with full backwages from the
time they were dismissed up to the time they were on forced leave with pay"
— "but with the modification that management . . . (was) directed to give the
striking workers strike duration pay for the whole period of the strike less
earnings."
GTE thereupon instituted the special civil action of certiorari at bar praying
for invalidation, because rendered with grave abuse of discretion, of the Labor
Minister's orders—
1) commanding "reinstatement of the fourteen dismissed employees, and
2) "finding . . . (it) guilty of unfair labor practice and directing (it) to pay
strike duration pay to striking workers."
It seems to the Court that upon the undisputed facts on record, GTE had cause
to dismiss the fourteen (14) premise sales representatives who had repeatedly
and deliberately, not to say defiantly, refused to comply with its directive for
submission of individual reports on specified matters. The record shows that
GTE addressed no less than (six) written official communications to said
premise sales representatives embodying this requirement, to wit:
1) Memorandum of July 9, 1985 pursuant to GTE's "Sales Administrative
Practices" — superseded by a memorandum dated July 16, 198 — requiring
submission of individual reports by August 2, 1985;
2) Memorandum of August 5, 1985, requiring submission of the reports by
2:00 P.M.;
3) Memorandum of August 6, 1985, for submission of requisite reports not
later than 4:00 P.M. of that day, with a warning of "appropriate disciplinary
action;"
23
4) Letter of August 9, 1985 imposing suspension without pay for five (5)
working days and extending the period for submission of reports to August
19, 1985;
5) Letter of August 19, 1985 suspending the sales representatives until their
submission of the required reports;
6) Letter dated August 28, 1985 giving the sales representatives "a last chance
to comply with . . . (the) directive within 24 hours from receipt . . .;" with
warning that failure to comply would result in termination of employment.
The only response of the sales representatives to these formal directives were:
1) a letter by their Union to GTE's Sales Manager dated August 5, 1985 in
which the requirement was criticized as not being the "result of an agreement
of all concerned," and as incomprehensible, "discriminate and whimsical;"
2) a strike notice filed with the Ministry of Labor on August 6, 1985; and
3) an undated letter sent to GTE's Director for Marketing & Sales on August
29, 1985, drawing attention to what it deemed contradictory directives, and
reserving the right to take action against the manager for "acts of harassment
and intimidation . . . clearly designed to discourage our legitimate union
activities in protesting management's continuous unfair labor practices."
The basic question then is whether or not the effectivity of an employer's
regulations and policies is dependent upon the acceptance and consent of the
employees thereby sought to be bound; or otherwise stated, whether or not the
union's objections to, or request for reconsideration of those regulations or
policies automatically suspend enforcement thereof and excuse the employees'
refusal to comply with the same.
This Court has already had occasion to rule upon a similar issue. The issue
was raised in a 1989 case, G.R. No. 53515, San Miguel Brewery Sales Force
Union (PTGWO) v. Ople.3 In that case, the facts were briefly as follows:
In September 1979, the company introduced a marketing scheme
known as the "Complementary distribution system" (CDS)
whereby its beer products were offered for sale directly to
wholesalers through San Miguel's sales offices.
The labor union (herein petitioner) filed a complaint for unfair
labor practice in the Ministry of Labor, with a notice of strike on
the ground that the CDS was contrary to the existing marketing
scheme whereby the Route Salesmen were assigned specific
territories within which to sell their stocks of beer, and wholesalers
had to buy beer products from them, not from the company. It was
alleged that the new marketing scheme violates . . . (a provision) of
the collective bargaining agreement because the introduction of the
CDS would reduce the take-home pay of the salesmen and their
truck helpers for the company would be unfairly competing with
them."
The Labor Minister found nothing to suggest that the employer's unilateral
action of inaugurating a new sales scheme "was designed to discourage union
organization or diminish its influence;" that on the contrary, it was "part of its
overall plan to improve efficiency and economy and at the same time gain
profit to the highest;" that the union's "conjecture that the new plan will sow
dissatisfaction from its rank is already a prejudgment of the plan's viability
and effectiveness, . . . like saying that the plan will not work out to the
workers' (benefit) and therefore management must adopt a new system of
marketing." The Minister accordingly dismissed the strike notice, although he
ordered a slight revision of the CDS which the employer evidently found
acceptable.
This Court approved of the Minister's findings, and declared correct his
holding that the CDS was "a valid exercise of management
prerogatives,"4 viz.:
Except as limited by special laws, an employer is free to regulate,
according to his own discretion and judgment, all aspects of
employment, including hiring, work assignments, working
methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of work. . . . (NLU
vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank
vs. CIR, 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor
Relations Law, 1985 ed., p. 44.) (Emphasis ours.)
The Court then closed its decision with the following pronouncements:5
Every business enterprise endeavors to increase its profits. In the
process, it may adopt or devise means designed towards that goal.
In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:
. . . Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer
to exercise what are clearly management prerogatives.
The free will of management to conduct its own
business affairs to achieve its purpose cannot be denied.
So long as a company's management prerogatives are exercised in
good faith for the advancement of the employer's interest and not
for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this
Court will uphold them (LVN, Pictures Workers vs. LVN, 35
SCRA 147; Phil. American Embroideries vs. Embroidery and
Garments Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia,
18 SCRA 110). . . .
In the case at bar, it must thus be conceded that its adoption of a new "Sales
Evaluation and Production Policy" was within its management prerogative to
regulate, according to its own discretion and judgment, all aspects of
employment, including the manner, procedure and processes by which
particular work activities should be done. There were, to be sure, objections
presented by the union, i.e., that the schedule had not been "drawn (up) as a
result of an agreement of all concerned," that the new policy was
incomprehensible, discriminatory and whimsical, and "would result to further
reduction" of the sales representatives' compensation. There was, too, the
union's accusation that GTE had committed unfair labor practices, such as—
1. Refusal to bargain on unjust sales policies particularly on the
failure to meet the 75% of the average sales production for two
consecutive years;
2. Open territory of accounts;
3. Illegal suspension of Brian Pineda, a union officer; and
4. Non-payment of eight days' suspension pay increase.
This Court fails to see, however, how these objections and accusations justify
the deliberate and obdurate refusal of the sales representatives to obey the
management's simple requirement for submission by all Premise Sales
Representatives (PSRs) of individual reports or memoranda requiring
reflecting target revenues—which is all that GTE basically required — and
which it addressed to the employees concerned no less than six (6) times. The
Court fails to see how the existence of objections made by the union justify
the studied disregard, or wilful disobedience by the sales representatives of
direct orders of their superior officers to submit reports. Surely, compliance
with their superiors' directives could not have foreclosed their demands for the
revocation or revision of the new sales policies or rules; there was nothing to
prevent them from submitting the requisite reports with the reservation to seek
such revocation or revision.
To sanction disregard or disobedience by employees of a rule or order laid
down by management, on the pleaded theory that the rule or order is
unreasonable, illegal, or otherwise irregular for one reason or another, would
be disastrous to the discipline and order that it is in the interest of both the
employer and his employees to preserve and maintain in the working
establishment and without which no meaningful operation and progress is
possible. Deliberate disregard or disobedience of rules, defiance of
management authority cannot be countenanced. This is not to say that the
employees have no remedy against rules or orders they regard as unjust or
illegal. They may object thereto, ask to negotiate thereon, bring proceedings
for redress against the employer before the Ministry of Labor. But until and
Unless the rules or orders are declared to be illegal or improper by competent
authority, the employees ignore or disobey them at their peril. It is
impermissible to reverse the process: suspend enforcement of the orders or
rules until their legality or propriety shall have been subject of negotiation,
conciliation, or arbitration.
These propositions were in fact adverted to in relation to the dispute in
question by then Minister Blas Ople in his Order dated January 21, 1986, to
the effect among others, that "promulgations of company policies and
regulations are basic management prerogatives" and that it is a "recognized
principle of law that company policies and regulations are, unless shown to be
grossly oppressive or contrary to law, generally binding (and) valid on the
parties and must be complied with until finally revised or amended
unilaterally or preferably through negotiations or by competent authorities."
Minister Sanchez however found GTE to have "acted evidently in bad faith"
in firing its 14 salespersons "for alleged violations of the reportorial
requirements of its sales policies which was then the subject of conciliation
proceedings between them;"6 and that "(w)hile the company, in merely
implementing its challenged sales policies did not ipso facto commit an unfair
labor practice, it did so when it in mala fide dismissed the fourteen salesmen,
all union members, while conciliation proceedings were being conducted on
disputes on its very same policies, especially at that time when a strike notice
was filed on the complaint of the union alleging that said sales policies are
being used to bust the union; thus precipitating a lawful strike on the part of
the latter." No other facts appear on record relevant to the issue of GTE's
dismissal of the 14 sales representatives. There is no proof on record to
24
demonstrate any underhanded motive on the part of GTE in formulating and
imposing the sales policies in question, or requiring the submission of reports
in line therewith. What, in fine, appears to be the Minister's thesis is that an
employer has the prerogative to lay down basic policies and rules applicable
to its employees, but may not exact compliance therewith, much less impose
sanctions on employees shown to have violated them, the moment the
propriety or feasibility of those policies and rules, or their motivation, is
challenged by the employees and the latter file a strike notice with the Labor
Department — which is the situation in the case at bar.

When the strike notice was filed by the union, the chain of events which
culminated in the termination of the 14 sales persons' employment was
already taking place, the series of defiant refusals by said sales representatives
to comply with GTE's requirement to submit individual reports was already in
progress. At that time, no less than three (3) of the ultimate six (6) direct
orders of the employer for the submission of the reports had already been
disobeyed. The filing of the strike notice, and the commencement of
conciliation activities by the Bureau of Labor Relations did not operate to
make GTE's orders illegal or unenforceable so as to excuse continued non-
compliance therewith. It does not follow that just because the employees or
their union are unable to realize or appreciate the desirability of their
employers' policies or rules, the latter were laid down to oppress the former
and subvert legitimate union activities. Indeed, the overt, direct, deliberate and
continued defiance and disregard by the employees of the authority of their
employer left the latter with no alternative except to impose sanctions. The
sanction of suspension having proved futile, termination of employment was
the only option left to the employer.

To repeat, it would be dangerous doctrine indeed to allow employees to refuse

to comply with rules and regulations, policies and procedures laid down by
their employer by the simple expedient of formally challenging their
reasonableness or the motives which inspired them, or filing a strike notice
with the Department of Labor and Employment, or, what amounts to the same
thing, to give the employees the power to suspend compliance with company
rules or policies by requesting that they be first subject of collective
bargaining, It would be well nigh impossible under these circumstances for
any employer to maintain discipline in its establishment. This is, of course,
intolerable. For common sense teaches, as Mr. Justice Gregorio Perfecto once
had occasion to stress7 that:

Success of industries and public services is the foundation upon

which just wages may be paid. There cannot be success without
efficiency. There cannot be efficiency without discipline.
Consequently, when employees and laborers violate the rules of
discipline they jeopardize not only the interest of the employer but
also their own. In violating the rules of discipline they aim at
killing the hen that lays the golden eggs. Laborers who trample
down the rules set for an efficient service are, in effect, parties to a
conspiracy, not only against capital but also against labor. The high
interest of society and of the individuals demand that we should
require everybody to do his duty. That demand is addressed not
only to employer but also to employees.

Minister Sanchez decided the dispute in the exercise of the jurisdiction

assumed by his predecessor in accordance with Article 263 (g) of the Labor
Code,8 providing in part as follows:

(g) When in his opinion there exists a labor dispute causing or

likely to cause strikes or lockouts adversely affecting the national
interest, such as may occur in but not limited to public utilities,
companies engaged in the generation or distribution of energy,
banks, hospitals, and export-oriented industries, including those
within export processing zones, the Minister of Labor and
Employment shall assume jurisdiction over the dispute and decide
it or certify the same to the Commission for compulsory
arbitration. . . .

Even that assumption of jurisdiction is open to question.

The production and publication of telephone directories, which is the principal

activity of GTE, can scarcely be described as an industry affecting the
national interest. GTE is a publishing firm chiefly dependent on the marketing
and sale of advertising space for its not inconsiderable revenues. Its services,
while of value, cannot be deemed to be in the same category of such essential
activities as "the generation or distribution of energy" or those undertaken by
"banks, hospitals, and export-oriented industries." It cannot be regarded as
playing as vital a role in communication as other mass media. The small
number of employees involved in the dispute, the employer's payment of "P10
million in income tax alone to the Philippine government," and the fact that
the "top officers of the union were dismissed during the conciliation process,"
obviously do not suffice to make the dispute in the case at bar one "adversely
affecting the national interest."

WHEREFORE, the petition is GRANTED, and as prayed for, the Order dated
October 1, 1986 of the public respondent is NULLIFIED and SET ASIDE.

SO ORDERED.

25