Labor Review: Case Digests (Labor Standards)
Samahan ng Mangagawa Sa Hanjin Shipyard
vs. Bureau of Labor Relations
The right to self-organization is not limited to
unionism. Workers may also form or join an
association for mutual aid and protection and
for other legitimate purposes.
FACTS: Samahan argues that the right to form
a workers' association is not exclusive to
intermittent, ambulant and itinerant workers.
While the Labor Code allows the workers "to
form, join or assist labor organizations of their
own choosing" for the purpose of collective
bargaining, it does not prohibit them from
forming a labor organization simply for
purposes of mutual aid and protection. All
members of Samahan have one common place
of work, Hanjin Shipyard. Thus, there is no
reason why they cannot use "Hanjin Shipyard"
in their name.
Hanjin counters that Samahan failed to adduce
sufficient basis that all its members were
employees of Hanjin or its legitimate
contractors, and that the use of the name "Hanjin
Shipyard" would create an impression that all its
members were employess of HHIC.
Samahan reiterates its stand that workers with a
definite employer can organize any association
for purposes of mutual aid and protection.
Inherent in the workers' right to self-
organization is its right to name its own
organization. Samahan referred "Hanjin
Shipyard" as their common place of work.
Therefore, they may adopt the same in their
association's name.
ISSUE: 1.) WON Samahan can form a workers
association for mutual aid and protection?
2.) WON Samahan can use the name
“Hanjin”?
RULING: Petition is partly meritorious.
1.) Yes, Samahan can form workers
association for the purpose of mutual aid
and protection.
In the case at bench, the Court cannot sanction
the opinion of the CA that Samahan should have
formed a union for purposes of collective
bargaining instead of a workers' association
because the choice belonged to it. The right to
form or join a labor organization necessarily
includes the right to refuse or refrain from
exercising the said right. It is self-evident that
just as no one should be denied the exercise of a
right granted by law, so also, no one should be
compelled to exercise such a conferred right.
Also inherent in the right to self-organization is
the right to choose whether to form a union for
purposes of collective bargaining or a workers'
association for purposes of providing mutual aid
and protection.
The right to self-organization, however, is
subject to certain limitations as provided by law.
For instance, the Labor Code specifically
disallows managerial employees from joining,
assisting or forming any labor union.
Meanwhile, supervisory employees, while
eligible for membership in labor organizations,
are proscribed from joining the collective
bargaining unit of the rank and file employees.
Even government employees have the right to
self-organization. It is not, however, regarded as
existing or available for purposes of collective
bargaining, but simply for the furtherance and
protection of their interests.
Hanjin posits that the members of Samahan have
definite employers, hence, they should have
formed a union instead of a workers' association.
The Court disagrees. There is no provision in the
Labor Code that states that employees with
definite employers may form, join or assist
unions only.
The Court cannot subscribe either to Hanjin's
position that Samahan's members cannot form
the association because they are not covered by
the second sentence of Article 243 (now 249), to
wit:
Article 243. Coverage and employees' right to self-
organization. All persons employed in commercial,
industrial and agricultural enterprises and in religious,
charitable, medical, or educational institutions, whether
operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor
organizations of their own choosing for purposes of
collective bargaining. Ambulant, intermittent and itinerant
workers, self-employed people, rural workers and those
without any definite employers may form labor
organizations for their mutual aid and protection. (As
amended by Batas Pambansa Bilang 70, May 1, 1980)
[Emphasis Supplied]
Further, Article 243 should be read together with
Rule 2 of Department Order (D.O.) No. 40-03,
Series of 2003, which provides:
RULE II
COVERAGE OF THE RIGHT TO SELF-ORGANIZATION
Section 1. Policy. - It is the policy of the State to promote
the free and responsible exercise of the right to self-
organization through the establishment of a simplified
mechanism for the speedy registration of labor unions and
workers associations, determination of representation
status and resolution of inter/intra-union and other related
labor relations disputes. Only legitimate or registered
labor unions shall have the right to represent their
members for collective bargaining and other purposes.
Workers' associations shall have the right to represent their
members for purposes other than collective bargaining.
Section 2. Who may join labor unions and workers'
associations. - All persons employed in commercial,
industrial and agricultural enterprises, including
employees of government owned or controlled corporations
without original charters established under the
Corporation Code, as well as employees of religious,
charitable, medical or educational institutions whether
operating for profit or not, shall have the right to self-
organization and to form, join or assist labor unions for
purposes of collective bargaining: provided, however, that
supervisory employees shall not be eligible for membership
in a labor union of the rank-and-file employees but may
form, join or assist separate labor unions of their own.
Managerial employees shall not be eligible to form, join or
assist any labor unions for purposes of collective
bargaining. Alien employees with valid working permits
issued by the Department may exercise the right to self-
organization and join or assist labor unions for purposes of
collective bargaining if they are nationals of a country
which grants the same or similar rights to Filipino
workers, as certified by the Department of Foreign Affairs.
For purposes of this section, any employee, whether
employed for a definite period or not, shall beginning on
the first day of his/her service, be eligible for membership
in any labor organization.
All other workers, including ambulant, intermittent and
other workers, the self-employed, rural workers and those
without any definite employers may form labor
organizations for their mutual aid and protection and other
legitimate purposes except collective bargaining.
[Emphases Supplied]
Clearly, there is nothing in the foregoing
implementing rules which provides that workers,
with definite employers, cannot form or join a
workers' association for mutual aid and
protection. Section 2 thereof even broadens the
coverage of workers who can form or join a
workers' association. Thus, the Court agrees
with Samahan's argument that the right to form a
workers' association is not exclusive to
ambulant, intermittent and itinerant workers.
The option to form or join a union or a workers'
association lies with the workers themselves,
and whether they have definite employers or not.
2.) No, Samahan cannot use the name
“Hanjin”
Nevertheless, the Court agrees with the BLR
that "Hanjin Shipyard" must be removed in the
name of the association. A legitimate workers'
association refers to an association of workers
organized for mutual aid and protection of its
members or for any legitimate purpose other
than collective bargaining registered with the
DOLE. Having been granted a certificate of
registration, Samahan's association is now
recognized by law as a legitimate workers'
association.
According to Samahan, inherent in the workers'
right to self-organization is its right to name its
own organization. It seems to equate the
dropping of words "Hanjin Shipyard" from its
name as a restraint in its exercise of the right to
self-organization. Hanjin, on the other hand,
invokes that "Hanjin Shipyard" is a registered
trade name and, thus, it is within their right to
prohibit its use.
As there is no provision under our labor laws
which speak of the use of name by a workers'
association, the Court refers to the Corporation
Code, which governs the names of juridical
persons. Section 18 thereof provides:
No corporate name may be allowed by the Securities and
Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law
or is patently deceptive, confusing or contrary to existing
laws. When a change in the corporate name is approved,
the Commission shall issue an amended certificate of
incorporation under the amended name.
[Emphases Supplied]
The policy underlying the prohibition in Section
18 against the registration of a corporate name
which is "identical or deceptively or confusingly
similar" to that of any existing corporation or
which is "patently deceptive" or "patently
confusing" or "contrary to existing laws," is the
avoidance of fraud upon the public which would
have occasion to deal with the entity concerned,
the evasion of legal obligations and duties, and
the reduction of difficulties of administration
and supervision over corporations.
For the same reason, it would be misleading for
the members of Samahan to use "Hanjin
Shipyard" in its name as it could give the wrong
impression that all of its members are employed
by Hanjin.
BPI vs. BPI Employees Union Davao Chapter
et. al. (2010) (Absorption of EE’s in cases of
merger)
Human beings are never embraced in the term
“assets and liabilities”. The Corporation Code
does not also mandate the absorption of the
employees of the non-surviving corporation by
the surviving corporation in the case of a
merger.
FACTS: Bangko Sentral ng Pilipinas approved
the Articles of Merger executed by and between
BPI, herein petitioner, and Far East Bank and
Trust Company (FEBTC) and was approved by
the Securities and Exchange Commission. The
Articles of Merger and Plan of Merger did not
contain any specific stipulation with respect to
the employment contracts of existing personnel
of the non-surviving entity which is FEBTC.
Pursuant to the said Article and Plan of Merger,
all the assets and liabilities of FEBTC were
transferred to and absorbed by BPI as the
surviving corporation. FEBTC employees,
including those in its different branches across
the country, were hired by petitioner as its own
employees, with their status and tenure
recognized and salaries and benefits maintained.
ISSUE: WON Employees are ipso jure absorbed
in a merger of two corporations?
RULING: NO. Human beings are never
embraced in the term “assets and liabilities.”
Moreover, BPI’s absorption of former FEBTC
employees was neither by operation of law nor
by legal consequence of contract. There was no
government regulation or law that compelled the
merger of the two banks or the absorption of the
employees of the dissolved corporation by the
surviving corporation. Had there been such law
or regulation, the absorption of employees of the
non-surviving entities of the merger would have
been mandatory on the surviving corporation. In
the present case, the merger was voluntarily
entered into by both banks presumably for some
mutually acceptable consideration. In fact, the
Corporation Code does not also mandate the
absorption of the employees of the non-
surviving corporation by the surviving
corporation in the case of a merger.
The Court cannot uphold the reasoning that the
general stipulation regarding transfer of FEBTC
assets and liabilities to BPI as set forth in the
Articles of Merger necessarily includes the
transfer of all FEBTC employees into the
employ of BPI and neither BPI nor the FEBTC
employees allegedly could do anything about it.
Even if it is so, it does not follow that the
absorbed employees should not be subject to the
terms and conditions of employment obtaining
in the surviving corporation.
Furthermore, the Court believes that it is
contrary to public policy to declare the former
FEBTC employees as forming part of the assets
or liabilities of FEBTC that were transferred and
absorbed by BPI in the Articles of Merger.
Assets and liabilities, in this instance, should be
deemed to refer only to property rights and
obligations of FEBTC and do not include the
employment contracts of its personnel. A
corporation cannot unilaterally transfer its
employees to another employer like chattel.
Certainly, if BPI as an employer had the right to
choose who to retain among FEBTC’s
employees, FEBTC employees had the
concomitant right to choose not to be absorbed
by BPI. Even though FEBTC employees had no
choice or control over the merger of their
employer with BPI, they had a choice whether or
not they would allow themselves to be absorbed
by BPI. Certainly nothing prevented the
FEBTC’s employees from resigning or retiring
and seeking employment elsewhere instead of
going along with the proposed absorption.
Employment is a personal consensual contract
and absorption by BPI of a former FEBTC
employee without the consent of the employee is
in violation of an individual’s freedom to
contract. It would have been a different matter
if there was an express provision in the articles
of merger that as a condition for the merger, BPI
was being required to assume all the
employment contracts of all existing FEBTC
employees with the conformity of the
employees. In the absence of such a provision
in the articles of merger, then BPI clearly had
the business management decision as to whether
or not employ FEBTC’s employees. FEBTC
employees likewise retained the prerogative to
allow themselves to be absorbed or not;
otherwise, that would be tantamount to
involuntary servitude.
NOTE: However in a MR (in 2011) this
decision was reversed.
In said case the SC ruled that, employees should
be absorbed.
It is more in keeping with the dictates of social
justice and the State policy of according full
protection to labor to deem employment
contracts as automatically assumed by the
surviving corporation in a merger, even in the
absence of an express stipulation in the articles
of merger or the merger plan. In his dissenting
opinion, Justice Brion reasoned that:
To my mind, due consideration of Section 80 of
the Corporation Code, the constitutionally
declared policies on work, labor and
employment, and the specific FEBTC-BPI
situation — i.e., a merger with complete “body
and soul” transfer of all that FEBTC embodied
and possessed and where both participating
banks were willing (albeit by deed, not by their
written agreement) to provide for the affected
human resources by recognizing continuity of
employment — should point this Court to a
declaration that in a complete merger situation
where there is total takeover by one corporation
over another and there is silence in the merger
agreement on what the fate of the human
resource complement shall be, the latter should
not be left in legal limbo and should be properly
provided for, by compelling the surviving entity
to absorb these employees. This is what Section
80 of the Corporation Code commands, as the
surviving corporation has the legal obligation to
assume all the obligations and liabilities of the
merged constituent corporation.
lawful or authorized cause or the right of such an
employee to resign, retire or otherwise sever his
employment, whether before or after the merger,
subject to existing contractual obligations. In
this manner, Justice Brion’s theory of automatic
assumption may be reconciled with the
majority’s concerns with the successor
employer’s prerogative to choose its employees
and the prohibition against involuntary
servitude.

Not to be forgotten is that the affected Notwithstanding this concession, the Court finds
employees managed, operated and worked on no reason to reverse our previous
the transferred assets and properties as their pronouncement that the absorbed FEBTC
means of livelihood; they constituted a basic employees are covered by the Union Shop
component of their corporation during its Clause.
existence. In a merger and consolidation
situation, they cannot be treated without
consideration of the applicable constitutional
declarations and directives, or, worse, be simply
disregarded. If they are so treated, it is up to this
Court to read and interpret the law so that they
are treated in accordance with the legal
requirements of mergers and consolidation, read
in light of the social justice, economic and social
provisions of our Constitution. Hence, there is a
need for the surviving corporation to take
responsibility for the affected employees and to
absorb them into its workforce where no
appropriate provision for the merged
corporation’s human resources component is
made in the Merger Plan.

By upholding the automatic assumption of the

non-surviving corporation’s existing
employment contracts by the surviving
corporation in a merger, the Court strengthens
judicial protection of the right to security of
tenure of employees affected by a merger and
avoids confusion regarding the status of their
various benefits which were among the chief
objections of our dissenting colleagues.
However, nothing in this Resolution shall impair
the right of an employer to terminate the
employment of the absorbed employees for a
ISAE vs. Quisimbing (Equal Pay for Equal
Work)
Employees working in the Philippines, if they
are performing similar functions and
responsibilities under similar working
conditions, should be paid under the principle of
“equal pay for equal work.”
FACTS: The School hires both foreign and
local teachers as members of its faculty,
classifying the same into two: (1) foreign-hires
and (2) local-hires. The School grants foreign-
hires certain benefits not accorded local-hires.
These include housing, transportation, shipping
costs, taxes, and home leave allowance. Foreign-
hires are also paid a salary rate twenty-five
percent (25%) more than that of local-hires. The
School justifies the difference on two
“significant economic disadvantages” that
foreign-hires have to endure, namely: (a) the
“dislocation factor” and (b) limited tenure.
Petitioner union claims that the point-of-hire
classification employed by the School is
discriminatory to Filipinos and that the grant of
higher salaries to foreign hires constitutes racial
discrimination. When the CBA negotiation
reached a deadlock, the Secretary of Labor
assumed jurisdiction. The Acting Secretary
upheld the point-of-hire classification for the
distinction in salary rates, as he said:
The principle “equal pay for equal work” does not find
application in the present case. The international character
of the School requires the hiring of foreign personnel to
deal with different nationalities and different cultures,
among the student population.
ISSUE: WON the Acting Labor Secretary’s
ruling is correct?
RULING: NO, the Acting Labor Secretary’s
ruling is not correct. If an employer accords
employees the same position and rank, the
presumption is that these employees perform
equal work.
There is no evidence that foreign-hires perform
25% more efficiently or effectively than the
local-hires. Both groups have similar functions
and responsibilities, which they perform under
similar working conditions.
While the need of the School to attract foreign-
hires is recognized, salaries should not be used
as an enticement to the prejudice of local-hires.
The local-hires perform the same services as
foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the
“dislocation factor” and the foreign-hires’
limited tenure also cannot serve as valid bases
for the distinction in salary rates. The dislocation
factor and limited tenure affecting foreign-hires
are adequately compensated by certain benefits
accorded them which are not enjoyed by local
hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
The State has the right and duty to regulate the
relations between labor and capital. These
relations are not merely contractual but are so
impressed with public interest that labor
contracts, collective bargaining agreements
included, must yield to the common good.
Should such contracts contain stipulations that
are contrary to public policy, courts will not
hesitate to strike down these stipulations.
We find the point-of-hire classification
employed by respondent School to justify the
distinction in the salary rates of foreign-hires
and local hires to be an invalid classification.
There is no reasonable distinction between the
services rendered by foreign-hires and local-
hires.
Serrano vs. Gallant Maritime Services et. al.
(Constitutionality Section 10(5) of RA 8042)
The Court concludes that the subject clause
contains a suspect classification in that, in the
computation of the monetary benefits of fixed-
term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs
with an unexpired portion of one year or more
in their contracts, but none on the claims of
other OFWs or local workers with fixed- term
employment.
FACTS: Serrano was hired by Gallant Maritime
Services, Inc. and Marlow Navigation Co., Ltd.
under a Philippine Overseas Employment
Administration (POEA)-approved Contract of
Employment. On the date of his departure,
Serrano was constrained to accept a downgraded
employment contract for the position of 2nd
Officer with a monthly salary of US$1,000.00,
upon the assurance and representation of
respondents that he would be made Chief
Officer however the latter did not deliver their
promise. Serrano refused to stay on as 2nd
Officer and was repatriated to the Philippines.
Serrano's employment contract was for a period
of 12 months but at the time of his repatriation
he had served only 2 months and 7 days of his
contract, leaving an unexpired portion of 9
months and 23 days. Serrano filed with the LA a
complaint against respondents for constructive
dismissal and for payment of his money claims.
The LA declared the dismissal of Serrano illegal
and awarding him monetary benefits.
In awarding Serrano a lump-sum salary of
US$8,770.00, the LA based his computation on
the salary period of 3 months only, rather than
the entire unexpired portion of 9 months and 23
days of petitioner's employment contract,
applying the subject clause13. However, the LA
applied the salary rate of US$2,590.00,
consisting of Serrano's "basic salary,
US$1,400.00/ month + US$700.00/ month, fixed
overtime pay, + US$490.00/ month, vacation
leave pay = US$2,590.00/ compensation per
month.” Respondents appealed to the NLRC to
question the finding of the LA that Serrano was
illegally dismissed. Serrano also appealed on the
sole issue that the LA erred in not applying the
previous ruling of the Court that in case of
illegal dismissal, OFWs are entitled to their
salaries for the unexpired portion of their
contracts. The NLRC corrected the LA's
computation of the lump-sum salary awarded to
Serrano by reducing the applicable salary rate
from US$2,590.00 to US$1,400.00 because R.A.
No. 8042 "does not provide for the award of
overtime pay, which should be proven to have
been actually performed, and for vacation leave
pay." Serrano questioned the constitutionality of
the subject clause1.
ISSUE: Is the subject clause under RA 8042
unconstitutional?
RULING: YES. The subject clause violates
Section 1, Article III of the Constitution, and
Section 18, Article II and Section 3, Article XIII
on labor as a protected sector. Upon cursory
reading, the subject clause appears facially
neutral, for it applies to all OFWs. However, a
closer examination reveals that the subject
clause has a discriminatory intent against and an
invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less
than one year vis-à-vis OFWs with employment
contracts of one year or more;
Second, among OFWs with employment
contracts of more than one year; and
1
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by
law or contract, the workers shall be entitled to the full
reimbursement of his placement fee with interest of 12% per
annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the
unexpired term, whichever is less.
Third, OFWs vis-à-vis local workers with fixed-
period employment; OFWs with employment
contracts of less than one year vis-à-vis OFWs
with employment contracts of one year or more.
As pointed out by Serrano, it was in Marsaman
Manning Agency, Inc. v. National Labor
Relations Commission, that the Court laid down
the following rules on the application of the
periods prescribed under Section 10(5) of R.A.
No. 8042, to wit: “A plain reading of Sec. 10
clearly reveals that the choice of which amount
to award an illegally dismissed overseas contract
worker, i.e., whether his salaries for the
unexpired portion of his employment contract or
three (3) months' salary for every year of the
unexpired term, whichever is less, comes into
play only when the employment contract
concerned has a term of at least one (1) year or
more. This is evident from the words " for every
year of the unexpired term" which follows the
words " salaries x x x for three months." To
follow petitioners' thinking that private
respondent is entitled to three (3) months salary
only simply because it is the lesser amount is to
completely disregard and overlook some words
used in the statute while giving effect to some.
This is contrary to the well established rule in
legal hermeneutics that in interpreting a statute,
care should be taken that every part or word
thereof be given effect since the law-making
body is presumed to know the meaning of the
words employed in the statue and to have used
them advisedly.
The enactment of the subject clause in R.A. No.
8042 introduced a differentiated rule of
computation of the money claims of illegally
dismissed OFWs based on their employment
periods, in the process singling out one category
whose contracts have an unexpired portion of
one year or more and subjecting them to the
peculiar disadvantage of having their monetary
awards limited to their salaries for 3 months or
for the unexpired portion thereof, whichever is
less, but all the while sparing the other category
from such prejudice, simply because the latter's
unexpired contracts fall short of one year.
The Court concludes that the subject clause
contains a suspect classification in that, in the
computation of the monetary benefits of fixed-
term employees who are illegally discharged, it
imposes a 3-month cap on the claim of OFWs
with an unexpired portion of one year or more in
their contracts, but none on the claims of other
OFWs or local workers with fixed- term
employment. The subject clause singles out one
classification of OFWs and burdens it with a
peculiar disadvantage. The subject clause does
not state or imply any definitive governmental
purpose; and it is for that precise reason that the
clause violates not just Serrano's right to equal
protection, but also the right to substantive due
process under Section 1, Article III of the
Constitution. The subject clause being
unconstitutional, Serrano is entitled to his
salaries for the entire unexpired period of
nine months and 23 days of his employment
contract, pursuant to law and jurisprudence
prior to the enactment of R.A. No. 8042.
Sameer Overseas Placement Agency Inc. vs.
Joy Cabiles (RA 10022 in relation to RA 8042
and Serrano case)
Thus, when a law or a provision of law is null
because it is inconsistent with the Constitution,
the nullity cannot be cured by reincorporation
or reenactment of the same or a similar law or
provision. A law or provision of law that was
already declared unconstitutional remains as
such unless circumstances have so changed as to
warrant a reverse conclusion.
Note: In this case, RA 8042 was already
amended by RA 10022 in 2010, which reinstated
Sec. 10 Paragraph 5 of said provision which was
declared unconstitutional by the SC in the
Serrano case.
FACTS: Petitioner, Sameer Overseas Placement
Agency, Inc., is a recruitment and placement
agency.
Respondent Joy Cabiles was hired thus signed a
one-year employment contract for a monthly
salary of NT$15,360.00. Joy was deployed to
work for Taiwan Wacoal, Co. Ltd. (Wacoal) on
June 26, 1997. She alleged that in her
employment contract, she agreed to work as
quality control for one year. In Taiwan, she was
asked to work as a cutter.
Sameer claims that on July 14, 1997, a certain
Mr. Huwang from Wacoal informed Joy,
without prior notice, that she was terminated and
that “she should immediately report to their
office to get her salary and passport.” She was
asked to “prepare for immediate repatriation.”
Joy claims that she was told that from June 26 to
July 14, 1997, she only earned a total of
NT$9,000.15 According to her, Wacoal
deducted NT$3,000 to cover her plane ticket to
Manila.
On October 15, 1997, Joy filed a complaint for
illegal dismissal with the NLRC against
petitioner and Wacoal. LA dismissed the
complaint. NLRC reversed LA’s decision. CA
affirmed the ruling of the National Labor
Relations Commission finding respondent
illegally dismissed and awarding her three
months’ worth of salary, the reimbursement of
the cost of her repatriation, and attorney’s fees.
ISSUE: Whether or not Cabiles was entitled to
the unexpired portion of her salary due to illegal
dismissal?
RULING: YES. The Court held that the award
of the three-month equivalent of respondent’s
salary should be increased to the amount
equivalent to the unexpired term of the
employment contract.
In Serrano v. Gallant Maritime Services, Inc.
and Marlow Navigation Co., Inc., this court
ruled that the clause “or for three (3) months for
every year of the unexpired term, whichever is
less” is unconstitutional for violating the equal
protection clause and substantive due process.
A statute or provision which was declared
unconstitutional is not a law. It “confers no
rights; it imposes no duties; it affords no
protection; it creates no office; it is inoperative
as if it has not been passed at all.”
The Court said that they are aware that the
clause “or for three (3) months for every year of
the unexpired term, whichever is less” was
reinstated in Republic Act No. 8042 upon
promulgation of Republic Act No. 10022 in
2010.
Ruling on the constitutional issue
In the hierarchy of laws, the Constitution is
supreme. No branch or office of the government
may exercise its powers in any manner
inconsistent with the Constitution, regardless of
the existence of any law that supports such
exercise. The Constitution cannot be trumped by
any other law. All laws must be read in light of
the Constitution. Any law that is inconsistent
with it is a nullity.
Thus, when a law or a provision of law is null
because it is inconsistent with the Constitution,
the nullity cannot be cured by reincorporation or
reenactment of the same or a similar law or
provision. A law or provision of law that was
already declared unconstitutional remains as
such unless circumstances have so changed as to
warrant a reverse conclusion.
The Court observed that the reinstated clause,
this time as provided in Republic Act. No.
10022, violates the constitutional rights to equal
protection and due process. Petitioner as well as
the Solicitor General has failed to show any
compelling change in the circumstances that
would warrant us to revisit the precedent.
The Court declared, once again, the clause, “or
for three (3) months for every year of the
unexpired term, whichever is less” in Section 7
of Republic Act No. 10022 amending Section 10
of Republic Act No. 8042 is declared
unconstitutional and, therefore, null and void.
Manuel Sosito vs. Aguinaldo Development
Corp. (Art 4 of the Labor Code)
While the Constitution is committed to the policy
of social justice and the protection of the
working class, it should not be supposed that
every labor dispute will be automatically
decided in favor of labor. Management also has
its own rights which, as such, are entitled to
respect and enforcement in the interest of simple
fair play.
FACTS: Petitioner Manuel Sosito was
employed by the private respondent, a logging
company, when he went on indefinite leave with
the consent of the company on January 16, 1976.
On July 20, 1976, the private respondent,
through its president, announced a retrenchment
program and offered separation pay to
employees in the active service as of June 30,
1976, who would tender their resignations not
later than July 31, 1976.
The petitioner decided to accept this offer and
submitted his resignation on July 29, 1976, "to
avail himself of the gratuity benefits" promised.
However, his resignation was not acted upon
and he was never given the separation pay he
expected.
Department of Labor ordered the company to
pay Sosito the sum of P4,387.50, representing
his salary for six and a half months. On appeal to
the National Labor Relations Commission, this
decision was reversed and it was held that the
petitioner was not covered by the retrenchment
program.
ISSUE: Is Manuel Sosito, who was on
Indefinite Leave, entitled to separation pay
under the retrenchment program?
RULING: No. He is not entitled to the
separation pay under the retrenchment program.
Separation pay was extended only to those who
were in the active service of the company as of
June 30, 1976.
Being on indefinite leave, he was not in the
active service of the private respondent
although, if one were to be technical, he was still
in its employ.
Under the law then in force the private
respondent could have validly reduced its work
force because of its financial reverses without
the obligation to grant separation pay. This was
permitted under the original Article 272(a), of
the Labor Code, which was in force at the time.
While the Constitution is committed to the
policy of social justice and the protection of the
working class, it should not be supposed that
every labor dispute will be automatically
decided in favor of labor. Management also has
its own rights which, as such, are entitled to
respect and enforcement in the interest of simple
fair play. Out of its concern for those with less
privileges in life, this Court has inclined more
often than not toward the worker and upheld his
cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the
rule that justice is in every case for the
deserving, to be dispensed in the light of the
established facts and the applicable law and
doctrine.
Dee Jay’s Inn and Café et. al vs. Rañeses (In
this case, Nightowl case was cited which
involves the same factual background)
(Illegal Dismissal and Abandonment)
In a case where the employee was neither found
to have been dismissed nor to have abandoned
his/her work, the general course of action is for
the Court to dismiss the complaint, direct the
employee to return to work, and order the
employer to accept the employee. However, the
Court recognized in Nightowl that when a
considerable length of time had already passed
rendering it impossible for the employee to
return to work, the award of separation pay is
proper.
FACTS: Petitioner Ferraris, the owner and
manager of petitioner DJIC, engaged the
services of respondent and a certain Moonyeen
J. Bura-ay (Moonyeen) as cashier and
cashier/receptionist, respectively, for a monthly
salary of P3,000.00 each.
Respondent filed before the Social Security
System (SSS) Office a complaint against
petitioner Ferraris for non-remittance of SSS
contributions. Respondent also filed before the
NLRC City Arbitration Unit (CAU) XII,
Cotabato City, a complaint against petitioners
for underpayment/nonpayment of wages,
overtime pay, holiday pay, service incentive
leave pay, 13th month pay, and moral and
exemplary damages.
Respondent averred that sometime in January
2005, she asked from petitioner Ferraris the
latter’s share as employer in the SSS
contributions and overtime pay for the 11 hours
of work respondent rendered per day at
petitioner DJIC. Petitioner Ferraris got infuriated
and told respondent to seek another
employment. This prompted respondent to file
her complaints before the SSS Office and NLRC
CAU XII. After learning of respondent’s
complaints, petitioner Ferraris terminated
respondent’s employment on February 5, 2005.
Respondent submitted the Joint Affidavit of
Mercy Joy Christine Bura-ay (Mercy) and Mea
Tormo (Mea) to corroborate her allegations.
Petitioners countered that respondent and
Moonyeen were not terminated from
employment. According to petitioners, petitioner
DJIC incurred a shortage of P400.00 in its
earnings for February 4, 2005. That same day,
petitioner Ferraris called respondent and
Moonyeen for a meeting but the two employees
denied incurring any shortage. Petitioner
Ferraris lost her temper and scolded respondent
and Moonyeen, and required them to produce
the missing P400.00. However, respondent and
Moonyeen merely walked out and did not report
back to work anymore. To support their version
of events, petitioners submitted the affidavit of
Ma. Eva Gorospe (Eva), another employee of
petitioners.
Petitioners further claimed that it was
respondent herself who requested that the SSS
contributions not be deducted from her salary
because it would only diminish her take-home
pay. Thus, respondent received from petitioners
the amount of SSS contributions, with the
undertaking that she would comply with the law
by paying the SSS premiums herself as self
employed. Respondent recorded her weekly
wages and payment of SSS premiums in a
notebook, which had since been missing.
The LA ruled in favor of petitioners, to which
the NLRC also affirmed. The argument of both
quasi-judicial agencies hinges on respondents
failure to prove the fact of his termination.
Respondent then filed a petition for certiorari
with CA alleging grave abuse of discretion on
the part of NLRC in its decision. CA held that
respondent was illegally dismissed. CA ruled
that since there is failure on the part of petitioner
to also prove abandonment by substantial
evidence. It is a well-settled doctrine, that if
doubts exist between the evidence presented by
the employer and the employee, the scales of
justice must be tilted in favor of the latter. Hence
the petition to this Court.
ISSUES: 1.) WON there is Illegal Dismissal?
2.) WON there is Abandonment?
RULING: 1.) NO, there is no Illegal Dismissal
in this case.
In several cases2 this Court held that “In illegal
dismissal cases, the employer has the burden of
proving that the employee’s dismissal was legal.
However, to discharge this burden, the employee
must first prove, by substantial evidence, that he
had been dismissed from employment.”
Respondent failed to prove that she had been
dismissed from employment.
Given the jurisprudence cited in the preceding
paragraphs, the application by the Court of
Appeals of the equipoise doctrine and the rule
that all doubts should be resolved in favor of
labor was misplaced. Without the joint affidavit
of Mercy and Mea, there only remained the bare
allegation of respondent that she was dismissed
by petitioners on February 5, 2005, which hardly
constitute substantial evidence of her dismissal.
As both the Labor Arbiter and the NLRC held,
since respondent was unable to establish with
substantial evidence her dismissal from
employment, the burden of proof did not shift to
petitioners to prove that her dismissal was for
just or authorized cause.
2.) NO, there is no Abandonment of
employment in this case.
As pointed out by petitioners, they never raised
abandonment as a defense as there was no
2
Exodus International Construction Corp vs. Biscocho, Cañedo vs.
Kampilan Security and Detective Agency, Inc., and Brown
Madonna Press, Inc. vs. Casas.
dismissal in the first place. Petitioners did not
argue that respondent abandoned her work
which justified her dismissal from employment.
Petitioners merely alleged the fact that
respondent, after being scolded on February 4,
2005, no longer returned to work beginning
February 5, 2005, which was corroborated by
one of petitioners’ employees, Eva, in her
affidavit. Similar to this case is the factual
background in Nightowl Watchman & Security
Agency, Inc. v. Lumahan, to which the Court
ruled that;
In every employee dismissal case, the employer bears the
burden of proving the validity of the employee’s dismissal,
i.e., the existence of just or authorized cause for the
dismissal and the observance of the due process
requirements. The employer’s burden of proof, however,
presupposes that the employee had in fact been dismissed,
with the burden to prove the fact of dismissal resting on the
employee. Without any dismissal action on the part of the
employer, valid or otherwise, no burden to prove just or
authorized cause arises.
As no dismissal was carried out in this case, any
consideration of abandonment — as a defense raised by an
employer in dismissal situations — was clearly misplaced.
To our mind, the CA again committed a reversible error in
considering that Nightowl raised abandonment as a
defense.
Abandonment, as understood under our labor laws, refers
to the deliberate and unjustified refusal of an employee to
resume his employment. It is a form of neglect of duty
that constitutes just cause for the employer to dismiss the
employee.
Under this construct, abandonment is a defense available
against the employee who alleges a dismissal. Thus, for the
employer “to successfully invoke abandonment, whether as
a ground for dismissing an employee or as a defense, the
employer bears the burden of proving the employee’s
unjustified refusal to resume his employment.” This
burden, of course, proceeds from the general rule that
places the burden on the employer to prove the validity of
the dismissal.
The critical point the CA missed, however, was the fact that
Nightowl never raised abandonment as a defense. What
Nightowl persistently argued was that Lumahan stopped
reporting for work beginning April 22, 1999; and that it
had been waiting for Lumahan to show up so that it could
impose on him the necessary disciplinary action for
abandoning his post at Steelwork, only to learn that
Lumahan had filed an illegal dismissal complaint.
Nightowl did not at all argue that Lumahan had abandoned
his work, thereby warranting the termination of his
employment. Significantly, the CA construed these
arguments as abandonment of work under the labor law
construct. We find it clear, however, that Nightowl did not
dismiss Lumahan; hence, it never raised the defense of
abandonment.
Besides, Nightowl did not say that Lumahan “abandoned
his work”; rather, Nightowl stated that Lumahan
“abandoned his post” at Steelwork. When read together
with its arguments, what this phrase simply means is that
Lumahan abandoned his assignment at Steelwork;
nonetheless, Nightowl still considered him as its employee
whose return they had been waiting for.
Finally, failure to send notices to Lumahan to report back
to work should not be taken against Nightowl despite the
fact that it would have been prudent, given the
circumstance, had it done so. Report-to-work notices are
required, as an aspect of procedural due process, only in
situations involving the dismissal, or the possibility of
dismissal, of the employee. Verily, report-to-work notices
could not be required when dismissal or the possibility of
dismissal, of the employee does not exist.
(Emphasis supplied, citations omitted)
In a case where the employee was neither found
to have been dismissed nor to have abandoned
his/her work, the general course of action is for
the Court to dismiss the complaint, direct the
employee to return to work, and order the
employer to accept the employee. However, the
Court recognized in Nightowl that when a
considerable length of time had already passed
rendering it impossible for the employee to
return to work, the award of separation pay is
proper. Considering that more than ten (10)
years had passed since respondent stopped
reporting for work on February 5, 2005, up to
the date of this judgment, it is no longer possible
and reasonable for the Court to direct respondent
to return to work and order petitioners to accept
her. Under the circumstances, it is just and
equitable for the Court instead to award
respondent separation pay in an amount
equivalent to one (1) month salary for every year
of service, computed up to the time she stopped
working, or until February 4, 2005.
Agabon vs. NLRC (Statutory Due Process
under the Labor Code)
Note: In Agabon v. NLRC promulgated on
November 14, 2004, the Court reverted to the
doctrine in Wenphil v. National Labor Relations
Commission. According to that doctrine, a
dismissal based on a just cause is legal, even
when made without notice to the employee
concerned; but because of the breach of the
statutory notice requirement, the employer must
be sanctioned by being made to pay indemnity --
in this case, nominal damages of P30,000 for
each petitioner. Thus, the Court abandoned
Serrano v. NLRC.
Where the dismissal is for a just cause, the lack
of statutory due process should not nullify the
dismissal but the employer should indemnify the
employee for the violation of his statutory rights
FACTS: Riviera Home Improvements, Inc.,
which was in the business of selling and
installing ornamental and construction materials,
employed Petitioners Virgilio Agabon and Jenny
Agabon on January 2, 1992, as cornice and
gypsum board installers. On February 23, 1999,
they were dismissed, without any termination
notice, for allegedly abandoning their work. The
Agabons sued their employer for illegal
dismissal and payment of money claims. They
filed the case before the labor arbiter, from
whom they scored an initial victory. On appeal,
however, the NLRC found that they had
abandoned their work; hence, they were not
entitled to back wages and separation pay or to
the other money claims awarded by the labor
arbiter. This ruling was sustained by the Court of
Appeals.
ISSUES: WON Petitioners were illegally
dismissed?
RULING: NO, petitioners were not illegally
dismissed. By a vote of 8 to 6, the Court,
through Mme. Justice Consuelo Ynares-
Santiago, held that there was a just cause for the
termination of the employment of the
petitioners, as their abandonment of work had
clearly been established. However, the company
did not comply with the twin-notice requirement
in Book VI, Rule I, Section 2(d) of the Omnibus
Rules Implementing the Labor Code. This rule
mandates the sending of the notices to the last
known addresses of the employees. Where the
dismissal is for a just cause, the lack of statutory
due process should not nullify the dismissal but
the employer should indemnify the employee for
the violation of his statutory rights. The
indemnity should be stiffer to discourage the
abhorrent practice of “dismiss now, pay later”
which we sought to deter in Serrano ruling. The
violation of employees’ rights warrants the
payment of nominal damages. For failing to
comply procedural due process, the employer in
this case was directed to pay each petitioner an
indemnity in the form of nominal damages of
P30,000.
Jaka Food Processing Corporation vs. Pacot
(Award of Nominal Damages, Compare with
Agabon Case)
1) if the dismissal is based on a just cause but
the employer failed to comply with the notice
requirement, the sanction to be imposed upon
him should be tempered because the dismissal
was initiate by an act imputable to the employee.
2) if the dismissal is based on an authorized
cause but the employer fails to comply with the
notice requirement, the sanction should be stiffer
because the dismissal process was initiated by
the employer’s exercise of his management
prerogative. Thus, dismissal was upheld but
ordered JAKA to pay each of the respondents
the amount of Php 50,000.00 representing
nominal damages for non-compliance with
statutory due process.
FACTS: Respondents were hired by JAKA until
their termination on August 29, 1997 because
the Corporation was “in dire financial straits”. It
was not disputed that they were terminated
without complying with the requirement under
Art. 283 of the Labor Code regarding the service
of notice upon the employees and DOLE at least
one month before the intended date of
termination.
Respondents filed a complaint for illegal
dismissal against JAKA. JAKA was defeated on
appeal in the lower court hence this petition.
ISSUE: WON full backwages and separation
pay be awarded to respondents when employers
effected termination without complying with the
twin notice rule?
RULING: No, full backwages and separation
pay cannot be awarded. The dismissal of the
respondents was for an authorized cause under
Article 283. A dismissal for authorized cause
does not necessarily imply delinquency or
culpability on the part of the employee. Instead,
the dismissal process is initiated by the
employer’s exercise of his management
prerogative, i.e. when the employer opts to
install labor-saving devices, when he decides to
cease business operations or when he undertakes
to implement a retrenchment program.
Accordingly, it is wise to hold that:
1) if the dismissal is based on a just cause but
the employer failed to comply with the notice
requirement, the sanction to be imposed upon
him should be tempered because the dismissal
was initiate by an act imputable to the employee.
2) if the dismissal is based on an authorized
cause but the employer fails to comply with the
notice requirement, the sanction should be stiffer
because the dismissal process was initiated by
the employer’s exercise of his management
prerogative. Thus, dismissal was upheld but
ordered JAKA to pay each of the respondents
the amount of Php 50,000.00 representing
nominal damages for non-compliance with
statutory due process.
JAKA, however should not pay separation pay
because where it is true that the rule is to grant
separation pay to employees terminated due to
authorized causes, the EXCEPTION is where
the closure of business or cessation of operations
is due to serious business losses or financial
reverses, duly proved, as in this case.
Abbot Laboratories Phil et. al. vs. Alcaraz
(Contractual Due Process)
In this light, while there lies due cause to
terminate Alcaraz probationary employment for
her failure to meet the standards required for
her regularization, and while it must be further
pointed out that Abbott had satisfied its statutory
duty to serve a written notice of termination, the
fact that it violated its own company procedure
renders the termination of Alcaraz employment
procedurally infirm, warranting the payment of
nominal damages.
FACTS: Petitioner Abbott Laboratories,
Philippines (Abbott) caused the publication in a
major broadsheet newspaper of its need for a
Medical and Regulatory Affairs Manager.
Alcaraz - who was then a Regulatory Affairs and
Information Manager at Aventis Pasteur
Philippines, Incorporated (another
pharmaceutical company like Abbott) showed
interest and submitted her application.
In Abbotts offer sheet, it was stated that Alcaraz
was to be employed on a probationary basis.
Later that day, she accepted the said offer and
received an electronic mail (e-mail) from
Abbotts Recruitment Officer, petitioner Teresita
C. Bernardo (Bernardo), confirming the same.
Attached to Bernardos e-mail were Abbotts
organizational chart and a job description of
Alcarazs work.
During Alcarazs pre-employment orientation,
petitioner Allan G. Almazar (Almazar), Hospiras
Country Transition Manager, briefed her on her
duties and responsibilities as Regulatory Affairs
Manager. Petitioner Kelly Walsh (Walsh),
Manager of the Literature Drug Surveillance
Drug Safety of Hospira, will be her immediate
supervisor. Petitioner Maria Olivia T. Yabut-
Misa (Misa), Abbotts Human Resources (HR)
Director, sent Alcaraz an e-mail which contained
an explanation of the procedure for evaluating
the performance of probationary employees.
During the course of her employment, Alcaraz
noticed that some of the staff had disciplinary
problems. Thus, she would reprimand them for
their unprofessional behavior such as non-
observance of the dress code, moonlighting, and
disrespect of Abbott officers. However, Alcaraz
method of management was considered by
Walsh to be "too strict."
Alcaraz was called to a meeting with Walsh and
Terrible, Abbotts former HR Director, where she
was informed that she failed to meet the
regularization standards for the position of
Regulatory Affairs Manager. Walsh, Almazar,
and Bernardo personally handed to Alcaraz a
letter stating that her services had been
terminated effective May 19, 2005. The letter
detailed the reasons for Alcaraz termination.
Alcaraz felt that she was unjustly terminated
from her employment and thus, filed a complaint
for illegal dismissal and damages against Abbott
and its officers, namely, Misa, Bernardo,
Almazar, Walsh, Terrible, and Feist. She
claimed that she should have already been
considered as a regular and not a probationary
employee given Abbotts failure to inform her of
the reasonable standards for her regularization
upon her engagement as required under Article
295of the Labor Code.
LA dismissed Alcarazs complaint for lack of
merit. The LA rejected Alcarazs argument that
she was not informed of the reasonable
standards to qualify as a regular employee. The
NLRC reversed the findings of the LA and ruled
that there was no evidence showing that Alcaraz
had been apprised of her probationary status and
the requirements which she should have
complied with in order to be a regular employee.
On appeal, CA affirmed the NLRC decision.
Hence, this petition.
ISSUE: WON Alcaraz was illegally dismissed?
RULING: NO, Alcaraz was not illegally
dismissed. The probationary employee may also
be terminated for failure to qualify as a regular
employee in accordance with the reasonable
standards made known by the employer to the
employee at the time of the engagement.
A probationary employee, like a regular
employee, enjoys security of tenure. However,
in cases of probationary employment, aside from
just or authorized causes of termination, an
additional ground is provided under Article 295
of the Labor Code, i.e., the probationary
employee may also be terminated for failure to
qualify as a regular employee in accordance with
the reasonable standards made known by the
employer to the employee at the time of the
engagement. Thus, the services of an employee
who has been engaged on probationary basis
may be terminated for any of the following: (a) a
just or (b) an authorized cause; and (c) when he
fails to qualify as a regular employee in
accordance with reasonable standards prescribed
by the employer.
A punctilious examination of the records reveals
that Abbott had indeed complied with the above-
stated requirements. This conclusion is largely
impelled by the fact that Abbott clearly
conveyed to Alcaraz her duties and
responsibilities as Regulatory Affairs Manager
prior to, during the time of her engagement, and
the incipient stages of her employment. On this
score, the Court finds it apt to detail not only the
incidents which point out to the efforts made by
Abbott but also those circumstances which
would show that Alcaraz was well-apprised of
her employers expectations that would, in turn,
determine her regularization.
Abbott caused the publication in a major
broadsheet newspaper of its need for a
Regulatory Affairs Manager, indicating therein
the job description for as well as the duties and
responsibilities attendant to the aforesaid
position. In Abbotts December 7, 2004 offer
sheet, it was stated that Alcaraz was to be
employed on a probationary status. On the day
Alcaraz accepted Abbotts employment offer,
Bernardo sent her copies of Abbotts
organizational structure and her job description
through e-mail. Alcaraz was made to undergo a
pre-employment orientation where Almazar
informed her that she had to implement Abbotts
Code of Conduct and office policies on human
resources and finance and that she would be
reporting directly to Walsh. Alcaraz received
copies of Abbotts Code of Conduct and
Performance Modules from Misa who explained
to her the procedure for evaluating the
performance of probationary employees; she
was further notified that Abbott had only one
evaluation system for all of its employees.
Considering the totality of the above-stated
circumstances, it cannot, therefore, be doubted
that Alcaraz was well-aware that her
regularization would depend on her ability and
capacity to fulfill the requirements of her
position as Regulatory Affairs Manager and that
her failure to perform such would give Abbott a
valid cause to terminate her probationary
employment.
An employer who terminates an employee for a
valid cause but does so through invalid
procedure is liable to pay the latter nominal
damages.
Despite the existence of a sufficient ground to
terminate Alcaraz employment and Abbotts
compliance with the Labor Code termination
procedure, it is readily apparent that Abbott
breached its contractual obligation to Alcaraz
when it failed to abide by its own procedure in
evaluating the performance of a probationary
employee.
Records show that Abbotts PPSE procedure
mandates, inter alia, that the job performance of
a probationary employee should be formally
reviewed and discussed with the employee at
least twice: first on the third month and second
on the fifth month from the date of employment.
Abbott is also required to come up with a
Performance Improvement Plan during the third
month review to bridge the gap between the
employee’s performance and the standards set, if
any. In addition, a signed copy of the PPSE form
should be submitted to Abbotts HRD as the
same would serve as basis for recommending the
confirmation or termination of the probationary
employment.
In this case, it is apparent that Abbott failed to
follow the above-stated procedure in evaluating
Alcaraz. For one, there lies a hiatus of evidence
that a signed copy of Alcaraz PPSE form was
submitted to the HRD. It was not even shown
that a PPSE form was completed to formally
assess her performance. Neither was the
performance evaluation discussed with her
during the third and fifth months of her
employment. Nor did Abbott come up with the
necessary Performance Improvement Plan to
properly gauge Alcaraz performance with the set
company standards.
In this light, while there lies due cause to
terminate Alcaraz probationary employment for
her failure to meet the standards required for her
regularization, and while it must be further
pointed out that Abbott had satisfied its statutory
duty to serve a written notice of termination, the
fact that it violated its own company procedure
renders the termination of Alcaraz employment
procedurally infirm, warranting the payment of
nominal damages.
Lopez vs. Alturas (Right to Counsel)
The right to counsel and the assistance of one in
investigations involving termination cases is
neither indispensable nor mandatory, except
when the employee himself requests for one or
that he manifests that he wants a formal hearing
on the charges against him.
FACTS: Quirico Lopez was hired by
respondent Alturas Group of Companies in 1997
as truck driver. Ten years later or sometime in
November 2007, he was dismissed after he was
allegedly caught by respondent’s security guard
in the act of attempting to smuggle out of the
company premises 60 kilos of scrap iron worth
P840 aboard respondents’ Isuzu Cargo
Aluminum Van with Plate Number PHP 271
that was then assigned to him. When
questioned, petitioner allegedly admitted to the
security guard that he was taking out the scrap
iron consisting of lift springs out of which he
would make axes.
Petitioner, in compliance with the Show Cause
Notice dated December 5, 2007 issued by
respondent company’s Human Resource
Department Manager, denied the allegations by
a handwritten explanation written in the Visayan
dialect.
Finding petitioner’s explanation unsatisfactory,
respondent company terminated his employment
by Notice of Termination effective December
14, 2007 on the grounds of loss of trust and
confidence, and of violation of company rules
and regulations. In issuing the Notice,
respondent company also took into account the
result of an investigation showing that petitioner
had been smuggling out its cartons which he had
sold, in conspiracy with one Maritess Alaba, for
his own benefit to thus prompt it to file a
criminal case for Qualified Theft against him
before the Regional Trial Court (RTC) of Bohol.
It had in fact earlier filed another criminal case
for Qualified Theft against petitioner arising
from the theft of the scrap iron.
ISSUE: WON Lopez was afforded procedural
due process?
RULING: YES, Lopez was afforded due
process. This Court has held that there is no
violation of due process even if no hearing was
conducted, where the party was given a chance
to explain his side of the controversy. What is
frowned upon is the denial of the opportunity to
be heard.
Petitioner was given the opportunity to explain
his side when he was informed of the charge
against him and required to submit his written
explanation with which he complied.
The above rulings are a clear recognition that the
employer may provide an employee with ample
opportunity to be heard and defend himself with
the assistance of a representative or counsel in
ways other than a formal hearing. The employee
can be fully afforded a chance to respond to the
charges against him, adduce his evidence or
rebut the evidence against him through a wide
array of methods, verbal or written.
After receiving the first notice apprising him of
the charges against him, the employee may
submit a written explanation (which may be in
the form of a letter, memorandum, affidavit or
position paper) and offer evidence in support
thereof, like relevant company records (such as
his 201 file and daily time records) and the
sworn statements of his witnesses. For this
purpose, he may prepare his explanation
personally or with the assistance of a
representative or counsel. He may also ask the
employer to provide him copy of records
material to his defense. His written explanation
may also include a request that a formal hearing
or conference be held. In such a case, the
conduct of a formal hearing or conference
becomes mandatory, just as it is where there
exist substantial evidentiary disputes or where
company rules or practice requires an actual
hearing as part of employment pretermination
procedure.
Lopez argued that his right to be represented by
counsel under the constitution was violated. He
argues that such right is mandatory.
The Court does not agree. The right to counsel
and the assistance of one in investigations
involving termination cases is neither
indispensable nor mandatory, except when the
employee himself requests for one or that he
manifests that he wants a formal hearing on the
charges against him.
Note: To summarize, there are two kinds of due
process that may be asserted. Procedural Due
Process which involves, Statutory Due Process
(Agabon case) and Contractual Due Process
(Abbot Case) and Constitutional Due Process.
In cases where the company also provides its
own policies and guidelines on termination, such
policies and guidelines must also be followed. It
is not enough that the employer complied with
Statutory Due Process; there must also be
compliance with the Contractual Due Process.
Failure to comply will not result in the
invalidation of the dismissal but will entitle the
employee to nominal damages.
Constitutional Due Process should only be
invoked against the State and not against the
Private Employer. (People vs. Marti) The only
time an employee may invoke such is when the
case has already been filed with the Labor
Arbiter, NLRC and/or with the Higher Courts.
In Agabon, just cause dismissal without due
process entitles the EE payment of 30k nominal
damages.
In JAKA, authorized cause dismissal without
due process entitles EE payment of 50k nominal
damages.
Brent School vs. Zamora (Guidelines for
Fixed-term EE’s)
Accordingly, and since the entire purpose
behind the development of legislation
culminating in the present Article 280 of the
Labor Code clearly appears to have been, as
already observed, to prevent circumvention of
the employee's right to be secure in his tenure,
the clause in said article indiscriminately and
completely ruling out all written or oral
agreements conflicting with the concept of
regular employment as defined therein should be
construed to refer to the substantive evil that the
Code itself has singled out: agreements entered
into precisely to circumvent security of tenure. It
should have no application to instances where a
fixed period of employment was agreed upon
knowingly and voluntarily by the parties,
without any force, duress or improper pressure
being brought to bear upon the employee and
absent any other circumstances vitiating his
consent, or where it satisfactorily appears that
the employer and employee dealt with each
other on more or less equal terms with no moral
dominance whatever being exercised by the
former over the latter.
FACTS: Alegre was an athletic director at
Brent, at a yearly compensation of P20,000. His
contract fixed a specific term of 5 years for its
existence, from July, 1971, to July, 1976.
Subsequent subsidiary agreements in March
1973, August 1973, and Sept. 1974 reiterated the
same terms and conditions, including the expiry
date, as those contained in the original contract
of July, 1971.- 3 months before the expiration of
the stipulated period, in April 1976, Alegre was
given a copy of the report filed by Brent with the
Dep. of Labor advising of the termination of his
services, effective July 16, 1976. The stated
ground for termination was “completion of
contract, expiration of the definite period of
employment.”
Alegre protested the announced termination of
his employment. He argued that although his
contract did stipulate that the same would
terminate on July 17, 1976, since his services
were necessary and desirable in the usual
business of his employer, and his employment
had lasted for five years, he had acquired the
status of regular employee and could not be
removed except for valid cause.
The employment contract of 1971 was executed
when the Labor Code of the Philippines had not
yet been promulgated, which came into effect
some 3 years after the perfection of the contract.
ISSUE: WON provisions of the Labor Code as
amended (regarding probationary/regular
employees), have anathematized "fixed period
employment" or employment for a term.
RULING: NO. Before the Labor Code, there
was no doubt about the validity of term
employment. It was impliedly but clearly
recognized by the Termination Pay law, RA
1052.
The employment contract between Brent School
and Alegre was executed on July 18, 1971, at a
time when the Labor Code of the Philippines
(P.D. 442) had not yet been promulgated.
Indeed, the Code did not come into effect until
November 1, 1974, some three years after the
perfection of the employment contract, and
rights and obligations there under had arisen and
been mutually observed and enforced.
At that time, i.e., before the advent of the Labor
Code, there was no doubt whatever about the
validity of term employment. It was impliedly
but nonetheless clearly recognized by the
Termination Pay Law, R.A. 1052, 11 as
amended by R.A. 1787. 12 Basically, this statute
provided that—
In cases of employment, without a definite period, in a
commercial, industrial, or agricultural establishment or
enterprise, the employer or the employee may terminate at
any time the employment with just cause; or without just
cause in the case of an employee by serving written notice
on the employer at least one month in advance, or in the
case of an employer, by serving such notice to the employee
at least one month in advance or one-half month for every
year of service of the employee, whichever is longer, a
fraction of at least six months being considered as one
whole year.
The employer, upon whom no such notice was served in
case of termination of employment without just cause, may
hold the employee liable for damages.
The employee, upon whom no such notice was served in
case of termination of employment without just cause, shall
be entitled to compensation from the date of termination of
his employment in an amount equivalent to his salaries or
wages corresponding to the required period of notice.
There was, to repeat, clear albeit implied
recognition of the licitness of term employment.
RA 1787 also enumerated what it considered to
be just causes for terminating an employment
without a definite period, either by the employer
or by the employee without incurring any
liability therefor.
Accordingly, and since the entire purpose behind
the development of legislation culminating in
the present Article 280 of the Labor Code
clearly appears to have been, as already
observed, to prevent circumvention of the
employee's right to be secure in his tenure, the
clause in said article indiscriminately and
completely ruling out all written or oral
agreements conflicting with the concept of
regular employment as defined therein should be
construed to refer to the substantive evil that the
Code itself has singled out: agreements entered
into precisely to circumvent security of tenure. It
should have no application to instances where a
fixed period of employment was agreed upon
knowingly and voluntarily by the parties,
without any force, duress or improper pressure
being brought to bear upon the employee and
absent any other circumstances vitiating his
consent, or where it satisfactorily appears that
the employer and employee dealt with each
other on more or less equal terms with no moral
dominance whatever being exercised by the
former over the latter. Unless thus limited in its
purview, the law would be made to apply to
purposes other than those explicitly stated by its
framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and
unintended consequences.
Note: To summarize, the guidelines to be
followed for a valid fixed term employment
contract are the following: 1.) That such fixed
period of employment was agreed upon
knowingly and voluntarily by the parties,
without any force, duress or improper pressure
being brought to bear upon the employee and
absent any other circumstances vitiating his
consent, 2.) That employer and employee dealt
with each other on more or less equal terms with
no moral dominance whatever being exercised
by the former over the latter, and lastly 3.) That
such contract was not entered into for the
purpose of circumventing security of tenure as
guaranteed under the law and constitution.
IPAMS vs. De Vera (Application of Foreign
Law)
As an exception, the parties may agree that a
foreign law shall govern the employment
contract. A synthesis of the existing laws and
jurisprudence reveals that this exception is
subject to the following requisites: 1.) That it is
expressly stipulated in the overseas employment
contract that a specific foreign law shall govern;
2.) That the foreign law invoked must be proven
before the courts pursuant to the Philippine
rules on evidence; 3.) That the foreign law
stipulated in the overseas employment contract
must not be contrary to law, morals, good
customs, public order, or public policy of the
Philippines; and 4.) That the overseas
employment contract must be processed through
the POEA. The Court is of the view that these
four (4) requisites must be complied with before
the employer could invoke the applicability of a
foreign law to an overseas employment contract.
FACTS: Industrial Personnel & Management
Services, Inc. (IPAMS) is a local placement
agency duly organized and existing under
Philippine laws. Petitioner SNC Lavalin
Engineers & Contractors, Inc. (SNC-Lavalin), a
Canadian company with business interests in
several countries, is the principal of IPAMS.
Respondent Alberto Arriola, a licensed general
surgeon in the Philippines, was hired by SNC-
Lavalin, through its local manning agency,
IPAMS, as a safety officer in its Ambatovy
Project site in Madagascar. He was then hired
and his overseas employment contract was
processed with the Philippine Overseas
Employment Agency (POEA) According to
Arriola, he signed the contract of employment in
the Philippines. Arriola started working in
Madagascar.
After three months, Arriola received a notice of
pre-termination of employment due to
diminishing workload in the area of his expertise
and the unavailability of alternative assignments.
Consequently, Arriola was repatriated. SNC-
Lavalin deposited in Arriola's bank account his
pay amounting to Two Thousand Six Hundred
Thirty Six Dollars and Eight Centavos
(CA$2,636.80), based on Canadian labor law.
Aggrieved, Arriola filed a complaint against the
petitioners for illegal dismissal and non-payment
of overtime pay, vacation leave and sick leave
pay before the Labor Arbiter (LA). He claimed
that SNC-Lavalin still owed him unpaid salaries
equivalent to the three-month unexpired portion
of his contract, amounting to, more or less, One
Million Sixty-Two Thousand Nine Hundred
Thirty-Six Pesos (P1,062,936.00). He asserted
that SNC-Lavalin never offered any valid reason
for his early termination and that he was not
given sufficient notice regarding the same.
Arriola also insisted that the petitioners must
prove the applicability of Canadian law before
the same could be applied to his employment
contract.
The petitioners asserted that Arriola’s
employment documents were processed in
Canada, not to mention that SNC-Lavalin’s
office was in Ontario, so that the principle of lex
loci celebrationis was applicable.
They relied on a copy of the Employment
Standards Act (ESA) of Ontario, which was duly
authenticated by the Canadian authorities and
certified by the Philippine Embassy. Hence, they
insisted that Canadian laws governed the
contract.
ISSUE: WON Canadian law applies in this
case?
RULING: NO, Canadian law cannot apply in
this case.
RA. No. 8042, or the Migrant Workers Act, was
enacted to institute the policies on overseas
employment and to establish a higher standard
of protection and promotion of the welfare of
migrant workers.
It emphasized that while recognizing the
significant contribution of Filipino migrant
workers to the national economy through their
foreign exchange remittances, the State does not
promote overseas employment as a means to
sustain economic growth and achieve national
development.
Although it acknowledged claims arising out of
law or contract involving Filipino workers, it
does not categorically provide that foreign laws
are absolutely and automatically applicable in
overseas employment contracts.
A contract freely entered into should, of course,
be respected, since a contract is the law between
the parties. The principle of party autonomy in
contracts is not, however, an absolute principle.
The rule in Article 1306, of our Civil Code is
that the contracting parties may establish such
stipulations as they may deem convenient,
"provided they are not contrary to law, morals,
good customs, public order or public policy."
Thus, counter-balancing the principle of
autonomy of contracting parties is the equally
general rule that provisions of applicable law,
especially provisions relating to matters affected
with public policy, are deemed written into the
contract. Put a little differently, the governing
principle is that parties may not contract away
applicable provisions of law especially
peremptory provisions dealing with matters
heavily impressed with public interest. The law
relating to labor and employment is clearly such
an area and parties are not at liberty to insulate
themselves and their relationships from the
impact of labor laws and regulations by simply
contracting with each other.
The general rule is that Philippine laws apply
even to overseas employment contracts. This
rule is rooted in the constitutional provision of
Section 3, Article XIII that the State shall afford
full protection to labor, whether local or
overseas. Hence, even if the OFW has his
employment abroad, it does not strip him of his
rights to security of tenure, humane conditions
of work and a living wage under our
Constitution.
As an exception, the parties may agree that a
foreign law shall govern the employment
contract. A synthesis of the existing laws and
jurisprudence reveals that this exception is
subject to the following requisites: 1.) That it is
expressly stipulated in the overseas employment
contract that a specific foreign law shall govern;
2.) That the foreign law invoked must be proven
before the courts pursuant to the Philippine rules
on evidence; 3.) That the foreign law stipulated
in the overseas employment contract must not be
contrary to law, morals, good customs, public
order, or public policy of the Philippines; and 4.)
That the overseas employment contract must be
processed through the POEA. The Court is of
the view that these four (4) requisites must be
complied with before the employer could invoke
the applicability of a foreign law to an overseas
employment contract.
With these requisites, the State would be able to
abide by its constitutional obligation to ensure
that the rights and well-being of our OFWs are
fully protected.
If the first requisite is absent, or that no foreign
law was expressly stipulated in the employment
contract which was executed in the Philippines,
then the domestic labor laws shall apply in
accordance with the principle of lex loci
contractus.
If the second requisite is lacking, or that the
foreign law was not proven pursuant to Sections
24 and 25 of Rule 132 of the Revised Rules of
Court, then the international law doctrine of
processual presumption operates. The said
doctrine declares that "[w]here a foreign law is
not pleaded or, even if pleaded, is not proved,
the presumption is that foreign law is the same
as ours."
If the third requisite is not met, or that the
foreign law stipulated is contrary to law, morals,
good customs, public order or public policy,
then Philippine laws govern. This finds legal
bases in the Civil Code, specifically: (1) Article
17, which provides that laws which have, for
their object, public order, public policy and good
customs shall not be rendered ineffective by
laws of a foreign country; and (2) Article 1306,
which states that the stipulations, clauses, terms
and conditions in a contract must not be contrary
to law, morals, good customs, public order, or
public policy.
Finally, if the fourth requisite is missing, or that
the overseas employment contract was not
processed through the POEA, then Article 18 of
the Labor Code is violated. Article 18 provides
that no employer may hire a Filipino worker for
overseas employment except through the boards
and entities authorized by the Secretary of
Labor. In relation thereto, Section 4 of R.A. No.
8042, as amended, declares that the State shall
only allow the deployment of overseas Filipino
workers in countries where the rights of Filipino
migrant workers are protected. Thus, the POEA,
through the assistance of the Department of
Foreign Affairs, reviews and checks whether the
countries have existing labor and social laws
protecting the rights of workers, including
migrant workers
Unless processed through the POEA, the State
has no effective means of assessing the
suitability of the foreign laws to our migrant
workers. Thus, an overseas employment contract
that was not scrutinized by the POEA definitely
cannot be invoked as it is an unexamined foreign
law.
In other words, lacking any one of the four
requisites would invalidate the application of the
foreign law, and the Philippine law shall govern
the overseas employment contract.
Granting arguendo that the labor contract
expressly stipulated the applicability of
Canadian law, still, Arriola’s employment
cannot be governed by such foreign law because
the third requisite is not satisfied. A perusal of
the ESA will show that some of its provisions
are contrary to the Constitution and the labor
laws of the Philippines.
First, the ESA does not require any ground for
the early termination of employment. Article 54
thereof only provides that no employer should
terminate the employment of an employee
unless a written notice had been given in
advance. Necessarily, the employer can dismiss
any employee for any ground it so desired. At its
own pleasure, the foreign employer is endowed
with the absolute power to end the employment
of an employee even on the most whimsical
grounds.
Second, the ESA allows the employer to
dispense with the prior notice of termination to
an employee. Article 65 (4) thereof indicated
that the employer could terminate the
employment without notice by simply paying
the employee a severance pay computed on the
basis of the period within which the notice
should have been given. The employee under the
ESA could be immediately dismissed without
giving him the opportunity to explain and defend
himself.
The provisions of the ESA are patently
inconsistent with the right to security of tenure.
Both the Constitution and the Labor Code
provide that this right is available to any
employee. In a host of cases, the Court has
upheld the employee’s right to security of tenure
in the face of oppressive management behavior
and management prerogative. Security of tenure
is a right which cannot be denied on mere
speculation of any unclear and nebulous basis.
Not only do these provisions collide with the
right to security of tenure, but they also deprive
the employee of his constitutional right to due
process by denying him of any notice of
termination and the opportunity to be heard.
Glaringly, these disadvantageous provisions
under the ESA produce the same evils which the
Court vigorously sought to prevent in the cases
of Pakistan International and Sameer Overseas.
Thus, the Court concurs with the CA that the
ESA is not applicable in this case as it is against
our fundamental and statutory laws.
In fine, as the petitioners failed to meet all the
four requisites on the applicability of a foreign
law, then the Philippine labor laws must govern
the overseas employment contract of Arriola.
Manila Hotel vs. NLRC (Forum non
conveniens)
Under the rule of forum non conveniens, a
Philippine court or agency may assume
jurisdiction over the case if it chooses to do so
provided: (1) that the Philippine court is one to
which the parties may conveniently resort to; (2)
that the Philippine court is in a position to make
an intelligent decision as to the law and the
facts; and (3) that the Philippine court has or is
likely to have power to enforce its decision.
FACTS: During his employment with the
Mazoon Printing Press in the Sultanate of Oman,
respondent Santos received a letter dated May 2,
1988 from Mr. Gerhard R. Shmidt, General
Manager, Palace Hotel, Beijing, China. Mr.
Schmidt informed respondent Santos that he was
recommended by one Nestor Buenio, a friend of
his. Mr. Shmidt offered respondent Santos the
same position as printer, but with a higher
monthly salary and increased benefits. The
position was slated to open on October 1, 1988.
He then signified his acceptance of the offer.
The employment contract of June 4, 1988 stated
that his employment would commence
September 1, 1988 for a period of two years. It
provided for a monthly salary of nine hundred
dollars (US$900.00) net of taxes, payable
fourteen (14) times a year. From June 8 to 29,
1989, respondent Santos was in the Philippines
on vacation leave. He returned to China and
reassumed his post on July 17, 1989.
On July 22, 1989, Mr. Shmidt's Executive
Secretary, a certain Joanna suggested in a
handwritten note that respondent Santos be
given one (1) month notice of his release from
employment. On August 10, 1989, the Palace
Hotel informed respondent Santos by letter
signed by Mr. Shmidt that his employment at the
Palace Hotel print shop would be terminated due
to business reverses brought about by the
political upheaval in China. We quote the letter:
("After the unfortunate happenings in China and
especially Beijing (referring to Tiannamen
Square incidents), our business has been
severely affected. To reduce expenses, we will
not open/operate printshop for the time being.)
On September 5, 1989, the Palace Hotel
terminated the employment of respondent Santos
and paid all benefits due him, including his
plane fare back to the Philippines.
On February 20, 1990, respondent Santos filed a
complaint for illegal dismissal with the
Arbitration Branch, National Capital Region,
National Labor Relations Commission (NLRC).
He prayed for an award of nineteen thousand
nine hundred and twenty three dollars
(US$19,923.00) as actual damages, forty
thousand pesos (P40,000.00) as exemplary
damages and attorney's fees equivalent to 20%
of the damages prayed for. The complaint
named MHC, MHICL, the Palace Hotel and Mr.
Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not
served with summons and neither participated in
the proceedings before the Labor Arbiter. Labor
Arbiter Ceferina J. Diosana, decided the case
against petitioners. Petitioners appealed to the
NLRC, arguing that the POEA, not the NLRC
had jurisdiction over the case. NLRC
promulgated a resolution, stating that the
Decision be, as it is hereby, declared null and
void for want of jurisdiction.
On September 18, 1992, respondent Santos
moved for reconsideration arguing that the case
was not cognizable by the POEA as he was not
an "overseas contract worker." The NLRC
granted the motion and reversed itself. The
NLRC directed Labor Arbiter Emerson
Tumanon to hear the case on the question of
whether private respondent was retrenched or
dismissed. Subsequently, Labor Arbiter
Tumanon was re-assigned as trial Arbiter of the
National Capital Region, Arbitration Branch,
and the case was transferred to Labor Arbiter
Jose G. de Vera. Labor Arbiter de Vera
submitted his report. He found that respondent
Santos was illegally dismissed from
employment and recommended that he be paid
actual damages equivalent to his salaries for the
unexpired portion of his contract. NLRC ruled in
favor of Private Respondent.
Petitioners filed a motion for reconsideration
arguing that Labor Arbiter de Vera's
recommendation had no basis in law and in fact,
the NLRC denied the motion for
reconsideration. Hence, this petition.
ISSUE: WON NLRC correctly assumed
jurisdiction over the case?
RULING: NO, NLRC was a seriously
inconvenient forum. The case transpired in two
foreign jurisdictions and the case involves
purely foreign elements. The only link that the
Philippines has with the case is that respondent
Santos is a Filipino citizen. The Palace Hotel
and MHICL are foreign corporations. Not all
cases involving our citizens can be tried here.
Respondent Santos was hired directly by the
Palace Hotel, a foreign employer, through
correspondence sent to the Sultanate of Oman,
where respondent Santos was then employed. He
was hired without the intervention of the POEA
or any authorized recruitment agency of the
government.
Under the rule of forum non conveniens, a
Philippine court or agency may assume
jurisdiction over the case if it chooses to do so
provided: (1) that the Philippine court is one to
which the parties may conveniently resort to; (2)
that the Philippine court is in a position to make
an intelligent decision as to the law and the
facts; and (3) that the Philippine court has or is
likely to have power to enforce its decision.
The conditions are unavailing in the case at bar.
We fail to see how the NLRC is a convenient
forum given that all the incidents of the case —
from the time of recruitment, to employment to
dismissal occurred outside the Philippines. The
inconvenience is compounded by the fact that
the proper defendants, the Palace Hotel and
MHICL are not nationals of the Philippines.
Neither are they "doing business in the
Philippines." Likewise, the main witnesses, Mr.
Shmidt and Mr. Henk are non-residents of the
Philippines.
Neither can an intelligent decision be made as to
the law governing the employment contract as
such was perfected in foreign soil. This calls to
fore the application of the principle of lex loci
contractus (the law of the place where the
contract was made).
The employment contract was not perfected in
the Philippines. Respondent Santos signified his
acceptance by writing a letter while he was in
the Republic of Oman. This letter was sent to the
Palace Hotel in the People's Republic of China.
Neither can the NLRC determine the facts
surrounding the alleged illegal dismissal as all
acts complained of took place in Beijing,
People's Republic of China. The NLRC was not
in a position to determine whether the
Tiannamen Square incident truly adversely
affected operations of the Palace Hotel as to
justify respondent Santos' retrenchment.
Even assuming that a proper decision could be
reached by the NLRC, such would not have any
binding effect against the employer, the Palace
Hotel. The Palace Hotel is a corporation
incorporated under the laws of China and was
not even served with summons. Jurisdiction over
its person was not acquired.
This is not to say that Philippine courts and
agencies have no power to solve controversies
involving foreign employers. Neither are we
saying that we do not have power over an
employment contract executed in a foreign
country. If Santos were an "overseas contract
worker", a Philippine forum, specifically the
POEA, not the NLRC, would protect him. He is
not an "overseas contract worker" a fact which
he admits with conviction.
Saudi Arabian Airlines vs. Rebesencio
Article II, Sections 1 and 14 of the 1987
Constitution ensures the equal protection of
persons, and the equality between men and
women. Though pregnancy does present
physical limitations that may render difficult the
performance of functions associated with being
a flight attendant, it would be the height of
iniquity to view pregnancy as a disability so
permanent and immutable that, it must entail the
termination of one's employment
FACTS: Petitioner Saudi Arabian Airlines is a
foreign corporation established and existing
under the Royal Decree No. M/24 of Jeddah,
who hired Respondents as flight attendants.
After undergoing seminars required by the
Philippine Overseas Employment
Administration for deployment overseas, as well
as training modules offered by Saudia,
Respondents became Temporary and then
eventually Permanent Flight Attendants; they
entered into the necessary Cabin Attendant
Contracts with Saudi.
Respondents were released from service on
separate dates in 2006; claimed that such release
was illegal since the basis of termination of
contract was solely because they were pregnant.
They claim that they had informed Saudia of
their respective pregnancies and had gone
through the necessary procedures to process
their maternity leaves and while initially, Saudia
had given its approval, they ultimately reneged
and rather required them to file for resignation.
Respondents claim that Petitioner Airlines
threatened that if they would not resign, they
would be terminated along with loss of benefits,
separation pay, and ticket discount entitlements;
they anchored such on its “Unified Employment
Contract for Female Cabin Attendants" which
provides that “if the Air Hostess becomes
pregnant at any time during the term of this
contract, this shall render her employment
contract as void and she will be terminated due
to lack of medical fitness. “
November 8,2007 - Respondents filed a
Complaint with the Labor Arbiter against Saudia
and its officers for illegal dismissal and for
underpayment, along with moral and exemplary
damages, and attorney's fees. Petitioner Airlines
contests the Labor Arbiter’s jurisdiction, as the
contract’s points referred to foreign law and that
Respondents had no cause of action since they
already voluntarily resigned.
Executive Labor Arbiter dismissed the
complaint, but on appeal the NLRC reversed the
Labor Arbiter’s decision and denied Petitioner
Airlines’ Motion for Reconsideration, hence the
current appeal.
ISSUE: WON the Labor Arbiter and NLRC has
jurisdiction over petitioner and can acquire
jurisdiction over the dispute?
RULING: YES, the LA and NLRC has
jurisdiction and can acquire jurisdiction over the
dispute. No doubt that the pleadings were served
to Petitioner Airlines through their counsel,
however they claim that the NLRC and Labor
Arbiter had no jurisdiction since summons were
served to Saudi Airlines Manila and not to them,
Saudi Airlines Jeddah. Saudi Airlines Manila
was neither a party to the Cabin attendant
contracts nor funded the Respondents, and it was
to Saudi Jeddah that they filed their resignations.
Court ruled however that by its own admission,
Saudia, while a foreign corporation has a
Philippine office, and that under the Foreign
Investments act of 1991, they are a foreign
corporation doing business in the Phililppines
and therefore are subject to Philippine
jurisdiction.
Petitioner Airlines also asserts that the Cabin
Attendant Contracts require the application of
the laws of Saudi Arabia rather than those of the
Philippines. It claims that the difficulty of
ascertaining foreign law calls into operation the
principle of forum non conveniens, thereby
rendering improper the exercise of jurisdiction
by Philippine tribunals.
The Court disagrees. Forum non conveniens
finds no application and does not operate to
divest Philippine tribunals of jurisdiction and to
require the application of foreign law. Though
Article 1306 of the Civil Code provides that
Parties may stipulate terms they may deem
convenient, Philippine tribunals may not lose
sight of considerations of law, morals, good
customs, public order, or public policy that
underlie the contract.
Article II, Sections 1 and 14 of the 1987
Constitution ensures the equal protection of
persons, and the equality between men and
women. Though pregnancy does present
physical limitations that may render difficult the
performance of functions associated with being
a flight attendant, it would be the height of
iniquity to view pregnancy as a disability so
permanent and immutable that, it must entail the
termination of one's employment.
Furthermore, contracts relating to labor and
employment are impressed with public interest.
Article 1700 of the Civil Code provides that "the
relation between capital and labor are not merely
contractual. They are so impressed with public
interest that labor contracts must yield to the
common good.
Under the Pakistan Airlines case this Court held
that, the relationship between capital and labor is
much affected with public interest and that the
otherwise applicable Philippine laws and
regulations cannot be rendered illusory by the
parties agreeing upon some other law to govern
their relationship.
As the present dispute relates to (what the
respondents allege to be) the illegal termination
of respondents' employment, this case is
immutably a matter of public interest and public
policy. Consistent with clear pronouncements in
law and jurisprudence, Philippine laws properly
find application in and govern this case.
Oddly enough, the petitioner Saudia themselves
stated that the Saudi law does not allow the
termination of employment of women who take
maternity leaves;
Consistent with lex loci intentionis, to the extent that it is
proper and practicable (i.e., “to make an intelligent
decision”), Philippine tribunals may apply the foreign law
selected by the parties. In fact, (albeit without meaning to
make a pronouncement on the accuracy and reliability of
respondents’ citation) in this case, respondents themselves
have made averments as to the laws of Saudi Arabia. In
their Comment, respondents write:
Under the Labor Laws of Saudi Arabia and the
Philippines[,] it is illegal and unlawful to terminate the
employment of any woman by virtue of pregnancy. The law
in Saudi Arabia is even more harsh and strict [sic] in that
no employer can terminate the employment of a female
worker or give her a warning of the same while on
Maternity Leave, the specific provision of Saudi Labor
Laws on the matter is hereto quoted as follows: “An
employer may not terminate the employment of a female
worker or give her a warning of the same while on
maternity leave.” (Article 155, Labor Law of the Kingdom
of Saudi Arabia, Royal Decree No. M/5
Note: Applying the guidelines set in IPAMS vs.
De Vera, foreign law cannot apply because such
contract is contrary to our own laws and when a
contract, although executed abroad, is contrary
to our own laws, Philippine courts may refuse to
apply foreign law and apply domestic law
instead. This is because the protection afforded
by the constitution to workers extends even to
those working overseas.
SUNACE International Management
Services, Inc. vs. NLRC (Theory of Imputed
Knowledge)
The theory of imputed knowledge ascribes the
knowledge of the agent, Sunace, to the principal,
employer Xiong, not the other way around. The
knowledge of the principal-foreign employer
cannot, therefore, be imputed to its agent Sunace
FACTS: Respondent Divina Montehermozo is a
domestic helper deployed to Taiwan by Sunace
International Management Services (Sunace)
under a 12-month contract. Such employment
was made with the assistance of Taiwanese
broker Edmund Wang. After the expiration of
the contract, Montehermozo continued her
employment with her Taiwanese employer Hang
Rui Xiong for another 2 years.
When Montehermozo returned to the
Philippines, she filed a complaint against
Sunace, Wang, and her Taiwanese employer
before the National Labor Relations
Commission (NLRC). She alleges that she was
underpaid and was jailed for three months in
Taiwan. She further alleges that the 2-year
extension of her employment contract was with
the consent and knowledge of Sunace. Sunace,
on the other hand, denied all the allegations.
Ruling of the Labor Arbiter and Court of
Appeals: The Labor Arbiter ruled in favor of
Montehermozo and found Sunace liable thereof.
The National Labor Relations Commission and
Court of Appeals affirmed the labor arbiter’s
decision. Hence, the filing of this appeal.
ISSUE: Whether or not there is theory of
imputed knowledge between the principal and
the agent
RULING: NO. As agent of its foreign principal,
[Sunace] cannot profess ignorance of such an
extension as obviously, the act of its principal
extending [Divina’s] employment contract
necessarily bound it,it too is a misapplication, a
misapplication of the theory of imputed
knowledge.
The theory of imputed knowledge ascribes the
knowledge of the agent, Sunace, to the principal,
employer Xiong, not the other way around. The
knowledge of the principal-foreign employer
cannot, therefore, be imputed to its agent
Sunace.
There being no substantial proof that Sunace
knew of and consented to be bound under the 2-
year employment contract extension, it cannot
be said to be privy thereto. As such, it and its
“owner” cannot be held solidarily liable for any
of Divina’s claims arising from the 2-year
employment extension. As the New Civil Code
provides, Contracts take effect only between the
parties, their assigns, and heirs, except in case
where the rights and obligations arising from the
contract are not transmissible by their nature, or
by stipulation or by provision of law.
Furthermore, as Sunace correctly points out,
there was an implied revocation of its agency
relationship with its foreign principal when, after
the termination of the original employment
contract, the foreign principal directly negotiated
with Divina and entered into a new and separate
employment contract in Taiwan. Article 1924
of the New Civil Code provides The agency is
revoked if the principal directly manages the
business entrusted to the agent, dealing directly
with third persons, thus applies.
Wilhelmina Orosco vs. CA (Control
Test/Economic Reality Test)
Not all rules imposed by the hiring party on the
hired party indicate that the latter is an
employee of the former. Rules which serve as
general guidelines towards the achievement of
the mutually desired result are not indicative of
the power of control.
FACTS: In March 1990, Wilhelmina Orozco
was hired as a writer by the Philippine Daily
Inquirer (PDI). She was the columnist of
“Feminist Reflections” under the Lifestyle
section of the publication. She writes on a
weekly basis and on a per article basis (P250-
300/article).
In 1991, Leticia Magsanoc as the editor-in-chief
sought to improve the Lifestyle section of the
paper. She said there were too many Lifestyle
writers and that it was time to reduce the number
of writers. Orozco’s column was eventually
dropped.
Orozco filed for a case for Illegal Dismissal
against PDI and Magsanoc. Orozco won in the
Labor Arbiter where the arbiter ruled that there
exists an employer-employee relationship
between PDI and Orozco.
The case eventually reached the Court of
Appeals where the CA ruled that there is no such
relationship.
Orozco insists that by applying the four-fold
test, it can be seen that she is an employee of
PDI; Orozco insists that PDI had been exercising
the power of control over her because:
a) PDI provides the guidelines as to what her
article content should be;
b) PDI sets deadlines as to when Orozco must
submit her article/s;
c) PDI controls the number of articles to be
submitted by Orozco;
d) PDI requires a certain discipline from their
writers so as to maintain their readership.
ISSUE: WON Orozco is an employee of PDI,
and is yes, whether she was illegally dismissed.
RULING: No. Orosco is not an employee of
PDI.
We rule for PDI.
The existence of an employer-employee
relationship is essentially a question of fact.
Factual findings of quasi-judicial agencies like
the NLRC are generally accorded respect and
finality if supported by substantial evidence.
Considering that the CA's findings are in direct
conflict with those of the Labor Arbiter and
NLRC, this Court must now make its own
examination and evaluation of the facts of this
case.
It is true the Orozco herself admitted that she
was not and had not been considered
respondent's employee because the terms of
works were arbitrarily decided upon by PDI.
This Court has constantly adhered to the FOUR-
FOLD TEST to determine whether there exists
an employee-employer relationship between
parties. The four elements of an employee
relationship are the selection and engagement of
the employee; the payment of wages; the power
of dismissal; and the employer's power to
control the employee's conduct.
Of these four elements, it is the power of control
which is most crucial and most determinative
factor, so important in fact the other elements
may even be disregarded. In other words, the
test is whether the employer controls or has
reserved the right to control the employee, not
only as to the work done, but also as to the
means and methods by which the same is
accomplished.
Orozco argues that several factors exist to prove
that PDI exercised control over her and her
work. But as to whether this is the form of
control that our labor laws contemplate such as
to establish an employer-employee relationship
between Orozco and PDI, it is not.
Orozco has misconstrued the CONTROL TEST
as did the Labor Arbiter and the NLRC.
Not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee
of the former. Rules which serve as general
guidelines towards the achievement of the
mutually desired result are not indicative of the
power of control.
Orozco has not shown the PDI, acting through
its editors, dictated how she was to write or
produce her articles each week. Aside from the
constraints presented by the space allocation of
her column, there were no restraints on her
creativity. The perceived constraint on Orozco's
column was dictated by her own choice of her
column's perspective.
The newspaper's power to approve or reject
publication of any specific article she wrote for
her column cannot be the control contemplated
in the control test as it is but logical that one
who commissions another to do a piece of work
should have the right to accept or reject the
product. The important factor to consider in the
control test is still the elements of control over
how the work itself is done, not just the end
result thereof.
Where a person who works for another performs
his job more or less at his own pleasure, in the
manner he sees fit, subject to definite hours or
conditions of work, and is compensated
according to the result of his efforts and not the
amount thereof, no employer-employee
relationship exists.
Aside from the control test, this Court has also
used the ECONOMIC REALITY TEST. The
economic realities prevailing within the activity
or between the parties are examined, taking into
consideration the totality of the circumstances
surrounding the true nature of the relationship
between the parties.
Orozco's main occupation is not as a columnist
for respondent but as women's rights advocate
working in various women' organizations. She
also contributes articles to other publications.
Thus, it cannot be said that Orozco was
dependent on PDI for her continued employment
in PDI's line of business.
The inevitable conclusion is that Orozco was not
PDI's employee but an INDEPENDENT
CONTRACTOR, engaged to do independent
work.
ANGELINA FRANCISCO VS. NLRC,
KASEI CORP. ETC. (Two Tiered Test)
The better approach would therefore be to adopt
a two-tiered test involving: (1) the putative
employer’s power to control the employee with
respect to the means and methods by which the
work is to be accomplished; and (2) the
underlying economic realities of the activity or
relationship.
FACTS: Petitioner was hired by Kasei
Corporation during the incorporation stage. She
was designated as accountant and corporate
secretary and was assigned to handle all the
accounting needs of the company. She was also
designated as Liason Officer to the City of
Manila to secure permits for the operation of the
company. In 1996, Petitioner was designated as
Acting Manager. She was assigned to handle
recruitment of all employees and perform
management administration functions. In 2001,
Liza Fuentes replaced her as Manager. Kasei
Corporation reduced her salary toP2,500 per
month which was until September. She asked for
her salary but was informed that she was no
longer connected to the company. She did not
anymore report to work since she was not paid
for her salary. She filed an action for
constructive dismissal with the Labor Arbiter.
The Labor Arbiter found that the petitioner was
illegally dismissed. NLRC affirmed the decision
while CA reversed it.
ISSUE: WON there was employer-employee
relationship?
RULING: Yes, Francisco is an employee of
Kasei.
Petitioner is an employee of Kasei Corporation.
The court held that in this jurisdiction, there has
been no uniform test to determine the existence
of an employer-employee relation. Generally,
courts have relied on the so-called right of
control test where the person for whom the
services are performed reserves a right to control
not only the end to be achieved but also the
means to be used in reaching such end.
In addition to the standard of right-of-control,
the existing economic conditions prevailing
between the parties, like the inclusion of the
employee in the payrolls, can help in
determining the existence of an employer-
employee relationship.
The better approach would therefore be to adopt
a two-tiered test involving: (1) the putative
employer’s power to control the employee with
respect to the means and methods by which the
work is to be accomplished; and (2) the
underlying economic realities of the activity or
relationship. Petitioner was selected and
engaged by the company for compensation, and
is economically dependent upon respondent for
her continued employment in that line of
business. There is no doubt that petitioner is an
employee of Kasei Corporation because she was
under the direct of it.
Manila Golf Country Club vs. NLRC
(Control Test)
The regulations, does not circumscribe the
actions or judgment of the caddies concerned as
to leave them little or no freedom of choice
whatsoever in the manner of carrying out their
services. In the very nature of things, caddies
must submit to some supervision of their conduct
while enjoying the privilege of pursuing their
occupation within the premises and grounds of
whatever club they do their work in.
FACTS: This case involves three separate
proceedings all initiated by or on behalf of
herein private respondent and his fellow caddies
namely: (1) A case in the Social Security
Comission (SSC) via petition of seventeen (17)
persons who styled themselves as "Caddies of
Manila Golf and Country Club-PTCCEA
(Philippine Technical, Clerical, Commercial
Employees Association) against the petitioner.
In the case before SSC, petitioner asserts that
there is no employer-employee relationship
between them. Later on, all but two of the 17
employees withdrew their claim namely the
respondent and Ramundo Jomok. Thereafter, the
SSC decided in favor of the Manila Golf on two
grounds: (1) caddy's fees were paid by the golf
players themselves and not by respondent club
and (2) While respondent club promulgates rules
and regulations on the assignment, deportment
and conduct of caddies the same are designed to
impose personal discipline among the caddies
but not to direct or conduct their actual work.
This lends credence to respondent's assertion
that the caddies are never their employees in the
absence of two elements, namely, (1) payment
of wages and (2) control or supervision over
them.
The IAC then reversed the decision in favor of
the respondent (Jomok’s appeal was dismissed)
by saying it passed the control test on the
following grounds: (1) Promulgation rules and
regulations and any violation of any of which
could subject him to disciplinary action. (2)
Enforcement of a group rotation system (3)
"suggesting" the rate of fees payable to the
caddies.
ISSUE: WON persons rendering caddying
services for members of golf clubs and their
guests in said clubs' courses or premises are the
employees of such clubs and therefore within the
compulsory coverage of the Social Security
System (SSS)?
RULING: No. There is no employer-employee
relationship between the caddies and the golf
club. On the matter of an employer - employee
relationship, the court resolves that there is none.
(1) The regulations, does not circumscribe the
actions or judgment of the caddies concerned as
to leave them little or no freedom of choice
whatsoever in the manner of carrying out their
services. In the very nature of things, caddies
must submit to some supervision of their
conduct while enjoying the privilege of pursuing
their occupation within the premises and
grounds of whatever club they do their work in.
They do not have to observe any working hours,
free to leave anytime they please, to stay away
for as long as they like. (2) The group rotation
system is less a measure of employee control
than an assurance that the work is fairly
distributed, the club has no way of compelling
the presence of a caddie. (3) On Fees, the Club
has no measure of control over the incidents of
the caddies' work and compensation that an
employer would possess, as the fact suggests,
it’s a mere suggestion.
Great Pacific Life Assurance Corporation vs.
Judico (Two types of insurance agents)
An insurance company may have two classes of
agents who sell its insurance policies: (1)
salaried employees who keep definite hours and
work under the control and supervision of the
company; and (2) registered representatives
who work on commission basis.
FACTS: Honorato as a debit agent received a
definite minimum amount per week as his wage
known as “sales reserve.” He performed
canvassing and collection job about which he
was required to make a regular report, but he
was assigned an office when he was not in the
field.
An anemic performance would mean a
dismissal; a faithful and productive service
would earn him a promotion. In September
1981, Honorato was promoted to Zone
Supervisor, but was reverted to his former
position in November. Finally, on June 28,
1982, his agency contract was terminated. When
he complained of illegal dismissal, the company
averred that he was not an employee at all.
The Labor Arbiter dismissed the complaint on
the ground that employeremployee relationship
did not exist. The NLRC reversed the decision,
ruling that Honorato was a regular employee.
ISSUE: WON Honorato is an employee of
GREPA life?
RULING: Yes, The Supreme Court affirmed
the decision of the NLRC. The element of
control by the company on Honorato was
present. He was controlled by the company not
only as to the kind of work, the amount of
results, the kind of performance, but also by the
power of dismissal.
Honorato, by the nature of his position and
work, had been a regular employee and was
therefore entitled to the protection of the law and
could not just be terminated without valid and
justifiable reason.
An insurance company may have two classes of
agents who sell its insurance policies: (1)
salaried employees who keep definite hours and
work under the control and supervision of the
company; and (2) registered representatives who
work on commission basis.
The agents who belong to the second category
are not required to report for work at anytime.
They do not have to devote their time
exclusively to or work solely for the company
since the time and the effort they spend in their
work depend entirely upon their own will and
initiative. They are not required to account for
their time nor submit a report of their activities.
They shoulder their own selling expenses as well
as transportation. They are paid their
commission based on a certain percentage of
their sales. One salient point in the
determination of employer-employee
relationship which cannot be easily ignored is
the fact that the compensation that these agents
on commission received is not paid by the
insurance company but by the investor (or the
person insured). After determining the
commission earned by an agent on his sales, the
agent directly deducts it from the amount he
received from the investor or the person insured
and turns over to the insurance company the
amount invested after such deduction is made.
The test therefore is whether the ‘employer’
controls or has reserved the right to control the
‘employee’ not only as to the result of the work
to be done but as to the means and methods by
which the same is to be accomplished. An
ordinary commission insurance agent works at
his own volition or at his own leisure without
fear of dismissal from the company and short of
committing acts detrimental to the business
interest of the company or against the latter;
whether he produces or not is of no moment as
his salary is based on his production, his anemic
performance or even dead result does not
become a ground for dismissal.
Tongko vs. Manulife (Insurance Agent)
(2011)
Note: For more clarity, please read all the
decisions, there is a 2008, and 2010 decision of
the same case.
In the Supreme Courts June 29, 2010
Resolution, they noted that there are built-in
elements of control specific to an insurance
agency, which do not amount to the elements of
control that characterize an employment
relationship governed by the Labor Code.
FACTS: Taking from the November 2008
decision, the facts are as follows:
Manufacturers Life Insurance, Co. is a domestic
corporation engaged in life insurance business.
De Dios was its President and Chief Executive
Officer. Petitioner Tongko started his
relationship with Manulife in 1977 by virtue of a
Career Agent's Agreement.
Pertinent provisions of the agreement state that:
It is understood and agreed that the Agent is an
independent contractor and nothing contained
herein shall be construed or interpreted as
creating an employer-employee relationship
between the Company and the Agent.
a) The Agent shall canvass for applications for
Life Insurance, Annuities, Group policies and
other products offered by the Company, and
collect, in exchange for provisional receipts
issued by the Agent, money due or to become
due to the Company in respect of applications or
policies obtained by or through the Agent or
from policyholders allotted by the Company to
the Agent for servicing, subject to subsequent
confirmation of receipt of payment by the
Company as evidenced by an Official Receipt
issued by the Company directly to the
policyholder.
b) The Company may terminate this Agreement
for any breach or violation of any of the
provisions hereof by the Agent by giving written
notice to the Agent within fifteen (15) days from
the time of the discovery of the breach. No
waiver, extinguishment, abandonment,
withdrawal or cancellation of the right to
terminate this Agreement by the Company shall
be construed for any previous failure to exercise
its right under any provision of this Agreement.
c) Either of the parties hereto may likewise
terminate his Agreement at any time without
cause, by giving to the other party fifteen (15)
days notice in writing.
Sometime in 2001, De Dios addressed a letter to
Tongko, then one of the Metro North Managers,
regarding meetings wherein De Dios found
Tongko's views and comments to be unaligned
with the directions the company was taking. De
Dios also expressed his concern regarding the
Metro North Managers' interpretation of the
company's goals. He maintains that Tongko's
allegations are unfounded. Some allegations
state that some Managers are unhappy with their
earnings, that they're earning less than what they
deserve and that these are the reasons why
Tonko's division is unable to meet agency
development objectives. However, not a single
Manager came forth to confirm these
allegations. Finally, De Dios related his worries
about Tongko's inability to push for company
development and growth.
De Dios subsequently sent Tongko a letter of
termination in accordance with Tongko's Agents
Contract. Tongko filed a complaint with the
NLRC against Manulife for illegal dismissal,
alleging that he had an employer-employee
relationship with De Dios instead of a revocable
agency by pointing out that the latter exercised
control over him through directives regarding
how to manage his area of responsibility and
setting objectives for him relating to the
business. Tongko also claimed that his dismissal
was without basis and he was not afforded due
process. The NLRC ruled that there was an
employer-employee relationship as evidenced by
De Dios's letter which contained the manner and
means by which Tongko should do his work.
The NLRC ruled in favor of Tongko, affirming
the existence of the employer-employee
relationship.
The Court of Appeals, however, set aside the
NLRC's ruling. It applied the four-fold test for
determining control and found the elements in
this case to be lacking, basing its decision on the
same facts used by the NLRC. It found that
Manulife did not exert control over Tongko,
there was no employer-employee relationship
and thus the NLRC did not have jurisdiction
over the case.
The Supreme Court reversed the ruling of the
Court of Appeals and ruled in favor of Tongko.
However, the Supreme Court issued another
Resolution dated June 29, 2010, reversing its
decision. Tongko filed a motion for
reconsideration, which is now the subject of the
instant case.
ISSUE: WON Supreme Court erred in issuing
the June 29, 2010 resolution, reversing its earlier
decision that an employer-employee relationship
existed?
RULING: No, Supreme Court did not err.
Tongko is not an employee of Manulife.
The Supreme Court finds no reason to reverse
the June 29, 2010 decision. Control over the
performance of the task of one providing service
both with respect to the means and manner, and
the results of the service is the primary element
in determining whether an employment
relationship exists. The Supreme Court ruled
petitioners Motion against his favor since he
failed to show that the control Manulife
exercised over him was the control required to
exist in an employer-employee relationship;
Manulife’s control fell short of this norm and
carried only the characteristic of the relationship
between an insurance company and its agents, as
defined by the Insurance Code and by the law of
agency under the Civil Code.
In the Supreme Courts June 29, 2010
Resolution, they noted that there are built-in
elements of control specific to an insurance
agency, which do not amount to the elements of
control that characterize an employment
relationship governed by the Labor Code. The
Insurance Code provides definite parameters in
the way an agent negotiates for the sale of the
company’s insurance products, his collection
activities and his delivery of the insurance
contract or policy. They do not reach the level of
control into the means and manner of doing an
assigned task that invariably characterizes an
employment relationship as defined by labor
law.
To reiterate, guidelines indicative of labor law
"control" do not merely relate to the mutually
desirable result intended by the contractual
relationship; they must have the nature of
dictating the means and methods to be employed
in attaining the result. Tested by this norm,
Manulife’s instructions regarding the objectives
and sales targets, in connection with the training
and engagement of other agents, are among the
directives that the principal may impose on the
agent to achieve the assigned tasks. They are
targeted results that Manulife wishes to attain
through its agents. Manulife’s codes of conduct,
likewise, do not necessarily intrude into the
insurance agents means and manner of
conducting their sales. Codes of conducts are
norms or standards of behavior rather than
employer directives into how specific tasks are
to be done. In sum, the Supreme Court found
absolutely no evidence of labor law control.
DENIED.
Sevilla vs. CA (Agent of Employer not an
Employee)
A true employee cannot be made to part with his
own money in pursuance of his employer's
business, or otherwise, assume any liability
thereof.
In a contract of agency, the essence of the
contract that the agent renders services "in
representation or on behalf of another”. In the
case at bar, Sevilla solicited airline fares, but
she did so for and on behalf of her principal,
Tourist World Service, Inc.
FACTS: On Oct. 19, 1960, Mrs. Noguera leased
her property to Tourist World Service (TWS)
represented by Eliseo Canilao in Mabini st.,
Manila with Lina Sevilla holding herself
solidarily liable for the payment of the monthly
rentals agreed on. A branch was opened in said
property by TWS, the same was run by the
herein appellant payable to Tourist World
Service Inc. by any airline for any fare brought
in on the efforts of Mrs. Lina Sevilla, 4% was to
go to Lina Sevilla and 3% was to be withheld by
TWS. However on November 24, 1961, the
board of TWS decided to abolish said branch on
the ground that it was losing and the alleged
connection of Sevilla with a rival firm,
Philippine Travel Bureau. The board also
authorized the corporate secretary (Gabino
Canilao) to receive the properties of the Tourist
World Service then located at the said branch
office. Later on, the corporate secretary went to
the branch and upon the finding that it was
locked and being unable to contact Sevilla, he
padlocked the premises of the branch. When
neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a
complaint was filed by the herein appellants
against the appellees with a prayer for the
issuance of mandatory preliminary injunction
(with claim for damages invoking the provisions
of the NCC on human relations). Both appellees
answered with counterclaims. For apparent lack
of interest of the parties therein, the trial court
ordered the dismissal of the case without
prejudice. However, on June 17,1963 both
parties refiled their respective claims he court a
quo ordered both cases to be dismissed for lack
of merit.
On appeal, petitioners claim that there was no
employer - employee relationship between her
and TWS and what exists was that of one of a
joint business venture and that TWS had no right
to unilaterally evict Sevilla from the Mabini
Office.
ISSUE: WON Sevilla is an employee of Tourist
World Services rendering the lower court
without jurisdiction for such case is within the
ambit of the jurisdiction of the Bureau of Labor
Relations.
RULING: NO, Sevilla is not an employee of
TWS. The court relied on the Right of Control
Test "where the person for whom the services
are performed reserves a right to control not
only the end to be achieved but also the means
to be used in reaching such end.” In addition to
the standard of right-of control, the existing
economic conditions prevailing between the
parties, like the inclusion of the employee in the
payrolls, in determining the existence of an
employer-employee relationship. The records
will show that the petitioner, Lina Sevilla, was
not subject to control by the private respondent
Tourist World Service, Inc., either as to the
result of the enterprise or as to the means used in
connection therewith for the following reasons:
(1) She bound herself in solidum (solidary) and
for rental payments of the Mabini property
although the lower court reduced such in to a
mere guaranty this does not make her an
employee of TWS. A true employee cannot be
made to part with his own money in pursuance
of his employer's business, or otherwise, assume
any liability thereof.
(2) As found by the Appellate Court, 'When the
branch office was opened, the same was run by
the herein appellant Lina O. Sevilla payable to
Tourist World Service, Inc. by any airline for
any fare brought in on the effort of Mrs. Lina
Sevilla. Under these circumstances, it cannot be
said that Sevilla was under the control of Tourist
World Service, Inc. "as to the means used."
Sevilla in pursuing the business obviously relied
on her own gifts and capabilities.
(3) Sevilla was not in the company's payroll. For
her efforts, she retained 4% in commissions
from airline bookings, the remaining 3% going
to Tourist World.
(4) Contrary to the claims of both parties, what
exist between them seems to be that of a contract
of agency since Sevilla had conceded certain
rights in favor of TWS (TWS claims it was an
employer-employee relationship while Sevilla
claims that it was of a joint venture or
partnership). A joint venture presupposes an
equal standing between the joint partners, in
which each party has an equal proprietary
interest in the capital or property contributed and
where each party exercises equal rights in the
conduct of the business. Furthermore, both
parties never held themselves as partners for the
branch was embellished with the sign of TWS
instead of a distinct partner name. In a contract
of agency, the essence of the contract that the
agent renders services "in representation or on
behalf of another” In the case at bar, Sevilla
solicited airline fares, but she did so for and on
behalf of her principal, Tourist World Service,
Inc. But unlike simple grants of a power of
attorney, the agency that we hereby declare to be
compatible with the intent of the parties, cannot
be revoked at will. The reason is that it is one
coupled with an interest, the agency having been
created for mutual interest, of the agent and the
principal *remember that she had a solidary
obligation for the payment of rentals.
In this same vein the lower court must likewise
be held to be in error with respect to the
padlocking incident. For the fact that Tourist
World Service, Inc. was the lessee named in the
lease contract did not accord it any authority to
terminate that contract without notice to its
actual occupant, and to padlock the premises in
such fashion. As this Court has ruled, the
petitioner, Lina Sevilla, had acquired a personal
stake in the business itself, and necessarily, in
the equipment pertaining thereto. Furthermore,
Sevilla was not a stranger to that contract having
been explicitly named therein as a third party in
charge of rental payments (solidarily with
Tourist World, Inc.). She could not be ousted
from possession as summarily as one would
eject an interloper.
Petition Granted, Respondents, with the
exception of Noguera, were ordered to pay
jointly and severally sum of 25,00.00 as and for
moral damages, the sum of P10,000.00, as and
for exemplary damages, and the sum of
P5,000.00, as and for nominal and/or temperate
damages.
Thelma Dumpit Murillo vs. CA (Fixed-Term
EE rehired 15 times in 4 years)
The practice of having fixed-term contracts in
the industry does not automatically make all
talent contracts valid and compliant with labor
law.
FACTS: On October 2, 1995, under talent
contract no. NT95-1805, private respondent
Associated Broadcasting Company (ABC) hired
petitioner Thelma Dumpit-Murillo as a
newscaster and co-anchor of Balitang-Balita, an
early evening news program. The contract was
for a period of 3 months. It renewed under talent
contract nos. NT95-1915, NT96-3002, NT98-
4984, and NT99-5649. In addition, petitioner’s
services were engaged for the program “Live on
Five.” On September 30, 1999, after 4 years of
repeated renewals, petitioner’s talent contract
expired. Two weeks after the expiration of the
last contract, petitioner sent a letter to Mr. Jose
Javier, Vice President for news and public
affairs of ABC, informing the latter that she was
still interested in renewing her contract subject
to a salary increase, thereafter, petitioner
stopped reporting for work. On November 5,
1999 she wrote Mr. Javier another letter.
ISSUE: WON the continuous renewal of
petitioner’s talent contracts constitute regularity
in the employment status?
RULING: Yes. An employer-employee
relationship was created when the private
respondents started to merely renew the
contracts repeatedly 15 times for 4 consecutive
years. Petitioner was a regular employee under
contemplation of law. The practice of having
fixed-term contracts in the industry does not
automatically make all talent contracts valid and
compliant with labor law. The assertion that a
talent contract exists does not necessarily
prevent a regular employment status.
The elements to determine the existence of an
employment relationship are: a.) The selection
and engagement of the employee; b.) The
payment of wages; c.) The power of dismissal;
and d.) The employer’s control of the
employee’s conduct, not only as to the result of
the work to be done, but also as to the means
and methods to accomplish it.
The duties of petitioner as enumerated in her
employment contract indicate that ABC had
control over the work or petitioner. Aside from
control, ABC also dictated the work assignments
and payment of petitioner’s wages. ABC also
had power to dismiss her. All these being
present, clearly there existed an employment
relationship between petitioner and ABC.
Concerning regular employment, the law
provides for 2 kinds of employees, namely: 1.)
Those who are engaged to perform activities
which are usually necessary or desirable in the
usual business or trade of the employer; and 2.)
Those who have rendered at least one year of
service, whether continuous or broken with
respect to the activity in which they are
employed. In other words, regular status arises
from either the nature of work of the employee
or the duration of his employment.
The primary standard of determining regular
employment is the reasonable connection
between the particular activity performed by the
employee vis-a-vis the usual trade or business of
the employer. This connection can be
determined by considering the nature of the
work performed and its relation to the scheme of
the particular business or trade in its entirety. If
the employee has been performing the job for at
least a year, even if the performance is not
continuous and merely intermittent, the law
deems repeated and continuing need for its
performance as sufficient evidence of the
necessity if not indispensability of that activity
to the business.
JOSE SONZA vs. ABS-CBN
BROADCASTING CORPORATION
(Individuals as Independent Contractor)
Individuals with special skills, expertise or talent
enjoy the freedom to offer their services as
independent contractors.
FACTS: In May 1994, ABS-CBN signed an
agreement with the Mel and Jay Management
and Development Corporation (MJMDC). ABS-
CBN was represented by its corporate officers
while MJMDC was represented by Sonza, as
President and general manager, and Tiangco as
its EVP and treasurer. Referred to in the
agreement as agent, MJMDC agreed to provide
Sonza’s services exclusively to ABS-CBN as
talent for radio and television.
ABS-CBN agreed to pay Sonza a monthly talent
fee of P310, 000 for the first year and P317, 000
for the second and third year. On April 1996,
Sonza wrote a letter to ABS-CBN where he
irrevocably resigned in view of the recent events
concerning his program and career.
After the said letter, Sonza filed with the
Department of Labor and Employment a
complaint alleging that ABS-CBN did not pay
his salaries, separation pay, service incentive
pay,13th month pay, signing bonus, travel
allowance and amounts under the Employees
Stock Option Plan (ESOP).
ABS-CBN contended that no employee-
employer relationship existed between the
parties. However, ABS-CBN continued to remit
Sonza’s monthly talent fees but opened another
account for the same purpose.
The Labor Arbiter dismissed the complaint and
found that there is no employee-employer
relationship. NLRC affirmed the decision of the
Labor Arbiter. CA also affirmed the decision of
NLRC.
ISSUE: WON there was employer-employee
relationship between the parties?
RULING: No, there was no employer-employee
relationship between the parties.
Case law has consistently held that the elements
of an employee-employer relationship are
selection and engagement of the employee, the
payment of wages, the power of dismissal and
the employer’s power to control the employee
on the means and methods by which the work is
accomplished. The last element, the so-called
"control test", is the most important element.
Sonza’s services to co-host its television and
radio programs are because of his peculiar
talents, skills and celebrity status. Independent
contractors often present themselves to possess
unique skills, expertise or talent to distinguish
them from ordinary employees. The specific
selection and hiring of SONZA, because of his
unique skills, talent and celebrity status not
possessed by ordinary employees, is a
circumstance indicative, but not conclusive, of
an independent contractual relationship. All the
talent fees and benefits paid to SONZA were the
result of negotiations that led to the Agreement.
For violation of any provision of the Agreement,
either party may terminate their relationship.
Applying the control test to the present case, we
find that SONZA is not an employee but an
independent contractor. The control test is the
most important test our courts apply in
distinguishing an employee from an independent
contractor. This test is based on the extent of
control the hirer exercises over a worker. The
greater the supervision and control the hirer
exercises, the more likely the worker is deemed
an employee. The converse holds true as well –
the less control the hirer exercises, the more
likely the worker is considered an independent
contractor. To perform his work, SONZA only
needed his skills and talent. How SONZA
delivered his lines, appeared on television, and
sounded on radio were outside ABS-CBN’s
control. ABS-CBN did not instruct SONZA how
to perform his job. ABS-CBN merely reserved
the right to modify the program format and
airtime schedule "for more effective
programming." ABS-CBN’s sole concern was
the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of
performance of Sonza’s work.
A radio broadcast specialist who works under
minimal supervision is an independent
contractor. Sonza’s work as television and radio
program host required special skills and talent,
which SONZA admittedly possesses. ABS-CBN
claims that there exists a prevailing practice in
the broadcast and entertainment industries to
treat talents like Sonza as independent
contractors. The right of labor to security of
tenure as guaranteed in the Constitution arises
only if there is an employer-employee
relationship under labor laws. Individuals with
special skills, expertise or talent enjoy the
freedom to offer their services as independent
contractors. The right to life and livelihood
guarantees this freedom to contract as
independent contractors. The right of labor to
security of tenure cannot operate to deprive an
individual, possessed with special skills,
expertise and talent, of his right to contract as an
independent contractor.
Fuji TV vs. Arlene Espiritu (Compare with
Sonza)
Employees under fixed-term contracts cannot be
independent contractors because in fixed-term
contracts, an employer-employee relationship
exists.
Rules that merely serve as guidelines towards
the achievement of a mutually desired result
without dictating the means or methods to be
employed creates no employer-employee
relationship; whereas those that control or fix
the methodology and bind or restrict the party
hired to the use of such means creates the
relationship.
The successive renewals of her contract
indicated the necessity and desirability of her
work in the usual course of Fuji’s business.
Because of this, Arlene had become a regular
employee with the right to security of tenure.
FACTS: Arlene S. Espiritu (Arlene) was
engaged by Fuji Television Network, Inc. (Fuji)
as a news correspondent/producer tasked to
report Philippine news to Fuji through its Manila
Bureau field office. The employment contract
was initially for one year, but was successively
renewed on a yearly basis with salary
adjustments upon every renewal.
In January 2009, Arlene was diagnosed with
lung cancer. She informed Fuji about her
condition, and the Chief of News Agency of
Fuji, Yoshiki Aoki, informed the former that the
company had a problem with renewing her
contract considering her condition. Arlene
insisted she was still fit to work as certified by
her attending physician.
After a series of verbal and written
communications, Arlene and Fuji signed a non-
renewal contract. In consideration thereof,
Arlene acknowledged the receipt of the total
amount of her salary from March-May 2009,
year-end bonus, mid-year bonus and separation
pay. However, Arlene executed the non-renewal
contract under protest.
Arlene filed a complaint for illegal dismissal
with the NCR Arbitration Branch of the NLRC,
alleging that she was forced to sign the non-
renewal contract after Fuji came to know of her
illness. She also alleged that Fuji withheld her
salaries and other benefits when she refused to
sign, and that she was left with no other recourse
but to sign the non-renewal contract to get her
salaries.
Labor Arbiter dismissed the complaint and held
that Arlene was not a regular employee but an
independent contractor.
The NLRC reversed the Labor Arbiter’s
decision and ruled that Arlene was a regular
employee since she continuously rendered
services that were necessary and desirable to
Fuji’s business.
The Court of Appeals affirmed that NLRC
ruling with modification that Fuji immediately
reinstate Arlene to her position without loss of
seniority rights and that she be paid her
backwages and other emoluments withheld from
her. The Court of Appeals agreed with the
NLRC that Arlene was a regular employee,
engaged to perform work that was necessary or
desirable in the business of Fuji, and the
successive renewals of her fixed-term contract
resulted in regular employment. The case of
Sonza does not apply in the case because Arlene
was not contracted on account of a special talent
or skill. Arlene was illegally dismissed because
Fuji failed to comply with the requirements of
substantive and procedural due process. Arlene,
in fact, signed the non-renewal contract under
protest as she was left without a choice.
Fuji filed a petition for review on certiorari
under Rule 45 before the Supreme Court,
alleging that Arlene was hired as an independent
contractor; that Fuji had no control over her
work; that the employment contracts were
renewed upon Arlene’s insistence; that there was
no illegal dismissal because she freely agreed
not to renew her fixed-term contract as
evidenced by her email correspondences.
ISSUES:
1.) WON Arlene an independent
contractor?
 2.) WON Arlene a regular employee?
3.) WON Arlene was illegally dismissed?
RULING:
1.) Arlene was not an independent contractor.
Fuji alleged that Arlene was an independent
contractor citing the Sonza case. She was hired
because of her skills. Her salary was higher than
the normal rate. She had the power to bargain
with her employer. Her contract was for a fixed
term. It also stated that Arlene was not forced to
sign the non-renewal agreement, considering
that she sent an email with another version of
her non-renewal agreement.
Arlene argued (1) that she was a regular
employee because Fuji had control and
supervision over her work; (2) that she based her
work on instructions from Fuji; (3) that the
successive renewal of her contracts for four
years indicated that her work was necessary and
desirable; (4) that the payment of separation pay
indicated that she was a regular employee; (5)
that the Sonza case is not applicable because she
was a plain reporter for Fuji; (6) that her illness
was not a ground for her dismissal; (7) that she
signed the non-renewal agreement because she
was not in a position to reject the same.
Distinctions among fixed-term employees,
independent contractors, and regular employees
Fixed Term Employment
1) The fixed period of employment was
knowingly and voluntarily agreed upon by the
parties without any force, duress, or improper
pressure being brought to bear upon the
employee and absent any other circumstances
vitiating his consent; or
2) It satisfactorily appears that the employer and
the employee dealt with each other on more or
less equal terms with no moral dominance
exercised by the former or the latter.
These indications, which must be read together,
make the Brent doctrine applicable only in a few
special cases wherein the employer and
employee are on more or less in equal footing in
entering into the contract. The reason for this is
evident: when a prospective employee, on
account of special skills or market forces, is in a
position to make demands upon the prospective
employer, such prospective employee needs less
protection than the ordinary worker. Lesser
limitations on the parties’ freedom of contract
are thus required for the protection of the
employee.
For as long as the guidelines laid down in Brent
are satisfied, this court will recognize the
validity of the fixed-term contract. (GMA
Network, Inc. vs. Pabriga)
Independent Contractor
One who carries on a distinct and independent
business and undertakes to perform the job,
work, or service on its own account and under
one’s own responsibility according to one’s own
manner and method, free from the control and
direction of the principal in all matters
connected with the performance of the work
except as to the results thereof.
No employer-employee relationship exists
between the independent contractors and their
principals.
Art. 106. Contractor or subcontractor.
Whenever an employer enters into a contract
with another person for the performance of the
former’s work, the employees of the contractor
and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this
Code.
XXX
The Secretary of Labor and Employment may,
by appropriate regulations, restrict or prohibit
the contracting-out of labor to protect the rights
of workers established under this Code. In so
prohibiting or restricting, he may make
appropriate distinctions between labor-only
contracting and job contracting as well as
differentiations within these types of contracting
and determine who among the parties involved
shall be considered the employer for purposes of
this Code, to prevent any violation or
circumvention of any provision of this Code.
There is “labor-only” contracting where the
person supplying workers to an employer does
not have substantial capital or investment in the
form of tools, equipment, machineries, work
premises, among others, and the workers
recruited and placed by such person are
performing activities which are directly related
to the principal business of such employer. In
such cases, the person or intermediary shall be
considered merely as an agent of the employer
who shall be responsible to the workers in the
same manner and extent as if the latter were
directly employed by him.
Department Order No. 18-A, Series of 2011,
Section 3
(c) . . . an arrangement whereby a principal
agrees to put out or farm out with a contractor
the performance or completion of a specific job,
work or service within a definite or
predetermined period, regardless of whether
such job, work or service is to be performed or
completed within or outside the premises of the
principal.
This department order also states that there is a
trilateral relationship in legitimate job
contracting and subcontracting arrangements
among the principal, contractor, and employees
of the contractor. There is no employer-
employee relationship between the contractor
and principal who engages the contractor’s
services, but there is an employer-employee
relationship between the contractor and workers
hired to accomplish the work for the principal.
Jurisprudence has recognized another kind of
independent contractor: individuals with unique
skills and talents that set them apart from
ordinary employees. There is no trilateral
relationship in this case because the independent
contractor himself or herself performs the work
for the principal. In other words, the relationship
is bilateral.
XXX
There are different kinds of independent
contractors: those engaged in legitimate job
contracting and those who have unique skills
and talents that set them apart from ordinary
employees.
Since no employer-employee relationship exists
between independent contractors and their
principals, their contracts are governed by the
Civil Code provisions on contracts and other
applicable laws.
Regular Employees
Contracts of employment are different and have
a higher level of regulation because they are
impressed with public interest. Article 13,
Section 3 of the 1987 Constitution provides full
protection to labor.
Apart from the Constitutional guarantee, Article
1700 of the Civil Code states that : The relations
between capital and labor are not merely
contractual. They are so impressed with public
interest that labor contracts must yield to the
common good. Therefore, such contracts are
subject to the special laws on labor unions,
collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours
of labor and similar subjects.
In contracts of employment, the employer and
the employee are not on equal footing. Thus, it is
subject to regulatory review by the labor
tribunals and courts of law. The law serves to
equalize the unequal. The labor force is a special
class that is constitutionally protected because of
the inequality between capital and labor. This
presupposes that the labor force is weak.
The level of protection to labor should vary from
case to case. When a prospective employee, on
account of special skills or market forces, is in a
position to make demands upon the prospective
employer, such prospective employee needs less
protection than the ordinary worker.
The level of protection to labor must be
determined on the basis of the nature of the
work, qualifications of the employee, and other
relevant circumstances such as but not limited to
educational attainment and other special
qualifications.
Fuji’s argument that Arlene was an independent
contractor under a fixed-term contract is
contradictory. Employees under fixed-term
contracts cannot be independent contractors
because in fixed-term contracts, an employer-
employee relationship exists. The test in this
kind of contract is not the necessity and
desirability of the employee’s activities, “but the
day certain agreed upon by the parties for the
commencement and termination of the
employment relationship.” For regular
employees, the necessity and desirability of their
work in the usual course of the employer’s
business are the determining factors. On the
other hand, independent contractors do not have
employer-employee relationships with their
principals.
To determine the status of employment, the
existence of employer-employee relationship
must first be settled with the use of the four-fold
test, especially the qualifications for the power
to control.
The distinction is in this guise:
Rules that merely serve as guidelines towards
the achievement of a mutually desired result
without dictating the means or methods to be
employed creates no employer-employee
relationship; whereas those that control or fix
the methodology and bind or restrict the
party hired to the use of such means creates
the relationship.
In application, Arlene was hired by Fuji as a
news producer, but there was no evidence that
she was hired for her unique skills that would
distinguish her from ordinary employees. Her
monthly salary appeared to be a substantial sum.
Fuji had the power to dismiss Arlene, as
provided for in her employment contract. The
contract also indicated that Fuji had control over
her work as she was required to report for 8
hours from Monday to Friday. Fuji gave her
instructions on what to report and even her mode
of transportation in carrying out her functions
was controlled.
Therefore, Arlene could not be an independent
contractor.
2.) Arlene was a regular employee with a
fixed-term contract.
In determining whether an employment should
be considered regular or non-regular, the
applicable test is the reasonable connection
between the particular activity performed by the
employee in relation to the usual business or
trade of the employer. The standard, supplied by
the law itself, is whether the work undertaken is
necessary or desirable in the usual business or
trade of the employer, a fact that can be assessed
by looking into the nature of the services
rendered and its relation to the general scheme
under which the business or trade is pursued in
the usual course. It is distinguished from a
specific undertaking that is divorced from the
normal activities required in carrying on the
particular business or trade.
However, there may be a situation where an
employee’s work is necessary but is not always
desirable in the usual course of business of the
employer. In this situation, there is no regular
employment.
Fuji’s Manila Bureau Office is a small unit213
and has a few employees. Arlene had to do all
activities related to news gathering.
A news producer “plans and supervises newscast
[and] works with reporters in the field planning
and gathering information, including monitoring
and getting news stories, rporting interviewing
subjects in front of a video camera, submission
of news and current events reports pertaining to
the Philippines, and traveling to the regional
office in Thailand.” She also had to report for
work in Fuji’s office in Manila from Mondays to
Fridays, eight hours per day. She had no
equipment and had to use the facilities of Fuji to
accomplish her tasks.
The successive renewals of her contract
indicated the necessity and desirability of her
work in the usual course of Fuji’s business.
Because of this, Arlene had become a regular
employee with the right to security of tenure.
Arlene’s contract indicating a fixed term did not
automatically mean that she could never be a
regular employee. For as long as it was the
employee who requested, or bargained, that the
contract have a “definite date of termination,” or
that the fixed-term contract be freely entered
into by the employer and the employee, then the
validity of the fixed-term contract will be
upheld.
3.) Arlene was illegally dismissed.
As a regular employee, Arlene was entitled to
security of tenure under Article 279 of the Labor
Code and could be dismissed only for just or
authorized causes and after observance of due
process.
The expiration of the contract does not negate
the finding of illegal dismissal. The manner by
which Fuji informed Arlene of non-renewal
through email a month after she informed Fuji of
her illness is tantamount to constructive
dismissal. Further, Arlene was asked to sign a
letter of resignation prepared by Fuji. The
existence of a fixed-term contract should not
mean that there can be no illegal dismissal. Due
process must still be observed.
Moreover, disease as a ground for termination
under Article 284 of the Labor Code and Book
VI, Rule 1, Section 8 of the Omnibus Rules
Implementing the Labor Code require two
requirements to be complied with: (1) the
employee’s disease cannot be cured within six
months and his continued employment is
prohibited by law or prejudicial to his health as
well as to the health of his co-employees; and
(2) certification issued by a competent public
health authority that even with proper medical
treatment, the disease cannot be cured within six
months. The burden of proving compliance with
these requisites is on the employer. Non-
compliance leads to illegal dismissal.
Arlene was not accorded due process. After
informing her employer of her lung cancer, she
was not given the chance to present medical
certificates. Fuji immediately concluded that
Arlene could no longer perform her duties
because of chemotherapy. Neither did it suggest
for her to take a leave. It did not present any
certificate from a competent public health
authority.
Therefore, Arlene was illegally dismissed.
Consulta vs. CA (Independent Agent)
The manner in which Consulta was to pursue
her tasked activities was not subject to the
control of PAMANA. Consulta failed to show
that she worked definite hours. The amount of
time, the methods and means, the management
and maintenance of her sales division were left
to her sound judgment.
Finally, Pamana paid Consulta not for labor she
performed but only for the results of her labor
FACTS: Consulta was Managing Associate of
Pamana. On 1987 she was issued a certification
authorizing her to negotiate for and in behalf of
PAMANA with the Federation of Filipino
Civilian Employees Association. Consulta was
able to secure an account with FFCEA in behalf
of PAMANA. However, Consulta claimed that
PAMANA did not pay her commission for the
PPCEA account and filed a complaint for unpaid
wages or commission.
ISSUE: WON Consulta was an employee of
PAMANA.
RULING: The SC held that Pamana was an
independent agent and not an employee.
The power of control in the four fold test is
missing. The manner in which Consulta was to
pursue her tasked activities was not subject to
the control of PAMANA. Consulta failed to
show that she worked definite hours. The
amount of time, the methods and means, the
management and maintenance of her sales
division were left to her sound judgment.
Finally, Pamana paid Consulta not for labor she
performed but only for the results of her labor.
Without results, Consulta’s labor was her own
burden and loss. Her right to compensation, or to
commission, depended on the tangible results of
her work - whether she brought in paying
recruits.
The fact that the appointment required Consulta
to solicit business exclusively for Pamana did
not mean Pamana exercised control over the
means and methods of Consulta’s work as the
term control is understood in labor
jurisprudence. Neither did it make Consulta an
employee of Pamana. Pamana did not prohibit
Consulta from engaging in any other business,
or from being connected with any other
company, for as long as the business or company
did not compete with Pamana’s business. The
exclusivity clause was a reasonable restriction to
prevent similar acts prejudicial to Pamana’s
business interest. Article 1306 of the Civil Code
provides that “[t]he contracting parties may
establish such stipulation, clauses, terms and
conditions as they may deem convenient,
provided that they are not contrary to law,
morals, good customs, public order, or public
policy.
There being no employer-employee relationship
between Pamana and Consulta, the Labor
Arbiter and the NLRC had no jurisdiction to
entertain and rule on Consulta’s money claim.
Consulta’s remedy is to file an ordinary civil
action to litigate her claim
Petition is dismissed.
Tabas vs. California Manufacturing
Company, Inc. (LOC)
On the other hand, we have likewise held, based
on Article 106 of the Labor Code, x x x that
notwithstanding the absence of a direct
employer-employee relationship between the
employer in whose favor work had been
contracted out by a “labor-only” contractor,
and the employees, the former has the
responsibility, together with the “labor-only”
contractor for any valid labor claims, by
operation of law. The reason, so we held, is that
the “labor-only” contractor is considered
“merely an agent of the employer,” and liability
must be shouldered by either one or shared by
both.
FACTS: The petitioner employees were
employees of Livi Manpower Services, Inc.
(Livi), which assigned them to work as
“promotional merchandisers” of California
Manufacturing under a manpower supply
agreement. The agreement provided that
California has no control or supervision
whatsoever over (Livi’s) workers with respect to
how they accomplish their work, that Livi is an
independent contractor and that “it is hereby
agreed that it is the sole responsibility of [Livi]
to comply with all existing as well as future
laws, rules and regulations pertinent to
employment of labor.” It was further expressly
stipulated that the assignment of workers to
California shall be on a “seasonal and
contractual basis.” The petitioner employees
were made to sign employment contracts with
duration of six months, upon the expiration of
which they signed new agreements with the
same period, and so on. Unlike regular
California employees, who received not less
than P2,823.00 a month in addition to a host of
fringe benefits and bonuses, they received
P38.56 plus P15.00 in allowance daily. The
petitioners now allege that they had become
regular California employees and demand, as a
consequence whereof, similar benefits. They
likewise claim that they were notified by
California that they would not be rehired, hence,
they filed an amended complaint charging
California with illegal dismissal.
ISSUE: WON the labor arbiter’s decision,
which was affirmed by NLRC on appeal that no
employer-employee relation exists between the
petitioners and California is correct?
RULING: No, it is not correct. We reverse. The
existence of an employer-employee relation is a
question of law and being such, it cannot be
made the subject of agreement. Hence, the fact
that the manpower supply agreement between
Livi and California had specifically designated
the former as the petitioner’s employer and had
absolved the latter from any liability as an
employer, will not erase either party’s
obligations as an employer, if an employer-
employee relation otherwise exists between the
workers and either firm. At any rate, since the
agreement was between Livi and California,
they alone are bound by it, and the petitioners
cannot be made to suffer from its adverse
consequences.
This Court has consistently ruled that the
determination of whether or not there is an
employer-employee relation depends upon four
standards: (1) the manner of selection and
engagement of the putative employee; (2) the
mode of payment of wages; (3) the presence or
absence of a power of dismissal; and (4) the
presence or absence of a power to control the
putative employee’s conduct. Of the four, the
right-of-control test has been held to be the
decisive factor.
On the other hand, we have likewise held, based
on Article 106 of the Labor Code, x x x that
notwithstanding the absence of a direct
employer-employee relationship between the
employer in whose favor work had been
contracted out by a “labor-only” contractor, and
the employees, the former has the responsibility,
together with the “labor-only” contractor for any
valid labor claims, by operation of law. The
reason, so we held, is that the “labor-only”
contractor is considered “merely an agent of the
employer,” and liability must be shouldered by
either one or shared by both.
There is no doubt that in the case at bar, Livi
performs “manpower services,” meaning to say,
it contracts out labor in favor of clients. We hold
that it is one notwithstanding its vehement
claims to the contrary, and notwithstanding the
provision of the contract that it is “an
independent contractor.” The nature of one’s
business is not determined by self-serving
appellations one attaches thereto but by the tests
provided by statute and prevailing case law. The
bare fact that Livi maintains a separate line of
business does not extinguish the equal fact that it
has provided California with workers to pursue
the latter’s own business. In this connection, we
do not agree that the petitioners had been made
to perform activities “which are not directly
related to the general business of
manufacturing,” California’s purported
“principal operation activity.” The petitioners
had been charged with “merchandizing [sic]
promotion or sale of the products of [California]
in the different sales outlets in Metro Manila
including task and occasional [sic] price
tagging,” an activity that is, doubtless, an
integral part of the manufacturing business. It is
not, then, as if Livi had served as its
(California’s) promotions or sales arm or agents,
or otherwise, rendered a piece of work it
(California) could not have itself done; Livi as a
placement agency, had simply supplied it with
the manpower necessary to carry out its
(California) merchandising activities, using its
(California’s) premises and equipment.
The fact that the petitioners have been hired on a
“temporary or seasonal” basis merely is no
argument either. As we held in Philippine Bank
of Communications vs. NLRC , a temporary or
casual employee, under Article 281 of the Labor
Code, becomes regular after service of one year,
unless he has been contracted for a specific
project. And we cannot say that merchandising
is a specific project for the obvious reason that it
is an activity related to the day-to-day operations
of California. It would have been different, we
believe, had Livi been discretely a promotions
firm, and that California had hired it to perform
the latter’s merchandising activities. For then,
Livi would have been truly the employer of its
employees, and California, its client. The client,
in that case, would have been a mere patron, and
not an employer. The employees would not in
that event be unlike waiters, who, although at
the service of customers, are not the latter’s
employees, but of the restaurant.
Note: After reading this case, read Department
Order No. 174 Series of 2017
Coca-Cola vs. Agito et. al (LOC)
There is labor-only contracting where the
person supplying workers to an employee does
not have substantial capital or investment in the
form of tools, equipment, machineries, work
premises, among others, and the workers
recruited and placed by such persons are
performing activities which are directly related
to the principal business of such employer. Thus,
performing activities directly related to the
principal business of the employer is only one of
the two indicators that labor-only contracting
exists; the other is lack of substantial capital or
investment.
FACTS: Agito, et al. are salesmen assigned at
the Lagro Sales Office of Coca-Cola for a
number of years but were not regularized. Their
employment was terminated without just cause
and due process. They filed complaints against
Coca-Cola, Interserve, Peerless Integrated
Services, Inc. Better Builders, Inc., and
Excellent Partners, Inc. However, they failed to
state a reason for filing complaints against
Interserve, Peerless, Better Builders and
Excellent Partners.
Coca-Cola averred that Agito, et al. were
employees of Interserve who were tasked to
perform contracted services in accordance with
the provision of the Contract of Services. The
contract covering the period of April 1, 2002 to
September 30, 2002 constituted legitimate job
contracting.
To prove that Interserve is an independent
contractor, Coca-Cola presented the following:
(1) AOI of Interserve; (2) Certificate of
Registration of Interserve with BIR; (3) ITR
with Audited Financial Statements of Interserve
for 2001; and (4) Certificate of Registration of
Interserve as an independent contractor issued
by DOLE.
As a result, Coca-Cola asserted that Agito, et al.
were employees of Interserve since it was the
latter which hired them, paid their wages and
supervised their work, as proven by: (1) PDFs
are in the records of Interserve; (2) Contracts of
Temporary Employment with Interserve; and (3)
payroll records of Interserve.
LA found for Coca-Cola and held that Interserve
was a legitimate job contractor. The complaint
against Peerless, Better Building and Excellent
Partners was dismissed for failure to pursue the
case.
On appeal, NLRC affirmed LA's decision.
CA reversed the NLRC decision and ruled that
Interserve was a labor-only contractor with
insufficient capital and investments for the
services which it was contracted to perform.
Additionally, CA determined that Coca-Cola
had effective control over the means and method
of Agito, et al.'s work as evidenced by the Daily
Sales Monitoring Report, the Conventional
Route System Proposed Set-Up, and the
memoranda issued by the supervisor of
petitioner addressed to workers. Respondents'
tasks were directly related and necessary to the
main business of Coca-Cola. Finally, certain
provisions of the Contract of Service between
Coca-Cola and Interserve suggested that the
latter's undertaking did not involve a specific job
but rather the supply of manpower.
ISSUE: WON Interserve is a legitimate job
contractor?
RULING: No, Interserve is not a legitimate job
contractor.
Legitimate Contracting vs. Labor-Only
Contracting3
A legitimate job contract, wherein an employer
enters into a contract with a job contractor for
the performance of the formers work, is
permitted by law. Thus, the employer-employee
relationship between the job contractor and his
employees is maintained. In legitimate job
contracting, the law creates an employer-
employee relationship between the employer and
the contractors employees only for a limited
purpose, i.e., to ensure that the employees are
paid their wages. The employer becomes jointly
and severally liable with the job contractor only
for the payment of the employee’s wages
whenever the contractor fails to pay the same.
Other than that, the employer is not responsible
for any claim made by the contractor’s
employees.
On the other hand, labor-only contracting is an
arrangement wherein the contractor merely acts
as an agent in recruiting and supplying the
principal employer with workers for the purpose
of circumventing labor law provisions setting
down the rights of employees. It is not condoned
by law. A finding by the appropriate authorities
that a contractor is a labor-only contractor
establishes an employer-employee relationship
between the principal employer and the
contractor’s employees and the former becomes
solidarily liable for all the rightful claims of the
employees.
Section 5 of the Rules Implementing Articles
106-109 of the Labor Code, as amended,
provides the guidelines in determining whether
labor-only contracting exists:
Section 5. Prohibition against labor-only
contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-
only contracting shall refer to an arrangement
3
See Article 106 of the Labor Code
where the contractor or subcontractor merely
recruits, supplies, or places workers to perform
a job, work or service for a principal, and any of
the following elements are [is] present:
i) The contractor or subcontractor does not
have substantial capital or investment which
relates to the job, work, or service to be
performed and the employees recruited, supplied
or placed by such contractor or subcontractor
are performing activities which are directly
related to the main business of the principal; or
ii) The contractor does not exercise the right to
control the performance of the work of the
contractual employee.
The foregoing provisions shall be without
prejudice to the application of Article 248(C) of
the Labor Code, as amended.
Substantial capital or investment refers to
capital stocks and subscribed capitalization in
the case of corporations, tools, equipment,
implements, machineries and work premises,
actually and directly used by the contractor or
subcontractor in the performance or completion
of the job, work, or service contracted out.
The right to control shall refer to the right
reversed to the person for whom the services of
the contractual workers are performed, to
determine not only the end to be achieved, but
also the manner and means to be used in
reaching that end. (Emphasis supplied.)
When there is labor-only contracting, there is
employer-employee relationship between the
principal and the contractual employee.
When there is labor-only contracting, Section 7
of the same implementing rules describes the
consequences thereof:
Section 7. Existence of an employer-employee
relationship. The contractor or subcontractor
shall be considered the employer of the
contractual employee for purposes of enforcing
the provisions of the Labor Code and other
social legislation. The principal, however, shall
be solidarily liable with the contractor in the
event of any violation of any provision of the
Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of
the contractual employee in any of the following
case, as declared by a competent authority:
a. Where there is labor-only contracting; or
b. where the contracting arrangement falls
within the prohibitions provided in Section 6
(Prohibitions) hereof.
According to the foregoing provision, labor-only
contracting would give rise to: (1) the creation
of an employer-employee relationship between
the principal and the employees of the contractor
or sub-contractor; and (2) the solidary liability of
the principal and the contractor to the employees
in the event of any violation of the Labor Code.
Even if employees are not performing
activities indispensable to the business of the
principal, labor-contracting may still exist if
the contractor does not demonstrate
substantial capital or investment.
The law clearly establishes an employer-
employee relationship between the principal
employer and the contractor’s employee upon a
finding that the contractor is engaged in labor-
only contracting. Article 106 of the Labor Code
categorically states: There is labor-only
contracting where the person supplying workers
to an employee does not have substantial capital
or investment in the form of tools, equipment,
machineries, work premises, among others, and
the workers recruited and placed by such
persons are performing activities which are
directly related to the principal business of such
employer. Thus, performing activities directly
related to the principal business of the employer
is only one of the two indicators that labor-only
contracting exists; the other is lack of substantial
capital or investment.
The Court finds that both indicators exist in
the case at bar
Interserve has no substantial capital; it is
impossible to measure whether or not there is
substantial capital because the Contract between
Coca-Cola and Interserve does not specify the
work or the project that needs to be performed or
completed.
At the outset, the Court clarifies that although
Interserve has an authorized capital stock
amounting to P2,000,000.00, only P625,000.00
thereof was paid up as of 31 December 2001.
The Court does not set an absolute figure for
what it considers substantial capital for an
independent job contractor, but it measures the
same against the type of work which the
contractor is obligated to perform for the
principal. However, this is rendered impossible
in this case since the Contract between petitioner
and Interserve does not even specify the work or
the project that needs to be performed or
completed by the latter’s employees, and uses
the dubious phrase tasks and activities that are
considered contractible under existing laws and
regulations. Even in its pleadings, petitioner
carefully sidesteps identifying or describing the
exact nature of the services that Interserve was
obligated to render to petitioner. The importance
of identifying with particularity the work or task
which Interserve was supposed to accomplish
for petitioner becomes even more evident,
considering that the Articles of Incorporation of
Interserve states that its primary purpose is to
operate, conduct, and maintain the business of
janitorial and allied services. But respondents
were hired as salesmen and leadsman for
petitioner. The Court cannot, under such
ambiguous circumstances, make a reasonable
determination if Interserve had substantial
capital or investment to undertake the job it was
contracting with petitioner.
Burden of proof of substantial capital rests in
the contractor, or in its absence, the principal
claiming it to be an independent contractor
The contractor, not the employee, has the burden
of proof that it has the substantial capital,
investment, and tool to engage in job
contracting. Although not the contractor itself
(since Interserve no longer appealed the
judgment against it by the Labor Arbiter), said
burden of proof herein falls upon petitioner who
is invoking the supposed status of Interserve as
an independent job contractor. Noticeably,
petitioner failed to submit evidence to establish
that the service vehicles and equipment of
Interserve, valued at P510,000.00 and
P200,000.00, respectively, were sufficient to
carry out its service contract with petitioner.
Certainly, petitioner could have simply provided
the courts with records showing the deliveries
that were undertaken by Interserve for the Lagro
area, the type and number of equipment
necessary for such task, and the valuation of
such equipment. Absent evidence which a
legally compliant company could have easily
provided, the Court will not presume that
Interserve had sufficient investment in service
vehicles and equipment, especially since
respondents allegation that they were using
equipment, such as forklifts and pallets
belonging to petitioner, to carry out their jobs
was uncontroverted.
Interserve did not exercise the right to control
the performance of the work of the
respondents
The lack of control of Interserve over the
respondents can be gleaned from the Contract of
Services between Interserve (as the
CONTRACTOR) and petitioner (as the
CLIENT).
Paragraph 3 of the Contract specified that the
personnel of contractor Interserve, which
included the respondents, would comply with
CLIENT as well as CLIENTs policies, rules and
regulations. It even required Interserve
personnel to subject themselves to on-the-spot
searches by petitioner or its duly authorized
guards or security men on duty every time the
said personnel entered and left the premises of
petitioner. Said paragraph explicitly established
the control of petitioner over the conduct of
respondents. Although under paragraph 4 of the
same Contract, Interserve warranted that it
would exercise the necessary and due
supervision of the work of its personnel, there is
a dearth of evidence to demonstrate the extent or
degree of supervision exercised by Interserve
over respondents or the manner in which it was
actually exercised. There is even no showing
that Interserve had representatives who
supervised respondents work while they were in
the premises of petitioner.
Also significant was the right of petitioner under
paragraph 2 of the Contract to request the
replacement of the CONTRACTORS personnel.
True, this right was conveniently qualified by
the phrase if from its judgment, the jobs or the
projects being done could not be completed
within the time specified or that the quality of
the desired result is not being achieved, but such
qualification was rendered meaningless by the
fact that the Contract did not stipulate what work
or job the personnel needed to complete, the
time for its completion, or the results desired.
The said provision left a gap which could enable
petitioner to demand the removal or replacement
of any employee in the guise of his or her
inability to complete a project in time or to
deliver the desired result. The power to
recommend penalties or dismiss workers is the
strongest indication of a company’s right of
control as direct employer.
Paragraph 4 of the same Contract, in which
Interserve warranted to petitioner that the former
would provide relievers and replacements in
case of absences of its personnel, raises another
red flag. An independent job contractor, who is
answerable to the principal only for the results
of a certain work, job, or service need not
guarantee to said principal the daily attendance
of the workers assigned to the latter. An
independent job contractor would surely have
the discretion over the pace at which the work is
performed, the number of employees required to
complete the same, and the work schedule which
its employees need to follow.
As the Court previously observed, the Contract
of Services between Interserve and petitioner did
not identify the work needed to be performed
and the final result required to be accomplished.
Instead, the Contract specified the type of
workers Interserve must provide petitioner
(Route Helpers, Salesmen, Drivers, Clericals,
Encoders & PD) and their qualifications
(technical/vocational course graduates,
physically fit, of good moral character, and have
not been convicted of any crime). The Contract
also states that, to carry out the undertakings
specified in the immediately preceding
paragraph, the CONTRACTOR shall employ the
necessary personnel, thus, acknowledging that
Interserve did not yet have in its employ the
personnel needed by petitioner and would still
pick out such personnel based on the criteria
provided by petitioner. In other words,
Interserve did not obligate itself to perform an
identifiable job, work, or service for petitioner,
but merely bound itself to provide the latter with
specific types of employees. These contractual
provisions strongly indicated that Interserve was
merely a recruiting and manpower agency
providing petitioner with workers performing
tasks directly related to the latter’s principal
business.
Certification issued by DOLE is not sufficient
to prove independent contractorship
The certification issued by the DOLE stating
that Interserve is an independent job contractor
does not sway this Court to take it at face value,
since the primary purpose stated in the Articles
of Incorporation of Interserve is misleading.
According to its Articles of Incorporation, the
principal business of Interserve is to provide
janitorial and allied services. The delivery and
distribution of Coca-Cola products, the work for
which respondents were employed and assigned
to petitioner, were in no way allied to janitorial
services. While the DOLE may have found
that the capital and/or investments in tools
and equipment of Interserve were sufficient
for an independent contractor for janitorial
services, this does not mean that such capital
and/or investments were likewise sufficient to
maintain an independent contracting business
for the delivery and distribution of Coca-Cola
products.
Quintanar vs. Coca-Cola (LOC)
Labor-only contracting exists when any of the
two elements is present, that is, such employees
are performing activities directly related to the
principal business of the employer, and lack of
substantial capital or investment. Thus, even if
the Court would indulge Coca-Cola and admit
that Interserve had more than sufficient capital
or investment in the form of tools, equipment,
machineries, work premises, still, it cannot be
denied that the petitioners were performing
activities which were directly related to the
principal business of such employer.
FACTS: Complainants were former employees
of Coca-Cola (CC) as regular Route Helpers,*
they were direct hires of the company during the
period of 1984 to 2000. After sometime, the
complainants were transferred successively as
agency workers to the different manpower
agencies, the latest being respondent Interserve
Management and Manpower Resources, Inc.
Complainants filed a case for illegal dismissal
against CC. They contended that they were
regular employees of the latter and could only be
dismissed for just and authorized cause. CC,
however, denied the existence of an employer-
employee relationship with the complainants.
CC maintained that respondent Interserve was
the employer of the complainants with whom it
has a service agreement.
LA and NLRC were consistent in holding that
ER-EE relationship exists and, consequently,
that complainants were illegally dismissed. CA,
however, overturned.
ISSUES:
(1) Does an employment relationship exist
between the route helpers and CC even if during
the course of their employment they were
transferred to a labor contractor?
(2) Can a contractor be considered engaged in
labor only contracting despite its registration
with the DOLE as an independent contractor and
possession of substantial capital?
(3) Was there a valid termination and thereby a
valid severance of employment relationship
when complainants were transferred to
manpower agencies?
RULING:
[Issue 1] Yes. In this case, the SC, guided by
stare decisis, applied its position in prior cases
involving the Routine Helpers and CC. The
Court ruled that that an employment relationship
existed between the parties for the following
reasons: 1) Routine Helpers perform functions
necessary and desirable, even indispensable, in
the usual business or trade of Coca- Cola
Philippines, Inc; 2) SC pronouncements in prior
cases that Interserve is a labor-only
contractor;** 3) the employees performed work
which was directly related to the principal
business of petitioner; and 4) in the service
agreements between CC and the manpower
agencies, CC still exercised the right of control
over the employees.
[Issue 2] Yes. The possession of substantial
capital is only one element. Labor-only
contracting exists when any of the two elements
is present, that is, such employees are
performing activities directly related to the
principal business of the employer, and lack of
substantial capital or investment. Thus, even if
the Court would indulge Coca-Cola and admit
that Interserve had more than sufficient capital
or investment in the form of tools, equipment,
machineries, work premises, still, it cannot be
denied that the petitioners were performing
activities which were directly related to the
principal business of such employer. Also, it has
been ruled that no absolute figure is set for what
is considered 'substantial capital' because the
same is measured against the type of work
which the contractor is obligated to perform for
the principal.
[Issue 3] No. Even granting that the petitioners
were last employed by Interserve, the record is
bereft of any evidence that would show that the
petitioners voluntarily resigned from their
employment with Coca-Cola only to be later
hired by Interserve. Other than insisting that the
petitioners were last employed by Interserve,
Coca-Cola failed not only to show by
convincing evidence how it severed its employer
relationship with the petitioners, but also to
prove that the termination of its relationship with
them was made through any of the grounds
sanctioned by law.
Notes: An unregistered contractor is presumed
to be a Labor-only contractor. Registration
should be made with DOLE.
Prior to this case, both elements must concur in
order for the contract to be considered as Labor-
only contracting. In this case, however the SC
has laid down the rule that presence of any one
of the elements of LOC is enough to make the
contract into Labor-only contracting.
Under previous Department Orders issued by
DOLE, contracting out functions directly
related to the business of the principal for as
long as there is good faith and there are
legitimated business reasons is allowed.
However under Department Order No. 174-17,
such provision was removed, and in fact under
Sec. 6 (f) such is now prohibited. (No
jurisprudence yet on the matter)
Buiser vs. Leogardo
While the Labor Code, specifically Article 282,
provides that probationary periods cannot
exceed 6 months, it still allows the both
employer and employee to stipulate the terms of
the employment, provided that they can come
into agreement.
FACTS: Petitioners Iluminada Buiser, Ma.
Cecilia Rilloacuña, and Ma. Mercedes Intengan
all entered into an eighteen-month probationary
employment contract with private respondent
General Telephone Directory Company (GTPD),
as sales representatives charged with soliciting
advertisements to include in the telephone
directories. All petitioners were terminated after
the provisionary period (May 1981), on the
ground of failing to meet their sales quotas that
were set by respondent company. In response to
their termination, petitioners filed before the
NCR Ministry of Labor of and Employment a
complaint for illegal dismissal with claims for
backwages. However, the petition was denied in
a decision by the Regional Director and the
same was affirmed by herein respondent Deputy
Minister of Labor Vicente Leogardo, ruling that
(a) they have not attained regular status; (b) the
stipulated probationary period was valid; and
(c), that the termination was valid because they
have not reached their required sales quotas set
by the GTPD.
Petitioners filed before the Supreme Court a
petition for certiorari, contending that
respondent Deputy Minister Leogardo
committed grave abuse of discretion in
rendering the decision in favor of the private
respondent and that as provided for by the Labor
Code, probationary period cannot exceed 6
months, therefore the probationary period of
GTPD was illegal.
ISSUE: WON the stipulated eighteen month
probationary period is violative of the Labor
Code?
RULING: No, it is not violative of the Labor
Code. The Supreme Court rejects the petitioner’s
contentions. While the Labor Code, specifically
Article 282, provides that probationary periods
cannot exceed 6 months, it still allows the both
employer and employee to stipulate the terms of
the employment, provided that they can come
into agreement. Given that both petitioner and
private respondent came into agreement (by
signing and agreeing) that the 18 month
probationary period is the law between them,
petitioners cannot impugn this by invoking the
provision of the Labor Code in their favor.
Additionally, the grounds for their dismissal
were just, because it was proven in the records
that they did in fact failed to meet their sales
quotas set by private respondent GTPD in the
employment contract. Hence, petition is
dismissed for lack of merit.
Mariwasa vs. Leogardo (Cited Buiser,
Probationary Period of more than 6 months)
In this case, the extension given to Dequila
could not have been pre-arranged to avoid the
legal consequences of a probationary period
satisfactorily completed. In fact, it was ex
gratia, an act of liberality on the part of his
employer affording him a second chance to
make good after having initially failed to prove
his worth as an employee. Such an act cannot
now unjustly be turned against said employer’s
account to compel it to keep on its payroll one
who could not perform according to its work
standards.
FACTS: Joaquin A. Dequila (or Dequilla) was
hired on probation by Mariwasa Manufacturing,
Inc. as a general utility worker on January 10,
1979. After 6 months, he was informed that his
work was unsatisfactory and had failed to meet
the required standards. To give him another
chance, and with Dequila’s written consent,
Mariwasa extended Dequila’s probationary
period for another three months: from July 10 to
October 9, 1979. Dequila’s performance,
however, did not improve and Mariwasa
terminated his employment at the end of the
extended period.
Dequila filed a complaint for illegal dismissal
against Mariwasa and its VP for Administration,
Angel T. Dazo, and violation of Presidential
Decrees Nos. 928 and 1389.
DIRECTOR OF MINISTRY OF LABOR:
Complaint is dismissed. Termination is justified.
Thus, Dequila appeals to the Minister of Labor.
MINISTER OF LABOR: Deputy Minister
Vicente Leogardo, Jr. held that Dequila was
already a regular employee at the time of his
dismissal, thus, he was illegally dismissed.
(Initial order is Reinstatement with full
backwages, then it was later amended to direct
payment of Dequila’s backwages from the date
of his dismissal to December 20, 1982 only.)
ISSUE: WON employer and employee may, by
agreement, extend the probationary period of
employment beyond the six months prescribed
in Art. 282 of the Labor Code?
RULING: YES, agreements stipulating longer
probationary periods may constitute lawful
exceptions to the statutory prescription limiting
such periods to six months.
The SC in its decision in Buiser vs. Leogardo,
Jr. (1984) said that “Generally, the probationary
period of employment is limited to six (6)
months. The exception to this general rule is
when the parties to an employment contract may
agree otherwise, such as when the same is
established by company policy or when the same
is required by the nature of work to be
performed by the employee. In the latter case,
there is recognition of the exercise of managerial
prerogatives in requiring a longer period of
probationary employment, such as in the present
case where the probationary period was set for
eighteen (18) months, i.e. from May, 1980 to
October, 1981 inclusive, especially where the
employee must learn a particular kind of work
such as selling, or when the job requires certain
qualifications, skills experience or training.”
In this case, the extension given to Dequila
could not have been pre-arranged to avoid the
legal consequences of a probationary period
satisfactorily completed. In fact, it was ex
gratia, an act of liberality on the part of his
employer affording him a second chance to
make good after having initially failed to prove
his worth as an employee. Such an act cannot
now unjustly be turned against said employer’s
account to compel it to keep on its payroll one
who could not perform according to its work
standards.
By voluntarily agreeing to an extension of the
probationary period, Dequila in effect waived
any benefit attaching to the completion of said
period if he still failed to make the grade during
the period of extension. By reasonably extending
the period of probation, the questioned
agreement actually improved the probationary
employee’s prospects of demonstrating his
fitness for regular employment.
Alcatel Philippines vs. Relos
The principal test for determining whether a
particular employee is a project employee or a
regular employee is whether the project
employee was assigned to carry out a specific
project or undertaking, the duration and scope
of which were specified at the time the employee
is engaged for the project. ‘Project’ may refer to
a particular job or undertaking that is within the
regular or usual business of the employer, but
which is distinct and separate and identifiable
as such from the undertakings of the company.
Such job or undertaking begins and ends at
determined or determinable times.
FACTS: Complainant Rene R. Relos filed a
complaint for illegal dismissal with monetary
claims against defendant Alcatel Philippines.
Previously, complainant was repeatedly rehired
in various capacities (estimator/draftsman, civil
works inspector, civil engineer, etc.) for several
projects of defendant from January 1988 to
December 1993 (with different periods, from 1
to 11 months). On 31 December 1995,
complainant’s last contract terminated. In March
1997, he instituted the labor case claiming that
he was illegally dismissed as he was a regular
employee.
Alcatel argues that respondent was a project
employee because he worked on distinct projects
with the terms of engagement and the specific
project made known to him at the time of the
engagement. Alcatel clarifies that
[complainant’s] employment was coterminous
with the project for which he was hired and,
therefore, [complainant] was not illegally
dismissed but was validly dismissed upon the
expiration of the term of his project
employment. Alcatel explains that its business
relies mainly on the projects it enters into and
thus, it is constrained to hire project employees
to meet the demands of specific projects.
On the other hand, [complainant] insists that he
is a regular employee because he was assigned
by Alcatel on its various projects since 4 January
1988 performing functions desirable or
necessary to Alcatel’s business. [Complainant]
adds that his employment contracts were
renewed successively by Alcatel for seven years.
[Complainant] contends that, even assuming that
he was a project employee, he became a regular
employee because he was re-hired every
termination of his employment contract and he
performed functions necessary to Alcatel’s
business. [Complainant] also claims that he was
illegally dismissed because he was dismissed
during the existence of the project.
ISSUE: WON respondent is a project
employee?
RULING: Yes respondent is a project
employee. Petitioner is not liable as complainant
was a project employee. The principal test for
determining whether a particular employee is a
project employee or a regular employee is
whether the project employee was assigned to
carry out a specific project or undertaking, the
duration and scope of which were specified at
the time the employee is engaged for the project.
‘Project’ may refer to a particular job or
undertaking that is within the regular or usual
business of the employer, but which is distinct
and separate and identifiable as such from the
undertakings of the company. Such job or
undertaking begins and ends at determined or
determinable times.
The complainant was a project employee. “The
specific projects for which respondent was hired
and the periods of employment were specified in
his employment contracts. The services he
rendered, the duration and scope of each
employment are clear indications that
respondent was hired as a project employee.
While complainant was continuously rehired by
Alcatel and he “performed tasks that were
clearly vital, necessary and indispensable to the
usual business or trade of Alcatel, respondent
was not continuously rehired by Alcatel after the
cessation of every project. Records show that
respondent was hired by Alcatel from 1988 to
1995 for three projects, namely the PLDT X-5
project, the PLDT X-4 IOT project and the
PLDT 1342 project. On 30 April 1988, upon the
expiration of respondent’s contract for the PLDT
X-4 IOT project, Alcatel did not rehire
respondent until 1 February 1991, or after a
lapse of 33 months, for the PLDT 1342 project.
Alcatel’s continuous rehiring of respondent in
various capacities from February 1991 to
December 1995 was done entirely within the
framework of one and the same project ― the
PLDT 1342 project. This did not make
[complainant] a regular employee of Alcatel as
respondent was not continuously rehired after
the cessation of a project. [Complainant]
remained a project employee of Alcatel working
on the PLDT 1342 project.
The employment of a project employee ends on
the date specified in the employment contract.
Therefore, respondent was not illegally
dismissed but his employment terminated upon
the expiration of his employment contract.
Notes: Stipulate clearly the parameters for
project or fixed-period employment – In order to
avoid doubts on the status of an employee, the
employment contract should clearly stipulate the
terms and conditions for the project
employment. In particular, the project should be
clearly specified.
Refrain from continuous rehiring of the same
project employee – While project employment is
valid, a continuous rehiring of the same project
employee who performs work that is vital,
necessary and indispensable to the usual
business or trade of the employer, may result in
the latter becoming a regular employee by
operation of law.
However as in this case, rehiring of the same
employee not after cessation of each project but
after a while (33 months in this case) does not
convert the employee to regular status.
Insular Bank of Asia and America
Employees’ Union (IBAA-EU) vs.
HON.
Amado G. Inciong, and IBAA (1984)
(Monthly Paid vs. Daily Paid employees)
The law clearly states that every worker shall be
paid their regular holiday pay.
FACTS: On August 25, 1975, Labor Arbiter
Ricarte T. Soriano rendered a decision in the
above-entitled case, granting petitioner's
complaint for payment of holiday pay. Pertinent
portions of the decision read:
“The records disclosed that employees of
respondent bank were not paid their wages on
unworked regular holidays as mandated by the
Code, particularly Article 208, to wit:
Art. 208. Right to holiday pay.
(a) Every worker shall be paid his regular daily
wage during regular holidays, except in retail
and service establishments regularly employing
less than 10 workers.
(b) The term "holiday" as used in this chapter,
shall include: New Year's Day, Maundy
Thursday, Good Friday, the ninth of April the
first of May, the twelfth of June, the fourth of
July, the thirtieth of November, the twenty-fifth
and the thirtieth of December and the day
designated by law for holding a general
election.
This conclusion is deduced from the fact that the
daily rate of pay of the bank employees was
computed in the past with the unworked regular
holidays as excluded for purposes of
determining the deductible amount for absences
incurred Thus, if the employer uses the factor
303 days as a divisor in determining the daily
rate of monthly paid employee, this gives rise to
a presumption that the monthly rate does not
include payments for unworked regular
holidays. The use of the factor 303 indicates the
number of ordinary working days in a year
(which normally has 365 calendar days),
excluding the 52 Sundays and the 10 regular
holidays. The use of 251 as a factor (365
calendar days less 52 Saturdays, 52 Sundays,
and 10 regular holidays) gives rise likewise to
the same presumption that the unworked
Saturdays, Sundays and regular holidays are
unpaid. This being the case, it is not amiss to
state with certainty that the instant claim for
wages on regular unworked holidays is found to
be tenable and meritorious.
WHEREFORE, judgment is hereby rendered “
The Department of Labor promulgated the rules
and regulations for the implementation of
holidays with pay. The controversial section
thereof reads: “Sec. 2. Status of employees paid
by the month. — Employees who are uniformly
paid by the month, irrespective of the number of
working days therein, with a salary of not less
than the statutory or established minimum wage
shall be presumed to be paid for all days in the
month whether worked or not. For this purpose,
the monthly minimum wage shall not be less
than the statutory minimum wage multiplied by
365 days divided by twelve”
Later, Policy Instruction No. 9 was issued by the
then Secretary of Labor interpreting the above-
quoted rule, pertinent portions of which read:
“The ten (10) paid legal holidays law, to start
with, is intended to benefit principally daily
employees. In the case of monthly, only those
whose monthly salary did not yet include
payment for the ten (10) paid legal holidays are
entitled to the benefit.”
Respondent IBAA by reason of the ruling laid
down by the aforecited rule implementing
Article 94 of the Labor Code and by Policy
Instruction No. 9, stopped the payment of
holiday pay to all its employees.
Writ of execution of the previously decided case
for them to be paid their holiday pay was filed
by the petitioner. Labor arbiter and NLRC ruled
in their favor. IBAA filed an MR to the Office of
the Minister of Labor which set aside the
decision of NLRC. Hence this petition.
ISSUE: WON holiday pay applies to monthly-
paid employees.
RULING: Yes.
Section 2, Rule IV, Book III of the
implementing rules and Policy Instruction No. 9
issued by the then Secretary of Labor are null
and void since in the guise of clarifying the
Labor Code’s provisions on holiday pay, they in
effect amended them by enlarging the scope of
their exclusion.
The provisions of the Labor Code on the
entitlement to the benefits of holiday pay are
clear and explicit – it provides for both the
coverage of and exclusion from the benefits. In
Policy Instruction No. 9, the then Secretary of
Labor went as far as to categorically state that
the benefit is principally intended for daily paid
employees, when the law clearly states that
every worker shall be paid their regular holiday
pay.
Note: Daily paid employees are those
employees who are only paid on the days they
actually worked while monthly paid employees
are those presumed to be paid for all days in the
month whether worked or not.
Chartered Bank Employees Association vs.
Ople and The Chartered Bank (1985) involves
the same facts and same issue, Policy Instruction
No. 9 of the Secretary of Labor was also
questioned which this Court ruled that such
instruction was null and void for exceeding his
authority. Monthly paid employees are also
entitled to holiday pay.
Since the private respondent premises its action
on the invalidated rule and policy instruction, it
is clear that the employees belonging to the
petitioner association are entitled to the payment
of ten (10) legal holidays under Articles 82 and
94 of the Labor Code, aside from their monthly
salary. They are not among those excluded by
law from the benefits of such holiday pay.
Presidential Decree No. 850 states who are
excluded from the holiday provisions of that
law. It states:
ART. 82. Coverage. The provision of this Title
shall apply to employees in all establishments
and undertakings, whether for profit or not, but
not to government employees, managerial
employees, field personnel members of the
family of the employer who are dependent on
him for support, domestic helpers, persons in the
personal service of another, and workers who
are paid by results as determined by the
Secretary of Labor in appropriate regulations.
(Emphasis supplied).
The questioned Section 2, Rule IV, Book III of
the Integrated Rules and the Secretary's Policy
Instruction No. 9 add another excluded group,
namely, "employees who are uniformly paid by
the month." While the additional exclusion is
only in the form of a presumption that all
monthly paid employees have already been paid
holiday pay, it constitutes a taking away or a
deprivation which must be in the law if it is to be
valid. An administrative interpretation which
diminishes the benefits of labor more than what
the statute delimits or withholds is obviously
ultra vires.
It is argued that even without the presumption
found in the rules and in the policy instruction,
the company practice indicates that the monthly
salaries of the employees are so computed as to
include the holiday pay provided by law. The
petitioner contends otherwise.
One strong argument in favor of the petitioner's
stand is the fact that the Chartered Bank, in
computing overtime compensation for its
employees, employs a "divisor" of 251 days.
The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten
(10) legal holidays from the total number of
calendar days in a year. If the employees are
already paid for all non-working days, the
divisor should be 365 and not 251.
The situation is muddled somewhat by the fact
that, in computing the employees' absences from
work, the respondent bank uses 365 as divisor.
Any slight doubts, however, must be resolved in
favor of the workers. This is in keeping with the
constitutional mandate of promoting social
justice and affording protection to labor
(Sections 6 and 9, Article II, Constitution). The
Labor Code, as amended, itself provides:
ART. 4. Construction in favor of labor. All
doubts in the implementation and interpretation
of the provisions of this Code, including its
implementing rules and regulations, shall be
resolved in favor of labor.
Any remaining doubts which may arise from the
conflicting or different divisors used in the
computation of overtime pay and employees'
absences are resolved by the manner in which
work actually rendered on holidays is paid.
Thus, whenever monthly paid employees work
on a holiday, they are given an additional 100%
base pay on top of a premium pay of 50%. If the
employees' monthly pay already includes their
salaries for holidays, they should be paid only
premium pay but not both base pay and
premium pay.
The contention of the respondent that 100% base
pay and 50% premium pay for work actually
rendered on holidays is given in addition to
monthly salaries only because the collective
bargaining agreement so provides is itself an
argument in favor of the petitioner stand. It
shows that the Collective Bargaining
Agreement already contemplated a divisor of
251 days for holiday pay computations before
the questioned presumption in the Integrated
Rules and the Policy Instruction was
formulated. There is furthermore a similarity
between overtime pay, which is computed on the
basis of 251 working days a year, and holiday
pay, which should be similarly treated
notwithstanding the public respondents'
issuances. In both cases overtime work and
holiday work- the employee works when he is
supposed to be resting. In the absence of an
express provision of the CBA or the law to the
contrary, the computation should be similarly
handled.
We are not unmindful of the fact that the
respondent's employees are among the highest
paid in the industry. It is not the intent of this
Court to impose any undue burdens on an
employer which is already doing its best for its
personnel. We have to resolve the labor dispute
in the light of the parties' own collective
bargaining agreement and the benefits given by
law to all workers. When the law provides
benefits for "employees in all establishments and
undertakings, whether for profit or not" and lists
specifically the employees not entitled to those
benefits, the administrative agency
implementing that law cannot exclude certain
employees from its coverage simply because
they are paid by the month or because they are
already highly paid. The remedy lies in a clear
redrafting of the collective bargaining agreement
with a statement that monthly pay already
includes holiday pay or an amendment of the
law to that effect but not an administrative rule
or a policy instruction.
Union of FILIPRO Employees (UFE) vs.
Nestle Philippines Inc. and Vivar (1992)
(Divisor, Field Workers)
Under Article 82, field personnel are not entitled
to holiday pay. Said article defines field
personnel as “non-agritultural employees who
regularly perform their duties away from the
principal place of business or branch office of
the employer and whose actual hours of work in
the field cannot be determined with reasonable
certainty.”
The respondent arbitrator’s order to change the
divisor from 251 to 261 days would result in a
lower daily rate which is violative of the
prohibition on non-diminution of benefits found
in Article 100 of the Labor Code. To maintain
the same daily rate if the divisor is adjusted to
261 days, then the dividend, which represents
the employee’s annual salary, should
correspondingly be increased to incorporate the
holiday pay.
FACTS: On November 8, 1985, respondent
Filipro, Inc. (now Nestle Philippines, Inc.) filed
with the National Labor Relations Commission
(NLRC) a petition for claims of its monthly paid
employees for holiday pay.
Abitrator Vivar: Filipro to pay its monthly paid
employees holiday pay pursuant to Art 94 of
Labor Code, subject to exclusions and
limitations in Art 82.
Filipro filed a motion for clarification seeking
(1) the limitation of the award to three years, (2)
the exclusion of salesmen, sales representatives,
truck drivers, merchandisers and medical
representatives (hereinafter referred to as sales
personnel) from the award of the holiday pay,
and (3) deduction from the holiday pay award of
overpayment for overtime, night differential,
vacation and sick leave benefits due to the use of
251 divisor.
Petitioner UFE answered that the award should
be made effective from the date of effectivity of
the Labor Code, that their sales personnel are not
field personnel and are therefore entitled to
holiday pay, and that the use of 251 as divisor is
an established employee benefit which cannot be
diminished.
Arbitrator Vivar: On January 14, 1986, the
respondent arbitrator issued an order declaring
that the effectivity of the holiday pay award
shall retroact to November 1, 1974, the date of
effectivity of the Labor Code. He adjudged,
however, that the company’s sales personnel are
field personnel and, as such, are not entitled to
holiday pay. He likewise ruled that with the
grant of 10 days’ holiday pay, the divisor should
be changed from 251 to 261 and ordered the
reimbursement of overpayment for overtime,
night differential, vacation and sick leave pay
due to the use of 251 days as divisor.
ISSUES:
1) WON Nestle’s sales personnel are entitled to
holiday pay; and
2) WON concomitant with the award of holiday
pay, the divisor should be changed from 251 to
261 days and whether or not the previous use of
251 as divisor resulted in overpayment for
overtime, night differential, vacation and sick
leave pay.
RULING:
1. Sales personnel are not entitled to holiday
pay.
Under Article 82, field personnel are not entitled
to holiday pay. Said article defines field
personnel as “non-agritultural employees who
regularly perform their duties away from the
principal place of business or branch office of
the employer and whose actual hours of work in
the field cannot be determined with reasonable
certainty.”
The law requires that the actual hours of work in
the field be reasonably ascertained. The
company has no way of determining whether or
not these sales personnel, even if they report to
the office before 8:00 a.m. prior to field work
and come back at 4:30 p.m, really spend the
hours in between in actual field work.
Moreover, the requirement that “actual hours of
work in the field cannot be determined with
reasonable certainty” must be read in
conjunction with Rule IV, Book III of the
Implementing Rules which provides:
Rule IV Holidays with Pay
Sec. 1. Coverage — This rule shall apply to all
employees except:
(e) Field personnel and other employees whose
time and performance is unsupervised by the
employer . .
Hence, in deciding whether or not an
employee’s actual working hours in the field can
be determined with reasonable certainty, query
must be made as to whether or not such
employee’s time and performance is constantly
supervised by the employer.
2. The divisor in computing the award of
holiday pay should still be 251 days.
While in that case the issue was whether or not
salesmen were entitled to overtime pay, the
same rationale for their exclusion as field
personnel from holiday pay benefits also applies.
The petitioner union also assails the respondent
arbitrator’s ruling that, concomitant with the
award of holiday pay, the divisor should be
changed from 251 to 261 days to include the
additional 10 holidays and the employees should
reimburse the amounts overpaid by Filipro due
to the use of 251 days’ divisor.
The 251 working days divisor is the result of
subtracting all Saturdays, Sundays and the ten
(10) legal holidays from the total number of
calendar days in a year. If the employees are
already paid for all non-working days, the
divisor should be 365 and not 251.
In the petitioner’s case, its computation of daily
ratio since September 1, 1980, is as follows:
monthly rate x 12 months / 251 days
The use of 251 days’ divisor by respondent
Filipro indicates that holiday pay is not yet
included in the employee’s salary, otherwise the
divisor should have been 261.
It must be stressed that the daily rate, assuming
there are no intervening salary increases, is a
constant figure for the purpose of computing
overtime and night differential pay and
commutation of sick and vacation leave credits.
Necessarily, the daily rate should also be the
same basis for computing the 10 unpaid
holidays.
The respondent arbitrator’s order to change the
divisor from 251 to 261 days would result in a
lower daily rate which is violative of the
prohibition on non-diminution of benefits found
in Article 100 of the Labor Code. To maintain
the same daily rate if the divisor is adjusted to
261 days, then the dividend, which represents
the employee’s annual salary, should
correspondingly be increased to incorporate the
holiday pay.
To illustrate, if prior to the grant of holiday pay,
the employee’s annual salary is P25,100, then
dividing such figure by 251 days, his daily rate
is P100.00 After the payment of 10 days’
holiday pay, his annual salary already includes
holiday pay and totals P26,100 (P25,100 +
1,000). Dividing this by 261 days, the daily rate
is still P100.00. There is thus no merit in
respondent Nestle’s claim of overpayment of
overtime and night differential pay and sick
and vacation leave benefits, the computation
of which are all based on the daily rate, since
the daily rate is still the same before and after
the grant of holiday pay.
In Insular Bank of Asia and America
Employees' Union (IBAAEU) v. Inciong, 132
SCRA 663 [1984], hereinafter referred to as the
IBAA case, the Court declared that Section 2,
Rule IV, Book III of the implementing rules and
Policy Instruction No. 9, issued by the then
Secretary of Labor on February 16, 1976 and
April 23, 1976, respectively, and which
excluded monthly paid employees from holiday
pay benefits, are null and void. The Court
therein reasoned that, in the guise of clarifying
the Labor Code's provisions on holiday pay, the
aforementioned implementing rule and policy
instruction amended them by enlarging the
scope of their exclusion. The Chartered Bank
case reiterated the above ruling and added the
"divisor" test.
However, prior to their being declared null and
void, the implementing rule and policy
instruction enjoyed the presumption of validity
and hence, Nestle's non-payment of the holiday
benefit up to the promulgation of the IBAA case
on October 23, 1984 was in compliance with
these presumably valid rule and policy
instruction.
The "operative fact" doctrine realizes that in
declaring a law or rule null and void, undue
harshness and resulting unfairness must be
avoided. It is now almost the end of 1991. To
require various companies to reach back to 1975
now and nullify acts done in good faith is unduly
harsh. 1984 is a fairer reckoning period under
the facts of this case.
Applying the aforementioned doctrine to the
case at bar, it is not far-fetched that Nestle,
relying on the implicit validity of the
implementing rule and policy instruction before
this Court nullified them, and thinking that it
was not obliged to give holiday pay benefits to
its monthly paid employees, may have been
moved to grant other concessions to its
employees, especially in the collective
bargaining agreement. This possibility is
bolstered by the fact that respondent Nestle's
employees are among the highest paid in the
industry. With this consideration, it would be
unfair to impose additional burdens on Nestle
when the non-payment of the holiday benefits up
to 1984 was not in any way attributed to Nestle's
fault.
The Court thereby resolves that the grant of
holiday pay be effective, not from the date of
promulgation of the Chartered Bank case or
from the date of effectivity of the Labor Code,
but from October 23, 1984, the date of
promulgation of the IBAA case.
WHEREFORE, the order of the voluntary
arbitrator in hereby MODIFIED. The divisor to
be used in computing holiday pay shall be 251
days. The holiday pay as above directed shall be
computed from October 23, 1984. In all other
respects, the order of the respondent arbitrator is
hereby AFFIRMED.
Note: During this time, there was only 10 legal
holidays. We now have 12 legal holidays as of
this date. So adjust accordingly if ever a
question about this is asked.
Cezar Odango vs. NLRC (2004) (Divisor)
The use of a divisor less than 365 days cannot
make ANTECO automatically liable for
underpayment. The facts show that petitioners
are required to work only from Monday to
Friday and half of Saturday. Thus, the minimum
allowable divisor is 287, which is the result of
365 days, less 52 Sundays and less 26 Saturdays
(or 52 half Saturdays). Any divisor below 287
days means that ANTECOs workers are
deprived of their holiday pay for some or all of
the ten legal holidays. The 304 days divisor used
by ANTECO is clearly above the minimum of
287 days.
FACTS: Petitioners are monthly-paid
employees of ANTECO whose workdays are
from Monday to Friday and half of Saturday.
After a routine inspection, the Regional Branch
of the Department of Labor and Employment
found ANTECO liable for underpayment of the
monthly salaries of its employees. On September
1989, the DOLE directed ANTECO to pay its
employees wage differentials amounting to
P1,427,412.75. ANTECO failed to pay. On
various dates in 1995, thirty-three (33) monthly-
paid employees filed complaints with the NLRC
praying for payment of wage differentials,
damages and attorney’s fees.
Labor Arbiters Ruling
The Labor Arbiter reasoned that ANTECO
failed to refute petitioners argument that
monthly-paid employees are considered paid for
all the days in a month under Section 2, Rule IV
of Book 3 of the Implementing Rules of the
Labor Code (Section 2). Petitioners claim that
this includes not only the 10 legal holidays, but
also their unworked half of Saturdays and all of
Sundays.
The Labor Arbiter gave credence to petitioners
arguments on the computation of their wages
based on the 304 divisor used by ANTECO in
converting the leave credits of its employees.
The Labor Arbiter agreed with petitioners that
ANTECOs use of 304 as divisor is an admission
that it is paying its employees for only 304 days
a year instead of the 365 days as specified in
Section 2. The Labor Arbiter concluded that
ANTECO owed its employees the wages for 61
days, the difference between 365 and 304, for
every year.
NLRC Ruling
On appeal, the NLRC reversed the Labor
Arbiters ruling that ANTECO underpaid its
employees. The NLRC pointed out that the
Labor Arbiters own computation showed that
the daily wage rates of ANTECOs employees
were above the minimum daily wage of P124.
The lowest paid employee of ANTECO was
then receiving a monthly wage of P3,788. The
NLRC applied the formula in Section 2 [(Daily
Wage Rate = (Wage x 12)/365)] to the monthly
wage of P3,788 to arrive at a daily wage rate of
P124.54, an amount clearly above the minimum
wage.
The NLRC noted that while the reasoning in the
body of the Labor Arbiters decision supported
the view that ANTECO did not underpay, the
conclusion arrived at was the opposite. Finally,
the NLRC ruled that the use of 304 as a divisor
in converting leave credits is more favorable to
the employees since a lower divisor yields a
higher rate of pay.
CA Ruling
The Court of Appeals held that the petition was
insufficient in form and substance since it does
not allege the essential requirements of the
extra-ordinary special action of certiorari. The
Court of Appeals faulted petitioners for failing
to recite where and in what specific instance
public respondent abused its discretion. The
appellate court characterized the allegations in
the petition as sweeping and clearly falling short
of the requirement of Section 3, Rule 46 of the
Rules of Court.
ISSUE: WON Petitioners are entitled to their
Money Claim?
RULING: No, Petitioners are not entitled to
their Money Claim.
Petitioners claim that the Court of Appeals
gravely erred in denying their claim for wage
differentials. Petitioners base their claim on
Section 2, Rule IV of Book III of the Omnibus
Rules Implementing the Labor Code. Petitioners
argue that under this provision monthly-paid
employees are considered paid for all days of the
month including un-worked days. Petitioners
assert that they should be paid for all the 365
days in a year. They argue that since in the
computation of leave credits, ANTECO uses a
divisor of 304, ANTECO is not paying them 61
days every year.
We have long ago declared void Section 2, Rule
IV of Book III of the Omnibus Rules
Implementing the Labor Code. In Insular Bank
of Asia v. Inciong, we ruled as follows:
Section 2, Rule IV, Book III of the
Implementing Rules and Policy Instructions No.
9 issued by the Secretary (then Minister) of
Labor are null and void since in the guise of
clarifying the Labor Codes provisions on
holiday pay, they in effect amended them by
enlarging the scope of their exclusion.
The Labor Code is clear that monthly-paid
employees are not excluded from the benefits of
holiday pay. However, the implementing rules
on holiday pay promulgated by the then
Secretary of Labor excludes monthly-paid
employees from the said benefits by inserting,
under Rule IV, Book III of the implementing
rules, Section 2 which provides that monthly-
paid employees are presumed to be paid for all
days in the month whether worked or not.
Thus, Section 2 cannot serve as basis of any
right or claim. Absent any other legal basis,
petitioners claim for wage differentials must fail.
Even assuming that Section 2, Rule IV of Book
III is valid, petitioners claim will still fail. The
basic rule in this jurisdiction is no work, no pay.
The right to be paid for unworked days is
generally limited to the ten legal holidays in a
year. Petitioners claim is based on a mistaken
notion that Section 2, Rule IV of Book III gave
rise to a right to be paid for un-worked days
beyond the ten legal holidays. In effect,
petitioners demand that ANTECO should pay
them on Sundays, the unworked half of
Saturdays and other days that they do not work
at all. Petitioner’s line of reasoning is not only a
violation of the no work, no pay principle, it also
gives rise to an invidious classification, a
violation of the equal protection clause.
Sustaining petitioner’s argument will make
monthly-paid employees a privileged class who
are paid even if they do not work.
The use of a divisor less than 365 days cannot
make ANTECO automatically liable for
underpayment. The facts show that petitioners
are required to work only from Monday to
Friday and half of Saturday. Thus, the minimum
allowable divisor is 287, which is the result of
365 days, less 52 Sundays and less 26 Saturdays
(or 52 half Saturdays). Any divisor below 287
days means that ANTECOs workers are
deprived of their holiday pay for some or all of
the ten legal holidays. The 304 days divisor used
by ANTECO is clearly above the minimum of
287 days.
Finally, petitioners cite Chartered Bank
Employees Association v. Ople as an analogous
situation.
Petitioners have misread this case.
In Chartered Bank, the workers sought payment
for unworked legal holidays as a right
guaranteed by a valid law. In this case,
petitioners seek payment of wages for unworked
non-legal holidays citing as basis a void
implementing rule. The circumstances are also
markedly different. In Chartered Bank, there
was a collective bargaining agreement that
prescribed the divisor. No CBA exists in this
case. In Chartered Bank, the employer was liable
for underpayment because the divisor it used
was 251 days, a figure that clearly fails to
account for the ten legal holidays the law
requires to be paid. Here, the divisor ANTECO
uses is 304 days. This figure does not deprive
petitioners of their right to be paid on legal
holidays.
A final note, ANTECOs defense is likewise
based on Section 2, Rule IV of Book III of the
Omnibus Rules Implementing the Labor Code
although ANTECOs interpretation of this
provision is opposite that of petitioners. It is
deplorable that both parties premised their
arguments on an implementing rule that the
Court had declared void twenty years ago in
Insular Bank. This case is cited prominently in
basic commentaries. And yet, counsel for both
parties failed to consider this. This does not
speak well of the quality of representation they
rendered to their clients. This controversy should
have ended long ago had either counsel first
checked the validity of the implementing rule on
which they based their contentions.
Damasco vs. NLRC (OT pay)
Still, even assuming that Damasco received a
wage which is higher than the minimum
provided by law, it does not follow that any
additional compensation due her can be offset
by her pay in excess of the minimum, in the
absence of an express agreement to that effect.
Moreover, such arrangement, if there be any,
must appear in the manner required by law on
how overtime compensation must be determined.
For it is necessary to have a clear and definite
delineation between an employee’s regular and
overtime compensation to thwart violation of the
labor standards provision of the Labor Code.
FACTS: Ms. Imelda Damasco is was a regular
sales clerk in Manila Glass Supply in Olongapo
City. Damasco filed before the NLRC Regional
Arbitration Branch in San Fernando, Pampanga,
a complaint against Bonifacio Sia and Manila
Glass Supply (jointly referred hereafter as "Sia"
for easy reference). In the one-page complaint
form of the NLRC, Damasco indicated that she
is suing her employer for illegal dismissal and
non-payment of overtime pay. However, in her
complaint affidavit and position paper filed later
before the labor arbiter, Damasco additionally
charged her employer with non-payment of 13th
month pay, service incentive leave pay, holiday
pay and night shift differential.
On September 2, 1993, the labor arbiter rendered
judgment in favor of Ms. Damasco. The labor
official declared that Sia has not shown any just
or authorized cause in terminating the services
of Damasco, except for wild, generalized and
self-serving statements that Damasco committed
serious misconduct or willful disobedience of
the lawful orders in connection with her work.
The labor arbiter also ruled that Damasco is
entitled to 13th month pay, service incentive
leave pay, holiday pay, overtime pay, and
disposed of the case.
On appeal, the NLRC upheld the labor arbiter’s
finding that Damasco was illegally dismissed
but with modifications. (deleted overtime pay
and reducing award of attorneys’ fees in favor of
petitioner)
In her petition, Damasco alleged that the NLRC
committed grave abuse of discretion:
"…IN DELETING THE AWARD FOR
OVERTIME PAY AND REDUCING THE
ATTORNEY’S FEES IN FAVOR OF
PETITIONER”
ISSUE: WON NLRC committed grave abuse of
discretion in deleting the overtime pay?
RULING: Yes, NLRC committed grave abuse
of discretion.
Now, as regards Ms. Damasco’s contention that
public respondent gravely abused its discretion
in deleting the award for overtime pay for lack
of factual basis, we find the same impressed
with merit. We note that Sia has admitted in his
pleadings that Damasco’s work starts at 8:30 in
the morning and ends up at 6:30 in the evening
daily, except holidays and Sundays. However,
Sia claims that Damasco’s basic salary of
P140.00 a day is more than enough to cover the
"one hour excess work" which is the
compensation they allegedly agreed upon.
Judicial admissions made by parties in the
pleadings, or in the course of the trial or other
proceedings in the same case are conclusive, no
further evidence being required to prove the
same, and cannot be contradicted unless
previously shown to have been made through
palpable mistake or that no such admission was
made. In view of Sia’s formal admission that
Ms. Damasco worked beyond eight hours daily,
the latter is entitled to overtime compensation.
No further proof is required. Sia already
admitted she worked an extra hour daily. Thus,
public respondent gravely erred in deleting the
award of overtime pay to Ms. Damasco on the
pretext that the claim has no factual basis.
Still, even assuming that Damasco received a
wage which is higher than the minimum
provided by law, it does not follow that any
additional compensation due her can be offset by
her pay in excess of the minimum, in the
absence of an express agreement to that effect.
Moreover, such arrangement, if there be any,
must appear in the manner required by law on
how overtime compensation must be
determined. For it is necessary to have a clear
and definite delineation between an employee’s
regular and overtime compensation to thwart
violation of the labor standards provision of the
Labor Code.
With regard to the award of attorney’s fees the
ten percent (10%) attorney’s fees is provided for
in Article 111 of the Labor Code. Considering
the circumstances of this case, said award is in
order.
Note: This case also involves illegal dismissal.
Damasco was illegally dismissed and the Court
did not warrant reinstatement because of
strained relations. (Read in full for the illegal
dismissal issue)
Songco, et al. vs. National Labor Relations
Commission (1990) (Sales Commissions)
The Court takes judicial notice of the fact that
some salesmen do not receive any basic salary
but depend on commissions and allowances or
commissions alone, although an employer-
employee relationship exists.
If the opposite view is adopted, i.e., that
commission does not form part of the wage or
salary, then in effect, we will be saying that this
kind of salesmen does not receive any salary and
therefore, not entitled to separation pay in the
event of discharge from employment. This
narrow interpretation is not in accord with the
liberal spirit of the labor laws and considering
the purpose of separation pay which is, to
alleviate the difficulties which confront a
dismissed employee thrown to the streets to face
the harsh necessities of life.
FACTS: Zuelig terminated the services of
Songco, and others, on the ground of
retrenchment due to financial losses. During the
hearing, the parties agreed that the sole issue to
be resolved was the basis of computation of the
separation pay. The salesmen received monthly
salaries of at least P400.00 [yes, P400] and
commissions for every sale they made.
The Collective Bargaining Agreement between
Zuelig and the union of which Songco, et al.
were members contained the following
provision: “Any employee who is separated
from employment due to old age, sickness, death
or permanent lay-off, not due to the fault of said
employee, shall receive from the company a
retirement gratuity in an amount equivalent to
one (1) month’s salary per year of service.”
The Labor Arbiter ordered Zuelig to pay
Songco, et al., separation pay equivalent to their
one month salary (exclusive of commissions,
allowances, etc.) for every year of service with
the company.
ISSUE: WON the earned sales commissions and
allowances should be included in the monthly
salary of Songco, et al. for the purpose of
computing their separation pay?
RULING: In the computation of backwages and
separation pay, account must be taken not only
of the basic salary of the employee but also of
the transportation and emergency living
allowances.
Even if the commissions were in the form of
incentives or encouragement, so that the
salesman would be inspired to put a little more
industry on the jobs particularly assigned to
them, still these commissions are direct
remunerations for services rendered which
contributed to the increase of income of the
employer. Commission is the recompense
compensation or reward of an agent, salesman,
executor, trustee, receiver, factor, broker or
bailee, when the same is calculated as a
percentage on the amount of his transactions or
on the profit to the principal. The nature of the
work of a salesman and the reason for such type
of remuneration for services rendered
demonstrate that commissions are part of
Songco, et al.’s wage or salary.
The Court takes judicial notice of the fact that
some salesmen do not receive any basic salary
but depend on commissions and allowances or
commissions alone, although an employer-
employee relationship exists.
If the opposite view is adopted, i.e., that
commission does not form part of the wage or
salary, then in effect, we will be saying that this
kind of salesmen does not receive any salary and
therefore, not entitled to separation pay in the
event of discharge from employment. This
narrow interpretation is not in accord with the
liberal spirit of the labor laws and considering
the purpose of separation pay which is, to
alleviate the difficulties which confront a
dismissed employee thrown to the streets to face
the harsh necessities of life.
In Soriano vs. NLRC, 155 SCRA 124, we held
that the commissions also claimed by the
employee (override commission plus net deposit
incentive) are not properly includible in such
base figure since such commissions must be
earned by actual market transactions attributable
to the petitioner [salesman]. Since the
commissions in the present case were earned by
actual transactions attributable to Songco, et al.,
these should be included in their separation pay.
In the computation thereof, what should be taken
into account is the average commission earned
during their last year of employment.
Boie-Takeda vs. De La Serna and Philippine
Fuji Xerox vs. Trajano (1993) (Sales
commissions for purposes of computing 13th
month pay)
Commissions are given for extra efforts exerted
in consummating sales or other related
transactions. They are, as such, additional pay,
which this Court has made clear do not form
part of the "basic salary.
FACTS: 2 cases were consolidated involving
similar issues. A routine inspection was
conducted in the premises of petitioner Boie-
Takeda Chemicals, Inc. Finding that Boie-
Takeda had not been including the commissions
earned by its medical representatives in the
computation of their 13th month pay, The
officer served a Notice of Inspection Results on
Boie-Takeda requiring Boie-Takeda within ten
(10) calendar days from notice to effect
restitution or correction of "the underpayment of
13th month pay for the year(s) 1986, 1987 and
1988 of Med Rep (Revised Guidelines on the
Implementation of 13th month pay # 5) in the
total amount of P558,810.89."
Boie-Takeda wrote the Labor Department
contesting the Notice of Inspection Results
because according to the law, only basic salary
is required4. Regional Director directed Boie-
Takeda to pay the said amount. On appeal before
the Acting Labor Secretary, the commissions
shall be excluded in the computation of their
13th month pay. A similar inspection was also
conducted in the premises of Philippine Fuji
Xerox Corp. The two companies had the same
counsel who filed a complaint against labor
officials Hon. Dionisio dela Serna and
Undersecretary Cresenciano B. Trajano in
issuing the questioned Orders and attacked
Section 5 Revised Guidelines of P. D. 85125.
4
"Basic Salary" shall include all remunerations or earnings paid by
an employer to an employee for services rendered but may not
include cost-of-living allowances granted pursuant to Presidential
Decree No. 525 or Letter of Instructions No. 174, profit-sharing
payments, and all allowances and monetary benefits which are not
considered or integrated as part of the regular or basic salary of the
employee at the time of the promulgation of the Decree on
December 16, 1975.
5
5. 13th Month Pay for Certain Types of Employees. (a)
Employees Paid by Results.- Employees who are paid on piece
work basis are by law entitled to the 13th month pay. Employees
who are paid a fixed or guaranteed wage plus commission are also
entitled to the mandated 13th month pay based on their total
earnings during the calendar year, i.e., on both their fixed or
guaranteed wage and commission.
ISSUE: WON Commissions of Sales
Representatives excluded from the computation
of 13th month pay?
RULING: Yes. In remunerative schemes
consisting of a fixed or guaranteed wage plus
commission, the fixed or guaranteed wage is
patently the "basic salary" for this is what the
employee receives for a standard work period.
Commissions are given for extra efforts exerted
in consummating sales or other related
transactions. They are, as such, additional pay,
which this Court has made clear do not form part
of the "basic salary."
Respondents would do well to distinguish this
case from Songco vs. National Labor Relations
Commission, supra, upon which they rely so
heavily. What was involved therein was the term
"salary" without the restrictive adjective "basic".
Thus, in said case, we construed the term in its
generic sense to refer to all types of "direct
remunerations for services rendered," including
commissions. In the same case, we also took
judicial notice of the fact "that some salesmen
do not receive any basic salary but depend on
commissions and allowances or commissions
alone, although an employer-employee
relationship exists," which statement is quite
significant in that it speaks of a "basic salary"
apart and distinct from "commissions" and
"allowances".
Instead of supporting respondents' stand, it
would appear that Songco itself recognizes that
commissions are not part of "basic salary." In
including commissions in the computation of the
13th month pay, the second paragraph of Section
5 (a) of the Revised Guidelines on the
Implementation of the 13th Month Pay Law
unduly expanded the concept of "basic salary" as
defined in P.D. 851. It is a fundamental rule that
implementing rules cannot add to or detract from
the provisions of the law it is designed to
implement. Administrative regulations adopted
under legislative authority by a particular
department must be in harmony with the
provisions of the law they are intended to carry
into effect. They cannot widen its scope. An
administrative agency cannot amend an act of
Congress.
WHEREFORE, the consolidated petitions are
hereby GRANTED. The second paragraph of
Section 5 (a) of the Revised Guidelines on the
Implementation of the 13th Month Pay Law
issued on November 16, 1987 by then Labor
Secretary Franklin M. Drilon is declared null
and void as being violative of the law said
Guidelines were issued to implement, hence
issued with grave abuse of discretion correctible
by the writ of prohibition and certiorari.
Philippine Duplicators Inc. vs. NLRC (1993
and 1995) (Sales Commission)
However, sales commissions which are
effectively an integral portion of the basic salary
structure of an employee shall be included in
determining his 13th month pay.
A productivity bonus is something extra for
which no specific additional services are
rendered by any particular employee and hence
not legally demandable, absent a contractual
undertaking to pay it. Sales commissions, on the
other hand, such as those paid in Duplicators,
are intimately related to or directly proportional
to the extent or energy of an employee's
endeavors. Commissions are paid upon the
specific results achieved by a salesman-
employee. It is a percentage of the sales closed
by a salesman and operates as an integral part
of such salesman's basic pay.
1993 Case
FACTS: Petitioner corporation refused the
union’s request, but stated it would respect an
opinion from the MOLE. On 17 November
1987, acting upon a request for opinion
submitted by respondent union, Director
Augusto G. Sanchez of the Bureau of Working
Conditions, MOLE, rendered an opinion to
respondent union declaring applicable the
provisions of Explanatory Bulletin No. 86-12,
Item No. 5 (a):
. . . . Since the salesmen of Philippine
Duplicators are receiving a fixed basic wage
plus commission on sales and not purely on
commission basis, they are entitled to receive
13th month pay provided they worked at least
one (1) month during the calendar year. May we
add at this point that in computing such 13th
month pay, the total commissions of said
salesmen for the calendar year shall be divided
by twelve (12).
Notwithstanding Director Sanchez’ opinion or
ruling, petitioner refused to pay the claims of its
salesmen for 13th month pay computed on the
basis of both fixed wage plus sales commissions
ISSUE: WON sales commission is included in
the coverage of basic salary for purposes of 13th
month pay?
RULING (1993): Yes, sales commissions are
included.
In the first place, Article 97 (f) of the Labor
Code defines the term “wage” (which is
equivalent to “salary,” as used in P.D. No. 851
and Memorandum Order No. 28) in the
following terms:
(f) “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 reasonable
value, as determined by the Secretary of Labor,
of board, lodging, or other facilities customarily
furnished by the employer to the employee.
“Fair and reasonable value” shall not include
any profit to the employer or to any person
affiliated with the employer. (Emphasis
supplied)
In the instant case, there is no question that the
sales commissions earned by salesmen who
make or close a sale of duplicating machines
distributed by petitioner corporation constitute
part of the compensation or remuneration paid to
salesmen for serving as salesmen, and hence as
part of the “wage” or “salary” of petitioner’s
salesmen. Indeed, it appears that petitioner pays
its salesmen a small fixed or guaranteed wage;
the greater part of the salesmen’s wages or
salaries being composed of the sales or incentive
commissions earned on actual sales closed by
them. No doubt this particular salary structure
was intended for the benefit of petitioner
corporation, on the apparent assumption that
thereby its salesmen would be moved to greater
enterprise and diligence and close more sales in
the expectation of increasing their sales
commissions. This, however, does not detract
from the character of such commissions as part
of the salary or wage paid to each of its
salesmen for rendering services to petitioner
corporation.
The term "basic salary" used in P.D. No. 851
and Memorandum Order No. 28 is not to be
confused with the term "fixed or guaranteed
wage." The term "basic salary" is used to
distinguish wage or salary from "fringe benefits"
which are not integrated into "basic salary" for
certain specific purposes. In San Miguel
Corporation v. Inciong, the catch-all phrase
"allowances" and "monetary benefits'" which are
deemed not considered or integrated as part of
"basic salary" was construed to refer to "any and
all additions which may be in the form of
allowances or 'fringe' benefits." These fringe
benefits include payments for sick leave,
vacation leave or maternity leave; premium pay
for work performed on rest day and special
holidays; premium pay for regular holidays and
night differential pay; and cost of living
allowances. Sales commissions form part of the
"wage" or "salary" of salesmen and are not in
the nature of an "allowance" or "additional
fringe" benefit. Once more, we note that in the
instant case, sales commissions form the bulk of
the salaries or wages of petitioner's salesmen.
In the 1995 MR
Philippine Duplicators, Inc. (Duplicators) is
assailing the decision of the NLRC directing
petitioner to pay 13th month pay to private
respondent employees computed on the basis of
their fixed wages plus sales commissions. The
Third Division denied with finality on 15
December 1993 the Motion for Reconsideration
filed (on 12 December 1993) by petitioner.
On 17 January 1994, petitioner Duplicators filed
(a) a Motion for Leave to Admit Second Motion
for Reconsideration and (b) a Second Motion for
Reconsideration. This time, petitioner invoked
the decision handed down by this Court, through
its Second Division, on 10 December 1993 in
the two (2) consolidated cases of Boie-Takeda
Chemicals, Inc. vs. Hon. Dionisio de la Serna
and Philippine Fuji Xerox Corp. vs. Hon.
Cresenciano B. Trajano, in G.R. Nos. 92174 and
102552.
ISSUE: WON the sales commission earned by
the salesmen who make or close a sale of
duplicating machines distributed by petitioner
corporation, constitute part of the compensation
or remuneration paid to salesmen for serving as
salesmen, and hence as part of the 'wage' or
salary of petitioner's salesmen?
RULING (1995): Yes, they are part of the basic
salary of the salesmen.
The Third Division held, correctly, that the sales
commissions were an integral part of the basic
salary structure of Philippine Duplicators'
employees-salesmen. These commissions are not
overtime payments, nor profit-sharing payments
nor any other fringe benefit. Thus, the
salesmen's commissions, comprising a pre-
determined percent of the selling price of the
goods sold by each salesman, were properly
included in the term "basic salary" for purposes
of computing their 13th month pay.
The Supplementary Rules and Regulations
Implementing P.D. No. 851 subsequently issued
by former Labor Minister Ople sought to clarify
the scope of items excluded in the computation
of the 13th month pay; viz.
"Sec. 4. Overtime pay, earnings and other
remunerations which are not part of the basic
salary shall not be included in the computation
of the 13th month pay."
We observe that the third item excluded from
the term "basic salary" is cast in open ended and
apparently circular terms: "other remunerations
which are not part of the basic salary." However,
what particular types of earnings and
remuneration are or are not properly included or
integrated in the basic salary are questions to be
resolved on a case to case basis, in the light of
the specific and detailed facts of each case. In
principle, where these earnings and
remuneration are closely akin to fringe benefits,
overtime pay or profit-sharing payments, they
are properly excluded in computing the 13th
month pay. However, sales commissions which
are effectively an integral portion of the basic
salary structure of an employee shall be included
in determining his 13th month pay.
We recognize that both productivity bonuses and
sales commissions may have an incentive effect.
But there is reason to distinguish one from the
other here. Productivity bonuses are generally
tied to the productivity or profit generation of
the employer corporation. Productivity bonuses
are not directly dependent on the extent an
individual employee exerts himself. A
productivity bonus is something extra for which
no specific additional services are rendered by
any particular employee and hence not legally
demandable, absent a contractual undertaking to
pay it. Sales commissions, on the other hand,
such as those paid in Duplicators, are
intimately related to or directly proportional
to the extent or energy of an employee's
endeavors. Commissions are paid upon the
specific results achieved by a salesman-
employee. It is a percentage of the sales closed
by a salesman and operates as an integral part of
such salesman's basic pay.
In Boie-Takeda the so-called commissions
“paid to or received by medical representatives
of Boie-Takeda Chemicals or by the rank and
file employees of Philippine Fuji Xerox Co.,”
were excluded from the term “basic salary”
because these were paid to the medical
representatives and rank-and-file employees as
“productivity bonuses.” The Second Division
characterized these payments as additional
monetary benefits not properly included in the
term “basic salary” in computing their 13th
month pay. As a rule a bonus is an amount
granted and paid to an employee for his industry
loyalty which contributed to the success of the
employer’s business and made possible the
realization of profits. It is an act of generosity of
the employer for which the employee ought to
be thankful and grateful. It is also granted by an
enlightened employer to spur the employee to
greater efforts for the success of the business
and realization of bigger profits. From the legal
point of view a bonus is not a demandable and
enforceable obligation. It is only so when It is
made part of the wage or salary or
compensation.
Note: The difference between the Boie Takeda
case and Philippine Duplicators is that the sales
commission in the former case, are in the form
of productivity bonus, which are not included in
the computation of the 13th month pay, while in
the latter case, the sales commission are effort
based which forms part of the salesman’s basic
pay which can be included in the computation of
the 13th month pay.
GAA vs. CA (Wages vs. Salary)
Only wages, according to the law, are exempt
from execution. Salaries may be subject to
execution.
FACTS: In 1976, Rosario Gaa, the building
administrator of Trinity Building and manager
of the El Grande Hotel lost a case filed against
her by the Europhil Industries Corporation. Gaa
was adjudged to pay damages to Europhil.
Eventually, a writ of garnishment was issued
upon Gaa’s salary with El Grande Hotel. She
now moves for the quashal of the writ on the
ground that the garnishment on her salary is
prohibited by Article 1708 of the Civil Code.
ISSUE: WON salaries may be garnished?
RULING: Yes. Article 1708 of the Civil Code
reads:
The laborer’s wage shall not be subject to
execution or attachment, except for debts
incurred for food, shelter, clothing and medical
attendance.
Gaa’s functions as El Grande Hotel’s manager
include “responsible for planning, directing,
controlling, and coordinating the activities of all
housekeeping personnel”; “ensure the
cleanliness, maintenance and orderliness of all
guest rooms, function rooms, public areas, and
the surroundings of the hotel.” Gaa is a
responsibly placed employee and not a mere
laborer. As such, Gaa is not receiving a laborer’s
wage. She is receiving salary.
In its broadest sense, the word “laborer”
includes everyone who performs any kind of
mental or physical labor, but as commonly and
customarily used and understood, it only applies
to one engaged in some form of manual or
physical labor. That is the sense in which the
courts generally apply the term as applied in
exemption acts, since persons of that class
usually look to the reward of a day’s labor for
immediate or present support and so are more in
need of the exemption than are other.
Article 1708 used the word “wages” and not
“salary” in relation to “laborer” when it declared
what are to be exempted from attachment and
execution. The term “wages” as distinguished
from “salary”, applies to the compensation for
manual labor, skilled or unskilled, paid at stated
times, and measured by the day, week, month, or
season, while “salary” denotes a higher degree
of employment, or a superior grade of services,
and implies a position of office: by contrast, the
term wages ” indicates considerable pay for a
lower and less responsible character of
employment, while “salary” is suggestive of a
larger and more important service.
Only wages, according to the law, are exempt
from execution. Salaries may be subject to
execution.
Special Steel Products vs. Lutgardo Villareal
and Frederick So (Withholding of wages)
What an employee has worked for, his employer
must pay. Thus, an employer cannot simply
refuse to pay the wages or benefits of its
employee because he has either defaulted in
paying a loan guaranteed by his employer; or
violated their memorandum of agreement; or
failed to render an accounting of his employer’s
property.
FACTS: Petitioner Special Steels Products, Inc.
is a domestic corporation engaged in the
business of importation, sale and marketing of
BOHLER steel products. Respondent Villareal
and So, worked for petitioner as assistant sales
manager and salesman, respectively.
Sometime in May 1993, respondent Villareal
obtained a car loan from Bank of Commerce,
with petitioner as surety, as shown by a
continuing suretyship agreement and promissory
note. In 1997, respondent Villareal resigned and
thereafter joined another company.
Sometime in August 1994, petitioner
“sponsored” respondent So to attend a training
course in Austria conducted by BOHLER. This
training was reward for respondent So’s
outstanding sales performances. When
respondent returned 9 months thereafter,
petitioner directed him to sign a memorandum
providing that BOHLER requires trainees from
Austria to continue working with petitioner for a
period of 3 years after the training. Otherwise,
each training shall refund to BOHLER the
training expenses by way of set-off or
compensation. After 2 years and 4 months,
respondent So resigned from petitioner.
Immediately, petitioner order respondents to
render an accounting of its various Christmas
giveaways they received. These were intended
for distribution to petitioner’s customer.
In protest, respondents demanded from
petitioner payment of their separation benefits,
commissions, vacation and sick leave benefits,
and proportionate 13th month. But petitioner
refused, and instead, withheld the 13th month
pay and other benefits.
Respondents filed a complaint with the LA for
payment of their monetary benefits.
LA ruled in favor of respondents, ordering
petitioner-company and its president jointly and
severally liable to pay the monetary benefits of
Villareal and So
On appeal, NLRC affirmed the LA decision, but
exempted the petitioner’s president from any
liability, which was affirmed by the CA. Hence,
this petition.
Petitioner contends that as a guarantor, it could
legally withhold respondent Villareal’s
monetary benefits as a preliminary remedy
pursuant to Art. 2071 of the Civil Code. As to
respondent So, petitioner citing Article 113 of
the Labor Code, in relation to Art. 1706 of the
Civil Code, maintains that it could withhold his
monetary benefits being authorized by the
memorandum he signed.
ISSUE: WON the petitioner has legal authority
to withhold respondent’s monetary benefits?
RULING: NO, the employer cannot withhold
respondent’s 13th month pay and other
monetary benefits.
Article 116 of the Labor Code, as amended,
provides:
“Withholding of wages and kickbacks
prohibited. – It shall be unlawful for any person,
directly or indirectly, to withhold any amount
from the wages (and benefits) of a worker or
induce him to give up any part of his wages by
force, stealth, intimidation, threat or by any
other means whatsoever without the worker’s
consent.”
The above provision is clear and needs no
further elucidation. Indeed, petitioner has no
legal authority to withhold respondents’ 13th
month pay and other benefits.
What an employee has worked for, his employer
must pay. Thus, an employer cannot simply
refuse to pay the wages or benefits of its
employee because he has either defaulted in
paying a loan guaranteed by his employer; or
violated their memorandum of agreement; or
failed to render an accounting of his employer’s
property.
There is no guaranty involved herein, and
therefore Art. 2071 does not apply. The contract
executed by petitioner and respondent Villareal
(in favor of the Bank of Commerce) is a contract
of surety. In fact, it is denominated as a
“continuing suretyship agreement.” Hence,
petitioner could not just unilaterally withhold
respondent’s wages or benefits as a preliminary
remedy under Article 2071. It must file an action
against respondent Villareal. Thus, the Appellate
Court aptly ruled that petitioner „may only
protect its right as surety by instituting an
“action to demand a security.”
As to respondent So, petitioner maintains that
there can be a set-off or legal compensation
between them. Consequently, it can withhold his
13th month pay and other benefits. In the present
case, set-off or legal compensation cannot take
place between petitioner and respondent So
because they are not mutually creditor and
debtor of each other.
A careful reading of the Memorandum reveals
that the “lump sum compensation of not less
than US $6,000.00 will have to be refunded” by
each trainee to BOHLER, not to petitioner.
In fine, we rule that petitioner has no legal right
to withhold respondents’ 13th month pay and
other benefits to recompense for whatever
amount it paid as security for respondent
Villareal’s car loan; and for the expenses
incurred by respondent So in his training abroad.
SHS Perforated vs. Diaz (Withholding of
wages)
The Supreme Court said that management
prerogative refers to “the right to regulate all
aspects of employment,” it cannot be understood
to include the right to temporarily withhold
salary/wages without the consent of the
employee.
FACTS: SHS Perforated Materials, Inc.
(“SHS”) hired Manuel Diaz (“Manuel”) as the
company’s Business Development Manger on
probationary status from July 18, 2005 to
January 18, 2006 with a monthly salary of
P100,000.00.
Manuel’s Probationary Employment Contract
contained his job description and his tasks.
Aside from the Contract, Hartmannshenn also
instructed Manuel to report to the SHS office
and plant at least two (2) days every work week
to observe technical processes involved in the
manufacturing of perforated materials, and to
learn about the products of the company, which
respondent was hired to market and sell.
Hartmannshenn was often abroad so
communication with Manuel was usually
through e-mail or phone. There was no close
supervision over Manuel.
In the Statement of Facts of the case, SHS and
Manuel give conflicting accounts of the days
leading up to Manuel’s resignation. On the one
hand, SHS wanted Manuel to explain his
absences and return company property before
they would give him his salary for the period
November 16-30, 2005. And on the other hand,
when Manuel’s salary was withheld, he resigned
on November 30, 2005 citing the withholding of
his salary as an “illegal and unfair labor
practice.” In his letter he demanded that SHS
give him his salary and 13 th month pay. On
December 9, 2005, Manuel filed a Complaint
against SHS for illegal dismissal, non-payment
of salaries/wages and 13th month pay with prayer
for reinstatement and full backwages, exemplary
damages and attorney’s fees, costs of suit and
legal interest.
LA found respondent constructively dismissed.
On the other hand, the NLRC found otherwise,
and reversed said decision stating that the
withholding of wages was a valid exercise of
management prerogative.
The CA reversed the NLRC resolutions, the CA
held that withholding respondent’s salary was
not a valid exercise of management prerogative
as there is no such thing as a management
prerogative to withhold wages temporarily. The
malicious withholding of respondent’s salary
made it impossible or unacceptable for
respondent to continue working, thus,
compelling him to resign. The respondent’s
immediate filing of a complaint for illegal
dismissal could only mean that his resignation
was not voluntary. As a probationary employee
entitled to security of tenure, respondent was
illegally dismissed. The CA ruled out actual
reinstatement, because antagonism had caused a
severe strain in their relationship and instead,
separation pay equivalent to at least one month
pay, plus full backwages and other privileges
and benefits, or their monetary equivalent would
be a more equitable disposition.
ISSUE: WON employer can exercise
management prerogative in withholding
respondent’s wages?
RULING: No, employer cannot withhold the
wages.
The Supreme Court said that management
prerogative refers to “the right to regulate all
aspects of employment,” it cannot be understood
to include the right to temporarily withhold
salary/wages without the consent of the
employee.
To allow this would be contrary to Article 116
of the Labor Code which prohibits withholding
of wages and kickbacks.
The only allowable deductions are in Art. 113 of
the Labor Code:
(a) In cases where the worker is insured with his
consent by the employer, and the deduction is to
recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of
the worker or his union to check-off has been
recognized by the employer or authorized in
writing by the individual worker concerned; and
(c) In cases where the employer is authorized by
law or regulations issued by the Secretary of
Labor.
Further, Manuel’s duties as manager for
business development entailed cultivating
business ties, connections, and clients in order to
make sales. Thus because of the nature of his
job, he was frequently outside of the office and
did not report to the office on a regular schedule.
The Supreme Court said just because he failed to
answer e-mails and take Hartmannshenn’s calls
mean that he wasn’t working on November 16-
30, 2005. However, the consistent rule is that if
doubt exists between the evidence presented by
the employer and that by the employee, the
scales of justice must be tilted in favor of the
latter in line with the policy mandated by
Articles 2 and 3 of the Labor Code to afford
protection to labor and construe doubts in favor
of labor. SHS failed to satisfy their burden of
proof, so Manuel is presumed to have worked
during the period in question and is, accordingly,
entitled to his salary. Therefore, the withholding
of respondent’s salary by petitioners is contrary
to Article 116 of the Labor Code and, thus,
unlawful.
The Court agrees with the LA and the CA that
the unlawful withholding of respondent’s salary
amounts to constructive dismissal, which is an
act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable
on the part of the employee that it would
foreclose any choice by him except to forego his
continued employment. It exists where there is
cessation of work because continued
employment is rendered impossible,
unreasonable or unlikely, as an offer involving a
demotion in rank and a diminution in pay.
The Supreme Court affirmed the CA’s decision
with some modifications. Separation Pay of
P50,000.00 and no 13th month pay because it
was already included in the monthly wages.
Milan vs. NLRC
The return of the property’s possession became
an obligation or liability on the part of the
employees when the employer-employee
relationship ceased. Thus, respondent Solid
Mills has the right to withhold petitioners’
wages and benefits because of this existing debt
or liability.
FACTS: Petitioners are Solid Mills, Inc.’s
employees. They are represented by the National
Federation of Labor Unions (NAFLU), their
collective bargaining agent.
Petitioners and their families were allowed to
occupy SMI Village, a property owned by Solid
Mills out of liberality and for the convenience of
its employees . . . [and] on the condition that the
employees . . . would vacate the premises
anytime the Company deems fit.”
Petitioners were informed that effective October
10, 2003, Solid Mills would cease its operations
due to serious business losses. NAFLU
recognized Solid Mills’ closure due to serious
business losses in the memorandum of
agreement. The memorandum of agreement
provided for Solid Mills’ grant of separation pay
less accountabilities, accrued sick leave benefits,
vacation leave benefits, and 13th month pay to
the employees.
Later, Solid Mills, sent to petitioners individual
notices to vacate SMI Village. They were
required to sign a memorandum of agreement
with release and quitclaim before their pay
would be released. Petitioners refused to sign the
documents and demanded to be paid their
benefits and separation pay.
Hence, petitioners filed complaints before the
Labor Arbiter for alleged non-payment. They
argued that their accrued benefits and separation
pay should not be withheld because their
payment is based on company policy and
practice. Moreover, the 13th month pay is based
on law. Their possession of Solid Mills property
is not an accountability that is subject to
clearance procedures.
Petitioners argue that respondent Solid Mills and
NAFLU’s memorandum of agreement has no
provision stating that benefits shall be paid only
upon return of the possession of respondent
Solid Mills’ property. It only provides that the
benefits shall be “less accountabilities,” which
should not be interpreted to include such
possession.
ISSUE: WON PAYMENT OF THE
MONETARY CLAIMS OF PETITIONERS
SHOULD BE HELD IN ABEYANCE
PENDING COMPLIANCE OF THEIR
ACCOUNTABILITIES TO RESPONDENT
SOLID MILLS BY TURNING OVER THE
SUBJECT LOTS THEY RESPECTIVELY
OCCUPY AT SMI VILLAGE, SUCAT,
MUNTINLUPA CITY.
RULING: YES.
Requiring clearance before the release of last
payments to the employee is a standard
procedure among employers, whether public or
private. Clearance procedures are instituted to
ensure that the properties, real or personal,
belonging to the employer but are in the
possession of the separated employee, are
returned to the employer before the employee’s
departure.
As a general rule, employers are prohibited from
withholding wages from employees. The Labor
Code provides:
Art. 116. Withholding of wages and kickbacks
prohibited.
Art. 100. Prohibition against elimination or
diminution of benefits.
Art. 113. Wage deduction. No employer, in his
own behalf or in behalf of any person, shall
make any deduction from the wages of his
employees, except:
3. In cases where the employer is authorized by
law or regulations issued by the Secretary of
Labor and Employment.
The Civil Code provides that the employer is
authorized to withhold wages for debts due:
Article 1706. Withholding of the wages, except
for a debt due, shall not be made by the
employer.
“Debt” in this case refers to any obligation due
from the employee to the employer. It includes
any accountability that the employee may have
to the employer. There is no reason to limit its
scope to uniforms and equipment, as petitioners
would argue.
“Accountability,” in its ordinary sense, means
obligation or debt. As long as the debt or
obligation was incurred by virtue of the
employer-employee relationship, generally, it
shall be included in the employee’s
accountabilities that are subject to clearance
procedures.
In this case, respondent Solid Mills claims that
its properties are in petitioners’ possession by
virtue of their status as its employees.
Respondent Solid Mills allowed petitioners to
use its property as an act of liberality. Put in
other words, it would not have allowed
petitioners to use its property had they not been
its employees.
It may be true that not all employees enjoyed the
privilege of staying in respondent Solid Mills’
property. However, this alone does not imply
that this privilege when enjoyed was not a result
of the employer-employee relationship.
Petitioners’ possession should, therefore, be
included in the term “accountability.”
The return of the property’s possession became
an obligation or liability on the part of the
employees when the employer-employee
relationship ceased. Thus, respondent Solid
Mills has the right to withhold petitioners’
wages and benefits because of this existing debt
or liability.
The law does not sanction a situation where
employees who do not even assert any claim
over the employer’s property are allowed to take
all the benefits out of their employment while
they simultaneously withhold possession of their
employer’s property for no rightful reason.
Withholding of payment by the employer does
not mean that the employer may renege on its
obligation to pay employees their wages,
termination payments, and due benefits. The
employees’ benefits are also not being reduced.
It is only subjected to the condition that the
employees return properties properly belonging
to the employer. This is only consistent with the
equitable principle that “no one shall be unjustly
enriched or benefited at the expense of another.”
Mabeza vs. NLRC (Guidelines for deduction
of facilities)
Without satisfying these requirements, the
employer simply cannot deduct the value from
the employee's wages. First, proof must be
shown that such facilities are customarily
furnished by the trade. Second, the provision of
deductible facilities must be voluntarily accepted
in writing by the employee. Finally, facilities
must be charged at fair and reasonable value.
FACTS: Petitioner Norma Mabeza contends
that on the first week of May 1991, she and her
co-employees at the Hotel Supreme in Baguio
City were asked by the hotel's management to
sign an instrument attesting to the latter's
compliance with minimum wage and other labor
standard provisions of law. Petitioner signed the
affidavit but refused to go to the City
Prosecutor's Office to swear to the veracity and
contents of the affidavit as instructed by
management. The affidavit was nevertheless
submitted on the same day to the Regional
Office of the Department of Labor and
Employment in Baguio City.
The affidavit was drawn by management for the
sole purpose of refuting findings of the Labor
Inspector of DOLE apparently adverse to the
private respondent. After she refused to proceed
to the City Prosecutor's Office, petitioner states
that she was ordered by the hotel management to
turn over the keys to her living quarters and to
remove her belongings from the hotel premises.
According to her, respondent strongly chided her
for refusing to proceed to the City Prosecutor's
Office to attest to the affidavit. She thereafter
reluctantly filed a leave of absence from her job
which was denied by management. When she
attempted to return to work on May 1991, the
hotel's cashier informed her that she should not
report to work and, instead, continue with her
unofficial leave of absence.
Consequently, three days after her attempt to
return to work, petitioner filed a complaint for
illegal dismissal before the Arbitration Branch
of the National Labor Relations Commission —
CAR Baguio City. In addition to her complaint
for illegal dismissal, she alleged underpayment
of wages, non-payment of holiday pay, service
incentive leave pay, 13th month pay, night
differential and other benefits.
Responding to the allegations for illegal
dismissal, private respondent Peter Ng alleged
before Labor Arbiter that petitioner
surreptitiously left her job without notice to the
management and that she actually abandoned
her work. He maintained that there was no basis
for the money claims for underpayment and
other benefits as these were paid in the form of
facilities to petitioner and the hotel's other
employees.
Labor Arbiter dismissed the complaint. On April
1994, respondent NLRC promulgated its
assailed Resolution affirming the Labor Arbiter's
decision.
ISSUE: WON the employer’s exerted pressure,
in the form of restraint, interference or coercion,
against his employee's right to institute
concerted action for better terms and conditions
of employment constitutes unfair labor practice.
RULING: The Court ruled that there was unfair
labor practice.
Without doubt, the act of compelling employees
to sign an instrument indicating that the
employer observed labor standards provisions of
law when he might have not, together with the
act of terminating or coercing those who refuse
to cooperate with the employer's scheme
constitutes unfair labor practice. The first act
clearly preempts the right of the hotel's workers
to seek better terms and conditions of
employment through concerted action. For
refusing to cooperate with the private
respondent's scheme, petitioner was obviously
held up as an example to all of the hotel's
employees, that they could only cause trouble to
management at great personal inconvenience.
Implicit in the act of petitioner's termination and
the subsequent filing of charges against her was
the warning that they would not only be
deprived of their means of livelihood, but also
possibly, their personal liberty.
Granting that meals and lodging were provided
and indeed constituted facilities, such facilities
could not be deducted without the employer
complying first with certain legal requirements.
Without satisfying these requirements, the
employer simply cannot deduct the value from
the employee's wages. First, proof must be
shown that such facilities are customarily
furnished by the trade. Second, the provision of
deductible facilities must be voluntarily accepted
in writing by the employee. Finally, facilities
must be charged at fair and reasonable value.
These requirements were not met in the instant
case.
More significantly, the food and lodging, or the
electricity and water consumed by the petitioner
were not facilities but supplements. A benefit or
privilege granted to an employee for the
convenience of the employer is not a facility.
The criterion in making a distinction between
the two not so much lies in the kind (food,
lodging) but the purpose. Considering that hotel
workers are required to work different shifts and
are expected to be available at various odd
hours, their ready availability is a necessary
matter in the operations of a small hotel, such as
the private respondent's hotel.
Eastern Telecoms Phil. Inc. vs. Eastern
Telecom Employees Union (14th, 15th and 16th
month pay included in the CBA, Company
Practice)
Verily, by virtue of its incorporation in the CBA
Side Agreements, the grant of 14th, 15th and
16th month bonuses has become more than just
an act of generosity on the part of ETPI but a
contractual obligation it has undertaken. From
the foregoing, ETPI cannot insist on business
losses as a basis for disregarding its
undertaking.
FACTS: Eastern Telecommunications Phils.,
Inc. (ETPI) is a corporation engaged in the
business of providing telecommunications
facilities. Eastern Telecoms Employees Union
(ETEU) is the certified exclusive bargaining
agent of the company’s rank and file employees.
It has an existing CBA with the company to
expire in the year 2004 with a Side Agreement
signed on September 3, 2001.
In essence, the labor dispute was a spin-off of
the company’s plan to defer payment of the
2003 14th, 15th and 16th month bonuses
sometime in April 2004. The company’s main
ground in postponing the payment of bonuses is
due to allege continuing deterioration of
company’s financial position which started in
the year 2000. However, ETPI while postponing
payment of bonuses sometime in April 2004,
such payment would also be subject to
availability of funds.
Invoking the Side Agreement of the existing
CBA for the period 2001-2004 between ETPI
and ETEU, the union strongly opposed the
deferment in payment of the bonuses by filing a
preventive mediation complaint with the
NCMB.
Later, the company made a sudden turnaround in
its position by declaring that they will no longer
pay the bonuses until the issue is resolved
through compulsory arbitration.
Thus ETEU filed a Notice of Strike on the
ground of unfair labor practice for failure of
ETPI to pay the bonuses in gross violation of the
economic provision of the existing CBA.
ETPI insists that it is under no legal compulsion
to pay 14th, 15th and 16th month bonuses for
the year 2003 and 14th month bonus for the year
2004 contending that they are not part of the
demandable wage or salary and that their grant
is conditional based on successful business
performance and the availability of company
profits from which to source the same. To thwart
ETEU’s monetary claims, it insists that the
distribution of the subject bonuses falls well
within the company’s prerogative, being an act
of pure gratuity and generosity on its part. Thus,
it can withhold the grant thereof especially since
it is currently plagued with economic difficulties
and financial losses.
ETPI further avers that the act of giving the
subject bonuses did not ripen into a company
practice arguing that it has always been a
contingent one dependent on the realization of
profits and, hence, the workers are not entitled to
bonuses if the company does not make profits
for a given year. It asseverates that the 1998 and
2001 CBA Side Agreements did not
contractually afford ETEU a vested property
right to a perennial payment of the bonuses. It
opines that the bonus provision in the Side
Agreement allows the giving of benefits only at
the time of its execution. For this reason, it
cannot be said that the grant has ripened into a
company practice.
ISSUE: Is ETPI is liable to pay 14th, 15th and
16th month bonuses for the year 2003 and 14th
month bonus for the year 2004 to the members
of respondent union?
RULING: Yes, ETPI is liable to pay.
From a legal point of view, a bonus is a gratuity
or act of liberality of the giver which the
recipient has no right to demand as a matter of
right. The grant of a bonus is basically a
management prerogative which cannot be forced
upon the employer who may not be obliged to
assume the onerous burden of granting bonuses
or other benefits aside from the employee’s
basic salaries or wages.
A bonus, however, becomes a demandable or
enforceable obligation when it is made part of
the wage or salary or compensation of the
employee.
Whether or not a bonus forms part of wages
depends upon the circumstances and conditions
for its payment. If it is additional compensation
which the employer promised and agreed to give
without any conditions imposed for its payment,
such as success of business or greater production
or output, then it is part of the wage. But if it is
paid only if profits are realized or if a certain
level of productivity is achieved, it cannot be
considered part of the wage. Where it is not
payable to all but only to some employees and
only when their labor becomes more efficient or
more productive, it is only an inducement for
efficiency, a prize therefore, not a part of the
wage.
In the case at bench, it is indubitable that ETPI
and ETEU agreed on the inclusion of a provision
for the grant of 14th, 15th and 16th month
bonuses in the 1998-2001 CBA Side Agreement,
as well as in the 2001-2004 CBA Side
Agreement, which was signed on September 3,
2001. The provision, which was similarly
worded, states:
The Company confirms that the 14th, 15th and
16th month bonuses (other than the 13th month
pay) are granted.
A reading of the above provision reveals that the
same provides for the giving of 14th, 15th and
16th month bonuses without qualification. The
wording of the provision does not allow any
other interpretation. There were no conditions
specified in the CBA Side Agreements for the
grant of the benefits contrary to the claim of
ETPI that the same is justified only when there
are profits earned by the company. Thus, it is
clear, the said provision does not state that the
subject bonuses shall be made to depend on the
ETPI’s financial standing or that their payment
was contingent upon the realization of profits.
Neither does it state that if the company derives
no profits, no bonuses are to be given to the
employees.
In fine, the payment of these bonuses was not
related to the profitability of business operations.
In the absence of any proof that ETPI’s consent
was vitiated by fraud, mistake or duress, it is
presumed that it entered into the Side Agreement
voluntarily, that it had full knowledge of the
contents thereof and that it was aware of its
commitment under the contract.
Verily, by virtue of its incorporation in the CBA
Side Agreements, the grant of 14th, 15th and
16th month bonuses has become more than just
an act of generosity on the part of ETPI but a
contractual obligation it has undertaken. From
the foregoing, ETPI cannot insist on business
losses as a basis for disregarding its undertaking.
Granting arguendo that the CBA Side
Agreement does not contractually bind petitioner
ETPI to give the subject bonuses, nevertheless,
the Court finds that its act of granting the same
has become an established company practice
such that it has virtually become part of the
employees’ salary or wage. A bonus may be
granted on equitable consideration when the
giving of such bonus has been the company’s
long and regular practice. In Philippine
Appliance Corporation v. CA, it was
pronounced:
To be considered a “regular practice,”
however, the giving of the bonus should have
been done over a long period of time, and must
be shown to have been consistent and deliberate.
The test or rationale of this rule on long practice
requires an indubitable showing that the
employer agreed to continue giving the benefits
knowing fully well that said employees are not
covered by the law requiring payment thereof.
The records show that ETPI, aside from
complying with the regular 13th month
bonus, has been further giving its employees
14th month bonus every April as well as 15th
and 16th month bonuses every December of
the year, without fail, from 1975 to 2002 or
for 27 years whether it earned profits or not.
The considerable length of time ETPI has been
giving the special grants to its employees
indicates a unilateral and voluntary act on its
part to continue giving said benefits knowing
that such act was not required by law.
Accordingly, a company practice in favor of the
employees has been established and the
payments made by ETPI pursuant thereto
ripened into benefits enjoyed by the employees.
Note: If the bonus is provided under the CBA,
the company has a contractual obligation to give
such bonus, provided that such provision is
unqualified. If it is qualified then it becomes a
non-demandable right, absent the conditions
prescribed.
Honda Phils., Inc. vs. Samahan ng mga
Malayang Manggagawa sa Honda (Pro-rated
13th month pay)
The IRR also provide for a pro-ration of this
benefit ONLY in cases of resignation or
separation from work. In the present case, there
being no resignation/separation, the
computation of the 13th month pay should not be
pro-rated but should be given in full.
FACTS: The case stems from the collective
bargaining agreement between Honda and the
respondent union that it granted the computation
of 14th month pay as the same as 13th month
pay. Honda continues the practice of granting
financial assistance covered every December
each year of not less than 100% of the basic
salary. In the latter part of 1998, the parties
started to re-negotiate for the fourth and fifth
years of the CBA. The union filed a notice of
strike on the ground of unfair labor practice for
deadlock.
DOLE assumed jurisdiction over the case and
certified it to the NLRC for compulsory
arbitration. The striking employees were ordered
to return to work and management to accept
them back under the same terms prior to the
strike staged. Honda issued a memorandum of
the new computation of the 13th month and 14th
month pay to be granted to all its employees
whereby the 31 long strikes shall be considered
unworked days for purpose of computing the
said benefits. The amount equivalent to ½ of the
employees’ basic salary shall be deducted from
these bonuses, with a commitment that in the
event that the strike is declared legal, Honda
shall pay the amount.
The respondent union opposed the pro-rated
computation of bonuses. This issue was
submitted to voluntary arbitration where it ruled
that the company’s implementation of the pro-
rated computation is invalid.
ISSUE: WON the pro-rated computation of the
13th and 14th month pays and other bonuses in
question are valid and lawful?
RULING: The pro-rated computation is invalid.
13th month pay should be based on the length of
service and not on the actual wage earned by the
worker. PD 851 or the 13th Month Pay Law was
issued to protect the level of wages of workers
from worldwide inflation. The Court has
interpreted “basic salary” to mean, NOT the
amount actually received by an employee, but
1/12 of their standard monthly wage multiplied
by their length of service within a given calendar
year. The IRR also provide for a pro-ration of
this benefit ONLY in cases of resignation or
separation from work. In the present case, there
being no resignation/separation, the computation
of the 13th month pay should not be pro-rated
but should be given in full. Moreover, it has not
been proven that Honda has been implementing
pro-rating of the 13th month pay before the
present case. It is not a company practice. In
fact, there was an implicit acceptance that prior
to the strike, a full month basic pay computation
was the “present practice” intended in the CBA.
It was the second strike that prompted the
company to adopt the pro-rata computation.
The pro-rated computation of Honda as a
company policy has not ripened into a company
practice and it was the first time they
implemented such practice.
The payment of the 13th month pay in full
month payment by Honda has become an
established practice. The length of time where it
should be considered in practice is not being laid
down by jurisprudence. The voluntary act of the
employer cannot be unilaterally withdrawn
without violating Article 100 of the Labor Code.
The court also rules that the withdrawal of the
benefit of paying a full month salary for 13th
month pay shall constitute a violation of Article
100 of the Labor Code.
Arco Metal Products Co. Inc. vs. Samahan ng
mga Manggagawa sa Arco Metal
In the years 1992, 1993, 1994, 1999, 2002 and
2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full
benefits to its employees regardless of the length
of service rendered. True, there were only a
total of seven employees who benefited from
such a practice, but it was an established
practice nonetheless
FACTS: Petitioner is a company engaged in the
manufacture of metal products, whereas
respondent is the labor union of petitioner’s rank
and file employees. Sometime in December
2003, petitioner paid the 13th month pay, bonus,
and leave encashment of three union members in
amounts proportional to the service they actually
rendered in a year, which is less than a full
twelve (12) months. Respondent protested the
prorated scheme, claiming that on several
occasions petitioner did not prorate the payment
of the same benefits to seven (7) employees who
had not served for the full 12 months. According
to respondent, the prorated payment violates the
rule against diminution of benefits under Article
100 of the Labor Code. Thus, they filed a
complaint before the National Conciliation and
Mediation Board (NCMB)
ISSUE: WON the grant of 13th month pay,
bonus, and leave encashment in full regardless
of actual service rendered constitutes voluntary
employer practice and, consequently, whether or
not the prorated payment of the said benefits
constitute diminution of benefits under Article
100 of the Labor Code.
RULING: Any benefit and supplement being
enjoyed by employees cannot be reduced,
diminished, discontinued or eliminated by the
employer.
The principle of non-diminution of benefits is
founded on the Constitutional mandate to
"protect the rights of workers and promote their
welfare and to afford labor full protection. Said
mandate in turn is the basis of Article 4 of the
Labor Code which states that all doubts in the
implementation and interpretation of this Code,
including its implementing rules and regulations
shall be rendered in favor of labor.
Jurisprudence is replete with cases which
recognize the right of employees to benefits
which were voluntarily given by the employer
and which ripened into company practice. Thus
in Davao Fruits Corporation v. Associated Labor
Unions, et al. where an employer had freely and
continuously included in the computation of the
13th month pay those items that were expressly
excluded by the law, we held that the act which
was favorable to the employees though not
conforming to law had thus ripened into a
practice and could not be withdrawn, reduced,
diminished, discontinued or eliminated. In
Sevilla Trading Company v. Semana, we ruled
that the employer’s act of including non-basic
benefits in the computation of the 13th month
pay was a voluntary act and had ripened into a
company practice which cannot be peremptorily
withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and
2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full
benefits to its employees regardless of the length
of service rendered. True, there were only a total
of seven employees who benefited from such a
practice, but it was an established practice
nonetheless. Jurisprudence has not laid down
any rule specifying a minimum number of years
within which a company practice must be
exercised in order to constitute voluntary
company practice. Thus, it can be six (6) years,
three (3) years, or even as short as two (2) years.
Petitioner cannot shirk away from its
responsibility by merely claiming that it was a
mistake or an error, supported only by an
affidavit of its manufacturing group head.
Note: Art. 100 Non-diminution rule is violated
when: 1) the grant of benefits is founded on a
policy or ripened into a practice over a long
period, 2) practice is consistent and deliberate,
3) practice is not due to error in the construction
or application of a difficult or doubtful question
of law, 4) the diminution is done unilaterally.
Prubankers Association v. Prudential Bank
and Trust Co. (Wage Distortion)
A disparity in wages between employees holding
similar positions but in different regions does
not constitute wage distortion as contemplated
by law
FACTS: The Regional Tripartite Wages and
Productivity Board of Region V issued Wage
Order No. RB 05-03 which provided for a Cost
of Living Allowance (COLA) to workers in the
private sector who ha[d] rendered service for at
least three (3) months, P17.50 in Naga and
Legaspi; P15.50 in Tabaco, Daraga, Pili and
Iriga; and P10.00 for all other areas in the Bicol
Region.
The Regional Tripartite Wages and Productivity
Board of Region VII issued Wage Order No. RB
VII-03, which directed the integration of the
COLA mandated pursuant to Wage Order No.
RO VII-02-A into the basic pay of all workers.
It also established an increase in the minimum
wage rates for all workers and employees in the
private sector as follows: by P10.00 in Cebu,
Mandaue and Lapulapu; P5.00 in Compostela,
Liloan, Consolacion, Cordova, Talisay,
Minglanilla, Naga and Davao, Toledo,
Dumaguete, Bais, Canlaon, and Tagbilaran.
PBTC granted a COLA of P17.50 to its
employees at its Naga Branch, the only branch
covered by Wage Order No. RB 5-03, and
integrated the P150.00 per month COLA into the
basic pay of its rank-and-file employees at its
Cebu, Mabolo and P. del Rosario branches, the
branches covered by Wage Order No. RB VII-
03.
Prubankers Association then demanded that the
PBTC extend the application of the wage orders
to its employees outside Regions V and VII,
claiming that the regional implementation of the
said orders created a wage distortion in the wage
rates of PBTC’s employees nationwide. The
grievance was not settled in the meetings and the
parties resorted to voluntary arbitration.
The arbitrators ruled that there was wage
distortion nationwide, as per Art. 124 of the
Labor Code. However, the CA reversed it saying
that the variance in the salary rates of employees
in different regions of the country was justified
by RA 6727.
ISSUE: Was there wage distortion when PBTC
applied the two wage orders to only those
regions mentioned and not including others
regions in the country?
RULING: No, there is no wage distortion
The concept of wage distortion assumes an
existing grouping or classification of employees
which establishes distinctions among such
employees on some relevant or legitimate basis.
This classification is reflected in a differing
wage rate for each of the existing classes of
employees”
Wage distortion involves four elements: (1) An
existing hierarchy of positions with
corresponding salary rates; (2) A significant
change in the salary rate of a lower pay class
without a concomitant increase in the salary rate
of a higher one; (3) The elimination of the
distinction between the two levels; and (4) The
existence of the distortion in the same region of
the country.
In the present case, it is clear that no wage
distortion resulted when respondent
implemented the subject Wage Orders in the
covered branches. In the said branches, there
was an increase in the salary rates of all pay
classes. Furthermore, the hierarchy of positions
based on skills, length of service and other
logical bases of differentiation was preserved.
In other words, the quantitative difference in
compensation between different pay classes
remained the same in all branches in the affected
region.
A disparity in wages between employees
holding similar positions but in different regions
does not constitute wage distortion as
contemplated by law. As previously enunciated,
it is the hierarchy of positions and the disparity
of their corresponding wages and other
emoluments that are sought to be preserved by
the concept of wage distortion. Put differently, a
wage distortion arises when a wage order
engenders wage parity between employees in
different rungs of the organizational ladder of
the same establishment. It bears emphasis that
wage distortion involves a parity in the salary
rates of different pay classes which, as a result,
eliminates the distinction between the different
ranks in the same region.
The difference in wages between employees in
the same pay scale in different regions is not the
mischief sought to be banished by the law. In
fact, Republic Act No. 6727 (the Wage
Rationalization Act), recognizes “existing
regional disparities in the cost of living.”
A disparity in wages between employees with
similar positions in different regions is
necessarily expected. In insisting that the
employees of the same pay class in different
regions should receive the same compensation,
petitioner has apparently misunderstood both the
meaning of wage distortion and the intent of the
law to regionalize wage rates.
It must be understood that varying in each
region of the country are controlling factors such
as the cost of living; supply and demand of basic
goods, services and necessities; and the
purchasing power of the peso. Other
considerations underscore the necessity of the
law. Wages in some areas may be increased in
order to prevent migration to the National
Capital Region and, hence, to decongest the
metropolis. Therefore, what the petitioner
herein bewails is precisely what the law provides
in order to achieve its purpose.
A uniform national wage structure is antithetical
to the purpose of RA 6727.
Petitioner also avers that the implementation of
the Wage Order in only one region violates the
equal-pay-for-equal-work principle. This is not
correct. At the risk of being repetitive, we stress
that RA 6727 mandates that wages in every
region must be set by the particular wage board
of that region, based on the prevailing situation
therein. Necessarily, the wages in different
regions will not be uniform. Thus, under RA
6727, the minimum wage in Region 1 may be
different from that in Region 13, because the
socioeconomic conditions in the two regions are
different.
PBTC’s nationwide uniform wage policy of the
Bank had been adopted prior to the enactment of
RA 6727. After the passage of said law, the
Bank was mandated to regionalize its wage
structure. Although the Bank implemented
Wage Order Nos. NCR-01 and NCR-02
nationwide instead of regionally even after the
effectivity of RA 6727, the Bank at the time was
still uncertain about how to follow the new law.
In any event, that single instance cannot be
constitutive of “management practice.”
Metropolitan Bank & Trust Company
Employees Union vs. NLRC (Wage
Distortion)
wage distortion occurs when an increase in
prescribed wage rates results in the elimination
or severe contraction of intentional quantitative
differences in wage or salary rates between and
among employee groups in an establishment as
to effectively obliterate the distinctions
embodied in such wage structure based on skills,
length of service, or other logical bases of
differentiation
FACTS: On May 25, 1989, Metro Bank entered
into a collective bargaining agreement with the
MBTCEU, granting a monthly P900 wage
increase effective January 1, 1989, P600 on
1990, and P200 on 1991. Subsequently, on July
1989, Republic Act 6727 (fixing new wage
rates, providing wage incentives for industrial
dispersal to the countryside, and for other
purposes) took effect. Under section 4, “all
workers and employees in the private sector,
whether agricultural or non-agricultural, shall be
increased by twenty-five pesos (P25) per day.”
The law also provided that those already
receiving above the minimum wage rates up to
P100 shall also receive an increase of P25 per
day. Lastly, it provided that increases in daily
wage rates granted 3 months before the
effectivity of RA 6727 shall be credited as
compliance, if such increase be less than what
was prescribed, the employer shall pay the
difference. Pursuant to RA 6727, the bank gave
the P25 increase per day, or P750 a month, to its
probationary employees and to those who had
been promoted to regular or permanent status
before 01 July 1989 but whose daily rate was
P100 and below. The bank refused to give the
same increase to its regular employees who were
receiving more than P100 per day and recipients
of the P900 CBA increase.
This resulted in the categorization of the
employees into (a) the probationary employees
as of 30 June 1989 and regular employees
receiving P100 or less a day who had been
promoted to permanent or regular status before
01 July 1989, and (b) the regular employees as
of January 1989, whose pay was over P100 a
day, and that, between the two groups, there
emerged a substantially reduced salary gap. To
quell an impending strike, Metro Bank sought
compulsory arbitration of the NLRC. The labor
arbiter held in favor of the union while the
NLRC second division reversed the former
hence, this petition.
ISSUE: WON there was a wage distortion
which resulted to a severe contraction of an
intentional quantitative difference in wage rates
between employee groups?
RULING: Yes, according to the rules
implementing RA 6727, wage distortion occurs
when an increase in prescribed wage rates
results in the elimination or severe contraction of
intentional quantitative differences in wage or
salary rates between and among employee
groups in an establishment as to effectively
obliterate the distinctions embodied in such
wage structure based on skills, length of service,
or other logical bases of differentiation. Such
event results in the "elimination or severe
contraction of intentional quantitative
differences in wage or salary rates" would occur
"between and among employee groups in an
establishment as to effectively obliterate the
distinctions embodied in such wage structure
based on skills, length of service, or other
logical bases of differentiation. The law did not
require that there be an elimination or total
abrogation of quantitative wage or salary
differences; a severe contraction thereof is
enough. As has been aptly observed by
Presiding Commissioner Edna Bonto Perez in
her dissenting opinion, the contraction between
personnel groupings comes close to eighty-three
(83%), which cannot, by any stretch of
imagination, be considered less than severe.
The court however does not agree with the
suggestion of the labor arbiter that there be a
P750 across the board increase to fix the
distortion, such increase would penalize
employers who grant their workers more than
the statutorily prescribed minimum rates of
increases. We find the formula suggested then
by Commissioner Bonto-Perez, which has also
been the standard considered by the Regional
Tripartite Wages and Productivity Commission
for the correction of pay scale structures in cases
of wage distortion, to well be the appropriate
measure to balance the respective contentions of
the parties in this instance. We also view it as
being just and equitable.
*prescribed formula: Minimum Wage = % x
Prescribed = Distortion Actual Salary Increase
Adjustment
Bankard Employees Union-Worker Alliance
Trade Unions vs. NLRC (Salary Scale)
Petitioner cannot legally obligate Bankard to
correct the alleged “wage distortion” as the
increase in the wages and salaries of the newly-
hired was not due to a prescribed law or wage
order.
FACTS: Bankard, Inc. classifies its employees
by levels, to wit: Level I, Level II, Level III,
Level IV, and Level V. Its Board of Directors
approved a “New Salary Scale”, made
retroactive for the purpose of making its hiring
rate competitive in the industry’s labor market.
The “New Salary Scale” increased the hiring
rates of new employees, to wit: Levels I and V
by P1,000.00, and Levels II, III and IV by
P900.00. The salaries of employees who fell
below the new minimum rates were also
adjusted to reach such rates under their levels.
Bankard’s move drew the Bankard Employees
Union-WATU, the duly certified exclusive
bargaining agent of the regular rank and file
employees of Bankard, to press for the increase
in the salary of its old, regular employees.
Bankard took the position that there was no
obligation on the part of the management to
grant to all its employees the same increase in an
across-the-board manner. The Second Division
of the NLRC, by Order of May 31, 1995, finding
no wage distortion, dismissed the case for lack
of merit. The petition was referred to the CA
which denied the same for lack of merit.
ISSUE: WON the unilateral adoption by an
employer of an upgraded salary scale that
increased the hiring rates of new employees
without increasing the salary rates of old
employees resulted in wage distortion within the
contemplation of Article 124 of the Labor Code?
RULING: No. Prubankers Association v.
Prudential Bank and Trust Company laid down
the four elements of wage distortion, to wit: (1.)
An existing hierarchy of positions with
corresponding salary rates; (2) A significant
change in the salary rate of a lower pay class
without a concomitant increase in the salary rate
of a higher one; (3) The elimination of the
distinction between the two levels; and (4) The
existence of the distortion in the same region of
the country. Normally, a company has a wage
structure or method of determining the wages of
its employees. In a problem dealing with “wage
distortion,” the basic assumption is that there
exists a grouping or classification of employees
that establishes distinctions among them on
some relevant or legitimate bases.
Thus the employees of private respondent have
been “historically” classified into levels, i.e. I to
V, and not on the basis of their length of service.
Put differently, the entry of new employees to
the company ipso facto place[s] them under any
of the levels mentioned in the new salary scale
which private respondent adopted retroactive
[to] April 1, 1993. Petitioner cannot make a
contrary classification of private respondent’s
employees without encroaching upon recognized
management prerogative of formulating a wage
structure, in this case, one based on level. It is
thus clear that there is no hierarchy of positions
between the newly hired and regular employees
of Bankard, hence, the first element of wage
distortion provided in Prubankers is wanting.
Even assuming that there is a decrease in the
wage gap between the pay of the old employees
and the newly hired employees, to our mind said
gap is not significant as to obliterate or result in
severe contraction of the intentional quantitative
differences in the salary rates between the
employee groups. As already stated, the
classification under the wage structure is based
on the rank of an employee, not on seniority. For
this reason, wage distortion does not appear to
exist.
Apart from the findings of fact of the NLRC and
the Court of Appeals that some of the elements
of wage distortion are absent, petitioner cannot
legally obligate Bankard to correct the alleged
“wage distortion” as the increase in the wages
and salaries of the newly-hired was not due to a
prescribed law or wage order.
If the compulsory mandate under Article
124 to correct “wage distortion” is applied to
voluntary and unilateral increases by the
employer in fixing hiring rates which is
inherently a business judgment prerogative, then
the hands of the employer would be completely
tied even in cases where an increase in wages of
a particular group is justified due to a re-
evaluation of the high productivity of a
particular group, or as in the present case, the
need to increase the competitiveness of
Bankard’s hiring rate. An employer would be
discouraged from adjusting the salary rates of a
particular group of employees for fear that it
would result to a demand by all employees for a
similar increase, especially if the financial
conditions of the business cannot address an
across-the-board increase.
Note: Wage distortion is present only in cases of
distortions cause by a WAGE ORDER. An
employer’s salary scheme will not amount to
Wage Distortion.
Duncan Assoc. vs. Glaxo (Prohibition from
marrying an employee of a competitor
company)
The prohibition against personal or marital
relationships with employees of competitor
companies upon Glaxo’s employees is
reasonable under the circumstances because
relationships of that nature might compromise
the interests of the company.
FACTS: Petitioner Pedro Tecson was hired by
respondent Glaxo as medical representative,
after Tecson had undergone training and
orientation. Thereafter, Tecson signed a contract
of employment which stipulates, among others,
that he agrees to study and abide by existing
company rules; to disclose to management any
existing or future relationship by consanguinity
or affinity with co-employees or employees of
competing drug companies and should
management find that such relationship poses a
possible conflict of interest, to resign from the
company. The Employee Code of Conduct of
Glaxo similarly provides that an employee is
expected to inform management of any existing
or future relationship by consanguinity or
affinity with co-employees or employees of
competing drug companies.
Tecson was initially assigned to market Glaxo’s
products in the Camarines Sur-Camarines Norte
sales area. Subsequently, Tecson entered into a
romantic relationship with Bettsy, an employee
of Astra, a competitor of Glaxo. She was Astra’s
Branch Coordinator in Albay and supervised the
district managers and medical representatives of
her company and prepared marketing strategies
for Astra in that area. The two married even with
the several reminders given by the District
Manager to Tecson. In January 1999, Tecson’s
superiors informed him that his marriage to
Bettsy gave rise to a conflict of interest.
Tecson’s superiors reminded him that he and
Bettsy should decide which one of them would
resign from their jobs, although they told him
that they wanted to retain him as much as
possible because he was performing his job well.
This situation eventually led to his constructive
dismissal.
ISSUE: WON Glaxo’s policy prohibiting its
employees from marrying an employee of a
competitor company is valid?
RULING: Yes it is valid. Glaxo’s policy
prohibiting an employee from having a
relationship with an employee of a competitor
company is a valid exercise of management
prerogative.
Tecson’s contract of employment with Glaxo
being questioned, stipulates that Tescon agrees
to abide by the existing company rules of Glaxo,
and to study and become acquainted with such
policies. In this regard, the Employee Handbook
of Glaxo expressly informs its employees of its
rules regarding conflict of interest. No reversible
error can be ascribed to the Court of Appeals
when it ruled that Glaxo’s policy prohibiting an
employee from having a relationship with an
employee of a competitor company is a valid
exercise of management prerogative. Glaxo has
a right to guard its trade secrets, manufacturing
formulas, marketing strategies and other
confidential programs and information from
competitors, especially so that it and Astra are
rival companies in the highly competitive
pharmaceutical industry.
The prohibition against personal or marital
relationships with employees of competitor
companies upon Glaxo’s employees is
reasonable under the circumstances because
relationships of that nature might compromise
the interests of the company. In laying down the
assailed company policy, Glaxo only aims to
protect its interests against the possibility that a
competitor company will gain access to its
secrets and procedures. That Glaxo possesses the
right to protect its economic interests cannot be
denied. No less than the Constitution recognizes
the right of enterprises to adopt and enforce such
a policy to protect its right to reasonable returns
on investments and to expansion and growth.
Indeed, while our laws endeavor to give life to
the constitutional policy on social justice and the
protection of labor, it does not mean that every
labor dispute will be decided in favor of the
workers. The law also recognizes that
management has rights which are also entitled to
respect and enforcement in the interest of fair
play.
Note: Reasonable business necessity rule
Star Paper vs. Simbol (Compare with Glaxo)
The requirement is that a company policy must
be reasonable under the circumstances to
qualify as a valid exercise of management
prerogative
FACTS: Simbol was employed by the company
on Oct 1993. He met Alma Dayrit, also an
employee of the company, whom he married.
Prior to the marriage, Ongsitco advised the
couple that should they decide to get married,
one of them should resign pursuant to a
company policy to which Simbol complied.
1. New applicants will not be allowed to be
hired if in case he/she has [a] relative, up to [the]
3rd degree of relationship, already employed by
the company.
2. In case of two of our employees (both singles
[sic], one male and another female) developed a
friendly relationship during the course of their
employment and then decided to get married,
one of them should resign to preserve the policy
stated above.
ISSUE: WON the policy of the employer
banning spouses from working in the same
company violates the rights of the employee
under the Constitution and the Labor Code or is
a valid exercise of management prerogative?
RULING: Petitioners’ sole contention that "the
company did not just want to have two or more
of its employees related between the third degree
by affinity and/or consanguinity" is lame.
Article 136 of the Labor Code which provides:
It shall be unlawful for an employer to require
as a condition of employment or continuation of
employment that a woman employee shall not
get married, or to stipulate expressly or tacitly
that upon getting married a woman employee
shall be deemed resigned or separated, or to
actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely
by reason of her marriage.
The requirement is that a company policy must
be reasonable under the circumstances to qualify
as a valid exercise of management prerogative.
It is significant to note that in the case at bar,
respondents were hired after they were found fit
for the job, but were asked to resign when they
married a co-employee. Petitioners failed to
show how the marriage of Simbol, then a
Sheeting Machine Operator, to Alma Dayrit,
then an employee of the Repacking Section,
could be detrimental to its business operations.
The policy is premised on the mere fear that
employees married to each other will be less
efficient. If we uphold the questioned rule
without valid justification, the employer can
create policies based on an unproven
presumption of a perceived danger at the
expense of an employee’s right to security of
tenure.
The questioned policy may not facially violate
Article 136 of the Labor Code but it creates a
disproportionate effect and under the disparate
impact theory, the only way it could pass
judicial scrutiny is a showing that it is
reasonable despite the discriminatory, albeit
disproportionate, effect. The failure of
petitioners to prove a legitimate business
concern in imposing the questioned policy
cannot prejudice the employee’s right to be free
from arbitrary discrimination based upon
stereotypes of married persons working together
in one company.
Philippine Telegraph and Telephone Co. vs.
NLRC
The Constitution, cognizant of the disparity in
rights between men and women in almost all
phases of social and political life, provides a
gamut of protective provisions. Acknowledged
as paramount in the due process scheme is the
constitutional guarantee of protection to labor
and security of tenure.
FACTS: Seeking relief through the
extraordinary writ of certiorari, petitioner
Philippine Telegraph and Telephone Company
(hereafter, PT&T) invokes the alleged
concealment of civil status and defalcation of
company funds as grounds to terminate the
services of an employee. That employee, herein
private respondent Grace de Guzman, contrarily
argues that what really motivated PT&T to
terminate her services was her having contracted
marriage during her employment, which is
prohibited by petitioner in its company policies.
She thus claims that she was discriminated
against in gross violation of law, such a
proscription by an employer being outlawed by
Article 136 of the Labor Code.
ISSUE: WON the policy of not accepting or
considering as disqualified from work any
woman worker who contracts marriage is valid?
RULING: Petitioner’s policy of not accepting
or considering as disqualified from work any
woman worker who contracts marriage runs
afoul of the test of, and the right against,
discrimination, afforded all women workers by
our labor laws and by no less than the
Constitution.
The Constitution, cognizant of the disparity in
rights between men and women in almost all
phases of social and political life, provides a
gamut of protective provisions. Acknowledged
as paramount in the due process scheme is the
constitutional guarantee of protection to labor
and security of tenure. Thus, an employer is
required, as a condition sine qua non prior to
severance of the employment ties of an
individual under his employ, to convincingly
establish, through substantial evidence, the
existence of a valid and just cause in dispensing
with the services of such employee, one’s labor
being regarded as constitutionally protected
property. The government, to repeat, abhors any
stipulation or policy in the nature of that adopted
by petitioner PT&T. The Labor Code states, in
no uncertain terms, as follows:
“ART. 136. Stipulation against marriage. - It
shall be unlawful for an employer to require as
a condition of employment or continuation of
employment that a woman shall not get married,
or to stipulate expressly or tacitly that upon
getting married, a woman employee shall be
deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason
of marriage.”
In the case at bar, it can easily be seen from the
memorandum sent to private respondent by the
branch supervisor of the company, with the
reminder, that “you’re fully aware that the
company is not accepting married women
employee (sic), as it was verbally instructed to
you.” Again, in the termination notice sent to her
by the same branch supervisor, private
respondent was made to understand that her
severance from the service was not only by
reason of her concealment of her married status
but, over and on top of that, was her violation of
the company’s policy against marriage (“and
even told you that married women employees
are not applicable [sic] or accepted in our
company.”
Petitioner’s policy is not only in derogation of
the provisions of Article 136 of the Labor Code
on the right of a woman to be free from any kind
of stipulation against marriage in connection
with her employment, but it likewise assaults
good morals and public policy, tending as it does
to deprive a woman of the freedom to choose her
status, a privilege that by all accounts inheres in
the individual as an intangible and inalienable
right. Hence, while it is true that the parties to a
contract may establish any agreements, terms,
and conditions that they may deem convenient,
the same should not be contrary to law, morals,
good customs, public order, or public policy.
Carried to its logical consequences, it may even
be said that petitioner’s policy against legitimate
marital bonds would encourage illicit or
common-law relations and subvert the sacrament
of marriage.
Zialcita vs. PAL
Article 136's protection of women is broader
and more powerful than the regulation provided
under Article 132.
FACTS: Zialcita is a stewardess of PAL. She
was fired from work because she had gotten
married. PAL argued and cited its policy that
stewardesses must be single. The policy also
states that subsequent marriage of a stewardess
shall automatically terminate employment.
Zialcita anchored on Article 136 of the Labor
Code. PAL sought refuge from Article 132.
Article 132 provides, "Article 132. Facilities for
women. The Secretary of Labor and
Employment shall establish standards that will
ensure the safety and health of women
employees. In appropriate cases, he shall, by
regulations, require any employer to: To
determine appropriate minimum age and other
standards for retirement or termination in special
occupations such as those of flight attendants
and the like."
Article 136 provides, "Article 136. Stipulation
against marriage. It shall be unlawful for an
employer to require as a condition of
employment or continuation of employment that
a woman employee shall not get married, or to
stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed
resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her
marriage."
ISSUE: WON Zialcita’s termination is
improper?
RULING: Yes, the termination was improper.
First of all, during the time Zialcita was
terminated, no regulation had yet been issued by
the Secretary of Labor to implement Article 132.
Second, even assuming that the Secretary of
Labor had already issued such a regulation and
to the effect that stewardesses should remain
single, such would be in violation of Article 136
of the Labor Code.
Article 136's protection of women is broader and
more powerful than the regulation provided
under Article 132.
Domingo vs. Rayala (Sexual Harassment)
It is true that this provision calls for a “demand,
request or requirement of a sexual favor.” But it
is not necessary that the demand, request or
requirement of a sexual favor be articulated in a
categorical oral or written statement. It may be
discerned, with equal certitude, from the acts of
the offender
FACTS: Ma. Lourdes T. Domingo (Domingo),
then Stenographic Reporter III at the NLRC,
filed a Complaint for sexual harassment against
Rayala, the chairman of NLRC.
She alleged that Rayala called her in his office
and touched her shoulder, part of her neck then
tickled her ears. Rayala argued that his acts do
not constitute sexual harassment because for it to
exist there must be a demand, request or
requirement of sexual favor.
ISSUE: WON Rayala committed Sexual
Harassment?
RULING: Yes. Rayala committed Sexual
Harassment.
The law penalizing sexual harassment in our
jurisdiction is RA 7877. Section 3 thereof
defines work-related sexual harassment in this
wise:
Sec. 3. Work, Education or Training-related
Sexual Harassment Defined. – Work, education
or training-related sexual harassment is
committed by an employer, manager, supervisor,
agent of the employer, teacher, instructor,
professor, coach, trainor, or any other person
who, having authority, influence or moral
ascendancy over another in a work or training
or education environment, demands, requests or
otherwise requires any sexual favor from the
other, regardless of whether the demand,
request or requirement for submission is
accepted by the object of said Act.
(a) In a work-related or employment
environment, sexual harassment is committed
when:
(1) The sexual favor is made as a condition in
the hiring or in the employment, re-employment
or continued employment of said individual, or
in granting said individual favorable
compensation, terms, conditions, promotions, or
privileges; or the refusal to grant the sexual
favor results in limiting, segregating or
classifying the employee which in a way would
discriminate, deprive or diminish employment
opportunities or otherwise adversely affect said
employee;
(2) The above acts would impair the employee’s
rights or privileges under existing labor laws; or
(3) The above acts would result in an
intimidating, hostile, or offensive environment
for the employee.
Even if we were to test Rayala’s acts strictly by
the standards set in Section 3, RA 7877, he
would still be administratively liable. It is true
that this provision calls for a “demand, request
or requirement of a sexual favor.” But it is not
necessary that the demand, request or
requirement of a sexual favor be articulated in a
categorical oral or written statement. It may be
discerned, with equal certitude, from the acts of
the offender. Holding and squeezing Domingo’s
shoulders, running his fingers across her neck
and tickling her ear, having inappropriate
conversations with her, giving her money
allegedly for school expenses with a promise of
future privileges, and making statements with
unmistakable sexual overtones – all these acts of
Rayala resound with deafening clarity the
unspoken request for a sexual favor.
Atty. Susan Aquino vs. Hon. Ernesto D.
Acosta (Beso-Beso)
A mere casual buss on the cheek is not a sexual
conduct or favor and does not fall within the
purview of sexual harassment under R.A. No.
7877.
FACTS: n November 21, 2000, she reported for
work after her vacation in the U.S., bringing
gifts for the three judges of the CTA, including
respondent. In the afternoon of the same day, he
entered her room and greeted her by shaking her
hand. Suddenly, he pulled her towards him and
kissed her on her cheek.
On December 28, 2000, while respondent was
on official leave, he called complainant by
phone, saying he will get something in her
office. Shortly thereafter, he entered her room,
shook her hand and greeted her, "Merry
Christmas." Thereupon, he embraced her and
kissed her. She was able to free herself by
slightly pushing him away.
On the first working day in January, 2001,
respondent phoned complainant, asking if she
could see him in his chambers in order to discuss
some matters. When complainant arrived there,
respondent tried to kiss her but she was able to
evade his sexual attempt.
Weeks later, after the Senate approved the
proposed bill expanding the jurisdiction of the
CTA, while complainant and her companions
were congratulating and kissing each other,
respondent suddenly placed his arms around her
shoulders and kissed her.
In the morning of February 14, 2001, respondent
called complainant, requesting her to go to his
office. She then asked Ruby Lanuza, a clerk in
the Records Section, to accompany her.
Fortunately, when they reached his chambers,
respondent had left.
The last incident happened the next day. At
around 8:30 a.m., respondent called complainant
and asked her to see him in his office to discuss
the Senate bill on the CTA. She again requested
Ruby to accompany her. The latter agreed but
suggested that they should act as if they met by
accident in respondents office. Ruby then
approached the secretary’s table which was
separated from respondent’s office by a
transparent glass. For her part, complainant sat
in front of respondent's table and asked him
what he wanted to know about the Senate bill.
Respondent seemed to be at a loss for words and
kept glancing at Ruby who was searching for
something at the secretary's desk. Forthwith,
respondent approached Ruby, asked her what
she was looking for and stepped out of the
office. When he returned, Ruby said she found
what she was looking for and left. Respondent
then approached complainant saying, “me gusto
akong gawin sa iyo kahapon pa”. Thereupon, he
tried to grab her. Complainant instinctively
raised her hands to protect herself but
respondent held her arms tightly, pulled her
towards him and kissed her. She pushed him
away, and then slumped on a chair trembling.
Meantime, respondent sat on his chair and
covered his face with his hands. Thereafter,
complainant left crying and locked herself inside
a comfort room. After that incident, respondent
went to her office and tossed a note stating,
sorry, it won’t happen again.
ISSUE: WON respondent is guilty of Sexual
Harassment?
RULING: No, Judge Acosta is not guilty of
sexual harassment. He is exonerated of the
charges against him and is advised to be more
circumspect in his deportment.
A mere casual buss on the cheek is not a sexual
conduct or favor and does not fall within the
purview of sexual harassment under R.A. No.
7877. Section 3 (a) thereof provides, to wit:
Sec. 3. Work, Education or Training - related
Sexual Harassment Defined. - Work, education
or training-related sexual harassment is
committed by an employer, employee, manager,
supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor, or any
other person who, having authority, influence or
moral ascendancy over another in a work or
training or education environment, demands,
requests or otherwise requires any sexual favor
from the other, regardless of whether the
demand, request or requirement for submission
is accepted by the object of said Act.
a) In a work-related or employment
environment, sexual harassment is committed
when:
1) The sexual favor is made as a condition in the
hiring or in the employment, re-employment or
continued employment of said individual, or in
granting said individual favorable
compensation, terms, conditions, promotions or
privileges; or the refusal to grant sexual favor
results in limiting, segregating or classifying the
employee which in anyway would discriminate,
deprive or diminish employment opportunities
or otherwise adversely affect said employees;
2) The above acts would impair the employee's
right or privileges under existing labor laws; or
3) The above acts would result in an
intimidating, hostile, or offensive environment
for the employee.
Clearly, under the foregoing provisions, the
elements of sexual harassment are as follows:
1) The employer, employee, manager,
supervisor, agent of the employer, teacher,
instructor, professor, coach, trainor, or any
other person has authority, influence or moral
ascendancy over another;
2) The authority, influence or moral ascendancy
exists in a working environment;
3) The employer ,employee, manager,
supervisor, agent of the employer, teacher,
instructor, professor, coach, or any other person
having authority, influence or moral ascendancy
makes a demand, request or requirement of a
sexual favor.
Indeed, from the records on hand, there is no
showing that respondent judge demanded,
requested or required any sexual favor from
complainant in exchange for favorable
compensation, terms, conditions, promotion or
privileges specified under Section 3 of R.A.
7877. Nor did he, by his actuations, violate the
Canons of Judicial Ethics or the Code of
Professional Responsibility.
Note: Dubious ruling. According to Attorney
Marquez, the mere creation of a hostile,
oppressive and intimidating environment in
places of work, education or training is enough
to be considered liable for sexual harassment.
So if the circumstance in this case arises in a
question, there is sexual harassment.
However, take note of this case. If ever the same
set of facts arises in a question you may also cite
this case as an answer.
APEX Mining vs. NLRC (Domestic Helper as
Regular Employee)
The definition cannot be interpreted to include
househelper or laundrywomen working in
staffhouses of a company, like private
respondent who attends to the needs of the
company's guest and other persons availing of
said facilities.
FACTS: Private respondent Sinclita Candida
was employed by petitioner Apex Mining
Company, Inc to perform laundry services at its
staff house.
On December 18, 1987, while she was attending
to her assigned task and she was hanging her
laundry, she accidentally slipped and hit her
back on a stone. As a result of the accident she
was not able to continue with her work. She was
permitted to go on leave for medication.
De la Rosa offered her the amount of P 2,000.00
which was eventually increased to P5,000.00 to
persuade her to quit her job, but she refused the
offer and preferred to return to work.
Petitioner did not allow her to return to work and
dismissed her on February 4, 1988.
Private respondent filed a request for assistance
with the Department of Labor and Employment,
which the latter rendered its Decision by
ordering the Apex Mining Co. to pay Candida
the total amount of P55,161.42 for salary
differential, emergency living allowance, 13th
month pay differential and separation pay.
Petitioner appealed the case before the NLRC,
which was subsequently dismissed for lack of
merit.
ISSUE: WON private respondent should be
treated as a house helper or domestic servant or
a regular employee?
RULING: Private respondent is a regular
employee.
Under Rule XIII, Section l(b), Book 3 of the
Labor Code, as amended, the term
"househelper" as used herein is synonymous to
the term "domestic servant" and shall refer to
any person, whether male or female, who
renders services in and about the employer's
home and which services are usually
necessary or desirable for the maintenance
and enjoyment thereof, and ministers
exclusively to the personal comfort and
enjoyment of the employer's family.
The definition cannot be interpreted to include
househelper or laundrywomen working in
staffhouses of a company, like private
respondent who attends to the needs of the
company's guest and other persons availing of
said facilities.
The mere fact that the househelper or domestic
servant is working within the premises of the
business of the employer and in relation to or in
connection with its business, as in its staffhouses
for its guest or even for its officers and
employees, warrants the conclusion that such
househelper or domestic servant is and should be
considered as a regular employee.
GSIS vs. Alegre (24-hour doctrine) (Cited in
this case are, Hinoguin, ECC vs. CA and
Nitura case)
Taking together jurisprudence and the pertinent
guidelines of the ECC, with respect to claims for
death benefits, namely (a) that the employee
must be at the place where his work requires
him to be; (b) that the employee must have been
performing his official functions; and (c) that if
the injury is sustained elsewhere, the employee
must have been executing an order for the
employer
In other words, the 24-hour duty doctrine should
not be sweepingly applied to all acts and
circumstances causing the death of a police
officer but only to those which, although not on
official line of duty, are nonetheless, basically
police service in character.
FACTS: SPO2 Alegre, a police officer was
driving his tricycle and ferrying passengers
within the vicinity of a commercial Complex
when SPO4 A. Tenorio, Jr., Team/Desk Officer,
confronted him regarding his tour of duty.
Alegre allegedly snubbed Tenorio and even
directed curse words upon the latter. A verbal
tussle ensued between the two which led to the
fatal shooting of SPO2 Alegre.
The widow filed a claim for death benefits with
GSIS which denied the claim on the ground that
at the time of his death, Alegre was performing a
personal activity which was not work-connected.
The Employees’ Compensation Commission
(ECC) affirmed the ruling of the GSIS.
But the Court of Appeals reversed the ECC’s
decision and ruled that Alegre’s death was work-
connected, hence, compensable. Citing Nitura
vs. Employees’ Compensation Commission and
Employees’ Compensation Commission vs.
Court of Appeals, the appellate court explained
its conclusion, thus:
“[T]he Supreme Court held that the concept of a
‘workplace’ cannot always be literally applied
to a person in active duty status, as if he were a
machine operator or a worker in an assembly
line in a factory or a clerk in a particular fixed
office.
It is our considered view that, as applied to a
peace officer, his work place is not confined to
the police precinct or station but to any place
where his services, as lawman, to maintain
peace and security, are required.
At the time of his death, Alegre was driving a
tricycle at the northeastern part of the Imelda
Commercial Complex where the police
assistance center is located. There can be
dispute therefore that he met his death literally
in his place of work.
It is true that the deceased was driving his
tricycle, with passengers aboard, when he was
accosted by another police officer. This would
lend some semblance of viability to the argument
that he was not in the performance of official
duty at the time.
However, the argument, though initially
plausible, overlooks the fact that policemen, by
the nature of their function, are deemed to be on
a round-the-clock duty.”
GSIS goes to the SC on petition for review on
certiorari reiterating its position that SPO2
Alegre’s death lacks the requisite element of
compensability which is, that the activity being
performed at the time of death must be work-
connected.
ISSUE: WON SPO2 Alegre’s death is
compensable?
RULING: No, it is not compensable.
We grant the petition. Under the pertinent
guidelines of the ECC on compensability, for the
injury and the resulting disability or death to be
compensable, the injury must be the result of an
employment accident satisfying all of the
following conditions:
(1) The employee must have been injured at the
place where his work requires him to be;
 (2) The employee must have been performing
his official functions; and
(3) If the injury is sustained elsewhere, the
employee must have been executing an order for
the employer.
Owing to the similarity of functions, that is, to
keep peace and order, and the risks assumed, the
Court has treated police officers similar to
members of the Armed Forces of the Philippines
with regard to the compensability of their
deaths.
Thus, echoing Hinoguin vs. Employees’
Compensation Commission, a case involving a
soldier who was accidentally fired at by a fellow
soldier, we held in Employees’ Compensation
Commission vs. Court of Appeals, that
“members of the national police are by the
nature of their functions technically on duty 24
hours a day” because “policemen are subject to
call at any time and may be asked by their
superiors or by any distressed citizen to assist in
maintaining the peace and security of the
community.”
Upon examination of the Court of Appeals’
reasoning, we believe that the appellate court
committed reversible error in applying the
precepts enunciated in the cited cases. While we
agree that policemen, like soldiers, are at the
beck and call of public duty as peace officers
and technically on duty round-the-clock, the
same does not justify the grant of compensation
benefits for the death of SPO2 Alegre based on
the facts disclosed by the records. For clarity, a
review of the cases relevant to the matter at hand
is in order.
In Hinoguin, the deceased Philippine Army
soldier, Sgt. Limec Hinoguin, together with two
other members of his detachment, sought and
were orally granted permission by the
commanding officer of their company to leave
their station in Carranglan, Nueva Ecija to go on
overnight pass to Aritao, Nueva Vizcaya. As
they were returning to their headquarters, one of
his companions, not knowing that his M-16 rifle
was on “semi-automatic” mode, accidentally
pulled the trigger and shot Sgt. Hinoguin who
then died as a result thereof. Ruling for the grant
of death compensation benefits this Court held:
“The concept of a ‘workplace’ referred to in
Ground 1, for instance, cannot always be
literally applied to a soldier on active duty
status, as if he were a machine operator or a
worker in assembly line in a factory or a clerk in
a particular fixed office. Obviously, a soldier
must go where his company is stationed. In the
instant case, Aritao, Nueva Vizcaya was not of
course, Carranglan, Nueva Ecija, Aritao, being
approximately 1-1/2 hours away from the latter
by public transportation. But Sgt. Hinoguin, Cpl.
Clavo and Dft. Alibuyog had permission from
their Commanding Officer to proceed to Aritao,
and it appears to us that a place which soldiers
have secured lawful permission to be at cannot
be very different, legally speaking, from a place
where they are required to go by their
commanding officer. We note that the three (3)
soldiers were on an overnight pass which,
notably, they did not utilize in full. They were
not on vacation leave. Moreover, they were
required or authorized to carry their firearms
with which presumably they were to defend
themselves if NPA elements happened to attack
them while en route to and from Aritao or with
which to attack and seek to capture such NPA
elements as they might encounter. Indeed, if the
three (3) soldiers had in fact encountered NPAs
while on their way to or from Aritao and been
fired upon by them and if Sgt. Hinoguin had
been killed by an NPA bullet, we do not believe
that respondent GSIS would have had any
difficulty in holding the death a compensable
one.”
Then came the case of Nitura, likewise
involving a member of the Philippine Army, Pfc.
R.S. Nitura, who was assigned at Basagan,
Katipunan, Zamboanga del Norte. At the time he
met his death, he was instructed by his battalion
commander to check on several personnel of his
command post who were then attending a dance
party in Barangay San Jose, Dipolog City. But
on his way back to the camp, he passed, crossed
and fell from a hanging wooden bridge which
accident caused his death. Reversing the ECC
which earlier denied death benefits to the
deceased’s widow, the Court ruled:
“A soldier must go where his company is
stationed. In the case at bar, Pfc. Nitura’s
station was at Basagan, Katipunan, Zamboanga
del Norte. But then his presence at the site of the
accident was with the permission of his superior
officer... As to the question of whether or not he
was performing an official function at the time
of the incident, it has been held that a soldier on
active duty status is really on a 24 hours a day
official duty status and is subject to military
discipline and military law 24 hours a day. He is
subject to call and to the orders of his superior
officers at all times, seven (7) days a week,
except, of course, when he is on vacation leave
status...”
The more recent case which was cited by the
appellate court in support of its decision is
Employees’ Compensation Commission vs.
Court of Appeals. This time, the claim for
death compensation benefits was made in behalf
of a deceased police officer, P/Sgt. W. Alvaran,
who, at the time of his death, was a member of
the Mandaluyong Police Station but assigned to
the Pasig Provincial Jail. Findings showed that
the deceased brought his son to the
Mandaluyong Police Station for interview
because the latter was involved in a stabbing
incident. While in front of the said station, the
deceased was approached by another policeman
[who] shot him to death. Both the GSIS and the
ECC denied the claim by the deceased’s widow
on the ground that Sgt. Alvaran was plainly
acting as a father to his son and that he was in a
place where he was not required to be. The
Court of Appeals reversed said denial which
decision was affirmed by this Court, declaring
that:
“But for clarity’s sake and as a guide for future
cases, we hereby hold that members of the
national police, like P/Sgt. Alvaran, are by the
nature of their functions technically on duty 24
hours a day. Except when they are on vacation
leave, policemen are subject to call all anytime
and may be asked by their superiors or by any
distressed citizen to assist in maintaining the
peace and security of the community. We hold
that by analogy and for purposes of granting
compensation under P.D. No. 626, as amended,
policemen should be treated in the same manner
as soldiers. While it is true that,
“geographically” speaking, P/Sgt. Alvaran was
not actually at his assigned post at the Pasig
Provincial Jail when he was attacked and killed,
it could not also be denied that in bringing his
son — as a suspect in a case — to the police
station for questioning to shed light on a
stabbing incident, he was not merely acting as
father but as a peace officer.”
From the foregoing cases, it can be gleaned that
the Court did not justify its grant of death
benefits merely on account of the rule that
soldiers or policemen, as the case may be, are
virtually working round-the-clock. Note that the
Court likewise attempted in each case to find a
reasonable nexus between the absence of the
deceased from his assigned place of work and
the incident that led to his death. Taking
together jurisprudence and the pertinent
guidelines of the ECC, with respect to claims
for death benefits, namely (a) that the
employee must be at the place where his work
requires him to be; (b) that the employee
must have been performing his official
functions; and (c) that if the injury is
sustained elsewhere, the employee must have
been executing an order for the employer, it is
not difficult to understand then why SPO2
Alegre’s widow should be denied the claims
otherwise due her. Obviously, the matter SPO2
Alegre was attending to at the time he met his
death, that of ferrying passengers for a fee, was
intrinsically private and unofficial in nature
proceeding as it did from no particular directive
or permission of his superior officer. In the
absence of such prior authority as in the cases of
Hinoguin and Nitura, or peacekeeping nature of
the act attended to by the policeman at the time
he died even without the explicit permission or
directive of a superior officer, as in the case of
P/Sgt. Alvaran, there is no justification for
holding that SPO2 Alegre met the requisites set
forth in the ECC guidelines. That he may be
called upon at any time to render police work as
he is considered to be on a round-the-clock duty
and was not on an approved vacation leave will
not change the conclusion arrived at considering
that he was not placed in a situation where he
was required to exercise his authority and duty
as a policeman. In fact, he was refusing to render
one, pointing out that he already complied with
duty detail. At any rate, the 24-hour duty
doctrine, as applied to policemen and soldiers,
serves more as an after-the-fact validation of
their acts to place them within the scope of the
guidelines rather than a blanket license to benefit
them in all situations that may give rise to their
deaths. In other words, the 24-hour duty doctrine
should not be sweepingly applied to all acts and
circumstances causing the death of a police
officer but only to those which, although not on
official line of duty, are nonetheless, basically
police service in character.
Note: To sum it up, the employee must, at the
time of death, be performing an official act, not
mere proprietary acts in order for their death to
be compensable.
The 24-hour doctrine should not be sweepingly
applied to all acts and circumstances.
Valeriano vs. ECC (24-hour doctrine)
The circumstances in the present case do not
call for the application of Hinoguin and Nitura.
Following the rationalization in GSIS vs. Alegre
the 24-hour-duty doctrine cannot be applied to
petitioner’s case, because he was neither at his
assigned work place nor in pursuit of the orders
of his superiors when he met an accident. But
the more important justification for the Court’s
stance is that he was not doing an act within his
duty and authority as a firetruck driver, or any
other act of such nature, at the time he sustained
his injuries. There is no any reasonable
connection between his injuries and his work as
a firetruck driver.
FACTS: C.S. Valeriano was employed as a fire
truck driver assigned at the San Juan Fire
Station. On the evening of July 3, 1985, he was
standing along Santolan Road, Quezon City,
when he met a friend. They decided to proceed
to Bonanza Restaurant in EDSA, Quezon City,
for dinner. On their way home at around 9:30
PM, the owner-type jeepney they were riding in
figured in a head-on collision with another
vehicle at the intersection of N. Domingo and
Broadway streets in Quezon City. Valeriano,
thrown out of the vehicle, was severely injured.
Pursuing his EC claim, Valeriano argued that the
exigency of his job as a fireman requires a
constant observance of his duties as such; thus,
he should be considered to have been “on call”
when he met the accident. He underscored the
applicability of Hinoguin vs. ECC and Nitura vs.
ECC to his case.
ISSUE: WON Valeriano’s claim will prosper?
RULING: No. Petitioner Valeriano was not able
to demonstrate solidly how his job as a firetruck
driver was related to the injuries he had suffered.
That he sustained the injuries after pursuing a
purely personal and social function — having
dinner with some friends — is clear from the
records of the case. His injuries were not
acquired at his work place; nor were they
sustained while he was performing an act within
the scope of his employment or in pursuit of an
order of his superior. Thus his injuries and
consequent disability were not work-connected
and thus not compensable.
The circumstances in the present case do not call
for the application of Hinoguin and Nitura.
Following the rationalization in GSIS vs. Alegre
the 24-hour-duty doctrine cannot be applied to
petitioner’s case, because he was neither at his
assigned work place nor in pursuit of the orders
of his superiors when he met an accident. But
the more important justification for the Court’s
stance is that he was not doing an act within his
duty and authority as a firetruck driver, or any
other act of such nature, at the time he sustained
his injuries. There is no any reasonable
connection between his injuries and his work as
a firetruck driver.
Iloilo Dock and Eng’g Co. vs WCC et. al.
(Ingress-Egress/Proximity Rule)
The general rule in workmen’s compensation
law known as the “going and coming rule,”
simply stated, is that “in the absence of special
circumstances, an employee injured in, going to,
or coming from, his place of work is excluded
from the benefits of workmen’s compensation
acts.” This rule, however, admits four well
recognized exceptions, to wit: (1) where the
employee is proceeding to or from his work on
the premises of his employer; (2) where the
employee is about to enter or about to leave the
premises of his employer by way of the exclusive
or customary means of ingress and egress; (3)
where the employee is charged, while on his way
to or from his place of employment or at his
home, or during his employment, with some duty
or special errand connected with his
employment; and (4) where the employer, as an
incident of the employment, provides the means
of transportation to and from the place of
employment.
FACTS: At about 5:02 in the afternoon of
January 29, 1960, Pablo, who was employed as a
mechanic of the IDECO, while walking on his
way home, was shot to death in front of, and
about 20 meters away from, the main IDECO
gate, on a private road commonly called the
IDECO road. The slayer, Martin Cordero, was
not heard to say anything before or after the
killing. The motive for the crime was and still is
unknown as Cordero was himself killed before
he could be tried for Pablo’s death. At the time
of the killing, Pablo’s companion was Rodolfo
Galopez, another employee, who, like Pablo,
had finished overtime work at 5:00 p.m. and was
going home. From the main IDECO gate to the
spot where Pablo was killed, there were four
“carinderias” on the left side of the road and two
“carinderias” and a residential house on the right
side. The entire length of the road is nowhere
stated in the record.
The principal issue is whether Pablo’s death
comes within the meaning and intendment of
that “deceptively simple and litigiously prolific”
phrase “arising out of and in the course of
employment.”
ISSUE: WON Pablo’s death is compensable?
RULING: Yes, it is compensable.
The general rule in workmen’s compensation
law known as the “going and coming rule,”
simply stated, is that “in the absence of special
circumstances, an employee injured in, going to,
or coming from, his place of work is excluded
from the benefits of workmen’s compensation
acts.” This rule, however, admits four well
recognized exceptions, to wit: (1) where the
employee is proceeding to or from his work on
the premises of his employer; (2) where the
employee is about to enter or about to leave the
premises of his employer by way of the
exclusive or customary means of ingress and
egress; (3) where the employee is charged, while
on his way to or from his place of employment
or at his home, or during his employment, with
some duty or special errand connected with his
employment; and (4) where the employer, as an
incident of the employment, provides the means
of transportation to and from the place of
employment.
We address ourselves particularly to an
examination and consideration of the second
exception, i.e., injuries sustained off the
premises of the employer, but while using a
customary means of ingress and egress.
This exception, known as the “proximity rule,”
was applied in Philippine Fiber Processing
Co., Inc. vs. Ampil. There, the employee, at
about 5:15 a.m., while proceeding to his place of
work and running to avoid the rain, slipped and
fell into a ditch fronting the main gate of
employer’s factory, as a result of which he died
the next day. The sole question was whether or
not the accident which caused the employee’s
death arose out of and in the course of his
employment. The Court ruled in favor of the
claimant.
The point where Pablo was shot was barely
twenty meters away from the main IDECO gate,
certainly nearer than a stone’s throw therefrom.
The spot is immediately proximate to the
IDECO’s premises. Considering this fact, and
the further facts that Pablo has just finished
overtime work at the time, and was killed barely
two minutes after dismissal from work, the
Ampil case is squarely applicable here. We may
say, as we did in Ampil, that the place where the
employee was injured being “immediately
proximate to his place of work, the accident in
question must be deemed to have occurred
within the zone of his employment and therefore
arose out of and in the course thereof.” Our
principal question is whether the injury was
sustained in the course of employment. We find
that it was, and so conclude that the assault arose
out of the employment, even though the said
assault is unexplained.
Note: Going to and Coming from Work Rule
The ECC passed Resolution No. 3914-A on July
5, 1988, extending the compensable coverage of
off premises injury from near the premises up to
the residence of the employee. The resolution
provides that an injury or death of a covered
member in an accident while he is going to, or
coming from, the workplace, shall henceforth be
duly considered compensable provided the
following conditions are established definitively:
(1) The act of the employee of going to, or
coming from, the workplace, must have been a
continuing act, that is, he had not been diverted
therefrom by any other activity, and he had not
departed from his usual route to, or from, his
workplace; and
(2) Re: an employee on an special errand, the
special errand must have been official and in
connection with his work.
The compensability is sometimes called the
“street peril”principle
Alano vs. ECC (Accident on the Way to
Work)
She was at the place where her job necessarily
required her to be if she was to reach her place
of work on time. There was nothing private or
personal about her being at the place of the
accident. She was there because her employment
required her to be there
FACTS: Dedication was a school principal
whose tour of duty was from 7:30 a.m. to 5:30
p.m. While waiting for a ride at a public plaza
on her way to school, she was bumped and run
over by a speeding bus which caused her death.
The Employees’ Compensation Commission
denied the claim filed by her heirs on the ground
that the injury was not an employment accident
satisfying all the conditions prescribed by law.
ISSUE: WON Death is compensable?
RULING: Yes. The deceased died while going
to her place of work. She was at the place where
her job necessarily required her to be if she was
to reach her place of work on time. There was
nothing private or personal about her being at
the place of the accident. She was there because
her employment required her to be there. The
GSIS, as the ultimate implementing agency of
the Employees’ Compensation Commission, is
ordered to pay the claimants.
Lazo vs. ECC (Accident on the Way Home)
There is no evidence that he deviated from his
usual, regular homeward route or that
interruptions occurred in the journey.
FACTS: Lazo is a security guard of the Central
Bank assigned to its main office. His regular
tour of duty is from 2 o’clock in the afternoon to
10 o’clock in the evening. On June 18, 1986, he
rendered duty from 2 o’clock in the afternoon to
10 o’clock in the evening. But as the security
guard who was to relieve him failed to arrive, he
rendered overtime duty up to 5 o’clock in the
morning of June 19. On his way home, at about
6 o’clock that morning, the passenger jeepney
the petitioner was riding on turned turtle due to
slippery road. As a result, he sustained injuries
and was taken to the hospital for treatment.
ISSUE: WON he is entitled to compensation for
his injuries?
RULING: Yes, he is entitled to compensation.
The claim is compensable. Here, Lazo left his
station at the Central Bank several hours after
his regular time off, because the reliever did not
arrive, and so he was asked to go on overtime.
After permission to leave was given, he went
home. There is no evidence that he deviated
from his usual, regular homeward route or
that interruptions occurred in the journey.
Employment includes not only the actual doing
of the work, but a reasonable margin of time and
space necessary to be used in passing to and
from the place where the work is to be done. If
the employee be injured while passing, with the
express or implied consent of the employer, to or
from his work by a way over the employer’s
premises, or over those of another in such
proximity and relation as to be in practical effect
a part of the employer’s premises, the injury is
one arising out of and in the course of the
employment as much as though it had happened
while the employee was engaged in his work at
the place of its performance.
Note: The extra-premises rule is otherwise
called the “Shuttle bus” rule.
This rule is the same as that in the old
workmen’s compensation jurisprudence, where
the company which provides the means of
transportation in going to and coming from the
place of work is liable for the injury sustained by
employees while on board said means of
transportation. This is because the company
vehicle is an extension of its premises.
Special Errand Rule
An injury sustained by an employee outside the
company premises is compensable if his being
out is covered by an office order or a locator slip
or a pass for official business.
While travelling to buy school supplies, the
employee was ambushed along the way. It was
ruled that where claimant was performing
official functions, it hardly matters that she was
injured outside regular working hours and
beyond her place of work.
If an employee is injured outside the work
premises, and is doing an act for the benefit of
the employer, then he is entitled to
compensation for such injuries.
Dual Purpose Doctrine
An employee’s status of acting in the course of
his employment is not destroyed by the fact that
he may be pursuing a dual purpose. The dual
purpose doctrine allowing compensation applies
where a special trip would have had to be made
for the employer if the employee had not
combined the service for the employer with his
own going or coming trip.
Stated briefly, the “dual purpose” doctrine,
considers as compensable an injury that an
employee sustains while on a trip undertaken for
the benefit of the employer even if in the course
thereof the employee pursues also a personal
purpose.
“The test that is ordinarily employed for
determining liability in such a case is that if the
work of the employee tends to create necessity
for travel, he or she is deemed in the course of
employment, albeit the employee serves at the
same time some personal purpose. The
requirement is that the service of the employer is
at least a concurrent cause of the trip of the
employee”
Special Engagement Rule
In determining whether an injury suffered by an
employee in the course of recreation is
compensable, the test is whether the recreation
was for the employee’s exclusive benefit, or
whether the employer had some interest in the
activity. Where an employee is injured while at
recreation during a temporary cessation of work,
the injury is compensable as arising out of and in
the course of employment where the recreation
indulged in was fostered and encouraged by the
employer to the end of efficiency of their
service.
Recreational activities fall under the so-called
“special engagement rule” which is one of the
exceptions to the “direct premises rule.” This
exception covers field trips, intramurals, outings,
and picnics when initiated or sanctioned by the
employer. Accidents befalling employees on
those occasions are compensable.
Local and Positional Doctrine
The generally accepted doctrine is that the
employer is not responsible for accidents arising
from force majeure or an act of God, as it is
usually called, when the employee has not been
exposed to a greater danger than usual.
However, this general rule recognizes an
exception in the so-called “positional and local
risks” doctrine so that if an employee, by reason
of his duties, is exposed to a special or peculiar
danger from the elements, that is, one greater
than that to which other persons in the
community are exposed, and an unexpected
injury is sustained by reason of the elements,
the injury constitutes an accident arising out
of and in the course of the employment within
the meaning of the workmen’s compensation
acts. Stated otherwise, when one in the course of
his employment is reasonably required to be at a
particular place at a particular time and there
meets an accident, although one which any other
person then and there present would have met
irrespective of his employment, that accident is
one “arising out of the employment” of the
person so injured.
Theory of Increased Risk
This applies when the sickness is not one of
those listed in Annex A list of occupational
diseases.
The claimant has the burden to prove that the
nature of the work increased the risk of
contracting the disease.
This was applied in the Raro case.
Raro vs. ECC (Cancer not always
compensable)
Cancer is a disease of still unknown origin
which strikes people in all walks of life,
employed or unemployed. Unless it be shown
that a particular form of cancer is caused by
specific working conditions (e.g., chemical
fumes, nuclear radiation, asbestos dust, etc.),
the Court cannot conclude that it was the
employment which increased the risk of
contracting the disease.
FACTS: The petitioner states that she was in
perfect health when employed as a clerk by the
Bureau of Mines and Geo-Sciences at its Daet,
Camarines Norte regional office on March
17,1975. About four years later, she began
suffering from severe and recurrent headaches
coupled with blurring of vision. Forced to take
sick leaves every now and then, she sought
medical treatment in Manila. The petitioner was
diagnosed at the Makati Medical Center to be
suffering from brain tumor. By that time, her
memory, sense of time, vision, and reasoning
power had been lost. A claim for disability
benefits filed by her husband with the
Government Service Insurance System (GSIS)
was denied. A motion for reconsideration was
similarly denied. An appeal to the Employees'
Compensation Commission resulted in the
Commission's affirming the GSIS decision. On
January 1, 1975, the Workmen's Compensation
Act was replaced by a novel scheme under the
new Labor Code. The new law discarded, among
others, the concepts of "presumption of
compensability" and "aggravation" and
substituted a system based on social security
principles. The present system is also
administered by social insurance agencies — the
Government Service Insurance System and
Social Security System — under the Employees'
Compensation Commission. The intent was to
restore a sensible equilibrium between the
employer's obligation to pay workmen's
compensation and the employee's right to
receive reparation for work-connected death or
disability.
ISSUE: WON the claim will prosper?
RULING: No. Cancer is a disease that strikes
people in general. The nature of a person’s
employment appears to have no relevance.
Cancer can strike a lowly paid laborer or a
highly paid executive or one who works on land,
in water, or in the bowels of the earth. It makes
no difference whether the victim is employed or
unemployed, a white collar employee or a blue
collar worker, a housekeeper, an urban dweller
or a resident of a rural area.
Jurisprudence on the compensability of cancer
ailments has of late become a source of
confusion among the claimants and the
government agencies enforcing the employees’
compensation law. The strongly lingering
influence of the principles of “presumption of
compensability” and “aggravation” found in the
defunct Workmen’s Compensation Act but
expressly discarded under the present
compensation scheme has led to conflict and
inconsistency in employees’ compensation
decisions.
The problem is attributable to the inherent
difficulty in applying the new principle of “proof
of increased risk.” There are two approaches to a
solution in cases where it cannot be proved that
the risk of contracting an illness not listed as an
occupational disease was increased by the
claimant’s working conditions. One approach is
that if a claimant cannot prove the necessary
work connection because the causes of the
disease are still unknown, it must be presumed
that working conditions increased the risk of
contracting the ailment. The other approach is
that if there is no proof of the required work
connection, the disease is not compensable
because the law says so.
It is not correct to say that all cancers are not
compensable. The list of occupational diseases
prepared by the Employees’ Compensation
Commission includes some cancers as
compensable. There is no arbitrariness in the
Commission’s allowing vinyl chloride workers
or plastic workers to be compensated for brain
cancer. There are certain cancers which are
reasonably considered as strongly induced by
specific causes. Heavy doses of radiation as in
Chernobyl, USSR, cigarette smoke over a long
period for lung cancer, certain chemicals for
specific cancers, and asbestos dust, among
others, are generally accepted as increasing the
risks of contracting specific cancers. What the
law requires for others is proof.
Cancer is a disease of still unknown origin
which strikes people in all walks of life,
employed or unemployed. Unless it be shown
that a particular form of cancer is caused by
specific working conditions (e.g., chemical
fumes, nuclear radiation, asbestos dust, etc.), the
Court cannot conclude that it was the
employment which increased the risk of
contracting the disease.
For the guidance of the administrative agencies
and practicing lawyers concerned, the decision
of the Supreme Court in Raro vs. Employees’
Compensation Commission, G.R. No. 58445,
April 27, 1989, en banc, Gutierrez, Jr., J.
supersedes the decisions in Panotes vs.
Employees’ Compensation Commission (128
SCRA 473 [1984]); Mercado vs. Employees’
Compensation Commission (127 SCRA 664
[1984]); Ovenson vs. Employees’ Compensation
Commission (156 SCRA 2 [1987]); Nemaria vs.
Employees’ Compensation Commission (155
SCRA 166 [1987]) and other cases with
conclusions different from those stated in Raro
vs. Employees’ Compensation Commission.
GSIS vs. CATE (Cancer Compensable,
Contrary to Raro case)
As earlier noted, however, in the specific case of
respondent, the requirement is impossible to
comply with, given the present state of scientific
knowledge. The obligation to present such as an
impossible evidence must, therefore, be deemed
void. Respondent, therefore, is entitled to
compensation, consistent with the social
legislation’s intended beneficial purpose.
FACTS: On March 6, 1974, Abraham Cate
(Abraham) joined the military service as a
Rifleman of the Philippine Navy. On January 2,
1991, he was absorbed in the Philippine
National Police (PNP) with the rank of Senior
Police Officer IV (SPO4).
In 1993, Abraham complained of a mass on his
left cheek which gradually increased in size. A
biopsy was done at the Philippine General
Hospital (PGH). The histopath report revealed
that he was suffering from Osteoblastic
Osteosarcoma. He was admitted at the PGH
payward, and on October 28, 1993, he
underwent "Total Maxillectomy with Orbital
Exenteration," which operation removed the
mass on his left cheek. In April 1994, another
biopsy revealed the recurrence of the ailment.
On June 9, 1994, Abraham underwent debulking
of the recurrent tumor at the PGH. Post-
operative course was uneventful and he
underwent radiotherapy.
On December 1, 1994, Abraham was
compulsorily retired from the PNP.
On December 20, 1994, Abraham filed a claim
for income benefits with the Government
Service Insurance System (GSIS) under P.D.
No. 626,3 as amended.
In a letter dated December 27, 1994, GSIS
denied the claim on the ground that
Osteosarcoma is not considered an occupational
disease under P.D. No. 626, and there is no
showing that his duties as SPO4 in the Armed
Forces of the Philippines had increased the risk
of contracting said ailment. GSIS denied
Abraham’s request for reconsideration of the
decision in a letter dated March 22, 1995.
On May 2, 1995, Abraham died at the age of 45.
He was survived by his wife, Dorothy Cate, and
two children. The heirs of Abraham appealed the
decision of GSIS to the ECC.
In a Decision dated September 7, 1995, ECC
affirmed the decision of GSIS and dismissed the
case for lack of merit.
The heirs of Abraham filed a petition for review
of the decision of ECC with the CA.
In a Decision promulgated on March 13, 1996,
the CA reversed and set aside the decision of
ECC.
ISSUE: WON CA is correct in ruling that the
late Abraham’s ailments are compensable under
the ECC?
RULING: Yes, CA is correct.
In this case, Osteosarcoma is not listed as an
occupational disease in the Amended Rules on
Employees’ Compensation. Hence, it is
supposed to be upon the claimant or private
respondents to prove by substantial evidence
that the risk of contracting Osteosarcoma was
increased by the working conditions of the late
Abraham. Substantial evidence means such
relevant evidence as a reasonable mind might
accept as adequate to support a conclusion. The
records show that Abraham failed to present
evidence to establish that the development of his
ailment was traceable to his working conditions
in the Philippine Navy, the now defunct
Philippine Constabulary and the PNP. Further,
private respondents’ allegation in their petition
for review with the CA that Abraham, as a
rifleman in the Philippine Navy, may have been
exposed to elements like a virus which could
have contributed to his ailment does not satisfy
the requirement of substantial evidence. The rule
is that awards of compensation cannot rest on
speculations and presumptions as the claimant
must prove a positive thing. The application of
the rules would mean that absent any proof that
the risk of contracting the ailment was increased
by the working conditions of the late Abraham,
private respondents would not be entitled to
compensation.
Considering, however, that it is practically
undisputed that under the present state of
science, the proof referred by the law to be
presented by the deceased private respondent
claimant was unavailable and impossible to
comply with, the condition must be deemed as
not imposed.
For this reason, the CA held, thus:
In all due respect and with the least of intention
of committing contempt and discourtesy but
rather solely moved by the time-honored
principle that the Employees Compensation Act
is basically a social legislation designed to
afford relief to our working men (Santos v. ECC,
221 SCRA 182 [1993] and that labor, social
welfare legislations should be liberally
construed in favor of the applicant (Tira v. ECC,
208 SCRA 834 [1992]), We have to rule in favor
of herein petitioners.
The plight of any cancer patient deserves some
serious considerations. We were not to be told
that no one is a willing victim of cancer.
Inflicted with this dreadful malady, the patient
suffers from the trauma of an impending death
not to mention the high cost of medical
attendance required, only to prolong one’s
agony and the hopelessness of any definite cure
simply because the origin and cause of cancer
are farfetched unresolved.
The present case at bench is no different.
Petitioners’ failure to present positive evidence
of a causal relation of the illness and his
working conditions is due to the pure and simple
lack of available proof to be offered in evidence.
Verily, to deny compensation to osteosarcoma
victims who will definitely be unable to produce
a single piece of proof to that effect, is
unrealistic, illogical and unfair. At the very
least, on a very exceptional circumstance, the
rule on compensability should be relaxed and be
allowed to apply to such situations. To disallow
the benefit will even more add up to the
sufferings, this time, for the ignorance of the
inability of mankind to discover the real truth
about cancer.
It is not the intention of this decision to
challenge the wisdom of the Raro case. What is
being hoped for is to have a second look on the
issue of compensability of those inflicted with
osteosarcoma or like disease, where the origin
or cause is still virtually not ascertained. The
protection of the stability and integrity of the
State Insurance Fund against non-compensable
claims, is much to be desired. Nonetheless, to
allow the presumption of compensability to
Osteosarcoma victims, will not adversely
prejudice such state policy. In fact, it will give
more meaning to the very purpose and essence
of the State Insurance Fund. Upon the other
hand, to deny the claim will not only defeat the
very reason for its creation but will likewise turn
down benefits to the intended rightful
beneficiary thereof. As employee’s compensation
is based on social security principles. We
believe that in the meantime that osteosarcoma’s
cause and origin are not yet unearthed, the
benefit of the doubt should be resolved in favor
of the claim.
In main, We subscribe to the more
compassionate and humane considerations
contained in the dissenting opinions of Justices
Sarmiento and Paras in the same Raro case and
We quote:
"It must be likewise be noted that the petitioner
is suffering from cancer (brain tumor), whose
cause medical science is yet to unravel. It would
then be asking too much to make her prove that
her illness was cause by work or aggravated by
it, when experts themselves are ignorant as to
what brings it about. I do not believe, finally,
that the question is a matter of legislation.
Compassion, it is my view, is reason enough."
(J. Sarmiento)
"While ‘brain tumor’ is not expressly or
specifically referred to as an occupational
disease, and while admittedly it precise causes
are still unknown, We may say that the disease is
akin to ‘cancer of the brain’ and should
therefore be regarded as either compensable or
borderline case. At any rate, the precise work of
the petitioner at the Bureau of Mines and Geo-
Sciences consisted of the following: "As Mining
Recorded II, to record and file mining
instruments and documents in the Mining
Recorder’s Section and to type correspondence
and other documents pertaining to the same
action. It will readily be seen that her work
required at times mental concentration. Whether
this is specifically causative of brain tumor is of
course still unknown but doubts must generally
be resolved in favor whenever compensation for
disease is concerned. It would certainly be
absurd to throw upon petitioner the burden of
showing that her work either caused or
aggravated the disease, particularly when both
the GSIS and ECC profess ignorance themselves
of the causes of the disease." (Justice Paras).
Stated otherwise, before the amendment, the law
simply did not allow compensation for the
ailment of respondent. It is under this set-up that
the Raro case was decided. However, as the
ECC decision noted, the law was amended and
now "the present law on compensation allows
certain diseases to be compensable if it is
sufficiently proven that the risk of
contracting is increased by the working
conditions." It, therefore, now allows
compensation subject to requirement of proving
by sufficient evidence that the risk of contracting
the ailment is increased by the working
conditions.
As earlier noted, however, in the specific case of
respondent, the requirement is impossible to
comply with, given the present state of scientific
knowledge. The obligation to present such
impossible evidence must, therefore, be deemed
void. Respondent, therefore, is entitled to
compensation, consistent with the social
legislation’s intended beneficial purpose.
In fine, the Court sees no reversible error in the
decision of the Court of Appeals.
Note: This case is contrary to Raro case, but it
did not abandon the doctrine in Raro. The
doctrine in Raro still stands.
So if a question arises where the cancer is not
those found in Annex A, then such calls for the
application of Theory of Increased Risk as held
in the case of Raro in order for the sickness or
disease to be compensable.
Claims under ECC by an employee may be
denied if there is on his part:
1.) Notorious Negligence
2.) Intoxication
3.) Willful intent to injure oneself (Suicide)
XPN: Suicide may be compensable if:
1.) Stipulated in the contract, that
suicide is compensable
2.) If the employee is proven to have a
mental illness proven by medical
findings, and commits suicide.
Manansala vs. Marlow Navigation
(Misrepresentation of a pre-existing condition
constitutes bad faith which negates
compensation)
As laypersons, seafarers cannot be expected to
make completely accurate accounts of their state
of health. Unaware of the nuances of medical
conditions, they may, in good faith, make
statements that tum out to be false. These honest
mistakes do not negate compensability for
disability arising from pre-existing illnesses
shown to be aggravated by their working
conditions. However, when a seafarer's proper
knowledge of pre-existing conditions and intent
to deceive an employer are established,
compensability is negated.
FACTS: On April 8, 2010, Manansalals
services were engaged by Marlow Navigation
Phils., Inc., for and on behalf of its principal,
Marlow Navigation Co. Ltd./Cyprus, for him to
serve as a "fitter" on board the vessel M/V
Seaboxer.
Before boarding the vessel, Manansala
underwent a Pre Employment Medical
Examination (PEME) on March 23, 20109 at
the EL ROI Medical Clinic and Diagnostic
Center, Inc.10 In his examination, Manansala
was required to disclose information regarding
all existing and prior medical conditions. The
examination specifically required information on
29 illnesses and/or conditions, among which
were hypertension and diabetes. Manansala's
examination certificate indicates that he denied
having hypertension and diabetes, specifically
answering "NO" when asked about hypertension
and diabetes mellitus. Following his
examination, Manansala was declared fit for sea
duty and was cieployed.
On May 30, 2010, while on board the M/V
Seaboxer, Manansala suffered a stroke. Because
of this, Manansala was repatriated on June 8,
2010.
Manansala was confined at the De Los Santos
Medical Center from June 10, 2010 to June 23,
2010, under the primary care of company-
-designated physician, Dr. Teresita Barrairo (Dr.
Barrairo). While under Dr. Barrairo's care, he
"repeatedly denied that he ha[d] any past history
of diabetes and hypertension."
On September 7, 2010, Dr. Barrairo issued to
Manansala an interim Grade 10 disability rating.
She issued a final Grade 10 Disability
assessment on September 30, 2010.
On October 21, 2010, Manansala filed a
Complaint against the respondents for total and
permanent disability benefits, as well as
damages and attorney's fees. When the
mandatory conferences failed, the parties were
ordered to file their respective position papers
and responsive pleadings.
Two (2) months after he filed his Complaint, on
December 20, 2010, Manansala's own doctor,
Dr. Amado San Luis (Dr. San Luis), issued a
medical opinion stating that Manansala must be
considered permanently disabled:
Medical Opinion
4. Patient should be permanently disabled (sic)
because of the inherent risk of his work as a
seaman that will predispose him to repeated
stroke or other cardiovascular attacks. Because
of the presence of diabetes, hypertension,
hyperlipidemia and stroke, he is considered a
high risk of (sic) developing another stroke.
The same opinion indicated that Manansala
admitted to having had a long history of
hypertension and diabetes, He even admitted to
taking Enalapril and Metformin as maintenance
medications.
On Apri1 20, 2011, the Labor Arbiter rendered a
Decision finding that Manansala was suffering
from pre-existing, rather than work-related,
ailments. Therefore, he was not entitled to
disability benefits. NLRC affirmed the LA’s
decision. So did the CA. Hence this Petition.
ISSUE: WON Manansala is entitled to total
permanent disability benefits occasioned by
work-related illness?
RULING: No, he is not entitled.
POEA-SEC defines Work Related illness as -
any sickness resulting to disability or death as a
result of an occupational disease listed under
Section 32-A of this Contract with the
conditions set therein satisfied.
Section 32-A of the POEA-SEC provides a non-
exhaustive list of diseases considered as
occupational. The mere occurrence of a listed
illness does not automatically engender
compensability. The first paragraph of Section
32-A requires the satisfaction of all of its listed
general conditions "[f]or an occupational disease
and the resulting disability or death to be
compensable":
Section 32-A OCCUPATIONAL DISEASES
For an occupational disease and the resulting
disability or death to be compensable, all of the
following conditions must be satisfied:
(1)The seafarer's work must involve the risks
described herein;
(2)The disease was contracted as a result of the
seafarer's exposure to the described risks;
(3)The disease was contracted within a period of
exposure and under such other factors necessary
to contract it;
(4)There was no notorious negligence on the
part of the seafarer.
To enable compensation, an occupational
disease and ensuing death or disability must,
thus, be "work-related"; that is to say that there
must be a "reasonable linkage between the
disease suffered by the employee and his work."
Common sense dictates that an illness could not
possibly have been "contracted as a result of the
seafarer's exposure to the described risks" if it
has been existing before the seafarer's services
are engaged. Still, pre- existing illnesses may be
aggravated by the seafarer's working conditions.
To the extent that any such aggravation is
brought about by the work of the seafarer,
compensability ensues:
Settled is the rule that for illness to be
compensable, it is not necessary that the nature
of the employment be the sole and only reason
for the illness suffered by the seafarer. It is
sufficient that there is a reasonable linkage
between the disease suffered by the employee
and his work to lead a rational mind to conclude
that his work may have contributed to the
establishment or, at the very least, aggravation
of any pre-existing condition he might have had.
The POEA-SEC bars the compensability of
disability arising from a pre-existing illness
when attended by an employee's fraudulent
misrepresentation. Section 20(E) of the POEA-
SEC states:
E. A seafarer who knowingly conceals and does
not disclose past medical condition, disability
and history in the pre-employment medical
examination constitutes fraudulent
misrepresentation and shall disqualify him from
any compensation and benefits. This may also be
a valid ground for termination of employment
and imposition of the appropriate administrative
and legal sanctions.
This Court finds petitioner to have knowingly
and fraudulently misrepresented himself as not
afflicted with hypertension or diabetes. He did
not merely make inaccuracies in good faith but
engaged in serial dishonesty. Thus, this Court
affirms the Decision of the Court of Appeals.
During his PEME, petitioner was recorded to
have "categorically answered 'No' when asked
whether he has ever suffered from or has been
told to have hypertension and diabetes." After
repatriation and while being treated by Dr.
Barrairo, the company-designated physician, he
again "denied that he ha[d] any past history of
diabetes and hypertension.”
However, in the medical opinion and evaluation
prepared by his own physician, Dr. San Luis,
petitioner was indicated to not only have
admitted that "he ha[d] a past history of
hypertension and diabetes," but even that he was
"regularly taking Enalapril and Metformin
respectively to treat the said illnesses."
Petitioner's assertion is an admission that he
fully knew of his conditions at the moment he
was examined, rendering it pointless for this
Court to consider whether he was merely
confused at the time of his examination.
Additionally, his assertion burdens him with the
task of proving his claims. As he was duty-
bound to truthfully answer questions during his
examination, petitioner must show that despite
his knowledge, he did not willfully or
deceptively withhold information. Likewise, his
imputation of the examining physician's liability
despite the examination certificate's indication
that his responses were duly recorded is an
affirmative defense or an alternative version of
events that becomes his burden to prove.
Petitioner failed to discharge his burden. On the
contrary, the confluence of circumstances belies
his claims.
Petitioner adequately understood the
significance of the declarations attributed to him
in his examination certificate. Petitioner's
engagement aboard the MIV Seaboxer was not
his first stint as a seafarer. He had been a
seafarer since 1994, although he worked for
respondents, on and off, only since 2007. His
prolonged seafaring experience must have
familiarized him with the conduct of PEMEs and
the need for him to give truthful answers. He
explicitly declared, too, that he was "aware of
the contents of Section 20.E [on
misrepresentation] in the POEA [Standard
Employment Contract]." Certainly, his
awareness of Section 20(E) must have impressed
upon him not only the potential complications of
what he claims to be a false declaration foisted
on him by the examining physician but also the
urgency of rectifying that error. Instead, he
remained silent and did nothing. Petitioner's
concession by omission militates against him.
This Court has nothing to rely on but petitioner's
bare recollection. This does not satisfy, He
should have actively endeavored to demonstrate
that the false declarations in his examination
certificate were anomalous, stray errors. As a
seafarer since 1994, he must have completed
several other medical examinations. His good
faith could have been substantiated by prior acts
in analogous situations. He could have presented
copies of the certificates for his previous
medical examinations, but he did not These
would have shown that while the responses he
uttered about his conditions in prior instances
had been properly recorded, the examining
physician during his March 23, 2010
examination failed to render an accurate
account.
It is, of course, possible that prior to his most
recent medical examination on March 23, 2010,
petitioner had not been diagnosed with
hypertension or diabetes. This would make it
impossible for him to present evidence of
countervailing prior declarations. However, even
conceding this, petitioners good faith is belied
by other circumstances attending this case.
Petitioner's good faith could have been
demonstrated by his subsequent acts. Knowing
full well that a false declaration was made on his
examination certificate, petitioner should, at the
very least, not have compounded it. Instead of
this, however, he maintained before Dr. Barrairo
upon repatriation that he had no history of either
hypertension or diabetes. It was only before his
personally chosen physician did petitioner admit
to not only a history of diabetes and
hypertension but even to the maintenance
medications he had been taking to address those
illnesses.
A measure of good faith can be appreciated on
the part of a seafarer who is unable to grasp the
nuances of his or her medical condition. This
Court is unable to appreciate this good faith
here. Petitioner knew that his illnesses were of
such severity that he needed to take maintenance
medicine. Despite this, he consistently
maintained that he had no history of
hypertension or diabetes. Finally confronted
with his own discrepant statements he denied
accountability by shifting the blame to a person
who was beyond the reach of the proceedings he
had initiated.
Petitioner's disavowals were not statements
made in good faith but were part of a serial
utterance of lies.