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I.

Principles and Concepts Doctrinal Rulings Calalang v. Williams (70 Phils. 726)1

G.R. No. 47800 December 2, 1940 MAXIMO CALALANG, petitioner, vs. A. D. WILLIAMS, ET AL., respondents. DECISION LAUREL, J., J.:

Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought before this court this petition for a writ of prohibition against the respondents, A. D. Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as Director of Public Works; Sergio Bayan, as Acting Secretary of Public Works and Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of Police of Manila. It is alleged in the petition that the National Traffic Commission, in its resolution of July 17, 1940, resolved to recommend to the Director of Public Works and to the Secretary of Public Works and Communications that animal-drawn vehicles be prohibited from passing along Rosario Street extending from Plaza Calderon de la Barca to Dasmarias Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending from the railroad crossing at Antipolo Street to Echague Street, from 7 a.m. to 11 p.m., from a period of one year from the date of the opening of the Colgante Bridge to traffic; that the Chairman of the National Traffic Commission, on July 18, 1940 recommended to the Director of Public Works the adoption of the measure proposed in the resolution aforementioned, in pursuance of the provisions of Commonwealth Act No. 548 which authorizes said Director of Public Works, with the approval of the Secretary of Public Works and Communications, to promulgate rules and regulations to regulate and control the use of and traffic on national roads; that on August 2, 1940, the Director of Public Works, in his first indorsement to the Secretary of Public Works and Communications, recommended to the latter the approval of the recommendation made by the Chairman of the National Traffic Commission as aforesaid, with the modification that the closing of Rizal Avenue to traffic to animal-drawn vehicles be limited to the portion thereof extending from the railroad crossing at Antipolo Street to Azcarraga Street; that on August 10, 1940, the Secretary of Public Works and Communications, in his second indorsement addressed to the Director of Public Works, approved the recommendation of the latter that Rosario Street and Rizal Avenue be closed to traffic of animal-drawn vehicles, between the points and during the hours as above indicated, for a period of one year from the date of the opening of the Colgante Bridge to traffic; that the Mayor of Manila and the Acting Chief of Police of Manila have enforced and caused to be enforced the rules and regulations thus adopted; that as a consequence of such enforcement, all animal-drawn vehicles are not allowed to pass and pick up passengers in the places above-mentioned to the detriment not only of their owners but of the riding public as well. It is contended by the petitioner that Commonwealth Act No. 548 by which the Director of Public Works, with the approval of the Secretary of Public Works and Communications, is authorized to promulgate rules and regulations for the regulation and control of the use of and traffic on national roads and streets is unconstitutional because it constitutes an undue delegation of legislative power. This contention is untenable. As was observed by this court in Rubi vs. Provincial Board of Mindoro (39 Phil, 660, 700), The rule has nowhere been better stated than in the early Ohio case decided by Judge Ranney, and since followed in a multitude of cases, namely: The true distinction therefore is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made. (Cincinnati, W. & Z. R. Co. vs. Commrs. Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief Justice Marshall in Wayman vs. Southard (10 Wheat., 1) may be committed by the Legislature to an executive department or official. The Legislature may make decisions of executive departments or subordinate officials thereof, to whom it has committed the execution of certain acts, final on questions of fact. (U.S. vs. Kinkead, 248 Fed., 141.) The growing tendency in the decisions is to give prominence to the necessity of the case. Section 1 of Commonwealth Act No. 548 reads as follows: SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive orders of the President of the Philippines, the Director of Public Works, with the approval of the Secretary of Public Works and Communications, shall promulgate the necessary rules and regulations to regulate and control the use of and traffic on such roads and streets. Such rules and regulations, with the approval of the President, may contain provisions controlling or regulating the construction of buildings or other structures within a reasonable distance from along the national roads. Such roads may be temporarily closed to any or all classes of traffic by the Director of Public Works and his duly authorized representatives whenever the condition of the road or the traffic thereon makes such action necessary or advisable in the public convenience and interest, or for a specified period, with the approval of the Secretary of Public Works and Communications. The above provisions of law do not confer legislative power upon the Director of Public Works and the Secretary of Public Works and Communications. The authority therein conferred upon them and under which they promulgated the rules and regulations now complained of is not to determine what public policy demands but merely to carry out the legislative policy laid down by the National Assembly in said Act, to wit, to promote safe transit upon and avoid obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive orders of the President of the Philippines and to close them temporarily to any or all classes of traffic whenever the condition of the road or the traffic makes such action necessary or advisable in the public convenience
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and interest. The delegated power, if at all, therefore, is not the determination of what the law shall be, but merely the ascertainment of the facts and circumstances upon which the application of said law is to be predicated. To promulgate rules and regulations on the use of national roads and to determine when and how long a national road should be closed to traffic, in view of the condition of the road or the traffic thereon and the requirements of public convenience and interest, is an administrative function which cannot be directly discharged by the National Assembly. It must depend on the discretion of some other government official to whom is confided the duty of determining whether the proper occasion exists for executing the law. But it cannot be said that the exercise of such discretion is the making of the law. As was said in Lockes Appeal (72 Pa. 491): To assert that a law is less than a law, because it is made to depend on a future event or act, is to rob the Legislature of the power to act wisely for the public welfare whenever a law is passed relating to a state of affairs not yet developed, or to things future and impossible to fully know. The proper distinction the court said was this: The Legislature cannot delegate its power to make the law; but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend. To deny this would be to stop the wheels of government. There are many things upon which wise and useful legislation must depend which cannot be known to the law-making power, and, must, therefore, be a subject of inquiry and determination outside of the halls of legislation. (Field vs. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.) In the case of People vs. Rosenthal and Osmea, G.R. Nos. 46076 and 46077, promulgated June 12, 1939, and in Pangasinan Transportation vs. The Public Service Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to observe that the principle of separation of powers has been made to adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of subordinate legislation, not only in the United States and England but in practically all modern governments. Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulations, and the increased difficulty of administering the laws, the rigidity of the theory of separation of governmental powers has, to a large extent, been relaxed by permitting the delegation of greater powers by the legislative and vesting a larger amount of discretion in administrative and executive officials, not only in the execution of the laws, but also in the promulgation of certain rules and regulations calculated to promote public interest. The petitioner further contends that the rules and regulations promulgated by the respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an unlawful interference with legitimate business or trade and abridge the right to personal liberty and freedom of locomotion. Commonwealth Act No. 548 was passed by the National Assembly in the exercise of the paramount police power of the state. Said Act, by virtue of which the rules and regulations complained of were promulgated, aims to promote safe transit upon and avoid obstructions on national roads, in the interest and convenience of the public. In enacting said law, therefore, the National Assembly was prompted by considerations of public convenience and welfare. It was inspired by a desire to relieve congestion of traffic. which is, to say the least, a menace to public safety. Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to promote the general welfare may interfere with personal liberty, with property, and with business and occupations. Persons and property may be subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the state (U.S. vs. Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the individual are subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty because then the individual will fall into slavery. The citizen should achieve the required balance of liberty and authority in his mind through education and personal discipline, so that there may be established the resultant equilibrium, which means peace and order and happiness for all. The moment greater authority is conferred upon the government, logically so much is withdrawn from the residuum of liberty which resides in the people. The paradox lies in the fact that the apparent curtailment of liberty is precisely the very means of insuring its preservation. The scope of police power keeps expanding as civilization advances. As was said in the case of Dobbins vs. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), the right to exercise the police power is a continuing one, and a business lawful today may in the future, because of the changed situation, the growth of population or other causes, become a menace to the public health and welfare, and be required to yield to the public good. And in People vs. Pomar (46 Phil., 440), it was observed that advancing civilization is bringing within the police power of the state today things which were not thought of as being within such power yesterday. The development of civilization, the rapidly increasing population, the growth of public opinion, with an increasing desire on the part of the masses and of the government to look after and care for the interests of the individuals of the state, have brought within the police power many questions for regulation which formerly were not so considered. The petitioner finally avers that the rules and regulations complained of infringe upon the constitutional precept regarding the promotion of social justice to insure the well-being and economic security of all the people. The promotion of social justice, however, is to be achieved not through a mistaken sympathy towards any given group. Social justice is neither communism, nor despotism, nor atomism, nor anarchy, but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of measures calculated to insure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. Social justice, therefore, must be founded on the recognition of the necessity of interdependence among divers and diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic

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life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about the greatest good to the greatest number. IN VIEW OF THE FOREGOING, the Writ of Prohibition Prayed for is hereby denied, with costs against the petitioner. So ordered.
Avancea, C.J., Imperial, Diaz and Horrilleno, JJ., concur.

International School Alliance of Educators v. Quisumbing. June 1, 20002

G.R. No. 128845 June 1, 2000 INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL, INC., respondents. KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of course, beside the point. The point is that employees should be given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold today.1wphi1.nt Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic educational institution established primarily for dependents of foreign diplomatic personnel and other temporary residents.1 To enable the School to continue carrying out its educational program and improve its standard of instruction, Section 2(c) of the same decree authorizes the School to employ its own teaching and management personnel selected by it either locally or abroad, from Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and regulations attending their employment, except laws that have been or will be enacted for the protection of employees. Accordingly, 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 employs four tests to determine whether a faculty member should be classified as a foreign-hire or a local hire: a. What is one's domicile? b. Where is one's home economy? c. To which country does one owe economic allegiance? d. Was the individual hired abroad specifically to work in the School and was the School responsible for bringing that individual to the Philippines?2 Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire; otherwise, he or she is deemed a foreign-hire. The School grants foreign-hires certain benefits not accorded local-hires. These include housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two "significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains: A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take the risk of deviating from a promising career path all for the purpose of pursuing his profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance for the education of one's children, adequate insurance against illness and death, and of course the primary benefit of a basic salary/retirement compensation. Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he will eventually and inevitably return to his home country where he will have to confront the uncertainty of obtaining suitable employment after along period in a foreign land.
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The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms of attracting competent professionals in the field of international education.3 When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty members" 4 of the School, contested the difference in salary rates between foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock between the parties. On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court. Petitioner 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. The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities other than Filipino, who have been hired locally and classified as local hires. 5 The Acting Secretary of Labor found that these non-Filipino localhires received the same benefits as the Filipino local-hires. The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local hires.6 The Acting secretary upheld the point-of-hire classification for the distinction in salary rates: The Principle "equal pay for equal work" does not find applications 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. We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which system is universally recognized. We agree that certain amenities have to be provided to these people in order to entice them to render their services in the Philippines and in the process remain competitive in the international market. Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would also require parity in other terms and conditions of employment which include the employment which include the employment contract. A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional compensation wherein the parties agree as follows: All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers from abroad, under terms and conditions that are consistent with accepted international practice. Appendix C of said CBA further provides: The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25% differential is reflective of the agreed value of system displacement and contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS). To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of employees, hence, the difference in their salaries. The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of constitutional law that the guarantee of equal protection of the laws is not violated by legislation or private covenants based on reasonable classification. A classification is reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no amenities of their own in the Philippines and have to be given a good compensation package in order to attract them to join the teaching faculty of the School.7

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We cannot agree. That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The Constitution8 in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith. International law, which springs from general principles of law,9 likewise proscribes discrimination. General principles of law include principles of equity, 10 i.e., the general principles of fairness and justice, based on the test of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the International Covenant on Economic, Social, and Cultural Rights, 13 the International Convention on the Elimination of All Forms of Racial Discrimination, 14 the Convention against Discrimination in Education, 15 the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation 16 all embody the general principle against discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated this principle as part of its national laws. In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and discrimination by the employer are all the more reprehensible. The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the physical workplace the factory, the office or the field but include as well the manner by which employers treat their employees. The Constitution 18 also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code 19 provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of employment. 20 Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and penalizes 21 the payment of lesser compensation to a female employee as against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to encourage or discourage membership in any labor organization. Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides: The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work, which ensure, in particular: a. Remuneration which provides all workers, as a minimum, with: (i) Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work; xxx xxx xxx

The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid similar salaries. 22 This rule applies to the School, its "international character" notwithstanding. The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-hires. 23 The Court finds this argument a little cavalier. If an employer accords employees the same position and rank, the presumption is that these employees perform equal work. This presumption is borne by logic and human experience. If the employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the others receive more. That would be adding insult to injury. The employer has discriminated against that employee; it is for the employer to explain why the employee is treated unfairly. The employer in this case has failed to discharge this burden. There is no evidence here 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.

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The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary rates without violating the principle of equal work for equal pay. "Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National Labor Relations Commission, 24 we said that: "salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis supplied.) While we recognize the need of the School to attract foreign-hires, 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 Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to afford labor full protection." 26 The State, therefore, has the right and duty to regulate the relations between labor and capital.27 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. 28 Should such contracts contain stipulations that are contrary to public policy, courts will not hesitate to strike down these stipulations. In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreignhires and local hires to be an invalid classification. There is no reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.1avvphi1 We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires. A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of employees, consistent with equity to the employer, indicate to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law." 29 The factors in determining the appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status. 30 The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights. 31 It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of collective bargaining. The collective bargaining history in the School also shows that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar functions under the same working conditions as the local-hires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective bargaining rights. WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART. The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than local-hires. SO ORDERED.
Puno and Pardo, JJ., concur. Davide, Jr., C.J., on official leave. Ynares-Santiago, J., is on leave.

PASEI Inc. v. Drilon, June 30, 19983

G.R. No. 81958 June 30, 1988

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PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner, vs. HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D. ACHACOSO, as Administrator of the Philippine Overseas Employment Administration, respondents. Gutierrez & Alo Law Offices for petitioner. SARMIENTO, J.:

The petitioner, Philippine Association of Service Exporters, Inc. (PASEI, for short), a firm "engaged principally in the recruitment of Filipino workers, male and female, for overseas placement," 1 challenges the Constitutional validity of Department Order No. 1, Series of 1988, of the Department of Labor and Employment, in the character of "GUIDELINES GOVERNING THE TEMPORARY SUSPENSION OF DEPLOYMENT OF FILIPINO DOMESTIC AND HOUSEHOLD WORKERS," in this petition for certiorari and prohibition. Specifically, the measure is assailed for "discrimination against males or females;" 2 that it "does not apply to all Filipino workers but only to domestic helpers and females with similar skills;" 3 and that it is violative of the right to travel. It is held likewise to be an invalid exercise of the lawmaking power, police power being legislative, and not executive, in character. In its supplement to the petition, PASEI invokes Section 3, of Article XIII, of the Constitution, providing for worker participation "in policy and decision-making processes affecting their rights and benefits as may be provided by law." 4 Department Order No. 1, it is contended, was passed in the absence of prior consultations. It is claimed, finally, to be in violation of the Charter's non-impairment clause, in addition to the "great and irreparable injury" that PASEI members face should the Order be further enforced. On May 25, 1988, the Solicitor General, on behalf of the respondents Secretary of Labor and Administrator of the Philippine Overseas Employment Administration, filed a Comment informing the Court that on March 8, 1988, the respondent Labor Secretary lifted the deployment ban in the states of Iraq, Jordan, Qatar, Canada, Hongkong, United States, Italy, Norway, Austria, and Switzerland. * In submitting the validity of the challenged "guidelines," the Solicitor General invokes the police power of the Philippine State. It is admitted that Department Order No. 1 is in the nature of a police power measure. The only question is whether or not it is valid under the Constitution. The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare." 5 As defined, it consists of (1) an imposition of restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive embrace. "Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done, provides enough room for an efficient and flexible response to conditions and circumstances thus assuring the greatest benefits." 6 It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the Charter. Along with the taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental attribute of government that has enabled it to perform the most vital functions of governance. Marshall, to whom the expression has been credited, 7 refers to it succinctly as the plenary power of the State "to govern its citizens."8 "The police power of the State ... is a power coextensive with self- protection, and it is not inaptly termed the "law of overwhelming necessity." It may be said to be that inherent and plenary power in the State which enables it to prohibit all things hurtful to the comfort, safety, and welfare of society." 9 It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is "rooted in the conception that men in organizing the state and imposing upon its government limitations to safeguard constitutional rights did not intend thereby to enable an individual citizen or a group of citizens to obstruct unreasonably the enactment of such salutary measures calculated to ensure communal peace, safety, good order, and welfare." 10 Significantly, the Bill of Rights itself does not purport to be an absolute guaranty of individual rights and liberties "Even liberty itself, the greatest of all rights, is not unrestricted license to act according to one's will." 11 It is subject to the far more overriding demands and requirements of the greater number. Notwithstanding its extensive sweep, police power is not without its own limitations. For all its awesome consequences, it may not be exercised arbitrarily or unreasonably. Otherwise, and in that event, it defeats the purpose for which it is exercised, that is, to advance the public good. Thus, when the power is used to further private interests at the expense of the citizenry, there is a clear misuse of the power. 12 In the light of the foregoing, the petition must be dismissed. As a general rule, official acts enjoy a presumed vahdity. 13 In the absence of clear and convincing evidence to the contrary, the presumption logically stands.

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The petitioner has shown no satisfactory reason why the contested measure should be nullified. There is no question that Department Order No. 1 applies only to "female contract workers," 14 but it does not thereby make an undue discrimination between the sexes. It is well-settled that "equality before the law" under the Constitution 15does not import a perfect Identity of rights among all men and women. It admits of classifications, provided that (1) such classifications rest on substantial distinctions; (2) they are germane to the purposes of the law; (3) they are not confined to existing conditions; and (4) they apply equally to all members of the same class. 16 The Court is satisfied that the classification made-the preference for female workers rests on substantial distinctions. As a matter of judicial notice, the Court is well aware of the unhappy plight that has befallen our female labor force abroad, especially domestic servants, amid exploitative working conditions marked by, in not a few cases, physical and personal abuse. The sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of torture, confirmed by testimonies of returning workers, are compelling motives for urgent Government action. As precisely the caretaker of Constitutional rights, the Court is called upon to protect victims of exploitation. In fulfilling that duty, the Court sustains the Government's efforts. The same, however, cannot be said of our male workers. In the first place, there is no evidence that, except perhaps for isolated instances, our men abroad have been afflicted with an Identical predicament. The petitioner has proffered no argument that the Government should act similarly with respect to male workers. The Court, of course, is not impressing some male chauvinistic notion that men are superior to women. What the Court is saying is that it was largely a matter of evidence (that women domestic workers are being ill-treated abroad in massive instances) and not upon some fanciful or arbitrary yardstick that the Government acted in this case. It is evidence capable indeed of unquestionable demonstration and evidence this Court accepts. The Court cannot, however, say the same thing as far as men are concerned. There is simply no evidence to justify such an inference. Suffice it to state, then, that insofar as classifications are concerned, this Court is content that distinctions are borne by the evidence. Discrimination in this case is justified. As we have furthermore indicated, executive determinations are generally final on the Court. Under a republican regime, it is the executive branch that enforces policy. For their part, the courts decide, in the proper cases, whether that policy, or the manner by which it is implemented, agrees with the Constitution or the laws, but it is not for them to question its wisdom. As a co-equal body, the judiciary has great respect for determinations of the Chief Executive or his subalterns, especially when the legislature itself has specifically given them enough room on how the law should be effectively enforced. In the case at bar, there is no gainsaying the fact, and the Court will deal with this at greater length shortly, that Department Order No. 1 implements the rule-making powers granted by the Labor Code. But what should be noted is the fact that in spite of such a fiction of finality, the Court is on its own persuaded that prevailing conditions indeed call for a deployment ban. There is likewise no doubt that such a classification is germane to the purpose behind the measure. Unquestionably, it is the avowed objective of Department Order No. 1 to "enhance the protection for Filipino female overseas workers" 17 this Court has no quarrel that in the midst of the terrible mistreatment Filipina workers have suffered abroad, a ban on deployment will be for their own good and welfare. The Order does not narrowly apply to existing conditions. Rather, it is intended to apply indefinitely so long as those conditions exist. This is clear from the Order itself ("Pending review of the administrative and legal measures, in the Philippines and in the host countries . . ." 18), meaning to say that should the authorities arrive at a means impressed with a greater degree of permanency, the ban shall be lifted. As a stop-gap measure, it is possessed of a necessary malleability, depending on the circumstances of each case. Accordingly, it provides: 9. LIFTING OF SUSPENSION. The Secretary of Labor and Employment (DOLE) may, upon recommendation of the Philippine Overseas Employment Administration (POEA), lift the suspension in countries where there are: 1. Bilateral agreements or understanding with the Philippines, and/or, 2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino workers. 19 The Court finds, finally, the impugned guidelines to be applicable to all female domestic overseas workers. That it does not apply to "all Filipina workers" 20 is not an argument for unconstitutionality. Had the ban been given universal applicability, then it would have been unreasonable and arbitrary. For obvious reasons, not all of them are similarly circumstanced. What the Constitution prohibits is the singling out of a select person or group of persons within an existing class, to the prejudice of such a person or group or resulting in an unfair advantage to another person or group of persons. To apply the ban, say exclusively to workers deployed by A, but not to those recruited by B, would obviously clash with the equal protection clause of the Charter. It would be a classic case of what Chase refers to as a law that "takes property from A and gives it to B." 21 It would be an unlawful invasion of property rights and freedom of contract and needless to state, an invalid act. 22 (Fernando says: "Where the classification is based on such distinctions that make a real difference as infancy, sex, and stage of civilization of minority groups, the better rule, it would seem, is to recognize its validity only if the young, the women, and the cultural minorities are singled out for favorable treatment. There would be an element of unreasonableness if on the contrary their status that calls for the law ministering to their needs is made the basis of discriminatory legislation against them. If

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such be the case, it would be difficult to refute the assertion of denial of equal protection." clearly accords protection to certain women workers, and not the contrary.)

23

In the case at bar, the assailed Order

It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas deployment. From scattered provisions of the Order, it is evident that such a total ban has hot been contemplated. We quote: 5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and workers of similar skills defined herein to the following [sic] are authorized under these guidelines and are exempted from the suspension. 5.1 Hirings by immediate members of the family of Heads of State and Government; 5.2 Hirings by Minister, Deputy Minister and the other senior government officials; and 5.3 Hirings by senior officials of the diplomatic corps and duly accredited international organizations. 5.4 Hirings by employers in countries with whom the Philippines have [sic] bilateral labor agreements or understanding. xxx xxx xxx 7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR SKILLS--Vacationing domestic helpers and/or workers of similar skills shall be allowed to process with the POEA and leave for worksite only if they are returning to the same employer to finish an existing or partially served employment contract. Those workers returning to worksite to serve a new employer shall be covered by the suspension and the provision of these guidelines. xxx xxx xxx 9. LIFTING OF SUSPENSION-The Secretary of Labor and Employment (DOLE) may, upon recommendation of the Philippine Overseas Employment Administration (POEA), lift the suspension in countries where there are: 1. Bilateral agreements or understanding with the Philippines, and/or, 2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino workers. 24 xxx xxx xxx The consequence the deployment ban has on the right to travel does not impair the right. The right to travel is subject, among other things, to the requirements of "public safety," "as may be provided by law." 25 Department Order No. 1 is a valid implementation of the Labor Code, in particular, its basic policy to "afford protection to labor," 26 pursuant to the respondent Department of Labor's rule-making authority vested in it by the Labor Code.27 The petitioner assumes that it is unreasonable simply because of its impact on the right to travel, but as we have stated, the right itself is not absolute. The disputed Order is a valid qualification thereto. Neither is there merit in the contention that Department Order No. 1 constitutes an invalid exercise of legislative power. It is true that police power is the domain of the legislature, but it does not mean that such an authority may not be lawfully delegated. As we have mentioned, the Labor Code itself vests the Department of Labor and Employment with rulemaking powers in the enforcement whereof. 28 The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and decision-making processes affecting their rights and benefits" 29 is not well-taken. The right granted by this provision, again, must submit to the demands and necessities of the State's power of regulation. The Constitution declares that: Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. 30

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"Protection to labor" does not signify the promotion of employment alone. What concerns the Constitution more paramountly is that such an employment be above all, decent, just, and humane. It is bad enough that the country has to send its sons and daughters to strange lands because it cannot satisfy their employment needs at home. Under these circumstances, the Government is duty-bound to insure that our toiling expatriates have adequate protection, personally and economically, while away from home. In this case, the Government has evidence, an evidence the petitioner cannot seriously dispute, of the lack or inadequacy of such protection, and as part of its duty, it has precisely ordered an indefinite ban on deployment. The Court finds furthermore that the Government has not indiscriminately made use of its authority. It is not contested that it has in fact removed the prohibition with respect to certain countries as manifested by the Solicitor General. The non-impairment clause of the Constitution, invoked by the petitioner, must yield to the loftier purposes targetted by the Government. 31 Freedom of contract and enterprise, like all other freedoms, is not free from restrictions, more so in this jurisdiction, where laissez faire has never been fully accepted as a controlling economic way of life. This Court understands the grave implications the questioned Order has on the business of recruitment. The concern of the Government, however, is not necessarily to maintain profits of business firms. In the ordinary sequence of events, it is profits that suffer as a result of Government regulation. The interest of the State is to provide a decent living to its citizens. The Government has convinced the Court in this case that this is its intent. We do not find the impugned Order to be tainted with a grave abuse of discretion to warrant the extraordinary relief prayed for. WHEREFORE, the petition is DISMISSED. No costs. SO ORDERED.
Yap, C.J., Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Cortes and Grio-Aquino, JJ., concur. Gutierrez, Jr. and Medialdea, JJ., are on leave.

Cases on ER-EE Relationship

Jose Mel Bernarte v. PBA, G.R. No. 192084, June 1, 2000.4

G.R. No. 192084 September 14, 2011 JOSE MEL BERNARTE, Petitioner, vs. PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, and PERRY MARTINEZ,Respondents. DECISION CARPIO, J.:

The Case This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of respondents Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration. The Facts The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows: Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes were made on the terms of their employment. Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was from February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a one and a half month contract for the period July 1 to August 5, 2003. On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be renewed citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.
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On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of referees officiating out-of-town games. Beginning February 2004, he was no longer made to sign a contract. Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003. After the lapse of the latter period, PBA decided not to renew their contracts. Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer were simply not renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed.4 In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages and attorneys fees, to wit: WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby ordered to (a) reinstate complainants within thirty (30) days from the date of receipt of this decision and to solidarily pay complainants: 1. backwages from January 1, 2004 up to the finality of this Decision, which to date is 2. moral damages 100,000.00 3. exemplary damages 4. 10% attorneys fees TOTAL or a total of P1,152,250.00 The rest of the claims are hereby dismissed for lack of merit or basis. SO ORDERED.7 In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The dispositive portion of the NLRCs decision reads: WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED. SO ORDERED.9 Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The dispositive portion of the Court of Appeals decision reads: WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolutiondated August 26, 2008 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents complaint before the Labor Arbiter is DISMISSED. SO ORDERED.10 The Court of Appeals Ruling The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means and methods by which petitioner performed his work as a basketball referee. The Court of Appeals held: 50,000.00 68,625.00 P754,875.00 50,000.00 36,125.00 P397,375.00 100,000.00 JOSE MEL BERNARTE P536,250.00 RENATO GUEVARRA P211,250.00

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While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle and making calls during basketball games, it, nevertheless, theorized that the said acts refer to the means and methods employed by the referees in officiating basketball games for the illogical reason that said acts refer only to the referees skills. How could a skilled referee perform his job without blowing a whistle and making calls? Worse, how can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls? Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the NLRC) that the Contracts of Retainer show that petitioners have control over private respondents. xxxx Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that private respondents repeated hiring made them regular employees by operation of law.11 The Issues The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was illegally dismissed. Petitioner raises the procedural issue of whether the Labor Arbiters decision has become final and executory for failure of respondents to appeal with the NLRC within the reglementary period. The Ruling of the Court The petition is bereft of merit. The Court shall first resolve the procedural issue posed by petitioner. Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final and executory for failure of respondents to appeal with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiters decision was constructively served on respondents as early as August 2005 while respondents appealed the Arbiters decision only on 31 March 2006, way beyond the reglementary period to appeal. Petitioner points out that service of an unclaimed registered mail is deemed complete five days from the date of first notice of the post master. In this case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was consequently returned to sender. Petitioner presents the Postmasters Certification to prove constructive service of the Labor Arbiters decision on respondents. The Postmaster certified: xxx That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry notice to claim on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005, respectively. That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month retention period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8, 2005.12 Section 10, Rule 13 of the Rules of Court provides: SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever date is earlier. The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon receipt by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of five days from the date the addressee received the first notice of the postmaster.13 Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the addressee.14 Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by the addressee.15 Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is incumbent upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee.16

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The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice was issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the notice was actually delivered.17 In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices issued by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by respondents, negating petitioners claim of constructive service of the Labor Arbiters decision on respondents. The Postmasters Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the post office issued the three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiters decision on respondents. At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as respondents appeal was considered in the interest of substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on the merits rather than allowing the substantial issue of whether petitioner is an independent contractor or an employee linger and remain unsettled due to procedural technicalities. The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the province of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.18 To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished. The so-called "control test" is the most important indicator of the presence or absence of an employer-employee relationship.19 In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioners violation of its terms and conditions. However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent contractor and not an employee of respondents. Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the performance of his work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents classify or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized by the PBA, at least one hour before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the referees whether on or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the life of the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any basketball game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself on and off the court according to the highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the terms and conditions of the contract. The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the professional basketball league. As correctly observed by the Court of Appeals, "how could a skilled referee perform his job without blowing a whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?"20 In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio station and one of its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. The Court held: We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that: Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that:

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Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.22 We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of the game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA cannot overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the playing court. Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot control the referee when he blows the whistle because such authority exclusively belongs to the referees. The very nature of petitioners job of officiating a professional basketball game undoubtedly calls for freedom of control by respondents. Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for work only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and they officiate games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are withholding taxes. In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees salaries. These undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of respondents. Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent judgment are required specifically for such position and cannot possibly be controlled by the hiring party. In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a soccer referee, is an independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As such, plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled: Generally, "if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also as to details by which the result is achieved, an employer/employee relationship is likely to exist." The Court must be careful to distinguish between "control[ling] the conduct of another party contracting party by setting out in detail his obligations" consistent with the freedom of contract, on the one hand, and "the discretionary control an employer daily exercises over its employees conduct" on the other. Yonan asserts that the Federation "closely supervised" his performance at each soccer game he officiated by giving him an assessor, discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that the Federation did not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his performance after matches. That the Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties retaining independent contractors may judge the performance of those contractors to determine if the contractual relationship should continue. x x x It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority, under the Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and procedures like the Federations registration and training requirements does not create an employer/employee relationship. x x x A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x x Here, it is undisputed that soccer refereeing, especially at the professional and international level, requires "a great deal of skill and natural ability." Yonan asserts that it was the Federations training that made him a top referee, and that suggests he was an employee. Though substantial training supports an employment inference, that inference is dulled significantly or negated when the putative employers activity is the result of a statutory requirement, not the employers choice. x x x In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so the players vicarious liability claim against the association should be dismissed. In finding that the umpire is an independent contractor, the Court of Appeals of Tennesse ruled: The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The TSSAA does not supervise regular season games. It does not tell an official how to conduct the game beyond the framework established by the rules. The TSSAA does not, in the vernacular of the case law, control the means and method by which the umpires work.

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In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is to perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract between PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to discontinue petitioners services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the nonrenewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal of petitioner by respondents. WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals. SO ORDERED.
ANTONIO T. CARPIO Associate Justice

Atok Big Wedge Company Inc. v. Sison, G.R. No. 169510, August 8, 2011.5
G.R. No. 169510 August 8, 2011 ATOK BIG WEDGE COMPANY, INC., Petitioner, vs. JESUS P. GISON, Respondent. DECISION PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision 1 dated May 31, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution2 dated August 23, 2005 denying petitioners motion for reconsideration. The procedural and factual antecedents are as follows: Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by petitioner Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo A. Torres. As a consultant on retainer basis, respondent assisted petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal surface occupants within the area covered by the company's mineral claims. Respondent was likewise tasked to perform liaison work with several government agencies, which he said was his expertise. Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by the management to discuss matters needing his expertise as a consultant. As payment for his services, respondent received a retainer fee of P3,000.00 a month,3 which was delivered to him either at his residence or in a local restaurant. The parties executed a retainer agreement, but such agreement was misplaced and can no longer be found. The said arrangement continued for the next eleven years. Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the Social Security System (SSS), but petitioner did not accede to his request. He later reiterated his request but it was ignored by respondent considering that he was only a retainer/consultant. On February 4, 2003, respondent filed a Complaint4 with the SSS against petitioner for the latter's refusal to cause his registration with the SSS. On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum 5advising respondent that within 30 days from receipt thereof, petitioner is terminating his retainer contract with the company since his services are no longer necessary. On February 21, 2003, respondent filed a Complaint 6 for illegal dismissal, unfair labor practice, underpayment of wages, non-payment of 13th month pay, vacation pay, and sick leave pay with the National Labor Relations Commission (NLRC), Regional Arbitration Branch (RAB), Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed as NLRC Case No. RAB-CAR-02-0098-03. Respondent alleged that: x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co., Inc., or Atok for brevity, approached him and asked him if he can help the companys problem involving the 700 million pesos crop damage claims of the residents living at the minesite of Atok. He participated in a series of dialogues conducted with the residents. Mr. Torres offered to pay him P3,000.00 per month plus representation expenses. It was also agreed upon by him and Torres that his participation in resolving the problem was temporary and there will be no employer-employee relationship between him and Atok. It was also agreed upon that his compensation, allowances and other expenses will be paid through disbursement vouchers. On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants barricaded the only passage to and from the minesite. In the early morning of February 1, 1992, a dialogue was made by Atok and the crop damage claimants. Unfortunately, Atoks representatives, including him, were virtually held hostage by the irate claimants who demanded on the spot payment of their claims. He was able to convince the claimants to release the company representatives pending referral of the issue to higher management.

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A case was filed in court for the lifting of the barricades and the court ordered the lifting of the barricade. While Atok was prosecuting its case with the claimants, another case erupted involving its partner, Benguet Corporation. After Atok parted ways with Benguet Corporation, some properties acquired by the partnership and some receivables by Benguet Corporation was the problem. He was again entangled with documentation, conferences, meetings, planning, execution and clerical works. After two years, the controversy was resolved and Atok received its share of the properties of the partnership, which is about 5 million pesos worth of equipment and condonation of Atoks accountabilities with Benguet Corporation in the amount of P900,000.00. In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok was relieved of the burden of paying 700 million pesos. In between attending the problems of the crop damage issue, he was also assigned to do liaison works with the SEC, Bureau of Mines, municipal government of Itogon, Benguet, the Courts and other government offices. After the crop damage claims and the controversy were resolved, he was permanently assigned by Atok to take charge of some liaison matters and public relations in Baguio and Benguet Province, and to report regularly to Atoks office in Manila to attend meetings and so he had to stay in Manila at least one week a month. Because of his length of service, he invited the attention of the top officers of the company that he is already entitled to the benefits due an employee under the law, but management ignored his requests. However, he continued to avail of his representation expenses and reimbursement of company-related expenses. He also enjoyed the privilege of securing interest free salary loans payable in one year through salary deduction. In the succeeding years of his employment, he was designated as liaison officer, public relation officer and legal assistant, and to assist in the ejection of illegal occupants in the mining claims of Atok. Since he was getting older, being already 56 years old, he reiterated his request to the company to cause his registration with the SSS. His request was again ignored and so he filed a complaint with the SSS. After filing his complaint with the SSS, respondents terminated his services.7 On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D. Gambito rendered a Decision 8 ruling in favor of the petitioner. Finding no employer-employee relationship between petitioner and respondent, the Labor Arbiter dismissed the complaint for lack of merit. Respondent then appealed the decision to the NLRC. On July 30, 2004, the NLRC, Second Division, issued a Resolution 9 affirming the decision of the Labor Arbiter. Respondent filed a Motion for Reconsideration, but it was denied in the Resolution10 dated September 30, 2004. Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the decision and resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition, respondent raised the following issues: a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable Public Respondent affirming the same, are in harmony with the law and the facts of the case; b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the Complaint of Petitioner and whether or not the Honorable Public Respondent Committed a Grave Abuse of Discretion when it affirmed the said Decision.11 On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the decretal portion of which reads: WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations Commission dismissing petitioner's complaint for illegal dismissal is ANNULLED and SET ASIDE. Private respondent Atok Big Wedge Company Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former or equivalent position without loss of seniority rights and to pay him full backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the time these were withheld from him up to the time of his actual and effective reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper computation of backwages, allowances and other benefits due to petitioner. Costs against private respondent Atok Big Wedge Company Incorporated. SO ORDERED.12 In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may have overlooked Article 280 of the Labor Code,13 or the provision which distinguishes between two kinds of employees, i.e., regular and casual employees. Applying the provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse of one year from his employment. Considering also that respondent had been performing services for the petitioner for eleven years, respondent is entitled to the rights and privileges of a regular employee. The CA added that although there was an agreement between the parties that respondent's employment would only be temporary, it clearly appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to perform. Moreover, although respondent may have waived his right to attain a regular status of employment when he agreed to perform these tasks on a temporary employment status, still, it was the law that recognized and considered him a regular employee after his first year of rendering service to petitioner. As such, the waiver was ineffective. Hence, the petition assigning the following errors: I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.

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II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE. III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY. IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE PROVIDED TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL.14 Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule 65 of the Rules of Court, the CA should have limited the issue on whether or not there was grave abuse of discretion on the part of the NLRC in rendering the resolution affirming the decision of the Labor Arbiter. Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an employer-employee relationship between the petitioner and the respondent. Petitioner contends that where the existence of an employer-employee relationship is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a casual employee from a regular employee for purposes of determining the rights of an employee to be entitled to certain benefits. Petitioner insists that respondent is not a regular employee and not entitled to reinstatement. On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his favor. The petition is meritorious. At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears stressing that there is no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of St. Martin Funeral Home v. NLRC,15 the special civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the Court of Appeals in strict observance of the doctrine on hierarchy of courts as the appropriate forum for the relief desired.16 This Court not being a trier of facts, the resolution of unclear or ambiguous factual findings should be left to the CA as it is procedurally equipped for that purpose. From the decision of the Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be resorted to by the parties. Hence, respondent's resort to the CA was appropriate under the circumstances. Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and respondent. Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial evidence. 17 Being a question of fact, the determination whether such a relationship exists between petitioner and respondent was well within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such determination should have been accorded great weight by the CA in resolving the issue. To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct, or the so-called "control test."18 Of these four, the last one is the most important.19 The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.20 Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among other things, respondent was not required to report everyday during regular office hours of petitioner. Respondent's monthly retainer fees were paid to him either at his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent would accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent was left alone and given the freedom to accomplish the tasks using his own means and method. Respondent was assigned tasks to perform, but petitioner did not control the manner and methods by which respondent performed these tasks. Verily, the absence of the element of control on the part of the petitioner engenders a conclusion that he is not an employee of the petitioner. Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly admitted that petitioner hired him in a limited capacity only and that there will be no employer-employee relationship between them. As averred in respondent's Position Paper:21 2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr. Torres and the complainant that his participation on this particular problem of Atok will be temporary since the problem was then contemplated to be limited in nature, hence, there will be no employer-employee relationship between him and Atok. Complainant agreed on this arrangement. It was also agreed that complainant's compensations, allowances, representation expenses and reimbursement of company- related expenses will be processed and paid through disbursement vouchers;22 Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and he agreed to perform tasks for the petitioner on a temporary employment status only. However, respondent anchors his claim that he became a regular employee of the petitioner based on his contention that the "temporary" aspect of his job and its "limited" nature could not have lasted for eleven years unless some time during that period, he became a regular employee of the petitioner by continually performing services for the company.

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Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner. The appellate court's premise that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. In fact, any agreement may provide that one party shall render services for and in behalf of another, no matter how necessary for the latter's business, even without being hired as an employee.23 Hence, respondent's length of service and petitioner's repeated act of assigning respondent some tasks to be performed did not result to respondent's entitlement to the rights and privileges of a regular employee. Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot be considered as a regular employee of petitioner. Article 280 of the Labor Code, in which the lower court used to buttress its findings that respondent became a regular employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said provision is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in dispute.24It is, therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in determining whether an employer-employee relationship exists between respondent and the petitioner Considering that there is no employer-employee relationship between the parties, the termination of respondent's services by the petitioner after due notice did not constitute illegal dismissal warranting his reinstatement and the payment of full backwages, allowances and other benefits. WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and September 30, 2004 of the National Labor Relations Commission are REINSTATED. SO ORDERED.
DIOSDADO M. PERALTA Associate Justice

Francisco v. NLRC. G.R. No. 170087, August 31, 2006. 6

G.R. No. 170087 August 31, 2006 ANGELINA FRANCISCO, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents. DECISION YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal. In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company. 5 Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6 In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7 For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8 In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9 Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10 On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer connected with the company. 11
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Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the labor arbiter. Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company never interfered with her work except that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the companys employees. 12 Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation. To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitioners latest employer was Seiji Corporation. 13 The Labor Arbiter found that petitioner was illegally dismissed, thus: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. finding complainant an employee of respondent corporation; 2. declaring complainants dismissal as illegal; 3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally pay complainant her money claims in accordance with the following computation: a. Backwages 10/2001 07/2002 275,000.00 (27,500 x 10 mos.) b. Salary Differentials (01/2001 09/2001) 22,500.00 c. Housing Allowance (01/2001 07/2002) 57,000.00 d. Midyear Bonus 2001 27,500.00 e. 13th Month Pay 27,500.00 f. 10% share in the profits of Kasei Corp. from 1996-2001 361,175.00 g. Moral and exemplary damages 100,000.00 h. 10% Attorneys fees 87,076.50 P957,742.50 If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that would accrue up to actual payment of separation pay. SO ORDERED. 14 On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which reads: PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows: 1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full backwages from October 2001 to July 31, 2002; 2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;

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3) The award of 10% attorneys fees shall be based on salary differential award only; 4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED. SO ORDERED. 15 On appeal, the Court of Appeals reversed the NLRC decision, thus: WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal. SO ORDERED. 16 The appellate court denied petitioners motion for reconsideration, hence, the present recourse. The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed. Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contending parties is supported by substantial evidence. 17 We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship. However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside from the employers power to control the employee with respect to the means and methods by which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity. The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship. This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various positions and responsibilities given to the worker over the period of the latters employment. The control test initially found application in the case of Viaa v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end. In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker. Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the employers business; (2) the extent of the workers investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. 23 The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his employer. By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct control and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement. Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation made

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a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employeremployee relationship between petitioner and respondent corporation. 27 It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latters line of business. In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers covering petitioners salaries for the months stated therein, these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent. We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were the formers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship. Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as Kamuras direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared documentation for the company. 30 The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation. Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution. 33 Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished. The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34 A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer. Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment. In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national development. WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CAG.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole year. SO ORDERED.
CONSUELO YNARES-SANTIAGO Associate Justice

Sonza v. ABS-CBN, June 10, 2004.7

G.R. No. 138051 June 10, 2004 JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

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DECISION CARPIO, J.:

The Case Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction. The Facts In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("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 Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as follows: a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays; b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3 ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 for the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month. On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III, which reads:
Dear Mr. Lopez, We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA. As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve notice of rescission of said Agreement at our instance effective as of date. Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other benefits under said Agreement. Thank you for your attention. Very truly yours, (Sgd.) JOSE Y. SONZA President and Gen. Manager4

On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock Option Plan ("ESOP"). On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the parties. SONZA filed an Opposition to the motion on 19 July 1996. Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent fees and other payments due him under the Agreement. In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file their respective position papers. The Labor Arbiter ruled:

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In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a result of a hearing. Thus, the respondents plea of lack of employer-employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between it and the complainant. The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February 1997. On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent contractors. The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.6 The pertinent parts of the decision read as follows: xxx While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the engagement of his services. It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly very much higher than those generally given to employees. For one, complainant Sonzas monthly talent fees amount to a staggering P317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day as he worked only for such number of hours as may be necessary. The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by reason of employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent fees and other contractual benefits and should not be deemed as salaries, wages and/or other remuneration accorded to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such benefit." The fact that complainant was made subject to respondents Rules and Regulations, likewise, does not detract from the absence of employer-employee relationship. As held by the Supreme Court, "The line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989). x x x (Emphasis supplied)7 SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiters decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998. On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8 Hence, this petition. The Rulings of the NLRC and Court of Appeals The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the appellate court quoted the following findings of the NLRC:

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x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made particularly true in this case, as admittedly MJMDC is a management company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss) Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABSCBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the AGENT. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President. Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza. We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employeremployee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement. It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from complainant-appellants Position Paper, his claims for compensation for services, 13th month pay, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears perusal: Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00). Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was receiving prior to effectivity of (the) Agreement. Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos (P150,000.00) per year. Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainantappellant served upon the latter a notice of rescission of Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement. (Annex 3 of the respondent ABS-CBNs Motion to Dismiss dated July 10, 1996). Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellants claims being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of DaiChi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied) The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRCs conclusion.12 The Court of Appeals added that it could not re-examine the parties evidence and substitute the factual findings of the NLRC with its own.13 The Issue In assailing the decision of the Court of Appeals, SONZA contends that:

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THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14 The Courts Ruling We affirm the assailed decision. No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case for lack of jurisdiction. The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and radio station and one of its "talents." There is no case law stating that a radio and television program host is an employee of the broadcast station. The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio personality, and ABS-CBN, one of the biggest television and radio networks in the country. SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor. Employee or Independent Contractor? The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. 15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible.17 SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has consistently held that the elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished.18 The last element, the so-called "control test", is the most important element.19 A. Selection and Engagement of Employee ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondents claim of independent contractorship." Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee. In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of the relationship, with the control test being the most important element. B. Payment of Wages ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract." All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay" 20 which the law automatically incorporates into every employer-employee contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.22

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SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship. The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement. C. Power of Dismissal For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor laws.23 During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as "AGENT and Jay Sonza shall faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN. SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.25 SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement as an admission that he is not an employee of ABSCBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the Agreement. SONZAs letter clearly bears this out.26 However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his status as employee or independent contractor. D. Power of Control Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica ("WIPR") 27 that a television program host is an independent contractor. We quote the following findings of the U.S. court: Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor favors independent contractor status because WIPR provided the "equipment necessary to tape the show." Albertys argument is misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show. Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her particular function. If we accepted this argument, independent contractors could never work on collaborative projects because other individuals often provide the equipment required for different aspects of the collaboration. x x x Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Albertys contracts with WIPR specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x x28 (Emphasis supplied) 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.29 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.30

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First, SONZA contends that ABS-CBN exercised control over the means and methods of his work. SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign any other work to SONZA. 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-CBNs control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests. We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work. 33 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."34 ABS-CBNs sole concern was the quality of the shows and their standing in the ratings. Clearly, ABSCBN did not exercise control over the means and methods of performance of SONZAs work. SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZAs performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his talent fees in full.35 Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the Agreement. In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting objectionable features.37 SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance.38Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for SONZA to display his talent during the airing of the programs.39 A radio broadcast specialist who works under minimal supervision is an independent contractor. 40 SONZAs work as television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows. Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of performance. SONZA claims that this indicates ABS-CBNs control "not only [over] his manner of work but also the quality of his work." The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code applies to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN. In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. 43 In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that: Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:

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Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.44 The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from performing his services according to his own initiative.45 Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN exercised over him. This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control. The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. 46 This practice is not designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast station normally spends substantial amounts of money, time and effort "in building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with the station for a commensurate period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case. MJMDC as Agent of SONZA SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer. In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the employees.48 These circumstances are not present in this case. There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and SONZA. As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and television industry.49 Policy Instruction No. 40 SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program employees. Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy Instruction No. 40 determines SONZAs status. A mere executive issuance cannot exclude independent contractors from the class of service providers to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when the classification has no basis either in law or in fact. Affidavits of ABS-CBNs Witnesses SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the

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opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant. While SONZA failed to cross-examine ABS-CBNs witnesses, he was never prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position papers of the parties, thus: Section 3. Submission of Position Papers/Memorandum xxx These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the place of the latters direct testimony. x x x Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness.50 The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter. Talents as Independent Contractors ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure. The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there is an employer-employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd results. 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. An individual like an artist or talent has a right to render his services without any one controlling the means and methods by which he performs his art or craft. This Court will not interpret the right of labor to security of tenure to compel artists and talents to render their services only as employees. If radio and television program hosts can render their services only as employees, the station owners and managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the press. Different Tax Treatment of Talents and Broadcasters The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under an employer-employee relationship.57 This different tax treatment accorded to talents and broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are present as in this case. Nature of SONZAs Claims SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58

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WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner. SO ORDERED.
Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

Thelma Dumpit-Murillo v. CA, June 8, 2007.8

G.R. No. 164652 June 8, 2007 THELMA DUMPIT-MURILLO, petitioner, vs. COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND EDWARD TAN,respondents. DECISION QUISUMBING, J.:

This petition seeks to reverse and set aside both the Decision1 dated January 30, 2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its Resolution 2 dated June 23, 2004 denying the motion for reconsideration. The Court of Appeals had overturned the Resolution3 dated August 30, 2000 of the National Labor Relations Commission (NLRC) ruling that petitioner was illegally dismissed. The facts of the case are as follows: On October 2, 1995, under Talent Contract No. NT95-1805, 4 private respondent Associated Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor for Balitang-Balita, an early evening news program. The contract was for a period of three months. It was renewed under Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984 and NT99-5649.5 In addition, petitioners services were engaged for the program "Live on Five." On September 30, 1999, after four years of repeated renewals, petitioners 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,6 which we quote verbatim: xxxx Dear Mr. Javier: On October 20, 1999, I wrote you a letter in answer to your query by way of a marginal note "what terms and conditions" in response to my first letter dated October 13, 1999. To date, or for more than fifteen (15) days since then, I have not received any formal written reply. xxx In view hereof, should I not receive any formal response from you until Monday, November 8, 1999, I will deem it as a constructive dismissal of my services. xxxx A month later, petitioner sent a demand letter7 to ABC, demanding: (a) reinstatement to her former position; (b) payment of unpaid wages for services rendered from September 1 to October 20, 1999 and full backwages; (c) payment of 13th month pay, vacation/sick/service incentive leaves and other monetary benefits due to a regular employee starting March 31, 1996. ABC replied that a check covering petitioners talent fees for September 16 to October 20, 1999 had been processed and prepared, but that the other claims of petitioner had no basis in fact or in law. On December 20, 1999, petitioner filed a complaint8 against ABC, Mr. Javier and Mr. Edward Tan, for illegal constructive dismissal, nonpayment of salaries, overtime pay, premium pay, separation pay, holiday pay, service incentive leave pay, vacation/sick leaves and 13th month pay in NLRC-NCR Case No. 30-1200985-99. She likewise demanded payment for moral, exemplary and actual damages, as well as for attorneys fees. The parties agreed to submit the case for resolution after settlement failed during the mandatory conference/conciliation. On March 29, 2000, the Labor Arbiter dismissed the complaint.9 On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30, 2000. The NLRC held that an employer-employee relationship existed between petitioner and ABC; that the subject talent contract was void; that the petitioner was a regular employee illegally dismissed; and that she was entitled to reinstatement and backwages or separation pay, aside from 13th month pay and service incentive leave pay, moral and exemplary damages and attorneys fees. It held as follows: WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is hereby REVERSED/SET ASIDE and a NEW ONE promulgated: 1) declaring respondents to have illegally dismissed complainant from her regular work therein and thus, ordering them to reinstate her in her former position without loss of seniority right[s] and other privileges and to pay her full backwages, inclusive of allowances and other benefits, including 13th month pay based on her said latest rate ofP28,000.00/mo. from the date of her illegal dismissal on 21 October 1999 up to finality hereof, or at complainants option, to pay her separation pay of one (1) month pay per year of service based on said latest monthly rate, reckoned from date of hire on 30 September 1995 until finality hereof;

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2) to pay complainants accrued SILP [Service Incentive Leave Pay] of 5 days pay per year and 13th month pay for the years 1999, 1998 and 1997 of P19,236.00 and P84,000.00, respectively and her accrued salary from 16 September 1999 to 20 October 1999 of P32,760.00 plus legal interest at 12% from date of judicial demand on 20 December 1999 until finality hereof; 3) to pay complainant moral damages of P500,000.00, exemplary damages of P350,000.00 and 10% of the total of the adjudged monetary awards as attorneys fees. Other monetary claims of complainant are dismissed for lack of merit. SO ORDERED.10 After its motion for reconsideration was denied, ABC elevated the case to the Court of Appeals in a petition for certiorari under Rule 65. The petition was first dismissed for failure to attach particular documents,11 but was reinstated on grounds of the higher interest of justice.12 Thereafter, the appellate court ruled that the NLRC committed grave abuse of discretion, and reversed the decision of the NLRC.13 The appellate court reasoned that petitioner should not be allowed to renege from the stipulations she had voluntarily and knowingly executed by invoking the security of tenure under the Labor Code. According to the appellate court, petitioner was a fixed-term employee and not a regular employee within the ambit of Article 280 14 of the Labor Code because her job, as anticipated and agreed upon, was only for a specified time.15 Aggrieved, petitioner now comes to this Court on a petition for review, raising issues as follows:

I. THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT[;] II. THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC FIRST DIVISION, ARE "ANTIREGULARIZATION DEVICES" WHICH MUST BE STRUCK DOWN FOR REASONS OF PUBLIC POLICY[;] III. BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS CREATED AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;] IV. BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE, THERE WAS A DENIAL OF PETITIONERS RIGHT TO DUE PROCESS THUS ENTITLING HER TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.]16 The issues for our disposition are: (1) whether or not this Court can review the findings of the Court of Appeals; and (2) whether or not under Rule 45 of the Rules of Court the Court of Appeals committed a reversible error in its Decision. On the first issue, private respondents contend that the issues raised in the instant petition are mainly factual and that there is no showing that the said issues have been resolved arbitrarily and without basis. They add that the findings of the Court of Appeals are supported by overwhelming wealth of evidence on record as well as prevailing jurisprudence on the matter.17 Petitioner however contends that this Court can review the findings of the Court of Appeals, since the appellate court erred in deciding a question of substance in a way which is not in accord with law or with applicable decisions of this Court.18 We agree with petitioner. Decisions, final orders or resolutions of the Court of Appeals in any case regardless of the nature of the action or proceeding involved may be appealed to this Court through a petition for review. This remedy is a continuation of the appellate process over the original case,19 and considering there is no congruence in the findings of the NLRC and the Court of Appeals regarding the status of employment of petitioner, an exception to the general rule that this Court is bound by the findings of facts of the appellate court,20 we can review such findings. On the second issue, private respondents contend that the Court of Appeals did not err when it upheld the validity of the talent contracts voluntarily entered into by petitioner. It further stated that prevailing jurisprudence has recognized and sustained the absence of employer-employee relationship between a talent and the media entity which engaged the talents services on a per talent contract basis, citing the case of Sonza v. ABS-CBN Broadcasting Corporation.21

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Petitioner avers however that an employer-employee relationship was created when the private respondents started to merely renew the contracts repeatedly fifteen times or for four consecutive years.22 Again, we agree with petitioner. The Court of Appeals committed reversible error when it held that petitioner was a fixed-term employee. 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.23 Further, the Sonza case is not applicable. In Sonza, the television station did not instruct Sonza how to perform his job. How Sonza delivered his lines, appeared on television, and sounded on radio were outside the television stations control. Sonza had a free hand on what to say or discuss in his shows provided he did not attack the television station or its interests. Clearly, the television station did not exercise control over the means and methods of the performance of Sonzas work.24 In the case at bar, ABC had control over the performance of petitioners work. Noteworthy too, is the comparatively low P28,000 monthly pay of petitioner25 vis the P300,000 a month salary of Sonza,26 that all the more bolsters the conclusion that petitioner was not in the same situation as Sonza. The contract of employment of petitioner with ABC had the following stipulations: xxxx 1. SCOPE OF SERVICES TALENT agrees to devote his/her talent, time, attention and best efforts in the performance of his/her duties and responsibilities as Anchor/Program Host/Newscaster of the Program, in accordance with the direction of ABC and/or its authorized representatives. 1.1. DUTIES AND RESPONSIBILITIES TALENT shall: a. Render his/her services as a newscaster on the Program; b. Be involved in news-gathering operations by conducting interviews on- and off-the-air; c. Participate in live remote coverages when called upon; d. Be available for any other news assignment, such as writing, research or camera work; e. Attend production meetings; f. On assigned days, be at the studios at least one (1) hour before the live telecasts; g. Be present promptly at the studios and/or other place of assignment at the time designated by ABC; h. Keep abreast of the news; i. Give his/her full cooperation to ABC and its duly authorized representatives in the production and promotion of the Program; and j. Perform such other functions as may be assigned to him/her from time to time. xxxx 1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND REGULATIONS TALENT agrees that he/she will promptly and faithfully comply with the requests and instructions, as well as the program standards, policies, rules and regulations of ABC, the KBP and the government or any of its agencies and instrumentalities.27 xxxx In Manila Water Company, Inc. v. Pena,28 we said that 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 employers power to control. The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.29

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The duties of petitioner as enumerated in her employment contract indicate that ABC had control over the work of petitioner. Aside from control, ABC also dictated the work assignments and payment of petitioners 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 two 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. 30 In other words, regular status arises from either the nature of work of the employee or the duration of his employment.31 In Benares v. Pancho,32 we very succinctly said: [T]he primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee vis--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. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists.33 In our view, the requisites for regularity of employment have been met in the instant case. Gleaned from the description of the scope of services aforementioned, petitioners work was necessary or desirable in the usual business or trade of the employer which includes, as a pre-condition for its enfranchisement, its participation in the governments news and public information dissemination. In addition, her work was continuous for a period of four years. This repeated engagement under contract of hire is indicative of the necessity and desirability of the petitioners work in private respondent ABCs business.34 The contention of the appellate court that the contract was characterized by a valid fixed-period employment is untenable. For such contract to be valid, it should be shown that the fixed period was knowingly and voluntarily agreed upon by the parties. There should have been no force, duress or improper pressure brought to bear upon the employee; neither should there be any other circumstance that vitiates the employees consent.35 It should satisfactorily appear that the employer and the employee dealt with each other on more or less equal terms with no moral dominance being exercised by the employer over the employee. 36 Moreover, fixed-term employment will not be considered valid where, from the circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee.37 In the case at bar, it does not appear that the employer and employee dealt with each other on equal terms. Understandably, the petitioner could not object to the terms of her employment contract because she did not want to lose the job that she loved and the workplace that she had grown accustomed to,38 which is exactly what happened when she finally manifested her intention to negotiate. Being one of the numerous newscasters/broadcasters of ABC and desiring to keep her job as a broadcasting practitioner, petitioner was left with no choice but to affix her signature of conformity on each renewal of her contract as already prepared by private respondents; otherwise, private respondents would have simply refused to renew her contract. Patently, the petitioner occupied a position of weakness vis--vis the employer. Moreover, private respondents practice of repeatedly extending petitioners 3-month contract for four years is a circumvention of the acquisition of regular status. Hence, there was no valid fixed-term employment between petitioner and private respondents. While this Court has recognized the validity of fixed-term employment contracts in a number of cases, it has consistently emphasized that when the circumstances of a case show that the periods were imposed to block the acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs, public order or public policy.39 As a regular employee, petitioner is entitled to security of tenure and can be dismissed only for just cause and after due compliance with procedural due process. Since private respondents did not observe due process in constructively dismissing the petitioner, we hold that there was an illegal dismissal. WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution dated June 23, 2004 of the Court of Appeals in CAG.R. SP No. 63125, which held that the petitioner was a fixed-term employee, are REVERSED and SET ASIDE. The NLRC decision is AFFIRMED. Costs against private respondents. SO ORDERED.
*

LEONARDO A. QUISUMBING Acting Chief Justice

Air Material Wing Savings and Loan Association Inc. v. NLRC, June 30, 1994.9
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G.R. No. 111870 June 30, 1994 AIR MATERIAL WING SAVINGS AND LOAN ASSOCIATION, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, et al., respondents. CRUZ, J.:

Private respondent Luis S. Salas was appointed "notarial and legal counsel" for petitioner Air Material Wings Savings and Loan Association (AMWSLAI) in 1980. The appointment was renewed for three years in an implementing order dated January 23, 1987, reading as follows: SUBJECT: Implementing Order on the Reappointment of the Legal Officer TO: ATTY. LUIS S. SALAS Per approval of the Board en banc in a regular meeting held on January 21, 1987, you are hereby reappointed as Notarial and Legal Counsel of this association for a term of three (3) years effective March 1, 1987, unless sooner terminated from office for cause or as may be deemed necessary by the Board for the interest and protection of the association. Aside from notarization of loan & other legal documents, your duties and responsibilities are hereby enumerated in the attached sheet, per Articles IX, Section 1-d of the by-laws and those approved by the Board en banc. Your monthly compensation/retainer's fee remains the same. This shall form part of your 201 file. BY AUTHORITY OF THE BOARD: LUVIN S. MANAY President & Chief of the Board On January 9, 1990, the petitioner issued another order reminding Salas of the approaching termination of his legal services under their contract. This prompted Salas to lodge a complaint against AMWSLAI for separation pay, vacation and sick leave benefits, cost of living allowances, refund of SSS premiums, moral and exemplary damages, payment of notarial services rendered from February 1, 1980 to March 2, 1990, and attorney's fees. Instead of filing an answer, AMWSLAI moved to dismiss for lack of jurisdiction. It averred that there was no employer-employee relationship between it and Salas and that his monetary claims properly fell within the jurisdiction of the regular courts. Salas opposed the motion and presented documentary evidence to show that he was indeed an employee of AMWSLAI. The motion was denied and both parties were required to submit their position papers. AMWSLAI filed a motion for reconsideration ad cautelam, which was also denied. The parties were again ordered to submit their position papers but AMWSLAI did not comply. Nevertheless, most of Salas' claims were dismissed by the labor arbiter in his decision dated November 21, 1991. 1 It was there held that Salas was not illegally dismissed and so not entitled to collect separation benefits. His claims for vacation leave, sick leave, medical and dental allowances and refund of SSS premiums were rejected on the ground that he was a managerial employee. He was also denied moral and exemplary damages for lack of evidence of bad faith on the part of AMWSLAI. Neither was he allowed to collect his notarial fees from 1980 up to 1986 because the claim therefor had already prescribed. However, the petitioner was ordered to pay Salas his notarial fees from 1987 up to March 2, 1990, and attorney's fee equivalent to 10% of the judgment award. On appeal, the decision was affirmed in toto by the respondent Commission, prompting the petitioner to seek relief in this Court. 2 The threshold issue in this case is whether or not Salas can be considered an employee of the petitioner company. We have held in a long line of decisions that the elements of an employer-employee relationship are: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) employer's own power to control employee's conduct. 3 The existence of such a relationship is essentially a factual question. The findings of the NLRC on this matter are accorded great respect and even finality when the same are supported by substantial evidence. 4

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The terms and conditions set out in the letter-contract entered into by the parties on January 23, 1987, clearly show that Salas was an employee of the petitioner. His selection as the company counsel was done by the board of directors in one of its regular meetings. The petitioner paid him a monthly compensation/retainer's fee for his services. Though his appointment was for a fixed term of three years, the petitioner reserved its power of dismissal for cause or as it might deem necessary for its interest and protection. No less importantly, AMWSLAI also exercised its power of control over Salas by defining his duties and functions as its legal counsel, to wit: 1. To act on all legal matters pertinent to his Office. 2. To seek remedies to effect collection of overdue accounts of members without prejudice to initiating court action to protect the interest of the association. 3. To defend by all means all suit against the interest of the Association. 5 In the earlier case of Hydro Resources Contractors Corp. v. Pagalilauan, 6 this Court observed that: A lawyer, like any other professional, may very well be an employee of a private corporation or even of the government. It is not unusual for a big corporation to hire a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its table of organization, and otherwise treat them like its other officers and employees. At the same time, it may also contract with a law firm to act as outside counsel on a retainer basis. The two classes of lawyers often work closely together but one group is made up of employees while the other is not. A similar arrangement may exist as to doctors, nurses, dentists, public relations practitioners and other professionals. We hold, therefore, that the public respondent committed no grave abuse of discretion in ruling that an employer-employee relationship existed between the petitioner and the private respondent. We must disagree with the NLRC, however, on Salas' claims for notarial fees. The petitioner contends that the public respondents are not empowered to adjudicate claims for notarial fees. On the other hand, the Solicitor General believes that the NLRC acted correctly when it took cognizance of the claim because it arose out of Salas' employment contract with the petitioner which assigned him the duty to notarize loan agreements and other legal documents. Moreover, Section 9 of Rule 141 of the Rules of Court does not restrict or prevent the labor arbiter and the NLRC from determining claims for notarial fees. Labor arbiters have the original and exclusive jurisdiction over money claims of workers when such claims have some reasonable connection with the employer-employee relationship. The money claims of workers referred to in paragraph 3 of Article 217 of the Labor Code are those arising out of or in connection with the employer-employee relationship or some aspect or incident of such relationship. Salas' claim for notarial fees is based on his employment as a notarial officer of the petitioner and thus comes under the jurisdiction of the labor arbiter. The public respondents agreed that Salas was entitled to collect notarial fees from 1987 to 1990 by virtue of his having been assigned as notarial officer. We feel, however, that there is no substantial evidence to support this finding. The letter-contract of January 23, 1987, does not contain any stipulation for the separate payment of notarial fees to Salas in addition to his basic salary. On the contrary, it would appear that his notarial services were part of his regular functions and were thus already covered by his monthly compensation. It is true that the notarial fees were paid by members-borrowers of the petitioner for its own account and not of Salas. However, this is not a sufficient basis for his claim to such fees in the absence of any agreement to that effect. ACCORDINGLY, the appealed judgment of the NLRC is AFFIRMED, with the modification that the award of notarial fees and attorney's fees is disallowed. It is so ordered.
Davide, Jr., Bellosillo, Quiason and Kapunan, JJ., concur.

Grepalife Assurance Corporations v. Judico, December 2, 1989.10

G.R. No. 73887 December 21, 1989 GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner, vs. HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.
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PARAS J.:

Before us is a Petition for certiorari to review the decision of the National Labor Relations Commission (NLRC, for brevity) dated September 9, 1985 reversing the decision of Labor Arbiter Vito J. Minoria, dated June 9, 1983, by 1) ordering petitioner insurance company, Great Pacific Life Assurance Corporation (Grepalife, for brevity) to recognize private respondent Honorato Judico, as its regular employee as defined under Art. 281 of the Labor Code and 2) remanding the case to its origin for the determination of private respondent Judico's money claims. The records of the case show that Honorato Judico filed a complaint for illegal dismissal against Grepalife, a duly organized insurance firm, before the NLRC Regional Arbitration Branch No. VII, Cebu City on August 27, 1982. Said complaint prayed for award of money claims consisting of separation pay, unpaid salary and 13th month pay, refund of cash bond, moral and exemplary damages and attorney's fees. Both parties appealed to the NLRC when a decision was rendered by the Labor Arbiter dismissing the complaint on the ground that the employer-employee relations did not exist between the parties but ordered Grepalife to pay complainant the sum of Pl,000.00 by reason of Christian Charity. On appeal, said decision was reversed by the NLRC ruling that complainant is a regular employee as defined under Art. 281 of the Labor Code and declaring the appeal of Grepalife questioning the legality of the payment of Pl,000.00 to complainant moot and academic. Nevertheless, for the purpose of revoking the supersedeas bond of said company it ruled that the Labor Arbiter erred in awarding Pl,000.00 to complainant in the absence of any legal or factual basis to support its payment. Petitioner company moved to reconsider, which was denied, hence this petition for review raising four legal issues to wit: I. Whether the relationship between insurance agents and their principal, the insurance company, is that of agent and principal to be governed by the Insurance Code and the Civil Code provisions on agency, or one of employeremployee, to be governed by the Labor Code. II. Whether insurance agents are entitled to the employee benefits prescribed by the Labor Code. III. Whether the public respondent NLRC has jurisdiction to take cognizance of a controversy between insurance agent and the insurance company, arising from their agency relations. IV. Whether the public respondent acted correctly in setting aside the decision of Labor Arbiter Vito J. Minoria and in ordering the case remanded to said Labor Arbiter for further proceedings.(p. 159, Rollo) The crux of these issues boil down to the question of whether or not employer-employee relationship existed between petitioner and private respondent. Petitioner admits that on June 9, 1976, private respondent Judico entered into an agreement of agency with petitioner Grepalife to become a debit agent attached to the industrial life agency in Cebu City. Petitioner defines a debit agent as "an insurance agent selling/servicing industrial life plans and policy holders. Industrial life plans are those whose premiums are payable either daily, weekly or monthly and which are collectible by the debit agents at the home or any place designated by the policy holder" (p. 156, Rollo). Such admission is in line with the findings of public respondent that as such debit agent, private respondent Judico had definite work assignments including but not limited to collection of premiums from policy holders and selling insurance to prospective clients. Public respondent NLRC also found out that complainant was initially paid P 200. 00 as allowance for thirteen (13) weeks regardless of production and later a certain percentage denominated as sales reserve of his total collections but not lesser than P 200.00. Sometime in September 1981, complainant was promoted to the position of Zone Supervisor and was given additional (supervisor's) allowance fixed at P110.00 per week. During the third week of November 1981, he was reverted to his former position as debit agent but, for unknown reasons, not paid so-called weekly sales reserve of at least P 200.00. Finally on June 28, 1982, complainant was dismissed by way of termination of his agency contract. Petitioner assails the findings of the NLRC that private respondent is an employee of the former. Petitioner argues that Judico's compensation was not based on any fixed number of hours he was required to devote to the service of petitioner company but rather it was the production or result of his efforts or his work that was being compensated and that the so-called allowance for the first thirteen weeks that Judico worked as debit agent, cannot be construed as salary but as a subsidy or a way of assistance for transportation and meal expenses of a new debit agent during the initial period of his training which was fixed for thirteen (13) weeks. Stated otherwise, petitioner contends that Judico's compensation, in the form of commissions and bonuses, was based on actual production, (insurance plans sold and premium collections).

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Said contentions of petitioner are strongly rejected by private respondent. He maintains that he received a definite amount as his Wage known as "sales reserve" the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to canvassing and making regular reports, he was burdened with the job of collection and to make regular weekly report thereto for which an anemic performance would mean dismissal. He earned out of his faithful and productive service, a promotion to Zone Supervisor with additional supervisor's allowance, (a definite or fixed amount of P110.00) that he was dismissed primarily because of anemic performance and not because of the termination of the contract of agency substantiate the fact that he was indeed an employee of the petitioner and not an insurance agent in the ordinary meaning of the term. That private respondent Judico was an agent of the petitioner is unquestionable. But, as We have held in Investment Planning Corp. vs. SSS, 21 SCRA 294, 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; and 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 also as to the means and methods by which the same is to be accomplished. Applying the aforementioned test to the case at bar, We can readily see that the element of control by the petitioner on Judico was very much present. The record shows that petitioner Judico received a definite minimum amount per week as his wage known as "sales reserve" wherein the failure to maintain the same would bring him back to a beginner's employment with a fixed weekly wage of P 200.00 for thirteen weeks regardless of production. He was assigned a definite place in the office to work on when he is not in the field; and in addition to his canvassing work he was burdened with the job of collection. In both cases he was required to make regular report to the company regarding these duties, and for which an anemic performance would mean a dismissal. Conversely faithful and productive service earned him a promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular P 200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of work nor for a definite period. On the other hand, 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. Whereas, in private respondent's case, the undisputed facts show that he was controlled by petitioner insurance company not only as to the kind of work; the amount of results, the kind of performance but also the power of dismissal. Undoubtedly, private respondent, by nature of his position and work, had been a regular employee of petitioner and is therefore entitled to the protection of the law and could not just be terminated without valid and justifiable cause. Premises considered, the appealed decision is hereby AFFIRMED in toto. SO ORDERED.
Melencio-Herrera (Chairperson), Padilla, Sarmiento and Regalado, JJ ., concur.

Apprenticeship Atlanta Industries Inc. and/or Robert Chan v. Aprilito Sebolino, January 26, 2011.11
January 26, 2011

G.R. No. 187320

ATLANTA INDUSTRIES, INC. and/or ROBERT CHAN, Petitioners, vs. APRILITO R. SEBOLINO, KHIM V. COSTALES, ALVIN V. ALMOITE, and JOSEPH S. SAGUN, Respondents. DECISION BRION, J.:

For resolution is the petition for review on certiorari1 assailing the decision2 and the resolution3 of the Court of Appeals (CA) rendered on November 4, 2008 and March 25, 2009, respectively, in CA-G.R. SP. No. 99340.4 The Antecedents
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The facts are summarized below. In the months of February and March 2005, complainants Aprilito R. Sebolino, Khim V. Costales, Alvin V. Almoite, Joseph S. Sagun, Agosto D. Zao, Domingo S. Alegria, Jr., Ronie Ramos, Edgar Villagomez, Melvin Pedregoza, Teofanes B. Chiong, Jr., Leonardo L. dela Cruz, Arnold A. Magalang, and Saturnino M. Mabanag filed several complaints for illegal dismissal, regularization, underpayment, nonpayment of wages and other money claims, as well as claims for moral and exemplary damages and attorneys fees against the petitioners Atlanta Industries, Inc. (Atlanta) and its President and Chief Operating Officer Robert Chan. Atlanta is a domestic corporation engaged in the manufacture of steel pipes. The complaints were consolidated and were raffled to Labor Arbiter Daniel Cajilig, but were later transferred to Labor Arbiter Dominador B. Medroso, Jr. The complainants alleged that they had attained regular status as they were allowed to work with Atlanta for more than six (6) months from the start of a purported apprenticeship agreement between them and the company. They claimed that they were illegally dismissed when the apprenticeship agreement expired. In defense, Atlanta and Chan argued that the workers were not entitled to regularization and to their money claims because they were engaged as apprentices under a government-approved apprenticeship program. The company offered to hire them as regular employees in the event vacancies for regular positions occur in the section of the plant where they had trained. They also claimed that their names did not appear in the list of employees (Master List)5 prior to their engagement as apprentices. On May 24, 2005, dela Cruz, Magalang, Zao and Chiong executed a Pagtalikod at Pagwawalang Saysay before Labor Arbiter Cajilig. The Compulsory Arbitration Rulings On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to dela Cruz, Magalang, Zao and Chiong, but found the termination of service of the remaining nine to be illegal.6 Consequently, the arbiter awarded the dismissed workers backwages, wage differentials, holiday pay and service incentive leave pay amounting to P1,389,044.57 in the aggregate. Atlanta appealed to the National Labor Relations Commission (NLRC). In the meantime, or on October 10, 2006, Ramos, Alegria, Villagomez, Costales and Almoite allegedly entered into a compromise agreement with Atlanta.7The agreement provided that except for Ramos, Atlanta agreed to pay the workers a specified amount as settlement, and to acknowledge them at the same time as regular employees. On December 29, 2006,8 the NLRC rendered a decision, on appeal, modifying the ruling of the labor arbiter, as follows: (1) withdrawing the illegal dismissal finding with respect to Sagun, Mabanag, Sebolino and Pedregoza; (2) affirming the dismissal of the complaints of dela Cruz, Zao, Magalang and Chiong; (3) approving the compromise agreement entered into by Costales, Ramos, Villagomez, Almoite and Alegria, and (4) denying all other claims. Sebolino, Costales, Almoite and Sagun moved for the reconsideration of the decision, but the NLRC denied the motion in its March 30, 20079 resolution. The four then sought relief from the CA through a petition for certiorari under Rule 65 of the Rules of Court. They charged that the NLRC committed grave abuse of discretion in: (1) failing to recognize their prior employment with Atlanta; (2) declaring the second apprenticeship agreement valid; (3) holding that the dismissal of Sagun, Mabanag, Sebolino and Melvin Pedregoza is legal; and (4) upholding the compromise agreement involving Costales, Ramos, Villagomez, Almoite and Alegria. The CA Decision The CA granted the petition based on the following findings:10 1. The respondents were already employees of the company before they entered into the first and second apprenticeship agreements Almoite and Costales were employed as early as December 2003 and, subsequently, entered into a first apprenticeship agreement from May 13, 2004 to October 12, 2004; before this first agreement expired, a second apprenticeship agreement, from October 9, 2004 to March 8, 2005 was executed. The same is true with Sebolino and Sagun, who were employed by Atlanta as early as March 3, 2004. Sebolino entered into his first apprenticeship agreement with the company from March 20, 2004 to August 19, 2004, and his second apprenticeship agreement from August 20, 2004 to January 19, 2005. Sagun, on the other hand, entered into his first agreement from May 28, 2004 to October 8, 2004, and the second agreement from October 9, 2004 to March 8, 2005. 2. The first and second apprenticeship agreements were defective as they were executed in violation of the law and the rules.11 The agreements did not indicate the trade or occupation in which the apprentice would be trained; neither was the apprenticeship program approved by the Technical Education and Skills Development Authority (TESDA).

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3. The positions occupied by the respondents machine operator, extruder operator and scaleman are usually necessary and desirable in the manufacture of plastic building materials, the companys main business. Costales, Almoite, Sebolino and Sagun were, therefore, regular employees whose dismissals were illegal for lack of a just or authorized cause and notice. 4. The compromise agreement entered into by Costales and Almoite, together with Ramos, Villagomez and Alegria, was not binding on Costales and Almoite because they did not sign the agreement. The petitioners themselves admitted that Costales and Almoite were initially planned to be a part of the compromise agreement, but their employment has been regularized as early as January 11, 2006; hence, the company did not pursue their inclusion in the compromise agreement.12 The CA faulted the NLRC for failing to appreciate the evidence regarding the respondents prior employment with Atlanta. The NLRC recognized the prior employment of Costales and Almoite on Atlantas monthly report for December 2003 for the CPS Department/Section dated January 6, 2004.13 This record shows that Costales and Almoite were assigned to the companys first shift from 7:00 a.m. to 3:00 p.m. The NLRC ignored Sebolino and Saguns prior employment under the companys Production and Work Schedule for March 7 to 12, 2005 dated March 3, 2004, 14 as they had been Atlantas employees as early as March 3, 2004, with Sebolino scheduled to work on March 7-12, 2005 at 7:00 a.m. to 7:00 p.m., while Sagun was scheduled to work for the same period but from 7:00 p.m. to 7:00 a.m. The CA noted that Atlanta failed to challenge the authenticity of the two documents before it and the labor authorities. Atlanta and Chan moved for reconsideration, but the CA denied the motion in a resolution rendered on March 25, 2009.15 Hence, the present petition. The Petition Atlanta seeks a reversal of the CA decision, contending that the appellate court erred in (1) concluding that Costales, Almoite, Sebolino and Sagun were employed by Atlanta before they were engaged as apprentices; (2) ruling that a second apprenticeship agreement is invalid; (3) declaring that the respondents were illegally dismissed; and (4) disregarding the compromise agreement executed by Costales and Almoite. It submits the following arguments: First. The CAs conclusion that the respondent workers were company employees before they were engaged as apprentices was primarily based on the Monthly Report16 and the Production and Work Schedule for March 7-12, 2005, 17 in total disregard of the Master List18 prepared by the company accountant, Emelita M. Bernardo. The names of Costales, Almoite, Sebolino and Sagun do not appear as employees in the Master List which "contained the names of all the persons who were employed by and at petitioner."19 Atlanta faults the CA for relying on the Production and Work Schedule and the Monthly Report which were not sworn to, and in disregarding the Master List whose veracity was sworn to by Bernardo and by Alex Go who headed the companys accounting division. It maintains that the CA should have given more credence to the Master List. Second. In declaring invalid the apprenticeship agreements it entered into with the respondent workers, the CA failed to recognize the rationale behind the law on apprenticeship. It submits that under the law,20 apprenticeship agreements are valid, provided they do not exceed six (6) months and the apprentices are paid the appropriate wages of at least 75% of the applicable minimum wage. The respondents initially executed a five-month apprenticeship program with Atlanta, at the end of which, they "voluntarily and willingly entered into another apprenticeship agreement with the petitioner for the training of a second skill" 21 for five months; thus, the petitioners committed no violation of the apprenticeship period laid down by the law. Further, the apprenticeship agreements, entered into by the parties, complied with the requisites under Article 62 of the Labor Code; the companys authorized representative and the respondents signed the agreements and these were ratified by the companys apprenticeship committee. The apprenticeship program itself was approved and certified by the TESDA. 22 The CA, thus, erred in overturning the NLRCs finding that the apprenticeship agreements were valid. Third. There was no illegal dismissal as the respondent workers tenure ended with the expiration of the apprenticeship agreement they entered into. There was, therefore, no regular employer-employee relationship between Atlanta and the respondent workers. The Case for Costales, Almoite, Sebolino and Sagun In a Comment filed on August 6, 2009,23 Costales, Almoite, Sebolino and Sagun pray for a denial of the petition for being procedurally defective and for lack of merit.

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The respondent workers contend that the petition failed to comply with Section 4, Rule 45 of the Rules of Court which requires that the petition be accompanied by supporting material portions of the records. The petitioners failed to attach to the petition a copy of the Production and Work Schedule despite their submission that the CA relied heavily on the document in finding the respondent workers prior employment with Atlanta. They also did not attach a copy of the compromise agreement purportedly executed by Costales and Almoite. For this reason, the respondent workers submit that the petition should be dismissed. The respondents posit that the CA committed no error in holding that they were already Atlantas employees before they were engaged as apprentices, as confirmed by the companys Production and Work Schedule.24 They maintain that the Production and Work Schedule meets the requirement of substantial evidence as the petitioners failed to question its authenticity. They point out that the schedule was prepared by Rose A. Quirit and approved by Adolfo R. Lope, head of the companys PE/Spiral Section. They argue that it was highly unlikely that the head of a production section of the company would prepare and assign work to the complainants if the latter had not been company employees. The respondent workers reiterate their mistrust of the Master List25 as evidence that they were not employees of the company at the time they became apprentices. They label the Master List as "self-serving, dubious and even if considered as authentic, its content contradicts a lot of petitioners claim and allegations,"26 thus 1. Aside from the fact that the Master List is not legible, it contains only the names of inactive employees. Even those found by the NLRC to have been employed in the company (such as Almoite, Costales and Sagun) do not appear in the list. If Costales and Almoite had been employed with Atlanta since January 11, 2006, as the company claimed,27 their names would have been in the list, considering that the Master List accounts for all employees "as of May 2006" the notation carried on top of each page of the document. 2. There were no entries of employees hired or resigned in the years 2005 and 2006 despite the "as of May 2006" notation; several pages making up the Master List contain names of employees for the years 1999 - 2004. 3. The fact that Atlanta presented the purported Master List instead of the payroll raised serious doubts on the authenticity of the list. In sum, the respondent workers posit that the presentation of the Master List revealed the "intention of the herein petitioner[s] to perpetually hide the fact of [their] prior employment."28 On the supposed apprenticeship agreements they entered into, Costales, Almoite, Sebolino and Sagun refuse to accept the agreements validity, contending that the companys apprenticeship program is merely a ploy "to continually deprive [them] of their rightful wages and benefits which are due them as regular employees."29 They submit the following "indubitable facts and ratiocinations:"30 1. The apprenticeship agreements were submitted to TESDA only in 2005 (with dates of receipt on "1/4/05" & "2/22/05"31 ), when the agreements were supposed to have been executed in April or May 2004. Thus, the submission was made long after the starting date of the workers apprenticeship or even beyond the agreements completion/termination date, in violation of Section 23, Rule VI, Book II of the Labor Code. 2. The respondent workers were made to undergo apprenticeship for occupations different from those allegedly approved by TESDA. TESDA approved Atlantas apprenticeship program on "Plastic Molder"32 and not for extrusion molding process, engineering, pelletizing process and mixing process. 3. The respondents were already skilled workers prior to the apprenticeship program as they had been employed and made to work in the different job positions where they had undergone training. Sagun and Sebolino, together with Mabanag, Pedregoza, dela Cruz, Chiong, Magalang and Alegria were even given production assignments and work schedule at the PE/Spiral Section from May 11, 2004 to March 23, 2005, and some of them were even assigned to the 3:00 p.m. 11:00 p.m. and graveyard shifts (11:00 p.m. 7:00 a.m.) during the period.33 4. The respondent workers were required to continue as apprentices beyond six months. The TESDA certificate of completion indicates that the workers apprenticeship had been completed after six months. Yet, they were suffered to work as apprentices beyond that period. Costales, Almoite, Sebolino and Sagun resolutely maintain that they were illegally dismissed, as the reason for the termination of their employment notice of the completion of the second apprenticeship agreement did not constitute either a just or authorized cause under Articles 282 and 283 of the Labor Code. Finally, Costales and Almoite refuse to be bound by the compromise agreement34 that Atlanta presented to defeat the two workers cause of action. They claim that the supposed agreement is invalid as against them, principally because they did not sign it.

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The Courts Ruling The procedural issue The respondent workers ask that the petition be dismissed outright for the petitioners failure to attach to the petition a copy of the Production and Work Schedule and a copy of the compromise agreement Costales and Almoite allegedly entered into material portions of the record that should accompany and support the petition, pursuant to Section 4, Rule 45 of the Rules of Court. In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena35 where the Court addressed essentially the same issue arising from Section 2(d), Rule 42 of the Rules of Court, 36 we held that the phrase "of the pleadings and other material portions of the record xxx as would support the allegation of the petition clearly contemplates the exercise of discretion on the part of the petitioner in the selection of documents that are deemed to be relevant to the petition. The crucial issue to consider then is whether or not the documents accompanying the petition sufficiently supported the allegations therein."37 As in Mariners, we find that the documents attached to the petition sufficiently support the petitioners allegations. The accompanying CA decision38 and resolution,39 as well as those of the labor arbiter40 and the NLRC,41referred to the parties position papers and even to their replies and rejoinders. Significantly, the CA decision narrates the factual antecedents, defines the complainants cause of action, and cites the arguments, including the evidence the parties adduced. If any, the defect in the petition lies in the petitioners failure to provide legible copies of some of the material documents mentioned, especially several pages in the decisions of the labor arbiter and of the NLRC. This defect, however, is not fatal as the challenged CA decision clearly summarized the labor tribunals rulings. We, thus, find no procedural obstacle in resolving the petition on the merits. The merits of the case We find no merit in the petition. The CA committed no reversible error in nullifying the NLRC decision 42 and in affirming the labor arbiters ruling,43 as it applies to Costales, Almoite, Sebolino and Sagun. Specifically, the CA correctly ruled that the four were illegally dismissed because (1) they were already employees when they were required to undergo apprenticeship and (2) apprenticeship agreements were invalid. The following considerations support the CA ruling. First. Based on company operations at the time material to the case, Costales, Almoite, Sebolino and Sagun were already rendering service to the company as employees before they were made to undergo apprenticeship. The company itself recognized the respondents status through relevant operational records in the case of Costales and Almoite, the CPS monthly report for December 200344 which the NLRC relied upon and, for Sebolino and Sagun, the production and work schedule for March 7 to 12, 200545 cited by the CA. Under the CPS monthly report, Atlanta assigned Costales and Almoite to the first shift (7:00 a.m. to 3:00 p.m.) of the Sections work. The Production and Work Schedules, in addition to the one noted by the CA, showed that Sebolino and Sagun were scheduled on different shifts vis--vis the production and work of the companys PE/Spiral Section for the periods July 5-10, 2004;46 October 25-31, 2004;47 November 8-14, 2004;48 November 16-22, 2004;49 January 3-9, 2005;50 January 10-15, 2005;51 March 7-12, 200552 and March 17-23, 2005.53 We stress that the CA correctly recognized the authenticity of the operational documents, for the failure of Atlanta to raise a challenge against these documents before the labor arbiter, the NLRC and the CA itself. The appellate court, thus, found the said documents sufficient to establish the employment of the respondents before their engagement as apprentices. Second. The Master List54 (of employees) that the petitioners heavily rely upon as proof of their position that the respondents were not Atlantas employees, at the time they were engaged as apprentices, is unreliable and does not inspire belief. The list, consisting of several pages, is hardly legible. It requires extreme effort to sort out the names of the employees listed, as well as the other data contained in the list. For this reason alone, the list deserves little or no consideration. As the respondents also pointed out, the list itself contradicts a lot of Atlantas claims and allegations, thus: it lists only the names of inactive employees; even the names of those the NLRC found to have been employed by Atlanta, like Costales and Almoite, and those who even Atlanta claims attained regular status on January 11, 2006,55 do not appear in the list when it was supposed to account for all employees "as of May 6, 2006." Despite the "May 6, 2006" cut off date, the list contains no entries of employees who were hired or who resigned in 2005 and 2006. We note that the list contains the names of employees from 1999 to 2004. We cannot fault the CA for ignoring the Master List even if Bernardo, its head office accountant, swore to its correctness and authenticity.56 Its substantive unreliability gives it very minimal probative value. Atlanta would have been better served, in terms of

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reliable evidence, if true copies of the payroll (on which the list was based, among others, as Bernardo claimed in her affidavit) were presented instead. Third. The fact that Costales, Almoite, Sebolino and Sagun were already rendering service to the company when they were made to undergo apprenticeship (as established by the evidence) renders the apprenticeship agreements irrelevant as far as the four are concerned. This reality is highlighted by the CA finding that the respondents occupied positions such as machine operator, scaleman and extruder operator - tasks that are usually necessary and desirable in Atlantas usual business or trade as manufacturer of plastic building materials.57 These tasks and their nature characterized the four as regular employees under Article 280 of the Labor Code. Thus, when they were dismissed without just or authorized cause, without notice, and without the opportunity to be heard, their dismissal was illegal under the law.58 Even if we recognize the companys need to train its employees through apprenticeship, we can only consider the first apprenticeship agreement for the purpose. With the expiration of the first agreement and the retention of the employees, Atlanta had, to all intents and purposes, recognized the completion of their training and their acquisition of a regular employee status. To foist upon them the second apprenticeship agreement for a second skill which was not even mentioned in the agreement itself,59 is a violation of the Labor Codes implementing rules60 and is an act manifestly unfair to the employees, to say the least. This we cannot allow. Fourth. The compromise agreement61 allegedly entered into by Costales and Almoite, together with Ramos, Villagomez and Alegria, purportedly in settlement of the case before the NLRC, is not binding on Costales and Almoite because they did not sign it. The company itself admitted62 that while Costales and Almoite were initially intended to be a part of the agreement, it did not pursue their inclusion "due to their regularization as early as January 11, 2006."63 WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The assailed decision and resolution of the Court of Appeals are AFFIRMED. Costs against the petitioner Atlanta Industries, Inc. SO ORDERED.
ARTURO D. BRION Associate Justice

Women Zialcita et. Al, v. PAL, February 29, 1977.12

PT and T Company v. NLRC and Grace De Guzman, May 23, 1997. 13

G.R. No. 118978 May 23, 1997 PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents. REGALADO, J.:

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. Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary Project Worker," for a fixed period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave.1 Under the Reliever Agreement which she signed with petitioner company, her employment was to be immediately terminated upon expiration of the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private respondent's services as reliever were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on leave during both periods. 2 After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated. On September 2, 1991, private respondent was once more asked to join petitioner company as a probationary employee, the probationary period to cover 150 days. In the job application form that was furnished her to be filled up for the purpose, she indicated in the portion for civil status therein that she was single although she had contracted marriage a few months earlier, that is, on May 26, 1991. 3

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It now appears that private respondent had made the same representation in the two successive reliever agreements which she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about the same later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent a memorandum dated January 15, 1992 requiring her to explain the discrepancy. In that memorandum, she was reminded about the company's policy of not accepting married women for employment. 4 In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&T's policy regarding married women at the time, and that all along she had not deliberately hidden her true civil status. 5Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed from the company effective January 29, 1992, 6 which she readily contested by initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost of living allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission in Baguio City. At the preliminary conference conducted in connection therewith, private respondent volunteered the information, and this was incorporated in the stipulation of facts between the parties, that she had failed to remit the amount of P2,380.75 of her collections. She then executed a promissory note for that amount in favor of petitioner 7. All of these took place in a formal proceeding and with the agreement of the parties and/or their counsel. On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that private respondent, who had already gained the status of a regular employee, was illegally dismissed by petitioner. Her reinstatement, plus payment of the corresponding back wages and COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view that the ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that it was apparent that she had been discriminated against on account of her having contracted marriage in violation of company rules. On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the labor arbiter and, in its decision dated April 29, 1994, it ruled that private respondent had indeed been the subject of an unjust and unlawful discrimination by her employer, PT & T. However, the decision of the labor arbiter was modified with the qualification that Grace de Guzman deserved to be suspended for three months in view of the dishonest nature of her acts which should not be condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the order for the reinstatement of private respondent in her employment with PT & T. The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in its resolution of November 9, 1994, hence this special civil action assailing the aforestated decisions of the labor arbiter and respondent NLRC, as well as the denial resolution of the latter. 1. Decreed in the Bible itself is the universal norm that women should be regarded with love and respect but, through the ages, men have responded to that injunction with indifference, on the hubristic conceit that women constitute the inferior sex. Nowhere has that prejudice against womankind been so pervasive as in the field of labor, especially on the matter of equal employment opportunities and standards. In the Philippine setting, women have traditionally been considered as falling within the vulnerable groups or types of workers who must be safeguarded with preventive and remedial social legislation against discriminatory and exploitative practices in hiring, training, benefits, promotion and retention. 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. To cite a few of the primordial ones, Section 14, Article II 8on the Declaration of Principles and State Policies, expressly recognizes the role of women in nation-building and commands the State to ensure, at all times, the fundamental equality before the law of women and men. Corollary thereto, Section 3 of Article XIII 9 (the progenitor whereof dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to labor and to promote full employment and equality of employment opportunities for all, including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates that the State shall protect working women through provisions for opportunities that would enable them to reach their full potential. 2. Corrective labor and social laws on gender inequality have emerged with more frequency in the years since the Labor Code was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to our country's commitment as a signatory to the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). 11 Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination against women with respect to terms and conditions of employment, promotion, and training opportunities; Republic Act No. 695513 which bans the "mail-order-bride" practice for a fee and the export of female labor to countries that cannot guarantee protection to the rights of women workers; Republic Act No. 7192 14 also known as the "Women in Development and Nation Building Act," which affords women equal opportunities with men to act and to enter into contracts, and for appointment, admission, training, graduation, and commissioning in all military or similar schools of the Armed Forces of the Philippines and the Philippine National Police; Republic Act No. 7322 15 increasing the maternity benefits granted to women in the private sector; Republic Act No. 7877 16 which outlaws and punishes sexual harassment in the workplace and in the education and training environment; and Republic Act No. 8042, 17or the "Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as a matter of policy, inter alia, the deployment of migrant workers, with emphasis on women, only in

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countries where their rights are secure. Likewise, it would not be amiss to point out that in the Family Code, field of civil law have been greatly enhanced and expanded.

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women's rights in the

In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138 thereof. Article 130 involves the right against particular kinds of night work while Article 132 ensures the right of women to be provided with facilities and standards which the Secretary of Labor may establish to ensure their health and safety. For purposes of labor and social legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments shall be considered as an employee under Article 138. Article 135, on the other hand, recognizes a woman's right against discrimination with respect to terms and conditions of employment on account simply of sex. Finally, and this brings us to the issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage of a female employee. 3. 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. On the other hand, it is recognized that regulation of manpower by the company falls within the so-called management prerogatives, which prescriptions encompass the matter of hiring, supervision of workers, work assignments, working methods and assignments, as well as regulations on the transfer of employees, lay-off of workers, and the discipline, dismissal, and recall of employees. 19 As put in a case, an employer is free to regulate, according to his discretion and best business judgment, all aspects of employment, "from hiring to firing," except in cases of unlawful discrimination or those which may be provided by law. 20 In the case at bar, 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. Contrary to petitioner's assertion that it dismissed private respondent from employment on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally because of the company's policy that married women are not qualified for employment in PT & T, and not merely because of her supposed acts of dishonesty. That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the branch supervisor of the company, with the reminder, in the words of the latter, that "you're fully aware that the company is not accepting married women employee (sic), as it was verbally instructed to you." 21 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.") 22 Parenthetically, this seems to be the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in this case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily liable with the corporation. 23 Verily, private respondent's act of concealing the true nature of her status from PT & T could not be properly characterized as willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a stable company. In other words, she was practically forced by that very same illegal company policy into misrepresenting her civil status for fear of being disqualified from work. While loss of confidence is a just cause for termination of employment, it should not be simulated. 24 It must rest on an actual breach of duty committed by the employee and not on the employer's caprices. 25 Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified. 26 In the present controversy, petitioner's expostulations that it dismissed private respondent, not because the latter got married but because she concealed that fact, does have a hollow ring. Her concealment, so it is claimed, bespeaks dishonesty hence the consequent loss of confidence in her which justified her dismissal. Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless takes umbrage over the concealment of that fact. This improbable reasoning, with interstitial distinctions, perturbs the Court since private respondent may well be minded to claim that the imputation of dishonesty should be the other way around. Petitioner would have the Court believe that although private respondent defied its policy against its female employees contracting marriage, what could be an act of insubordination was inconsequential. What it submits as unforgivable is her concealment of that marriage yet, at the same time, declaring that marriage as a trivial matter to which it supposedly has no objection. In other words, PT & T says it gives its blessings to its female employees contracting marriage, despite the maternity leaves and other benefits it would consequently respond for and which obviously it would have wanted to avoid. If that employee confesses such fact of marriage, there will be no sanction; but if such employee conceals the same instead of proceeding to the confessional, she will be dismissed. This line of reasoning does not impress us as reflecting its true management policy or that we are being regaled with responsible advocacy. This Court should be spared the ennui of strained reasoning and the tedium of propositions which confuse through less than candid arguments. Indeed, petitioner glosses over the fact that it was its unlawful policy against married women, both on the aspects of

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qualification and retention, which compelled private respondent to conceal her supervenient marriage. It was, however, that very policy alone which was the cause of private respondent's secretive conduct now complained of. It is then apropos to recall the familiar saying that he who is the cause of the cause is the cause of the evil caused. Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that she failed to remit some of her collections, but that is an altogether different story. The fact is that she was dismissed solely because of her concealment of her marital status, and not on the basis of that supposed defalcation of company funds. That the labor arbiter would thus consider petitioner's submissions on this supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of experience in labor cases. For, there was no showing that private respondent deliberately misappropriated the amount or whether her failure to remit the same was through negligence and, if so, whether the negligence was in nature simple or grave. In fact, it was merely agreed that private respondent execute a promissory note to refund the same, which she did, and the matter was deemed settled as a peripheral issue in the labor case. Private respondent, it must be observed, had gained regular status at the time of her dismissal. When she was served her walking papers on January 29, 1992, she was about to complete the probationary period of 150 days as she was contracted as a probationary employee on September 2, 1991. That her dismissal would be effected just when her probationary period was winding down clearly raises the plausible conclusion that it was done in order to prevent her from earning security of tenure. 27 On the other hand, her earlier stints with the company as reliever were undoubtedly those of a regular employee, even if the same were for fixed periods, as she performed activities which were essential or necessary in the usual trade and business of PT & T. 28 The primary standard of determining regular employment is the reasonable connection between the activity performed by the employee in relation to the business or trade of the employer. 29 As an employee who had therefore gained regular status, and as she had been dismissed without just cause, she is entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances and other benefits or their monetary equivalent. 30 However, as she had undeniably committed an act of dishonesty in concealing her status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month suspension imposed by respondent NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would be unfair to the employer if she were to return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her entitlement to back wages, which shall be computed from the time her compensation was withheld up to the time of her actual reinstatement, shall be reduced by deducting therefrom the amount corresponding to her three months suspension. 4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner PT & T. The Labor Code state, 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. This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No. 148, 31better known as the "Women and Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An Act to Regulate the Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other Purposes." The forerunner to Republic Act No. 679, on the other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the employment of women and children in shops, factories, industrial, agricultural, and mercantile establishments and other places of labor in the then Philippine Islands. It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs. Philippine Air Lines, 33a decision that emanated from the Office of the President. There, a policy of Philippine Air Lines requiring that prospective flight attendants must be single and that they will be automatically separated from the service once they marry was declared void, it being violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination against married women. Thus: Of first impression is the incompatibility of the respondent's policy or regulation with the codal provision of law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to women employed in ordinary occupations and that the prohibition against marriage of women engaged in extraordinary occupations, like flight attendants, is fair and reasonable, considering the pecularities of their chosen profession. We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted policy has already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise known as the Women and Child Labor Law, was promulgated. But for the timidity of those affected or their labor unions in challenging the validity of the policy, the same was able to obtain a momentary reprieve. A close look at Section 8 of

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said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which was promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974. It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to establish standards that will ensure the safety and health of women employees and in appropriate cases shall by regulation require employers to determine appropriate minimum standards for termination in special occupations, such as those of flight attendants, but that is precisely the factor that militates against the policy of respondent. The standards have not yet been established as set forth in the first paragraph, nor has the Secretary of Labor issued any regulation affecting flight attendants. It is logical to presume that, in the absence of said standards or regulations which are as yet to be established, the policy of respondent against marriage is patently illegal. This finds support in Section 9 of the New Constitution, which provides: Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and employees. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work . . . . Moreover, we cannot agree to the respondent's proposition that termination from employment of flight attendants on account of marriage is a fair and reasonable standard designed for their own health, safety, protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its concern is not so much against the continued employment of the flight attendant merely by reason of marriage as observed by the Secretary of Labor, but rather on the consequence of marriage-pregnancy. Respondent discussed at length in the instant appeal the supposed ill effects of pregnancy on flight attendants in the course of their employment. We feel that this needs no further discussion as it had been adequately explained by the Secretary of Labor in his decision of May 2, 1976. In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles 52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution and the family as a basic social institution, respectively, as bases for its policy of non-marriage. In both instances, respondent predicates absence of a flight attendant from her home for long periods of time as contributory to an unhappy married life. This is pure conjecture not based on actual conditions, considering that, in this modern world, sophisticated technology has narrowed the distance from one place to another. Moreover, respondent overlooked the fact that married flight attendants can program their lives to adapt to prevailing circumstances and events. Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the employment of women. The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial Corporation 34considered as void a policy of the same nature. In said case, respondent, in dismissing from the service the complainant, invoked a policy of the firm to consider female employees in the project it was undertaking as separated the moment they get married due to lack of facilities for married women. Respondent further claimed that complainant was employed in the project with an oral understanding that her services would be terminated when she gets married. Branding the policy of the employer as an example of "discriminatory chauvinism" tantamount to denying equal employment opportunities to women simply on account of their sex, the appellate court struck down said employer policy as unlawful in view of its repugnance to the Civil Code, Presidential Decree No. 148 and the Constitution. Under American jurisprudence, job requirements which establish employer preference or conditions relating to the marital status of an employee are categorized as a "sex-plus" discrimination where it is imposed on one sex and not on the other. Further, the same should be evenly applied and must not inflict adverse effects on a racial or sexual group which is protected by federal job discrimination laws. Employment rules that forbid or restrict the employment of married women, but do not apply to married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the main federal statute prohibiting job discrimination against employees and applicants on the basis of, among other things, sex. 35 Further, it is not relevant that the rule is not directed against all women but just against married women. And, where the employer discriminates against married women, but not against married men, the variable is sex and the discrimination is unlawful. 36 Upon the other hand, a requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality

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reasonably necessary for satisfactory job performance. Thus, in one case, a no-marriage rule applicable to both male and female flight attendants, was regarded as unlawful since the restriction was not related to the job performance of the flight attendants. 37 5. 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. 38 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. 39Carried 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. Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the common good. 40 It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. 41 In the final reckoning, the danger of just such a policy against marriage followed by petitioner PT & T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and, ultimately, of the family as the foundation of the nation. 42 That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but imperatively required. ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is hereby DISMISSED for lack of merit, with double costs against petitioner. SO ORDERED.
Romero, Puno, Mendoza and Torres, Jr., JJ., concur.

Del Monte Philippines Inc. v. Velasco, March 6, 2007.14

G.R. NO. 153477 March 6, 2007 DEL MONTE PHILIPPINES, INC., Petitioner, vs. LOLITA VELASCO, Respondent. DECISION AUSTRIA-MARTINEZ, J.:

Before this Court is a Petition for Certiorari under Rule 45 seeking to reverse and set aside the Decision 1 dated July 23, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 56571 which affirmed the Decision dated May 27, 1999 of the National Labor Relations Commission (NLRC); and the CA Resolution2 dated May 7, 2002 which denied the petitioner's Motion for Reconsideration. The facts of the case, as stated by the CA, are as follows: Lolita M. Velasco (respondent) started working with Del Monte Philippines (petitioner) on October 21, 1976 as a seasonal employee and was regularized on May 1, 1977. Her latest assignment was as Field Laborer. On June 16, 1987, respondent was warned in writing due to her absences. On May 4, 1991, respondent, thru a letter, was again warned in writing by petitioner about her absences without permission and a forfeiture of her vacation leave entitlement for the year 1990-1991 was imposed against her. On September 14, 1992, another warning letter was sent to respondent regarding her absences without permission during the year 1991-1992. Her vacation entitlement for the said employment year affected was consequently forfeited. In view of the said alleged absences without permission, on September 17, 1994, a notice of hearing was sent to respondent notifying her of the charges filed against her for violating the Absence Without Official Leave rule: that is for excessive absence without permission on August 15-18, 29-31 and September 1-10, 1994. The hearing was set on September 23, 1994. Respondent having failed to appear on September 23, 1994 hearing, another notice of hearing was sent to her resetting the investigation on September 30, 1994. It was again reset to October 5, 1994. On January 10, 1995, after hearing, the petitioner terminated the services of respondent effective January 16, 1994 due to excessive absences without permission.
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http://www.lawphil.net

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Feeling aggrieved, respondent filed a case for illegal dismissal against petitioner asserting that her dismissal was illegal because she was on the family way suffering from urinary tract infection, a pregnancy-borne, at the time she committed the alleged absences. She explained that for her absence from work on August 15, 16, 17 & 18, 1994 she had sent an application for leave to her supervisor, Prima Ybaez. Thereafter, she went to the company hospital for check-up and was advised accordingly to rest in quarters for four (4) days or on August 27 to 30, 1994. Still not feeling well, she failed to work on September 1, 1994 and was again advised two days of rest in quarters on September 2-3, 1994. Unable to recover, she went to see an outside doctor, Dr. Marilyn Casino, and the latter ordered her to rest for another five (5) consecutive days, or from September 5 to 9, 1994. She declared she did not file the adequate leave of absence because a medical certificate was already sufficient per company policy. On September 10, 1994 she failed to report to work but sent an application for leave of absence to her supervisor, Prima Ybaez, which was not anymore accepted.3 On April 13, 1998, the Labor Arbiter dismissed the Complaint for lack of merit. The Labor Arbiter held that the respondent was an incorrigible absentee; that she failed to file leaves of absence; that her absences in 1986 and 1987 were without permission; that the petitioner gave the respondent several chances to reform herself; and that the respondent did not justify her failure to appear during the scheduled hearings and failed to explain her absences. Respondent appealed to the NLRC. On May 29, 1999, the NLRC issued its Resolution, the dispositive portion of which reads: WHEREFORE, foregoing considered, the instant decision is hereby VACATED and a new one entered declaring the dismissal of complainant as ILLEGAL. In consonance with Art. 279 of the Labor [Code], her reinstatement with full backwages from the date of her termination from employment to her actual reinstatement is necessarily decreed.4 The NLRC held that, under the company rules, the employee may make a subsequent justification of her absenteeism, which she was able to do in the instant case; that while it is not disputed that the respondent incurred absences exceeding six (6) days within one employment year a ground for dismissal under the company rules the petitioner actually admitted the fact that the respondent had been pregnant, hence, negating petitioners assertion that the respondent failed to give any explanation of her absences; that the records bear the admission of petitioners officer of the receipt of the hospital record showing the cause of her absences ("RIQ advice" or "rest-in-quarters") for August 19-20, 1994 which, in turn, could already serve as reference in resolving the absences on August 15 to 18; that the petitioner further admitted that the respondent was under "RIQ advice" on September 2-3, 1994 and yet insisted in including these dates among respondents 16 purported unexplained absences; that it is sufficient notice for the petitioner, "a plain laborer" with "unsophisticated judgment," to send word to her employer through a co-worker on August 15 to 16, 1994 that she was frequently vomiting; that the sheer distance between respondents home and her workplace made it difficult to send formal notice; that respondent even sent her child of tender age to inform her supervisor about her absence on September 5, 1994 due to stomach ache, but her child failed to approach the officer because her child felt ashamed, if not mortified; that respondents narration that she had to bear pains during her absences on September 21 to 27, 1994 is credible; that she dared not venture through the roads for fear of forest creatures or predators; that the petitioner is guilty of unlawfully discharging respondent on account of her pregnancy under Article 137(2) of the Labor Code; and, that petitioners reference to the previous absenteeism of respondent is misplaced because the latter had already been penalized therefor. Petitioners Motion for Reconsideration was denied on September 30, 1999. The petitioner then appealed to the CA. On July 23, 2001, the CA promulgated its Decision the dispositive portion of which states: VIEWED IN THE LIGHT OF ALL THE FOREGOING, the instant petition is DISMISSED, the Resolutions, dated May 27, 1999 and September 30, 1999 of the National Labor Relations Commission in NLRC CA No. M-003926-98, are hereby AFFIRMED in toto. SO ORDERED.5 In affirming the NLRC, the CA held that absences due to a justified cause cannot be a ground for dismissal; that it is undisputed that the respondent was pregnant at the time she incurred the absences in question; that the certification issued by a private doctor duly established this fact; that it was no less than petitioners company doctor who advised the respondent to have rest-in-quarters for four days on account of a pregnancy- related sickness; that it had been duly established that respondent filed leaves of absence though the last had been refused by the company supervisor; that the dismissal of an employee due to prolonged absence with leave by reason of illness duly established by the presentation of a medical certificate is not justified; that it is undisputed that respondents sickness was pregnancy-related; that under Article 137(2) of the Labor Code, the petitioner committed a prohibited act in discharging a woman on account of her pregnancy. On May 7, 2002, the CA denied petitioners Motion for Reconsideration. Hence, the instant Petition raising the following issues: I.

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The court of appeals seriously erred In considering respondents Excessive aWOPs as justified Simply on account of her pregnancy. II. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT CONSIDERING THAT RESPONDENTS LATEST STRING OF ABSENCES INCURRED WITHOUT ANY PRIOR PERMISSION, AND AS ABOVE SHOWN, WITHOUT ANY VALID JUSTIFICATION, TAKEN TOGETHER WITH HER DAMAGING awop history, established her gross and habitual neGlect of duties, a just and valid ground for dismissal. III. The court of appeals seriously erred in holding that respondents dismissal was in violation of article 137 (prohibiting an employer to discharge an employee on account of her pregnancy). IV. The court of appeals seriously erred in awarding full backwages in favor of respondent notwithstanding petitioners evident good faith.6 The essential question is whether the employment of respondent had been validly terminated on the ground of excessive absences without permission. Corollary to this is the question of whether the petitioner discharged the respondent on account of pregnancy, a prohibited act. The petitioner posits the following arguments: (a) The evidence proffered by the respondent, to wit: (1) the Discharge Summary indicating that she had been admitted to the Phillips Memorial Hospital on August 23, 1994 and discharged on August 26, 1994, and that she had been advised to "rest in quarters" for four days from August 27, 1994 to August 30, 1994, and (2) the Medical Certificate issued by Dr. Marilyn M. Casino stating that respondent had sought consultation on September 4, 2002 because of spasm in the left iliac region, and was advised to rest for five days (from September 4, 1994 up to September 8, 1994), due to urinary tract infection, all in all establish respondents sickness only from August 23, 1994 up to August 30, 1994 and from September 4, 1994 up to September 8, 1994. In other words, respondent was absent without permission on several other days which were not supported by any other proof of illness, specifically, on August 15, 16, 17, 18, 31, 1994 and September 1, 2, 3, 9, and 10, 1994, and, hence, she is guilty of ten unjustified absences; (b) Per Filflex Industrial and Manufacturing Co. v. National Labor Relations Commission (Filflex), 7 if the medical certificate fails to refer to the specific period of the employees absence, then such absences, attributable to chronic asthmatic bronchitis, are not supported by competent proof and, hence, they are unjustified. By parity of reasoning, in the absence of evidence indicating any pregnancy-borne illness outside the period stated in respondents medical certificate, such illness ought not to be considered as an acceptable excuse for respondents excessive absences without leave; (c) Respondents latest string of absences, taken together with her long history of absenteeism without permission, established her gross and habitual neglect of duties, as established by jurisprudence; (d) The respondent was dismissed not by reason of her pregnancy but on account of her gross and habitual neglect of duties. In other words, her pregnancy had no bearing on the decision to terminate her employment; and, (e) Her state of pregnancy per se could not excuse her from filing prior notice for her absence. Petitioners arguments are without merit. First. The Filflex Industrial and Manufacturing Co. case is not applicable, principally because the nature and gravity of the illness involved in that case chronic asthmatic bronchitis are different from the conditions that are present in the instant case, which is pregnancy and its related illnesses. The Court takes judicial notice of the fact that the condition of asthmatic bronchitis may be intermittent, in contrast to pregnancy which is a continuing condition accompanied by various symptoms and related illnesses. Hence, as to the former, if the medical certificate or other proof proffered by the worker fails to correspond with the dates of absence, then it can be reasonably concluded that, absent any other proof, such absences are unjustified. This is the ruling in Filflex which cannot be applied in a straight-hand fashion in cases of pregnancy which is a long-term condition accompanied by an assortment of related illnesses. In this case, by the measure of substantial evidence, what is controlling is the finding of the NLRC and the CA that respondent was pregnant and suffered from related ailments. It would be unreasonable to isolate such condition strictly to the dates stated in the Medical Certificate or the Discharge Summary. It can be safely assumed that the absences that are not covered by, but which nonetheless approximate, the dates stated in the Discharge Summary and Medical Certificate, are due to the continuing condition of pregnancy and related illnesses, and, hence, are justified absences. As the CA and the NLRC correctly noted, it is not disputed that respondent was pregnant and that she was suffering from urinary tract infection, and that her absences were due to such facts. The petitioner admits these facts in its Petition for Review.8 And, as the CA

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aptly held, it was no less than the company doctor who advised the respondent to have "rest-in-quarters" for four days on account of a pregnancy-related sickness.9 On this note, this Court upholds and adopts the finding of the NLRC, thus: In this jurisdiction tardiness and absenteeism, like abandonment, are recognized forms of neglect of duties, the existence of which justify the dismissal of the erring employee. Respondents rule penalizing with discharge any employee who has incurred six (6) or more absences without permission or subsequent justification is admittedly within the purview of the foregoing standard. However, while it is not disputed that complainant incurred absences exceeding six (6) days as she actually failed to report for work from August 15-18, 23-26, 29-31, September 1-3, 5-10, 12-17, 21-24, 26-30, and October 1-3, 1994, her being pregnant at the time these absences were incurred is not questioned and is even admitted by respondent. It thus puzzles us why respondent asserts complainant failed to explain satisfactorily her absences on August 15-18, 29-31, September 1-3 and 5-10, 1994, yet reconsidered the rest of her absences for being covered with "rest-in-quarters" (RIQ) advice from its hospital personnel when this advice was unquestionably issued in consideration of the physiological and emotional changes complainant, a conceiving mother, naturally developed. Medical and health reports abundantly disclose that during the first trimester of pregnancy, expectant mothers are plagued with morning sickness, frequent urination, vomiting and fatigue all of which complainant was similarly plagued with. Union official IBB Lesnas observation on complainant being [sic] apparently not feeling well during the investigation conducted by respondent on October 5, 1994 even remains in the records of said proceedings. For respondent to isolate the absences of complainant in August and mid-September, 1994 from the absences she incurred later in said month without submitting any evidence that these were due to causes not in manner associated with her [ ] condition renders its justification of complainants dismissal clearly not convincing under the circumstances. Despite contrary declaration, the records bear the admission of respondents P/A North Supervisor, PB Ybanez, of her receipt of the hospital record showing complainants RIQ advice for August 19-20, 1994 which could already serve as respondents reference in resolving the latters absences on August 15 to 18, 1994. Respondent further admitted complainant was under RIQ advice on September 2-3, 1994, yet, insisted in including these dates among her 16 purported unexplained absences justifying termination of her employment.10 (emphasis supplied) Petitioners contention that the cause for the dismissal was gross and habitual neglect unrelated to her state of pregnancy is unpersuasive. The Court agrees with the CA in concluding that respondents sickness was pregnancy-related and, therefore, the petitioner cannot terminate respondents services because in doing so, petitioner will, in effect, be violating the Labor Code which prohibits an employer to discharge an employee on account of the latters pregnancy.11 Article 137 of the Labor Code provides: Art. 137. Prohibited acts. It shall be unlawful for any employer: (1) To deny any woman employee the benefits provided for in this Chapter or to discharge any woman employed by him for the purpose of preventing her from enjoying any of the benefits provided under this Code; (2) To discharge such woman on account of her pregnancy, while on leave or in confinement due to her pregnancy; or (3) To discharge or refuse the admission of such woman upon returning to her work for fear that she may again be pregnant. (Emphasis supplied) Second. The petitioner stresses that many women go through pregnancy and yet manage to submit prior notices to their employer, especially if "there is no evidence on record indicating a condition of such gravity as to preclude efforts at notifying petitioner of her absence from work in series."12 But it must be emphasized that under petitioners company rules, absences may be subsequently justified.13 The Court finds no cogent reason to disturb the findings of the NLRC and the CA that the respondent was able to subsequently justify her absences in accordance with company rules and policy; that the respondent was pregnant at the time she incurred the absences; that this fact of pregnancy and its related illnesses had been duly proven through substantial evidence; that the respondent attempted to file leaves of absence but the petitioners supervisor refused to receive them; that she could not have filed prior leaves due to her continuing condition; and that the petitioner, in the last analysis, dismissed the respondent on account of her pregnancy, a prohibited act. Third. Petitioners reliance on the jurisprudential rule that the totality of the infractions of an employee may be taken into account to justify the dismissal, is tenuous considering the particular circumstances obtaining in the present case. Petitioner puts much emphasis

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on respondents "long history" of unauthorized absences committed several years beforehand. However, petitioner cannot use these previous infractions to lay down a pattern of absenteeism or habitual disregard of company rules to justify the dismissal of respondent. The undeniable fact is that during her complained absences in 1994, respondent was pregnant and suffered related illnesses. Again, it must be stressed that respondents discharge by reason of absences caused by her pregnancy is covered by the prohibition under the Labor Code. Since her last string of absences is justifiable and had been subsequently explained, the petitioner had no legal basis in considering these absences together with her prior infractions as gross and habitual neglect. The Court is convinced that the petitioner terminated the services of respondent on account of her pregnancy which justified her absences and, thus, committed a prohibited act rendering the dismissal illegal. In fine, the Court finds no cogent reason to disturb the findings of the CA and the NLRC. WHEREFORE, the petition is DENIED for lack of merit. The Decision dated July 23, 2001 and the Resolution dated May 7, 2002 of the Court of Appeals are AFFIRMED. No pronouncement as to costs. SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

Tecson v. Glaxo Welcome Phils., September 17, 200415

G.R. No. 162994 September 17, 2004 DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs. GLAXO WELLCOME PHILIPPINES, INC., Respondent. RESOLUTION TINGA, J.:

Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434.2 Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, 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. If management perceives a conflict of interest or a potential conflict between such relationship and the employees employment with the company, the management and the employee will explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation for employment outside the company after six months. Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales area. Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals3(Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area. Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.
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In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons 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. Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsys separation from her company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra. In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of Glaxos "least-movement-possible" policy. In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied. Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area. During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra. He was also not included in product conferences regarding such products. Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to another sales territory. Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision. On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management prerogatives.4 Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied by the appellate court in its Resolution dated March 26, 2004.5 Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was constructively dismissed when he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and training sessions.6 Petitioners contend that Glaxos policy against employees marrying employees of competitor companies violates the equal protection clause of the Constitution because it creates invalid distinctions among employees on account only of marriage. They claim that the policy restricts the employees right to marry.7 They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars and training sessions for medical representatives, and (4) he was prohibited from promoting respondents products which were competing with Astras products.8 In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that Tecsons reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal.9 Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having personal or family interests in any competitor company which may influence their actions and decisions

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and consequently deprive Glaxo of legitimate profits. The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies.10 It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor companies, and is therefore not violative of the equal protection clause. It maintains that considering the nature of its business, the prohibition is based on valid grounds.11 According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astras products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its management prerogatives.12 In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead.13 Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds that his relationship with an employee of a competitor company would be detrimental to the interests of Glaxo.14 Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars regarding respondents new products did not amount to constructive dismissal. It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur-Camarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to him and his family as he would be relocating to a familiar territory and minimizing his travel expenses.15 In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma drug was due to the fact that said product was in direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga City because the supplier thought he already transferred to Butuan).16 The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxos policy against its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was constructively dismissed. The Court finds no merit in the petition. The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners provides: 10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy. 17 The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to study and become acquainted with such policies.18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest: 1. Conflict of Interest Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe Glaxo Wellcome. Specifically, this means that employees are expected:

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a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate profit. b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside personal interests, that of their relatives, friends and other businesses. c. To avoid outside employment or other interests for income which would impair their effective job performance. d. To consult with Management on such activities or relationships that may lead to conflict of interest. 1.1. Employee Relationships Employees with existing or future relationships either by consanguinity or affinity with co-employees of competing drug companies are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-counter checking position, or by career preparation toward outside employment after Glaxo Wellcome. Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible.19 No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos 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 Glaxos 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.20 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.21 As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964.23The Court pointed out that the policy was applied to men and women equally, and noted that the employers business was highly competitive and that gaining inside information would constitute a competitive advantage. The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct, however, discriminatory or wrongful. 25 The only exception occurs when the state29 in any of its manifestations or actions has been found to have become entwined or involved in the wrongful private conduct. 27 Obviously, however, the exception is not present in this case. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee. In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus: The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However,

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an employees personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business success. . .28 The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code of Conduct and of its contracts with its employees, such as that signed by Tescon, was made known to him prior to his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith."29 He is therefore estopped from questioning said policy. The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.30 None of these conditions are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area: . . . In this case, petitioners transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus validNote that [Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her employer-company which requires her to work in close coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astras inventoryshe therefore takes an active participation in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioners sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse of the others market strategies in the region would be inevitable. [Managements] appreciation of a conflict of interest is therefore not merely illusory and wanting in factual basis31 In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint filed by a medical representative against his employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its employee in accordance with its operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case: By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments are part of the employment contract.33 As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his employment with the company and on the companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo.34 WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners. SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.

Stars Paper Corp. v. Simbol Comia and Estrella, April 12, 2006.16
G.R. No. 164774 April 12, 2006

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STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners, vs. RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents. DECISION PUNO, J.:

We are called to decide an issue of first impression: whether 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. At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter. Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department while Sebastian Chua is its Managing Director. The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the company.1 Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get married, one of them should resign pursuant to a company policy promulgated in 1995,2 viz.: 1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company. 2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should resign to preserve the policy stated above.3 Simbol resigned on June 20, 1998 pursuant to the company policy.4 Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company policy, one must resign should they decide to get married. Comia resigned on June 30, 2000.5 Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker. Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to immorality but she opted to resign on December 21, 1999.6 The respondents each signed a Release and Confirmation Agreement. They stated therein that they have no money and property accountabilities in the company and that they release the latter of any claim or demand of whatever nature.7 Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to respondent Estrella, she alleges that she had a relationship with coworker Zuiga who misrepresented himself as a married but separated man. After he got her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the company policy. On November 30, 1999, she met an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21, 1999 but she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office where one of the staff handed her a memorandum. The memorandum stated that she was being dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for twenty-one (21) days and has not been given a chance to explain. The management asked her to write an explanation. However, after submission of the explanation, she was nonetheless dismissed by the company. Due to her urgent need for money, she later submitted a letter of resignation in exchange for her thirteenth month pay.8 Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorneys fees. They averred that the aforementioned company policy is illegal and contravenes Article 136 of the Labor Code. They also contended that they were dismissed due to their union membership. On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of merit, viz.:

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[T]his company policy was decreed pursuant to what the respondent corporation perceived as management prerogative. This management prerogative is quite broad and encompassing for it covers hiring, work assignment, working method, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Except as provided for or limited by special law, an employer is free to regulate, according to his own discretion and judgment all the aspects of employment.9 (Citations omitted.) On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11, 2002. 10 Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution 11 dated August 8, 2002. They appealed to respondent court via Petition for Certiorari. In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision, viz.: WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as follows: (1) Declaring illegal, the petitioners dismissal from employment and ordering private respondents to reinstate petitioners to their former positions without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement; and (2) Ordering private respondents to pay petitioners attorneys fees amounting to 10% of the award and the cost of this suit.13 On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that: 1. x x x the subject 1995 policy/regulation is violative of the constitutional rights towards marriage and the family of employees and of Article 136 of the Labor Code; and 2. x x x respondents resignations were far from voluntary.14 We affirm. The 1987 Constitution15 states our policy towards the protection of labor under the following provisions, viz.: Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. xxx Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. The Civil Code likewise protects labor with the following provisions: Art. 1700. 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. 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. Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves Article 136 of the Labor Code which provides:

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Art. 136. 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. Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read together with the first paragraph of the rule. The rule does not require the woman employee to resign. The employee spouses have the right to choose who between them should resign. Further, they are free to marry persons other than co-employees. Hence, it is not the marital status of the employee, per se, that is being discriminated. It is only intended to carry out its no-employment-for-relatives-within-the-third-degree-policy which is within the ambit of the prerogatives of management.16 It is true that the policy of petitioners prohibiting close relatives from working in the same company takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent the hiring of unqualified persons based on their status as a relative, rather than upon their ability.17 These policies focus upon the potential employment problems arising from the perception of favoritism exhibited towards relatives. With more women entering the workforce, employers are also enacting employment policies specifically prohibiting spouses from working for the same company. We note that two types of employment policies involve spouses: policies banning only spouses from working in the same company (no-spouse employment policies), and those banning all immediate family members, including spouses, from working in the same company (anti-nepotism employment policies).18 Unlike in our jurisdiction where there is no express prohibition on marital discrimination,19 there are twenty state statutes20 in the United States prohibiting marital discrimination. Some state courts21 have been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital status and sex discrimination. In challenging the anti-nepotism employment policies in the United States, complainants utilize two theories of employment discrimination: the disparate treatment and the disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an employment policy is discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting the employer from hiring wives of male employees, but not husbands of female employees, is discriminatory on its face.22 On the other hand, to establish disparate impact, the complainants must prove that a facially neutral policy has a disproportionate effect on a particular class. For example, although most employment policies do not expressly indicate which spouse will be required to transfer or leave the company, the policy often disproportionately affects one sex.23 The state courts rulings on the issue depend on their interpretation of the scope of marital status discrimination within the meaning of their respective civil rights acts. Though they agree that the term "marital status" encompasses discrimination based on a person's status as either married, single, divorced, or widowed, they are divided on whether the term has a broader meaning. Thus, their decisions vary.24 The courts narrowly25 interpreting marital status to refer only to a person's status as married, single, divorced, or widowed reason that if the legislature intended a broader definition it would have either chosen different language or specified its intent. They hold that the relevant inquiry is if one is married rather than to whom one is married. They construe marital status discrimination to include only whether a person is single, married, divorced, or widowed and not the "identity, occupation, and place of employment of one's spouse." These courts have upheld the questioned policies and ruled that they did not violate the marital status discrimination provision of their respective state statutes. The courts that have broadly26 construed the term "marital status" rule that it encompassed the identity, occupation and employment of one's spouse. They strike down the no-spouse employment policies based on the broad legislative intent of the state statute. They reason that the no-spouse employment policy violate the marital status provision because it arbitrarily discriminates against all spouses of present employees without regard to the actual effect on the individual's qualifications or work performance. 27 These courts also find the no-spouse employment policy invalid for failure of the employer to present any evidence of business necessity other than the general perception that spouses in the same workplace might adversely affect the business.28 They hold that the absence of such a bona fide occupational qualification29 invalidates a rule denying employment to one spouse due to the current employment of the other spouse in the same office.30 Thus, they rule that unless the employer can prove that the reasonable demands of the business require a distinction based on marital status and there is no better available or acceptable policy which would better accomplish the business purpose, an employer may not discriminate against an employee based on the identity of the employees spouse.31 This is known as the bona fide occupational qualification exception. We note that since the finding of a bona fide occupational qualification justifies an employers no-spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a compelling business necessity for which no alternative exists

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other than the discriminatory practice.32 To justify a bona fide occupational qualification, the employer must prove two factors: (1) that the employment qualification is reasonably related to the essential operation of the job involved; and, (2) that there is a factual basis for believing that all or substantially all persons meeting the qualification would be unable to properly perform the duties of the job.33 The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the standard ofreasonableness of the company policy which is parallel to the bona fide occupational qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we passed on the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. We held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors. We considered the prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employeesreasonable under the circumstances because relationships of that nature might compromise the interests of Glaxo. In laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.35 The requirement that a company policy must be reasonable under the circumstances to qualify as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the employee was dismissed in violation of petitioners policy of disqualifying from work any woman worker who contracts marriage. We held that the company policy violates the right against discrimination afforded all women workers under Article 136 of the Labor Code, but established a permissible exception, viz.: [A] requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance.37 (Emphases supplied.) The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly established to uphold the questioned employment policy. The employer has the burden to prove the existence of a reasonable business necessity. The burden was successfully discharged in Duncan but not in PT&T. We do not find a reasonable business necessity in the case at bar. Petitioners sole contention that "the company did not just want to have two (2) or more of its employees related between the third degree by affinity and/or consanguinity"38 is lame. That the second paragraph was meant to give teeth to the first paragraph of the questioned rule39 is evidently not the valid reasonable business necessity required by the law. It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employees right to security of tenure. Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. 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 employees right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company.40 Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the legislatures silence41 that married persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and academic. As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that her resignation letter was written in her own handwriting. Both ruled that her resignation was voluntary and thus valid. The respondent court failed to categorically rule whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol and Comia.

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Estrella claims that she was pressured to submit a resignation letter because she was in dire need of money. We examined the records of the case and find Estrellas contention to be more in accord with the evidence. While findings of fact by administrative tribunals like the NLRC are generally given not only respect but, at times, finality, this rule admits of exceptions,42 as in the case at bar. Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her alleged immoral conduct. At first, she did not want to sign the termination papers but she was forced to tender her resignation letter in exchange for her thirteenth month pay. The contention of petitioners that Estrella was pressured to resign because she got impregnated by a married man and she could not stand being looked upon or talked about as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the employee is compelled by personal reason(s) to dissociate himself from employment. It is done with the intention of relinquishing an office, accompanied by the act of abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient evidence on the part of petitioners that the resignation was voluntary, Estrellas dismissal is declared illegal. IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004 isAFFIRMED.1avvphil.net SO ORDERED.
REYNATO S. PUNO Associate Justice

II. Recruitment and Placement of Workers (Local and Overseas)

Cases on Recruitment/Placement

Avelina F. Sagun v. Sunace International Management Services Inc., February 23, 2011.17
G.R. No. 179242 February 23, 2011 AVELINA F. SAGUN, Petitioner, vs. SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC., Respondent. RESOLUTION NACHURA, J.:

This is a Petition for Review on certiorari under Rule 45 of the Rules of Court, seeking to reverse and set aside the Court of Appeals (CA) Decision1 dated March 23, 2007 and Resolution2 dated August 16, 2007 in CA-G.R. SP No. 89298. The case arose from a complaint for alleged violation of Article 32 and Article 34(a) and (b) of the Labor Code, as amended, filed by petitioner Avelina F. Sagun against respondent Sunace International Management Services, Inc. and the latters surety, Country Bankers Insurance Corporation, before the Philippine Overseas Employment Administration (POEA). The case was docketed as POEA Case No. RV 00-03-0261.3 Petitioner claimed that sometime in August 1998, she applied with respondent for the position of caretaker in Taiwan. In consideration of her placement and employment, petitioner allegedly paid P30,000.00 cash,P10,000.00 in the form of a promissory note, and NT$60,000.00 through salary deduction, in violation of the prohibition on excessive placement fees. She also claimed that respondent promised to employ her as caretaker but, at the job site, she worked as a domestic helper and, at the same time, in a poultry farm.4 Respondent, however, denied petitioners allegations and maintained that it only collected P20,840.00, the amount authorized by the POEA and for which the corresponding official receipt was issued. It also stressed that it did not furnish or publish any false notice or information or document in relation to recruitment or employment as it was duly received, passed upon, and approved by the POEA.5 On December 27, 2001, POEA Administrator Rosalinda Dimapilis-Baldoz dismissed 6 the complaint for lack of merit. Specifically, the POEA Administrator found that petitioner failed to establish facts showing a violation of Article 32, since it was proven that the amount received by respondent as placement fee was covered by an official receipt; or of Article 34(a) as it was not shown that respondent charged excessive fees; and of Article 34(b) simply because respondent processed petitioners papers as caretaker, the position she applied and was hired for. Aggrieved, petitioner filed a Motion for Reconsideration7 with the Office of the Secretary of Labor. The Secretary treated the motion as a Petition for Review. On January 13, 2004, then Secretary of Labor Patricia A. Sto. Tomas partially granted 8 petitioners motion, the pertinent portion of which reads:

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WHEREFORE, premises considered, the Motion for Reconsideration, herein treated as a petition for review, is PARTIALLY GRANTED. The Order dated December 27, 2001 of the POEA Administrator is partially MODIFIED, and SUNACE International Management Services, Inc. is held liable for collection of excessive placement fee in violation of Article 34 (a) of the Labor Code, as amended. The penalty of suspension of its license for two (2) months, or in lieu thereof, the penalty of fine in the amount of Twenty Thousand Pesos (P20,000.00) is hereby imposed upon SUNACE. Further, SUNACE and its surety, Country Bankers Insurance Corporation, are ordered to refund the petitioner the amounts of Ten Thousand Pesos (P10,000.00) and NT$65,000.00, representing the excessive placement fee exacted from her. SO ORDERED.9 On appeal by respondent, the Office of the President (OP) affirmed10 the Order of the Secretary of Labor. In resolving the case for petitioner, the OP emphasized the States policy on the full protection to labor, local and overseas, organized and unorganized. It also held that it was impossible for respondent to have extended a loan to petitioner since it was not in the business of lending money. It likewise found it immaterial that no evidence was presented to show the overcharging since the issuance of a receipt could not be expected. Respondents motion for reconsideration was denied in an Order11 dated March 21, 2005, which prompted respondent to elevate the matter to the CA via a petition for review under Rule 43 of the Rules of Court. On March 23, 2007, the CA decided in favor of respondent, disposing, as follows: WHEREFORE, premises considered, the instant petition is GRANTED and the decision of the Office of the President dated 07 January 2005 is REVERSED and SET ASIDE for lack of sufficient evidence. The Order of the POEA Administrator dismissing the complaint of respondent for violation of Article 34(a) and (b) of the Labor Code is hereby AFFIRMED. SO ORDERED.12 The appellate court reversed the rulings of the Secretary of Labor and the OP mainly because their conclusions were based not on evidence but on speculation, conjecture, possibilities, and probabilities. Hence, this petition filed by petitioner, raising the sole issue of: WHETHER THE COURT OF APPEALS ERRED IN GRANTING THE RESPONDENTS PETITION FOR REVIEW REVERSING THE DECISION AND ORDER [OF THE] OFFICE OF THE PRESIDENT.13 The petition is without merit. Respondent was originally charged with violation of Article 32 and Article 34(a) and (b) of the Labor Code, as amended. The pertinent provisions read: ART. 32. Fees to be Paid by Workers. - Any person applying with a private fee charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through its efforts or has actually commenced employment. Such fee shall be always covered with the appropriate receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a schedule of allowable fees. ART. 34. Prohibited Practices. - It shall be unlawful for any individual, entity, licensee, or holder of authority: (a) To charge or accept, directly or indirectly, any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor; or to make a worker pay any amount greater than that actually received by him as a loan or advance; (b) To furnish or publish any false notice or information or document in relation to recruitment or employment. The POEA, the Secretary of Labor, the OP, and the CA already absolved respondent of liability under Articles 32 and 34(b). As no appeal was interposed by petitioner when the Secretary of Labor freed respondent of said liabilities, the only issue left for determination is whether respondent is liable for collection of excess placement fee defined in Article 34(a) of the Labor Code, as amended. Although initially, the POEA dismissed petitioners complaint for lack of merit, the Secretary of Labor and the OP reached a different conclusion. On appeal to the CA, the appellate court, however, reverted to the POEA conclusion. Following this turn of events, we are constrained to look into the records of the case and weigh anew the evidence presented by the parties.

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We find and so hold that the POEA and the CA are correct in dismissing the complaint for illegal exaction filed by petitioner against respondent. In proceedings before administrative and quasi-judicial agencies, the quantum of evidence required to establish a fact is substantial evidence, or that level of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.14 In this case, are the pieces of evidence presented by petitioner substantial to show that respondent collected from her more than the allowable placement fee? We answer in the negative. To show the amount it collected as placement fee from petitioner, respondent presented an acknowledgment receipt showing that petitioner paid and respondent received P20,840.00. This notwithstanding, petitioner claimed that she paid more than this amount. In support of her allegation, she presented a photocopy of a promissory note she executed, and testified on the purported deductions made by her foreign employer. In the promissory note, petitioner promised to pay respondent the amount of P10,000.00 that she borrowed for only two weeks.15Petitioner also explained that her foreign employer deducted from her salary a total amount of NT$60,000.00. She claimed that the P10,000.00 covered by the promissory note was never obtained as a loan but as part of the placement fee collected by respondent. Moreover, she alleged that the salary deductions made by her foreign employer still formed part of the placement fee collected by respondent. We are inclined to give more credence to respondents evidence, that is, the acknowledgment receipt showing the amount paid by petitioner and received by respondent. A receipt is a written and signed acknowledgment that money or goods have been delivered.16 Although a receipt is not conclusive evidence, an exhaustive review of the records of this case fails to disclose any other evidence sufficient and strong enough to overturn the acknowledgment embodied in respondents receipt as to the amount it actually received from petitioner. Having failed to adduce sufficient rebuttal evidence, petitioner is bound by the contents of the receipt issued by respondent. The subject receipt remains as the primary or best evidence.171avvphi1 The promissory note presented by petitioner cannot be considered as adequate evidence to show the excessive placement fee. It must be emphasized that a promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date and under the conditions agreed upon by the borrower and the lender. A person who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a token of his good faith. 18 Moreover, as held by the CA, the fact that respondent is not a lending company does not preclude it from extending a loan to petitioner for her personal use. As for the deductions purportedly made by petitioners foreign employer, we reiterate the findings of the CA that "there is no single piece of document or receipt showing that deductions have in fact been made, nor is there any proof that these deductions from the salary formed part of the subject placement fee."19 At this point, we would like to emphasize the well-settled rule that the factual findings of quasi-judicial agencies, like the POEA, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but at times even finality if such findings are supported by substantial evidence.20While the Constitution is committed to the policy of social justice and to the protection of the working class, it should not be presumed that every dispute will automatically be decided in favor of labor.21 To be sure, mere general allegations of payment of excessive placement fees cannot be given merit as the charge of illegal exaction is considered a grave offense which could cause the suspension or cancellation of the agencys license. They should be proven and substantiated by clear, credible, and competent evidence.22 WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated March 23, 2007 and Resolution dated August 16, 2007 in CA-G.R. SP No. 89298 are AFFIRMED. SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice

Serrano v. Gallant Maritime Services Inc. and Marlow Navigation Company Inc., March 24, 2009.18
G.R. No. 167614 March 24, 2009 ANTONIO M. SERRANO, Petitioner, vs. Gallant MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents. DECISION AUSTRIA-MARTINEZ, J.:

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For decades, the toil of solitary migrants has helped lift entire families and communities out of poverty. Their earnings have built houses, provided health care, equipped schools and planted the seeds of businesses. They have woven together the world by transmitting ideas and knowledge from country to country. They have provided the dynamic human link between cultures, societies and economies. Yet, only recently have we begun to understand not only how much international migration impacts development, but how smart public policies can magnify this effect. United Nations Secretary-General Ban Ki-Moon Global Forum on Migration and Development Brussels, July 10, 20071 For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10, Republic Act (R.A.) No. 8042,2 to wit: 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 twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. x x x x (Emphasis and underscoring supplied) does not magnify the contributions of overseas Filipino workers (OFWs) to national development, but exacerbates the hardships borne by them by unduly limiting their entitlement in case of illegal dismissal to their lump-sum salary either for the unexpired portion of their employment contract "or for three months for every year of the unexpired term, whichever is less" (subject clause). Petitioner claims that the last clause violates the OFWs' constitutional rights in that it impairs the terms of their contract, deprives them of equal protection and denies them due process. By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the December 8, 2004 Decision 3 and April 1, 2005 Resolution4 of the Court of Appeals (CA), which applied the subject clause, entreating this Court to declare the subject clause unconstitutional. Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd. (respondents) under a Philippine Overseas Employment Administration (POEA)-approved Contract of Employment with the following terms and conditions:
Duration of contract Position Basic monthly salary Hours of work Overtime Vacation leave with pay 12 months Chief Officer US$1,400.00 48.0 hours per week US$700.00 per month 7.00 days per month5

On March 19, 1998, the date of his departure, petitioner was constrained to accept a downgraded employment contract for the position of Second Officer with a monthly salary of US$1,000.00, upon the assurance and representation of respondents that he would be made Chief Officer by the end of April 1998.6 Respondents did not deliver on their promise to make petitioner Chief Officer.7 Hence, petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May 26, 1998.8 Petitioner's employment contract was for a period of 12 months or from March 19, 1998 up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two (2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months and twenty-three (23) days. Petitioner filed with the Labor Arbiter (LA) a Complaint9 against respondents for constructive dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down as follows:
May 27/31, 1998 (5 days) incl. Leave pay June 01/30, 1998 US$ 413.90 2,590.00

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July 01/31, 1998 August 01/31, 1998 Sept. 01/30, 1998 Oct. 01/31, 1998 Nov. 01/30, 1998 Dec. 01/31, 1998 Jan. 01/31, 1999 Feb. 01/28, 1999 Mar. 1/19, 1999 (19 days) incl. leave pay

2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00 1,640.00 -------------------------------------------------------------------------------25,382.23

Amount adjusted to chief mate's salary (March 19/31, 1998 to April 1/30, 1998) + 1,060.5010 --------------------------------------------------------------------------------------------TOTAL CLAIM US$ 26,442.7311

as well as moral and exemplary damages and attorney's fees. The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal and awarding him monetary benefits, to wit: WHEREFORE, premises considered, judgment is hereby rendered declaring that the dismissal of the complainant (petitioner) by the respondents in the above-entitled case was illegal and the respondents are hereby ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00), representing the complainants salary for three (3) months of the unexpired portion of the aforesaid contract of employment.1avvphi1 The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00),12 representing the complainants claim for a salary differential. In addition, the respondents are hereby ordered to pay the complainant, jointly and severally, in Philippine Currency, at the exchange rate prevailing at the time of payment, the complainants (petitioner's) claim for attorneys fees equivalent to ten percent (10%) of the total amount awarded to the aforesaid employee under this Decision. The claims of the complainant for moral and exemplary damages are hereby DISMISSED for lack of merit. All other claims are hereby DISMISSED. SO ORDERED.13 (Emphasis supplied) In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary period of three months only -- rather than the entire unexpired portion of nine months and 23 days of petitioner's employment contract - applying the subject clause. However, the LA applied the salary rate of US$2,590.00, consisting of petitioner's "[b]asic salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation leave pay = US$2,590.00/compensation per month."14 Respondents appealed15 to the National Labor Relations Commission (NLRC) to question the finding of the LA that petitioner was illegally dismissed.

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Petitioner also appealed16 to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations Commission17 that in case of illegal dismissal, OFWs are entitled to their salaries for the unexpired portion of their contracts.18 In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit: WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents are hereby ordered to pay complainant, jointly and severally, in Philippine currency, at the prevailing rate of exchange at the time of payment the following:
1. Three (3) months salary $1,400 x 3 2. Salary differential US$4,245.00 3. 10% Attorneys fees TOTAL 424.50 US$4,669.50 US$4,200.00 45.00

The other findings are affirmed. SO ORDERED.19 The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner 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."20 Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the constitutionality of the subject clause. 21 The NLRC denied the motion.22 Petitioner filed a Petition for Certiorari23 with the CA, reiterating the constitutional challenge against the subject clause.24 After initially dismissing the petition on a technicality, the CA eventually gave due course to it, as directed by this Court in its Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner. In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction of the applicable salary rate; however, the CA skirted the constitutional issue raised by petitioner.25 His Motion for Reconsideration26 having been denied by the CA,27 petitioner brings his cause to this Court on the following grounds: I The Court of Appeals and the labor tribunals have decided the case in a way not in accord with applicable decision of the Supreme Court involving similar issue of granting unto the migrant worker back wages equal to the unexpired portion of his contract of employment instead of limiting it to three (3) months II In the alternative that the Court of Appeals and the Labor Tribunals were merely applying their interpretation of Section 10 of Republic Act No. 8042, it is submitted that the Court of Appeals gravely erred in law when it failed to discharge its judicial duty to decide questions of substance not theretofore determined by the Honorable Supreme Court, particularly, the constitutional issues raised by the petitioner on the constitutionality of said law, which unreasonably, unfairly and arbitrarily limits payment of the award for back wages of overseas workers to three (3) months. III Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding from petitioners award the overtime pay and vacation pay provided in his contract since under the contract they form part of his salary.28

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On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already old and sickly, and he intends to make use of the monetary award for his medical treatment and medication.29 Required to comment, counsel for petitioner filed a motion, urging the court to allow partial execution of the undisputed monetary award and, at the same time, praying that the constitutional question be resolved.30 Considering that the parties have filed their respective memoranda, the Court now takes up the full merit of the petition mindful of the extreme importance of the constitutional question raised therein. On the first and second issues The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner in all three fora. What remains disputed is only the computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal. Applying the subject clause, the NLRC and the CA computed the lump-sum salary of petitioner at the monthly rate of US$1,400.00 covering the period of three months out of the unexpired portion of nine months and 23 days of his employment contract or a total of US$4,200.00. Impugning the constitutionality of the subject clause, petitioner contends that, in addition to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his employment contract, computed at the monthly rate of US$2,590.00.31 The Arguments of Petitioner Petitioner contends that the subject clause is unconstitutional because it unduly impairs the freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a determinate employment period and a fixed salary package.32 It also impinges on the equal protection clause, for it treats OFWs differently from local Filipino workers (local workers) by putting a cap on the amount of lumpsum salary to which OFWs are entitled in case of illegal dismissal, while setting no limit to the same monetary award for local workers when their dismissal is declared illegal; that the disparate treatment is not reasonable as there is no substantial distinction between the two groups;33 and that it defeats Section 18,34 Article II of the Constitution which guarantees the protection of the rights and welfare of all Filipino workers, whether deployed locally or overseas.35 Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in line with existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though there are conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of affected OFWs.36 Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042 serves no other purpose but to benefit local placement agencies. He marks the statement made by the Solicitor General in his Memorandum, viz.: Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino migrant workers, liability for money claims was reduced under Section 10 of R.A. No. 8042. 37(Emphasis supplied) Petitioner argues that in mitigating the solidary liability of placement agencies, the subject clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers better off than local employers because in cases involving the illegal dismissal of employees, foreign employers are liable for salaries covering a maximum of only three months of the unexpired employment contract while local employers are liable for the full lump-sum salaries of their employees. As petitioner puts it: In terms of practical application, the local employers are not limited to the amount of backwages they have to give their employees they have illegally dismissed, following well-entrenched and unequivocal jurisprudence on the matter. On the other hand, foreign employers will only be limited to giving the illegally dismissed migrant workers the maximum of three (3) months unpaid salaries notwithstanding the unexpired term of the contract that can be more than three (3) months.38 Lastly, petitioner claims that the subject clause violates the due process clause, for it deprives him of the salaries and other emoluments he is entitled to under his fixed-period employment contract.39 The Arguments of Respondents

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In their Comment and Memorandum, respondents contend that the constitutional issue should not be entertained, for this was belatedly interposed by petitioner in his appeal before the CA, and not at the earliest opportunity, which was when he filed an appeal before the NLRC.40 The Arguments of the Solicitor General The Solicitor General (OSG)41 points out that as R.A. No. 8042 took effect on July 15, 1995, its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A. No. 8042 having preceded petitioner's contract, the provisions thereof are deemed part of the minimum terms of petitioner's employment, especially on the matter of money claims, as this was not stipulated upon by the parties.42 Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature of their employment, such that their rights to monetary benefits must necessarily be treated differently. The OSG enumerates the essential elements that distinguish OFWs from local workers: first, while local workers perform their jobs within Philippine territory, OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to acquire jurisdiction, or against whom it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor Relations Commission43 and Millares v. National Labor Relations Commission,44 OFWs are contractual employees who can never acquire regular employment status, unlike local workers who are or can become regular employees. Hence, the OSG posits that there are rights and privileges exclusive to local workers, but not available to OFWs; that these peculiarities make for a reasonable and valid basis for the differentiated treatment under the subject clause of the money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal protection clause nor Section 18, Article II of the Constitution.45 Lastly, the OSG defends the rationale behind the subject clause as a police power measure adopted to mitigate the solidary liability of placement agencies for this "redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed and are employed under decent and humane conditions."46 The Court's Ruling The Court sustains petitioner on the first and second issues. When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as the Congress, it does so only when these conditions obtain: (1) that there is an actual case or controversy involving a conflict of rights susceptible of judicial determination;47 (2) that the constitutional question is raised by a proper party48 and at the earliest opportunity;49 and (3) that the constitutional question is the very lis mota of the case,50otherwise the Court will dismiss the case or decide the same on some other ground.51 Without a doubt, there exists in this case an actual controversy directly involving petitioner who is personally aggrieved that the labor tribunals and the CA computed his monetary award based on the salary period of three months only as provided under the subject clause. The constitutional challenge is also timely. It should be borne in mind that the requirement that a constitutional issue be raised at the earliest opportunity entails the interposition of the issue in the pleadings before acompetent court, such that, if the issue is not raised in the pleadings before that competent court, it cannot be considered at the trial and, if not considered in the trial, it cannot be considered on appeal.52 Records disclose that the issue on the constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but in his Motion for Partial Reconsideration with said labor tribunal,53 and reiterated in his Petition forCertiorari before the CA.54 Nonetheless, the issue is deemed seasonably raised because it is not the NLRC but the CA which has the competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a quasi-judicial function its function in the present case is limited to determining questions of fact to which the legislative policy of R.A. No. 8042 is to be applied and to resolving such questions in accordance with the standards laid down by the law itself; 55 thus, its foremost function is to administer and enforce R.A. No. 8042, and not to inquire into the validity of its provisions. The CA, on the other hand, is vested with the power of judicial review or the power to declare unconstitutional a law or a provision thereof, such as the subject clause.56Petitioner's interposition of the constitutional issue before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its decision. The third condition that the constitutional issue be critical to the resolution of the case likewise obtains because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his 12-month employment contract, and not just for a period of three months, strikes at the very core of the subject clause. Thus, the stage is all set for the determination of the constitutionality of the subject clause.

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Does the subject clause violate Section 10, Article III of the Constitution on non-impairment of contracts? The answer is in the negative. Petitioner's claim that the subject clause unduly interferes with the stipulations in his contract on the term of his employment and the fixed salary package he will receive57 is not tenable. Section 10, Article III of the Constitution provides: No law impairing the obligation of contracts shall be passed. The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation, 58and cannot affect acts or contracts already perfected;59 however, as to laws already in existence, their provisions are read into contracts and deemed a part thereof.60 Thus, the non-impairment clause under Section 10, Article II is limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention of the parties thereto. As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the execution of the employment contract between petitioner and respondents in 1998. Hence, it cannot be argued that R.A. No. 8042, particularly the subject clause, impaired the employment contract of the parties. Rather, when the parties executed their 1998 employment contract, they were deemed to have incorporated into it all the provisions of R.A. No. 8042. But even if the Court were to disregard the timeline, the subject clause may not be declared unconstitutional on the ground that it impinges on the impairment clause, for the law was enacted in the exercise of the police power of the State to regulate a business, profession or calling, particularly the recruitment and deployment of OFWs, with the noble end in view of ensuring respect for the dignity and well-being of OFWs wherever they may be employed.61 Police power legislations adopted by the State to promote the health, morals, peace, education, good order, safety, and general welfare of the people are generally applicable not only to future contracts but even to those already in existence, for all private contracts must yield to the superior and legitimate measures taken by the State to promote public welfare.62 Does the subject clause violate Section 1, Article III of the Constitution, and Section 18, Article II and Section 3, Article XIII on labor as a protected sector? The answer is in the affirmative. Section 1, Article III of the Constitution guarantees: No person shall be deprived of life, liberty, or property without due process of law nor shall any person be denied the equal protection of the law. Section 18,63 Article II and Section 3,64 Article XIII accord all members of the labor sector, without distinction as to place of deployment, full protection of their rights and welfare. To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to economic security and parity: all monetary benefits should be equally enjoyed by workers of similar category, while all monetary obligations should be borne by them in equal degree; none should be denied the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like circumstances.65 Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit, a system of classification into its legislation; however, to be valid, the classification must comply with these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class.66 There are three levels of scrutiny at which the Court reviews the constitutionality of a classification embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification needs only be shown to be rationally related to serving a legitimate state interest;67 b) the middle-tier or intermediate scrutiny in which the government must show that the challenged classification serves an important state interest and that the classification is at least substantially related to serving that interest; 68 and c) strict judicial

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scrutiny69 in which a legislative classification which impermissibly interferes with the exercise of a fundamental right70 or operates to the peculiar disadvantage of a suspect class71 is presumed unconstitutional, and the burden is upon the government to prove that the classification is necessary to achieve a compelling state interest and that it is the least restrictive means to protect such interest.72 Under American jurisprudence, strict judicial scrutiny is triggered by suspect classifications 73 based on race74 or gender75 but not when the classification is drawn along income categories.76 It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas,77 the constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been exempted from the SSL by their respective charters. Finding that the disputed provision contained a suspect classification based on salary grade, the Court deliberately employed the standard of strict judicial scrutiny in its review of the constitutionality of said provision. More significantly, it was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit: Congress retains its wide discretion in providing for a valid classification, and its policies should be accorded recognition and respect by the courts of justice except when they run afoul of the Constitution. The deference stops where the classification violates a fundamental right, or prejudices persons accorded special protection by the Constitution. When these violations arise, this Court must discharge its primary role as the vanguard of constitutional guaranties, and require a stricter and more exacting adherence to constitutional limitations. Rational basis should not suffice. Admittedly, the view that prejudice to persons accorded special protection by the Constitution requires a stricter judicial scrutiny finds no support in American or English jurisprudence. Nevertheless, these foreign decisions and authorities are not per se controlling in this jurisdiction. At best, they are persuasive and have been used to support many of our decisions. We should not place undue and fawning reliance upon them and regard them as indispensable mental crutches without which we cannot come to our own decisions through the employment of our own endowments. We live in a different ambience and must decide our own problems in the light of our own interests and needs, and of our qualities and even idiosyncrasies as a people, and always with our own concept of law and justice. Our laws must be construed in accordance with the intention of our own lawmakers and such intent may be deduced from the language of each law and the context of other local legislation related thereto. More importantly, they must be construed to serve our own public interest which is the be-all and the end-all of all our laws. And it need not be stressed that our public interest is distinct and different from others. xxxx Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of effective judicial intervention. Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The command to promote social justice in Article II, Section 10, in "all phases of national development," further explicitated in Article XIII, are clear commands to the State to take affirmative action in the direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal support for a more vigorous state effort towards achieving a reasonable measure of equality. Our present Constitution has gone further in guaranteeing vital social and economic rights to marginalized groups of society, including labor. Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification that those with less privilege in life should have more in law. And the obligation to afford protection to labor is incumbent not only on the legislative and executive branches but also on the judiciary to translate this pledge into a living reality. Social justice calls for the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. xxxx Under most circumstances, the Court will exercise judicial restraint in deciding questions of constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power. Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion would be given deferential treatment. But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of prejudice against persons favored by the Constitution with special protection, judicial scrutiny ought to be more strict. A weak and watered down view would call for the abdication of this Courts solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true whether the actor committing the unconstitutional act is a private person or the government itself or one of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the actor.

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xxxx In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee status. It is akin to a distinction based on economic class and status, with the higher grades as recipients of a benefit specifically withheld from the lower grades. Officers of the BSP now receive higher compensation packages that are competitive with the industry, while the poorer, low-salaried employees are limited to the rates prescribed by the SSL. The implications are quite disturbing: BSP rank-and-file employees are paid the strictly regimented rates of the SSL while employees higher in rank - possessing higher and better education and opportunities for career advancement - are given higher compensation packages to entice them to stay. Considering that majority, if not all, the rankand-file employees consist of people whose status and rank in life are less and limited, especially in terms of job marketability, it is they - and not the officers - who have the real economic and financial need for the adjustment . This is in accord with the policy of the Constitution "to free the people from poverty, provide adequate social services, extend to them a decent standard of living, and improve the quality of life for all." Any act of Congress that runs counter to this constitutional desideratum deserves strict scrutiny by this Court before it can pass muster. (Emphasis supplied) Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect classification prejudicial to OFWs. 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--vis OFWs with employment contracts ofone year or more; Second, among OFWs with employment contracts of more than one year; and Third, OFWs vis--vis local workers with fixed-period employment; OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts of one year or more As pointed out by petitioner,78 it was in Marsaman Manning Agency, Inc. v. National Labor Relations Commission79 (Second Division, 1999) that the Court laid down the following rules on the application of the periods prescribed under Section 10(5) of R.A. No. 804, 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. Ut res magis valeat quam pereat.80 (Emphasis supplied) In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract, but was awarded his salaries for the remaining 8 months and 6 days of his contract. Prior to Marsaman, however, there were two cases in which the Court made conflicting rulings on Section 10(5). One was Asian Center for Career and Employment System and Services v. National Labor Relations Commission(Second Division, October 1998),81 which involved an OFW who was awarded a two-year employment contract,but was dismissed after working for one year and two months. The LA declared his dismissal illegal and awarded him SR13,600.00 as lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the Court reduced the award to SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit: Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just, valid or authorized cause is entitled to his salary for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. In the case at bar, the unexpired portion of private respondents employment contract is eight (8) months. Private respondent should therefore be paid his basic salary corresponding to three (3) months or a total of SR3,600.82 Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission (Third Division, December 1998),83 which involved an OFW (therein respondent Erlinda Osdana) who was originally granted a 12-month contract, which was deemed renewed for

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another 12 months. After serving for one year and seven-and-a-half months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion of four and one-half months of her contract. The Marsaman interpretation of Section 10(5) has since been adopted in the following cases:
Case Title Contract Period Period of Service Unexpired Period Period Applied in the Computation of the Monetary Award 4 months 4 months

Skippers v. Maguad84 Bahia Shipping v. Reynaldo Chua 85 Centennial Transmarine v. dela Cruz l86 Talidano v. Falcon87 Univan v. CA88 Oriental v. CA89 PCL v. NLRC90 Olarte v. Nayona91 JSS v.Ferrer92 Pentagon v. Adelantar93 Phil. Employ v. Paramio, et al.94 Flourish Maritime v. Almanzor 95 Athenna Manpower v. Villanos 96

6 months 9 months

2 months 8 months

4 months 4 months

9 months

4 months

5 months

5 months

12 months 12 months 12 months 12 months 12 months 12 months 12 months

3 months 3 months more than 2 months more than 2 months 21 days 16 days 9 months and 7 days 10 months

9 months 9 months 10 months more or less 9 months 11 months and 9 days 11 months and 24 days 2 months and 23 days

3 months 3 months 3 months 3 months 3 months 3 months 2 months and 23 days

12 months

2 months

Unexpired portion

2 years

26 days

23 months and 4 days

6 months or 3 months for each year of contract 6 months or 3 months for each year of contract

1 year, 10 months and 28 days

1 month

1 year, 9 months and 28 days

As the foregoing matrix readily shows, the subject clause classifies OFWs into two categories. The first category includes OFWs with fixed-period employment contracts of less than one year; in case of illegal dismissal, they are entitled to their salaries for the entire unexpired portion of their contract. The second category consists of OFWs with fixed-period employment contracts of one year or more; in case of illegal dismissal, they are entitled to monetary award equivalent to only 3 months of the unexpired portion of their contracts. The disparity in the treatment of these two groups cannot be discounted. In Skippers, the respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his salaries for the remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who had also worked for about 2 months out of their 12-month contracts were awarded their salaries for only 3 months of the unexpired portion of their contracts. Even the OFWs involved in Talidano and Univan who had worked for a longer period of 3 months out of their 12-month contracts before being illegally dismissed were awarded their salaries for only 3 months. To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a hypothetical OFW-B with an employment contract of 15 months with the same monthly salary rate of US$1,000.00. Both commenced work on the same day and under the same employer, and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14 months of his contract, as the US$3,000.00 is the lesser amount. The disparity becomes more aggravating when the Court takes into account jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14, 1995,97 illegally dismissed OFWs, no matter how long the period of their employment contracts, were entitled to their salaries for the entire unexpired portions of their contracts. The matrix below speaks for itself:

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Case Title

Contract Period

Period of Service

Unexpired Period

Period Applied in the Computation of the Monetary Award 22 months 23 months and 23 days

ATCI v. CA, et al.98 Phil. Integrated v. NLRC99 JGB v. NLC100 Agoy v. NLRC101 EDI v. NLRC, et al.102 Barros v. NLRC, et al.103 Philippine Transmarine v. Carilla104

2 years 2 years

2 months 7 days

22 months 23 months and 23 days 15 months 22 months 19 months 8 months

2 years 2 years 2 years 12 months

9 months 2 months 5 months 4 months

15 months 22 months 19 months 8 months

12 months

6 months and 22 days

5 months and 18 days

5 months and 18 days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions thereof, were treated alike in terms of the computation of their monetary benefits in case of illegal dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries multiplied by the entire unexpired portion of their employment contracts. 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. Among OFWs With Employment Contracts of More Than One Year Upon closer examination of the terminology employed in the subject clause, the Court now has misgivings on the accuracy of the Marsaman interpretation. The Court notes that the subject clause "or for three (3) months for every year of the unexpired term, whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary meaning, the word "term" means a limited or definite extent of time.105 Corollarily, that "every year" is but part of an "unexpired term" is significant in many ways: first, the unexpired term must be at least one year, for if it were any shorter, there would be no occasion for such unexpired term to be measured by every year; and second, the original term must be more than one year, for otherwise, whatever would be the unexpired term thereof will not reach even a year. Consequently, the more decisive factor in the determination of when the subject clause "for three (3) months forevery year of the unexpired term, whichever is less" shall apply is not the length of the original contract period as held in Marsaman,106 but the length of the unexpired portion of the contract period -- the subject clause applies in cases when the unexpired portion of the contract period is at least one year, which arithmetically requires that the original contract period be more than one year. Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract periods are for more than one year: those who are illegally dismissed with less than one year left in their contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are illegally dismissed with one year or more remaining in their contracts shall be covered by the subject clause, and their monetary benefits limited to their salaries for three months only. To concretely illustrate the application of the foregoing interpretation of the subject clause, the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFW-D, on the 13th month. Considering that there is at least 12 months remaining in the contract period of OFW-C, the subject clause applies to the computation of the latter's monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired term of the contract. On the other hand, OFW-D is spared from the effects of the subject clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-month unexpired portion. OFWs vis--vis Local Workers With Fixed-Period Employment

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As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the monetary awards of illegally dismissed OFWs was in place. This uniform system was applicable even to local workers with fixed-term employment.107 The earliest rule prescribing a uniform system of computation was actually Article 299 of the Code of Commerce (1888),108 to wit: Article 299. If the contracts between the merchants and their shop clerks and employees should have been made of a fixed period, none of the contracting parties, without the consent of the other, may withdraw from the fulfillment of said contract until the termination of the period agreed upon. Persons violating this clause shall be subject to indemnify the loss and damage suffered, with the exception of the provisions contained in the following articles. In Reyes v. The Compaia Maritima,109 the Court applied the foregoing provision to determine the liability of a shipping company for the illegal discharge of its managers prior to the expiration of their fixed-term employment. The Court therein held the shipping company liable for the salaries of its managers for the remainder of their fixed-term employment. There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce which provides: Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven negligence. Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,110 in which the Court held the shipping company liable for the salaries and subsistence allowance of its illegally dismissed employees for the entire unexpired portion of their employment contracts. While Article 605 has remained good law up to the present,111 Article 299 of the Code of Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit: Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain work cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract. (Emphasis supplied.) Citing Manresa, the Court in Lemoine v. Alkan112 read the disjunctive "or" in Article 1586 as a conjunctive "and" so as to apply the provision to local workers who are employed for a time certain although for no particular skill. This interpretation of Article 1586 was reiterated in Garcia Palomar v. Hotel de France Company. 113 And in both Lemoine and Palomar, the Court adopted the general principle that in actions for wrongful discharge founded on Article 1586, local workers are entitled to recover damages to the extent of the amount stipulated to be paid to them by the terms of their contract. On the computation of the amount of such damages, the Court in Aldaz v. Gay114 held: The doctrine is well-established in American jurisprudence, and nothing has been brought to our attention to the contrary under Spanish jurisprudence, that when an employee is wrongfully discharged it is his duty to seek other employment of the same kind in the same community, for the purpose of reducing the damages resulting from such wrongful discharge. However, while this is the general rule, the burden of showing that he failed to make an effort to secure other employment of a like nature, and that other employment of a like nature was obtainable, is upon the defendant. When an employee is wrongfully discharged under a contract of employment his prima facie damage is the amount which he would be entitled to had he continued in such employment until the termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.)115 (Emphasis supplied) On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.116 Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code do not expressly provide for the remedies available to a fixed-term worker who is illegally discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,117 the Court carried over the principles on the payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a case involving the illegal discharge of a local worker whose fixed-period employment contract was entered into in 1952, when the new Civil Code was already in effect.118 More significantly, the same principles were applied to cases involving overseas Filipino workers whose fixed-term employment contracts were illegally terminated, such as in First Asian Trans & Shipping Agency, Inc. v. Ople, 119involving seafarers who were illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations Commission, 120 an OFW who was illegally dismissed prior to the expiration of her fixed-period employment contract as a baby sitter, was awarded salaries corresponding to the unexpired

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portion of her contract. The Court arrived at the same ruling in Anderson v. National Labor Relations Commission, 121 which involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine months on the job -the Court awarded him salaries corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment, Inc. v. National Labor Relations Commission,122 a Filipino working as a security officer in 1989 in Angola was awarded his salaries for the remaining period of his 12-month contract after he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations Commission,123 an OFW whose 12-month contract was illegally cut short in the second month was declared entitled to his salaries for the remaining 10 months of his contract. In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally discharged were treated alike in terms of the computation of their money claims: they were uniformly entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired portion of one year or more in their employment contract have since been differently treated in that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local workers with fixed-term employment. The Court concludes that the subject clause contains a suspect classification in that, in the computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixedterm employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage. There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling state interest through the least restrictive means. What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the Constitution and calibrated by history.124 It is akin to the paramount interest of the state 125 for which some individual liberties must give way, such as the public interest in safeguarding health or maintaining medical standards,126 or in maintaining access to information on matters of public concern.127 In the present case, the Court dug deep into the records but found no compelling state interest that the subject clause may possibly serve. The OSG defends the subject clause as a police power measure "designed to protect the employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic], Filipino seafarers have better chance of getting hired by foreign employers." The limitation also protects the interest of local placement agencies, which otherwise may be made to shoulder millions of pesos in "termination pay."128 The OSG explained further: Often, placement agencies, their liability being solidary, shoulder the payment of money claims in the event that jurisdiction over the foreign employer is not acquired by the court or if the foreign employer reneges on its obligation. Hence, placement agencies that are in good faith and which fulfill their obligations are unnecessarily penalized for the acts of the foreign employer. To protect them and to promote their continued helpful contribution in deploying Filipino migrant workers, liability for money are reduced under Section 10 of RA 8042. This measure redounds to the benefit of the migrant workers whose welfare the government seeks to promote. The survival of legitimate placement agencies helps [assure] the government that migrant workers are properly deployed and are employed under decent and humane conditions.129 (Emphasis supplied) However, nowhere in the Comment or Memorandum does the OSG cite the source of its perception of the state interest sought to be served by the subject clause. The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in sponsorship of House Bill No. 14314 (HB 14314), from which the law originated;130 but the speech makes no reference to the underlying reason for the adoption of the subject clause. That is only natural for none of the 29 provisions in HB 14314 resembles the subject clause. On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit: Sec. 10. Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of the complaint, the claim arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas employment including claims for actual, moral, exemplary and other forms of damages.

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The liability of the principal and the recruitment/placement agency or any and all claims under this Section shall be joint and several. Any compromise/amicable settlement or voluntary agreement on any money claims exclusive of damages under this Section shall not be less than fifty percent (50%) of such money claims: Provided, That any installment payments, if applicable, to satisfy any such compromise or voluntary settlement shall not be more than two (2) months. Any compromise/voluntary agreement in violation of this paragraph shall be null and void. Non-compliance with the mandatory period for resolutions of cases provided under this Section shall subject the responsible officials to any or all of the following penalties: (1) The salary of any such official who fails to render his decision or resolution within the prescribed period shall be, or caused to be, withheld until the said official complies therewith; (2) Suspension for not more than ninety (90) days; or (3) Dismissal from the service with disqualification to hold any appointive public office for five (5) years. Provided, however, That the penalties herein provided shall be without prejudice to any liability which any such official may have incurred under other existing laws or rules and regulations as a consequence of violating the provisions of this paragraph. But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of money claims. A rule on the computation of money claims containing the subject clause was inserted and eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the rationale of the subject clause in the transcripts of the "Bicameral Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314)." However, the Court finds no discernible state interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of the subject clause. In fine, the Government has failed to discharge its burden of proving the existence of a compelling state interest that would justify the perpetuation of the discrimination against OFWs under the subject clause. Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect the employment of OFWs by mitigating the solidary liability of placement agencies, such callous and cavalier rationale will have to be rejected. There can never be a justification for any form of government action that alleviates the burden of one sector, but imposes the same burden on another sector, especially when the favored sector is composed of private businesses such as placement agencies, while the disadvantaged sector is composed of OFWs whose protection no less than the Constitution commands. The idea that private business interest can be elevated to the level of a compelling state interest is odious. Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies vis-a-vis their foreign principals, there are mechanisms already in place that can be employed to achieve that purpose without infringing on the constitutional rights of OFWs. The POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures on erring foreign employers who default on their contractual obligations to migrant workers and/or their Philippine agents. These disciplinary measures range from temporary disqualification to preventive suspension. The POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary measures against erring foreign employers. Resort to these administrative measures is undoubtedly the less restrictive means of aiding local placement agencies in enforcing the solidary liability of their foreign principals. Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and other OFWs to equal protection.
1avvphi1

Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality of the subject clause from the lone perspective that the clause directly violates state policy on labor under Section 3,131Article XIII of the Constitution. While all the provisions of the 1987 Constitution are presumed self-executing,132 there are some which this Court has declared not judicially enforceable, Article XIII being one,133 particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor Relations Commission,134 has described to be not self-actuating:

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Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-executing in the sense that these are automatically acknowledged and observed without need for any enabling legislation. However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor against any form of removal regardless of circumstance. This interpretation implies an unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the parameters of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector, but of the employers' as well. Without specific and pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution. Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable rightto stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice require legislative enactments for their enforceability.135 (Emphasis added) Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable rights, for the violation of which the questioned clause may be declared unconstitutional. It may unwittingly risk opening the floodgates of litigation to every worker or union over every conceivable violation of so broad a concept as social justice for labor. It must be stressed that Section 3, Article XIII does not directly bestow on the working class any actual enforceable right, but merely clothes it with the status of a sector for whom the Constitution urges protection through executive or legislative action and judicial recognition. Its utility is best limited to being an impetus not just for the executive and legislative departments, but for the judiciary as well, to protect the welfare of the working class. And it was in fact consistent with that constitutional agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated the judicial precept that when the challenge to a statute is premised on the perpetuation of prejudice against persons favored by the Constitution with special protection -- such as the working class or a section thereof -- the Court may recognize the existence of a suspect classification and subject the same to strict judicial scrutiny. The view that the concepts of suspect classification and strict judicial scrutiny formulated in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a groundless apprehension. Central Bank applied Article XIII in conjunction with the equal protection clause. Article XIII, by itself, without the application of the equal protection clause, has no life or force of its own as elucidated in Agabon. Along the same line of reasoning, the Court further holds that the subject clause violates petitioner's right to substantive due process, for it deprives him of property, consisting of monetary benefits, without any existing valid governmental purpose.136 The argument of the Solicitor General, that the actual purpose of the subject clause of limiting the entitlement of OFWs to their threemonth salary in case of illegal dismissal, is to give them a better chance of getting hired by foreign employers. This is plain speculation. As earlier discussed, there is nothing in the text of the law or the records of the deliberations leading to its enactment or the pleadings of respondent that would indicate that there is an existing governmental purpose for the subject clause, or even just a pretext of one. 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 petitioner's right to equal protection, but also her right to substantive due process under Section 1, 137 Article III of the Constitution. The subject clause being unconstitutional, petitioner 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. On the Third Issue Petitioner contends that his overtime and leave pay should form part of the salary basis in the computation of his monetary award, because these are fixed benefits that have been stipulated into his contract. Petitioner is mistaken. The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any work "performed" on designated rest days and holidays.

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By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday pay in the computation of petitioner's monetary award, unless there is evidence that he performed work during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,138 However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in Cagampan v. National Labor Relations Commission, to wit: The rendition of overtime work and the submission of sufficient proof that said was actually performed are conditions to be satisfied before a seaman could be entitled to overtime pay which should be computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees the right to overtime pay but the entitlement to such benefit must first be established. In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted since the same is given during the actual service of the seamen. WHEREFORE, the Court GRANTS the Petition. The subject clause "or for three months for every year of the unexpired term, whichever is less" in the 5th paragraph of Section 10 of Republic Act No. 8042 is DECLAREDUNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his employment contract consisting of nine months and 23 days computed at the rate of US$1,400.00 per month. No costs. SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

Claudio S. Yap v. Thenamaris Ship Management and Intermare Marine Agencies Inc., May 30, 2011.19
G.R. No. 179532 May 30, 2011 CLAUDIO S. YAP, Petitioner, vs. THENAMARIS SHIP'S MANAGEMENT and INTERMARE MARITIME AGENCIES, INC., Respondents. DECISION NACHURA, J.:

Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA) Decision2 dated February 28, 2007, which affirmed with modification the National Labor Relations Commission (NLRC) resolution3 dated April 20, 2005. The undisputed facts, as found by the CA, are as follows: [Petitioner] Claudio S. Yap was employed as electrician of the vessel, M/T SEASCOUT on 14 August 2001 by Intermare Maritime Agencies, Inc. in behalf of its principal, Vulture Shipping Limited. The contract of employment entered into by Yap and Capt. Francisco B. Adviento, the General Manager of Intermare, was for a duration of 12 months. On 23 August 2001, Yap boarded M/T SEASCOUT and commenced his job as electrician. However, on or about 08 November 2001, the vessel was sold. The Philippine Overseas Employment Administration (POEA) was informed about the sale on 06 December 2001 in a letter signed by Capt. Adviento. Yap, along with the other crewmembers, was informed by the Master of their vessel that the same was sold and will be scrapped. They were also informed about the Advisory sent by Capt. Constatinou, which states, among others: " PLEASE ASK YR OFFICERS AND RATINGS IF THEY WISH TO BE TRANSFERRED TO OTHER VESSELS AFTER VESSEL S DELIVERY (GREEK VIA ATHENS-PHILIPINOS VIA MANILA FOR CREW NOT WISH TRANSFER TO DECLARE THEIR PROSPECTED TIME FOR REEMBARKATION IN ORDER TO SCHEDULE THEM ACCLY" Yap received his seniority bonus, vacation bonus, extra bonus along with the scrapping bonus. However, with respect to the payment of his wage, he refused to accept the payment of one-month basic wage. He insisted that he was entitled to the payment of the unexpired portion of his contract since he was illegally dismissed from employment. He alleged that he opted for immediate transfer but none was made.
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[Respondents], for their part, contended that Yap was not illegally dismissed. They alleged that following the sale of the M/T SEASCOUT, Yap signed off from the vessel on 10 November 2001 and was paid his wages corresponding to the months he worked or until 10 November 2001 plus his seniority bonus, vacation bonus and extra bonus. They further alleged that Yaps employment contract was validly terminated due to the sale of the vessel and no arrangement was made for Yaps transfer to Thenamaris other vessels.4 Thus, Claudio S. Yap (petitioner) filed a complaint for Illegal Dismissal with Damages and Attorneys Fees before the Labor Arbiter (LA). Petitioner claimed that he was entitled to the salaries corresponding to the unexpired portion of his contract. Subsequently, he filed an amended complaint, impleading Captain Francisco Adviento of respondents Intermare Maritime Agencies, Inc. (Intermare) and Thenamaris Ships Management (respondents), together with C.J. Martionos, Interseas Trading and Financing Corporation, and Vulture Shipping Limited/Stejo Shipping Limited. On July 26, 2004, the LA rendered a decision5 in favor of petitioner, finding the latter to have been constructively and illegally dismissed by respondents. Moreover, the LA found that respondents acted in bad faith when they assured petitioner of re-embarkation and required him to produce an electrician certificate during the period of his contract, but actually he was not able to board one despite of respondents numerous vessels. Petitioner made several follow-ups for his re-embarkation but respondents failed to heed his plea; thus, petitioner was forced to litigate in order to vindicate his rights. Lastly, the LA opined that since the unexpired portion of petitioners contract was less than one year, petitioner was entitled to his salaries for the unexpired portion of his contract for a period of nine months. The LA disposed, as follows: WHEREFORE, in view of the foregoing, a decision is hereby rendered declaring complainant to have been constructively dismissed. Accordingly, respondents Intermare Maritime Agency Incorporated, Thenamaris Ships Mgt., and Vulture Shipping Limited are ordered to pay jointly and severally complainant Claudio S. Yap the sum of $12,870.00 or its peso equivalent at the time of payment. In addition, moral damages of ONE HUNDRED THOUSAND PESOS (P100,000.00) and exemplary damages of FIFTY THOUSAND PESOS (P50,000.00) are awarded plus ten percent (10%) of the total award as attorneys fees. Other money claims are DISMISSED for lack of merit. SO ORDERED.6 Aggrieved, respondents sought recourse from the NLRC. In its decision7 dated January 14, 2005, the NLRC affirmed the LAs findings that petitioner was indeed constructively and illegally dismissed; that respondents bad faith was evident on their wilful failure to transfer petitioner to another vessel; and that the award of attorneys fees was warranted. However, the NLRC held that instead of an award of salaries corresponding to nine months, petitioner was only entitled to salaries for three months as provided under Section 108 of Republic Act (R.A.) No. 8042,9 as enunciated in our ruling in Marsaman Manning Agency, Inc. v. National Labor Relations Commission.10 Hence, the NLRC ruled in this wise: WHEREFORE, premises considered, the decision of the Labor Arbiter finding the termination of complainant illegal is hereby AFFIRMED with a MODIFICATION. Complainant[s] salary for the unexpired portion of his contract should only be limited to three (3) months basic salary. Respondents Intermare Maritime Agency, Inc.[,] Vulture Shipping Limited and Thenamaris Ship Management are hereby ordered to jointly and severally pay complainant, the following: 1. Three (3) months basic salary US$4,290.00 or its peso equivalent at the time of actual payment. 2. Moral damages P100,000.00 3. Exemplary damages P50,000.00 4. Attorneys fees equivalent to 10% of the total monetary award. SO ORDERED.11 Respondents filed a Motion for Partial Reconsideration,12 praying for the reversal and setting aside of the NLRC decision, and that a new one be rendered dismissing the complaint. Petitioner, on the other hand, filed his own Motion for Partial Reconsideration,13 praying that he be paid the nine (9)-month basic salary, as awarded by the LA. On April 20, 2005, a resolution14 was rendered by the NLRC, affirming the findings of Illegal Dismissal and respondents failure to transfer petitioner to another vessel. However, finding merit in petitioners arguments, the NLRC reversed its earlier Decision, holding

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that "there can be no choice to grant only three (3) months salary for every year of the unexpired term because there is no full year of unexpired term which this can be applied." Hence WHEREFORE, premises considered, complainants Motion for Partial Reconsideration is hereby granted. The award of three (3) months basic salary in the sum of US$4,290.00 is hereby modified in that complainant is entitled to his salary for the unexpired portion of employment contract in the sum of US$12,870.00 or its peso equivalent at the time of actual payment. All aspect of our January 14, 2005 Decision STANDS. SO ORDERED.15 Respondents filed a Motion for Reconsideration, which the NLRC denied. Undaunted, respondents filed a petition for certiorari16 under Rule 65 of the Rules of Civil Procedure before the CA. On February 28, 2007, the CA affirmed the findings and ruling of the LA and the NLRC that petitioner was constructively and illegally dismissed. The CA held that respondents failed to show that the NLRC acted without statutory authority and that its findings were not supported by law, jurisprudence, and evidence on record. Likewise, the CA affirmed the lower agencies findings that the advisory of Captain Constantinou, taken together with the other documents and additional requirements imposed on petitioner, only meant that the latter should have been re-embarked. In the same token, the CA upheld the lower agencies unanimous finding of bad faith, warranting the imposition of moral and exemplary damages and attorneys fees. However, the CA ruled that the NLRC erred in sustaining the LAs interpretation of Section 10 of R.A. No. 8042. In this regard, the CA relied on the clause "or for three months for every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section 10 of R.A. No. 8042 and held: In the present case, the employment contract concerned has a term of one year or 12 months which commenced on August 14, 2001. However, it was preterminated without a valid cause. [Petitioner] was paid his wages for the corresponding months he worked until the 10th of November. Pursuant to the provisions of Sec. 10, [R.A. No.] 8042, therefore, the option of "three months for every year of the unexpired term" is applicable.17 Thus, the CA provided, to wit: WHEREFORE, premises considered, this Petition for Certiorari is DENIED. The Decision dated January 14, 2005, and Resolutions, dated April 20, 2005 and July 29, 2005, respectively, of public respondent National Labor Relations Commission-Fourth Division, Cebu City, in NLRC No. V-000038-04 (RAB VIII (OFW)-04-01-0006) are hereby AFFIRMED with the MODIFICATION that private respondent is entitled to three (3) months of basic salary computed at US$4,290.00 or its peso equivalent at the time of actual payment. Costs against Petitioners.18 Both parties filed their respective motions for reconsideration, which the CA, however, denied in its Resolution19dated August 30, 2007. Unyielding, petitioner filed this petition, raising the following issues: 1) Whether or not Section 10 of R.A. [No.] 8042, to the extent that it affords an illegally dismissed migrant worker the lesser benefit of "salaries for [the] unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less" is constitutional; and 2) Assuming that it is, whether or not the Court of Appeals gravely erred in granting petitioner only three (3) months backwages when his unexpired term of 9 months is far short of the "every year of the unexpired term" threshold.20 In the meantime, while this case was pending before this Court, we declared as unconstitutional the clause "or for three months for every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section 10 of R.A. No. 8042 in the case of Serrano v. Gallant Maritime Services, Inc.21 on March 24, 2009. Apparently, unaware of our ruling in Serrano, petitioner claims that the 5th paragraph of Section 10, R.A. No. 8042, is violative of Section 1,22 Article III and Section 3,23 Article XIII of the Constitution to the extent that it gives an erring employer the option to pay an illegally dismissed migrant worker only three months for every year of the unexpired term of his contract; that said provision of law has long been a source of abuse by callous employers against migrant workers; and that said provision violates the equal protection clause under the Constitution because, while illegally dismissed local workers are guaranteed under the Labor Code of reinstatement with full backwages computed from the time compensation was withheld from them up to their actual reinstatement, migrant workers, by virtue of Section 10 of R.A. No. 8042, have to waive nine months of their collectible backwages every time they have a year of unexpired term of contract to reckon with. Finally, petitioner posits that, assuming said provision of law is constitutional, the CA gravely abused its

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discretion when it reduced petitioners backwages from nine months to three months as his nine-month unexpired term cannot accommodate the lesser relief of three months for every year of the unexpired term.24 On the other hand, respondents, aware of our ruling in Serrano, aver that our pronouncement of unconstitutionality of the clause "or for three months for every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section 10 of R.A. No. 8042 in Serrano should not apply in this case because Section 10 of R.A. No. 8042 is a substantive law that deals with the rights and obligations of the parties in case of Illegal Dismissal of a migrant worker and is not merely procedural in character. Thus, pursuant to the Civil Code, there should be no retroactive application of the law in this case. Moreover, respondents asseverate that petitioners tanker allowance of US$130.00 should not be included in the computation of the award as petitioners basic salary, as provided under his contract, was only US$1,300.00. Respondents submit that the CA erred in its computation since it included the said tanker allowance. Respondents opine that petitioner should be entitled only to US$3,900.00 and not to US$4,290.00, as granted by the CA. Invoking Serrano, respondents claim that the tanker allowance should be excluded from the definition of the term "salary." Also, respondents manifest that the full sum of P878,914.47 in Intermares bank account was garnished and subsequently withdrawn and deposited with the NLRC Cashier of Tacloban City on February 14, 2007. On February 16, 2007, while this case was pending before the CA, the LA issued an Order releasing the amount of P781,870.03 to petitioner as his award, together with the sum of P86,744.44 to petitioners former lawyer as attorneys fees, and the amount of P3,570.00 as execution and deposit fees. Thus, respondents pray that the instant petition be denied and that petitioner be directed to return to Intermare the sum of US$8,970.00 or its peso equivalent.25 On this note, petitioner counters that this new issue as to the inclusion of the tanker allowance in the computation of the award was not raised by respondents before the LA, the NLRC and the CA, nor was it raised in respondents pleadings other than in their Memorandum before this Court, which should not be allowed under the circumstances.26 The petition is impressed with merit. Prefatorily, it bears emphasis that the unanimous finding of the LA, the NLRC and the CA that the dismissal of petitioner was illegal is not disputed. Likewise not disputed is the tribunals unanimous finding of bad faith on the part of respondents, thus, warranting the award of moral and exemplary damages and attorneys fees. What remains in issue, therefore, is the constitutionality of the 5th paragraph of Section 10 of R.A. No. 8042 and, necessarily, the proper computation of the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal. Verily, we have already declared in Serrano that the clause "or for three months for every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section 10 of R.A. No. 8042 is unconstitutional for being violative of the rights of Overseas Filipino Workers (OFWs) to equal protection of the laws. In an exhaustive discussion of the intricacies and ramifications of the said clause, this Court, in Serrano, pertinently held: 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.27 Moreover, this Court held therein that the subject clause does not state or imply any definitive governmental purpose; hence, the same violates not just therein petitioners right to equal protection, but also his right to substantive due process under Section 1, Article III of the Constitution.28 Consequently, petitioner therein was accorded 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. We have already spoken. Thus, this case should not be different from Serrano. As a general rule, an unconstitutional act 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 general rule is supported by Article 7 of the Civil Code, which provides: Art. 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary. The doctrine of operative fact serves as an exception to the aforementioned general rule. In Planters Products, Inc. v. Fertiphil Corporation,29 we held: The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to a determination of unconstitutionality is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration.

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The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden on those who have relied on the invalid law. Thus, it was applied to a criminal case when a declaration of unconstitutionality would put the accused in double jeopardy or would put in limbo the acts done by a municipality in reliance upon a law creating it.30 Following Serrano, we hold that this case should not be included in the aforementioned exception. After all, it was not the fault of petitioner that he lost his job due to an act of illegal dismissal committed by respondents. To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in effect, send a wrong signal that principals/employers and recruitment/manning agencies may violate an OFWs security of tenure which an employment contract embodies and actually profit from such violation based on an unconstitutional provision of law. In the same vein, we cannot subscribe to respondents postulation that the tanker allowance of US$130.00 should not be included in the computation of the lump-sum salary to be awarded to petitioner. First. It is only at this late stage, more particularly in their Memorandum, that respondents are raising this issue. It was not raised before the LA, the NLRC, and the CA. They did not even assail the award accorded by the CA, which computed the lump-sum salary of petitioner at the basic salary of US$1,430.00, and which clearly included the US$130.00 tanker allowance. Hence, fair play, justice, and due process dictate that this Court cannot now, for the first time on appeal, pass upon this question. Matters not taken up below cannot be raised for the first time on appeal. They must be raised seasonably in the proceedings before the lower tribunals. Questions raised on appeal must be within the issues framed by the parties; consequently, issues not raised before the lower tribunals cannot be raised for the first time on appeal.311avvphi1 Second. Respondents invocation of Serrano is unavailing. Indeed, we made the following pronouncements in Serrano, to wit: The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation for all work "performed" in excess of the regular eight hours, and holiday pay is compensation for any work "performed" on designated rest days and holidays.32 A close perusal of the contract reveals that the tanker allowance of US$130.00 was not categorized as a bonus but was rather encapsulated in the basic salary clause, hence, forming part of the basic salary of petitioner. Respondents themselves in their petition for certiorari before the CA averred that petitioners basic salary, pursuant to the contract, was "US$1,300.00 + US$130.00 tanker allowance."33 If respondents intended it differently, the contract per se should have indicated that said allowance does not form part of the basic salary or, simply, the contract should have separated it from the basic salary clause. A final note. We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte v. Nayona,34 this Court held that: Our overseas workers belong to a disadvantaged class. Most of them come from the poorest sector of our society. Their profile shows they live in suffocating slums, trapped in an environment of crimes. Hardly literate and in ill health, their only hope lies in jobs they find with difficulty in our country. Their unfortunate circumstance makes them easy prey to avaricious employers. They will climb mountains, cross the seas, endure slave treatment in foreign lands just to survive. Out of despondence, they will work under sub-human conditions and accept salaries below the minimum. The least we can do is to protect them with our laws. WHEREFORE, the Petition is GRANTED. The Court of Appeals Decision dated February 28, 2007 and Resolution dated August 30, 2007 are hereby MODIFIED to the effect that petitioner is AWARDED his salaries for the entire unexpired portion of his employment contract consisting of nine months computed at the rate of US$1,430.00 per month. All other awards are hereby AFFIRMED. No costs. SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice

Skippers United Pacific Inc. et. Al. v. Doza et. Al., February 8, 2012.20
G.R. No. 175558 February 8, 2012 SKIPPERS UNITED PACIFIC, INC. and SKIPPERS MARITIME SERVICES, INC., LTD., Petitioners, vs. NATHANIEL DOZA, NAPOLEON DE GRACIA, ISIDRO L. LATA, and CHARLIE APROSTA, Respondents. DECISION CARPIO, J.:
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The Case This is a Petition for Review under Rule 45 assailing the 5 July 2006 Decision 1 and 7 November 2006 Resolution2of the Court of Appeals in CA-G.R. SP No. 88148.3 This arose from consolidated labor case4 filed by seafarers Napoleon De Gracia (De Gracia), Isidro L. Lata (Lata), Charlie Aprosta (Aprosta), and Nathaniel Doza (Doza) against local manning agency Skippers United Pacific, Inc. and its foreign principal, Skippers Maritime Services, Inc., Ltd. (Skippers) for unremitted home allotment for the month of December 1998, salaries for the unexpired portion of their employment contracts, moral damages, exemplary damages, and attorneys fees. Skippers, on the other hand, answered with a claim for reimbursement of De Gracia, Aprosta and Latas repatriation expenses, as well as award of moral damages and attorneys fees. De Gracia, Lata, Aprosta and Dozas (De Gracia, et al.) claims were dismissed by the Labor Arbiter for lack of merit. 5 The Labor Arbiter also dismissed Skippers claims.6 De Gracia, et al. appealed7 the Labor Arbiters decision with the National Labor Relations Commission (NLRC), but the First Division of the NLRC dismissed the appeal for lack of merit. 8 Doza, et al.s Motion for Reconsideration was likewise denied by the NLRC,9 so they filed a Petition for Certiorari with the Court of Appeals (CA).10 The CA granted the petition, reversed the Labor Arbiter and NLRC Decisions, and awarded to De Gracia, Lata and Aprosta their unremitted home allotment, three months salary each representing the unexpired portion of their employment contracts and attorneys fees.11 No award was given to Doza for lack of factual basis.12 The CA denied Skippers Motion for Partial Reconsideration.13 Hence, this Petition. The Facts

Skippers United Pacific, Inc. deployed, in behalf of Skippers, De Gracia, Lata, and Aprosta to work on board the vessel MV Wisdom Star, under the following terms and conditions:

Name Position Contract Duration Basic Monthly Salary Contract Date

: : : : :

Napoleon O. De Gracia 3rd Engineer 10 months US$800.00 17 July 199814

Name Position Contract Duration Basic Monthly Salary Contract Date

: : : : :

Isidro L. Lata 4th Engineer 12 months US$600.00 17 April 199815

Name Position Contract Duration Basic Monthly Salary Contract Date

: : : : :

Charlie A. Aprosta Third Officer 12 months US$600.00 17 April 199816

Paragraph 2 of all the employment contracts stated that: "The terms and conditions of the Revised Employment Contract Governing the Employment of All Seafarers approved per Department Order No. 33 and Memorandum Circular No. 55, both series of 1996 shall be strictly and faithfully observed."17 No employment contract was submitted for Nathaniel Doza.

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De Gracia, et al. claimed that Skippers failed to remit their respective allotments for almost five months, compelling them to air their grievances with the Romanian Seafarers Free Union.18 On 16 December 1998, ITF Inspector Adrian Mihalcioiu of the Romanian Seafarers Union sent Captain Savvas of Cosmos Shipping a fax letter, relaying the complaints of his crew, namely: home allotment delay, unpaid salaries (only advances), late provisions, lack of laundry services (only one washing machine), and lack of maintenance of the vessel (perforated and unrepaired deck).19 To date, however, Skippers only failed to remit the home allotment for the month of December 1998.20On 28 January 1999, De Gracia, et al. were unceremoniously discharged from MV Wisdom Stars and immediately repatriated.21 Upon arrival in the Philippines, De Gracia, et al. filed a complaint for illegal dismissal with the Labor Arbiter on 4 April 1999 and prayed for payment of their home allotment for the month of December 1998, salaries for the unexpired portion of their contracts, moral damages, exemplary damages, and attorneys fees.22 Skippers, on the other hand, claims that at around 2:00 a.m. on 3 December 1998, De Gracia, smelling strongly of alcohol, went to the cabin of Gabriel Oleszek, Master of MV Wisdom Stars, and was rude, shouting noisily to the master. 23 De Gracia left the masters cabin after a few minutes and was heard shouting very loudly somewhere down the corridors.24 This incident was evidenced by the Captains Report sent via telex to Skippers on said date.25 Skippers also claims that at 12:00 noon on 22 January 1999, four Filipino seafarers, namely Aprosta, De Gracia, Lata and Doza, arrived in the masters cabin and demanded immediate repatriation because they were not satisfied with the ship.26 De Gracia, et al. threatened that they may become crazy any moment and demanded for all outstanding payments due to them.27 This is evidenced by a telex of Cosmoship MV Wisdom to Skippers, which however bears conflicting dates of 22 January 1998 and 22 January 1999.28 Skippers also claims that, due to the disembarkation of De Gracia, et al., 17 other seafarers disembarked under abnormal circumstsances.29 For this reason, it was suggested that Polish seafarers be utilized instead of Filipino seamen. 30 This is again evidenced by a fax of Cosmoship MV Wisdom to Skippers, which bears conflicting dates of 24 January 1998 and 24 January 1999.31 Skippers, in its Position Paper, admitted non-payment of home allotment for the month of December 1998, but prayed for the offsetting of such amount with the repatriation expenses in the following manner:32
Seafarer De Gracia Aprosta Lata Repatriation Expense US$1,340.00 US$1,340.00 US$1,340.00 Home Allotment US$900.00 US$600.00 US$600.00 Balance US$440.00 US$740.00 US$740.00

Since De Gracia, et al. pre-terminated their contracts, Skippers claims they are liable for their repatriation expenses33 in accordance with Section 19(G) of Philippine Overseas Employment Administration (POEA) Memorandum Circular No. 55, series of 1996 which states: G. A seaman who requests for early termination of his contract shall be liable for his repatriation cost as well as the transportation cost of his replacement. The employer may, in case of compassionate grounds, assume the transportation cost of the seafarers replacement. Skippers also prayed for payment of moral damages and attorneys fees.34 The Decision of the Labor Arbiter The Labor Arbiter rendered his Decision on 18 February 2002, with its dispositive portion declaring: WHEREFORE, judgment is hereby rendered dismissing herein action for lack of merit. Respondents claim for reimbursement of the expenses they incurred in the repatriation of complainant Nathaniel Doza is likewise dismissed. SO ORDERED.35 The Labor Arbiter dismissed De Gracia, et al.s complaint for illegal dismissal because the seafarers voluntarily pre-terminated their employment contracts by demanding for immediate repatriation due to dissatisfaction with the ship.36 The Labor Arbiter held that such voluntary pre-termination of employment contract is akin to resignation,37a form of termination by employee of his employment contract under Article 285 of the Labor Code. The Labor Arbiter gave weight and credibility to the telex of the master of the vessel to Skippers, claiming that De Gracia, et al. demanded for immediate repatriation. 38 Due to the absence of illegal dismissal, De Gracia, et. al.s claim for salaries representing the unexpired portion of their employment contracts was dismissed.39

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The Labor Arbiter also dismissed De Gracia et al.s claim for home allotment for December 1998.40 The Labor Arbiter explained that payment for home allotment is "in the nature of extraordinary money where the burden of proof is shifted to the worker who must prove he is entitled to such monetary benefit."41 Since De Gracia, et al. were not able to prove their entitlement to home allotment, such claim was dismissed.42 Lastly, Skippers claim for reimbursement of repatriation expenses was likewise denied, since Article 19(G) of POEA Memorandum Circular No. 55, Series of 1996 allows the employer, in case the seafarer voluntarily pre-terminates his contract, to assume the repatriation cost of the seafarer on compassionate grounds.43 The Decision of the NLRC The NLRC, on 28 October 2002, dismissed De Gracia, et al.s appeal for lack of merit and affirmed the Labor Arbiters decision.44 The NLRC considered De Gracia, et al.s claim for home allotment for December 1998 unsubstantiated, since home allotment is a benefit which De Gracia, et al. must prove their entitlement to.45 The NLRC also denied the claim for illegal dismissal because De Gracia, et al. were not able to refute the telex received by Skippers from the vessels master that De Gracia, et al. voluntarily pre-terminated their contracts and demanded immediate repatriation due to their dissatisfaction with the ships operations.46 The Decision of the Court of Appeals The CA, on 5 July 2006, granted De Gracia, et al.s petition and reversed the decisions of the Labor Arbiter and NLRC, its dispositive portion reading as follows: WHEREFORE, the instant petition for certiorari is GRANTED. The Resolution dated October 28, 2002 and the Order dated August 31, 2004 rendered by the public respondent NLRC are ANNULLED and SET ASIDE. Let another judgment be entered holding private respondents jointly and severally liable to petitioners for the payment of: 1. Unremitted home allotment pay for the month of December, 1998 or the equivalent thereof in Philippine pesos: a. De Gracia = US$900.00 b. Lata = US$600.00 c. Aprosta = US$600.00 2. Salary for the unexpired portion of the employment contract or for 3 months for every year of the unexpired term, whichever is less, or the equivalent thereof in Philippine pesos: a. De Gracia = US$2,400.00 b. Lata = US$1,800.00 c. Aprosta = US$1,800.00 3. Attorneys fees and litigation expenses equivalent to 10% of the total claims. SO ORDERED.47 The CA declared the Labor Arbiter and NLRC to have committed grave abuse of discretion when they relied upon the telex message of the captain of the vessel stating that De Gracia, et al. voluntarily pre-terminated their contracts and demanded immediate repatriation.48 The telex message was "a self-serving document that does not satisfy the requirement of substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify the conclusion that petitioners indeed voluntarily demanded their immediate repatriation."49 For this reason, the repatriation of De Gracia, et al. prior to the expiration of their contracts showed they were illegally dismissed from employment.50 In addition, the failure to remit home allotment pay was effectively admitted by Skippers, and prayed to be offset from the repatriation expenses.51 Since there is no proof that De Gracia, et al. voluntarily pre-terminated their contracts, the repatriation expenses are for the account of Skippers, and cannot be offset with the home allotment pay for December 1998.52

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No relief was granted to Doza due to lack of factual basis to support his petition. 53 Attorneys fees equivalent to 10% of the total claims was granted since it involved an action for recovery of wages or where the employee was forced to litigate and incur expenses to protect his rights and interest.54 The Issues Skippers, in its Petition for Review on Certiorari, assigned the following errors in the CA Decision: a) The Court of Appeals seriously erred in not giving due credence to the masters telex message showing that the respondents voluntarily requested to be repatriated. b) The Court of Appeals seriously erred in finding petitioners liable to pay backwages and the alleged unremitted home allotment pay despite the finding of the Labor Arbiter and the NLRC that the claims are baseless. c) The Court of Appeals seriously erred in awarding attorneys fees in favor of respondents despite its findings that the facts attending in this case do not support the claim for moral and exemplary damages.55 The Ruling of this Court We deny the petition and affirm the CA Decision, but modify the award. For a workers dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive due process.56 Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first notice apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the employee of the employers decision to dismiss him. Before the issuance of the second notice, the requirement of a hearing must be complied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be conducted.57 Substantive due process, on the other hand, requires that dismissal by the employer be made under a just or authorized cause under Articles 282 to 284 of the Labor Code. In this case, there was no written notice furnished to De Gracia, et al. regarding the cause of their dismissal. Cosmoship furnished a written notice (telex) to Skippers, the local manning agency, claiming that De Gracia, et al. were repatriated because the latter voluntarily pre-terminated their contracts. This telex was given credibility and weight by the Labor Arbiter and NLRC in deciding that there was pre-termination of the employment contract "akin to resignation" and no illegal dismissal. However, as correctly ruled by the CA, the telex message is "a biased and self-serving document that does not satisfy the requirement of substantial evidence." If, indeed, De Gracia, et al. voluntarily pre-terminated their contracts, then De Gracia, et al. should have submitted their written resignations. Article 285 of the Labor Code recognizes termination by the employee of the employment contract by "serving written notice on the employer at least one (1) month in advance." Given that provision, the law contemplates the requirement of a written notice of resignation. In the absence of a written resignation, it is safe to presume that the employer terminated the seafarers. In addition, the telex message relied upon by the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and 22 January 1999, giving doubt to the veracity and authenticity of the document. In 22 January 1998, De Gracia, et al. were not even employed yet by the foreign principal. For these reasons, the dismissal of De Gracia, et al. was illegal. On the issue of home allotment pay, Skippers effectively admitted non-remittance of home allotment pay for the month of December 1998 in its Position Paper. Skippers sought the repatriation expenses to be offset with the home allotment pay. However, since De Gracia, et al.s dismissal was illegal, their repatriation expenses were for the account of Skippers and could not be offset with the home allotment pay. Contrary to the claim of the Labor Arbiter and NLRC that the home allotment pay is in "the nature of extraordinary money where the burden of proof is shifted to the worker who must prove he is entitled to such monetary benefit," Section 8 of POEA Memorandum Circular No. 55, series of 1996, states that the allotment actually constitutes at least eighty percent (80%) of the seafarers salary: The seafarer is required to make an allotment which is payable once a month to his designated allottee in the Philippines through any authorized Philippine bank. The master/employer/agency shall provide the seafarer with facilities to do so at no expense to the seafarer. The allotment shall be at least eighty percent (80%) of the seafarers monthly basic salary including backwages, if any. (Emphasis supplied)

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Paragraph 2 of the employment contracts of De Gracia, Lata and Aprosta incorporated the provisions of above Memorandum Circular No. 55, series of 1996, in the employment contracts. Since said memorandum states that home allotment of seafarers actually constitutes at least eighty percent (80%) of their salary, home allotment pay is not in the nature of an extraordinary money or benefit, but should actually be considered as salary which should be paid for services rendered. For this reason, such non-remittance of home allotment pay should be considered as unpaid salaries, and Skippers shall be liable to pay the home allotment pay of De Gracia, et al. for the month of December 1998. Damages
As admitted by Skippers in its Position Paper, the home allotment pay for December 1998 due to De Gracia, Lata and Aprosta is: Seafarer De Gracia Aprosta Lata Home Allotment Pay US$900.00 US$600.00 US$600.00

The monthly salary of De Gracia, according to his employment contract, is only US$800.00. However, since Skippers admitted in its Position Paper a higher home allotment pay for De Gracia, we award the higher amount of home allotment pay for De Gracia in the amount of US$900.00. Since the home allotment pay can be considered as unpaid salaries, the peso equivalent of the dollar amount should be computed using the prevailing rate at the time of termination since it was due and demandable to De Gracia, et al. on 28 January 1999. Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims in cases of unjust termination of employment contracts: 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 twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. The Migrant Workers Act provides that salaries for the unexpired portion of the employent contract or three (3) months for every year of the unexpired term, whichever is less, shall be awarded to the overseas Filipino worker, in cases of illegal dismissal. However, in 24 March 2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co. Inc.,58 the Court, in an En Banc Decision, declared unconstitutional the clause "or for three months for every year of the unexpired term, whichever is less" and awarded the entire unexpired portion of the employment contract to the overseas Filipino worker. On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended Section 10 of the Migrant Workers Act, and once again reiterated the provision of awarding the unexpired portion of the employent contract or three (3) months for every year of the unexpired term, whichever is less. Nevertheless, since the termination occurred on January 1999 before the passage of the amendatory RA 10022, we shall apply RA 8042, as unamended, without touching on the constitutionality of Section 7 of RA 10022. The declaration in March 2009 of the unconstitutionality of the clause "or for three months for every year of the unexpired term, whichever is less" in RA 8042 shall be given retroactive effect to the termination that occurred in January 1999 because an unconstitutional clause in the law confers no rights, imposes no duties and affords no protection. The unconstitutional provision is inoperative, as if it was not passed into law at all.59 As such, we compute the claims as follows: Seafarer De Gracia Lata Aprosta Contract Term 10 months 12 months 12 months Contract Date 17 Jul. 1998 17 Apr. 1998 17 Apr. 1998 Repatriation Date 28 Jan. 1999 28 Jan. 1999 28 Jan. 1999 Unexpired Term 3 months & 20 days 2 months & 20 days 2 months & 20 days Monthly Salary US$800 US$600 US$600 Total Claims US$2933.34 US$1600 US$1600

Given the above computation, we modify the CAs imposition of award, and grant to De Gracia, et al. salaries representing the unexpired portion of their contracts, instead of salaries for three (3) months. Article 2219 of the Civil Code of the Philippines provides for recovery of moral damages in certain cases: Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries;

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(3) Seduction, abduction, rape, or other lascivious acts; (4) Adultery or concubinage; (5) Illegal or arbitrary detention or arrest; (6) Illegal search; (7) Libel, slander or any other form of defamation; (8) Malicious prosecution; (9) Acts mentioned in Article 309; (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral damages. The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the order named. Article 2229 of the Civil Code, on the other hand, provides for recovery of exemplary damages: Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. In this case, we agree with the CA in not awarding moral and exemplary damages for lack of factual basis. Lastly, Article 2208 of the Civil Code provides for recovery of attorneys fees and expenses of litigation: Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim; (6) In actions for legal support; (7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmens compensation and employers liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In all cases, the attorneys fees and expenses of litigation must be reasonable. Article 111 of the Labor Code provides for a maximum award of attorneys fees in cases of recovery of wages: Art. 111. Attorneys fees. a. In cases of unlawful withholding of wages, the culpable party may be assessed attorneys fees equivalent to ten percent of the amount of wages recovered.

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b. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of wages, attorneys fees which exceed ten percent of the amount of wages recovered. Since De Gracia, et al. had to secure the services of the lawyer to recover their unpaid salaries and protect their interest, we agree with the CAs imposition of attorneys fees in the amount of ten percent (10%) of the total claims.
1wphi1

WHEREFORE, we AFFIRM the Decision of the Court of Appeals dated 5 July 2006 with MODIFICATION. Petitioners Skippers United Pacific, Inc. and Skippers Maritime Services Inc., Ltd. are jointly and severally liable for payment of the following: 1) Unremitted home allotment pay for the month of December 1998 in its equivalent rate in Philippine Pesos at the time of termination on 28 January 1999: a. De Gracia = US$900.00 b. Lata = US$600.00 c. Aprosta = US$600.00 2) Salary for the unexpired portion of the employment contract or its current equivalent in Philippine Pesos: a. De Gracia = US$2,933.34 b. Lata = US$1,600.00 c. Aprosta = US$1,600.00 3) Attorneys fees and litigation expenses equivalent to 10% of the total claims. SO ORDERED.
ANTONIO T. CARPIO Associate Justice

Stolt Nielsen Transporation Group Inc. v. Medequillo, January 18, 2012.21

G.R. No. 177498 January 18, 2012 STOLT-NIELSEN TRANSPORTATION GROUP, INC. AND CHUNG GAI SHIP MANAGEMENT, Petitioners, vs. SULPECIO MEDEQUILLO, JR., Respondent. DECISION PEREZ, J.:

Before the Court is a Petition for Review on Certiorari1 of the Decision2 of the First Division of the Court of Appeals in CA-G.R. SP No. 91632 dated 31 January 2007, denying the petition for certiorari filed by Stolt-Nielsen Transportation Group, Inc. and Chung Gai Ship Management (petitioners) and affirming the Resolution of the National Labor Relations Commission (NLRC). The dispositive portion of the assailed decision reads: WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed Decision promulgated on February 28, 2003 and the Resolution dated July 27, 2005 are AFFIRMED.3 The facts as gathered by this Court follow: On 6 March 1995, Sulpecio Madequillo (respondent) filed a complaint before the Adjudication Office of the Philippine Overseas Employment Administration (POEA) against the petitioners for illegal dismissal under a first contract and for failure to deploy under a second contract. In his complaint-affidavit,4 respondent alleged that: 1. 2. On 6 November 1991(First Contract), he was hired by Stolt-Nielsen Marine Services, Inc on behalf of its principal Chung-Gai Ship Management of Panama as Third Assistant Engineer on board the vessel "Stolt Aspiration" for a period of nine (9) months; He would be paid with a monthly basic salary of $808.00 and a fixed overtime pay of $404.00 or a total of $1,212.00 per month during the employment period commencing on 6 November 1991;

21

http://www.lawphil.net

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3. 4.

On 8 November 1991, he joined the vessel MV "Stolt Aspiration"; On February 1992 or for nearly three (3) months of rendering service and while the vessel was at Batangas, he was ordered by the ships master to disembark the vessel and repatriated back to Manila for no reason or explanation; 5. Upon his return to Manila, he immediately proceeded to the petitioners office where he was transferred employment with another vessel named MV "Stolt Pride" under the same terms and conditions of the First Contract; 6. On 23 April 1992, the Second Contract was noted and approved by the POEA; 7. The POEA, without knowledge that he was not deployed with the vessel, certified the Second Employment Contract on 18 September 1992. 8. Despite the commencement of the Second Contract on 21 April 1992, petitioners failed to deploy him with the vessel MV "Stolt Pride"; 9. He made a follow-up with the petitioner but the same refused to comply with the Second Employment Contract. 10. On 22 December 1994, he demanded for his passport, seamans book and other employment documents. However, he was only allowed to claim the said documents in exchange of his signing a document; 11. He was constrained to sign the document involuntarily because without these documents, he could not seek employment from other agencies. He prayed for actual, moral and exemplary damages as well as attorneys fees for his illegal dismissal and in view of the Petitioners bad faith in not complying with the Second Contract. The case was transferred to the Labor Arbiter of the DOLE upon the effectivity of the Migrant Workers and Overseas Filipinos Act of 1995. The parties were required to submit their respective position papers before the Labor Arbiter. However, petitioners failed to submit their respective pleadings despite the opportunity given to them.5 On 21 July 2000, Labor Arbiter Vicente R. Layawen rendered a judgment 6 finding that the respondent was constructively dismissed by the petitioners. The dispositive portion reads: WHEREFORE, premises considered, judgment is hereby rendered, declaring the respondents guilty of constructively dismissing the complainant by not honoring the employment contract. Accordingly, respondents are hereby ordered jointly and solidarily to pay complainant the following:

1. $12,537.00 or its peso equivalent at the time of payment.7

The Labor Arbiter found the first contract entered into by and between the complainant and the respondents to have been novated by the execution of the second contract. In other words, respondents cannot be held liable for the first contract but are clearly and definitely liable for the breach of the second contract.8 However, he ruled that there was no substantial evidence to grant the prayer for moral and exemplary damages.9 The petitioners appealed the adverse decision before the National Labor Relations Commission assailing that they were denied due process, that the respondent cannot be considered as dismissed from employment because he was not even deployed yet and the monetary award in favor of the respondent was exorbitant and not in accordance with law.10 On 28 February 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter. The dispositive portion reads: WHEREFORE, premises considered, the decision under review is hereby, MODIFIED BY DELETING the award of overtime pay in the total amount of Three Thousand Six Hundred Thirty Six US Dollars (US $3,636.00). In all other respects, the assailed decision so stands as, AFFIRMED.11 Before the NLRC, the petitioners assailed that they were not properly notified of the hearings that were conducted before the Labor Arbiter. They further alleged that after the suspension of proceedings before the POEA, the only notice they received was a copy of the decision of the Labor Arbiter.12 The NLRC ruled that records showed that attempts to serve the various notices of hearing were made on petitioners counsel on record but these failed on account of their failure to furnish the Office of the Labor Arbiter a copy of any notice of change of address. There was also no evidence that a service of notice of change of address was served on the POEA.13 The NLRC upheld the finding of unjustified termination of contract for failure on the part of the petitioners to present evidence that would justify their non-deployment of the respondent.14 It denied the claim of the petitioners that the monetary award should be limited

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only to three (3) months for every year of the unexpired term of the contract. It ruled that the factual incidents material to the case transpired within 1991-1992 or before the effectivity of Republic Act No. 8042 or the Migrant Workers and Overseas Filipinos Act of 1995 which provides for such limitation.15 However, the NLRC upheld the reduction of the monetary award with respect to the deletion of the overtime pay due to the nondeployment of the respondent.16 The Partial Motion for Reconsideration filed by the petitioners was denied by the NLRC in its Resolution dated 27 July 2005.17 The petitioners filed a Petition for Certiorari before the Court of Appeals alleging grave abuse of discretion on the part of NLRC when it affirmed with modification the ruling of the Labor Arbiter. They prayed that the Decision and Resolution promulgated by the NLRC be vacated and another one be issued dismissing the complaint of the respondent. Finding no grave abuse of discretion, the Court of Appeals AFFIRMED the Decision of the labor tribunal. The Courts Ruling The following are the assignment of errors presented before this Court: I. THE COURT A QUO ERRED IN FINDING THAT THE SECOND CONTRACT NOVATED THE FIRST CONTRACT. 1. 2. THERE WAS NO NOVATION OF THE FIRST CONTRACT BY THE SECOND CONTRACT; THE ALLEGATION OF ILLEGAL DISMISSAL UNDER THE FIRST CONTRACT MUST BE RESOLVED SEPARATELY FROM THE ALLEGATION OF FAILURE TO DEPLOY UNDER THE SECOND CONTRACT. THE ALLEGED ILLEGAL DISMISSAL UNDER THE FIRST CONTRACT TRANSPIRED MORE THAN THREE (3) YEARS AFTER THE CASE WAS FILED AND THEREFORE HIS CASE SHOULD HAVE BEEN DISMISSED FOR BEING BARRED BY PRESCRIPTION. II. THE COURT A QUO ERRED IN RULING THAT THERE WAS CONSTRUCTIVE DISMISSAL UNDER THE SECOND CONTRACT. 1. 2. IT IS LEGALLY IMPOSSIBLE TO HAVE CONSTRUCTIVE DISMISSAL WHEN THE EMPLOYMENT HAS NOT YET COMMENCED. ASSUMING THERE WAS OMISSION UNDER THE SECOND CONTRACT, PETITIONERS CAN ONLY BE FOUND AS HAVING FAILED IN DEPLOYING PRIVATE RESPONDENT BUT WITH VALID REASON. III. THE COURT A QUO ERRED IN FAILING TO FIND THAT EVEN ASSUMING THERE WAS BASIS FOR HOLDING PETITIONER LIABLE FOR "FAILURE TO DEPLOY" RESPONDENT, THE POEA RULES PENALIZES SUCH OMISSION WITH A MERE "REPRIMAND."18 The petitioners contend that the first employment contract between them and the private respondent is different from and independent of the second contract subsequently executed upon repatriation of respondent to Manila. We do not agree. Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of the debtor, or by subrogating a third person in the rights of the creditor. In order for novation to take place, the concurrence of the following requisites is indispensable: 1. There must be a previous valid obligation, 2. There must be an agreement of the parties concerned to a new contract,

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3. There must be the extinguishment of the old contract, and 4. There must be the validity of the new contract.19 In its ruling, the Labor Arbiter clarified that novation had set in between the first and second contract. To quote: xxx [T]his office would like to make it clear that the first contract entered into by and between the complainant and the respondents is deemed to have been novated by the execution of the second contract. In other words, respondents cannot be held liable for the first contract but are clearly and definitely liable for the breach of the second contract.20 This ruling was later affirmed by the Court of Appeals in its decision ruling that: Guided by the foregoing legal precepts, it is evident that novation took place in this particular case. The parties impliedly extinguished the first contract by agreeing to enter into the second contract to placate Medequillo, Jr. who was unexpectedly dismissed and repatriated to Manila. The second contract would not have been necessary if the petitioners abided by the terms and conditions of Madequillo, Jr.s employment under the first contract. The records also reveal that the 2nd contract extinguished the first contract by changing its object or principal. These contracts were for overseas employment aboard different vessels. The first contract was for employment aboard the MV "Stolt Aspiration" while the second contract involved working in another vessel, the MV "Stolt Pride." Petitioners and Madequillo, Jr. accepted the terms and conditions of the second contract. Contrary to petitioners assertion, the first contract was a "previous valid contract" since it had not yet been terminated at the time of Medequillo, Jr.s repatriation to Manila. The legality of his dismissal had not yet been resolved with finality. Undoubtedly, he was still employed under the first contract when he negotiated with petitioners on the second contract. As such, the NLRC correctly ruled that petitioners could only be held liable under the second contract.21 We concur with the finding that there was a novation of the first employment contract. We reiterate once more and emphasize the ruling in Reyes v. National Labor Relations Commission,22 to wit: x x x [F]indings of quasi-judicial bodies like the NLRC, and affirmed by the Court of Appeals in due course, are conclusive on this Court, which is not a trier of facts. xxxx x x x Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by the Court of Appeals. Such findings deserve full respect and, without justifiable reason, ought not to be altered, modified or reversed.(Emphasis supplied)23 With the finding that respondent "was still employed under the first contract when he negotiated with petitioners on the second contract",24 novation became an unavoidable conclusion. Equally settled is the rule that factual findings of labor officials, who are deemed to have acquired expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by substantial evidence, i.e., the amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.25 But these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the courts.26 In this case, there was no showing of any arbitrariness on the part of the lower courts in their findings of facts. Hence, we follow the settled rule. We need not dwell on the issue of prescription. It was settled by the Court of Appeals with its ruling that recovery of damages under the first contract was already time-barred. Thus: Accordingly, the prescriptive period of three (3) years within which Medequillo Jr. may initiate money claims under the 1st contract commenced on the date of his repatriation. xxx The start of the three (3) year prescriptive period must therefore be reckoned on February 1992, which by Medequillo Jr.s own admission was the date of his repatriation to Manila. It was at this point in time that Medequillo Jr.s cause of action already accrued under the first contract. He had until February 1995 to pursue a case for illegal dismissal and damages arising from the 1st contract. With the filing of his Complaint-Affidavit on March 6, 1995, which was clearly beyond the prescriptive period, the cause of action under the 1st contract was already time-barred.27 The issue that proceeds from the fact of novation is the consequence of the non-deployment of respondent.

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The petitioners argue that under the POEA Contract, actual deployment of the seafarer is a suspensive condition for the commencement of the employment.28 We agree with petitioners on such point. However, even without actual deployment, the perfected contract gives rise to obligations on the part of petitioners. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.29 The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.30 The POEA Standard Employment Contract provides that employment shall commence "upon the actual departure of the seafarer from the airport or seaport in the port of hire."31 We adhere to the terms and conditions of the contract so as to credit the valid prior stipulations of the parties before the controversy started. Else, the obligatory force of every contract will be useless. Parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law.32 Thus, even if by the standard contract employment commences only "upon actual departure of the seafarer", this does not mean that the seafarer has no remedy in case of non-deployment without any valid reason. Parenthetically, the contention of the petitioners of the alleged poor performance of respondent while on board the first ship MV "Stolt Aspiration" cannot be sustained to justify the nondeployment, for no evidence to prove the same was presented.33 We rule that distinction must be made between the perfection of the employment contract and the commencement of the employeremployee relationship. The perfection of the contract, which in this case coincided with the date of execution thereof, occurred when petitioner and respondent agreed on the object and the cause, as well as the rest of the terms and conditions therein. The commencement of the employer-employee relationship, as earlier discussed, would have taken place had petitioner been actually deployed from the point of hire. Thus, even before the start of any employer-employee relationship, contemporaneous with the perfection of the employment contract was the birth of certain rights and obligations, the breach of which may give rise to a cause of action against the erring party. Thus, if the reverse had happened, that is the seafarer failed or refused to be deployed as agreed upon, he would be liable for damages.34 Further, we do not agree with the contention of the petitioners that the penalty is a mere reprimand. The POEA Rules and Regulations Governing Overseas Employment35 dated 31 May 1991 provides for the consequence and penalty against in case of non-deployment of the seafarer without any valid reason. It reads: Section 4. Workers Deployment. An agency shall deploy its recruits within the deployment period as indicated below: xxx b. Thirty (30) calendar days from the date of processing by the administration of the employment contracts of seafarers. Failure of the agency to deploy a worker within the prescribed period without valid reasons shall be a cause for suspension or cancellation of license or fine. In addition, the agency shall return all documents at no cost to the worker.(Emphasis and underscoring supplied) The appellate court correctly ruled that the penalty of reprimand36 provided under Rule IV, Part VI of the POEA Rules and Regulations Governing the Recruitment and Employment of Land-based Overseas Workers is not applicable in this case. The breach of contract happened on February 1992 and the law applicable at that time was the 1991 POEA Rules and Regulations Governing Overseas Employment. The penalty for non-deployment as discussed is suspension or cancellation of license or fine. Now, the question to be dealt with is how will the seafarer be compensated by reason of the unreasonable non-deployment of the petitioners? The POEA Rules Governing the Recruitment and Employment of Seafarers do not provide for the award of damages to be given in favor of the employees. The claim provided by the same law refers to a valid contractual claim for compensation or benefits arising from employer-employee relationship or for any personal injury, illness or death at levels provided for within the terms and conditions of employment of seafarers. However, the absence of the POEA Rules with regard to the payment of damages to the affected seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions provided for non-deployment do not end with the suspension or cancellation of license or fine and the return of all documents at no cost to the worker. As earlier discussed, they do not forfend a seafarer from instituting an action for damages against the employer or agency which has failed to deploy him.37 We thus decree the application of Section 10 of Republic Act No. 8042 (Migrant Workers Act) which provides for money claims by reason of a contract involving Filipino workers for overseas deployment.lavvphil The law provides:

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Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of any law or contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of damages. x x x (Underscoring supplied) Following the law, the claim is still cognizable by the labor arbiters of the NLRC under the second phrase of the provision. Applying the rules on actual damages, Article 2199 of the New Civil Code provides that one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Respondent is thus liable to pay petitioner actual damages in the form of the loss of nine (9) months worth of salary as provided in the contract. 38 This is but proper because of the non-deployment of respondent without just cause. WHEREFORE, the appeal is DENIED. The 31 January 2007 Decision of the Court of Appeals in CA-G.R. SP. No. 91632 is hereby AFFIRMED. The Petitioners are hereby ordered to pay Sulpecio Medequillo, Jr., the award of actual damages equivalent to his salary for nine (9) months as provided by the Second Employment Contract. SO ORDERED.
JOSE PORTUGAL PEREZ Associate Justice

Bright Maritime Corporation v. Fantonial, February 2, 2012.22

G.R. No. 165935 February 8, 2012 BRIGHT MARITIME CORPORATION (BMC)/DESIREE P. TENORIO, Petitioners, vs. RICARDO B. FANTONIAL, Respondent. DECISION PERALTA, J.:

This is a petition for review on certiorari1 of the Decision of the Court of Appeals in CA-G.R. SP No. 67571, dated October 25, 2004, reversing and setting aside the Decision of the National Labor Relations Commission (NLRC), and reinstating the Decision of the Labor Arbiter finding that respondent Ricardo B. Fantonial was illegally dismissed, but the Court of Appeals modified the award of damages. The facts are as follows: On January 15, 2000, a Contract of Employment2 was executed by petitioner Bright Maritime Corporation (BMC), a manning agent, and its president, petitioner Desiree P. Tenorio, for and in behalf of their principal, Ranger Marine S.A., and respondent Ricardo B. Fantonial, which contract was verified and approved by the Philippine Overseas Employment Administration (POEA) on January 17, 2000. The employment contract provided that respondent shall be employed as boatswain of the foreign vessel M/V AUK for one year, with a basic monthly salary of US$450, plus an allowance of US$220. The contract also provided for a 90 hours per month of overtime with pay and a vacation leave with pay of US$45 per month. Respondent was made to undergo a medical examination at the Christian Medical Clinic, which was petitioners accredited medical clinic. Respondent was issued a Medical Certificate3 dated January 17, 2000, which certificate had the phrase "FIT TO WORK" stamped on its lower and upper portion. At about 3:30 p.m. of January 17, 2000, respondent, after having undergone the pre-departure orientation seminar and being equipped with the necessary requirements and documents for travel, went to the Ninoy Aquino International Airport upon instruction of petitioners. Petitioners told respondent that he would be departing on that day, and that a liaison officer would be delivering his plane ticket to him. At about 4:00 p.m., petitioners liaison officer met respondent at the airport and told him that he could not leave on that day due to some defects in his medical certificate. The liaison officer instructed respondent to return to the Christian Medical Clinic. Respondent went back to the Christian Medical Clinic the next day, and he was told by the examining physician, Dr. Lyn dela Cruz-De Leon, that there was nothing wrong or irregular with his medical certificate. Respondent went to petitioners office for an explanation, but he was merely told to wait for their call, as he was being lined-up for a flight to the ship's next port of call. However, respondent never got a call from petitioners.

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http://www.lawphil.net

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On May 16, 2000, respondent filed a complaint against petitioners for illegal dismissal, payment of salaries for the unexpired portion of the employment contract and for the award of moral, exemplary, and actual damages as well as attorneys fees before the Regional Arbitration Branch No. 7 of the NLRC in Cebu City.4 In their Position Paper,5 petitioners stated that to comply with the standard requirements that only those who meet the standards of medical fitness have to be sent on board the vessel, respondent was referred to their accredited medical clinic, the Christian Medical Clinic, for pre-employment medical examination on January 17, 2000, the same day when respondent was supposed to fly to Germany to join the vessel. Unfortunately, respondent was not declared fit to work on January 17, 2000 due to some medical problems. Petitioners submitted the Affidavit6 of Dr. Lyn dela Cruz-De Leon, stating that the said doctor examined respondent on January 17, 2000; that physical and laboratory results were all within normal limits except for the finding, after chest x-ray, of Borderline Heart Size, and that respondent was positive to Hepatitis B on screening; that respondent underwent ECG to check if he had any heart problem, and the result showed left axis deviation. Dr. De Leon stated that she requested for a Hepatitis profile, which was done on January 18, 2000; that on January 20, 2000, the result of the Hepatitis profile showed non-infectious Hepatitis B. Further, Dr. De Leon stated that respondent was declared fit to work only on January 21, 2000; however, the date of the Medical Certificate was January 17, 2000, which was the date when she started to examine the patient per standard operating procedure. Petitioners argued that since respondent was declared fit to work only on January 21, 2000, he could not join the vessel anymore as it had left the port in Germany. Respondent was advised to wait for the next vacancy for boatswain, but he failed to report to petitioners office, and he gave them an incorrect telephone number. During the mandatory conference/conciliation stage of this case, petitioners offered respondent to join one of their vessels, but he refused. Petitioners further argued that they cannot be held liable for illegal dismissal as the contract of employment had not yet commenced based on Section 2 of the Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels (POEA Memorandum Circular No. 055-96), which states: SEC 2. COMMENCEMENT/DURATION OF CONTRACT A. The employment contract between the employer and the seafarer shall commence upon actual departure of the seafarer from the airport or seaport in the point of hire and with a POEA approved contract. It shall be effective until the seafarers date of arrival at the point of hire upon termination of his employment pursuant to Section 18 of this Contract. Petitioners asserted that since respondent was not yet declared fit to work on January 17, 2000, he was not able to leave on the scheduled date of his flight to Germany to join the vessel. With his non-departure, the employment contract was not commenced; hence, there is no illegal dismissal to speak of. Petitioners prayed for the dismissal of the complaint. On September 25, 2000, Labor Arbiter Ernesto F. Carreon rendered a Decision7 in favor of respondent. The pertinent portion of the decision reads: Unarguably, the complainant and respondents have already executed a contract of employment which was duly approved by the POEA. There is nothing left for the validity and enforceability of the contract except compliance with what are agreed upon therein and to all their consequences. Under the contract of employment, the respondents are under obligation to employ the complainant on board M/V AUK for twelve months with a monthly salary of 450 US$ and 220 US$ allowance. The respondents failed to present plausible reason why they have to desist from complying with their obligation under the contract. The allegation of the respondents that the complainant was unfit to work is ludicrous. Firstly, the respondents' accredited medical clinic had issued a medical certificate showing that the complainant was fit to work. Secondly, if the complainant was not fit to work, a contract of employment would not have been executed and approved by the POEA. We are not also swayed by the argument of the respondents that since the complainant did not actually depart from Manila his contract of employment can be withdrawn because he has not yet commenced his employment. The commencement of the employment is not one of those requirements in order to make the contract of employment consummated and enforceable between the parties, but only as a gauge for the payment of salary. In this case, while it is true that the complainant is not yet entitled to the payment of wages because then his employment has not yet commenced, nevertheless, the same did not relieve the respondents from fulfilling their obligation by unilaterally revoking the contract as the same amounted to pre-termination of the contract without just or authorized cause perforce, we rule to be constitutive of illegal dismissal. Anent our finding of illegal dismissal, we condemn the respondent corporation to pay the complainant three (3) months salary and the refund of his placement fee, including documentation and other actual expenses, which we fixed at one month pay. The granted claims are computed as follows:

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US$670 x 4 months US$ 2,680.00 WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Bright Maritime Corporation to pay the complainant Ricardo Fantonial the peso equivalent at the time of actual payment of US$ 2,680.00. The other claims and the case against respondent Desiree P. Tenorio are dismissed for lack of merit.8 Petitioners appealed the decision of the Labor Arbiter to the NLRC. On May 31, 2001, the NLRC, Fourth Division, rendered a Decision9 reversing the decision of the Labor Arbiter. The dispositive portion of the NLRC decision reads: WHEREFORE, premises considered, the decision of Labor Arbiter Ernesto F. Carreon, dated 25 September 2000, is SET ASIDE and a new one is entered DISMISSING the complaint of the complainant for lack of merit. SO ORDERED.10 The NLRC held that the affidavit of Dr. Lyn dela Cruz-De Leon proved that respondent was declared fit to work only on January 21, 2000, when the vessel was no longer at the port of Germany. Hence, respondents failure to depart on January 17, 2000 to join the vessel M/V AUK in Germany was due to respondents health. The NLRC stated that as a recruitment agency, petitioner BMC has to protect its name and goodwill, so that it must ensure that an applicant for employment abroad is both technically equipped and physically fit because a labor contract affects public interest. Moreover, the NLRC stated that the Labor Arbiters decision ordering petitioners to refund respondents placement fee and other actual expenses, which was fixed at one month pay in the amount of US$670.00, does not have any bases in law, because in the deployment of seafarers, the manning agency does not ask the applicant for a placement fee. Hence, respondent is not entitled to the said amount. Respondent filed a motion for reconsideration of the NLRC decision, which motion was denied in a Resolution11dated July 23, 2001. Respondent filed a petition for certiorari before the Court of Appeals, alleging that the NLRC committed grave abuse of discretion in rendering the Decision dated May 31, 2001and the Resolution dated July 23, 2001. On March 12, 2002, respondents counsel filed a Manifestation with Motion for Substitution of Parties due to the death of respondent on November 15, 2001, which motion was granted by the Court of Appeals. On October 25, 2004, the Court of Appeals rendered a Decision, the dispositive portion of which reads: WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us REVERSING and SETTING ASIDE the May 31, 2001 Decision and the July 23, 2001 Resolution of the NLRC, Fourth Division, and REINSTATING the September 25, 2000 Decision of the Labor Arbiter with the modification that the placement fee and other expenses equivalent to one (1) month salary is deleted and that the private respondent Bright Maritime Corporation must also pay the amounts of P30,000.00 and P10,000.00 as moral and exemplary damages, respectively, to the petitioner.12 The Court of Appeals held that the NLRC, Fourth Division, acted with grave abuse of discretion in reversing the decision of the Labor Arbiter who found that respondent was illegally dismissed. It agreed with the Labor Arbiter that the unilateral revocation of the employment contract by petitioners amounted to pre-termination of the said contract without just or authorized cause. The Court of Appeals held that the contract of employment between petitioners and respondent had already been perfected and even approved by the POEA. There was no valid and justifiable reason for petitioners to withhold the departure of respondent on January 17, 2000. It found petitioners argument that respondent was not fit to work on the said date as preposterous, since the medical certificate issued by petitioners accredited medical clinic showed that respondent was already fit to work on the said date. The Court of Appeals stated, thus: Private respondent's contention, which was contained in the affidavit of Dr. Lyn dela Cruz-De Leon, that the Hepatitis profile was done only on January 18, 2000 and was concluded on January 20, 2000, is of dubious merit. For how could the said examining doctor place in the medical certificate dated January 17, 2000 the words "CLASS-B NON-Infectious Hepatitis" (Rollo, p. 17) if she had not conducted the hepatitis profile? Would the private respondent have us believe that its accredited physician would fabricate medical findings? It is obvious, therefore, that the petitioner had been fit to work on January 17, 2000 and he should have been able to leave for Germany to meet with the vessel M/V AUK, had it not been for the unilateral act by private respondent of preventing him from leaving. The private

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respondent was merely grasping at straws in attacking the medical condition of the petitioner just so it can justify its act in preventing petitioner from leaving for abroad.13 The Court of Appeals held that petitioners act of preventing respondent from leaving for Germany was tainted with bad faith, and that petitioners were also liable to respondent for moral and exemplary damages. Thereafter, petitioners filed this petition raising the following issues: I WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED A SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION WHEN IT HELD THE PETITIONERS LIABLE FOR ILLEGALLY TERMINATING THE PRIVATE RESPONDENT FROM HIS EMPLOYMENT. II WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN SETTING ASIDE THE OVERWHELMING EVIDENCE SHOWING THAT THE PRIVATE RESPONDENT FAILED TO COMPLY WITH THE REQUIREMENTS SET BY THE POEA RULES REGARDING FITNESS FOR WORK. III WHETHER OR NOT THE HONORABLE APPELLATE COURT SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT AWARDED MONETARY BENEFITS TO THE PRIVATE RESPONDENT DESPITE THE PROVISION OF THE POEA [STANDARD EMPLOYMENT CONTRACT] TO THE CONTRARY. IV WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED SERIOUS ERROR WITH REGARD TO ITS FINDINGS OF FACTS, WHICH, IF NOT CORRECTED, WOULD CERTAINLY CAUSE GRAVE OR IRREPARABLE DAMAGE OR INJURY TO THE PETITIONERS.14 The general rule that petitions for review only allow the review of errors of law by this Court is not ironclad.15Where the issue is shrouded by a conflict of factual perceptions by the lower court or the lower administrative body, such as the NLRC in this case, this Court is constrained to review the factual findings of the Court of Appeals.16 Petitioners contend that the Court of Appeals erred in doubting the Affidavit of Dr. Lyn dela Cruz-De Leon, which affidavit stated that the Hepatitis profile of respondent was done only on January 18, 2000 and was concluded on January 20, 2000. Petitioners stated that they had no intention to fabricate or mislead the appellate court and the Labor Arbiter, but they had to explain the circumstances that transpired in the conduct of the medical examination. Petitioners reiterated that the medical examination was conducted on January 17, 2000 and the result was released on January 20, 2000. As explained by Dr. Lyn dela Cruz-De Leon, the date "January 17, 2000" was written on the medical examination certificate because it was the day when respondent was referred and initially examined by her. The medical examination certificate was dated January 17, 2000 not for any reason, but in accordance with a generally accepted medical practice, which was not controverted by respondent. Petitioners assert that respondents failure to join the vessel on January 17, 2000 should not be attributed to it for it was a direct consequence of the delay in the release of the medical report. Respondent was not yet declared fit to work at the time when he was supposed to be deployed on January 17, 2000, as instructed by petitioners principal. Respondents fitness to work is a condition sine qua non for purposes of deploying an overseas contract worker. Since respondent failed to qualify on the date designated by the principal for his deployment, petitioners had to find a qualified replacement considering the nature of the shipping business where delay in the departure of the vessel is synonymous to demurrage/damages on the part of the principal and on the vessels charterer. Without a clean bill of health, the contract of employment cannot be considered to have been perfected as it is wanting of an important requisite. Based on the foregoing argument of petitioners, the first issue to be resolved is whether petitioners reason for preventing respondent from leaving Manila and joining the vessel M/V AUK in Germany on January 17, 2000 is valid. The Court rules in the negative. The Court has carefully reviewed the records of the case, and agrees with the Court of Appeals that respondents Medical Certificate17 dated January 17, 2000, stamped with the words "FIT TO WORK," proves that respondent was medically fit to leave Manila

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on January 17, 2000 to join the vessel M/V AUK in Germany. The Affidavit of Dr. Lyn dela Cruz-De Leon that respondent was declared fit to work only on January 21, 2000 cannot overcome the evidence in the Medical Certificate dated January 17, 2000, which already stated that respondent had "Class-B Non-Infectious Hepatitis-B," and that he was fit to work. The explanation given by Dr. Lyn dela Cruz-De Leon in her affidavit that the Medical Certificate was dated January 17, 2000, since it carries the date when they started to examine the patient per standard operating procedure, does not persuade as it goes against logic and the chronological recording of medical procedures. The Medical Certificate submitted as documentary evidence18 is proof of its contents, including the date thereof which states that respondent was already declared fit to work on January 17, 2000, the date of his scheduled deployment. Next, petitioners contend that respondents employment contract was not perfected pursuant to the POEA Standard Employment Contract, which provides: SEC 2. COMMENCEMENT/DURATION OF CONTRACT A. The employment contract between the employer and the seafarer shall commence upon actual departure of the seafarer from the airport or seaport in the point of hire and with a POEA approved contract. It shall be effective until the seafarers date of arrival at the point of hire upon termination of his employment pursuant to Section 18 of this Contract.19 Petitioners argue that, as ruled by the NLRC, since respondent did not actually depart from the Ninoy Aquino International Airport in Manila, no employer-employee relationship existed between respondent and petitioners principal, Ranger Marine S.A., hence, there is no illegal dismissal to speak of, so that the award of damages must be set aside. Petitioners assert that they did not conceal any information from respondent related to his contract of employment, from his initial application until the release of the result of his medical examination. They even tried to communicate with respondent for another shipboard assignment even after his failed deployment, which ruled out bad faith. They pray that respondents complaint be dismissed for lack of merit. Petitioners argument is partly meritorious. An employment contract, like any other contract, is perfected at the moment (1) the parties come to agree upon its terms; and (2) concur in the essential elements thereof: (a) consent of the contracting parties, (b) object certain which is the subject matter of the contract, and (c) cause of the obligation.20 The object of the contract was the rendition of service by respondent on board the vessel for which service he would be paid the salary agreed upon. Hence, in this case, the employment contract was perfected on January 15, 2000 when it was signed by the parties, respondent and petitioners, who entered into the contract in behalf of their principal, Ranger Marine S.A., thereby signifying their consent to the terms and conditions of employment embodied in the contract, and the contract was approved by the POEA on January 17, 2000. However, the employment contract did not commence, since petitioners did not allow respondent to leave on January 17, 2000 to embark the vessel M/V AUK in Germany on the ground that he was not yet declared fit to work on the day of departure, although his Medical Certificate dated January 17, 2000 proved that respondent was fit to work. In Santiago v. CF Sharp Crew Management, Inc.,21 the Court held that the employment contract did not commence when the petitioner therein, a hired seaman, was not able to depart from the airport or seaport in the point of hire; thus, no employer-employee relationship was created between the parties. Nevertheless, even before the start of any employer-employee relationship, contemporaneous with the perfection of the employment contract was the birth of certain rights and obligations, the breach of which may give rise to a cause of action against the erring party.22 If the reverse happened, that is, the seafarer failed or refused to be deployed as agreed upon, he would be liable for damages.23 The Court agrees with the NLRC that a recruitment agency, like petitioner BMC, must ensure that an applicant for employment abroad is technically equipped and physically fit because a labor contract affects public interest. Nevertheless, in this case, petitioners failed to prove with substantial evidence that they had a valid ground to prevent respondent from leaving on the scheduled date of his deployment. While the POEA Standard Contract must be recognized and respected, neither the manning agent nor the employer can simply prevent a seafarer from being deployed without a valid reason.24 Petitioners act of preventing respondent from leaving and complying with his contract of employment constitutes breach of contract for which petitioner BMC is liable for actual damages to respondent for the loss of one-year salary as provided in the contract.25 The monthly salary stipulated in the contract is US$670, inclusive of allowance. The Court upholds the award of moral damages in the amount of P30,000.00, as the Court of Appeals correctly found petitioners act was tainted with bad faith,26 considering that respondents Medical Certificate stated that he was fit to work on the day of his scheduled departure, yet he was not allowed to leave allegedly for medical reasons.1wphi1

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Further, the Court agrees with the Court of Appeals that petitioner BMC is liable to respondent for exemplary damages,27 which are imposed by way of example or correction for the public good in view of petitioners act of preventing respondent from being deployed on the ground that he was not yet declared fit to work on the date of his departure, despite evidence to the contrary. Such act, if tolerated, would prejudice the employment opportunities of our seafarers who are qualified to be deployed, but prevented to do so by a manning agency for unjustified reasons. Exemplary damages are imposed not to enrich one party or impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions.28 In this case, petitioner should be held liable to respondent for exemplary damages in the amount of P50,000.00,29 following the recent case of Claudio S. Yap v. Thenamaris Ships Management, et al.,30 instead of P10,000.00 The Court also holds that respondent is entitled to attorneys fees in the concept of damages and expenses of litigation. 31 Attorney's fees are recoverable when the defendant's act or omission has compelled the plaintiff to incur expenses to protect his interest.32 Petitioners failure to deploy respondent based on an unjustified ground forced respondent to file this case, warranting the award of attorneys fees equivalent to ten percent (10%) of the recoverable amount.33 WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 67571, dated October 25, 2004, is AFFIRMED with modification. Petitioner Bright Maritime Corporation is hereby ORDERED to pay respondent Ricardo B. Fantonial actual damages in the amount of the peso equivalent of US$8,040.00, representing his salary for one year under the contract; moral damages in the amount Thirty Thousand Pesos (P30,000.00); exemplary damages that is increased from Ten Thousand Pesos (P10,000.00) to Fifty Thousand Pesos (P50,000.00), and attorneys fees equivalent to ten percent (10%) of the recoverable amount. Costs against petitioners. SO ORDERED.
DIOSDADO M. PERALTA Associate Justice

People v. Ganigan, August 20, 2008.23

G.R. No. 178204 August 20, 2008 [Formerly G.R. No. 156497] THE PEOPLE OF THE PHILIPPINES, appellee, vs. MARCOS GANIGAN, appellant. DECISION TINGA, J.:

Before us for automatic review is the Decision1 dated 14 November 2006 of the Court of Appeals affirming the judgment of conviction2 for the crime of illegal recruitment rendered by the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 21.3 In an Information filed before the RTC, accused Ruth, Monchito, Eddie, Avelin Sulaiman and Marcos (appellant), all surnamed Ganigan, were charged with illegal recruitment committed as follows: That sometime between the period from July and August 1998 in Plaridel, Bulacan and within the jurisdiction of this Honorable Court, the above-named accused, representing themselves to have the capacity to contract, enlist and transport workers for employment in New Zealand, conspiring, confederating and mutually helping one another, did then and there willfully, unlawfully and feloniously recruit for a fee the following persons namely: MAURO EUSEBIO, VALENTINO CRISOSTOMO and LEONORA DOMINGO, all residents of Sto. Nio, Plaridel, Bulacan for employment in New Zealand, without first obtaining the required license and/or authority from the Philippine Overseas Employment Administration. CONTRARY TO LAW.4 Only appellant was arrested. The other accused remained at large. Appellant, assisted by counsel, pleaded not guilty on arraignment. Trial ensued. The three private complainants, Leonora Domingo (Leonora), Mauro Reyes (Mauro), and Valentino Crisostomo (Valentino), testified for the prosecution.

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They narrated that they first met appellant in the house of Manolito Reyes in Plaridel, Bulacan in June 1998. Appellant allegedly made representations to private complainants, among others, that his brother, Monchito, and his sister-in-law, Ruth, had the capacity to recruit apple and grape pickers for employment in New Zealand.5 On 5 July 1998, the group, composed of the three private complainants and 35 others, 6 went to La Union where they met with Monchito and Ruth. Ruth proceeded to explain their prospective employment with a $1,200.00 monthly salary. Ruth also required the group to attend bible study sessions every Sunday because their prospective employer is a devout Catholic. Pursuant to their desire to work in New Zealand, the group attended bible study from 5 July to December 1998.7 Each member of the group was asked to pay P2,000.00 as assurance fee.8 Leonora paid an additionalP400.00 for her National Statistics Office-issued birth certificate,9 P500.00 for physical examination andP320.00 for medical fee.10 Mauro gave an additional P320.00 for medical expenses11 whereas Valentino shelled out P180.00 for pictures, P1,000.00 for bio-data and P350.00 for medical examination.12 The three attested that appellant received their payment and a document was prepared by one of their companions as evidence of the receipt.13 The exhibits submitted by the prosecution show that Monchito acknowledged having received a total of P101,480.00 from various applicants.14 Other documents showed that appellant and Ruth received payment from the applicants.15 Ruth and appellant allegedly promised them that they would leave for New Zealand before October 1998. When they were unable to leave, however, they were told that their prospective employer would arrive in the Philippines on 22 November 1998. On the designated date, they were informed that their prospective employer fell down the stairway of the airplane. An interview was then scheduled on 29 December 1998 but on that day, they were told that their prospective employer had been held up. This prompted the complainants to go to the Philippine Overseas Employment Administration (POEA) to check on the background of the accused. They learned that appellant, Ruth and Monchito do not have the authority to recruit workers for employment abroad.16 Certifications to that effect were issued by the POEA.17 Appellant denied having recruited private complainants for work abroad. He claimed that he himself was also a victim as he had also paid P3,000.00 for himself and P2,000.00 for his daughter. He likewise attended the bible study sessions as a requirement for the overseas employment.18 He contended that he was merely implicated in the case because he was the only one apprehended among the accused.19 The trial court rendered judgment convicting appellant of the crime of illegal recruitment. The dispositive portion of the decision reads: Wherefore, all premises considered, this Court finds and so holds that the prosecution was able to establish by proof beyond reasonable doubt the criminal culpability of the accused Marcos Ganigan on the offense charged against him. Accordingly, this Court finds him guilty of the crime of illegal recruitment in large scale resulting in economic sabotage as defined under Section 6 and penalized under Section 7(b) of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995. Accordingly, he is sentenced to suffer the penalty of life imprisonment and to pay a fine of P500,000.00. Accused Marcos Ganigan is also directed to pay complainants Leonora Domingo, Mauro Reyes and Valentino Crisostomo the amounts of P2,400.00 each plus the sum of P500.00 for Leonora Domingo for actual damages and P25,000.00 as and for moral damages. With regard to accused Ruth Ganigan, Monchito Ganigan, Eddie Ganigan and Avelin Sulaiman Ganigan, who remain at large until this time, the case against them is ordered archived. Let an alias Warrant of arrest be issued for their apprehension. SO ORDERED.20 The trial court found that all elements of illegal recruitment in large scale had been established through the testimonial and documentary evidence of the prosecution. In view of the penalty imposed, the case was elevated to this Court on automatic review. However, this Court resolved to transfer the case to the Court of Appeals for intermediate review in light of our ruling in People v. Mateo.21 On 14 November 2006, the Court of Appeals affirmed the trial court's decision. Upon receipt of the unfavorable decision, appellant filed a notice of appeal. On 15 October 2007, this Court resolved to accept the case and to require the parties to simultaneously submit their respective supplemental briefs. The Office of the Solicitor General (OSG) filed a Manifestation and Motion22 stating that it would no longer file any supplemental briefs and instead adopt its appellee's brief filed on 12 January 2006. Appellant likewise manifested that he would merely adopt his appellant's brief.23

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Appellant argues that the prosecution has failed to establish his guilt beyond reasonable doubt. He maintains that he did not participate in any recruitment activity and that the alleged payments made by private complainants were for membership in the Christian Catholic Mission, as shown by the fact that private complainants have regularly attended bible study sessions from 5 July to November 1998. He also points out that nothing on record would show that the necessary training or orientation seminar pertaining to the supposed employment has ever been conducted. Assuming arguendo that the Christian Catholic Mission was only a front to an illegal venture, appellant avers that he was not part of the conspiracy because he was a victim himself as he in fact also paid assurance fees for membership in the Christian Catholic Mission. He laments that aside from introducing private complainants to Ruth, he has not done any other act tantamount to recruitment. The OSG defended the decision of the trial court in giving full faith and credence to the testimonies of the complaining witnesses. It contends that there is no showing that the victims were impelled by any ill motive to falsely testify against appellant. It asserts that the collective testimony of the witnesses has categorically established appellant's participation in the crime.24 The crime of illegal recruitment is committed when these two elements concur: (1) the offenders have no valid license or authority required by law to enable them to lawfully engage in the recruitment and placement of workers; and (2) the offenders undertake any activity within the meaning of recruitment and placement defined in Article 13(b) or any prohibited practices enumerated in Article 34 of the Labor Code. In case of illegal recruitment in large scale, a third element is added - that the accused commits the acts against three or more persons, individually or as a group.25 Article 13(b) defines recruitment and placement as "any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers; and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not." In the simplest terms, illegal recruitment is committed by persons who, without authority from the government, give the impression that they have the power to send workers abroad for employment purposes.26 Since appellant, along with the other accused, made misrepresentations concerning their purported power and authority to recruit for overseas employment, and in the process collected from private complainants various amounts in the guise of placement fees, the former clearly committed acts constitutive of illegal recruitment. In fact, this Court held that illegal recruiters need not even expressly represent themselves to the victims as persons who have the ability to send workers abroad. It is enough that these recruiters give the impression that they have the ability to enlist workers for job placement abroad in order to induce the latter to tender payment of fees.27 It is clear from the testimonies of private complainants that appellant undertook to recruit them for a purported employment in New Zealand and in the process collected various amounts from them as "assurance fees" and other fees related thereto. Private complainants testified in a clear, positive and straightforward manner. Leonora testified that appellant recruited her to work in New Zealand as a fruit picker and was promised by Ruth a monthly salary of $1,200.00. She was required to pay an assurance fee of P2,000.00. She later learned that appellant and his cohorts had not been licensed by the POEA to recruit for overseas employment.28 On cross-examination, she confirmed that she turned over the amount of fees to appellant with the understanding that such payment was for employment abroad.29 Mauro similarly recounted that he was introduced to Monchito and Ruth by appellant as an applicant for farm work in New Zealand. He was told to prepare P2,000.00 as assurance fee, which he paid to appellant. When he was unable to leave, he checked with the POEA and found out that appellant had no license to recruit. 30 During the cross-examination, Mauro was firm in his stance that he paid the amount of P2,000.00 as assurance of employment in New Zealand. Furthermore, he regularly attended the bible study as a requirement for said employment.31 Valentino's testimony corroborated that of Leonora and Mauro.32 The trial court found these testimonies credible and convincing. Well-settled is the doctrine that great weight is accorded to the factual findings of the trial court particularly on the ascertainment of the credibility of witnesses; this can only be discarded or disturbed when it appears in the record that the trial court overlooked, ignored or disregarded some fact or circumstance of weight or significance which if considered would have altered the result. 33 In the present case, we find no reason to depart from the rule. Verily, we agree with the OSG that the testimonies of private complainants have adequately established the elements of the crime, as well as appellant's indispensable participation therein. Appellant recruited at least three persons, the private complainants in this case, giving them the impression that he and his relatives had the capability of sending them to New Zealand for employment as fruit pickers. The OSG adds that appellant went to Bulacan to invite the victims and accompanied them to a fellowship and briefing in La Union; that appellant misrepresented that joining the religious group would ensure their overseas employment; and that appellant without any license or authority to recruit, collected various amounts from private complainants.

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Appellant miserably failed to convince this Court that the payments made by the complainants were actually for their membership in the religious organization. He did not present any document to prove this allegation. For their part, private complainants were adamant that the payments made to appellant were for purposes of employment to New Zealand. They further explained that their participation in the bible study sessions was but a requirement imposed by appellant because their prospective employer was also a member of the same religious group. Moreover, appellant has failed to rebut the evidence presented by the prosecution consisting of a receipt of payment signed by him.34 His flimsy denial that the signature on the receipt was not his own does not merit consideration in light of the trial court's contrary finding. As between the positive and categorical testimonies of private complainants and the unsubstantiated denial proffered by appellant, this Court is inclined to give more weight to the former. In sum, appellant is correctly found guilty of large scale illegal recruitment tantamount to economic sabotage. Under Section 7(b) of Republic Act No. 8042, the penalty of life imprisonment and a fine of not less thanP500,000.00 nor more than P1,000.000.00 shall be imposed if illegal recruitment constitutes economic sabotage. WHEREFORE, premises considered, the decision of the Court of Appeals in CA-G.R. CR-H.C. No. 00867 is AFFIRMED. SO ORDERED.
DANTE O. TINGA Associate Justice

Romero v. People et al., November 23, 2011.24

G.R. No. 171644 November 23, 2011 DELIA D. ROMERO, Petitioner, vs. PEOPLE OF THE PHILIPPINES, ROMULO pADLAN and ARTURO SIAPNO, Respondents. DECISION PERALTA, J.:

This is to resolve the Petition for Review on Certiorari1 dated March 25, 2006 of petitioner Delia D. Romero assailing the Decision2 dated July 18, 2005 and Resolution3 dated February 13, 2006 of the Court of Appeals (CA), affirming the Decision4 dated February 24, 2004 of the Regional Trial Court (RTC), Branch 44, Dagupan City, finding petitioner guilty beyond reasonable doubt of the crime of Illegal Recruitment as defined in paragraph (a) of Article 38 of Presidential Decree (P.D.) No. 2018. The records contain the following antecedent facts: Private respondent Romulo Padlan (Romulo) was a former classmate of petitioner in college. Sometime in September 2000 Romulo went to petitioner's stall (wedding gown rentals) at W. A. Jones St., Calasiao, Pangasinan to inquire about securing a job in Israel. Convinced by petitioner's words of encouragement and inspired by the potential salary of US$700.00 to US$1,200.00 a month, Romulo asked petitioner the amount of money required in order for him to be able to go to Israel. Petitioner informed him that as soon as he could give her US$3,600.00, his papers would be immediately processed. To raise the amount, Romulo secured a loan from a bank and borrowed some more from his friends. When he was able to raise the amount, Romulo went back to petitioner and handed her the money. Petitioner contacted Jonney Erez Mokra who instructed Romulo to attend a briefing at his (Jonney's) house in Dau, Mabalacat, Pampanga. Romulo was able to leave for Israel on October 26, 2000 and was able to secure a job with a monthly salary of US$650.00. Unfortunately, after two and a half months, he was caught by Israel's immigration police and detained for 25 days. He was subsequently deported because he did not possess a working visa. On his return, Romulo demanded from petitioner the return of his money, but the latter refused and failed to do so. On the other hand, private respondent Arturo Siapno is petitioner's nephew. Sometime in August 2000, he went to petitioner's stall. He was convinced by the petitioner that if he could give her US$3,600.00 for the processing of his papers, he could leave the country within 1 to 2 weeks for a job placement in Israel. Arturo contacted a relative in the U.S. to ask the latter to cover the expenses for the former's overseas job placement. The relative sent the US$3,000.00 to Teresita D. Visperas, petitioner's sister in Israel. Petitioner processed Arturo's papers and contacted Jonney Erez Mokra. Jonney instructed Arturo to attend a briefing in Dau, Mabalacat, Pampanga. Afterwards, Arturo left for Israel sometime in September 2000. He was able to work and receive US$800.00 salary per
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month. After three months of stay in Israel, he was caught by the immigration officials, incarcerated for ten days and was eventually deported. After arriving in the country, Arturo immediately sought the petitioner. Petitioner promised him that she would send him back to Israel, which did not happen. Arturo, after learning that Romulo suffered the same fate, checked with the Department of Labor and Employment (DOLE) Dagupan District Office whether petitioner, Teresita D. Visperas and Jonney Erez Mokra had any license or authority to recruit employees for overseas employment. Finding that petitioner and the others were not authorized to recruit for overseas employment, Arturo and Romulo filed a complaint against petitioner, Teresita and Jonney before the National Bureau of Investigation (NBI). Consequently, an Information dated June 18, 2001 was filed against petitioner and Jonney Erez Mokra for the crime of Illegal Recruitment which reads as follows: That sometime in the month of August and September 2000 in the Municipality of Calasiao, Province of Pangasinan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, not being licensee or holder of authority, conspiring, confederating and mutually helping one another, did then and there, wilfully, unlawfully and feloniously undertake and perform recruitment activity by recruiting ARTURO SIAPNO and ROMULO PADLAN to a supposed job abroad particularly in Israel, for a fee, without first securing the necessary license and permit to do the same. CONTRARY to Art. 38 (a) of P.D. 442, as amended by P.D. 2018. Upon arraignment on August 20, 2001, petitioner, with the assistance of her counsel pleaded not guilty, whereas accused Jonney Erez Mokra was and is still at-large. Thereafter, trial on the merits ensued. To establish the facts earlier mentioned, the prosecution presented the testimonies of Romulo Padlan and Arturo Siapno. Petitioner, on the other hand, offered her own testimony, as well as Satchi Co Pontaces to prove that petitioner did not recruit the private respondents. According to petitioner, private respondents went to her to inquire about the working status of her sister in Israel. She told them that her sister was doing well. When private respondents asked her how her sister was able to go to Israel, petitioner told them that she does not know and that she will have to ask her sister about that matter. Petitioner then called her sister and told her that the private respondents wanted to ask for her help in going to Israel. It was petitioner's sister and the private respondents who communicated with each other, and the petitioner had no knowledge as to the content of the former's conversations and agreements. The RTC found petitioner guilty as charged. The dispositive portion of its decision reads as follows: WHEREFORE, the Court finds accused Delia Romero guilty beyond reasonable doubt of the crime of Illegal Recruitment as defined in paragraph (a) of Article 38 of Presidential Decree No. 442, as amended by Presidential Decree No. 2018, and pursuant to law hereby sentences accused Delia Romero to suffer the penalty of Eight (8) Years and a fine of P100,000.00 plus costs. Accused Delia Romero is directed to return the amount of $3,600.00 or its equivalent to complainant Romulo Padlan and the amount of $3,600.00 or its equivalent to Arturo Siapno. The case as against Jonney Mokra aka Erez, is hereby ordered archived subject to reinstatement upon his arrest. SO ORDERED. On appeal, the CA affirmed in toto the decision of the RTC, the fallo of which states: WHEREFORE, premises considered, the appealed Decision is AFFIRMED in toto. SO ORDERED. Hence, the present petition after petitioner's motion for reconsideration was denied by the CA. Petitioner enumerates the following assignment of errors: First Assignment of Error The Court of Appeals erred in affirming the conviction of the accused of the offense charged (Illegal Recruitment) for said finding is contrary to law and evidence in record. Second Assignment of Error

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The Court of Appeals erred in affirming the conviction of the accused in interpreting the gesture of good faith of the petitioner as referral in the guise of illegal recruitment. Third Assignment of Error The Court of Appeals erred in affirming the conviction of the accused based merely on a certification from the DOLE-Dagupan District Office without said certification being properly identified and testified thereto. Fourth Assignment of Error The Court of Appeals erred in affirming the conviction of accused based on speculations and probabilities and not on the evidence on record. Fifth Assignment of Error
The Court of Appeals erred in not acquitting the accused on the ground of reasonable doubt. Illegal recruitment is defined in Article 38 of the Labor Code, as amended, as follows: ART. 38. Illegal Recruitment. - (a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of this Code, to be undertaken by nonlicensees or non-holders of authority, shall be deemed illegal and punishable under Article 39 of this Code. The [Department] of Labor and Employment or any law enforcement officer may initiate complaints under this Article. (b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage and shall be penalized in accordance with Article 39 hereof. Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a group. Article 13 (b) of the same Code defines, "recruitment and placement" as: "any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not: Provided, that any person or entity which, in any manner, offers or promises for a fee, employment to two or more persons shall be deemed engaged in recruitment and placement." The crime of illegal recruitment is committed when two elements concur, namely: (1) the offender has no valid license or authority required by law to enable one to lawfully engage in recruitment and placement of workers; and (2) he undertakes either any activity within the meaning of "recruitment and placement" defined under Article 13 (b), or any prohibited practices enumerated under Article 34 of the Labor Code.5 In disputing the absence of the first element, petitioner offers her opinion that the CA erred in affirming the trial court's reliance on a mere certification from the DOLE Dagupan District Office that she does not have the necessary licence to recruit workers for abroad. She claims that the prosecution committed a procedural lapse in not procuring a certification from the agency primarily involved, the Philippine Overseas Employment Administration (POEA). The said argument, however, is flawed. Under the first element, a non-licensee or non-holder of authority is any person, corporation or entity which has not been issued a valid license or authority to engage in recruitment and placement by the Secretary of Labor, or whose license or authority has been suspended, revoked or cancelled by the POEA or the Secretary.6 Clearly, the creation of the POEA did not divest the Secretary of Labor of his/her jurisdiction over recruitment and placement of activities. The governing rule is still Article 35 7 of the Labor Code. This is further discussed in this Court's ruling in Trans Action Overseas Corp. v. Secretary of Labor, 8 wherein it was ruled that: In the case of Eastern Assurance and Surety Corp. v. Secretary of Labor, we held that: The penalties of suspension and cancellation of license or authority are prescribed for violations of the above-quoted provisions, among others. And the Secretary of Labor has the power under Section 35 of the law to apply these sanctions, as well as the authority, conferred by Section 36, not only to "restrict and regulate the recruitment and placement activities of all agencies," but also to "promulgate rules and regulations to carry out the objectives and implement the provisions" governing said activities. Pursuant to this rule-making power thus granted, the Secretary of Labor gave the POEA, on its own initiative or upon a filing of a complaint or report or upon request for investigation by any aggrieved person, "xxx (authority to) conduct the necessary proceedings for the suspension or cancellation of the license or authority of any agency or entity" for certain enumerated offenses including 1) the imposition or acceptance, directly or indirectly, of any amount of money, goods or services, or any fee or bond in excess of what is prescribed by the Administration, and 2) any other violation of pertinent provisions of the Labor Code and other relevant laws, rules and regulations. The Administrator was also given the power to "order the dismissal of the case or the suspension of the license or authority of the respondent agency or contractor or recommend to the Minister the cancellation thereof."

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This power conferred upon the Secretary of Labor and Employment was echoed in People v. Diaz, viz.: A non-licensee or non-holder of authority means any person, corporation or entity which has not been issued a valid license or authority to engage in recruitment and placement by the Secretary of Labor, or whose license or authority has been suspended, revoked or cancelled by the POEA or the Secretary.9 Thus, the trial court did not err in considering the certification from the DOLE-Dagupan District Office stating that petitioner has not been issued any license by the POEA nor is a holder of an authority to engage in recruitment and placement activities. The Office of the Solicitor General (OSG), in its Comment 10 dated October 9, 2006, also gives a valid observation as to the admissibility of the certification as evidence for the prosecution, thus: x x x Notably, there is nothing on record to show that petitioner objected to the admissibility of the certification for the purpose for which it was offered. Thus, petitioner's argument that the certification was inadmissible because it was not properly identified by the issuing officer should be rejected. It is well-settled that "[e]very objections to the admissibility of evidence shall be made at the time such evidence is offered or as soon thereafter as the ground for objection shall have become apparent, otherwise the objection shall be considered waived." Accordingly, the certification has been accepted as admissible by the trial court and properly considered as evidence for the party who submitted it.11 Anent the second element, petitioner insists that the CA was wrong in affirming the factual findings of the trial court. According to her, the accommodation extended by the petitioner to the private respondents is far from the referral as contemplated in Article 13 (b) of the Labor Code. It is a settled rule that factual findings of the trial courts, including their assessment of the witnesses' credibility, are entitled to great weight and respect by the Supreme Court, particularly when the CA affirmed such findings.12 After all, the trial court is in the best position to determine the value and weight of the testimonies of witnesses.13 Nevertheless, the testimonies of the private respondents clearly establish the fact that petitioner's conduct falls within the term recruitment as defined by law. As testified by Romulo Padlan, petitioner convinced him and Arturo Siapno to give her US$3,600.00 for the processing of their papers, thus: Q: In September 2000, did you see the accused? A: There was, sir. Q: Where did you see each other? A: At her stall, sir. xxxx Q: What was your purpose in going to her stall? A: My purpose is to inquire about my application to Israel, sir. Q: What happened when you inquired from her about your application in going to Israel? A: I inquired from her and she responded with me with sweet words, sir. Q: What did you ask her when you first met her in her stall [in] September 2000? A: I asked her about the possible placement and the condition about the job in Israel. Q: And what was her response? A: Her response was positive and very encouraging, sir. Q: What was the very good and very encouraging response of the accused? A: Regarding the salary amounting to $700.00 to $1,000.00 dollars a month, sir. Q: When you were informed that the salary is quite good in Israel, what did you do, if any? A: I planned to produce money so that I can apply for Israel, sir. Q: And what transpired next after that? A: She told me that, "If you can produce $3,600.00 dollars then I will begin to process your papers.

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Q: After telling you that, what did you do, if any? A: So I planned to have a loan [from] Rural Bank of Central Pangasinan and borrow some money [from] my other friends, sir. xxxx Q: After producing that money, what did you do? xxxx A: I [went] to her stall [in] September 26 around 10:00 P.M. and handed the money to Mrs. Delia Romero, sir. xxxx Q: How much money did you give to the accused [in] September 2000? A: [In] September 2000, I gave her $1,500.00 US dollars, sir.14 Arturo Siapno also testified as to how petitioner convinced him to apply for a job in Israel and offered her services for a fee, thus: Q: [I]n August 2000, where were you? A: I was residing in Puelay-Carangalaan. Dagupan City. Q: On the same month, did you have any transaction with the accused? A: Yes sir[.] I met the accused at the appliance store which is located at Puelay and she offered me a job in Israel. Q: [When] she offered you a job in Israel, what did you do? A: I went to their stall which is located [in] Calasiao, and in the same place I also met several applicants. Q: When did you go to the stall of the accused? A: The following day, sir. xxxx Q: And what did you do at the stall of the accused in Calasiao, Pangasinan? A: When I went to the stall of the accused, since I saw other applicants, I was convinced to apply and I called up my aunt and asked for help. Q: Since you were at the stall of the accused in Calasiao, what transpired next? A: When I talked to her, she told me if I have a money of P3,600.00 I could easily depart within one (1) week or two (2) weeks.15 From the above testimonies, it is apparent that petitioner was able to convince the private respondents to apply for work in Israel after parting with their money in exchange for the services she would render. The said act of the petitioner, without a doubt, falls within the meaning of recruitment and placement as defined in Article 13 (b) of the Labor Code. As to petitioner's contention that the testimony of Arturo Siapno that the latter paid a certain amount of money to the former must not be given any credence due to the absence of any receipt or any other documentary evidence proving such, the same is without any merit. In People v. Alvarez,16 this Court ruled that in illegal recruitment cases, the failure to present receipts for money that was paid in connection with the recruitment process will not affect the strength of the evidence presented by the prosecution as long as the payment can be proved through clear and convincing testimonies of credible witnesses. It was discussed that: In illegal recruitment, mere failure of the complainant to present written receipts for money paid for acts constituting recruitment activities is not fatal to the prosecution, provided the payment can be proved by clear and convincing testimonies of credible witnesses. xxxx

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x x x The Court has already ruled that the absence of receipts in a case for illegal recruitment is not fatal, as long as the prosecution is able to establish through credible testimonial evidence that accused-appellant has engaged in illegal recruitment. Such case is made, not by the issuance or the signing of receipts for placement fees, but by engagement in recruitment activities without the necessary license or authority. In People v. Pabalan, the Court held that the absence of receipts for some of the amounts delivered to the accused did not mean that the appellant did not accept or receive such payments. Neither in the Statute of Frauds nor in the rules of evidence is the presentation of receipts required in order to prove the existence of a recruitment agreement and the procurement of fees in illegal recruitment cases. Such proof may come from the testimonies of witnesses.17 With regard to the penalty imposed by the RTC and affirmed by the CA, this Court finds it to be inappropriate. The trial court imposed the penalty of eight (8) years imprisonment and a fine of P100,000.00 plus cost and ordered petitioner to return the amount of US$3,600.00 or its equivalent to Romulo Padlan and the amount of US$3,600.00 or its equivalent to Arturo Siapno. Under Article 39 (c) of the Labor Code, which prescribes the penalty for illegal recruitment, any person who is neither a licensee nor a holder of authority under the law and found violating any provision thereof or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of imprisonment of not less than four (4) years but not more than eight (8) years or a fine of not less than P20,000.00 nor more than P100,000.00 or both such imprisonment and fine, at the discretion of the court. Clearly, the trial court, by imposing a straight penalty, disregarded the application of the Indeterminate Sentence Law. 18 InArgoncillo v. Court of Appeals,19 this Court ruled that the application of the Indeterminate Sentence Law is mandatory to both the Revised Penal Code and the special laws, and in the same ruling, this Court summarized the application and non-application of the Indeterminate Sentence Law, to wit: x x x It is basic law that x x x the application of the Indeterminate Sentence Law is mandatory where imprisonment exceeds one (1) year, except only in the following cases: a. Offenses punished by death or life imprisonment. b. Those convicted of treason (Art. 114) conspiracy or proposal to commit treason (Art. 115). c. Those convicted of misprision of treason (Art. 116), rebellion (Art. 134), sedition (Art. 139) or espionage (Art. 117). d. Those convicted of piracy (Art. 122). e. Habitual delinquents (Art. 62, par. 5). Recidivists are entitled to an Indeterminate sentence. (People v. Jaramilla, L-28547, February 22, 1974) Offender is not disqualified to avail of the benefits of the law even if the crime is committed while he is on parole. (People v. Calreon, CA 78 O. G. 6701, November 19, 1982). f. Those who escaped from confinement or those who evaded sentence. g. Those granted conditional pardon and who violated the terms of the same. (People v. Corral, 74 Phil. 359). h. Those whose maximum period of imprisonment does not exceed one (1) year. Where the penalty actually imposed does not exceed one (1) year, the accused cannot avail himself of the benefits of the law, the application of which is based upon the penalty actually imposed in accordance with law and not upon that which may be imposed in the discretion of the court. (People v. Hidalgo, [CA] G.R. No. 00452-CR, January 22, 1962). i. Those who are already serving final judgment upon the approval of the Indeterminate Sentence Law. The need for specifying the minimum and maximum periods of the indeterminate sentence is to prevent the unnecessary and excessive deprivation of liberty and to enhance the economic usefulness of the accused, since he may be exempted from serving the entire sentence, depending upon his behavior and his physical, mental, and moral record. The requirement of imposing an indeterminate sentence in all criminal offenses whether punishable by the Revised Penal Code or by special laws, with definite minimum and maximum terms, as the Court deems proper within the legal range of the penalty specified by the law must, therefore, be deemed mandatory.20
1wphi1

The Indeterminate Sentence Law provides that if, as in this case, the offense is punished by a law other than the Revised Penal Code, the court shall sentence the accused to an indeterminate sentence, the maximum term of which shall not exceed the maximum fixed by said law and the minimum shall not be less than the minimum term prescribed by the same. The imposable penalty is imprisonment of not less than four (4) years but not more than eight (8) years; hence, the proper penalty imposed should be within the range of four (4) years to eight (8) years. Thus, applying the Indeterminate Sentence Law, the Court can impose the minimum and maximum terms of the penalty of imprisonment within the range of four (4) years to eight (8) years. WHEREFORE, the Petition for Review on Certiorari dated March 25, 2006 of petitioner Delia D. Romero is hereby DENIED. Consequently, the Decision dated July 18, 2005 and Resolution dated February 13, 2006 of the Court of Appeals, affirming the Decision dated February 24, 2004 of the Regional Trial Court, finding petitioner guilty beyond reasonable doubt of the crime of Illegal Recruitment as defined in paragraph (a) of Article 38 of Presidential Decree (P.D.) No. 2018, are hereby AFFIRMED with the MODIFICATION that the penalty imposed should be imprisonment of four (4) years, as minimum, to seven (7) years, as maximum, and a fine of P100,000.00 plus cost and for petitioner to return the amount of $3,600.00 or its equivalent to Romulo Padlan and the amount of $3,600.00 or its equivalent to Arturo Siapno. SO ORDERED.

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DIOSDADO M. PERALTA Associate Justice

III. Labor Standards (Book III)

Cases Pigcaulan v. Security and Credit Investigation Inc., January 16, 2012.25
January 16, 2012

G.R. No. 173648

ABDULJUAHID R. PIGCAULAN, * Petitioner, vs. SECURITY and CREDIT NVESTIGATION, INC. and/or RENE AMBY REYES, Respondents. DECISION DEL CASTILLO, J.:

It is not for an employee to prove non-payment of benefits to which he is entitled by law. Rather, it is on the employer that the burden of proving payment of these claims rests. This Petition for Review on Certiorari1 assails the February 24, 2006 Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 85515, which granted the petition for certiorari filed therewith, set aside the March 23, 2004 3 and June 14, 20044 Resolutions of the National Labor Relations Commission (NLRC), and dismissed the complaint filed by Oliver R. Canoy (Canoy) and petitioner Abduljuahid R. Pigcaulan (Pigcaulan) against respondent Security and Credit Investigation, Inc. (SCII) and its General Manager, respondent Rene Amby Reyes. Likewise assailed is the June 28, 2006 Resolution5 denying Canoys and Pigcaulans Motion for Reconsideration.6 Factual Antecedents Canoy and Pigcaulan were both employed by SCII as security guards and were assigned to SCIIs different clients. Subsequently, however, Canoy and Pigcaulan filed with the Labor Arbiter separate complaints 7 for underpayment of salaries and non-payment of overtime, holiday, rest day, service incentive leave and 13th month pays. These complaints were later on consolidated as they involved the same causes of action. Canoy and Pigcaulan, in support of their claim, submitted their respective daily time records reflecting the number of hours served and their wages for the same. They likewise presented itemized lists of their claims for the corresponding periods served. Respondents, however, maintained that Canoy and Pigcaulan were paid their just salaries and other benefits under the law; that the salaries they received were above the statutory minimum wage and the rates provided by the Philippine Association of Detective and Protective Agency Operators (PADPAO) for security guards; that their holiday pay were already included in the computation of their monthly salaries; that they were paid additional premium of 30% in addition to their basic salary whenever they were required to work on Sundays and 200% of their salary for work done on holidays; and, that Canoy and Pigcaulan were paid the corresponding 13th month pay for the years 1998 and 1999. In support thereof, copies of payroll listings8 and lists of employees who received their 13th month pay for the periods December 1997 to November 1998 and December 1998 to November 19999 were presented. In addition, respondents contended that Canoys and Pigcaulans monetary claims should only be limited to the past three years of employment pursuant to the rule on prescription of claims. Ruling of the Labor Arbiter Giving credence to the itemized computations and representative daily time records submitted by Canoy and Pigcaulan, Labor Arbiter Manuel P. Asuncion awarded them their monetary claims in his Decision10 dated June 6, 2002. The Labor Arbiter held that the payroll listings presented by the respondents did not prove that Canoy and Pigcaulan were duly paid as same were not signed by the latter or by any SCII officer. The 13th month payroll was, however, acknowledged as sufficient proof of payment, for it bears Canoys and Pigcaulans signatures. Thus, without indicating any detailed computation of the judgment award, the Labor Arbiter ordered the payment of overtime pay, holiday pay, service incentive leave pay and proportionate 13th month pay for the year 2000 in favor of Canoy and Pigcaulan, viz: WHEREFORE, the respondents are hereby ordered to pay the complainants: 1) their salary differentials in the amount of P166,849.60 for Oliver Canoy and P121,765.44 for Abduljuahid Pigcaulan; 2) the sum of P3,075.20 for Canoy and P2,449.71 for Pigcaulan for service incentive leave pay and; [3]) the sum of P1,481.85 for Canoy andP1,065.35 for Pigcaulan as proportionate 13th month pay for the year 2000. The rest of the claims are dismissed for lack of sufficient basis to make an award. SO ORDERED.11 Ruling of the National Labor Relations Commission
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Respondents appealed to the NLRC. They alleged that there was no basis for the awards made because aside from the self-serving itemized computations, no representative daily time record was presented by Canoy and Pigcaulan. On the contrary, respondents asserted that the payroll listings they submitted should have been given more probative value. To strengthen their cause, they attached to their Memorandum on Appeal payrolls 12 bearing the individual signatures of Canoy and Pigcaulan to show that the latter have received their salaries, as well as copies of transmittal letters13 to the bank to show that the salaries reflected in the payrolls were directly deposited to the ATM accounts of SCIIs employees. The NLRC, however, in a Resolution14 dated March 23, 2004, dismissed the appeal and held that the evidence show underpayment of salaries as well as non-payment of service incentive leave benefit. Accordingly, the Labor Arbiters Decision was sustained. The motion for reconsideration thereto was likewise dismissed by the NLRC in a Resolution15 dated June 14, 2004. Ruling of the Court of Appeals In respondents petition for certiorari with prayer for the issuance of a temporary restraining order and preliminary injunction16 before the CA, they attributed grave abuse of discretion on the part of the NLRC in finding that Canoy and Pigcaulan are entitled to salary differentials, service incentive leave pay and proportionate 13th month pay and in arriving at amounts without providing sufficient bases therefor. The CA, in its Decision17 dated February 24, 2006, set aside the rulings of both the Labor Arbiter and the NLRC after noting that there were no factual and legal bases mentioned in the questioned rulings to support the conclusions made. Consequently, it dismissed all the monetary claims of Canoy and Pigcaulan on the following rationale: First. The Labor Arbiter disregarded the NLRC rule that, in cases involving money awards and at all events, as far as practicable, the decision shall embody the detailed and full amount awarded. Second. The Labor Arbiter found that the payrolls submitted by SCII have no probative value for being unsigned by Canoy, when, in fact, said payrolls, particularly the payrolls from 1998 to 1999 indicate the individual signatures of Canoy. Third. The Labor Arbiter did not state in his decision the substance of the evidence adduced by Pigcaulan and Canoy as well as the laws or jurisprudence that would show that the two are indeed entitled to the salary differential and incentive leave pays. Fourth. The Labor Arbiter held Reyes liable together with SCII for the payment of the claimed salaries and benefits despite the absence of proof that Reyes deliberately or maliciously designed to evade SCIIs alleged financial obligation; hence the Labor Arbiter ignored that SCII has a corporate personality separate and distinct from Reyes. To justify solidary liability, there must be an allegation and showing that the officers of the corporation deliberately or maliciously designed to evade the financial obligation of the corporation.18 Canoy and Pigcaulan filed a Motion for Reconsideration, but same was denied by the CA in a Resolution19 dated June 28, 2006. Hence, the present Petition for Review on Certiorari. Issues The petition ascribes upon the CA the following errors: I. The Honorable Court of Appeals erred when it dismissed the complaint on mere alleged failure of the Labor Arbiter and the NLRC to observe the prescribed form of decision, instead of remanding the case for reformation of the decision to include the desired detailed computation. II. The Honorable Court of Appeals erred when it [made] complainants suffer the consequences of the alleged non-observance by the Labor Arbiter and NLRC of the prescribed forms of decisions considering that they have complied with all needful acts required to support their claims. III. The Honorable Court of Appeals erred when it dismissed the complaint allegedly due to absence of legal and factual [bases] despite attendance of substantial evidence in the records.20

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It is well to note that while the caption of the petition reflects both the names of Canoy and Pigcaulan as petitioners, it appears from its body that it is being filed solely by Pigcaulan. In fact, the Verification and Certification of Non-Forum Shopping was executed by Pigcaulan alone. In his Petition, Pigcaulan submits that the Labor Arbiter and the NLRC are not strictly bound by the rules. And even so, the rules do not mandate that a detailed computation of how the amount awarded was arrived at should be embodied in the decision. Instead, a statement of the nature or a description of the amount awarded and the specific figure of the same will suffice. Besides, his and Canoys claims were supported by substantial evidence in the form of the handwritten detailed computations which the Labor Arbiter termed as "representative daily time records," showing that they were not properly compensated for work rendered. Thus, the CA should have remanded the case instead of outrightly dismissing it. In their Comment,21 respondents point out that since it was only Pigcaulan who filed the petition, the CA Decision has already become final and binding upon Canoy. As to Pigcaulans arguments, respondents submit that they were able to present sufficient evidence to prove payment of just salaries and benefits, which bits of evidence were unfortunately ignored by the Labor Arbiter and the NLRC. Fittingly, the CA reconsidered these pieces of evidence and properly appreciated them. Hence, it was correct in dismissing the claims for failure of Canoy and Pigcaulan to discharge their burden to disprove payment. Pigcaulan, this time joined by Canoy, asserts in his Reply 22 that his filing of the present petition redounds likewise to Canoys benefit since their complaints were consolidated below. As such, they maintain that any kind of disposition made in favor or against either of them would inevitably apply to the other. Hence, the institution of the petition solely by Pigcaulan does not render the assailed Decision final as to Canoy. Nonetheless, in said reply they appended Canoys affidavit23 where he verified under oath the contents and allegations of the petition filed by Pigcaulan and also attested to the authenticity of its annexes. Canoy, however, failed to certify that he had not filed any action or claim in another court or tribunal involving the same issues. He likewise explains in said affidavit that his absence during the preparation and filing of the petition was caused by severe financial distress and his failure to inform anyone of his whereabouts. Our Ruling The assailed CA Decision is considered final as to Canoy. We have examined the petition and find that same was filed by Pigcaulan solely on his own behalf. This is very clear from the petitions prefatory which is phrased as follows: COMES NOW Petitioner Abduljuahid R. Pigcaulan, by counsel, unto this Honorable Court x x x. (Emphasis supplied.) Also, under the heading "Parties", only Pigcaulan is mentioned as petitioner and consistent with this, the body of the petition refers only to a "petitioner" and never in its plural form "petitioners". Aside from the fact that the Verification and Certification of Non-Forum Shopping attached to the petition was executed by Pigcaulan alone, it was plainly and particularly indicated under the name of the lawyer who prepared the same, Atty. Josefel P. Grageda, that he is the "Counsel for Petitioner Adbuljuahid Pigcaulan" only. In view of these, there is therefore, no doubt, that the petition was brought only on behalf of Pigcaulan. Since no appeal from the CA Decision was brought by Canoy, same has already become final and executory as to him. Canoy cannot now simply incorporate in his affidavit a verification of the contents and allegations of the petition as he is not one of the petitioners therein. Suffice it to state that it would have been different had the said petition been filed in behalf of both Canoy and Pigcaulan. In such a case, subsequent submission of a verification may be allowed as non-compliance therewith or a defect therein does not necessarily render the pleading, or the petition as in this case, fatally defective.24 "The court may order its submission or correction, or act on the pleading if the attending circumstances are such that strict compliance with the Rule may be dispensed with in order that the ends of justice may be served thereby. Further, a verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations in the complaint or petition signs the verification, and when matters alleged in the petition have been made in good faith or are true and correct."25 However, even if it were so, we note that Canoy still failed to submit or at least incorporate in his affidavit a certificate of non-forum shopping. The filing of a certificate of non-forum shopping is mandatory so much so that non-compliance could only be tolerated by special circumstances and compelling reasons.26 This Court has held that when there are several petitioners, all of them must execute and sign the certification against forum shopping; otherwise, those who did not sign will be dropped as parties to the case. 27 True, we held that in some cases, execution by only one of the petitioners on behalf of the other petitioners constitutes substantial compliance with the rule on the filing of a certificate of non-forum shopping on the ground of common interest or common cause of action or defense.28 We, however, find that common interest is not present in the instant petition. To recall, Canoys and Pigcaulans complaints were consolidated because they both sought the same reliefs against the same respondents. This does not, however, mean that they share a common interest or defense. The evidence required to substantiate their claims may not be the same. A particular evidence which could sustain Canoys action may not effectively serve as sufficient to support Pigcaulans claim.

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Besides, assuming that the petition is also filed on his behalf, Canoy failed to show any reasonable cause for his failure to join Pigcaulan to personally sign the Certification of Non-Forum Shopping. It is his duty, as a litigant, to be prudent in pursuing his claims against SCII, especially so, if he was indeed suffering from financial distress. However, Canoy failed to advance any justifiable reason why he did not inform anyone of his whereabouts when he knows that he has a pending case against his former employer. Sadly, his lack of prudence and diligence cannot merit the courts consideration or sympathy. It must be emphasized at this point that procedural rules should not be ignored simply because their non-observance may result in prejudice to a partys substantial rights. The Rules of Court should be followed except only for the most persuasive of reasons.29 Having declared the present petition as solely filed by Pigcaulan, this Court shall consider the subsequent pleadings, although apparently filed under his and Canoys name, as solely filed by the former. There was no substantial evidence to support the grant of overtime pay. The Labor Arbiter ordered reimbursement of overtime pay, holiday pay, service incentive leave pay and 13th month pay for the year 2000 in favor of Canoy and Pigcaulan. The Labor Arbiter relied heavily on the itemized computations they submitted which he considered as representative daily time records to substantiate the award of salary differentials. The NLRC then sustained the award on the ground that there was substantial evidence of underpayment of salaries and benefits. We find that both the Labor Arbiter and the NLRC erred in this regard. The handwritten itemized computations are self-serving, unreliable and unsubstantial evidence to sustain the grant of salary differentials, particularly overtime pay. Unsigned and unauthenticated as they are, there is no way of verifying the truth of the handwritten entries stated therein. Written only in pieces of paper and solely prepared by Canoy and Pigcaulan, these representative daily time records, as termed by the Labor Arbiter, can hardly be considered as competent evidence to be used as basis to prove that the two were underpaid of their salaries. We find nothing in the records which could substantially support Pigcaulans contention that he had rendered service beyond eight hours to entitle him to overtime pay and during Sundays to entitle him to restday pay. Hence, in the absence of any concrete proof that additional service beyond the normal working hours and days had indeed been rendered, we cannot affirm the grant of overtime pay to Pigcaulan. Pigcaulan is entitled to holiday pay, service incentive leave pay and proportionate 13th month pay for year 2000. However, with respect to the award for holiday pay, service incentive leave pay and 13th month pay, we affirm and rule that Pigcaulan is entitled to these benefits. Article 94 of the Labor Code provides that: ART. 94. RIGHT TO HOLIDAY PAY. (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than ten (10) workers; xxxx While Article 95 of the Labor Code provides: ART. 95. RIGHT TO SERVICE INCENTIVE LEAVE. (a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive of five days with pay. xxxx Under the Labor Code, Pigcaulan is entitled to his regular rate on holidays even if he does not work.30 Likewise, express provision of the law entitles him to service incentive leave benefit for he rendered service for more than a year already. Furthermore, under Presidential Decree No. 851,31 he should be paid his 13th month pay. As employer, SCII has the burden of proving that it has paid these benefits to its employees.32 SCII presented payroll listings and transmittal letters to the bank to show that Canoy and Pigcaulan received their salaries as well as benefits which it claimed are already integrated in the employees monthly salaries. However, the documents presented do not prove SCIIs allegation. SCII failed to show any other concrete proof by means of records, pertinent files or similar documents reflecting that the specific claims have been paid. With respect to 13th month pay, SCII presented proof that this benefit was paid but only for the years 1998 and 1999. To repeat, the burden of proving payment of these monetary claims rests on SCII, being the employer. It is a rule that one who pleads payment has the burden of proving it. "Even when the plaintiff alleges non-payment, still the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment."33Since SCII failed to provide

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convincing proof that it has already settled the claims, Pigcaulan should be paid his holiday pay, service incentive leave benefits and proportionate 13th month pay for the year 2000. The CA erred in dismissing the claims instead of remanding the case to the Labor Arbiter for a detailed computation of the judgment award. Indeed, the Labor Arbiter failed to provide sufficient basis for the monetary awards granted. Such failure, however, should not result in prejudice to the substantial rights of the party. While we disallow the grant of overtime pay and restday pay in favor of Pigcaulan, he is nevertheless entitled, as a matter of right, to his holiday pay, service incentive leave pay and 13th month pay for year 2000. Hence, the CA is not correct in dismissing Pigcaulans claims in its entirety. Consistent with the rule that all money claims arising from an employer-employee relationship shall be filed within three years from the time the cause of action accrued,34 Pigcaulan can only demand the amounts due him for the period within three years preceding the filing of the complaint in 2000. Furthermore, since the records are insufficient to use as bases to properly compute Pigcaulans claims, the case should be remanded to the Labor Arbiter for a detailed computation of the monetary benefits due to him. WHEREFORE, the petition is GRANTED. The Decision dated February 24, 2006 and Resolution dated June 28, 2006 of the Court of Appeals in CA-G.R. SP No. 85515 are REVERSED and SET ASIDE. Petitioner Abduljuahid R. Pigcaulan is hereby declared entitled to holiday pay and service incentive leave pay for the years 1997-2000 and proportionate 13th month pay for the year 2000. The case is REMANDED to the Labor Arbiter for further proceedings to determine the exact amount and to make a detailed computation of the monetary benefits due Abduljuahid R. Pigcaulan which Security and Credit Investigation Inc. should pay without delay. SO ORDERED.
MARIANO C. DEL CASTILLO Associate Justice

Bisig Manggagawa sa Tryco v. NLRC, October 2008.26

G.R. No. 151309 October 15, 2008 BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President, JOSELITO LARIO, VIVENCIO B. BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or WILFREDO C. RIVERA, respondents. DECISION NACHURA, J.:

This petition seeks a review of the Decision1 of the Court of Appeals (CA) dated July 24, 2001 and Resolution dated December 20, 2001, which affirmed the finding of the National Labor Relations Commission (NLRC) that the petitioners' transfer to another workplace did not amount to a constructive dismissal and an unfair labor practice. The pertinent factual antecedents are as follows: Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal office is located in Caloocan City. Petitioners Joselito Lario, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are its regular employees, occupying the positions of helper, shipment helper and factory workers, respectively, assigned to the Production Department. They are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining representative of the rank-and-file employees. Tryco and the petitioners signed separate Memorand[a] of Agreement2 (MOA), providing for a compressed workweek schedule to be implemented in the company effective May 20, 1996. The MOA was entered into pursuant to Department of Labor and Employment Department Order (D.O.) No. 21, Series of 1990, Guidelines on the Implementation of Compressed Workweek. As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as the regular working hours, and no overtime pay shall be due and payable to the employee for work rendered during those hours. The MOA specifically stated that the employee waives the right to claim overtime pay for work rendered after 5:00 p.m. until 6:12 p.m. from Monday to Friday considering that the compressed workweek schedule is adopted in lieu of the regular workweek schedule which also consists of 46 hours. However, should an employee be permitted or required to work beyond 6:12 p.m., such employee shall be entitled to overtime pay. Tryco informed the Bureau of Working Conditions of the Department of Labor and Employment of the implementation of a compressed workweek in the company.3
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In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining agreement (CBA) but failed to arrive at a new agreement. Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal Industry of the Department of Agriculture reminding it that its production should be conducted in San Rafael, Bulacan, not in Caloocan City: MR. WILFREDO C. RIVERA President, Tryco Pharma Corporation San Rafael, Bulacan Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan Dear Mr. Rivera: This is to remind you that your License to Operate as Veterinary Drug and Product Manufacturer is addressed at San Rafael, Bulacan, and so, therefore, your production should be done at the above mentioned address only. Further, production of a drug includes propagation, processing, compounding, finishing, filling, repacking, labeling, advertising, storage, distribution or sale of the veterinary drug product. In no instance, therefore, should any of the above be done at your business office at 117 M. Ponce St., EDSA, Caloocan City. Please be guided accordingly. Thank you. Very truly yours, (sgd.) EDNA ZENAIDA V. VILLACORTE, D.V.M. Chief, Animal Feeds Standard Division4 Accordingly, Tryco issued a Memorandum5 dated April 7, 1997 which directed petitioner Aya-ay to report to the company's plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated the order on April 18, 1997.6 Subsequently, through a Memorandum7 dated May 9, 1997, Tryco also directed petitioners Egera, Lario and Barte to report to the company's plant site in Bulacan. BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes unfair labor practice. In protest, BMT declared a strike on May 26, 1997. In August 1997, petitioners filed their separate complaints8 for illegal dismissal, underpayment of wages, nonpayment of overtime pay and service incentive leave, and refusal to bargain against Tryco and its President, Wilfredo C. Rivera. In their Position Paper,9 petitioners alleged that the company acted in bad faith during the CBA negotiations because it sent representatives without authority to bind the company, and this was the reason why the negotiations failed. They added that the management transferred petitioners Lario, Barte, Egera and Aya-ay from Caloocan to San Rafael, Bulacan to paralyze the union. They prayed for the company to pay them their salaries from May 26 to 31, 1997, service incentive leave, and overtime pay, and to implement Wage Order No. 4. In their defense, respondents averred that the petitioners were not dismissed but they refused to comply with the management's directive for them to report to the company's plant in San Rafael, Bulacan. They denied the allegation that they negotiated in bad faith, stating that, in fact, they sent the Executive Vice-President and Legal Counsel as the company's representatives to the CBA negotiations. They claim that the failure to arrive at an agreement was due to the stubbornness of the union panel. Respondents further averred that, long before the start of the negotiations, the company had already been planning to decongest the Caloocan office to comply with the government policy to shift the concentration of manufacturing activities from the metropolis to the countryside. The decision to transfer the company's production activities to San Rafael, Bulacan was precipitated by the letter-reminder of the Bureau of Animal Industry. On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit.10 The Labor Arbiter held that the transfer of the petitioners would not paralyze or render the union ineffective for the following reasons: (1) complainants are not members of the negotiating panel; and (2) the transfer was made pursuant to the directive of the Department of Agriculture.

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The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of wages was justified because the petitioners did not render work from May 26 to 31, 1997; overtime pay is not due because of the compressed workweek agreement between the union and management; and service incentive leave pay cannot be claimed by the complainants because they are already enjoying vacation leave with pay for at least five days. As for the claim of noncompliance with Wage Order No. 4, the Labor Arbiter held that the issue should be left to the grievance machinery or voluntary arbitrator. On October 29, 1999, the NLRC affirmed the Labor Arbiter's Decision, dismissing the case, thus: PREMISES CONSIDERED, the Decision of February 27, 1998 is hereby AFFIRMED and complainants' appeal therefrom DISMISSED for lack of merit. Complainants Joselito Lario, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are directed to report to work at respondents' San Rafael Plant, Bulacan but without backwages. Respondents are directed to accept the complainants back to work. SO ORDERED.11 On December 22, 1999, the NLRC denied the petitioners' motion for reconsideration for lack of merit.12 Left with no recourse, petitioners filed a petition for certiorari with the CA. On July 24, 2001, the CA dismissed the petition for certiorari and ruled that the transfer order was a management prerogative not amounting to a constructive dismissal or an unfair labor practice. The CA further sustained the enforceability of the MOA, particularly the waiver of overtime pay in light of this Court's rulings upholding a waiver of benefits in exchange of other valuable privileges. The dispositive portion of the said CA decision reads: WHEREFORE, the instant petition is DISMISSED. The Decision of the Labor Arbiter dated February 27, 1998 and the Decision and Resolution of the NLRC promulgated on October 29, 1999 and December 22, 1999, respectively, in NLRC-NCR Case Nos. 08-05715-97, 08-06115-97 and 08-05920-97, are AFFIRMED. SO ORDERED.13 The CA denied the petitioners' motion for reconsideration on December 20, 2001.14 Dissatisfied, petitioners filed this petition for review raising the following issues: -ATHE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE PATENTLY ERRONEOUS RULING OF THE LABOR ARBITER AND THE COMMISSION THAT THERE WAS NO DISMISSAL, MUCH LESS ILLEGAL DISMISSAL, OF THE INDIVIDUAL PETITIONERS. -BTHE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND CONCLUDING THAT PRIVATE RESPONDENTS COMMITTED ACTS OF UNFAIR LABOR PRACTICE. -CTHE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING THAT PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIMS AND TO DAMAGES, AS WELL AS LITIGATION COSTS AND ATTORNEY'S FEES.15 The petition has no merit. We have no reason to deviate from the well-entrenched rule that findings of fact of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality, and bind us when supported by substantial evidence.16 This is particularly true when the findings of the Labor Arbiter, the NLRC and the CA are in absolute agreement.17 In this case, the Labor Arbiter, the NLRC, and the CA uniformly agreed that the petitioners were not constructively dismissed and that the transfer orders did not amount to an unfair labor practice. But if only to disabuse the minds of the petitioners who have persistently pursued this case on the mistaken belief that the labor tribunals and the appellate court committed grievous errors, this Court will go over the issues raised in this petition.

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Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They maintain that the letter of the Bureau of Animal Industry is not credible because it is not authenticated; it is only a ploy, solicited by respondents to give them an excuse to effect a massive transfer of employees. They point out that the Caloocan City office is still engaged in production activities until now and respondents even hired new employees to replace them. We do not agree. We refuse to accept the petitioners' wild and reckless imputation that the Bureau of Animal Industry conspired with the respondents just to effect the transfer of the petitioners. There is not an iota of proof to support this outlandish claim. Absent any evidence, the allegation is not only highly irresponsible but is grossly unfair to the government agency concerned. Even as this Court has given litigants and counsel a relatively wide latitude to present arguments in support of their cause, we will not tolerate outright misrepresentation or baseless accusation. Let this be fair warning to counsel for the petitioners. Furthermore, Tryco's decision to transfer its production activities to San Rafael, Bulacan, regardless of whether it was made pursuant to the letter of the Bureau of Animal Industry, was within the scope of its inherent right to control and manage its enterprise effectively. While the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.18 This prerogative extends to the management's right to regulate, according to its own discretion and judgment, all aspects of employment, including the freedom to transfer and reassign employees according to the requirements of its business. 19 Management's prerogative of transferring and reassigning employees from one area of operation to another in order to meet the requirements of the business is, therefore, generally not constitutive of constructive dismissal.20 Thus, the consequent transfer of Tryco's personnel, assigned to the Production Department was well within the scope of its management prerogative. When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not involve a demotion in rank or diminution of salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal.21 However, the employer has the burden of proving that the transfer of an employee is for valid and legitimate grounds. The employer must show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits.22 Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or diminution of salaries, benefits and other privileges of the petitioners. Petitioners, therefore, anchor their objection solely on the ground that it would cause them great inconvenience since they are all residents of Metro Manila and they would incur additional expenses to travel daily from Manila to Bulacan. The Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim of constructive dismissal.23 Objection to a transfer that is grounded solely upon the personal inconvenience or hardship that will be caused to the employee by reason of the transfer is not a valid reason to disobey an order of transfer.24 Incidentally, petitioners cite Escobin v. NLRC25 where the Court held that the transfer of the employees therein was unreasonable. However, the distance of the workplace to which the employees were being transferred can hardly compare to that of the present case. In that case, the employees were being transferred from Basilan to Manila; hence, the Court noted that the transfer would have entailed the separation of the employees from their families who were residing in Basilan and accrual of additional expenses for living accommodations in Manila. In contrast, the distance from Caloocan to San Rafael, Bulacan is not considerably great so as to compel petitioners to seek living accommodations in the area and prevent them from commuting to Metro Manila daily to be with their families. Petitioners, however, went further and argued that the transfer orders amounted to unfair labor practice because it would paralyze and render the union ineffective. To begin with, we cannot see how the mere transfer of its members can paralyze the union. The union was not deprived of the membership of the petitioners whose work assignments were only transferred to another location. More importantly, there was no showing or any indication that the transfer orders were motivated by an intention to interfere with the petitioners' right to organize. Unfair labor practice refers to acts that violate the workers' right to organize. With the exception of Article 248(f) of the Labor Code of the Philippines, the prohibited acts are related to the workers' right to self-organization and to the observance of a CBA. Without that element, the acts, no matter how unfair, are not unfair labor practices.26 Finally, we do not agree with the petitioners' assertion that the MOA is not enforceable as it is contrary to law. The MOA is enforceable and binding against the petitioners. Where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking.27

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D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will derive from the adoption of a compressed workweek scheme, thus: The compressed workweek scheme was originally conceived for establishments wishing to save on energy costs, promote greater work efficiency and lower the rate of employee absenteeism, among others. Workers favor the scheme considering that it would mean savings on the increasing cost of transportation fares for at least one (1) day a week; savings on meal and snack expenses; longer weekends, or an additional 52 off-days a year, that can be devoted to rest, leisure, family responsibilities, studies and other personal matters, and that it will spare them for at least another day in a week from certain inconveniences that are the normal incidents of employment, such as commuting to and from the workplace, travel time spent, exposure to dust and motor vehicle fumes, dressing up for work, etc. Thus, under this scheme, the generally observed workweek of six (6) days is shortened to five (5) days but prolonging the working hours from Monday to Friday without the employer being obliged for pay overtime premium compensation for work performed in excess of eight (8) hours on weekdays, in exchange for the benefits abovecited that will accrue to the employees. Moreover, the adoption of a compressed workweek scheme in the company will help temper any inconvenience that will be caused the petitioners by their transfer to a farther workplace. Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to protect the interest of the employees in the implementation of a compressed workweek scheme: 1. The employees voluntarily agree to work more than eight (8) hours a day the total in a week of which shall not exceed their normal weekly hours of work prior to adoption of the compressed workweek arrangement; 2. There will not be any diminution whatsoever in the weekly or monthly take-home pay and fringe benefits of the employees; 3. If an employee is permitted or required to work in excess of his normal weekly hours of work prior to the adoption of the compressed workweek scheme, all such excess hours shall be considered overtime work and shall be compensated in accordance with the provisions of the Labor Code or applicable Collective Bargaining Agreement (CBA); 4. Appropriate waivers with respect to overtime premium pay for work performed in excess of eight (8) hours a day may be devised by the parties to the agreement. 5. The effectivity and implementation of the new working time arrangement shall be by agreement of the parties. PESALA v. NLRC,28 cited by the petitioners, is not applicable to the present case. In that case, an employment contract provided that the workday consists of 12 hours and the employee will be paid a fixed monthly salary rate that was above the legal minimum wage. However, unlike the present MOA which specifically states that the employee waives his right to claim overtime pay for work rendered beyond eight hours, the employment contract in that case was silent on whether overtime pay was included in the payment of the fixed monthly salary. This necessitated the interpretation by the Court as to whether the fixed monthly rate provided under the employment contract included overtime pay. The Court noted that if the employee is paid only the minimum wage but with overtime pay, the amount is still greater than the fixed monthly rate as provided in the employment contract. It, therefore, held that overtime pay was not included in the agreed fixed monthly rate. Considering that the MOA clearly states that the employee waives the payment of overtime pay in exchange of a five-day workweek, there is no room for interpretation and its terms should be implemented as they are written. WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 24, 2001 and Resolution dated December 20, 2001 are AFFIRMED. SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice

Wages Workers preference in case of bankruptcy Sapco v. Undaloc, May 22, 2008.
G.R. No. 155034 May 22, 2008 PEOPLE OF THE PHILIPPINES, appellee, vs. FRANCISCO BLANCAFLOR, appellant.

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DECISION TINGA, J.:

Assailed in this Petition for Review1 is the Decision2 of the Court of Appeals3 in CA-G.R. SP No. 66449 deleting the award of salary differential and attorneys fees to petitioner Virgilio Sapio, as well as the Resolution4 denying his motion for reconsideration. The controversy started with a complaint filed by petitioner against Undaloc Construction and/or Engineer Cirilo Undaloc for illegal dismissal, underpayment of wages and nonpayment of statutory benefits. Respondent Undaloc Construction, a single proprietorship owned by Cirilo Undaloc, is engaged in road construction business in Cebu City. Petitioner had been employed as watchman from 1 May 1995 to 30 May 1998 when he was terminated on the ground that the project he was assigned to was already finished, he being allegedly a project employee. Petitioner asserted he was a regular employee having been engaged to perform works which are "usually necessary or desirable" in respondents business. He claimed that from 1 May to 31 August 1995 and from 1 September to 31 December 1995, his daily wage rate was only P80.00 and P90.00, respectively, instead of P121.87 as mandated by Wage Order No. ROVII-03. From 1 March 1996 to 30 May 1998, his daily rate was P105.00. He further alleged that he was made to sign two payroll sheets, the first bearing the actual amount he received wherein his signature was affixed to the last column opposite his name, and the second containing only his name and signature. To buttress this allegation, petitioner presented the payroll sheet covering the period from 4 to 10 December 1995 in which the entries were written in pencil. He also averred that his salary from 18 to 30 May 1998 was withheld by respondents.5 For its part, respondent Cirilo Undaloc maintained that petitioner was hired as a project employee on 1 May 1995 and was assigned as watchman from one project to another until the termination of the project on 30 May 1998. 6 Refuting the claim of underpayment, respondent presented the payroll sheets from 2 September to 8 December 1996, 26 May to 15 June 1997, and 12 January to 31 May 1998.7 On 12 July 1999, the Labor Arbiter8 rendered a decision the dispositive portion of which reads: WHEREFORE, in the [sic] light of the foregoing, judgment is rendered finding complainant to be a project employee and his termination was for an authorized cause. However, respondent is found liable to pay complainants salary of P2,648.45 and 13th month pay of P2,489.00. Respondent is also found liable to pay complainants salary differential in the amount of P24,902.88. Attorneys fee of P3,000.00 is also awarded. All other claims are dismissed for lack of merit.9 Respondents appealed the award of salary differential to the National Labor Relations Commission (NLRC). In a Decision 10 dated 28 August 2000, the NLRC sustained the findings of the Labor Arbiter. Respondents elevated the case to the Court of Appeals which deleted the award of salary differential and attorneys fees. Thus, this petition for review. Petitioner raises two grounds, one procedural and the other substantive. On the procedural aspect, petitioner contends that the appellate court erred in failing to dismiss respondents petition for certiorari brought before it on the ground that respondents failed to attach certified true copies of the NLRCs decision and resolution denying the motion for reconsideration.11 In his Comment on the Petition for Certiorari with Prayer for Temporary Restraining and/or Preliminary Injunction12 filed with the Court of Appeals on 22 November 2001, petitioner did not raise this procedural issue. Neither did he do so when he moved for reconsideration of the 8 May 2002 Decision of the Court of Appeals. It is only now before this Court that petitioner proffered the same. This belated submission spells doom for petitioner. More fundamentally, an examination of the Court of Appeals rollo belies petitioner as it confirms that the alleged missing documents were in fact attached to the petition. 13 That petitioner was a project employee became a non-issue beginning with the decision of the Labor Arbiter. Contested still is his entitlement to salary differential, apart from attorneys fees. Petitioner avers that he was paid a daily salary way below the minimum wage provided for by law. 14 His claim of salary differential represents the difference between the daily wage he actually received and the statutory minimum wage, which he presented as follows:
Actual Daily Wage Received (for 8 hours worked) 5-1-95 to 8-31-95 P80.00 plus 3 hrs. OT Minimum Daily Wage Provided by Law (for 8 hours worked) P121.87

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Place of Assignment: 9-1-95 to 12-31-95 Place of Assignment: 1-1-96 to 2-28-96 Place of Assignment: 3-1-96 to 6-30-96 Place of Assignment: 7-1-96 to 9-30-96 Place of Assignment: 10-1-96 to 3-14-97 Place of Assignment: 3-15-97 to 6-30-97 Place of Assignment: 7-1-97 to 9-30-97 Place of Assignment: 10-1-97 to 3-31-98 Place of Assignment: 4-1-98 to 5-17-98 Place of Assignment: 5-18-98 to 5-30-98 Place of Assignment:

M.J. Cuenco-Imus Road Link P90.00 plus 3 hrs. OT P90.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT P105.00 plus 3 hrs. OT

P121.87 P131.00 P131.00 P136.00 P141.00 P141.00 P150.00 P150.00 P155.00 P160.00

To counter petitioners assertions, respondents submitted typewritten and signed payroll sheets from 2 September to 8 December 1996, from 26 May to 15 June 1997, and from 12 January to 31 May 1998. 15 These payroll sheets clearly indicate that petitioner did receive a daily salary of P141.00. In turn, petitioner presented the December 1995 payroll sheet written in pencil16 in tandem with the assertion that he, together with his co-employees, was required to sign two sets of payroll sheets in different colors: white, which bears the actual amount he received with his signature affixed in the last column opposite his name, and yellow, where only his name appears thereon with his signature also affixed in the last column opposite his name.17 In the December 1995 payroll sheet, petitioner appears to have received P90.00 only as his daily salary but he did not sign the same. Banking on the fact that the December 1995 payroll sheet was written in pencil, the Labor Arbiter concluded that the entries were susceptible to change or erasure and that that susceptibility in turn rendered the other payroll sheets though typewritten less credible. Thus: x x x Complainants allegation that he was made to sign two (2) payrolls, the first page bears the actual amount he received when he affixed his signature in the last column and the original with entries written in pencil is admitted by the respondent that it did so. When respondent had his payrolls prepared in pencil, the tendency is that the entries therein will be erased and changed them so that it would appear that the salaries of the workers are in conformity with the law. The explanation given by the respondent through the affidavit of Jessica Labang that the payrolls were first written in pencil because of the numerous employees to be paid each Saturday, is not acceptable. The efforts done in preparing the payroll in pencil is practically the same if it was done in ballpen or through typewriters. Obviously, the purpose is to circumvent the law. When payrolls are prepared in pencil, it is so easy for the employer to alter the amounts actually paid to the workers and make it appear that the amounts paid to the workers are in accord with law. The probative value of the payrolls submitted by the respondent becomes questionable, thus, cannot be given weight. It is most likely that the entries in the payrolls are no longer the same entries when complainant signed them. Complainant is therefore entitled to salary differential as complainants salary was only P105.00. x x x18 Thereupon, the Labor Arbiter proceeded to grant petitioners salary differential to the tune of P24,902.88. The Court of Appeals did not subscribe to the common findings of the Labor Arbiter and the NLRC. The appellate court pointed out that allegations of fraud in the preparation of payroll sheets must be substantiated by evidence and not by mere suspicions or conjectures, viz: As a general rule, factual findings and conclusions drawn by the National Labor Relations Commission are accorded great weight and respect upon appeal, even finality, as long as they are supported by substantial evidence. Substantial evidence is more than a mere scintilla. It means such relevant evidence that a reasonable mind would accept as sufficient to support a conclusion. A suspicion or belief no matter how sincerely felt cannot be a substitute for factual findings carefully established through an orderly procedure. The Labor Arbiter merely surmised and presumed that petitioners had the tendency to alter the entries in the payroll. Albeit the petitioner admitted that the payrolls were initially made in pencil, the same does not, and must not be presumed as

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groundwork for alteration. We find nothing in the proceedings, as well as in the pleadings submitted, to sustain the Labor Arbiters findings of the alleged "tendency" to alter the entries. It is elementary in this jurisdiction that whoever alleges fraud or mistake affecting a transaction must substantiate his allegation, since it is presumed that a person takes ordinary care of his concerns and private transactions have been fair and regular. Persons are presumed to have taken care of their business. Absent any indication sufficient enough to support a conclusion, we cannot uphold the findings of the Labor Arbiter and the NLRC.19 The conclusion of the Labor Arbiter that entries in the December 1995 payroll sheet could have been altered is utterly baseless. The claim that the December 1995 payroll sheet was written in pencil and was thus rendered it prone to alterations or erasures is clearly non sequitur. The same is true with respect to the typewritten payroll sheets. In fact, neither the Labor Arbiter nor the NLRC found any alteration or erasure or traces thereat, whether on the pencil-written or typewritten payroll sheets. Indeed, the most minute examination will not reveal any tampering. Furthermore, if there is any adverse conclusion as regards the December 1995 payroll sheet, it must be confined only to it and cannot be applied to the typewritten payroll sheets. Moreover, absent any evidence to the contrary, good faith must be presumed in this case. Entries in the payroll, being entries in the course of business, enjoy the presumption of regularity under Rule 130, Section 43 of the Rules of Court. Hence, while as a general rule, the burden of proving payment of monetary claims rests on the employer, 20 when fraud is alleged in the preparation of the payroll, the burden of evidence shifts to the employee and it is incumbent upon him to adduce clear and convincing evidence in support of his claim.21 Unfortunately, petitioners bare assertions of fraud do not suffice to overcome the disputable presumption of regularity. While we adhere to the position of the appellate court that the "tendency" to alter the entries in the payrolls was not substantiated, we cannot however subscribe to the total deletion of the award of salary differential and attorneys fees, as it so ruled. The Labor Arbiter granted a salary differential of P24,902.88.22 The Labor Arbiter erred in his computation. He fixed the daily wage rate actually received by petitioner at P105.0023 without taking into consideration the P141.00 rate indicated in the typewritten payroll sheets submitted by respondents. Moreover, the Labor Arbiter misapplied the wage orders24 when he wrongly categorized respondent as falling within the first category. Based on the stipulated number of employees and audited financial statements,25 respondents should have been covered by the second category. To avoid further delay in the disposition of this case which is not in consonance with the objective of speedy justice, we have to adjudge the rightful computation of the salary differential based on the applicable wage orders. After all, the supporting records are complete. This Court finds that from 1 January to 30 August 1996 and 1 July 1997 to 31 May 1998, petitioner had received a wage less than the minimum mandated by law. Therefore, he is entitled to a salary differential. For the periods from 30 May to 31 December 1995 and 2 September 1996 to 30 June 1997, petitioner had received the correct wages. To illustrate:
Wage actually received P105.00 P105.00 P105.00 P141.0029 P141.00 P141.00 P141.00 P141.00 P141.00 Statutory Minimum wage P99.0026 P125.0027 P130.0028 P130.0030 P135.0031 P139.0032 P144.0033 P149.0034 P154.0035 Differential 0 P20.00/day or P3120.00 P25.00/day or P1300.00 0 0 0 P3.00/day or P234.00 P8.00/day or P1248.00 P13.00/day or P676.00

30 May 31 December. 1995 1 January 30 June 1996 (156 days) 1 July 30 August 1996 (52 days) 2 30 September 1996 1 October 1996- 15 March 1997 16 March 30 June 1997 1 July 30 September 1997 (78 days) 1 October 1997- 31 March 1998 (156 days) 1 April 31 May 1998 (52 days)

The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00 However, pursuant to Section 12 of Republic Act (R.A.) No. 6727, as amended by R.A. No. 8188. Respondents are required to pay double the amount owed to petitioner, bringing their total liability to P13,156.00. Section 12. Any person, corporation, trust, firm, partnership, association or entity which refuses or fails to pay any of the prescribed increases or adjustments in the wage rates made in accordance with this Act shall be punished by a fine not less than Twenty-five thousand pesos (P25,000.00) nor more than One hundred thousand pesos (P100,000.00) or imprisonment of not less than two (2) years nor more than four (4) years, or both such fine and imprisonment at the discretion of the court: Provided, That any person convicted under this Act shall not be entitled to the benefits provided for under the Probation Law.

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The employer concerned shall be ordered to pay an amount equivalent to double the unpaid benefits owing to the employees: Provided, That payment of indemnity shall not absolve the employer from the criminal liability imposable under this Act. If the violation is committed by a corporation, trust or firm, partnership, association or any other entity, the penalty of imprisonment shall be imposed upon the entitys responsible officers, including, but not limited to, the president, vice president, chief executive officer, general manager, managing director or partner. (Emphasis supplied) The award of attorneys fees is warranted under the circumstances of this case. Under Article 2208 of the New Civil Code, attorney's fees can be recovered in actions for the recovery of wages of laborers and actions for indemnity under employer's liability laws 36 but shall not exceed 10% of the amount awarded.37 The fees may be deducted from the total amount due the winning party. WHEREFORE, the petition is PARTIALLY GRANTED. Petitioner is awarded the salary differential in the reduced amount of P13,156.00 and respondents are directed to pay the same, as well as ten percent (10%) of the award as attorney's fees. SO ORDERED.
Quisumbing,Chairperson Velasco, Jr., Leonardo- de Casto, Brion, JJ., concur.

Molina v. Pacific Plans Inc., August 15, 2011.27

G.R. No. 165476 August 15, 2011 AGRIPINO V. MOLINA, Petitioner, vs. PACIFIC PLANS, INC., Respondent. RESOLUTION PERALTA, J.:

For resolution is petitioner's Urgent Manifestation and Supplemental Motion to Implement the January 14, 2009 Resolution of this Court.1 On March 10, 2006, this Court promulgated its Decision2 in the instant case finding the dismissal of herein petitioner to be illegal and ordering herein respondent to immediately reinstate petitioner to his former position as Assistant Vice-President without demotion in rank and salary, and to pay him his backwages from August 1, 2001 up to his actual reinstatement, as well as other accrued monetary benefits. On March 5, 2007, the abovementioned Decision became final and executory.3 Thereafter, upon motion of petitioner, Executive Labor Arbiter Fatima Jambaro-Franco of the National Labor Relations Commission (NLRC)-National Capital Region Arbitration Branch issued an Order4 dated August 3, 2007 directing the Computation and Examination Unit (CEU) of the NLRC to compute petitioner's monetary award, inclusive of his other accrued monetary benefits. On September 3, 2007, the Executive Labor Arbiter issued a Writ of Execution commanding the sheriff of the NLRC-NCR to collect from respondent the amount of P5,494,358.75 representing petitioner's monetary award, consisting, among others, of backwages, separation pay and overriding commissions, as computed by the CEU. Meanwhile, respondent filed a Partial Appeal assailing the August 3, 2007 Order of the Executive Labor Arbiter. On February 26, 2008, the NLRC promulgated a Decision5 granting respondent's partial appeal and holding that the other monetary benefits granted to petitioner should not include salary increases based on the Collective Bargaining Agreement (CBA) because he is not covered by it, considering that he is an Assistant Vice-President. The NLRC also directed the remand of the records of the case to the Labor Arbiter of origin for the purpose of conducting a pre-execution conference and for the re-computation of the awards due to petitioner. In compliance with the Decision of the NLRC, the CEU submitted its Re-Computation indicating a total award ofP4,366,954.80 to petitioner.6 Both parties were furnished copies of the said Re-Computation. Subsequently, pre-execution conferences were held. During the proceedings, petitioner manifested that he had no objection to the monetary award as re-computed. However, he claimed that he is entitled to a legal interest of 12% on the amount due him reckoned
27

http://www.lawphil.net

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from the finality of the March 5, 2007 Decision of this Court until full payment thereof. Respondent, on the other hand, objected to the grant of overriding commissions amounting toP2,259,410.40. On November 25, 2008, the Labor Arbiter issued an Order7 approving the re-computed sum of P4,366,954.80. On December 8, 2008, respondent filed a partial appeal reiterating its stand that petitioner is not entitled to overriding commissions as well as 12% legal interest on the amount due him. Meanwhile, on December 3, 2008, petitioner filed with this Court a Very Urgent Manifestation and Motion to Order Execution of a Final and Executory Judgment. Petitioner prayed, among others, for the issuance of a writ of execution based on the approved recomputed amount awarded to petitioner plus legal interest of twelve (12%) per annum until full satisfaction thereof. On January 14, 2009, this Court issued a Resolution8 granting petitioner's Motion. On the other hand, in its Decision dated August 28, 2009, the NLRC found merit in respondent's Partial Appeal dated December 8, 2008. The dispositive portion of the NLRC Decision reads, thus: WHEREFORE, premises considered, the partial appeal filed by respondents is GRANTED IN PART. The computation of [the] Computation and Examination Unit dated July 8, 2008 is MODIFIED, in that, the award of overriding commission is DELETED, and respondents are additionally ordered to pay 12% interest per annum beginning March 5, 2007 on the monetary award of P2,107,544.40 (excluding vacation and sick leaves), which as of September 5, 2009 amounts to P632,263.32 (P2,107,544.40 x 12% x 2 years and 6 months). Thus, complainant's total monetary award is provisionally computed in the amount of P2,739,807.72. Let the records of this case be remanded immediately to the Regional Arbitration Branch of origin for execution proceedings. SO ORDERED.9 Both petitioner and respondent moved for the reconsideration of the abovequoted Decision. On June 18, 2010, the NLRC promulgated a Resolution10 granting the motions for reconsideration of petitioner and respondent holding that it was an error on its part to delete the overriding commissions from petitioner's monetary award. On the other hand, the NLRC deleted the award for legal interest. The dispositive portion of the Resolution reads as follows: WHEREFORE, premises considered, the Motions for Reconsideration filed by both parties are partly GRANTED. The assailed Decision of the Commission dated August 28, 2009 is SET ASIDE. A new one is entered REINSTATING the Computation of Monetary Awards submitted by the Computation and Examination Unit on July 8, 2008, as approved by Labor Arbiter Quitevis-Alconcel in her Order dated November 25, 2008. In compliance with the resolution of the Supreme Court dated January 14, 2009, the entire records of this case is remanded to the Labor Arbiter a quo for the immediate issuance of a writ of execution of complainant's monetary award totaling P4,366,954.80 SO ORDERED.11 On October 22, 2010, the Labor Arbiter issued an Alias Writ of Execution. In the meantime, petitioner filed the present Motion praying that the June 18, 2010 Resolution of the NLRC be modified to conform to the January 14, 2009 Resolution of this Court by including in the award, aside from the principal amount of P4,366,954.80, interest at the rate of 12% per annum from March 5, 2007 until full payment of the principal amount. Petitioner further prays that, after modification, the subject NLRC Resolution be immediately executed. On February 4, 2011, the NLRC, through its Commissioners, filed its Comment to the present Motion. Respondent also filed his Comment. The issues left for resolution now are: (1) whether petitioner is entitled to a legal interest of 12% on the principal amount due him to be computed from the finality of the March 5, 2007 Decision until full payment thereof; and (2) whether the judgment in favor of petitioner may be executed in view of respondent's claim that it is still undergoing corporate rehabilitation. The Court finds the Motion partly meritorious.

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With respect to the matter of legal interest, it should be noted that this Court's Resolution of January 14, 2009 granted petitioner's Very Urgent Manifestation and Motion to Order Execution of a Final and Executory Judgment. Petitioner prayed in the said Manifestation and Motion that in addition to the amount of P4,366,954.80 granted to him as monetary award, he should also be awarded legal interest at the rate of 12% per annum. Hence, the matter of the award of 12% legal interest is already settled. Nonetheless, it may not be amiss to reiterate the prevailing rule as enunciated in the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals12 thus: I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining the measure of recoverable damages. II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Article 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2 above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.13 Hence, the payment of legal interest becomes a necessary consequence of the finality of the Court's Decision, because reckoned from that time the said Decision becomes a judgment for money which, under established jurisprudence, earns interest at the rate of 12% per annum. With respect to the issue of execution, the Court notes respondent's contention that since it is still undergoing corporate rehabilitation the execution of the judgment in the instant case should be suspended, especially in view of the fact that a Stay Order was issued by the RTC of Makati City and that the same has not yet been lifted. Petitioner does not dispute respondent's claim of its ongoing corporate rehabilitation. Neither does he question the existence and validity of the Stay Order issued by the RTC. The only point he raises, insofar as this issue is concerned, is that the Interim Rules on Corporate Rehabilitation, upon which the Stay Order was based, applies only to claims or cases which are pending before any court tribunal or board but not to cases which have already been adjudicated, much less to those where there is already an entry of judgment, as in the present case. Petitioner's argument is without merit. The Court finds that all pending actions in the instant case, including the execution of the judgment in favor of petitioner, should be suspended pending termination of the rehabilitation proceedings. The Court's ruling in the more recent case of Castillo v. Uniwide Warehouse Club, Inc.14 is instructive, thus: An essential function of corporate rehabilitation is the mechanism of suspension of all actions and claims against the distressed corporation, which operates upon the due appointment of a management committee or rehabilitation receiver. The governing law concerning rehabilitation and suspension of actions for claims against corporations is P.D. No. 902-A, as amended. Section 6(c) of the law mandates that, upon appointment of a management committee, rehabilitation receiver, board, or body, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board, or body shall be suspended. It materially provides:

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Section 6 (c). x x x x x x Provided, finally, that upon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body, shall be suspended accordingly. In Finasia Investments and Finance Corporation v. Court of Appeals [G.R. No. 107002, October 7, 1994, 237 SCRA 446, 450], the term "claim" has been construed to refer to debts or demands of a pecuniary nature, or the assertion to have money paid. It was referred to, in Arranza v. B.F. Homes, Inc., [389 Phil. 318], as an action involving monetary considerations and in Philippine Airlines v. Kurangking [438 Phil. 375], the term was identified as the right to payment, whether or not it is reduced to judgment, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, legal or equitable, and secured or unsecured. Furthermore, the actions that were suspended cover all claims against a distressed corporation whether for damages founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary nature. More importantly, the new rules on corporate rehabilitation, as well as the interim rules, provide an all-encompassing definition of the term and, thus, include all claims or demands of whatever nature or character against a debtor or its property, whether for money or otherwise. There is no doubt that petitioners claim in this case, arising as it does from his alleged illegal dismissal, is a claim covered by the suspension order issued by the SEC, as it is one for pecuniary consideration.1avvphi1 Jurisprudence is settled that the suspension of proceedings referred to in the law uniformly applies to "all actions for claims" filed against a corporation, partnership or association under management or receivership, without distinction, except only those expenses incurred in the ordinary course of business. In the oft-cited case of Rubberworld (Phils.) Inc. v. NLRC [G.R. No. 126773, April 14, 1999, 305 SCRA 721], the Court noted that aside from the given exception, the law is clear and makes no distinction as to the claims that are suspended once a management committee is created or a rehabilitation receiver is appointed. Since the law makes no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec nos distinguere debemos. Philippine Airlines, Inc. v. Zamora [G.R. No. 166996, February 6, 2007, 514 SCRA 584, 605] declares that the automatic suspension of an action for claims against a corporation under a rehabilitation receiver or management committee embraces all phases of the suit, that is, the entire proceedings of an action or suit and not just the payment of claims.1avvphi1 The reason behind the imperative nature of a suspension or stay order in relation to the creditors claims cannot be downplayed, for indeed the indiscriminate suspension of actions for claims intends to expedite the rehabilitation of the distressed corporation by enabling the management committee or the rehabilitation receiver to effectively exercise its/his powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the rescue of the debtor company. To allow such other actions to continue would only add to the burden of the management committee or rehabilitation receiver, whose time, effort and resources would be wasted in defending claims against the corporation, instead of being directed toward its restructuring and rehabilitation.15 WHEREFORE, the instant Motion is PARTLY GRANTED. The June 18, 2010 Resolution of the National Labor Relations Commission is MODIFIED by including in the award, aside from the principal amount of P4,366,954.80, interest at the legal rate of 12% per annum from March 5, 2007, the date the Decision in the present case became final and executory, until the principal amount is fully paid. However, all proceedings in the instant case, including the execution of the June 18, 2010 Resolution of the NLRC, are SUSPENDED until further notice from this Court. Respondent Pacific Plans, Inc. is hereby DIRECTED to UPDATE the Court within five (5) days from receipt of this Resolution and, thereafter, on a quarterly basis, as to the status of its ongoing rehabilitation. SO ORDERED.
DIOSDADO M. PERALTA Associate Justice

Attorneys fees re: withholding of wages Evangelina Masmud v. NLRC and Atty. Go, February 13, 2009.28
G.R. No. 183385 February 13, 2009 EVANGELINA MASMUD (as substitute complainant for ALEXANDER J. MASMUD), Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (First Division) and ATTY. ROLANDO B. GO, JR.,Respondents. RESOLUTION NACHURA, J.:

Before the Court is a petition for review on certiorari1 assailing the Decision2 dated October 31, 2007 and the Resolution dated June 6, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 96279.

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The facts of the case are as follows: On July 9, 2003, Evangelina Masmuds (Evangelina) husband, the late Alexander J. Masmud (Alexander), filed a complaint3 against First Victory Shipping Services and Angelakos (Hellas) S.A. for non-payment of permanent disability benefits, medical expenses, sickness allowance, moral and exemplary damages, and attorneys fees. Alexander engaged the services of Atty. Rolando B. Go, Jr. (Atty. Go) as his counsel. In consideration of Atty. Gos legal services, Alexander agreed to pay attorneys fees on a contingent basis, as follows: twenty percent (20%) of total monetary claims as settled or paid and an additional ten percent (10%) in case of appeal. It was likewise agreed that any award of attorneys fees shall pertain to respondents law firm as compensation. On November 21, 2003, the Labor Arbiter (LA) rendered a Decision granting the monetary claims of Alexander. The dispositive portion of the decision, as quoted in the CA Decision, reads: WHEREFORE, foregoing considered, judgment is rendered finding the [First Victory Shipping Services and Angelakos (Hellas) S.A.] jointly and severally liable to pay [Alexanders] total permanent disability benefits in the amount of US$60,000.00 and his sickness allowance of US$2,348.00, both in Philippine currency at the prevailing rate of exchange at the time of payment; and to pay further the amount of P200,000.00 as moral damages,P100,000.00 as exemplary damages and attorneys fees equivalent to ten percent (10%) of the total monetary award. [Alexanders] claim for payment of medical expenses is dismissed for lack of basis. SO ORDERED.4 Alexanders employer filed an appeal before the National Labor Relations Commission (NLRC). During the pendency of the proceedings before the NLRC, Alexander died. After explaining the terms of the lawyers fees to Evangelina, Atty. Go caused her substitution as complainant. On April 30, 2004, the NLRC rendered a Decision dismissing the appeal of Alexanders employer. The employer subsequently filed a motion for reconsideration. The NLRC denied the same in an Order dated October 26, 2004. On appeal before the CA, the decision of the LA was affirmed with modification. The award of moral and exemplary damages was deleted.5 Alexanders employers filed a petition for certiorari6 before this Court. On February 6, 2006, the Court issued a Resolution dismissing the case for lack of merit. Eventually, the decision of the NLRC became final and executory. Atty. Go moved for the execution of the NLRC decision, which was later granted by the LA. The surety bond of the employer was garnished. Upon motion of Atty. Go, the surety company delivered to the NLRC Cashier, through the NLRC Sheriff, the check amounting toP3,454,079.20. Thereafter, Atty. Go moved for the release of the said amount to Evangelina. On January 10, 2005, the LA directed the NLRC Cashier to release the amount of P3,454,079.20 to Evangelina. Out of the said amount, Evangelina paid Atty. Go the sum of P680,000.00. Dissatisfied, Atty. Go filed a motion to record and enforce the attorneys lien alleging that Evangelina reneged on their contingent fee agreement. Evangelina paid only the amount of P680,000.00, equivalent to 20% of the award as attorneys fees, thus, leaving a balance of 10%, plus the award pertaining to the counsel as attorneys fees. In response to the motion filed by Atty. Go, Evangelina filed a comment with motion to release the amount deposited with the NLRC Cashier. In her comment, Evangelina manifested that Atty. Gos claim for attorneys fees of 40% of the total monetary award was null and void based on Article 111 of the Labor Code. On February 14, 2005, the LA issued an Order7 granting Atty. Gos motion, the fallo of which reads: WHEREFORE, premises considered, and further considering the substitute complainants initial payment of 20% to movant-counsel of the monetary claims as paid, let the balance or unpaid twenty (20%) per cent of attorneys fees due movant-counsel (or the amount of P839,587.39) be recorded as lien upon all the monies that may still be paid to substitute complainant Evangelina Masmud. Accordingly, the NLRC Cashier is directed to pay movant-counsel the amount of P677,589.96 which is currently deposited therein to partially satisfy the lien. SO ORDERED.8

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Evangelina questioned the February 14, 2005 Order of the LA before the NLRC. On January 31, 2006, the NLRC issued a Resolution9 dismissing the appeal for lack of merit. Evangelina then elevated the case to the CA via a petition for certiorari. 10 On October 31, 2007, the CA rendered a Decision 11 partially granting the petition. The dispositive portion of the decision reads: WHEREFORE, the petition is PARTIALLY GRANTED. The Resolutions dated January 31, 2006 and July 18, 2006 are hereby AFFIRMED with MODIFICATION in that the Attorneys fees of respondent Atty. Rolando B. Go, Jr. is declared fully compensated by the amount of P1,347,950.11 that he has already received. SO ORDERED.12 Evangelina filed a motion for reconsideration. However, on June 6, 2008, the CA issued a Resolution 13 denying the motion for reconsideration for lack of merit. Hence, the instant petition. Evangelina presented this issue, viz.: THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR OF LAW IN ITS DECISION DATED 31 OCTOBER 2007 AND RESOLUTION DATED 6 JUNE 2008 INSOFAR AS IT UPHOLDS RESPONDENT LAWYERS CLAIM OF FORTY PERCENT (40%) OF THE MONETARY AWARD IN A LABOR CASE AS ATTORNEYS FEES.14 In effect, petitioner seeks affirmance of her conviction that the legal compensation of a lawyer in a labor proceeding should be based on Article 111 of the Labor Code. There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the reasonable compensation paid to a lawyer by his client for the legal services rendered to the latter. On the other hand, in its extraordinary concept, attorney's fees may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party, 15 such that, in any of the cases provided by law where such award can be made, e.g., those authorized in Article 2208 of the Civil Code, the amount is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.16 Here, we apply the ordinary concept of attorneys fees, or the compensation that Atty. Go is entitled to receive for representing Evangelina, in substitution of her husband, before the labor tribunals and before the court. Evangelina maintains that Article 111 of the Labor Code is the law that should govern Atty. Gos compensation as her counsel and assiduously opposes their agreed retainer contract. Article 111 of the said Code provides: ART. 111. Attorney's fees. (a) In cases of unlawful withholding of wages the culpable party may be assessed attorney's fees equivalent to ten percent of the amount of the wages recovered.1avvphi1.zw+ Contrary to Evangelinas proposition, Article 111 of the Labor Code deals with the extraordinary concept of attorneys fees. It regulates the amount recoverable as attorney's fees in the nature of damages sustained by and awarded to the prevailing party. It may not be used as the standard in fixing the amount payable to the lawyer by his client for the legal services he rendered.17 In this regard, Section 24, Rule 138 of the Rules of Court should be observed in determining Atty. Gos compensation. The said Rule provides: SEC. 24. Compensation of attorney's; agreement as to fees. An attorney shall be entitled to have and recover from his client no more than a reasonable compensation for his services, with a view to the importance of the subject matter of the controversy, the extent of the services rendered, and the professional standing of the attorney. No court shall be bound by the opinion of attorneys as expert witnesses as to the proper compensation, but may disregard such testimony and base its conclusion on its own professional knowledge. A written contract for services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable.18 The retainer contract between Atty. Go and Evangelina provides for a contingent fee. The contract shall control in the determination of the amount to be paid, unless found by the court to be unconscionable or unreasonable.19Attorney's fees are unconscionable if they

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affront one's sense of justice, decency or reasonableness.20 The decree of unconscionability or unreasonableness of a stipulated amount in a contingent fee contract will not preclude recovery. It merely justifies the fixing by the court of a reasonable compensation for the lawyer's services.21 The criteria found in the Code of Professional Responsibility are also to be considered in assessing the proper amount of compensation that a lawyer should receive.1avvph1.zw+ Canon 20, Rule 20.01 of the said Code provides: CANON 20 A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES. Rule 20.01. A lawyer shall be guided by the following factors in determining his fees: (a) The time spent and the extent of the services rendered or required; (b) The novelty and difficulty of the question involved; (c) The importance of the subject matter; (d) The skill demanded; (e) The probability of losing other employment as a result of acceptance of the proffered case; (f) The customary charges for similar services and the schedule of fees of the IBP Chapter to which he belongs; (g) The amount involved in the controversy and the benefits resulting to the client from the service; (h) The contingency or certainty of compensation; (i) The character of the employment, whether occasional or established; and (j) The professional standing of the lawyer. Contingent fee contracts are subject to the supervision and close scrutiny of the court in order that clients may be protected from unjust charges.22 The amount of contingent fees agreed upon by the parties is subject to the stipulation that counsel will be paid for his legal services only if the suit or litigation prospers. A much higher compensation is allowed as contingent fees because of the risk that the lawyer may get nothing if the suit fails.23The Court finds nothing illegal in the contingent fee contract between Atty. Go and Evangelinas husband. The CA committed no error of law when it awarded the attorneys fees of Atty. Go and allowed him to receive an equivalent of 39% of the monetary award. The issue of the reasonableness of attorney's fees is a question of fact. Well-settled is the rule that conclusions and findings of fact of the CA are entitled to great weight on appeal and will not be disturbed except for strong and cogent reasons which are absent in the case at bench. The findings of the CA, which are supported by substantial evidence, are almost beyond the power of review by the Supreme Court.24 Considering that Atty. Go successfully represented his client, it is only proper that he should receive adequate compensation for his efforts. Even as we agree with the reduction of the award of attorney's fees by the CA, the fact that a lawyer plays a vital role in the administration of justice emphasizes the need to secure to him his honorarium lawfully earned as a means to preserve the decorum and respectability of the legal profession. A lawyer is as much entitled to judicial protection against injustice or imposition of fraud on the part of his client as the client is against abuse on the part of his counsel. The duty of the court is not alone to ensure that a lawyer acts in a proper and lawful manner, but also to see that a lawyer is paid his just fees. With his capital consisting of his brains and with his skill acquired at tremendous cost not only in money but in expenditure of time and energy, he is entitled to the protection of any judicial tribunal against any attempt on the part of his client to escape payment of his just compensation. It would be ironic if after putting forth the best in him to secure justice for his client, he himself would not get his due.25 WHEREFORE, in view of the foregoing, the Decision dated October 31, 2007 and the Resolution dated June 6, 2008 of the Court of Appeals in CA-G.R. SP No. 96279 are hereby AFFIRMED. SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice

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Job Contracting /Independent Contracting / Labor Only Contracting Cases Joeb Alivado et. Al. v. Procter and Gamble Phils. Inc. et. Al., March 9, 2010, June 6, 2011.29
G.R. No. 160506 March 9, 2010

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO, ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO CALANAO, ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR., ARNEL ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR, EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE, MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F. TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ, ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR CARDANO, MARIANO NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N. GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C. PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ, ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and ORLANDO S. BALANGUE, Petitioners, vs. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents. DECISION DEL CASTILLO, J.:

Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code establishes an employer-employee relationship between the employer and the employees of the labor-only contractor. The instant petition for review assails the March 21, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 52082 and its October 20, 2003 Resolution2 denying the motions for reconsideration separately filed by petitioners and respondent Procter & Gamble Phils. Inc. (P&G). The appellate court affirmed the July 27, 1998 Decision of the National Labor Relations Commission (NLRC), which in turn affirmed the November 29, 1996 Decision3 of the Labor Arbiter. All these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be legitimate independent contractors and the employers of the petitioners. Factual Antecedents Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993, more specifically as follows:
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Name 1. Joeb M. Aliviado 2. Arthur Corpuz 3. Eric Aliviado 4. Monchito Ampeloquio September, 5. Abraham Basmayor[, Jr.] 6. Jonathan Mateo May, 7. Lorenzo Platon 8. Jose Fernando Gutierrez 9. Estanislao Buenaventura 10. Lope Salonga 11. Franz David 12. Nestor Ignacio 13. Julio Rey 14. Ruben [Vasquez], Jr. 15. Maximino Pascual 16. Ernesto Calanao[, Jr.] 17. Rolando Romasanta 18. [Roehl] Agoo
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Date Employed November, 1985 1988 1985 1988 1987 1988 1985 1988 June, 1988 1982 1989 1982 1989 1985 1990 1987 1983 1988

Date Dismissed May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 1993 March 11, 1993

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19. Bonifacio Ortega 20. Arsenio Soriano, Jr. 21. Arnel Endaya 22. Roberto Enriquez December, 23. Nestor [Es]quila 24. Ed[g]ardo Quiambao 25. Santos Bacalso 26. Samson Basco 27. Aladino Gregor[e], Jr. 28. Edwin Garcia 29. Armando Villar 30. Emil Tawat 31. Mario P. Liongson 32. Cresente J. Garcia 33. Fernando Macabent[a] 34. Melecio Casapao 35. Reynaldo Jacaban 36. Ferdinand Salvo 37. Alstando Montos 38. Rainer N. Salvador 39. Ramil Reyes 40. Pedro G. Roy 41. Leonardo [F]. Talledo 42. Enrique [F]. Talledo 43. Willie Ortiz 44. Ernesto Soyosa 45. Romeo Vasquez 46. Joel Billones 47. Allan Baltazar 48. Noli Gabuyo 49. Emmanuel E. Laban 50. Ramir[o] E. [Pita] 51. Raul Dulay 52. Tadeo Duran[o] 53. Joseph Banico 54. Albert Leynes 55. Antonio Dacu[m]a 56. Renato dela Cruz 57. Romeo Viernes, Jr. 58. El[ia]s Bas[c]o 59. Wilfredo Torres

1988 1985 1983 1988 1983 1989 1990 1984 1980 1987 1990 1988 1991 1984 1990 1987 1990 1985 1984 1984 1984 1987 1985 1988 1987 1988 1985 1987 1989 1991 1987 1990 1988 1988 1988 1990 1990 1982 1986 1989 1986

March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 1993 May 5, 1992 March 11, 1993 May 5, 1992 March 11, 1993 May 5, 1992 May 5, 1992 March 11, 1993 May 5, 1992 March 11, 1993

March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 1993 May 5, 1992 May 5, 1992

May 5, 1992

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60. Melchor Carda[]o 61. [Marino] [Maranion] 62. John Sumergido 63. Roberto Rosales May, 64. Gerry [G]. Gatpo 65. German N. Guevara 66. Gilbert Y. Miranda 67. Rodolfo C. Toledo[, Jr.] 68. Arnold D. [Laspoa] 69. Philip M. Loza 70. Mario N. C[o]ldayon 71. Orlando P. Jimenez 72. Fred P. Jimenez 73. Restituto C. Pamintuan, Jr. 74. Rolando J. de Andres 75. Artuz Bustenera[, Jr.] 76. Roberto B. Cruz 77. Rosedy O. Yordan 78. Dennis Dacasin 79. Alejandrino Abaton 80. Orlando S. Balangue

1991 1989 1987 1987 November, 1990 May, 1990 June, 1991 May 14, 1991 June 1991 March 5, 1992 May 14, 1991 November 6, 1992 September, 1991 March 5, 1992 June, 1991 December, 1989 May 4, 1990 June, 1991 May. 1990 1988 March, 1989

May 5, 1992 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 19934

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time.5 They were assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS.6 SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual absenteeism, dishonesty or changing day-off without prior notice.7 P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells on a wholesale basis to various supermarkets and distributors.8 To enhance consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its products.9 In December 1991, petitioners filed a complaint 10 against P&G for regularization, service incentive leave pay and other benefits with damages. The complaint was later amended11 to include the matter of their subsequent dismissal. Ruling of the Labor Arbiter On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-employee relationship between petitioners and P&G. He found that the selection and engagement of the petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors. The dispositive portion of his Decision reads: WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled cases against respondent Procter & Gamble (Phils.), Inc. for lack of merit. SO ORDERED.12 Ruling of the NLRC

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Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the NLRC rendered a Decision13 disposing as follows: WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the decision appealed from AFFIRMED. SO ORDERED.14 Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998 Resolution.15 Ruling of the Court of Appeals Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However, said petition was also denied by the CA which disposed as follows: WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay to petitioners. SO ORDERED.16 Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition. Issues Petitioners now come before us raising the following issues: I. WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT WHEN, OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY THE FORMER. II. WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE PETITIONERS FOR PAYMENT OF ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION COSTS AND ATTORNEYS FEES.17 Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners were illegally dismissed; and (3) whether petitioners are entitled for payment of actual, moral and exemplary damages as well as litigation costs and attorneys fees. Petitioners Arguments Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-alignment program, petitioners were instructed to fill up application forms and report to the agencies which P&G created.18 Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter19 to SAPS dated February 24, 1993, informing the latter that their Merchandising Services Contract will no longer be renewed. Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to their client. They claim that the contractors have neither substantial capital nor tools and equipment to undertake independent labor contracting. Petitioners insist that since they had been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G, then they are its regular employees.20 Respondents Arguments

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On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown out as the Court is not a trier of facts. It argues that findings of facts of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and conclusive on the Supreme Court. P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of work. P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor, regardless of whether such activity is peripheral or core in nature. It insists that the determination of whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of management prerogative. At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of the Comment of Promm-Gem on the petition.21 Also, although SAPS was impleaded as a party in the proceedings before the Labor Arbiter and the NLRC, it was no longer impleaded as a party in the proceedings before the CA.22 Hence, our pronouncements with regard to SAPS are only for the purpose of determining the obligations of P&G, if any. Our Ruling The petition has merit. As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative functions, such as the NLRC. Occasionally, however, the Court is constrained to wade into factual matters when there is insufficient or insubstantial evidence on record to support those factual findings; or when too much is concluded, inferred or deduced from the bare or incomplete facts appearing on record.23 In the present case, we find the need to review the records to ascertain the facts. Labor-only contracting and job contracting In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors. The pertinent Labor Code provision on the matter states: ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such 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. (Emphasis and underscoring supplied.) Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02, 24 distinguishes between legitimate and labor-only contracting: xxxx Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of

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employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job[,] work or service. xxxx Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee. The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended. "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out. The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. x x x x (Underscoring supplied.) Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit labor-only contracting. To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal25 and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or ii) The contractor does not exercise the right to control over the performance of the work of the contractualemployee. (Underscoring supplied) In the instant case, the financial statements26 of Promm-Gem show that it has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990.27 It also has long term assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and office space with a floor area of 870 square meters.28 It also had under its name three registered vehicles which were used for its promotional/merchandising business.29Promm-Gem also has other clients30 aside from P&G.31 Under the circumstances, we find that Promm-Gem has substantial investment which relates to the work to be performed. These factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02. The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its regular, not merely contractual or project, employees. 32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates on the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often been tipping points that lead the Court to strike down the employment practice or agreement concerned as contrary to public policy, morals, good customs or public order.33

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Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate independent contractor. On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There is no other evidence presented to show how much its working capital and assets are. Furthermore, there is no showing of substantial investment in tools, equipment or other assets. In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor."35 Applying the same rationale to the present case, it is clear that SAPS having a paid-in capital of only P31,250 - has no substantial capital. SAPS lack of substantial capital is underlined by the records 36 which show that its payroll for its merchandisers alone for one month would already total P44,561.00. It had 6-month contracts with P&G.37 Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and investment. Its capital is not even sufficient for one months payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue to sustain its operations independently. Substantial capital refers to capitalization used in the performance or completion of the job, work or service contracted out. In the present case, SAPS has failed to show substantial capital. Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an activity that has already been considered by the Court as doubtlessly directly related to the manufacturing business,38 which is the principal business of P&G. Considering that SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business of P&G, we find that the former is engaged in "labor-only contracting". "Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the employees of the labor-only contractor."39 The statute establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.40 Consequently, the following petitioners, having been recruited and supplied by SAPS41 -- which engaged in labor-only contracting -- are considered as the employees of P&G: Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin. The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered the employees of Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado.42 Termination of services We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular employment, the employer shall not terminate the services of an employee except for a just43 or authorized44 cause. In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified the cause of dismissal as grave misconduct and breach of trust, as follows: xxxx This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc. has been terminated. We find your expressed admission, that you considered yourself as an employee of Procter & Gamble Phils., Inc. and assailing the integrity of the Company as legitimate and independent promotion firm, is deemed as an act of disloyalty prejudicial to the interests of our Company: serious misconduct and breach of trust reposed upon you as employee of our Company which [co]nstitute just cause for the termination of your employment. x x x x45

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Misconduct has been defined as improper or wrong conduct; the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent and not mere error of judgment. The misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant. 46 To be a just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the performance of the employees duties; and (c) must show that the employee has become unfit to continue working for the employer.47 In other words, in order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has violated some established rules or policies. It is equally important and required that the act or conduct must have been performed with wrongful intent. 48 In the instant case, petitionersemployees of Promm-Gem may have committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by any wrongful intent in doing so. As such, we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem as a legitimate and independent promotion firm. A misconduct which is not serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an employee. Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice. A breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.49 Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the employee concerned holds a position of responsibility or of trust and confidence. As such, he must be invested with confidence on delicate matters, such as custody, handling or care and protection of the property and assets of the employer. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and must show that the employee is unfit to continue to work for the employer. 50 In the instant case, the petitioners-employees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is there any evidence to show that they are unfit to continue to work as merchandisers for Promm-Gem. All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem. While Promm-Gem had complied with the procedural aspect of due process in terminating the employment of petitionersemployees, i.e., giving two notices and in between such notices, an opportunity for the employees to answer and rebut the charges against them, it failed to comply with the substantive aspect of due process as the acts complained of neither constitute serious misconduct nor breach of trust. Hence, the dismissal is illegal. With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal. The records show that upon receipt by SAPS of P&Gs letter terminating their "Merchandising Services Contact" effective March 11, 1993, they in turn verbally informed the concerned petitioners not to report for work anymore. The concerned petitioners related their dismissal as follows: xxxx 5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A. Ponce that we should already stop working immediately because that was the order of Procter and Gamble. According to him he could not do otherwise because Procter and Gamble was the one paying us. To prove that Procter and Gamble was the one responsible in our dismissal, he showed to us the letter51 dated February 24, 1993, x x x February 24, 1993 Sales and Promotions Services Armons Bldg., 142 Kamias Road, Quezon City Attention: Mr. Saturnino A. Ponce President & General Manager Gentlemen: Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be renewing our Merchandising Services Contract with your agency. Please immediately undertake efforts to ensure that your services to the Company will terminate effective close of business hours of 11 March 1993.

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This is without prejudice to whatever obligations you may have to the company under the abovementioned contract. Very truly yours, (Sgd.) EMMANUEL M. NON Sales Merchandising III 6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer allowed to work and we were refused entrance by the security guards posted. According to the security guards, all merchandisers of Procter and Gamble under S[APS] who filed a case in the Dept. of Labor are already dismissed as per letter of Procter and Gamble dated February 25, 1993. x x x521avvphi1 Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike Promm-Gem which dismissed its employees for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its employees upon the initiation of P&G. It is evident that SAPS does not carry on its own business because the termination of its contract with P&G automatically meant for it also the termination of its employees services. It is obvious from its act that SAPS had no other clients and had no intention of seeking other clients in order to further its merchandising business. From all indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the latters merchandising concerns only. Under the circumstances prevailing in the instant case, we cannot consider SAPS as an independent contractor. Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests with the employer.53 In termination cases, the burden of proof rests upon the employer to show that the dismissal is for just and valid cause.54 In the instant case, P&G failed to discharge the burden of proving the legality and validity of the dismissals of those petitioners who are considered its employees. Hence, the dismissals necessarily were not justified and are therefore illegal. Damages We now go to the issue of whether petitioners are entitled to damages. Moral and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy.55 With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any oppressive act on the part of the latter, we find no support for the award of damages. As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The sudden and peremptory barring of the concerned petitioners from work, and from admission to the work place, after just a one-day verbal notice, and for no valid cause bellows oppression and utter disregard of the right to due process of the concerned petitioners. Hence, an award of moral damages is called for. Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed in bad faith and were compelled to litigate or incur expenses to protect their rights by reason of the oppressive acts56 of P&G. Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, inclusive of allowances, and other benefits or their monetary equivalent from the time the compensation was withheld up to the time of actual reinstatement.57Hence, all the petitioners, having been illegally dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of Appeals in CA-G.R. SP No. 52082 and the Resolution dated October 20, 2003 are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective employees immediately without loss of seniority rights and with full backwages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of those petitioners considered as its employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio

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Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as moral damages plus ten percent of the total sum as and for attorneys fees. Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of this Decision, of petitioners backwages and other benefits; and ten percent of the total sum as and for attorneys fees as stated above; and for immediate execution. SO ORDERED.
MARIANO C. DEL CASTILLO Associate Justice G.R. No. 160506 June 6, 2011

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO, ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO CALANAO, ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR., ARNEL ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR, EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE, MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F. TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ, ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR CARDANO, MARIANO NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N. GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C. PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ, ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and ORLANDO S. BALANGUE, Petitioners, vs. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents. DECISION DEL CASTILLO, J.:

Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code establishes an employer-employee relationship between the employer and the employees of the labor-only contractor. The instant petition for review assails the March 21, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 52082 and its October 20, 2003 Resolution2 denying the motions for reconsideration separately filed by petitioners and respondent Procter & Gamble Phils. Inc. (P&G). The appellate court affirmed the July 27, 1998 Decision of the National Labor Relations Commission (NLRC), which in turn affirmed the November 29, 1996 Decision3 of the Labor Arbiter. All these decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be legitimate independent contractors and the employers of the petitioners. Factual Antecedents Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993, more specifically as follows:
Name 1. Joeb M. Aliviado 2. Arthur Corpuz 3. Eric Aliviado 4. Monchito Ampeloquio 5. Abraham Basmayor[, Jr.] 6. Jonathan Mateo May, 7. Lorenzo Platon 8. Jose Fernando Gutierrez 9. Estanislao Buenaventura 10. Lope Salonga 11. Franz David 12. Nestor Ignacio 13. Julio Rey 14. Ruben [Vasquez], Jr. Date Employed November, 1985 1988 1985 September, 1988 1987 1988 1985 1988 June, 1988 1982 1989 1982 1989 1985 Date Dismissed May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992

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15. Maximino Pascual 16. Ernesto Calanao[, Jr.] 17. Rolando Romasanta 18. [Roehl] Agoo 19. Bonifacio Ortega 20. Arsenio Soriano, Jr. 21. Arnel Endaya 22. Roberto Enriquez December, 23. Nestor [Es]quila 24. Ed[g]ardo Quiambao 25. Santos Bacalso 26. Samson Basco 27. Aladino Gregor[e], Jr. 28. Edwin Garcia 29. Armando Villar 30. Emil Tawat 31. Mario P. Liongson 32. Cresente J. Garcia 33. Fernando Macabent[a] 34. Melecio Casapao 35. Reynaldo Jacaban 36. Ferdinand Salvo 37. Alstando Montos 38. Rainer N. Salvador 39. Ramil Reyes 40. Pedro G. Roy 41. Leonardo [F]. Talledo 42. Enrique [F]. Talledo 43. Willie Ortiz 44. Ernesto Soyosa 45. Romeo Vasquez 46. Joel Billones 47. Allan Baltazar 48. Noli Gabuyo 49. Emmanuel E. Laban 50. Ramir[o] E. [Pita] 51. Raul Dulay 52. Tadeo Duran[o] 53. Joseph Banico 54. Albert Leynes 55. Antonio Dacu[m]a

1990 1987 1983 1988 1988 1985 1983 1988 1983 1989 1990 1984 1980 1987 1990 1988 1991 1984 1990 1987 1990 1985 1984 1984 1984 1987 1985 1988 1987 1988 1985 1987 1989 1991 1987 1990 1988 1988 1988 1990 1990

May 5, 1992 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 1993 May 5, 1992 March 11, 1993 May 5, 1992 March 11, 1993 May 5, 1992 May 5, 1992 March 11, 1993 May 5, 1992 March 11, 1993

March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 1993 May 5, 1992 May 5, 1992

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56. Renato dela Cruz 57. Romeo Viernes, Jr. 58. El[ia]s Bas[c]o 59. Wilfredo Torres 60. Melchor Carda[]o 61. [Marino] [Maranion] 62. John Sumergido 63. Roberto Rosales 64. Gerry [G]. Gatpo 65. German N. Guevara 66. Gilbert Y. Miranda 67. Rodolfo C. Toledo[, Jr.] 68. Arnold D. [Laspoa] 69. Philip M. Loza 70. Mario N. C[o]ldayon 71. Orlando P. Jimenez 72. Fred P. Jimenez 73. Restituto C. Pamintuan, Jr. 74. Rolando J. de Andres 75. Artuz Bustenera[, Jr.] 76. Roberto B. Cruz 77. Rosedy O. Yordan 78. Dennis Dacasin 79. Alejandrino Abaton 80. Orlando S. Balangue

1982 1986 1989 1986 1991 1989 1987 May, 1987 November, 1990 May, 1990 June, 1991 May 14, 1991 June 1991 March 5, 1992 May 14, 1991 November 6, 1992 September, 1991 March 5, 1992 June, 1991 December, 1989 May 4, 1990 June, 1991 May. 1990 1988 March, 1989 May 5, 1992 May 5, 1992 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 March 11, 1993 May 5, 1992 May 5, 1992 May 5, 1992 March 11, 19934

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time.5 They were assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS.6 SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual absenteeism, dishonesty or changing day-off without prior notice.7 P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells on a wholesale basis to various supermarkets and distributors.8 To enhance consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its products.9 In December 1991, petitioners filed a complaint 10 against P&G for regularization, service incentive leave pay and other benefits with damages. The complaint was later amended11 to include the matter of their subsequent dismissal. Ruling of the Labor Arbiter On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-employee relationship between petitioners and P&G. He found that the selection and engagement of the petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors. The dispositive portion of his Decision reads:

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WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled cases against respondent Procter & Gamble (Phils.), Inc. for lack of merit. SO ORDERED.12 Ruling of the NLRC Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the NLRC rendered a Decision13 disposing as follows: WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the decision appealed from AFFIRMED. SO ORDERED.14 Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998 Resolution.15 Ruling of the Court of Appeals Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However, said petition was also denied by the CA which disposed as follows: WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay to petitioners. SO ORDERED.16 Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition. Issues Petitioners now come before us raising the following issues: I. WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT WHEN, OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY THE FORMER. II. WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE PETITIONERS FOR PAYMENT OF ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION COSTS AND ATTORNEYS FEES.17 Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners were illegally dismissed; and (3) whether petitioners are entitled for payment of actual, moral and exemplary damages as well as litigation costs and attorneys fees. Petitioners Arguments Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-alignment program, petitioners were instructed to fill up application forms and report to the agencies which P&G created.18

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Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter19 to SAPS dated February 24, 1993, informing the latter that their Merchandising Services Contract will no longer be renewed. Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to their client. They claim that the contractors have neither substantial capital nor tools and equipment to undertake independent labor contracting. Petitioners insist that since they had been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G, then they are its regular employees.20 Respondents Arguments On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown out as the Court is not a trier of facts. It argues that findings of facts of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and conclusive on the Supreme Court. P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of work. P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor, regardless of whether such activity is peripheral or core in nature. It insists that the determination of whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of management prerogative. At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of the Comment of Promm-Gem on the petition.21 Also, although SAPS was impleaded as a party in the proceedings before the Labor Arbiter and the NLRC, it was no longer impleaded as a party in the proceedings before the CA.22 Hence, our pronouncements with regard to SAPS are only for the purpose of determining the obligations of P&G, if any. Our Ruling The petition has merit. As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative functions, such as the NLRC. Occasionally, however, the Court is constrained to wade into factual matters when there is insufficient or insubstantial evidence on record to support those factual findings; or when too much is concluded, inferred or deduced from the bare or incomplete facts appearing on record.23 In the present case, we find the need to review the records to ascertain the facts. Labor-only contracting and job contracting In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors. The pertinent Labor Code provision on the matter states: ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary

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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. (Emphasis and underscoring supplied.) Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02, 24 distinguishes between legitimate and labor-only contracting: xxxx Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job[,] work or service. xxxx Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee. The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended. "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out. The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. x x x x (Underscoring supplied.) Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works or services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit labor-only contracting. To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal25 and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or ii) The contractor does not exercise the right to control over the performance of the work of the contractualemployee. (Underscoring supplied) In the instant case, the financial statements26 of Promm-Gem show that it has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990.27 It also has long term assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and office space with a floor area of 870 square meters.28 It also had under its name three registered vehicles which were used for its promotional/merchandising business.29Promm-Gem also has other clients30 aside from P&G.31 Under the circumstances, we

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find that Promm-Gem has substantial investment which relates to the work to be performed. These factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02. The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its regular, not merely contractual or project, employees. 32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates on the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often been tipping points that lead the Court to strike down the employment practice or agreement concerned as contrary to public policy, morals, good customs or public order.33 Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate independent contractor. On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There is no other evidence presented to show how much its working capital and assets are. Furthermore, there is no showing of substantial investment in tools, equipment or other assets. In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital and, as such, PMCI cannot qualify as an independent contractor."35 Applying the same rationale to the present case, it is clear that SAPS having a paid-in capital of only P31,250 - has no substantial capital. SAPS lack of substantial capital is underlined by the records 36 which show that its payroll for its merchandisers alone for one month would already total P44,561.00. It had 6-month contracts with P&G.37 Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and investment. Its capital is not even sufficient for one months payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue to sustain its operations independently. Substantial capital refers to capitalization used in the performance or completion of the job, work or service contracted out. In the present case, SAPS has failed to show substantial capital. Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an activity that has already been considered by the Court as doubtlessly directly related to the manufacturing business,38 which is the principal business of P&G. Considering that SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business of P&G, we find that the former is engaged in "labor-only contracting". "Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between the employer and the employees of the labor-only contractor."39 The statute establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.40 Consequently, the following petitioners, having been recruited and supplied by SAPS41 -- which engaged in labor-only contracting -- are considered as the employees of P&G: Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin. The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered the employees of Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado.42 Termination of services We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular employment, the employer shall not terminate the services of an employee except for a just43 or authorized44 cause.

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In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified the cause of dismissal as grave misconduct and breach of trust, as follows: xxxx This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc. has been terminated. We find your expressed admission, that you considered yourself as an employee of Procter & Gamble Phils., Inc. and assailing the integrity of the Company as legitimate and independent promotion firm, is deemed as an act of disloyalty prejudicial to the interests of our Company: serious misconduct and breach of trust reposed upon you as employee of our Company which [co]nstitute just cause for the termination of your employment. x x x x45 Misconduct has been defined as improper or wrong conduct; the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent and not mere error of judgment. The misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant. 46 To be a just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the performance of the employees duties; and (c) must show that the employee has become unfit to continue working for the employer.47 In other words, in order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has violated some established rules or policies. It is equally important and required that the act or conduct must have been performed with wrongful intent. 48 In the instant case, petitionersemployees of Promm-Gem may have committed an error of judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by any wrongful intent in doing so. As such, we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem as a legitimate and independent promotion firm. A misconduct which is not serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an employee. Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice. A breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.49 Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the employee concerned holds a position of responsibility or of trust and confidence. As such, he must be invested with confidence on delicate matters, such as custody, handling or care and protection of the property and assets of the employer. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and must show that the employee is unfit to continue to work for the employer. 50 In the instant case, the petitioners-employees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is there any evidence to show that they are unfit to continue to work as merchandisers for Promm-Gem. All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem. While Promm-Gem had complied with the procedural aspect of due process in terminating the employment of petitionersemployees, i.e., giving two notices and in between such notices, an opportunity for the employees to answer and rebut the charges against them, it failed to comply with the substantive aspect of due process as the acts complained of neither constitute serious misconduct nor breach of trust. Hence, the dismissal is illegal. With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal. The records show that upon receipt by SAPS of P&Gs letter terminating their "Merchandising Services Contact" effective March 11, 1993, they in turn verbally informed the concerned petitioners not to report for work anymore. The concerned petitioners related their dismissal as follows: xxxx 5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A. Ponce that we should already stop working immediately because that was the order of Procter and Gamble. According to him he could not do otherwise because Procter and Gamble was the one paying us. To prove that Procter and Gamble was the one responsible in our dismissal, he showed to us the letter51 dated February 24, 1993, x x x February 24, 1993 Sales and Promotions Services Armons Bldg., 142 Kamias Road, Quezon City

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Attention: Mr. Saturnino A. Ponce President & General Manager Gentlemen: Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be renewing our Merchandising Services Contract with your agency. Please immediately undertake efforts to ensure that your services to the Company will terminate effective close of business hours of 11 March 1993. This is without prejudice to whatever obligations you may have to the company under the abovementioned contract. Very truly yours, (Sgd.) EMMANUEL M. NON Sales Merchandising III 6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer allowed to work and we were refused entrance by the security guards posted. According to the security guards, all merchandisers of Procter and Gamble under S[APS] who filed a case in the Dept. of Labor are already dismissed as per letter of Procter and Gamble dated February 25, 1993. x x x52 Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike Promm-Gem which dismissed its employees for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its employees upon the initiation of P&G. It is evident that SAPS does not carry on its own business because the termination of its contract with P&G automatically meant for it also the termination of its employees services. It is obvious from its act that SAPS had no other clients and had no intention of seeking other clients in order to further its merchandising business. From all indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the latters merchandising concerns only. Under the circumstances prevailing in the instant case, we cannot consider SAPS as an independent contractor. Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests with the employer.53 In termination cases, the burden of proof rests upon the employer to show that the dismissal is for just and valid cause.54 In the instant case, P&G failed to discharge the burden of proving the legality and validity of the dismissals of those petitioners who are considered its employees. Hence, the dismissals necessarily were not justified and are therefore illegal. Damages
We now go to the issue of whether petitioners are entitled to damages. Moral and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy.55 With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any oppressive act on the part of the latter, we find no support for the award of damages. As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The sudden and peremptory barring of the concerned petitioners from work, and from admission to the work place, after just a one-day verbal notice, and for no valid cause bellows oppression and utter disregard of the right to due process of the concerned petitioners. Hence, an award of moral damages is called for. Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed in bad faith and were compelled to litigate or incur expenses to protect their rights by reason of the oppressive acts56 of P&G. Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, inclusive of allowances, and other benefits or their monetary equivalent from the time the compensation was withheld up to the time of actual reinstatement.57Hence, all the petitioners, having been illegally dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement.
1avvphi1

WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of Appeals in CA-G.R. SP No. 52082 and the Resolution dated October 20, 2003 are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective employees immediately without loss of seniority rights and with full backwages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of those petitioners considered as its employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio,

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Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as moral damages plus ten percent of the total sum as and for attorneys fees. Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of this Decision, of petitioners backwages and other benefits; and ten percent of the total sum as and for attorneys fees as stated above; and for immediate execution. SO ORDERED.
MARIANO C. DEL CASTILLO Associate Justice

PAL v. Enrique Ligan et. Al,. February 29, 2008.

G.R. No. 146408 April 30, 2009 PHILIPPINE AIRLINES, INC., Petitioner, vs. ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARISUSA, JEFFREY LLENES, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL,Respondents. RESOLUTION CARPIO MORALES, J.:

Before the Court are petitioners Motion for Reconsideration and respondents Motion for Clarification and/or Reconsideration of the Courts February 29, 2008 Decision in light of incidents bearing on the present case which were not brought to light by them before the Court promulgated said Decision. The Decision of the Court affirmed with modification the appellate courts September 29, 2000 Decision and directed petitioner Philippine Airlines, Inc. to: (a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as its regular employees in their same or substantially equivalent positions, and pay the wages and benefits due them as regular employees plus salary differential corresponding to the difference between the wages and benefits given them and those granted to petitioners other regular employees of the same rank; and (b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal until the finality of this decision; and separation pay, in lieu of reinstatement, equivalent to one (1) month pay for every year of service until the finality of this decision. There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for that purpose. SO ORDERED.1 Synergy Services Corporation (Synergy) having been found to be a labor-only contractor, respondents were consequently declared as petitioners regular employees who are entitled to the salaries, allowances, and other employment benefits under the pertinent Collective Bargaining Agreement. Petitioner prays for a reconsideration of the Decision, maintaining its position that respondents were employed by Synergy, and to "reinstate" respondents as regular employees is iniquitous since it would be compelled to employ personnel more than what its operations require. It adds that the Court should declare that reinstatement is no longer an appropriate relief in view of the long period of time that had elapsed. For their part, respondents, deducing from the Decision that their termination was found to be illegal, posit that the portion of the Decision ordering petitioner to "accept" them should also mean to "reinstate" them with backwages. 2Respondents additionally pray for the award to them of attorneys fees, albeit they admit that they failed to raise it as an issue.

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Both parties point out that the Courts Decision "presupposes" or "was based on the erroneous assumption" that respondents are still in the actual employ of petitioner. Respondents disclose that except for those who have either died, accepted settlement earlier, or declared as employee of Synergy, the remaining respondents have all been terminated in the guise of retrenchment. Joining such account, petitioner reveals that 13 out of the 25 respondents filed an illegal dismissal case, which is pending before the appellate court stationed at Cebu City as CA-G.R. SP No. 00922.3 Respondents add that the appellate court, by Resolution of April 22, 2008, held the illegal dismissal case in abeyance until after this Court rules on the present case.4 Petitioner also urges the Court to examine the cases of respondents Roque Pilapil (Pilapil) and Benedicto Auxtero (Auxtero) in light of the following information, viz: Pilapil entered petitioners pool of regular employees on September 1, 19915 but was later terminated for submitting falsified academic credentials. Pilapils complaint for illegal dismissal was dismissed by the labor arbiter, whose decision was reinstated with modification by the appellate court by Decision of March 7, 2001 in CA-G.R. SP No. 50578. On Pilapils appeal, this Court, by Resolution of September 19, 2001 in G.R. No. 147853, declared the case terminated when Pilapil failed to file his intended petition. Given its information in the immediately foregoing paragraph, petitioner claims that it already complied with the judgment awarding separation pay representing financial assistance to Pilapil on September 23, 2003, during the pendency of the present case.6 Respondents do not dispute petitioners information.7 Petitioner also informs the Court that Auxtero already secured a favorable judgment from this Court in G.R. No. 158710 which effectively affirmed the appellate courts Decision of February 26, 2003 in CA-G.R. SP No. 50480.8It appears from the "Joint Declaration of Satisfaction of Judgment"9 with "Release and Quitclaim and Waiver,"10both dated November 29, 2007, that petitioner already satisfied the judgment rendered in said G.R. No. 158710 in favor of Auxtero in the amount of P1.3 Million, and that Auxtero had waived reinstatement. Respondents essentially corroborate this information of petitioner.11 In light of these recent manifestations-informations of the parties, the Court finds that a modification of the Decision is in order, the claims with respect to Pilapil and Auxtero having been deemed extinguished even before the promulgation of the Decision. That Pilapil was a regular employee yields to the final finding of a valid dismissal in the supervening case involving his own misconduct, while Auxteros attempt at forum-shopping should not be countenanced. IN ALL OTHER RESPECTS, the Court finds no sufficient reason to deviate from its Decision, but proceeds, nonetheless, to clarify a few points. While this Courts Decision ruled on the regular status of respondents, it must be deemed to be without prejudice to the resolution of the issue of illegal dismissal in the proper case. The Decision thus expressly stated: Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with observance of procedural due process.12 (Underscoring supplied) Notably, subject of the Decision was respondents complaints13 for regularization and under-/non-payment of benefits. The Court did not and could not take cognizance of the validity of the eventual dismissal of respondents because the matter of just or authorized cause is beyond the issues of the case. That is why the Court did not order reinstatement for such relief presupposes a finding of illegal dismissal14 in the proper case which, as the parties now manifest, pends before the appellate court. Respecting petitioners allegation of financial woes that led to the June 30, 1998 lay-off of respondents, as the Court held in its Decision, petitioner failed to establish such economic losses which rendered impossible the compliance with the order to accept respondent as regular employees. Thus the Decision reads: Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals. x x x15 (Underscoring supplied) Petitioner, for the first time, revealed the matter of termination and the allegation of financial woes in its Motion for Reconsideration of October 10, 2000 before the appellate court,16 not by way of defense to a charge of illegal dismissal but to manifest that supervening events have rendered it impossible for petitioner to comply with the order to accept respondents as regular employees.17 Moreover, the issue of economic losses as a ground for dismissing respondents is factual in nature, hence, it may be determined in the proper case.

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All told, the pending illegal dismissal case in CA-G.R. SP No. 00922 may now take its course. The Courts finding that respondents are regular employees of petitioner neither frustrates nor preempts the appellate courts proceedings in resolving the issue of retrenchment as an authorized cause for termination. If an authorized cause for dismissal is later found to exist, petitioner would still have to pay respondents their corresponding benefits and salary differential up to June 30, 1998. Otherwise, if there is a finding of illegal dismissal, an order for reinstatement with full backwages does not conflict with the Courts declaration of the regular employee status of respondents. As to the belated plea of respondents for attorneys fees, suffice it to state that parties who have not appealed cannot obtain from the appellate court any affirmative reliefs other than those granted, if any, in the decision of the lower tribunal. 18 Since respondents did not file a motion for reconsideration of the appellate courts decision, much less appeal therefrom, they can advance only such arguments as may be necessary to defeat petitioners claims or to uphold the appealed decision, and cannot ask for a modification of the judgment in their favor in order to obtain other positive reliefs.19 WHEREFORE, the Decision of February 29, 2008 is, in light of the foregoing discussions, MODIFIED. As MODIFIED, the dispositive portion of the Decision reads: WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION. Petitioner PHILIPPINE AIRLINES, INC., is ordered to recognize respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARISUSA, JEFFREY LLENES, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERIE ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as its regular employees in their same or substantially equivalent positions, and pay the wages and benefits due them as regular employees plus salary differential corresponding to the difference between the wages and benefits given them and those granted to petitioners other regular employees of the same or substantially equivalent rank, up to June 30, 1998, without prejudice to the resolution of the illegal dismissal case. There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for that purpose. SO ORDERED.
CONCHITA CARPIO MORALES Associate Justice G.R. No. 146408 February 29, 2008

PHILIPPINE AIRLINES, INC., petitioner, vs. ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, and ALLAN BENTUZAL, respondents. DECISION CARPIO MORALES, J.:

Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an Agreement1 on July 15, 1991 whereby Synergy undertook to "provide loading, unloading, delivery of baggage and cargo and other related services to and from [petitioner]'s aircraft at the Mactan Station."2 The Agreement specified the following "Scope of Services" of Contractor Synergy: 1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading and deliverymaterials, facilities, supplies, equipment and tools for the satisfactory performance and execution of the following services (the Work): a. Loading and unloading of baggage and cargo to and from the aircraft; b. Delivering of baggage from the ramp to the baggage claim area; c. Picking up of baggage from the baggage sorting area to the designated parked aircraft; d. Delivering of cargo unloaded from the flight to cargo terminal; e. Other related jobs (but not janitorial functions) as may be required and necessary;

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CONTRACTOR shall perform and execute the aforementioned Work at the following areas located at Mactan Station, to wit: a. Ramp Area b. Baggage Claim Area c. Cargo Terminal Area, and d. Baggage Sorting Area3 (Underscoring supplied) And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the other."4 On the duration of the Agreement, Section 10 thereof provided: 10. 1 Should at any time OWNER find the services herein undertaken by CONTRACTOR to be unsatisfactory, it shall notify CONTRACTOR who shall have fifteen (15) days from such notice within which to improve the services. If CONTRACTOR fails to improve the services under this Agreement according to OWNER'S specifications and standards, OWNER shall have the right to terminate this Agreement immediately and without advance notice. 10.2 Should CONTRACTOR fail to improve the services within the period stated above or should CONTRACTOR breach the terms of this Agreement and fail or refuse to perform the Work in such a manner as will be consistent with the achievement of the result therein contracted for or in any other way fail to comply strictly with any terms of this Agreement, OWNER at its option, shall have the right to terminate this Agreement and to make other arrangements for having said Work performed and pursuant thereto shall retain so much of the money held on the Agreement as is necessary to cover the OWNER's costs and damages, without prejudice to the right of OWNER to seek resort to the bond furnished by CONTRACTOR should the money in OWNER's possession be insufficient. x x x x (Underscoring supplied) Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to have been assigned by Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on March 3, 1992 complaints before the NLRC Regional Office VII at Cebu City against petitioner, Synergy and their respective officials for underpayment, non-payment of premium pay for holidays, premium pay for rest days, service incentiveleave pay, 13th month pay and allowances, and for regularization of employment status with petitioner, they claiming to be "performing duties for the benefit of [petitioner] since their job is directly connected with [its] business x x x."5 Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials for regularization of his employment status. Later alleging that he was, without valid ground, verbally dismissed, he filed a complaint against petitioner and Synergy and their respective officials for illegal dismissal and reinstatement with full backwages.6 The complaints of respondents were consolidated. By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed respondents' complaint for regularization against petitioner, but granted their money claims. The fallo of the decision reads: WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows: (1) Ordering respondents PAL and Synergy jointly and severally to pay all the complainants herein their 13th month pay and service incentive leave benefits; xxxx (3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial assistance in the amount of P5,000.00. The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87) are computed in detail by our Fiscal Examiner which computation is hereto attached to form part of this decision.

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The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring supplied) On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the Labor Arbiter by Decision9 of January 5, 1996, the fallo of which reads: WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby VACATED and SET ASIDE and judgment is hereby rendered: 1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor; 2. Ordering respondent Philippine Airlines to accept, as its regular employees, all the complainants, . . . and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the Collective Bargaining Agreement subsisting during the period of their employment; xxxx 4. Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering his reinstatementas helper or utility man with respondent Philippine Airlines, with full backwages, allowances and other benefits and privileges from the time of his dismissal up to his actual reinstatement; and 5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit.10 (Emphasis and underscoring supplied) Only petitioner assailed the NLRC decision via petition for certiorari before this Court. By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action and disposition, conformably with St. Martin Funeral Homes v. National Labor Relations Commission which was promulgated on September 16, 1998. The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.12 Petitioner's motion for reconsideration having been denied by Resolution of December 21, 2000,13 the present petition was filed, faulting the appellate court I. . . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION WHICH IMPOSED THE RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN. II. . . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS COMMISSION ORDERING THE REINSTATEMENT OF RESPONDENT AUXTERO DESPITE THE ABSENCE [OF] ANY FACTUAL FINDING IN THE DECISION THAT PETITIONER ILLEGALLY TERMINATED HIS EMPLOYMENT. III. . . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH COMPELLED THE PETITIONER TO EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR SERVICES ARE IN EXCESS OF PETITIONER COMPANY'S OPERATIONAL REQUIREMENTS.14 (Underscoring supplied) Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has substantial capital in carrying on an independent business of contracting, to perform specific jobs. Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling, etc., which are directly related to its business, does not make respondents its employees. Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between petitioner and respondents, viz: selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee's conduct, is present in the case.15

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Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy effective June 30, 199816 as a cost-saving measure. The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a legitimate contractor. If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner in which case respondents would be entitled to all the benefits granted to petitioner's regular employees; otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy. The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code which reads: ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the 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. (Emphasis, capitalization and underscoring supplied) Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended) as follows: Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service. (Emphasis and underscoring supplied) Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,and any of the following elements are [sic] 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 over the performance of the work of the contractual employee. (Emphasis, underscoring and capitalization supplied) "Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the Department Order as follows: "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.

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The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis and underscoring supplied) From the records of the case, it is gathered that the work performed by almost all of the respondents - loading and unloading of baggage and cargo of passengers - is directly related to the main business of petitioner. And the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by petitioner.17 Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to be considered a legitimate contractor, citing Neri v. National Labor Relations Commission.18 Petitioner's reliance on said case is misplaced. In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of P1 million fully subscribed and paid for.19 The corporation's status as independent contractor had in fact been previously confirmed in an earlier case20 by this Court which found it to be serving, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc." In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed to present evidence thereon. As the NLRC held: The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY has substantial capital, but there is no showing in the records as to how much is that capital. Neither had respondents shown that SYNERGY has such substantial capital. x x x21 (Underscoring supplied) It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's substantial capitalization by attaching photocopies of Synergy's financial statements, e.g., balance sheets, statements of income and retained earnings, marked as "Annexes 'A' - 'A-4.'"22 More significantly, however, is that respondents worked alongside petitioner's regular employees who were performing identical work.23 As San Miguel Corporation v. Aballa24 and Dole Philippines, Inc. v. Esteva, et al.25teach, such is an indicium of labor-only contracting. For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for convenience, re-quoted: (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 over the performance of the work of the contractual employee. (Emphasis and CAPITALIZATION supplied) Even if only one of the two elements is present then, there is labor-only contracting. The control test element under the immediately-quoted paragraph (ii), which was not present in the old Implementing Rules (Department Order No. 10, Series of 1997),26 echoes the prevailing jurisprudential trend27elevating such element as a primary determinant of employer-employee relationship in job contracting agreements. One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results.28 While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace. Even the parties' Agreement does not lend support to petitioner's claim, thus: Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers. CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading, unloading and delivery Work as well as provide all equipment, loading, unloading and delivery equipment, materials, supplies and tools necessary for the performance of the Work. CONTRACTOR shall upon OWNER'S request furnish the latter with information regarding the

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qualifications of the former's workers, to prove their capability and experience. Contractor shall require all its workers, employees, suppliers and visitors to comply with OWNER'S rules, regulations, procedures and directives relative to the safety and security of OWNER'S premises, properties and operations. For this purpose, CONTRACTOR shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms to be approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall not again be employed to perform the services hereunder without OWNER'S permission.29 (Underscoring partly in the original and partly supplied; emphasis supplied) Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of plane arrivals.30 And as the NLRC found, petitioner's managers and supervisors approved respondents' weekly work assignments and respondents and other regular PAL employees were all referred to as "station attendants" of the cargo operation and airfreight services of petitioner.31 Respondents having performed tasks which are usually necessary and desirable in the air transportation business of petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.32 The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the case33 which is determinative of the parties' relationship. Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner who had been working as utility man/helper since November 1988, it is not legally justified for want of just or authorized cause therefor and for non-compliance with procedural due process. Petitioner's claim that he abandoned his work does not persuade.35 The elements of abandonment being (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by some overt acts,36 the onus probandi lies with petitioner which, however, failed to discharge the same. Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from employment, should be entitled to salary differential37 from the time he rendered one year of service until his dismissal, reinstatement plus backwages until the finality of this decision.38 In view, however, of the long period of time39 that had elapsed since his dismissal on November 15, 1992, it would be appropriate to award separation pay of one (1) month salary for each year of service, in lieu of reinstatement.40 As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court, ordering petitioner to accept them as its regular employees and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the pertinent Collective Bargaining Agreement. Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the Court of Appeals, for during the pendency of this case, it was forced to reduce its personnel due to heavy losses caused by economic crisis and the pilots' strike of June 5, 1998.41 Hence, there are no available positions where respondents could be placed. And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated by Synergy effective 30 June 1998 when petitioner terminated its contract with Synergy."42 Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals. 43 Further, the notice of termination in 1998 was in disregard of a subsisting temporary restraining order44 to preserve the status quo, issued by this Court in 1996 before it referred the case to the Court of Appeals in January 1999. So as to thwart the attempt to subvert the implementation of the assailed decision, respondents are deemed to be continuously employed by petitioner, for purposes of computing the wages and benefits due respondents. Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with observance of procedural due process. WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION. Petitioner PHILIPPINE AIRLINES, INC. is ordered to:

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(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as its regular employees in their same or substantially equivalent positions, and pay the wages and benefits due them as regular employees plus salary differential corresponding to the difference between the wages and benefits given them and those granted to petitioner's other regular employees of the same rank; and (b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal until the finality of this decision; and separation pay, in lieu of reinstatement, equivalent to one (1) month pay for every year of service until the finality of this decision. There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for that purpose. SO ORDERED.
CONCHITA CARPIO MORALES Associate Justice

Garden of Memories Park and Life Plan Inc. et. Al., v. NLRC 2nd Division et. Al., February 8, 2012.30
G.R. No. 160278 February 8, 2012 GARDEN OF MEMORIES PARK and LIFE PLAN, INC. and PAULINA T. REQUIO, Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION, LABOR ARBITER FELIPE T. GARDUQUE II and HILARIA CRUZ, Respondents. DECISION MENDOZA, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking nullification of the June 11, 2003 Decision 1 and October 16, 2003 Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 64569, which affirmed the December 29, 2000 Decision3 of the National Labor Relations Commission (NLRC). The NLRC agreed with the Labor Arbiter (L.A.) in finding that petitioner Garden of Memories Memorial Park and Life Plan, Inc.(Garden of Memories) was the employer of respondent Hilaria Cruz (Cruz), and that Garden of Memories and petitioner Paulina Requio (Requio), were jointly and severally liable for the money claims of Cruz. The Facts Petitioner Garden of Memories is engaged in the business of operating a memorial park situated at Calsadang Bago, Pateros, MetroManila and selling memorial Plan and services. Respondent Cruz, on the other hand, worked at the Garden of Memories Memorial Park as a utility worker from August 1991 until her termination in February 1998. On March 13, 1998, Cruz filed a complaint4 for illegal dismissal, underpayment of wages, non-inclusion in the Social Security Services, and non-payment of legal/special holiday, premium pay for rest day, 13th month pay and service incentive leave pay against Garden of Memories before the Department of Labor and Employment(DOLE). Upon motion of Garden of Memories, Requio was impleaded as respondent on the alleged ground that she was its service contractor and the employer of Cruz. In her position paper,5 Cruz averred that she worked as a utility worker of Garden of Memories with a salary ofP115.00 per day. As a utility worker, she was in charge, among others, of the cleaning and maintenance of the ground facilities of the memorial park. Sometime in February 1998, she had a misunderstanding with a co-worker named Adoracion Requio regarding the use of a garden water hose. When the misunderstanding came to the knowledge of Requio, the latter instructed them to go home and not to return anymore. After three (3) days, Cruz reported for work but she was told that she had been replaced by another worker. She immediately reported the matter of her replacement to the personnel manager of Garden of Memories and manifested her protest. Cruz argued that as a regular employee of the Garden of Memories, she could not be terminated without just or valid cause. Also, her dismissal was violative of due process as she was not afforded the opportunity to explain her side before her employment was terminated.
30

http://www.lawphil.net

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Cruz further claimed that as a result of her illegal dismissal, she suffered sleepless nights, serious anxiety and mental anguish. In its Answer,6 Garden of Memories denied liability for the claims of Cruz and asserted that she was not its employee but that of Requio, its independent service contractor, who maintained the park for a contract price. It insisted that there was no employeremployee relationship between them because she was employed by its service contractor, Victoriana Requio (Victoriana), who was later succeeded by her daughter, Paulina, when she (Victoriana) got sick. Garden of Memories claimed that Requio was a service contractor who carried an independent business and undertook the contract of work on her own account, under her own responsibility and according to her own manner and method, except as to the results thereof. In her defense, Requio prayed for the dismissal of the complaint stating that it was Victoriana, her mother, who hired Cruz, and she merely took over the supervision and management of the workers of the memorial park when her mother got ill. She claimed that the ownership of the business was never transferred to her. Requio further stated that Cruz was not dismissed from her employment but that she abandoned her work.7 On October 27, 1999, the LA ruled that Requio was not an independent contractor but a labor-only contractor and that her defense that Cruz abandoned her work was negated by the filing of the present case.8 The LA declared both Garden of Memories and Requio, jointly and severally, liable for the monetary claims of Cruz, the dispositive portion of the decision reads: WHEREFORE, premises considered, respondents Garden of Memories Memorial [P]ark and Life Plan, Inc. and/or Paulina Requio are hereby ordered to jointly and severally pay within ten (10) days from receipt hereof, the herein complainant Hilaria Cruz, the sums of P 72,072 (P 198 x 26 days x 14 months pay), representing her eight (8) months separation pay and six (6) months backwages; P 42,138.46, as salary differential; P 2,475.00, as service incentive leave pay; and P 12,870.00 as 13th month pay, for three (3) years, or a total sum of P129,555.46, plus ten percent attorneys fee. Complainants other claims including her prayer for damages are hereby denied for lack of concrete evidence. SO ORDERED.9 Garden of Memories and Requio appealed the decision to the NLRC. In its December 29, 2000 Decision, the NLRC affirmed the ruling of the LA, stating that Requio had no substantial capital or investments in the form of tools, equipment, machineries, and work premises, among others, for her to qualify as an independent contractor. It declared the dismissal of Cruz illegal reasoning out that there could be no abandonment of work on her part since Garden of Memories and Requio failed to prove that there was a deliberate and unjustified refusal on the part of the employee to go back to work and resume her employment. Garden of Memories moved for a reconsideration of the NLRC decision but it was denied for lack of merit.10 Consequently, Garden of Memories and Requio filed before the CA a petition for certiorari under Rule 65 of the Rules of Court. In its June 11, 2003 Decision, the CA dismissed the petition and affirmed the NLRC decision. Hence, this petition, where they asserted that: The Public Respondents National Labor Relations Commission and Court of Appeals committed serious error, gravely abused their discretion and acted in excess of jurisdiction when they failed to consider the provisions of Section 6 (d) of Department Order No. 10, Series of 1997, by the Department of Labor and Employment, and then rendered their respective erroneous rulings that: I PETITIONER PAULINA REQUIO IS ENGAGED IN LABOR-ONLY CONTRACTING. II THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN RESPONDENT CRUZ AND PETITIONER GARDEN OF MEMORIES. III RESPONDENT HILARIA CRUZ DID NOT ABANDON HER WORK. IV

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THERE IS [NO] BASIS IN GRANTING THE MONETARY AWARDS IN FAVOR OF THE RESPONDENT CRUZ DESPITE THE ABSENCE OF A CLEAR PRONOUNCEMENT REGARDING THE LEGALITY OR ILLEGALITY OF HER DISMISSAL.11 The petitioners aver that Requio is the employer of Cruz as she (Requio) is a legitimate independent contractor providing maintenance work in the memorial park such as sweeping, weeding and watering of the lawns. They insist that there was no employeremployee relationship between Garden of Memories and Cruz. They claim that there was a service contract between Garden of Memories and Requio for the latter to provide maintenance work for the former and that the "power of control," the most important element in determining the presence of such a relationship was missing. Furthermore, Garden of Memories alleges that it did not participate in the selection or dismissal of Requios employees. As to the issue of dismissal, the petitioners denied the same and insist that Cruz willfully and actually abandoned her work. They argue that Cruzs utterances "HINDI KO KAILANGAN ANG TRABAHO" and "HINDI KO KAILANGAN MAGTRABAHO AT HINDI KO KAILANGAN MAKI-USAP KAY PAULINA REQUIO," manifested her belligerence and disinterest in her work and that her unexplained absences later only showed that she had no intention of returning to work. The Court finds no merit in the petition. At the outset, it must be stressed that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing errors of law, not of fact. This is in line with the well-entrenched doctrine that the Court is not a trier of facts, and this is strictly adhered to in labor cases.12 Factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality, and bind the Court when supported by substantial evidence. Particularly when passed upon and upheld by the CA, they are binding and conclusive upon the Court and will not normally be disturbed.13 This is because it is not the function of this Court to analyze or weigh all over again the evidence already considered in the proceedings below; or reevaluate the credibility of witnesses; or substitute the findings of fact of an administrative tribunal which has expertise in its special field.14 In the present case, the LA, the NLRC, and the CA are one in declaring that petitioner Requio was not a legitimate contractor. Echoing the decision of the LA and the NLRC, the CA reasoned out that Requio was not a licensed contractor and had no substantial capital or investment in the form of tool, equipment and work premises, among others. Section 106 of the Labor Code on contracting and subcontracting provides: Article 106. Contractor or subcontractor. - Whenever, an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.[Underscoring provided] In the same vein, Sections 8 and 9, DOLE Department Order No. 10, Series of 1997, state that: Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met: (1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.

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Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person: (1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and (2) The workers recruited and placed by such persons are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed. (b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers." On the matter of labor-only contracting, Section 5 of Rule VIII-A of the Omnibus Rules Implementing the Labor Code, provides: Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities related to the main business of the principal, or ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. Xxxx Thus, in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and payment of the contractors workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.15 On the other hand, there is labor-only contracting where: (a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others; and (b) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer.16 The Court finds no compelling reason to deviate from the findings of the tribunals below. Both the capitalization requirement and the power of control on the part of Requio are wanting. Generally, the presumption is that the contractor is a labor-only contracting unless such contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the like.17 In the present case, though Garden of Memories is not the contractor, it has the burden of proving that Requio has sufficient capital or investment since it is claiming the supposed status of Requio as independent contractor. 18 Garden of Memories, however, failed to adduce evidence purporting to show that Requio had sufficient capitalization. Neither did it show that she invested in the form of tools, equipment, machineries, work premises and other materials which are necessary in the completion of the service contract. Furthermore, Requio was not a licensed contractor. Her explanation that her business was a mere livelihood program akin to a cottage industry provided by Garden of Memories as part of its contribution to the upliftment of the underprivileged residing near the memorial park proves that her capital investment was not substantial. 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. 19 Obviously, Requio is a labor-only contractor.

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Another determinant factor that classifies petitioner Requio as a labor-only contractor was her failure to exercise the right to control the performance of the work of Cruz. This can be gleaned from the Service Contract Agreement20 between Garden of Memories and Requio, to wit: xxxx NOW THEREFORE, premises considered, the parties hereto have hereunto agreed on the following terms and conditions: 1. That the Contractor shall undertake the maintenance of the above-mentioned works in strict compliance with and subject to all the requirements and standards of GMMPLPI. 2. Likewise, the Contractor shall perform all other works that may from time to time be designated by GMMPLPI thru its authorized representatives, which work is similar in nature to the responsibilities of a regular employee with a similar function. 3. The contract price for the labor to be furnished or the service to be rendered shall be THIRTY-FIVE THOUSAND (P 35,000.00) PESOS per calendar month, payable as follows: (a) Eight Thousand Seven Hundred Fifty Thousand (P 8,750.00) Pesos payable on every 7th, 15th, 23rd and 30th of the month. 4. The period of this Contract shall be for Three (3) months from Feb 1, April 30, 1998 and renewable at the option of the Management. 5. It is expressly recognized that this contract was forged for the purpose of supplying the necessary maintenance work and in no way shall the same be interpreted to have created an employer-employee relationship. Xxxx [Underscoring supplied] The requirement of the law in determining the existence of independent contractorship is that the contractor should undertake the work on his own account, under his own responsibility, according to his own manner and method, free from the control and direction of the employer except as to the results thereof.21 In this case, however, the Service Contract Agreement clearly indicates that Requio has no discretion to determine the means and manner by which the work is performed. Rather, the work should be in strict compliance with, and subject to, all requirements and standards of Garden of Memories. Under these circumstances, there is no doubt that Requio is engaged in labor-only contracting, and is considered merely an agent of Garden of Memories. As such, the workers she supplies should be considered as employees of Garden of Memories. Consequently, the latter, as principal employer, is responsible to the employees of the labor-only contractor as if such employees have been directly employed by it.22 Notably, Cruz was hired as a utility worker tasked to clean, sweep and water the lawn of the memorial park. She performed activities which were necessary or desirable to its principal trade or business. Thus, she was a regular employee of Garden of Memories and cannot be dismissed except for just and authorized causes.23 Moreover, the Court agrees with the findings of the tribunals below that respondent Cruz did not abandon her work but was illegally dismissed. As the employer, Garden of Memories has the burden of proof to show the employee's deliberate and unjustified refusal to resume his employment without any intention of returning.24 For abandonment to exist, two factors must be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second element as the more determinative factor being manifested by some overt acts. 25 It has been said that abandonment of position cannot be lightly inferred, much less legally presumed from certain equivocal acts.26 Mere absence is not sufficient.27 In this case, no such intention to abandon her work can be discerned from the actuations of Cruz. Neither were there overt acts which could be considered manifestations of her desire to truly abandon her work. On the contrary, her reporting to the personnel manager that she had been replaced and the immediate filing of the complaint before the DOLE demonstrated a desire on her part to continue her employment with Garden of Memories. As correctly pointed out by the CA, the filing of the case for illegal dismissal negated the allegation of abandonment. WHEREFORE, the petition is DENIED. The June 11, 2003 Decision of the Court of Appeals in CA-G.R. SP No. 64569 and its October 16, 2003 Resolution are hereby AFFIRMED.

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SO ORDERED.
JOSE CATRAL MENDOZA Associate Justice

Bonus v. 13th Month Pay Eastern Telecommunications Philippines Inc. v. Eastern Telecom Employees Union, February 8, 2012.31
G.R. No. 185665 February 8, 2012 EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner, vs. EASTERN TELECOMS EMPLOYEES UNION, Respondent. DECISION MENDOZA, J.:

Before the Court is a petition for review on certiorari seeking modification of the June 25, 2008 Decision1 of the Court of Appeals (CA) and its December 12, 2008 Resolution,2 in CA-G.R. SP No. 91974, annulling the April 28, 2005 Resolution3 of the National Labor Relations Commission (NLRC) in NLRC-NCR-CC-000273-04 entitled "In the Matter of the Labor Dispute in Eastern Telecommunications, Philippines, Inc." The Facts As synthesized by the NLRC, the facts of the case are as follows, viz: Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing telecommunications facilities, particularly leasing international date lines or circuits, regular landlines, internet and data services, employing approximately 400 employees. Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the companys rank and file employees with a strong following of 147 regular members. It has an existing collecti[ve] bargaining agreement 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 companys plan to defer payment of the 2003 14th, 15th and 16th month bonuses sometime in April 2004. The companys main ground in postponing the payment of bonuses is due to allege continuing deterioration of companys 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 Collective Bargaining Agreement for the period 2001-2004 between ETPI and ETEU which stated as follows: "4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses (other than 13th month pay) are granted." The union strongly opposed the deferment in payment of the bonuses by filing a preventive mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine the date when the bonus should be paid. In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would only be made in April 2004 to which date of payment, the union agreed. Thus, considering the agreement forged between the parties, the said agreement was reduced to a Memorandum of Agreement. The union requested that the President of the company should be made a signatory to the agreement, however, the latter refused to sign. In addition to such a refusal, 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. The companys change in position was contained in a letter dated April 14, 2004 written to the union by Mr. Sonny Javier, VicePresident for Human Resources and Administration, stating that "the deferred release of bonuses had been superseded and voided due to the unions filing of the issue to the NCMB on July 18, 2003." He declared that "until the matter is resolved in a compulsory arbitration, the company cannot and will not pay any bonuses to any and all union members." Thus, on April 26, 2004, 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.
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On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged in an industry considered vital to the economy and any work disruption thereat will adversely affect not only its operation but also that of the other business relying on its services, certified the labor dispute for compulsory arbitration pursuant to Article 263 (q) of the Labor Code as amended. Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein the parties have submitted that the issues for resolution are (1) unfair labor practice and (2) the grant of 14th, 15th and 16th month bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were directed to submit their respective position papers and evidence in support thereof after which submission, they agreed to have the case considered submitted for decision.4 In its position paper,5 the Eastern Telecoms Employees Union (ETEU) claimed that Eastern Telecommunications Philippines, Inc. (ETPI) had consistently and voluntarily been giving out 14th month bonus during the month of April, and 15th and 16th month bonuses every December of each year (subject bonuses) to its employees from 1975 to 2002, even when it did not realize any net profits. ETEU posited that by reason of its long and regular concession, the payment of these monetary benefits had ripened into a company practice which could no longer be unilaterally withdrawn by ETPI. ETEU added that this long-standing company practice had been expressly confirmed in the Side Agreements of the 1998-2001 and 2001-2004 Collective Bargaining Agreements (CBA)which provided for the continuous grant of these bonuses in no uncertain terms. ETEU theorized that the grant of the subject bonuses is not only a company practice but also a contractual obligation of ETPI to the union members. ETEU contended that the unjustified and malicious refusal of the company to pay the subject bonuses was a clear violation of the economic provision of the CBA and constitutes unfair labor practice (ULP). According to ETEU, such refusal was nothing but a ploy to spite the union for bringing the matter of delay in the payment of the subject bonuses to the National Conciliation and Mediation Board (NCMB). It prayed for the award of moral and exemplary damages as well as attorneys fees for the unfair labor practice allegedly committed by the company. On the other hand, ETPI in its position paper,6 questioned the authority of the NLRC to take cognizance of the case contending that it had no jurisdiction over the issue which merely involved the interpretation of the economic provision of the 2001-2004 CBA Side Agreement. Nonetheless, it maintained that the complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and 14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject bonuses were not part of the legally demandable wage and the grant thereof to its employees was an act of pure gratuity and generosity on its part, involving the exercise of management prerogative and always dependent on the financial performance and realization of profits. It posited that it resorted to the discontinuance of payment of the bonuses due to the unabated huge losses that the company had continuously experienced. It claimed that it had been suffering serious business losses since 2000 and to require the company to pay the subject bonuses during its dire financial straits would in effect penalize it for its past generosity. It alleged that the non-payment of the subject bonuses was neither flagrant nor malicious and, hence, would not amount to unfair labor practice. Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a mere affirmation that the distribution of bonuses was discretionary to the company, premised and conditioned on the success of the business and availability of cash. It submitted that said bonus provision partook of the nature of a "one-time" grant which the employees may demand only during the year when the Side Agreement was executed and was never intended to cover the entire term of the CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to its employees, the drastic decline in its financial condition had already legally released it therefrom pursuant to Article 1267 of the Civil Code. On April 28, 2005, the NLRC issued its Resolution dismissing ETEUs complaint and held that ETPI could not be forced to pay the union members the 14th, 15th and 16th month bonuses for the year 2003 and the 14th month bonus for the year 2004 inasmuch as the payment of these additional benefits was basically a management prerogative, being an act of generosity and munificence on the part of the company and contingent upon the realization of profits. The NLRC pronounced that ETPI may not be obliged to pay these extra compensations in view of the substantial decline in its financial condition. Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating that no sufficient and substantial evidence was adduced to attribute malice to the company for its refusal to pay the subject bonuses. The dispositive portion of the resolution reads: WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for lack of merit. SO ORDERED.7 Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its Resolution dated August 31, 2005. Aggrieved, ETEU filed a petition for certiorari8 before the CA ascribing grave abuse of discretion on the NLRC for disregarding its evidence which allegedly would prove that the subject bonuses were part of the union members wages, salaries or compensations. In addition, ETEU asserted that the NLRC committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give said bonuses to the union members.

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In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and 2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its employees without qualification or condition. It also found that the grant of said bonuses has already ripened into a company practice and their denial would amount to diminution of the employees benefits. It held that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision would apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond the contemplation of the parties, which was not the case therein. The CA, however, sustained the NLRC finding that the allegation of ULP was devoid of merit. The dispositive portion of the questioned decision reads: WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the National Labor Relations Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE. Respondent Eastern Telecommunications Philippines, Inc. is ordered to pay the members of petitioner their 14th, 15th and 16th month bonuses for the year 2003 and 14th month for the year 2004. The complaint for unfair labor practice against said respondent is DISMISSED. SO ORDERED.9 ISSUES
Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly committed by the CA, to wit:

I. THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED AND SET ASIDE THE R E S O L U T I O NS OF THE NLRC DISREGARDING THE WELL SETTLED RULE THAT A WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION. II. THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT DISREGARDED THE RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES ARE ACCORDED FINALITY IF THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE BASED ON SUBSTANTIAL AND OVERWHELMING EVIDENCE AND UNDISPUTED FACTS. III. IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER THAT THE BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS NOT DEPENDENT ON THE REALIZATION OF PROFITS. IV. THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT DISREGARDED THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS SUFFERING FROM TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN COMMUNICATIONS TO GRANT THE BONUSES REGARDLESS OF THE FINANCIAL DISTRESS OF EASTERN COMMUNICATIONS. V. THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED AT THE CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES HAS RIPENED INTO A COMPANY PRACTICE.10 A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude that this case revolves around the following core issues: 1. Whether or not petitioner 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; and 2. Whether or not the CA erred in not dismissing outright ETEUs petition for certiorari.

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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 ETEUs monetary claims, it insists that the distribution of the subject bonuses falls well within the companys 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. It alleges that the companys fiscal situation greatly declined due to tremendous and extraordinary losses it sustained beginning the year 2000. It claims that it cannot be compelled to act liberally and confer upon its employees additional benefits over and above those mandated by law when it cannot afford to do so. It posits that so long as the giving of bonuses will result in the financial ruin of an already distressed company, the employer cannot be forced to grant the same. 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. In addition, it argues that even if such traditional company practice exists, the CA should have applied Article 1267 of the Civil Code which releases the obligor from the performance of an obligation when it has become so difficult to fulfill the same. It is the petitioners stance that the CA should have dismissed outright the respondent unions petition for certiorari alleging that no question of jurisdiction whatsoever was raised therein but, instead, what was being sought was a judicial re-evaluation of the adequacy or inadequacy of the evidence on record. It claims that the CA erred in disregarding the findings of the NLRC which were based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that the CA court should have refrained from tackling issues of fact and, instead, limited itself on issues of jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it. The Courts Ruling As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally embark on a reexamination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court. The rule, however, admits of several exceptions, one of which is when the findings of the appellate court are contrary to those of the trial court or the lower administrative body, as the case may be. 11 Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds Itself obliged to resolve it. The pivotal question determinative of this controversy is whether the members of ETEU are entitled to the payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for year 2004. After an assiduous assessment of the record, the Court finds no merit in the petition. 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.12 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 employees basic salaries or wages.13 A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee.14 Particularly instructive is the ruling of the Court in Metro Transit Organization, Inc. v. National Labor Relations Commission,15 where it was written: 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. The consequential question that needs to be settled, therefore, is whether the subject bonuses are demandable or not. Stated differently, can these bonuses be considered part of the wage, salary or compensation making them enforceable obligations? The Court believes so. 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,16 as well as in the 2001-2004 CBA Side Agreement, 17 which was signed on September 3, 2001. The provision, which was similarly worded, states:

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Employment-Related Bonuses 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. Terse and clear, the said provision does not state that the subject bonuses shall be made to depend on the ETPIs 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. The records are also bereft of any showing that the ETPI made it clear before or during the execution of the Side Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI and ETEU intended that the subject bonuses would be dependent on the company earnings, such intention should have been expressly declared in the Side Agreements or the bonus provision should have been deleted altogether. In the absence of any proof that ETPIs consent was vitiated by fraud, mistake or duress, it is presumed that it entered into the Side Agreements 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. Moreover, the continuous conferment of bonuses by ETPI to the union members from 1998 to 2002 by virtue of the Side Agreements evidently negates its argument that the giving of the subject bonuses is a management prerogative. From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its undertaking. It is manifestly clear that although it incurred business losses of P 149,068,063.00 in the year 2000, it continued to distribute 14th, 15th and 16th month bonuses for said year. Notwithstanding such huge losses, ETPI entered into the 2001-2004 CBA Side Agreement on September 3, 2001 whereby it contracted to grant the subject bonuses to ETEU in no uncertain terms. ETPI continued to sustain losses for the succeeding years of 2001 and 2002 in the amounts of P 348,783,013.00 and P 315,474,444.00, respectively. Still and all, this did not deter it from honoring the bonus provision in the Side Agreement as it continued to give the subject bonuses to each of the union members in 2001 and 2002 despite its alleged precarious financial condition. Parenthetically, it must be emphasized that ETPI even agreed to the payment of the 14th, 15th and 16th month bonuses for 2003 although it opted to defer the actual grant in April 2004. All given, business losses could not be cited as grounds for ETPI to repudiate its obligation under the 2001-2004 CBA Side Agreement. The Court finds no merit in ETPIs contention that the bonus provision confirms the grant of the subject bonuses only on a single instance because if this is so, the parties should have included such limitation in the agreement. Nowhere in the Side Agreement does it say that the subject bonuses shall be conferred once during the year the Side Agreement was signed. The Court quotes with approval the observation of the CA in this regard: ETPI argues that assuming the bonus provision in the Side Agreement of the 2001-2004 CBA entitles the union members to the subject bonuses, it is merely in the nature of a "one-time" grant and not intended to cover the entire term of the CBA. The contention is untenable. The bonus provision in question is exactly the same as that contained in the Side Agreement of the 1998-2001 CBA and there is no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of those years. Thus, ETPI may not now claim that the bonus provision in the Side Agreement of the 2001-2004 CBA is only a "one-time" grant.18 ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU members under the Side Agreements, its current financial difficulties should have released it from the obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares: Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. The Court is not persuaded. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. 19 In the case at bench, the Court determines that ETPIs claimed depressed financial state will not release it from the binding effect of the 2001-2004 CBA Side Agreement. ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU. Considering that ETPI had been continuously suffering huge losses from 2000 to 2002, its business losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said that the difficulty in complying with its obligation under the Side Agreement was "manifestly beyond the contemplation of the parties." Besides, as held in Central Bank of the Philippines v. Court of Appeals, 20 mere pecuniary inability to fulfill an engagement does not

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discharge a contractual obligation. Contracts, once perfected, are binding between the contracting parties. Obligations arising therefrom have the force of law and should be complied with in good faith. ETPI cannot renege from the obligation it has freely assumed when it signed the 2001-2004 CBA Side Agreement. 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 companys long and regular practice. InPhilippine Appliance Corporation v. Court of Appeals,21 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.1wphi1 The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article 100 of the Labor Code: Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code. The rule is settled that any benefit and supplement being enjoyed by the 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 to promote their welfare and to afford labor full protection.22 Interestingly, ETPI never presented countervailing evidence to refute ETEUs claim that the company has been continuously paying bonuses since 1975 up to 2002 regardless of its financial state. Its failure to controvert the allegation, when it had the opportunity and resources to do so, works in favor of ETEU. Time and again, it has been held that should doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.23 WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its December 12, 2008 Resolution are AFFIRMED. SO ORDERED.
JOSE CATRAL MENDOZA Associate Justice

Non Diminution of Benefits Central Azucarera de Tarlac v. Azucarera de Tarlac Labor Union (NLU), July 26, 2010.32
G.R. No. 188949 July 26, 2010 CENTRAL AZUCARERA DE TARLAC, Petitioner, vs. CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU, Respondent. DECISION NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision 1dated May 28, 2009, and the Resolution2 dated July 28, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 106657. The factual antecedents of the case are as follows:

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Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is a legitimate labor organization which serves as the exclusive bargaining representative of petitioners rank-and-file employees. The controversy stems from the interpretation of the term "basic pay," essential in the computation of the 13th-month pay. The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851, petitioner granted its employees the mandatory thirteenth (13th) - month pay since 1975. The formula used by petitioner in computing the 13th-month pay was: Total Basic Annual Salary divided by twelve (12). Included in petitioners computation of the Total Basic Annual Salary were the following: basic monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday; night premium pay; and vacation and sick leaves for each year. Throughout the years, petitioner used this computation until 2006.3 On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner declared a temporary cessation of operations. In December 2005, all the striking union members were allowed to return to work. Subsequently, petitioner declared another temporary cessation of operations for the months of April and May 2006. The suspension of operation was lifted on June 2006, but the rank-and-file employees were allowed to report for work on a fifteen (15) day-per-month rotation basis that lasted until September 2006. In December 2006, petitioner gave the employees their 13th-month pay based on the employees total earnings during the year divided by 12.4 Respondent objected to this computation. It averred that petitioner did not adhere to the usual computation of the 13th-month pay. It claimed that the divisor should have been eight (8) instead of 12, because the employees worked for only 8 months in 2006. It likewise asserted that petitioner did not observe the company practice of giving its employees the guaranteed amount equivalent to their one month pay, in instances where the computed 13th-month pay was less than their basic monthly pay.5 Petitioner and respondent tried to thresh out their differences in accordance with the grievance procedure as provided in their collective bargaining agreement. During the grievance meeting, the representative of petitioner explained that the change in the computation of the 13th-month pay was intended to rectify an error in the computation, particularly the concept of basic pay which should have included only the basic monthly pay of the employees.6 For failure of the parties to arrive at a settlement, respondent applied for preventive mediation before the National Conciliation and Mediation Board. However, despite four (4) conciliatory meetings, the parties still failed to settle the dispute. On March 29, 2007, respondent filed a complaint against petitioner for money claims based on the alleged diminution of benefits/erroneous computation of 13th-month pay before the Regional Arbitration Branch of the National Labor Relations Commission (NLRC).7 On October 31, 2007, the Labor Arbiter rendered a Decision8 dismissing the complaint and declaring that the petitioner had the right to rectify the error in the computation of the 13th-month pay of its employees.9 The fallo of the Decision reads: WHEREFORE, premises considered, the complaint filed by the complainants against the respondents should be DISMISSED with prejudice for utter lack of merit. SO ORDERED.10 Respondents filed an appeal. On August 14, 2008, the NLRC rendered a Decision11 reversing the Labor Arbiter. The dispositive portion of the Decision reads: WHEREFORE, the decision appealed is reversed and set aside and respondent-appellee Central Azucarera de Tarlac is hereby ordered to adhere to its established practice of granting 13th[-] month pay on the basis of gross annual basic which includes basic pay, premium pay for work in rest days and special holidays, night shift differential and paid vacation and sick leaves for each year. Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way of 13th month pay. SO ORDERED. 12 Petitioner filed a motion for reconsideration. However, the same was denied in a Resolution dated November 27, 2008. Petitioner then filed a petition for certiorari under Rule 65 of the Rules of Court before the CA.13 On May 28, 2009, the CA rendered a Decision14 dismissing the petition, and affirming the decision and resolution of the NLRC, viz.: WHEREFORE, the foregoing considered, the petition is hereby DISMISSED and the assailed August 14, 2008 Decision and November 27, 2008 Resolution of the NLRC, are hereby AFFIRMED. No costs. SO ORDERED.15

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Aggrieved, petitioner filed the instant petition, alleging that the CA committed a reversible error in affirming the Decision of the NLRC, and praying that the Decision of the Labor Arbiter be reinstated. The petition is denied for lack of merit. The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income based on wage but not part of the wage. It is equivalent to one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year. All rank-and-file employees, regardless of their designation or employment status and irrespective of the method by which their wages are paid, are entitled to this benefit, provided that they have worked for at least one month during the calendar year. If the employee worked for only a portion of the year, the 13th-month pay is computed pro rata.16 Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as a result of its mistake in implementing P.D. No. 851, an error that was discovered by the management only when respondent raised a question concerning the computation of the employees 13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost thirty (30) years. Petitioner insists that the length of time during which an employer has performed a certain act beneficial to the employees, does not prove that such an act was not done in error. It maintains that for the claim of mistake to be negated, there must be a clear showing that the employer had freely, voluntarily, and continuously performed the act, knowing that he is under no obligation to do so. Petitioner asserts that such voluntariness was absent in this case.17 The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines 13th-month pay and basic salary as follows: Sec. 2. Definition of certain terms. - As used in this issuance: (a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year; (b) "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, profitsharing 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. On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was issued. The Supplementary Rules clarifies that overtime pay, earnings, and other remuneration that are not part of the basic salary shall not be included in the computation of the 13th-month pay. On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay Law was issued. Significantly, under this Revised Guidelines, it was specifically stated that the minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year.1avvphi1 Furthermore, the term "basic salary" of an employee for the purpose of computing the 13th-month pay was interpreted to include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th-month pay if, by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees. Based on the foregoing, it is clear that there could have no erroneous interpretation or application of what is included in the term "basic salary" for purposes of computing the 13th-month pay of employees. From the inception of P.D. No. 851 on December 16, 1975, clearcut administrative guidelines have been issued to insure uniformity in the interpretation, application, and enforcement of the provisions of P.D. No. 851 and its implementing regulations. As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the employees gross annual earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift differential pay and holiday pay continued for almost thirty (30) years and has ripened into a company policy or practice which cannot be unilaterally withdrawn. Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to employees cannot be taken back or reduced unilaterally by the employer because the benefit has become part of the employment contract, written or unwritten. 18 The rule against diminution of benefits applies if it is shown that the grant of the benefit is based on an express policy or has ripened into a practice over a long period of time and that the practice is consistent and deliberate. Nevertheless, the rule will not

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apply if the practice is due to error in the construction or application of a doubtful or difficult question of law. But even in cases of error, it should be shown that the correction is done soon after discovery of the error.19 The argument of petitioner that the grant of the benefit was not voluntary and was due to error in the interpretation of what is included in the basic salary deserves scant consideration. No doubtful or difficult question of law is involved in this case. The guidelines set by the law are not difficult to decipher. The voluntariness of the grant of the benefit was manifested by the number of years the employer had paid the benefit to its employees. Petitioner only changed the formula in the computation of the 13th-month pay after almost 30 years and only after the dispute between the management and employees erupted. This act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith. Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim exemption from the coverage of the law on 13th-month pay, or to spare it from its erroneous unilateral computation of the 13th-month pay of its employees. Under Section 7 of the Rules and Regulations Implementing P.D. No. 851, distressed employers shall qualify for exemption from the requirement of the Decree only upon prior authorization by the Secretary of Labor.20 In this case, no such prior authorization has been obtained by petitioner; thus, it is not entitled to claim such exemption. WHEREFORE, the Decision dated May 28, 2009 and the Resolution dated July 28, 2009 of the Court of Appeals in CA-G.R. SP No. 106657 are hereby AFFIRMED. Costs against petitioner. SO ORDERED.
ANTONIO EDUARDO B. NACHURA Associate Justice

IV. Labor Relations