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G.R. No. 155109 C. ALCANTARA & SONS, INC.

, vs COURT OF APPEALS DECISION This case is about a) the consequences of an illegally staged strike upon the employment status of the union officers and its ordinary members and b) the right of reinstated union members to go back to work pending the companys appeal from the order reinstating them. The Facts and the Case C. Alcantara & Sons, Inc., (the Company) is a domestic corporation engaged in the manufacture and processing of plywood. Nagkahiusang Mamumuo sa Alsons-SPFL (the Union) is the exclusive bargaining agent of the Companys rank and file employees. The other parties to these cases are the Union officers[1] and their striking members.[2] The Company and the Union entered into a Collective Bargaining Agreement (CBA) that bound them to hold no strike and no lockout in the course of its life. At some point the parties began negotiating the economic provisions of their CBA but this ended in a deadlock, prompting the Union to file a notice of strike. After efforts at conciliation by the Department of Labor and Employment (DOLE) failed, the Union conducted a strike vote that resulted in an overwhelming majority of its members favoring it. The Union reported the strike vote to the DOLE and, after the observance of the mandatory cooling-off period, went on strike. During the strike, the Company filed a petition for the issuance of a writ of preliminary injunction with prayer for the issuance of a temporary restraining order (TRO) Ex Parte[3] with the National Labor Relations Commission (NLRC) to enjoin the strikers from intimidating, threatening, molesting, and impeding by barricade the entry of nonstriking employees at the Companys premises. The NLRC first issued a 20-day TRO and, after hearing, a writ of preliminary injunction, enjoining the Union and its officers and members from performing the acts complained of. But several attempts to implement the writ failed. Only the intervention of law enforcement units made such implementation possible. Meantime, the Union filed a petition[4] with the Court of Appeals (CA), questioning the preliminary injunction order. On February 8, 1999 the latter court dismissed the petition. The Union did not appeal from such dismissal. The Company, on the other hand, filed a petition with the Regional Arbitration Board to declare the Unions strike illegal,[5] citing

its violation of the no strike, no lockout, provision of their CBA. Subsequently, the Company amended its petition to implead the named Union members who allegedly committed prohibited acts during the strike. For their part, the Union, its officers, and its affected members filed against the Company a counterclaim for unfair labor practices, illegal dismissal, and damages. The Union also assailed as invalid the service of summons on the individual Union members included in the amended petition. On June 29, 1999 the Labor Arbiter rendered a decision, declaring the Unions strike illegal for violating the CBAs no strike, no lockout, provision. As a consequence, the Labor Arbiter held that the Union officers should be deemed to have forfeited their employment with the Company and that they should pay actual damages of P3,825,000.00 plus 10% interest and attorneys fees. With respect to the striking Union members, finding no proof that they actually committed illegal acts during the strike, the Labor Arbiter ordered their reinstatement without backwages. The Labor Arbiter denied the Unions counterclaim for lack of merit.
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On June 29, 1999 the terminated Union members promptly filed a motion for their immediate reinstatement but the Labor Arbiter did not act on the same. At any rate, the Company did not reinstate them. Both parties appealed[7] the Labor Arbiters decision to the NLRC. The Company impugned the Labor Arbiters decision insofar as it ordered the reinstatement of the terminated Union members. The Union, on the other hand, questioned the declaration of illegality of the strike as well as the dismissal of its officers and the order for them to pay damages. On November 8, 1999 the NLRC rendered a decision, affirming that of the Labor Arbiter insofar as the latter declared the strike illegal, ordered the Union officers terminated, and directed them to pay damages to the Company. The NLRC ruled, however, that the Union members involved, who were identified in the proceedings held in the case, should also be terminated for having committed prohibited and illegal acts.
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The Union filed a petition for certiorari[9] with the CA, questioning the NLRC decision. Finding merit in the petition, the CA rendered a decision on March 20, 2002, [10]annulling the NLRC decision and reinstating that of the Labor Arbiter. The Company and the Union with its officers and members filed separate petitions for review of the CA decision in G.R. 155109 and 155135, respectively. During the pendency of these cases, the affected Union members filed with the Labor Arbiter a motion for reinstatement pending appeal by the parties and the computation of their backwages

based on the CA decision. After hearing, the Labor Arbiter issued a resolution dated November 21, 2002, [11] holding that due to the delay in the resolution of the dispute and the impracticability of reinstatement owing to the fact that the relations between the terminated Union members and the Company had been severely strained by the prolonged litigation, payment of separation pay to such Union members was in order. The Labor Arbiter thus approved the computation and payment of their separation pay and denied all their other claims. Both parties appealed the Labor Arbiters resolution [12] to the NLRC. Initially, in its resolution dated April 30, 2003, [13] the NLRC declared the Labor Arbiters resolution of November 21, 2002 void for lack of factual and legal basis but ordered the Company to pay the affected employees accrued wages and 13th month pay considering the Companys refusal to reinstate them pending appeal. On motion for reconsideration by both parties, however, the NLRC issued a resolution on August 29, 2003, [14] modifying its earlier resolution by deleting the grant of accrued wages and 13 th month pay to the subject employees, thus denying their motion for computation. Upon the Unions petition for certiorari[15] with the CA, questioning the NLRCs denial of the terminated Union members claim for separation pay, accrued wages, and other benefits, the CA rendered a decision on February 24, 2005, [16] dismissing the petition. The CA ruled that the reinstatement pending appeal provided under Article 223 of the Labor Code contemplated illegal dismissal or termination cases and not cases under Article 263. Thus, the CA ruled that the resolution ordering the reinstatement of the terminated Union members and the payment of their wages and other benefits had no basis. Aggrieved, the Union sought intervention by this Court. The Issues Presented The issues presented in these cases are: 1. Whether or not the NLRC properly acquired jurisdiction over the persons of the individual Union members impleaded in the case; 2. Whether or not the Union staged an illegal strike;

refusal to reinstate them, pending appeal by the parties, from the Labor Arbiters decision of June 29, 1999; and 5. Whether or not the terminated Union members are entitled to accrued backwages and separation pay. The Rulings of the Court One. The NLRC acquires jurisdiction over parties in cases before it either by summons served on them or by their voluntary appearance before its Labor Arbiter. Here, while the Union insists that summons were not properly served on the impleaded Union members with respect to the Companys amended petition that sought to declare the strike illegal, the records show that they were so served. The Return of Service of Summons[17] indicated that 74 out of the 81[18] impleaded Union members were served with summons. But they refused either to accept the summons or to acknowledge receipt of the same. Such refusal cannot of course frustrate the NLRCs acquisition of jurisdiction over them. Besides, the affected Union members voluntarily entered their appearance in the case when they sought affirmative relief in the course of the proceedings like an award of damages in their favor. Two. A strike may be regarded as invalid although the labor union has complied with the strict requirements for staging one as provided in Article 263 of the Labor Code when the same is held contrary to an existing agreement, such as a no strike clause or conclusive arbitration clause.[19] Here, the CBA between the parties contained a no strike, no lockout provision that enjoined both the Union and the Company from resorting to the use of economic weapons available to them under the law and to instead take recourse to voluntary arbitration in settling their disputes. No law or public policy prohibits the Union and the Company from mutually waiving the strike and lockout maces available to them to give way to voluntary arbitration. Indeed, no less than the 1987 Constitution recognizes in Section 3, Article XIII, preferential use of voluntary means to settle disputes. Thus The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. The Court finds no compelling reason to depart from the findings of the Labor Arbiter, the NLRC, and the CA regarding the

3. Assuming the strike to be illegal, whether or not the impleaded Union members committed illegal acts during the strike, justifying their termination from employment; 4. Whether or not the terminated Union members are entitled to the payment of backwages on account of the Companys

illegality of the strike. Social justice is not one-sided. It cannot be used as a badge for not complying with a lawful agreement. Three. Since the Unions strike has been declared illegal, the Union officers can, in accordance with law be terminated from employment for their actions. This includes the shop stewards. They cannot be shielded from the coverage of Article 264 of the Labor Code since the Union appointed them as such and placed them in positions of leadership and power over the men in their respective work units. As regards the rank and file Union members, Article 264 of the Labor Code provides that termination from employment is not warranted by the mere fact that a union member has taken part in an illegal strike. It must be shown that such a union member, clearly identified, performed an illegal act or acts during the strike. [20] Here, although the Labor Arbiter found no proof that the dismissed rank and file Union members committed illegal acts, the NLRC found following the injunction hearing in NLRC IC M-000126-98 that the Union members concerned committed such acts, for which they had in fact been criminally charged before various courts and the prosecutors office in Davao City. Since the CA held that the existence of criminal complaints against the Union members did not warrant their dismissal, it becomes necessary for the Court to go into the records to settle the issue. The striking Union members allegedly committed the following prohibited acts: a. They threatened, coerced, and intimidated non-striking employees, officers, suppliers and customers; b. They obstructed the free ingress to and egress from the company premises; and c. They resisted and defied the implementation of the writ of preliminary injunction issued against the strikers. Cornelio Caguiat, Ruben Tungapalan, and Eufracio Rabusa depicted the above prohibited acts in their affidavits and testimonies. The Sheriff of the NLRC said in his Report [21] that, in the course of his implementation of the writ of injunction, he observed that the striking employees blocked the exit lane of the Alson drive with their tent. Tungapalan, a non-striking employee, identified the Union members who threatened and coerced him. Indeed, he filed criminal actions against them. Lastly, the photos taken of the strike show the

strikers, properly identified, committing the acts complained of. These constitute substantial evidence in support of the termination of the subject Union members. The mere fact that the criminal complaints against the terminated Union members were subsequently dismissed for one reason or another does not extinguish their liability under the Labor Code. Nor does such dismissal bar the admission of the affidavits, documents, and photos presented to establish their identity and guilt during the hearing of the petition to declare the strike illegal. The technical grounds that the Union interposed for denying admission of the photos are also not binding on the NLRC.[22] Four. The terminated Union members contend that, since the Company refused to reinstate them after the Labor Arbiter rendered a decision in their favor, the Company should be ordered to pay them their wages during the pendency of the appeals from the Labor Arbiters decision. It will be recalled that after the Labor Arbiter rendered his decision on June 29, 1999, which decision ordered the reinstatement of the terminated Union members, the latter promptly filed a motion for their reinstatement pending appeal. But the Labor Arbiter did not for some reason act on the motion. As it happened, after about four months or on November 8, 1999, the NLRC reversed the Labor Arbiters reinstatement order. It cannot be said, therefore, that the Company had resisted a standing order of reinstatement directed at it at this point. Of course, on March 20, 2002 the CA restored the Labor Arbiters reinstatement order. And this prompted the affected Union members to again file with the Labor Arbiter a motion for their reinstatement pending appeal. But, acting on the motion, the Labor Arbiter resolved at this point that reinstatement was no longer practicable because of the severely strained relation between the company and the terminated Union members. In place of reinstatement, the Labor Arbiter ordered the Company to pay them their separation pays. Both parties appealed the Labor Arbiters above ruling [23] to the NLRC. But, as it turned out the NLRC did not also favor reinstatement. It instead ordered the Company to pay the terminated Union members their accrued wages and 13th month pay considering its refusal to reinstate them pending appeal. On motion for reconsideration, however, the NLRC reconsidered and deleted altogether the grant of accrued wages and 13 th month pay. The Union appealed the NLRC ruling to the CA on behalf of its terminated members but the CA denied their appeal.

The CA denied reinstatement for the reason that the reinstatement pending appeal provided under Article 223 of the Labor Code contemplated illegal dismissal or termination cases and not cases under Article 264. But this perceived distinction does not find support in the provisions of the Labor Code. The grounds for termination under Article 264 are based on prohibited acts that employees could commit during a strike. On the other hand, the grounds for termination under Articles 282 to 284 are based on the employees conduct in connection with his assigned work. Still, Article 217, which defines the powers of Labor Arbiters, vests in the latter jurisdiction over all termination cases, whatever be the grounds given for the termination of employment. Consequently, Article 223, which provides that the decision of the Labor Arbiter reinstating a dismissed employee shall immediately be executory pending appeal, cannot but apply to all terminations irrespective of the grounds on which they are based. Here, although the Labor Arbiter failed to act on the terminated Union members motion for reinstatement pending appeal, the Company had the duty under Article 223 to immediately reinstate the affected employees even if it intended to appeal from the decision ordaining such reinstatement. The Companys failure to do so makes it liable for accrued backwages until the eventual reversal of the order of reinstatement by the NLRC on November 8, 1999, [24] a period of four months and nine days. Five. While it is true that generally the grant of separation pay is not available to employees who are validly dismissed, there are, in furtherance of the laws policy of compassionate justice, certain circumstances that warrant the grant of some relief in favor of the terminated Union members based on equity. Bitter labor disputes, especially strikes, always generate a throng of odium and abhorrence that sometimes result in unpleasant, although unwanted, consequences. [25] Considering this, the striking employees breach of certain restrictions imposed on their concerted actions at their employers doorsteps cannot be regarded as so inherently wicked that the employer can totally disregard their long years of service prior to such breach. [26] The records also fail to disclose any past infractions committed by the dismissed Union members. Taking these circumstances in consideration, the Court regards the award of financial assistance to these Union members in the form of one-half month salary for every year of service to the company up to the date of their termination as equitable and reasonable.

WHEREFORE, the Court DENIES the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and its officers and members in G.R. 155135 for lack of merit, andREVERSES and SETS ASIDE the decision of the Court of Appeals in CA-G.R. SP 59604 dated March 20, 2002. The Court, on the other hand, GRANTS the petition of C. Alcantara & Sons, Inc. in G.R. 155109 and REINSTATES the decision of the National Labor Relations Commission in NLRC CA M-004996-99 dated November 8, 1999. Further, the Court PARTIALLY GRANTS the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and their dismissed members in G.R. 179220 and ORDERS C. Alcantara & Sons, Inc. to pay the terminated Union members backwages for four (4) months and nine (9) days and separation pays equivalent to one-half month salary for every year of service to the company up to the date of their termination, with interest of 12% per annum from the time this decision becomes final and executory until such backwages and separation pays are paid. The Court DENIES all other claims. SO ORDERED.

G.R. No. 164913 September 8, 2010 ST. MARYS ACADEMY OFDIPOLOG CITY, VS TERESITA PALACIO, ET.AL

DECISION The Court will not hesitate to defend the workers constitutional right to security of tenure. After all, the interest of the workers is paramount as they are regarded with compassion under the policy of social justice.

By this Petition for Review on Certiorari,[1] petitioner St. Marys Academy of Dipolog City (petitioner) assails the Decision [2] dated September 24, 2003 and Resolution[3]dated August 16, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 67691, which affirmed with modification the Resolution[4] of the National Labor Relations Commission (NLRC), dated April 30, 2001 holding the dismissal of respondents Teresita Palacio (Palacio), Marigen Calibod (Calibod), Levie Laquio (Laquio), Elaine Marie Santander (Santander), Eliza Saile (Saile), and Ma. Dolores Montederamos (Montederamos) as illegal, as well as the Resolution[5] dated August 31, 2001 denying the motion for reconsideration. Factual Antecedents On different dates in the late 1990s, petitioner hired respondents Calibod, Laquio, Santander, Saile and Montederamos, as classroom teachers, and respondent Palacio, as guidance counselor. In separate letters dated March 31, 2000,[6] however, petitioner informed them that their re-application for school year 2000-2001 could not be accepted because they failed to pass the Licensure Examination for Teachers (LET). According to petitioner, as non-board passers, respondents could not continue practicing their teaching profession pursuant to the Department of Education, Culture and Sports (DECS) Memorandum No. 10, S. 1998[7] which requires incumbent teachers to register as professional teachers pursuant to Section 27[8] of Republic Act (RA) No. 7836, otherwise known as the Philippine Teachers Professionalization Act of 1994.[9] Together with four other classroom teachers namely Gail Josephine Padilla (Padilla), Virgilio Andalahao (Andalahao), Alma Decipulo (Decipulo), [10] and Marlynn Palacio,[11] who were similarly dismissed by petitioner on the same ground, respondents filed a complaint contesting their termination as highly irregular and premature. They admitted that they are indeed nonboard passers, however, they also argued that their security of tenure could not simply be trampled upon for their failure to register with the Professional Regulation Commission (PRC) or to pass the LET prior to the deadline set by RA 7836. Further, as the aforesaid law provides for exceptions to the taking of examination, they opined that their outright dismissal was illegal because some of them possessed civil service eligibilities and special permits to teach. Furthermore, petitioners retention and acceptance of other teachers who do not also possess the required eligibility showed evident bad faith in terminating respondents. Petitioner, on the other hand, maintained that it had repeatedly informed respondents of their obligation to comply with the mandate of the Memorandum issued by DECS by passing the LET to be eligible as a registered professional teacher. While the DECS Memorandum, pursuant to PRC Resolution No. 600, S. 1997,[12] fixed the deadline for teachers to register on September 19, 2000,[13] petitioner claimed that it decided to terminate

their services as early as March 31, 2000 because it would be prejudicial to the school if their services will be terminated in the middle of the school year. Ruling of the Labor Arbiter On September 22, 2000, the Labor Arbiter adjudged petitioner guilty of illegal dismissal because it terminated the services of the respondents on March 31, 2000 which was clearly prior to the September 19, 2000 deadline fixed by PRC for the registration of teachers as professional teachers, in violation of the doctrine regarding the prospective application of laws. Thus, petitioner was ordered to reinstate the respondents or to pay them separation pay at the rate of month wage for every year of service, plus limited backwages covering the period from March 31, 2000 to September 30, 2000. The dispositive portion of the Labor Arbiters Decision reads as follows: WHEREFORE, anchored on the foregoing premises, judgment is hereby rendered: 1.) that respondents act of having terminated the complainants employment is in fact and in law illegal, as it is not founded on any of the restricted just and authorized causes provided for by law[,] hence, entitling complainants to the right of reinstatement and backwages in accordance with the mandate of Article 279 of the Labor Code of the Philippines. In this case, however, separation pay is hereby directed against respondent together with the payment of limited backwages, as particularly reflected in paragraph 2 hereof; ordering respondent St. Marys Academy to pay complainants their separation pay and limited backwages, particularly indicated as follows:
A.) Teresita Palacio: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . B.) Gail Josephine Padilla: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . C.) Marigen Calibod: a.) Separation pay . . . . . . . . . P P P P P 11,250.90; 27,002.16; 38,253.06; 15,456.45; 26,512.20; 41,977.65; 8,837.40;

2.)

b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . D.) Levei Laquio: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . E.) Elaine Marie Santander: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . F.) Virgilio Andalahao: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . G.) Alma Decipulo: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . H.) Eliza Saile: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . I.) Marlynn Palacio: a.) Separation pay . . . . . . . . . b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . J.) P P

P P P

26,512.20; 35,349.60; 11,378.15; 27,307.56; 38,685.71;

P P P P P P

8,837.40; 26,512.20; 35,349.60; 6,435.00; 25,740.00; 32,175.00; 6,435.00; 25,740.00; 32,175.00;

The NLRC, in its Resolution [16] dated April 30, 2001, denied both appeals. In affirming the Labor Arbiters Decision, it held that the grounds relied upon by petitioner to dismiss respondents are not among those enumerated by the Labor Code and that respondents are regular employees, thus cannot be removed unless for cause. The NLRC did not grant respondents demand for the refund of their retirement contribution because this was not alleged in the original complaint as well as their prayer for attorneys fees since this case is not one for collection of unlawfully withheld wages. In a subsequent Resolution dated August 31, 2001, [17] the NLRC likewise denied petitioners Motion for Reconsideration, [18] reiterating that it cannot sustain petitioners premature implementation of relevant laws and regulations. Ruling of the Court of Appeals Petitioner, then, elevated the case to the CA via a petition for certiorari.[19] The CA agreed with the findings of both the Labor Arbiter and the NLRC that the dismissal was effected prematurely in violation of existing laws, noting that respondents still had until September 19, 2000 within which to pass the LET. A contingency plan, according to the CA, should have instead been adopted by petitioner in the event respondents termination from the service in the middle of the school year becomes inevitable. The CA also observed that petitioners ulterior motive for the termination may have been the result of a confrontation between petitioners principal and respondents. The CA also found petitioners acts of retaining and hiring other equally unqualified teachers who do not possess the required eligibility and allowing them to teach for the school year 2000-2001 as badges of bad faith. As regards Padilla, Marlynn Palacio, Andalahao and Decipulo, the CA found them to be mere probationary, and not regular, employees. Their employment contracts merely expired and since the petitioner did not wish to renew their contracts, then there is no illegal dismissal to speak of. Accordingly, the dispositive portion of the CA Decision reads: WHEREFORE, the assailed Resolutions of the NLRC, Fifth Division dated April 30, 2001, [is] hereby AFFIRMED with MODIFICATION. The monetary awards adjudged in favor of private respondents Gail Josephine Padilla, Virgilio Andalahao, Alma Decipolo and Merlyn Palacio whose services were legally terminated, are hereby DELETED for lack of basis. SO ORDERED.[20] Petitioner moved to partially reconsider the Decision insofar as it found the dismissal of herein respondents to be premature and prayed that

P 19,313.72; 28,970.58; P 48,284.30; 4,290.00; 25,740.00; 30,030.00; and 18,205.04; 27,307.56; 45,512.60; and claims of

Ma. Dolores Montederamos: a.) Separation pay . . . . . . . . . P b.) Limited backwages . . . . . Total . . . . . . . . . . . . . . . . . P

3.)

dismissing all other money complainants for lack of merit.

SO ORDERED. Ruling of the National Labor Relations Commission Both parties appealed to the NLRC. In its Memorandum of Appeal, petitioner insisted on the validity of respondents termination from service, such act being in compliance with RA 7836 and in accordance with DECS Memorandum No. 10, S. 1998. Respondents, for their part, did not question the merits of the Labor Arbiters Decision but prayed for the refund of their retirement contribution and payment of attorneys fees.
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respondents be declared legally dismissed from the service. The CA, however, denied the motion. Hence, this petition. Issues
I. THE COURT OF APPEALS COMMITTED GRIEVOUS ERROR IN HOLDING THAT THE DISMISSAL OF TERESITA PALACIO, MARIGEN CALIBOD, LEVIE LAQUIO, ELAINE MARIE SANTANDER, ELIZA SAILE, AND DOLORES MONTEDERAMOS, WAS PREMATURE BECAUSE IT WAS EFFECTED ON MARCH 31, 2000 PRIOR TO SEPTEMBER 20, 2000,[21] THE DEADLINE SET BY THE PROFESSIONAL [REGULATION] COMMISSION FOR TEACHERS TO ACQUIRE THEIR LICENSE. II. THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO CONSIDER THAT ASSUMING THAT RESPONDENTS WERE PREMATURELY TERMINATED IN MARCH 2000, AT THE MOST, RESPONDENTS ARE ENTITLED TO BACKWAGES UP TO SEPTEMBER 19, 2000 ONLY BECAUSE ON SUCH DATE, THEY WERE ALREADY DISMISSIBLE FOR CAUSE FOR NOT HAVING OBTAINED THEIR TEACHERS LICENSE.[22]

needed for continued practice of teaching. Pertinent provisions of RA 7836 provide:


SEC. 13. Examination, Registration and License Required. Except as otherwise specifically allowed under the provisions of this Act, all applicants for registration as professional teachers shall be required to undergo a written examination which shall be given at least once a year in such places and dates as the Board may determine upon approval by the Commission. A valid certificate of registration and a valid professional license from the Commission are required before any person is allowed to practice as a professional teacher in the Philippines, except as otherwise allowed under this Act. SEC. 26. Registration and Exception. Two (2) years after the effectivity of this Act, no person shall engage in teaching and/or act as a professional teacher as defined in this Act, whether in the preschool, elementary or secondary level, unless he is a duly registered professional teacher, and a holder of a valid certificate of registration and a valid professional license or a holder of a valid special/temporary permit.

Petitioner insists that it has the right to terminate respondents services as early as March 2000 without waiting for the September 19, 2000 deadline set by law for respondents to register as professional teachers due to the need to fix the school organization prior to the applicable school year. Petitioner justifies respondents termination by advancing that it would be difficult to hire licensed teachers in the middle of the school year as respondents replacements. Also, the termination of respondents in the middle of the school year might result in compromising the education of the students as well as the school operation. Petitioner further argues that it cannot hire respondents for the period covering only June to September as it would contravene the DECSs policy requiring written contracts of at least one years duration for teachers. Our Ruling The petition is devoid of merit. The dismissal of Teresita Palacio, Calibod, Laquio, Santander, and Montederamos was premature and defeated their right to security of tenure. Sailes dismissal has legal basis for lack of the required qualification

Upon approval of the application and payment of the prescribed fees, the certificate of registration and professional license as a professional teacher shall be issued without examination as required in this Act to a qualified applicant, who at the time of the approval of this Act, is: (a) A holder of a certificate of eligibility as a teacher issued by the Civil Service Commission and the Department of Education, Culture and Sports; or (b) A registered professional teacher with the National Board for Teachers under the Department of Education, Culture and Sports (DECS) pursuant to Presidential Decree No. 1006; or (c) Not qualified under paragraphs one and two but with any of the following qualifications, to wit: (1) An elementary or secondary teacher for five (5) years in good standing and a holder of a Bachelor of Science in Education or its equivalent; or (2) An elementary or secondary teacher for three (3) years in good standing and a holder of a masters degree in education or its equivalent. Provided, That they shall be given two (2) years from the organization of the Board for professional teachers within

which to register and be included in the roster of professional teachers: Provided, further, That those incumbent teachers who are not qualified to register without examination under this Act or who, albeit qualified, were unable to register within the two-year period shall be issued a five-year temporary or special permit from the time the Board is organized within which to register after passing the examination and complying with the requirements provided in this Act and be included in the roster of professional teachers: Provided, furthermore, That those who have failed the licensure examination for professional teachers shall be eligible as para-teachers and as such, shall be issued by the Board a special or temporary permit, and shall be assigned by the Department of Education, Culture and Sports (DECS) to schools as it may determine under the circumstances. xxxx
SEC. 27. Inhibition Against the Practice of the Teaching Profession. Except as otherwise allowed under this Act, no person shall practice or offer to practice the teaching profession in the Philippines or be appointed as teacher to any position without having previously obtained a valid certificate of registration and a valid professional license from the Commission. xxxx SEC. 31. Transitory Provision. All incumbent teachers in both the public and private sector not otherwise certified as professional teachers by virtue of this Act, shall be given five (5) years temporary certificates from the time the Board for Professional Teachers is organized within which to qualify as required by this Act and be included in the roster of professionals.

Commission (CSC) and DECS to further allow those teachers who failed to register by September 19, 1997 to continue their service and register. BPT Resolution No. 600, s. 1997 was thereafter passed to provide the guidelines[23] to govern teacher registration beyond September 19, 1997. Consequently, the deadline was moved to September 19, 2000. Pursuant to the aforestated law, resolution and memorandum, effective September 20, 2000, only holders of valid certificates of registration, valid professional licenses and valid special/temporary permits can engage in teaching in both public and private schools.[24] Clearly, respondents, in the case at bar, had until September 19, 2000 to comply with the mandatory requirement to register as professional teachers. As respondents are categorized as those not qualified to register without examination, the law requires them to register by taking and passing the licensure examination. It is undisputed that respondents were all non-board passers when they were dismissed by petitioner on March 31, 2000. Based on the certification issued by the PRC on October 23, 2000, [25] only respondent Santander passed the LET but only for the elementary level. Thus, she is still unqualified to teach in the high school level. All the others, except respondent Saile who is not qualified to take the LET, failed the examination. Petitioner harps on the fact that even if respondents were to take the LET in August of 2000, the results could not be known in time to meet the September 19, 2000 deadline. However, it is to be noted that the law still allows those who failed the licensure examination between 1996 and 2000 to continue teaching if they obtain temporary or special permits as para-teachers.[26] In other words, as the law has provided a specific timeframe within which respondents could comply, petitioner has no right to deny them of this privilege accorded to them by law. As correctly pointed out by the Labor Arbiter and affirmed by the NLRC and the CA, the dismissal from service of respondents Palacio, Calibod, Laquio, Santander and Montederamos on March 31, 2000 was quite premature. Petitioner claims that it terminated respondents employment as early as March 2000 because it would be highly difficult to hire professional teachers in the middle of the school year as replacements for respondents without compromising the operation of the school and education of the students. Also, petitioner reasons out that it could not enter into written contracts with respondents for the period June 2000 to September 19, 2000 without violating the DECSs policy requiring contracts of yearly duration for elementary and high school teachers. Petitioners contentions are not tenable. First, even if respondents contracts stipulate for a period of one year in compliance with DECSs directive, such stipulation could not be given effect for being violative of the law. Provisions in a contract must be read in conjunction with statutory and administrative regulations. This finds basis on the principle that an existing law enters into and forms part of a valid contract without the need for the

Pursuant to RA 7836, the PRC formulated certain rules and regulations relative to the registration of teachers and their continued practice of the teaching profession. Specific periods and deadlines were fixed within which incumbent teachers must register as professional teachers in consonance with the essential purpose of the law in promoting good quality education by ensuring that those who practice the teaching profession are duly licensed and are registered as professional teachers. Under DECS Memorandum No. 10, S. 1998, the Board for Professional Teachers (BPT), created under the general supervision and administrative control of the PRC, was organized on September 20, 1995 so that, in the implementation of Sections 26, 27 and 31 of RA 7836, incumbent teachers as of December 16, 1994 have until September 19, 1997 to register as professional teachers. The Memorandum further stated that a Memorandum of Agreement (MOA) was subsequently entered into by the PRC, Civil Service

parties expressly making reference to it.[27] Settled is the rule that stipulations made upon the convenience of the parties are valid only if they are not contrary to law.[28] Hence, mere reliance on the policy of DECS requiring yearly contracts for teachers should not prevent petitioner from retaining the services of respondents until and unless the law provides for cause for respondents dismissal. Petitioners intention and desire not to put the students education and school operation in jeopardy is neither a decisive consideration for respondents termination prior to the deadline set by law. Again, by setting a deadline for registration as professional teachers, the law has allowed incumbent teachers to practice their teaching profession until September 19, 2000, despite being unregistered and unlicensed. The prejudice that respondents retention would cause to the schools operation is only trivial if not speculative as compared to the consequences of respondents unemployment. Because of petitioners predicament, it should have adopted measures to protect the interest of its teachers as regular employees. As correctly observed by the CA, petitioner should have earlier drawn a contingency plan in the event there is need to terminate respondents services in the middle of the school year. Incidentally, petitioner did not dispute that it hired and retained other teachers who do not likewise possess the qualification and eligibility and even allowed them to teach during the school year 2000-2001. This indicates petitioners ulterior motive in hastily dismissing respondents. It is incumbent upon this Court to afford full protection to labor. Thus, while we take cognizance of the employers right to protect its interest, the same should be exercised in a manner which does not infringe on the workers right to security of tenure. 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.[29] To reiterate, this Court will not hesitate to defend respondents right to security of tenure. The premature dismissal from the service of respondents Palacio, Calibod, Laquio, Santander and Montederamos is unwarranted. However, we take exception to the case of respondent Saile who, as alleged by petitioner, was not qualified to take the LET as she only had three out of the minimum 10 required educational units to be admitted to take the LET pursuant to Section 15 of RA 7836, [30] which fact respondent Saile did not refute. Not being qualified to take the examination to become a duly licensed professional teacher, petitioner cannot be compelled to retain her services as she cannot possibly obtain the needed prerequisite to allow her to continue practicing the teaching profession. Thus, we find her termination just and legal. Limited backwages from March 31, computed 2000 to

September 30, 2000 awarded in favor of Palacio, Calibod, Laquio, Santander and Montederamos are sustained. Petitioner questions the amount of separation pay awarded to respondents contending that assuming respondents were illegally dismissed, they are only entitled to an amount computed from the time of dismissal up to September 19, 2000 only. After September 19, 2000, respondents, according to petitioner, are already dismissible for cause for lack of the necessary license to teach. This contention deserves no merit. Petitioner cannot possibly presume that respondents could not timely comply with the requirements of the law. At any rate, we note that petitioner only assailed the amount of backwages for the first time in its motion for reconsideration of the Decision of the CA. Thus, the Court cannot entertain the issue for being belatedly raised. Hence, the award of limited backwages covering the period from March 31, 2000 to September 30, 2000 as ruled by the Labor Arbiter and affirmed by both the NLRC and CA is in order. WHEREFORE, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals dated September 24, 2003 in CA-G.R. SP No. 67691 finding respondents Teresita Palacio, Marigen Calibod, Levie Laquio, Elaine Marie Santander and Ma. Dolores Montederamos to have been illegally dismissed and awarding them separation pay and limited backwages is AFFIRMED. As regards respondent Eliza Saile, we find her termination valid and legal. Consequently, the awards of separation pay and limited backwages in her favor are DELETED. SO ORDERED.

EN BANC ANTONIO M. SERRANO, Petitioner, GALLANT MARITIME SERVICES, INC. and MARLOW NAVIGATION CO., INC., Respondents. G.R. No. 167614

Promulgated: March 24, 2009

DECISION 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 SecretaryGlobal Forum on Migration and Development Brussels, July 10, 2007[1]

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 12 months Position Chief Officer Basic monthly salary US$1,400.00 Hours of work 48.0 hours per week Overtime US$7 00.00 per month Vacation leave with pay 7.00 days per month[5] 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. Hence, petitioner refused to stay on as Second Officer and was repatriated to thePhilippines on May 26, 1998.[8]
[7]

General Ban Ki-Moon

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 Resolution[4] of the Court of Appeals (CA), which applied the subject clause, entreating this Court to declare the subject clause unconstitutional.

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 Complaint [9] against respondents for constructive dismissal and for payment of his money claims in the total amount of US$26,442.73, broken down as follows:
May 27/31, 1998 (5 days) incl. Leave pay June 01/30, 1998 July 1998 August 1998 Sept. 1998 Oct. 01/31, 1998 Nov. 1998 01/30, 01/31, 01/31, 01/30, US$ 413.90 2,590.00 2,590.00 2,590.00 2,590.00 2,590.00

2,590.00

Dec. 1998 Jan. 01/31, 1999 Feb. 1999

01/31,

2,590.00

2,590.00

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.

01/28,

2,590.00

All other claims are hereby DISMISSED. SO ORDERED.[13] (Emphasis supplied)

Mar. 1/19, 1999 (19 days) incl. leave pay

1,640.00

------------------------------------------------------------------------------25,382.23

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 appealed[15] to the National Labor Relations Commission (NLRC) to question the finding of the LA that petitioner was illegally dismissed.

Amount adjusted to chief mate's salary (March 19/31, 1998 to April 1/30, 1998) +

1,060.50

[10]

Petitioner also appealed[16] to the NLRC on the sole issue that the LA erred in not applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations Commission[17] 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:
-----------------------------------

CLAIM

TOTAL

----------------------------------------------------------US$ 26,442.73[11]

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 $8,770.00), representing the complainants salary for three (3) months of the unexpired portion of the aforesaid contract of employment. The respondents are likewise ordered to pay the complainant [petitioner], jointly and severally, in Philippine Currency, based on the rate of exchange prevailing at the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$ 45.00), [12] representing the

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 US$4,200.00 2. Salary differential 45.00 US$4,245.00 3. 10% Attorneys fees 424.50 TOTAL US$4,669.50 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 Certiorari[23] 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]
[27]

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 lump-sum 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

His Motion for Reconsideration[26] having been denied petitioner brings his cause to this Court on the following grounds:

by

the

CA,

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] 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.

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 fixedperiod employment contract.[39] The Arguments of Respondents 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 Commission[43] 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 party[48]and at the earliest opportunity; [49] and (3) that the constitutional question is the very lis mota of the case,[50] otherwise 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 a competent 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 for Certiorari 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.[56] Petitioner'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. 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 [57] receive is not tenable. Section 10, Article III of the Constitution provides: No law impairing the obligation of contracts shall be pass ed.

The prohibition is aligned with the general principle that laws newly enacted have only a prospective operation,[58] and 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 scrutiny [69] in which a legislative classification which impermissibly interferes with the exercise of a fundamental right [70] or operates to the peculiar disadvantage of a suspect class [71] 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 race[74] or gender[75] 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. 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. 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. 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 rank-and-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 of one 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 Commission[79] (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 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:

Bahia Shipping v. Reynaldo Chua [85] Centennial Transmarine v. dela Cruz l[86] Talidano v. Falcon[87] Univan v. CA [88] Oriental v. CA [89] PCL v. NLRC[90] Olarte v. Nayona[91] JSS v. Ferrer[92]

9 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

3 months 3 months more than 2 months more than 2 months 21 days 16 days

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

3 months 3 months 3 months 3 months 3 months 3 months

Pentagon v. 12 months Adelantar[93] Phil. Employ v. Paramio, et al.[94] Flourish Maritime v. Almanzor [95] Athenna Manpower v. Villanos [96] 12 months

9 months 2 months and 23 2 months and 23 and 7 days days days 10 months 2 months Unexpired portion

2 years

26 days

23 months and 4 6 months or 3 days months for each year of contract 1 year, 9 months 6 months or 3 and 28 days months for each year of contract

1 year, 10 months and 28 days

1 month

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 6month 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.

Case Title

Contract Period 6 months

Period of Service 2 months

Unexpired Period 4 months

Period Applied in the Computation of the Monetary Award 4 months

Skippers v. Maguad[84]

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: Case Title Contract Period 2 years 2 years 2 years 2 years 2 years 12 months 12 months Period of Service 2 months 7 days 9 months 2 months 5 months 4 months Unexpired Period 22 months 23 months and 23 days 15 months 22 months 19 months 8 months Period Applied in the Computation of the Monetary Award 22 months 23 months and 23 days 15 months 22 months 19 months 8 months 5 months and 18 days

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 for every 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 24month 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 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:

ATCI v. CA, et al.[98] Phil. Integrated v. NLRC[99] JGB v. NLC[100] Agoy v. NLRC[101] EDI v. NLRC, et al.[102] Barros v. NLRC, et al.[103] Philippine Transmarine v. Carilla[104]

6 months 5 months and and 22 days 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

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. Alkan[112] 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 bothLemoine 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. Gay[114] 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 fixedterm 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, [119] involving 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 fixedperiod employment contract as a baby sitter, was awarded salaries corresponding to the unexpired 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 fixed-term 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. 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 5 th paragraph of Section 10 of R.A. No. 8042 is violative of the right of petitioner and other OFWs to equal protection. 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,[131] Article 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: 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 right to 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 inCentral 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 three-month 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. 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 DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals areMODIFIED 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.

G.R. No. 174585 October 19, 2007 FEDERICO M. LEDESMA, JR., vs NATIONAL LABOR RELATIONS COMMISSION (NLRC-SECOND DIVISION) DECISION

This a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioner Federico Ledesma, Jr., seeking to reverse and set aside the Decision, [1] dated 28 May 2005, and the Resolution,[2] dated 7 September 2006, of the Court of Appeals in CA-G.R. SP No. 79724. The appellate court, in its assailed Decision and Resolution, affirmed the Decision dated 15 April 2003, and Resolution dated 9 June 2003, of the National Labor Relations Commission (NLRC), dismissing petitioners complaint for illegal dismissal and ordering the private respondent Philippine National Training Institute (PNTI) to reinstate petitioner to his former position without loss of seniority rights. The factual and procedural antecedents of the instant petition are as follows: On 4 December 1998, petitioner was employed as a bus/service driver by the private respondent on probationary basis, as evidenced by his appointment. [3] As such, he was required to report at private respondents training site in Dasmarias, Cavite, under the direct supervision of its site administrator, Pablo Manolo de Leon (de Leon).[4] On 11 November 2000, petitioner filed a complaint against de Leon for allegedly abusing his authority as site administrator by using the private respondents vehicles and other facilities for personal ends. In the same complaint, petitioner also accused de Leon of immoral conduct allegedly carried out within the private respondents premises. A copy of the complaint was duly received by private respondents Chief Accountant, Nita Azarcon (Azarcon).[5]

On 27 November 2000, de Leon filed a written report against the petitioner addressed to private respondents Vice-President for Administration, Ricky Ty (Ty), citing his suspected drug use. In view of de Leons report, private respondents Human Resource Manager, Trina Cueva (HR Manager Cueva), on 29 November 2000, served a copy of a Notice to petitioner requiring him to explain within 24 hours why no disciplinary action should be imposed on him for allegedly violating Section 14, Article IV of the private respondents Code of Conduct.[6] On 3 December 2000, petitioner filed a complaint for illegal dismissal against private respondent before the Labor Arbiter. In his Position Paper,[7] petitioner averred that in view of the complaint he filed against de Leon for his abusive conduct as site administrator, the latter retaliated by falsely accusing petitioner as a drug user. VP for Administration Ty, however, instead of verifying the veracity of de Leons report, readily believed his allegations and together with HR Manager Cueva, verbally dismissed petitioner from service on 29 November 2000. Petitioner alleged that he was asked to report at private respondents main office in Espaa, Manila, on 29 November 2000. There, petitioner was served by HR ManagerCueva a copy of the Notice to Explain together with the copy of de Leons report citing his suspected drug use. After he was made to receive the copies of the said notice and report, HR Manager Cueva went inside the office of VP for Administration Ty. After a while, HR Manager Cueva came out of the office with VP for Administration Ty. To petitioners surprise, HR Manager Cueva took back the earlier Notice to Explain given to him and flatly declared that there was no more need for the petitioner to explain since his drug test result revealed that he was positive for drugs. When petitioner, however, asked for a copy of the said drug test result, HR Manager Cueva told him that it was with the companys president, but she would also later claim that the drug test result was already with the proper authorities at Camp Crame.[8] Petitioner was then asked by HR Manager Cueva to sign a resignation letter and also remarked that whether or not petitioner would resign willingly, he was no longer considered an employee of private respondent. All these events transpired in the presence of VP for Administration Ty, who even convinced petitioner to just voluntarily resign with the assurance that he would still be given separation pay. Petitioner did not yet sign the resignation letter replying that he needed time to think over the offers. When petitioner went back to private respondents training site in Dasmarias, Cavite, to get his bicycle, he was no longer allowed by the guard to enter the premises. [9]

On the following day, petitioner immediately went to St. Dominic Medical Center for a drug test and he was found negative for any drug substance. With his drug result on hand, petitioner went back to private respondents main office in Manila to talk to VP for Administration Ty and HR Manager Cueva and to show to them his drug test result. Petitioner then told VP for Administration Ty and HR Manager Cueva that since his drug test proved that he was not guilty of the drug use charge against him, he decided to continue to work for the private respondent.[10] On 2 December 2000, petitioner reported for work but he was no longer allowed to enter the training site for he was allegedly banned therefrom according to the guard on duty. This incident prompted the petitioner to file the complaint for illegal dismissal against the private respondent before the Labor Arbiter. For its part, private respondent countered that petitioner was never dismissed from employment but merely served a Notice to Explain why no disciplinary action should be filed against him in view of his superiors report that he was suspected of using illegal drugs. Instead of filing an answer to the said notice, however, petitioner prematurely lodged a complaint for illegal dismissal against private respondent before the Labor Arbiter. [11] Private respondent likewise denied petitioners allegations that it banned the latter from entering private respondents premises. Rather, it was petitioner who failed or refused to report to work after he was made to explain his alleged drug use. Indeed, on 3 December 2000, petitioner was able to claim at the training site his salary for the period of 16-30 November 2000, as evidenced by a copy of the pay voucher bearing petitioners signature. Petitioners accusation that he was no longer allowed to enter the training site was further belied by the fact that he was able to claim his 13 th month pay thereat on 9 December 2000, supported by a copy of the pay voucher signed by petitioner.[12] On 26 July 2002, the Labor Arbiter rendered a Decision, [13] in favor of the petitioner declaring illegal his separation from employment. The Labor Arbiter, however, did not order petitioners reinstatement for the same was no longer practical, and only directed private respondent to pay petitioner backwages. The dispositive portion of the Labor Arbiters Decision reads: WHEREFORE, premises considered, the dismissal of the [petitioner] is herein declared to be illegal. [Private respondent] is directed to pay the

complainant backwages and separation pay in the total amount of One Hundred Eighty Four Thousand Eight Hundred Sixty One Pesos and Fifty Three Centavos (P184, 861.53).[14] Both parties questioned the Labor Arbiters Decision before the NLRC. Petitioner assailed the portion of the Labor Arbiters Decision denying his prayer for reinstatement, and arguing that the doctrine of strained relations is applied only to confidential employees and his position as a driver was not covered by such prohibition. [15] On the other hand, private respondent controverted the Labor Arbiters finding that petitioner was illegally dismissed from employment, and insisted that petitioner was never dismissed from his job but failed to report to work after he was asked to explain regarding his suspected drug use.
[16]

foregoing Court of Appeals Decision and Resolution on the following grounds:


I. WHETHER, THE HON. COURT OF APPEALS COMMITTED A MISAPPREHENSION OF FACTS, AND THE ASSAILED DECISION IS NOT SUPPORTED BY THE EVIDENCE ON RECORD. PETITIONERS DISMISSAL WAS ESTABLISHED BY THE UNCONTRADICTED EVIDENCES ON RECORD, WHICH WERE MISAPPRECIATED BY PUBLIC RESPONDENT NLRC, AND HAD THESE BEEN CONSIDERED THE INEVITABLE CONCLUSION WOULD BE THE AFFIRMATION OF THE LABOR ARBITERS DECISION FINDING ILLEGAL DISMISSAL II. WHETHER, THE HON. COURT OF APPEALS SUBVERTED DUE PROCESS OF LAW WHEN IT DID NOT CONSIDER THE EVIDENCE ON RECORD SHOWING THAT THERE WAS NO JUST CAUSE FOR DISMISSAL AS PETITIONER IS NOT A DRUG USER AND THERE IS NO EVIDENCE TO SUPPORT THIS GROUND FOR DISMISSAL. III. WHETHER, THE HON. COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW IN NOT FINDING THAT RESPONDENTS SUBVERTED PETITIONERS RIGHT TO DUE PROCESS OF THE LAW.[23]

On 15 April 2003, the NLRC granted the appeal raised by both parties and reversed the Labor Arbiters Decision. [17] The NLRC declared that petitioner failed to establish the fact of dismissal for his claim that he was banned from entering the training site was rendered impossible by the fact that he was able to subsequently claim his salary and 13thmonth pay. Petitioners claim for reinstatement was, however, granted by the NLRC. The decretal part of the NLRC Decision reads: WHEREFORE, premises considered, the decision under review is, hereby REVERSED and SET ASIDE, and another entered, DISMISSING the complaint for lack of merit. [Petitioner] is however, ordered REINSTATED to his former position without loss of seniority rights, but WITHOUT BACKWAGES.[18] The Motion for Reconsideration filed by petitioner was likewise denied by the NLRC in its Resolution dated 29 August 2003.[19] The Court of Appeals dismissed petitioners Petition for Certiorari under Rule 65 of the Revised Rules of Court, and affirmed the NLRC Decision giving more credence to private respondents stance that petitioner was not dismissed from employment, as it is more in accord with the evidence on record and the attendant circumstances of the instant case. [20] Similarly ill-fated was petitioners Motion for Reconsideration, which was denied by the Court of Appeals in its Resolution issued on 7 September 2006. [21] Hence, this instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioner assailing the
[22]

Before we delve into the merits of this case, it is best to stress that the issues raised by petitioner in this instant petition are factual in nature which is not within the office of a Petition for Review . [24] The raison detre for this rule is that, this Court is not a trier of facts and does not routinely undertake the re-examination of the evidence presented by the contending parties for the factual findings of the labor officials who have acquired expertise in their own fields are accorded not only respect but even finality, and are binding upon this Court.[25] However, when the findings of the Labor Arbiter contradict those of the NLRC, departure from the general rule is warranted, and this Court must of necessity make an infinitesimal scrunity and examine the records all over again including the evidence presented by the opposing parties to determine which findings should be preferred as more conformable with evidentiary facts. [26] The primordial issue in the petition at bar is whether the petitioner was illegally dismissed from employment. The Labor Arbiter found that the petitioner was illegally dismissed from employment warranting the payment of his backwages. The NLRC and the Court of Appeals found otherwise.

In reversing the Labor Arbiters Decision, the NLRC underscored the settled evidentiary rule that before the burden of proof shifts to the employer to prove the validity of the employees dismissal, the employee must first sufficiently establish that he was indeed dismissed from employment. The petitioner, in the present case, failed to establish the fact of his dismissal. The NLRC did not give credence to petitioners allegation that he was banned by the private respondent from entering the workplace, opining that had it been true that petitioner was no longer allowed to enter the training site when he reported for work thereat on 2 December 2000, it is quite a wonder he was able to do so the very next day, on 3 December 2000, to claim his salary.[27] The Court of Appeals validated the above conclusion reached by the NLRC and further rationated that petitioners positive allegations that he was dismissed from service was negated by substantial evidence to the contrary. Petitioners averments of what transpired inside private respondents main office on 29 November 2000, when he was allegedly already dismissed from service, and his claim that he was effectively banned from private respondents premises are belied by the fact that he was able to claim his salary for the period of 16-30 November 2000 at private respondents training site. Petitioner, therefore, is now before this Court assailing the Decisions handed down by the NLRC and the Court of Appeals, and insisting that he was illegally dismissed from his employment. Petitioner argues that his receipt of his earned salary for the period of 16-30 November 2000, and his 13 th month pay, is neither inconsistent with nor a negation of his allegation of illegal dismissal. Petitioner maintains that he received his salary and benefit only from the guardhouse, for he was already banned from the work premises. We are not persuaded. Well-entrenched is the principle that in order to establish a case before judicial and quasi-administrative bodies, it is necessary that allegations must be supported by substantial evidence. [28] Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.[29] In the present case, there is hardly any evidence on record so as to meet the quantum of evidence required, i.e., substantial evidence. Petitioners claim of illegal dismissal is supported by no

other than his own bare, uncorroborated and, thus, self-serving allegations, which are also incoherent, inconsistent and contradictory. Petitioner himself narrated that when his presence was requested on 29 November 2000 at the private respondents main office where he was served with the Notice to Explain his superiors report on his suspected drug use, VP for Administration Ty offered him separation pay if he will just voluntarily resign from employment. While we do not condone such an offer, neither can we construe that petitioner was dismissed at that instance. Petitioner was only being given the option to either resign and receive his separation pay or not to resign but face the possible disciplinary charges against him. The final decision, therefore, whether to voluntarily resign or to continue working still, ultimately rests with the petitioner. In fact, by petitoners own admission, he requested from VP for Administration Ty more time to think over the offer. Moreover, the petitioner alleged that he was not allowed to enter the training site by the guard on duty who told him that he was already banned from the premises. Subsequently, however, petitioner admitted in his Supplemental Affidavit that he was able to return to the said site on 3 December 2000, to claim his 16-30 November 2000 salary, and again on 9 December 2000, to receive his 13th month pay. The fact alone that he was able to return to the training site to claim his salary and benefits raises doubt as to his purported ban from the premises. Finally, petitioners stance that he was dismissed by private respondent was further weakened with the presentation of private respondents payroll bearing petitioners name proving that petitioner remained as private respondents employee up to December 2000. Again, petitioners assertion that the payroll was merely fabricated for the purpose of supporting private respondents case before the NLRC cannot be given credence. 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. It is therefore incumbent upon the petitioner to adduce clear and convincing evidence in support of his claim of fabrication and to overcome such presumption of regularity. [30] Unfortunately, petitioner again failed in such endeavor. On these scores, there is a dearth of evidence to establish the fact of petitioners dismissal. We have scrupulously examined the records and we found no evidence presented by petitioner, other than his own contentions that he was indeed dismissed by private respondent.

While this Court is not unmindful of the rule that in cases of illegal dismissal, the employer bears the burden of proof to prove that the termination was for a valid or authorized cause in the case at bar, however, the facts and the evidence did not establish a prima facie case that the petitioner was dismissed from employment. [31] Before the private respondent must bear the burden of proving that the dismissal was legal, petitioner must first establish by substantial evidence the fact of his dismissal from service. Logically, if there is no dismissal, then there can be no question as to the legality or illegality thereof.
In Machica v. Roosevelt Services Center, Inc., we had underscored that the burden of proving the allegations rest upon the party alleging, to wit:
[32]

management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est -- justice is to be denied to none.[36] WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision dated 28 May 2005 and its Resolution dated 7 September 2006 in CA-G.R. SP No. 79724 are hereby AFFIRMED. Costs against the petitioner. SO ORDERED. G.R. No. 81958 June 30, 1988 PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner, vs. HON. FRANKLIN M. DRILON as Secretary of Labor and Employment, and TOMAS D. ACHACOSO, as Administrator of the Philippine Overseas Employment Administration, respondents. Gutierrez & Alo Law Offices for petitioner.

The rule is that one who alleges a fact has the burden of proving it; thus, petitioners were burdened to prove their allegation that respondents dismissed them from their employment. It must be stressed that the evidence to prove this fact must be clear, positive and convincing. The rule that the employer bears the burden of proof in illegal dismissal cases finds no application here because the respondents deny having dismissed the petitioners.[33] In Rufina Patis Factory v. Alusitain,[34] this Court took the occasion to emphasize: It is a basic rule in evidence, however, that the burden of proof is on the part of the party who makes the allegations ei incumbit probatio, qui dicit, non qui negat. If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.[35]

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

It is true that the Constitution affords full protection to labor, and that in light of this Constitutional mandate, we must be vigilant in striking down any attempt of the management to exploit or oppress the working class. However, it does not mean that we are bound to uphold the working class in every labor dispute brought before this Court for our resolution. The law in protecting the rights of the employees, authorizes neither oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scales of justice in favor of labor, it is in recognition of the inherent economic inequality between labor and management. The intent is to balance the scales of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of

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 selfprotection, and it is not inaptly termed the "law of overwhelming necessity." It may be said to be that inherent and plenary power in the State which enables it to prohibit all things hurtful to the comfort, safety, and welfare of society." 9 It constitutes an implied limitation on the Bill of Rights. According to Fernando, it is "rooted in the conception that men in organizing the

state and imposing upon its government limitations to safeguard constitutional rights did not intend thereby to enable an individual citizen or a group of citizens to obstruct unreasonably the enactment of such salutary measures calculated to ensure communal peace, safety, good order, and welfare." 10 Significantly, the Bill of Rights itself does not purport to be an absolute guaranty of individual rights and liberties "Even liberty itself, the greatest of all rights, is not unrestricted license to act according to one's will." 11 It is subject to the far more overriding demands and requirements of the greater number. Notwithstanding its extensive sweep, police power is not without its own limitations. For all its awesome consequences, it may not be exercised arbitrarily or unreasonably. Otherwise, and in that event, it defeats the purpose for which it is exercised, that is, to advance the public good. Thus, when the power is used to further private interests at the expense of the citizenry, there is a clear misuse of the power. 12 In the light of the foregoing, the petition must be dismissed. As a general rule, official acts enjoy a presumed vahdity. 13 In the absence of clear and convincing evidence to the contrary, the presumption logically stands. The petitioner has shown no satisfactory reason why the contested measure should be nullified. There is no question that Department Order No. 1 applies only to "female contract workers," 14 but it does not thereby make an undue discrimination between the sexes. It is wellsettled that "equality before the law" under the Constitution 15does not import a perfect Identity of rights among all men and women. It admits of classifications, provided that (1) such classifications rest on substantial distinctions; (2) they are germane to the purposes of the law; (3) they are not confined to existing conditions; and (4) they apply equally to all members of the same class. 16 The Court is satisfied that the classification made-the preference for female workers rests on substantial distinctions. As a matter of judicial notice, the Court is well aware of the unhappy plight that has befallen our female labor force abroad, especially domestic servants, amid exploitative working conditions marked by, in not a few cases, physical and personal abuse. The sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of torture, confirmed by testimonies of returning workers, are compelling motives for urgent Government action. As precisely the caretaker of Constitutional rights, the Court is called upon

to protect victims of exploitation. In fulfilling that duty, the Court sustains the Government's efforts. The same, however, cannot be said of our male workers. In the first place, there is no evidence that, except perhaps for isolated instances, our men abroad have been afflicted with an Identical predicament. The petitioner has proffered no argument that the Government should act similarly with respect to male workers. The Court, of course, is not impressing some male chauvinistic notion that men are superior to women. What the Court is saying is that it was largely a matter of evidence (that women domestic workers are being ill-treated abroad in massive instances) and not upon some fanciful or arbitrary yardstick that the Government acted in this case. It is evidence capable indeed of unquestionable demonstration and evidence this Court accepts. The Court cannot, however, say the same thing as far as men are concerned. There is simply no evidence to justify such an inference. Suffice it to state, then, that insofar as classifications are concerned, this Court is content that distinctions are borne by the evidence. Discrimination in this case is justified. As we have furthermore indicated, executive determinations are generally final on the Court. Under a republican regime, it is the executive branch that enforces policy. For their part, the courts decide, in the proper cases, whether that policy, or the manner by which it is implemented, agrees with the Constitution or the laws, but it is not for them to question its wisdom. As a co-equal body, the judiciary has great respect for determinations of the Chief Executive or his subalterns, especially when the legislature itself has specifically given them enough room on how the law should be effectively enforced. In the case at bar, there is no gainsaying the fact, and the Court will deal with this at greater length shortly, that Department Order No. 1 implements the rule-making powers granted by the Labor Code. But what should be noted is the fact that in spite of such a fiction of finality, the Court is on its own persuaded that prevailing conditions indeed call for a deployment ban. There is likewise no doubt that such a classification is germane to the purpose behind the measure. Unquestionably, it is the avowed objective of Department Order No. 1 to "enhance the protection for Filipino female overseas workers" 17 this Court has no quarrel that in the midst of the terrible mistreatment Filipina workers have suffered abroad, a ban on deployment will be for their own good and welfare. The Order does not narrowly apply to existing conditions. Rather, it is intended to apply indefinitely so long as those conditions exist. This is clear from the Order itself ("Pending review of the administrative and

legal measures, in the Philippines and in the host countries . . ." 18), meaning to say that should the authorities arrive at a means impressed with a greater degree of permanency, the ban shall be lifted. As a stop-gap measure, it is possessed of a necessary malleability, depending on the circumstances of each case. Accordingly, it provides: 9. LIFTING OF SUSPENSION. The Secretary of Labor and Employment (DOLE) may, upon recommendation of the Philippine Overseas Employment Administration (POEA), lift the suspension in countries where there are: 1. Bilateral agreements or understanding with the Philippines, and/or, 2. Existing mechanisms providing for sufficient safeguards to ensure the welfare and protection of Filipino workers. 19 The Court finds, finally, the impugned guidelines to be applicable to all female domestic overseas workers. That it does not apply to "all Filipina workers" 20 is not an argument for unconstitutionality. Had the ban been given universal applicability, then it would have been unreasonable and arbitrary. For obvious reasons, not all of them are similarly circumstanced. What the Constitution prohibits is the singling out of a select person or group of persons within an existing class, to the prejudice of such a person or group or resulting in an unfair advantage to another person or group of persons. To apply the ban, say exclusively to workers deployed by A, but not to those recruited by B, would obviously clash with the equal protection clause of the Charter. It would be a classic case of what Chase refers to as a law that "takes property from A and gives it to B." 21 It would be an unlawful invasion of property rights and freedom of contract and needless to state, an invalid act. 22 (Fernando says: "Where the classification is based on such distinctions that make a real difference as infancy, sex, and stage of civilization of minority groups, the better rule, it would seem, is to recognize its validity only if the young, the women, and the cultural minorities are singled out for favorable treatment. There would be an element of unreasonableness if on the contrary their status that calls for the law ministering to their needs is made the basis of discriminatory legislation against them. If such be the case, it would be difficult to refute the assertion of denial of equal protection." 23 In the case at bar, the assailed Order clearly accords protection to certain women workers, and not the contrary.)

It is incorrect to say that Department Order No. 1 prescribes a total ban on overseas deployment. From scattered provisions of the Order, it is evident that such a total ban has hot been contemplated. We quote: 5. AUTHORIZED DEPLOYMENT-The deployment of domestic helpers and workers of similar skills defined herein to the following [sic] are authorized under these guidelines and are exempted from the suspension. 5.1 Hirings by immediate members of the family of Heads of State and Government; 5.2 Hirings by Minister, Deputy Minister and the other senior government officials; and 5.3 Hirings by senior officials of the diplomatic corps and duly accredited international organizations. 5.4 Hirings by employers in countries with whom the Philippines have [sic] bilateral labor agreements or understanding. xxx xxx xxx 7. VACATIONING DOMESTIC HELPERS AND WORKERS OF SIMILAR SKILLS--Vacationing domestic helpers and/or workers of similar skills shall be allowed to process with the POEA and leave for 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: xxx xxx xxx

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

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 rulemaking authority vested in it by the Labor Code. 27 The petitioner assumes that it is unreasonable simply because of its impact on the right to travel, but as we have stated, the right itself is not absolute. The disputed Order is a valid qualification thereto. Neither is there merit in the contention that Department Order No. 1 constitutes an invalid exercise of legislative power. It is true that police power is the domain of the legislature, but it does not mean that such an authority may not be lawfully delegated. As we have mentioned, the Labor Code itself vests the Department of Labor and Employment with rulemaking powers in the enforcement whereof. 28 The petitioners's reliance on the Constitutional guaranty of worker participation "in policy and decision-making processes affecting their rights and benefits" 29 is not well-taken. The right granted by this provision, again, must submit to the demands and necessities of the State's power of regulation. The Constitution declares that: Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. 30 "Protection to labor" does not signify the promotion of employment alone. What concerns the Constitution more paramountly is that such an employment be above all, decent, just, and humane. It is bad

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

G.R. No. L-49280 April 30, 1980 LUZ G. CRISTOBAL, petitioner, vs. EMPLOYEES' COMPENSATION COMMISSION and GOVERNMENT SERVICE INSURANCE SYSTEM (National Science Development Board); respondents.

Petition for review on certiorari of the June 21, 1978 decision of the Employees' Compensation Commission filed by petitioner in forma pauperis. The deceased, Fortunato S. Cristobal was employed as Supervising Information Officer 11 of the National Science Development Board (NSDB for short) based in Bicutan, Taguig, Rizal. His original appointment was dated February 26, 1964 (p. 16, ECC rec.). On April 8, 1976, he developed loose bowel movement which later worsened and his excrement was marked with fresh blood. Self-administered medications were made but symptoms persisted until April 22, 1976 when he was brought to the Hospital of Infant Jesus and was there treated by Dr. Willie Lagdameo, who diagnosed his illness as rectal malignancy. On May 28, 1976, he was discharged with improved conditions but just one year thereafter, he was again confined at the UST Hospital for the same ailment. A second operation became necessary because of the recurrence of malignancy in the pelvis. Despite earnest medical efforts, he succumbed to his illness on May 27, 1977 (p. 6, rec.). The petitioner herein, as the decedent's widow and beneficiary, filed with the Government Service Insurance System (GSIS for short), a claim for income (death) benefits under Presidential Decree No. 626, as amended. The said claim was denied by the GSIS and in a subsequent request for reconsideration, the System reiterated its decision stating that Under the present law on compensation, the listed occupational diseases are compensable when the conditions set therein are satisfied. It also allows certain diseases to be compensable whenever the claimant is able to prove that the risks of contracting such diseases were increased by the working conditions attendant to the deceased's employment. This is provided under Sec. l (b) Rule III of the Rules and Regulations

Implementing Presidential Decree No. 626 which took effect on January 1, 1975. As far as the degree of proof is concerned, the claimant must be able to show at least by substantial evidence that the development of the ailment was brought largely by the working conditions present in the nature of employment. In the case of your husband, it will be noted that the ailment which resulted in his death on May 27, 1977 was Rectal Malignancy. This ailment, not being fisted as an occupational disease, therefore, required such degree of proof as mentioned above. On the basis, however, of the papers and evidence on record which you have submitted, it appears that you have not established that the deceased's employment has any direct causal relationship with the contraction of the ailment. While it is admitted that the aforementioned ailment supervened in the course of the deceased's employment as Supervising Information Officer II in the National Science Development Board, Bicutan, Taguig, Rizal, there has not been any showing that the same directly arose therefrom or resulted from the nature thereof (GSIS letter dated February 20, 1978 denying the request of petitioner for reconsideration). The petitioner appealed to the ECC, which affirmed the decision of the GSIS. Hence, this petition. In resolving the issue of compensability, the respondents herein failed to consider these outstanding facts patent from the records. The deceased, as Supervising Officer II of the NSDB, was actually assigned to the Printing Department of the said agency where he was exposed to various chemicals and intense heat. This fact was corroborated by the affidavit of one Angel Peres, a co-employee of the deceased, to the effect that I know personally Fortunato Cristobal because he was my Supervisor in the Bureau of Printing; During the employment of Fortunato Cristobal at the Bureau of Printing, he contracted sickness which was later diagnosed as anorectal cancer which caused his death; Fortunato Cristobal continued working at the aforementioned Bureau of Printing even when he was already suffering from a rectal illness and he had been complaining to me that said illness became more painful whenever he performs his job in the Bureau;

I also noticed that he oftentimes eat food in the Bureau without washing his hands; The place where Fortunato Cristobal was assigned in the Bureau of Printing is very unhygienic and polluted with chemicals and he oftentimes complain to me that the odor of the chemicals make him feel dizzy always; Fortunato Cristobal always handle chemicals in the Bureau of Printing while in the performance of his duties (Annex C, Petition). These statements find relevance in the medical certificate issued by Dr. Rufo A. Guzman stating that "the illness may be aggravated by the unhygienic conditions in the Bureau of Printing where he works. Handling of chemicals for printing, eating without proper washing of hands, tension due to the pressure of work, plus neglected personal necessity which may be attributed to the inadequate facilities in the Bureau of Printing" (Annex D, Petition). Undisputed is the fact that the deceased entered the government free from any kind of disease. Likewise, it is admitted that the deceased husband's ailment supervened in the course of his employment with the NSDB. The ECC, however, failed to appreciate the evidence submitted by the petitioner to substantiate her claim. In denying the claim, it merely relied on the fact that the certification issued by the physician of the deceased failed to indicate the actual causes or factors which led to the decedent's rectal malignancy. This Court, however, is of the opinion that the affidavit of Angel Peres substantiated by the medical certificate issued by Dr. Rufo A. Guzman (in relation to the medical findings of Dr. Willie Lagdameo of the Hospital of Infant Jesus [p. 17, ECC rec.] and Dr. Mercia C. Abrenica, its own medical officer [p. 9, ECC rec.]) sufficiently establish proof that the risk of contracting the disease is increased, if not caused, by the working conditions prevailing in the respondent's (NSDB) premises. In the case of Eliseo vs. Workmen's Compensation Commission (84 SCRA 188), this Court held: We cannot agree with the private respondent that the claim of the petitioner is without any factual or legal basis nor with the respondent Workmen's Compensation Commission that there is no evidence substantial enough to show that this leukemia which caused the death of Isabel Eliseo has a causal relation to the nature of her work with the respondent G & S Manufacturing Corp. It may be true that the job of a reviser or

quality controller, which was the work of claimant Isabel Eliseo, does not entail physical exertion. It may also be true that all that is required is alertness of the eye to see and detect any defect or flaw in a garment being and to point out those defects for correction or repair before a garment can pass for distribution and use. However, it must be admitted that the nature of the work of the claimant required her to deal with textiles or fabrics which involved chemicals of various kinds and composition and this exposure of the deceased to these chemicals in private respondent's establishment probably led to the development of the disease of leukemia or at least aggravated the illness of the claimant from which she died as a result. In Laron vs. Workmen's Compensation Commission, et al., 73 SCRA 84, We held that in testing the evidence or the relation between the injury or disease and the employment, probability and not certainty, is the touchstone, reiterated inNational Housing Corp. vs. WCC, 79 SCRA 281. Section l(b), Rule III of the Implementing Rules and regulations of P.D. 626 provides For sickness and the resulting disability or death to be compensable, the sickness must be the result of an occupational disease fisted under Annex 'A' of these Rules with the conditions set therein satisfied- otherwise, proof must be shown that the risk of contracting the disease is increased by the working conditions. This Court is convinced that the petitioner, by clear and convincing evidence, has adequately satisfied the second part of the aforequoted provision, following the theory of increased risk as laid down in the case of Amparo vs. GSIS, ECC Case No. 0046 (August 18, 1976) and reiterated in Corales vs. ECC, 84 SCRA 762 (August 25,1978). Furthermore, in the case of Sepulveda vs. Employees'Compensation Commission (84 SCRA 771 [August 25, 1978]), this Court stated that ... the respondent Commission, under Resolution No. 223 dated March 16, 1977, adopted, as a policy, the institution of a more compassionate interpretation of the restrictive provisions of Presidential Decree No. 626, as amended, by its administering agencies, the Social Security System and the Government Service Insurance System, with respect to, among others, Myocardial Infarction and other borderline cases. ...

In the instant case, it is evident that rectal cancer is one of those borderline cases. Like, it is clear that the purpose of the resolution is to extend the applicability of the provisions of P.D. 626, thereby affording a greater number of employees the opportunity to avail of the benefits under the law. This is in consonance with the avowed policy of the State, as mandated by the Constitution and embodied in the New Labor Code, to give maximum aid and protection to labor. The Employees' Compensation Commission, like the defunct Court of Industrial Relations and the Workmen's Compensation Commission, is under obligation at all times to give meaning and substance to the constitutional guarantees in favor of the working man, more specially, the social justice guarantee; for otherwise, these guarantees would be merely "a lot of meaningless patter." (Santos vs. WCC, 75 SCRA 371 [1977]).] As pointed out by no less than the respondent ECC itself in its Comment dated January 5, 1978 It may not be amiss to mention that the ECC has time and again expanded the list of occupational diseases. This comes about after continuing studies made by the ECC. Indeed, cancer has already been included as a qualified occupational disease in certain cases Occupational Disease
1. Cancer of the epithelial lining of the bladder (Papilloma of the bladder)

Nature of Employment
Work involving exposure to alphnaphtylamine, betanapthylamine or benzidine or any part

of the salts; and auramine or magent 2. Cancer epithellomatoma or ulceration of the skin of the corneal surface of the eye due to tar, pitch, bitumen, mineral oil or paraffin or any compound product or residue of any of these substances The use or handling of, ex posure to tar, pitch, bitumen, mineral oil (include paraffin) soot or any compound product or residue of any of these substances

xxx 7. Cancer of the stomach and other lymphatic and blood forming vessels; nasal cavity and sinuses 16. Cancer of the lungs, liver and brain

xxx Woodworkers; wood products industry carpenters, loggers and employees in pulp and paper mills and plywood mills Vinyl chloride workers, plastic workers

Evidently, GSIS has trodden the grounds on an unsure foot. It would seem to insinuate that petitioner must blame science for having not yet discovered the actual cause of her husband's fatal illness. Why is it then that petitioner must be required to prove causation-that her husband's cancer was caused by his employment - if science itself is ignorant of the cause of cancer?...

Worth noting is the fact that the above types of cancer have no known etiology. Yet, they are regarded as occupational. The clear implication is that the law merely requires a reasonable work connection (pp. 5960, rec., Empahasis supplied).

WE give due consideration to the respondent's application of P.D. 626 in ruling on the claim since petitioner's husband died on May 27, 1977, after the effectivity of the provisions of the New Labor Code on Employees' Compensation. Moreover, medical records did not disclose the date when the deceased employee actually contracted the disease, rectal malignancy having been discovered only on April 22, 1976 when the deceased sought hospital confinement. From the above discussion, it is undeniable that the petitioner is entitled to her claim.

From the foregoing statements, it is palpable that the respondent ECC recognizes, as it is duty bound to, the policy of the State to afford maximum aid and protection to labor. Therefore, to require the petitioner to show the actual causes or factors which led to the decendent's rectal malignancy would not be consistent with this liberal interpretation. It is of universal acceptance that practically all kinds of cancer belong to the class of clinical diseases whose exact etiology, cause or origin, is unknown. It is in this regard that the evidence submitted by the petitioner deserves serious consideration. As persuasively pointed out by the petitioner in her memorandum addressed to this Court dated April 6, 1979 xxx xxx xxx The respondent GSIS said, 'It is unfortunate that despite the relatively fast pace in the march of progress, science to this day has not given us the cause of cancer' (p. 11, GSIS Comment). Hence medical scientists are still venturing into the unknown, so to speak. ... xxx xxx xxx

WHEREFORE, THE DECISION OF RESPONDENT EMPLOYEES' COMPENSATION COMMISSION IS HEREBY SET ASIDE AND THE RESPONDENT GSIS IS HEREBY DIRECTED 1. TO PAY THE PETITIONER THE SUM OF TWELVE THOUSAND (P12,000.00) PESOS AS DEATH BENEFITS; 2. TO REIMBURSE PETITIONER MEDICAL, SURGICAL AND HOSPITAL EXPENSES DULY SUPPORTED BY PROPER RECEIPTS; 3. TO PAY PETITIONER THE SUM OF SEVEN HUNDRED (P700.00) PESOS AS FUNERAL EXPENSES; AND 4. TO PAY THE PETITIONER ATTORNEY'S FEES EQUIVALENT TO TEN (10%) PERCENT OF THE DEATH BENEFITS. SO ORDERED.

2. Que los obreros de una empresa fabril, que han celebrado contrato, ya individual ya colectivamente, con ell, sin tiempo fijo, y que se han visto obligados a cesar en sus tarbajos por haberse declarando paro forzoso en la fabrica en la cual tarbajan, dejan de ser empleados u obreros de la misma; 3. Que un patrono o sociedad que ha celebrado un contrato colectivo de trabajo con sus osbreros sin tiempo fijo de duracion y sin ser para una obra determiminada y que se niega a readmitir a dichos obreros que cesaron como consecuencia de un paro forzoso, no es culpable de practica injusta in incurre en la sancion penal del articulo 5 de la Ley No. 213 del Commonwealth, aunque su negativa a readmitir se deba a que dichos obreros pertenecen a un determinado organismo obrero, puesto que tales ya han dejado deser empleados suyos por terminacion del contrato en virtud del paro. The respondent National Labor Union, Inc., on the other hand, prays for the vacation of the judgement rendered by the majority of this Court and the remanding of the case to the Court of Industrial Relations for a new trial, and avers: G.R. No. L-46496 February 27, 1940 1. That Toribio Teodoro's claim that on September 26, 1938, there was shortage of leather soles in ANG TIBAY making it necessary for him to temporarily lay off the members of the National Labor Union Inc., is entirely false and unsupported by the records of the Bureau of Customs and the Books of Accounts of native dealers in leather. 2. That the supposed lack of leather materials claimed by Toribio Teodoro was but a scheme to systematically prevent the forfeiture of this bond despite the breach of his CONTRACT with the Philippine Army. 3. That Toribio Teodoro's letter to the Philippine Army dated September 29, 1938, (re supposed delay of leather soles from the States) was but a scheme to systematically prevent the forfeiture of this bond despite the breach of his CONTRACT with the Philippine Army. 4. That the National Worker's Brotherhood of ANG TIBAY is a company or employer union dominated by Toribio Teodoro, the existence and functions of which are illegal. (281 U.S., 548, petitioner's printed memorandum, p. 25.)

ANG TIBAY, represented by TORIBIO TEODORO, manager and propietor, and NATIONAL WORKERS BROTHERHOOD, petitioners, vs. THE COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION, INC., respondents. The Solicitor-General in behalf of the respondent Court of Industrial Relations in the above-entitled case has filed a motion for reconsideration and moves that, for the reasons stated in his motion, we reconsider the following legal conclusions of the majority opinion of this Court: 1. Que un contrato de trabajo, asi individual como colectivo, sin termino fijo de duracion o que no sea para una determinada, termina o bien por voluntad de cualquiera de las partes o cada vez que ilega el plazo fijado para el pago de los salarios segun costumbre en la localidad o cunado se termine la obra;

5. That in the exercise by the laborers of their rights to collective bargaining, majority rule and elective representation are highly essential and indispensable. (Sections 2 and 5, Commonwealth Act No. 213.) 6. That the century provisions of the Civil Code which had been (the) principal source of dissensions and continuous civil war in Spain cannot and should not be made applicable in interpreting and applying the salutary provisions of a modern labor legislation of American origin where the industrial peace has always been the rule. 7. That the employer Toribio Teodoro was guilty of unfair labor practice for discriminating against the National Labor Union, Inc., and unjustly favoring the National Workers' Brotherhood. 8. That the exhibits hereto attached are so inaccessible to the respondents that even with the exercise of due diligence they could not be expected to have obtained them and offered as evidence in the Court of Industrial Relations. 9. That the attached documents and exhibits are of such farreaching importance and effect that their admission would necessarily mean the modification and reversal of the judgment rendered herein. The petitioner, Ang Tibay, has filed an opposition both to the motion for reconsideration of the respondent National Labor Union, Inc. In view of the conclusion reached by us and to be herein after stead with reference to the motion for a new trial of the respondent National Labor Union, Inc., we are of the opinion that it is not necessary to pass upon the motion for reconsideration of the Solicitor-General. We shall proceed to dispose of the motion for new trial of the respondent labor union. Before doing this, however, we deem it necessary, in the interest of orderly procedure in cases of this nature, in interest of orderly procedure in cases of this nature, to make several observations regarding the nature of the powers of the Court of Industrial Relations and emphasize certain guiding principles which should be observed in the trial of cases brought before it. We have re-examined the entire record of the proceedings had before the Court of Industrial Relations in this case, and we have found no substantial evidence that the exclusion of the 89 laborers here was due to their union affiliation or activity. The whole transcript taken contains what transpired during the hearing and is more of a record of contradictory and conflicting statements of opposing counsel, with sporadic conclusion drawn to suit

their own views. It is evident that these statements and expressions of views of counsel have no evidentiary value. The Court of Industrial Relations is a special court whose functions are specifically stated in the law of its creation (Commonwealth Act No. 103). It is more an administrative than a part of the integrated judicial system of the nation. It is not intended to be a mere receptive organ of the Government. Unlike a court of justice which is essentially passive, acting only when its jurisdiction is invoked and deciding only cases that are presented to it by the parties litigant, the function of the Court of Industrial Relations, as will appear from perusal of its organic law, is more active, affirmative and dynamic. It not only exercises judicial or quasi-judicial functions in the determination of disputes between employers and employees but its functions in the determination of disputes between employers and employees but its functions are far more comprehensive and expensive. It has jurisdiction over the entire Philippines, to consider, investigate, decide, and settle any question, matter controversy or dispute arising between, and/or affecting employers and employees or laborers, and regulate the relations between them, subject to, and in accordance with, the provisions of Commonwealth Act No. 103 (section 1). It shall take cognizance or purposes of prevention, arbitration, decision and settlement, of any industrial or agricultural dispute causing or likely to cause a strike or lockout, arising from differences as regards wages, shares or compensation, hours of labor or conditions of tenancy or employment, between landlords and tenants or farm-laborers, provided that the number of employees, laborers or tenants of farm-laborers involved exceeds thirty, and such industrial or agricultural dispute is submitted to the Court by the Secretary of Labor or by any or both of the parties to the controversy and certified by the Secretary of labor as existing and proper to be by the Secretary of Labor as existing and proper to be dealth with by the Court for the sake of public interest. (Section 4, ibid.) It shall, before hearing the dispute and in the course of such hearing, endeavor to reconcile the parties and induce them to settle the dispute by amicable agreement. (Paragraph 2, section 4, ibid.) When directed by the President of the Philippines, it shall investigate and study all industries established in a designated locality, with a view to determinating the necessity and fairness of fixing and adopting for such industry or locality a minimum wage or share of laborers or tenants, or a maximum "canon" or rental to be paid by the "inquilinos" or tenants or less to landowners. (Section 5, ibid.) In fine, it may appeal to voluntary arbitration in the settlement of industrial disputes; may employ mediation or conciliation for that purpose, or recur to the more effective system of official investigation and compulsory arbitration in order to determine specific controversies between labor and capital industry and in agriculture. There is in reality here a mingling of

executive and judicial functions, which is a departure from the rigid doctrine of the separation of governmental powers. In the case of Goseco vs. Court of Industrial Relations et al ., G.R. No. 46673, promulgated September 13, 1939, we had occasion to joint out that the Court of Industrial Relations et al., G. R. No. 46673, promulgated September 13, 1939, we had occasion to point out that the Court of Industrial Relations is not narrowly constrained by technical rules of procedure, and the Act requires it to "act according to justice and equity and substantial merits of the case, without regard to technicalities or legal forms and shall not be bound by any technicalities or legal forms and shall not be bound by any technical rules of legal evidence but may inform its mind in such manner as it may deem just and equitable." (Section 20, Commonwealth Act No. 103.) It shall not be restricted to the specific relief claimed or demands made by the parties to the industrial or agricultural dispute, but may include in the award, order or decision any matter or determination which may be deemed necessary or expedient for the purpose of settling the dispute or of preventing further industrial or agricultural disputes. (section 13, ibid.) And in the light of this legislative policy, appeals to this Court have been especially regulated by the rules recently promulgated by the rules recently promulgated by this Court to carry into the effect the avowed legislative purpose. The fact, however, that the Court of Industrial Relations may be said to be free from the rigidity of certain procedural requirements does not mean that it can, in justifiable cases before it, entirely ignore or disregard the fundamental and essential requirements of due process in trials and investigations of an administrative character. There are primary rights which must be respected even in proceedings of this character: (1) The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. In the language of Chief Hughes, in Morgan v. U.S., 304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129, "the liberty and property of the citizen shall be protected by the rudimentary requirements of fair play. (2) Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. (Chief Justice Hughes in Morgan v. U.S. 298 U.S. 468, 56 S. Ct. 906, 80 law. ed. 1288.) In the language of this court inEdwards vs. McCoy, 22 Phil., 598, "the right to adduce evidence, without the corresponding duty on the part of the board to consider it, is vain. Such right is conspicuously futile if

the person or persons to whom the evidence is presented can thrust it aside without notice or consideration." (3) "While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support it is a nullity, a place when directly attached." (Edwards vs. McCoy, supra.) This principle emanates from the more fundamental is contrary to the vesting of unlimited power anywhere. Law is both a grant and a limitation upon power. (4) Not only must there be some evidence to support a finding or conclusion (City of Manila vs. Agustin, G.R. No. 45844, promulgated November 29, 1937, XXXVI O. G. 1335), but the evidence must be "substantial." (Washington, Virginia and Maryland Coach Co. v. national labor Relations Board, 301 U.S. 142, 147, 57 S. Ct. 648, 650, 81 Law. ed. 965.) It means such relevant evidence as a reasonable mind accept as adequate to support a conclusion." (Appalachian Electric Power v. National Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor Relations Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co. v. National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) . . . The statute provides that "the rules of evidence prevailing in courts of law and equity shall not be controlling.' The obvious purpose of this and similar provisions is to free administrative boards from the compulsion of technical rules so that the mere admission of matter which would be deemed incompetent inn judicial proceedings would not invalidate the administrative order. (Interstate Commerce Commission v. Baird, 194 U.S. 25, 44, 24 S. Ct. 563, 568, 48 Law. ed. 860; Interstate Commerce Commission v. Louisville and Nashville R. Co., 227 U.S. 88, 93 33 S. Ct. 185, 187, 57 Law. ed. 431; United States v. Abilene and Southern Ry. Co. S. Ct. 220, 225, 74 Law. ed. 624.) But this assurance of a desirable flexibility in administrative procedure does not go far as to justify orders without a basis in evidence having rational probative force. Mere uncorroborated hearsay or rumor does not constitute substantial evidence. (Consolidated Edison Co. v. National Labor Relations Board, 59 S. Ct. 206, 83 Law. ed. No. 4, Adv. Op., p. 131.)" (5) The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected. (Interstate Commence Commission vs. L. & N. R. Co., 227 U.S. 88, 33 S. Ct. 185, 57 Law. ed. 431.) Only by confining the administrative tribunal to the evidence disclosed to the parties, can the latter be

protected in their right to know and meet the case against them. It should not, however, detract from their duty actively to see that the law is enforced, and for that purpose, to use the authorized legal methods of securing evidence and informing itself of facts material and relevant to the controversy. Boards of inquiry may be appointed for the purpose of investigating and determining the facts in any given case, but their report and decision are only advisory. (Section 9, Commonwealth Act No. 103.) The Court of Industrial Relations may refer any industrial or agricultural dispute or any matter under its consideration or advisement to a local board of inquiry, a provincial fiscal. a justice of the peace or any public official in any part of the Philippines for investigation, report and recommendation, and may delegate to such board or public official such powers and functions as the said Court of Industrial Relations may deem necessary, but such delegation shall not affect the exercise of the Court itself of any of its powers. (Section 10, ibid.) (6) The Court of Industrial Relations or any of its judges, therefore, must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the views of a subordinate in arriving at a decision. It may be that the volume of work is such that it is literally Relations personally to decide all controversies coming before them. In the United States the difficulty is solved with the enactment of statutory authority authorizing examiners or other subordinates to render final decision, with the right to appeal to board or commission, but in our case there is no such statutory authority. (7) The Court of Industrial Relations should, in all controversial questions, render its decision in such a manner that the parties to the proceeding can know the various issues involved, and the reasons for the decision rendered. The performance of this duty is inseparable from the authority conferred upon it. In the right of the foregoing fundamental principles, it is sufficient to observe here that, except as to the alleged agreement between the Ang Tibay and the National Worker's Brotherhood (appendix A), the record is barren and does not satisfy the thirst for a factual basis upon which to predicate, in a national way, a conclusion of law. This result, however, does not now preclude the concession of a new trial prayed for the by respondent National Labor Union, Inc., it is alleged that "the supposed lack of material claimed by Toribio Teodoro

was but a scheme adopted to systematically discharged all the members of the National Labor Union Inc., from work" and this avernment is desired to be proved by the petitioner with the "records of the Bureau of Customs and the Books of Accounts of native dealers in leather"; that "the National Workers Brotherhood Union of Ang Tibay is a company or employer union dominated by Toribio Teodoro, the existence and functions of which are illegal." Petitioner further alleges under oath that the exhibits attached to the petition to prove his substantial avernments" are so inaccessible to the respondents that even within the exercise of due diligence they could not be expected to have obtained them and offered as evidence in the Court of Industrial Relations", and that the documents attached to the petition "are of such far reaching importance and effect that their admission would necessarily mean the modification and reversal of the judgment rendered herein." We have considered the reply of Ang Tibay and its arguments against the petition. By and large, after considerable discussions, we have come to the conclusion that the interest of justice would be better served if the movant is given opportunity to present at the hearing the documents referred to in his motion and such other evidence as may be relevant to the main issue involved. The legislation which created the Court of Industrial Relations and under which it acts is new. The failure to grasp the fundamental issue involved is not entirely attributable to the parties adversely affected by the result. Accordingly, the motion for a new trial should be and the same is hereby granted, and the entire record of this case shall be remanded to the Court of Industrial Relations, with instruction that it reopen the case, receive all such evidence as may be relevant and otherwise proceed in accordance with the requirements set forth hereinabove. So ordered. Avancea, C. J., Villa-Real, Imperial, Diaz, Concepcion and Moran, JJ., concur.

G.R. NO. 148132, JANUARY 28,2008 SMART COMMUNICATIONS vs ASTORGA DECISION

For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails the February 28, 2000Decision [1] and the May 7, 2001 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001 Decision[3]and the December 18, 2001 Resolution[4] in CA-G.R. SP. No. 57065. Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May 8, 1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits, namely, annual performance incentive equivalent to 30% of her annual gross salary, a group life and hospitalization insurance coverage, and a car plan in the amount ofP455,000.00.[5] In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made known to the employees on February 27, 1998.[6] Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Astorgas division. To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by SMART. SMART then conducted a performance evaluation of CSMG personnel and those who garnered the highest ratings were favorably recommended to SNMI. Astorga landed last in the performance evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried lower salary rank and rate. Despite the abolition of the CSMG/FSD, reporting for work. But on March 3, 1998, memorandum advising Astorga of the termination on ground of redundancy, effective April 3, 1998. on March 16, 1998.[7] Astorga continued SMART issued a of her employment Astorga received it

illegal for an employer, like SMART, to contract out services which will displace the employees, especially if the contractor is an in-house agency.[9] SMART responded that there was valid termination. It argued that Astorga was dismissed by reason of redundancy, which is an authorized cause for termination of employment, and the dismissal was effected in accordance with the requirements of the Labor Code. The redundancy of Astorgas position was the result of the abolition of CSMG and the creation of a specialized and more technically equipped SNMI, which is a valid and legitimate exercise of management prerogative.[10] In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of the Honda Civic Sedan which was given to her under the companys car plan program, or to surrender the same to the company for proper disposition.[11] Astorga, however, failed and refused to do either, thus prompting SMART to file a suit for replevin with the Regional Trial Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil Case No. 98-1936 and was raffled to Branch 57. [12] Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; and (iv) forum-shopping. Astorga posited that the regular courts have no jurisdiction over the complaint because the subject thereof pertains to a benefit arising from an employment contract; hence, jurisdiction over the same is vested in the labor tribunal and not in regular courts.
[13]

Pending resolution of Astorgas motion to dismiss the replevin case, the Labor Arbiter rendered a Decision[14] dated August 20, 1998, declaring Astorgas dismissal from employment illegal. While recognizing SMARTs right to abolish any of its departments, the Labor Arbiter held that such right should be exercised in good faith and for causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to terminate Astorgas employment. The Arbiter also ruled that contracting out the functions performed by Astorga to an in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code. Accordingly, the Labor Arbiter ordered: WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and unjust. [SMART and Santiago] are hereby ordered to:

The termination of her employment prompted Astorga to file a Complaint[8] for illegal dismissal, non-payment of salaries and other benefits with prayer for moral and exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She claimed that abolishing CSMG and, consequently, terminating her employment was illegal for it violated her right to security of tenure. She also posited that it was

1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of seniority rights and other privileges, with full backwages, inclusive of allowances and other benefits from the time of [her] dismissal to the date of reinstatement, which computed as of this date, are as follows:
(a) Astorga BACKWAGES; (P33,650.00 x 4 = P134,600.00 UNPAID SALARIES (February 15, 1998April 3, 1998 February 15-28, = P 16,823.00 March 1-31, = P 33,650.00 April 1-3, = P 3,882.69 x mos. =

As correctly pointed out, this case is to enforce a right of possession over a company car assigned to the defendant under a car plan privilege arrangement. The car is registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the jurisdiction of the Regional Trial Court. In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant refused to return said car. This is clearly sufficient statement of plaintiffs cause of action. Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the judgment in the labor dispute will not constitute res judicata to bar the filing of this case. WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit. SO ORDERED.[17] Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.[18] Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision, [19] reversed the RTC ruling. Granting the petition and, consequently, dismissing the replevin case, the CA held that the case is intertwined with Astorgas complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMARTs motion for reconsideration having been denied, [20] it elevated the case to this Court, now docketed as G.R. No. 148132. Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the National Labor Relations Commission (NLRC). In itsSeptember 27, 1999 Decision, [21] the NLRC sustained Astorgas dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI to do the sales and marketing services for SMART a valid organizational action. It overruled the Labor Arbiters ruling that SNMI is an in-house agency, holding that it lacked legal basis. It also declared that contracting, subcontracting and streamlining of operations for the purpose of increasing efficiency are allowed under the law. The NLRC further found erroneous the Labor Arbiters

months)

1998 [1998] 1998

CAR MAINTENANCE ALLOWANCE (P2,000.00 4) = P 8,000.00 FUEL ALLOWANCE (300 liters/mo. x 4 at P12.04/liter) = P 14,457.83 TOTAL P211,415.52 xxxx

3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary damages in the amount of P300,000.00. x x x 4. Jointly and severally pay 10% of the amount due as attorneys fees. SO ORDERED.[15] Subsequently, on March 29, 1999, the RTC issued an Order[16] denying Astorgas motion to dismiss the replevin case. In so ruling, the RTC ratiocinated that: Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.

disquisition that redundancy to be valid must be impelled by economic reasons, and upheld the redundancy measures undertaken by SMART. The NLRC disposed, thus: WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further ordered to immediately return the company vehicle assigned to her. [Smart and Santiago] are hereby ordered to pay the final wages of [Astorga] after [she] had submitted the required supporting papers therefor. SO ORDERED.[22] Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999.[23] Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision [24] affirming with modification the resolutions of the NLRC. In gist, the CA agreed with the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG was a legitimate exercise of management prerogative. It rejected Astorgas posturing that her non-absorption into SNMI was tainted with bad faith. However, the CA found that SMART failed to comply with the mandatory one-month notice prior to the intended termination. Accordingly, the CA imposed a penalty equivalent to Astorgas one-month salary for this non-compliance. The CA also set aside the NLRCs order for the return of the company vehicle holding that this issue is not essentially a labor concern, but is civil in nature, and thus, within the competence of the regular court to decide. It added that the matter had not been fully ventilated before the NLRC, but in the regular court. Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the Decision. On December 18, 2001, the CA resolved the motions, viz.: WHEREFORE, [Astorgas] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is hereby ordered to pay [Astorga] her backwages from 15 February 1998 to 06 November 1998. [Smarts] motion for reconsideration is outrightly DENIED. SO ORDERED.[25]

Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R Nos. 151079 and 151372. On February 27, 2002, this Court ordered the consolidation of these petitions with G.R. No. 148132. [26] In her Memorandum, Astorga argues:
I THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGAS DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR HER DISMISSAL. II SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL. III THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.[27] On the other hand, Smart in its Memoranda raises the following issues: I WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY. II WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.

III WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS COMMISSION FINDS APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.[28] IV WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED. V WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR. VI WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR CODE.[29]

That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly admits of doubt. In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the following disquisition, viz.: [I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment package. We doubt that [SMART] would extend [to Astorga] the same car plan privilege were it not for her employment as district sales manager of the company. Furthermore, there is no civil contract for a loan between [Astorga] and [Smart]. Consequently, We find that the car plan privilege is a benefit arising out of employer-employee relationship. Thus, the claim for such falls squarely within the original and exclusive jurisdiction of the labor arbiters and the NLRC.[32] We do not agree. Contrary to the CAs ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted well within its discretion in denying Astorgas motion to dismiss. SMARTs demand for payment of the market value of the car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It involves the relationship of debtor and creditor rather than employee-employer relations.[33] As such, the dispute falls within the jurisdiction of the regular courts. In Basaya, Jr. v. Militante ,[34] this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained: Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary relief sought therein is the return of the property in specie wrongfully detained by another person. It is an ordinary statutory proceeding to adjudicate rights to the title or possession of personal property. The question of whether or not a party has the right of possession over the property involved and if so, whether or not the adverse party has wrongfully taken and detained said property as to require its return to plaintiff, is outside the pale of competence of a labor tribunal and beyond the field of specialization of Labor Arbiters. xxxx

The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City allegedly for lack of jurisdiction, which is the issue raised in G.R. No. 148132. Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those goods or chattels from one who has wrongfully distrained or taken, or who wrongfully detains such goods or chattels. It is designed to permit one having right to possession to recover property in specie from one who has wrongfully taken or detained the property. [30] The term may refer either to the action itself, for the recovery of personalty, or to the provisional remedy traditionally associated with it, by which possession of the property may be obtained by the plaintiff and retained during the pendency of the action.[31]

The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues raised in each forum can be resolved independently on the other. In fact in 18 November 1986, the NLRC in the case before it had issued an Injunctive Writ enjoining the petitioners from blocking the free ingress and egress to the Vessel and ordering the petitioners to disembark and vacate. That aspect of the controversy is properly settled under the Labor Code. So also with petitioners right to picket. But the determination of the question of who has the better right to take possession of the Vessel and whether petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that right to possess in addressed to the competence of Civil Courts. In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as laid down by pertinent laws. The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the replevin case for lack of jurisdiction. Having resolved that issue, we proceed to rule on the validity of Astorgas dismissal. Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National Labor Relations Commission,[35] viz: x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of work. That no other person was holding the same position that private respondent held prior to termination of his services does not show that his position had not become redundant. Indeed, in any well organized business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a

position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. The characterization of an employees services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the employer. The wisdom and soundness of such characterization or decision is not subject to discretionary review provided, of course, that a violation of law or arbitrary or malicious action is not shown.[36] Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the reorganization was done in order to get rid of her. But except for her barefaced allegation, no convincing evidence was offered to prove it. This Court finds it extremely difficult to believe that SMART would enter into a joint venture agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a particular employee, such as Astorga. Moreover, Astorga never denied that SMART offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried a lower salary rank and rate. If indeed SMART simply wanted to get rid of her, it would not have offered her a position in any department in the enterprise. Astorga also states that the justification advanced by SMART is not true because there was no compelling economic reason for redundancy. But contrary to her claim, an employer is not precluded from adopting a new policy conducive to a more economical and effective management even if it is not experiencing economic reverses. Neither does the law require that the employer should suffer financial losses before he can terminate the services of the employee on the ground of redundancy. [37] We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD and termination of Astorgas employment was an honest effort to make SMARTs sales and marketing departments more efficient and competitive. As the CA had taken pains to elucidate: x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization undertaken by SMART is for no purpose other than its declared objective as a labor and cost savings device. Indeed, this Court finds no fault in SMARTs

decision to outsource the corporate sales market to SNMI in order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in charge of selling SMARTs telecommunications services to the corporate market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customers requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI Multimedia Incorporated, a joint venture company of SMART and NTT of Japan, for the reason that CSMG/FSD does not have the necessary technical expertise required for the value added services. By transferring the duties of CSMG/FSD to SNMI, SMART has created a more competent and specialized organization to perform the work required for corporate accounts. It is also relieved SMART of all administrative costs management, time and money-needed in maintaining the CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on relevant criteria and is therefore a legitimate exercise of management prerogative. Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and upheld his cause in most of his conflicts with his employer. This favored treatment is consonant with the social justice policy of the Constitution. But while tilting the scales of justice in favor of workers, the fundamental law also guarantees the right of the employer to reasonable returns for his investment.[38] In this light, we must acknowledge the prerogative of the employer to adopt such measures as will promote greater efficiency, reduce overhead costs and enhance prospects of economic gains, albeit always within the framework of existing laws. Accordingly, we sustain the reorganization and redundancy program undertaken by SMART. However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice prior to termination. The record is clear that Astorga received the notice of termination only on March 16, 1998[39] or less than a month prior to its effectivity on April 3, 1998. Likewise, the Department of Labor and Employment was notified of the redundancy program only on March 6, 1998.[40] Article 283 of the Labor Code clearly provides:

Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof x x x. SMARTs assertion that Astorga cannot complain of lack of notice because the organizational realignment was made known to all the employees as early as February 1998 fails to persuade. Astorgas actual knowledge of the reorganization cannot replace the formal and written notice required by the law. In the written notice, the employees are informed of the specific date of the termination, at least a month prior to the effectivity of such termination, to give them sufficient time to find other suitable employment or to make whatever arrangements are needed to cushion the impact of termination. In this case, notwithstanding Astorgas knowledge of the reorganization, she remained uncertain about the status of her employment until SMART gave her formal notice of termination. But such notice was received by Astorga barely two (2) weeks before the effective date of termination, a period very much shorter than that required by law. Be that as it may, this procedural infirmity would not render the termination of Astorgas employment illegal. The validity of termination can exist independently of the procedural infirmity of the dismissal.[41] In DAP Corporation v. CA,[42] we found the dismissal of the employees therein valid and for authorized cause even if the employer failed to comply with the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal, but held the employer liable for non-compliance with the procedural requirements. The CA, therefore, committed no reversible error in sustaining Astorgas dismissal and at the same time, awarding indemnity for violation of Astorga's statutory rights. However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on SMART for non-compliance with the one-month mandatory notice requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot,[43] viz.: [I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon

him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee, and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative. We deem it proper to increase the amount of the penalty on SMART to P50,000.00. As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent to at least one (1) month salary or to at least one (1) months pay for every year of service, whichever is higher. The records show that Astorgas length of service is less than a year. She is, therefore, also entitled to separation pay equivalent to one (1) month pay. Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never rebutted by SMART in the proceedings a quo. No proof of payment was presented by SMART to disprove the allegation. It is settled that in labor cases, the burden of proving payment of monetary claims rests on the employer. [44] SMART failed to discharge the onus probandi. Accordingly, it must be held liable for Astorgas salary from February 15, 1998 until the effective date of her termination, on April 3, 1998. However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to an illegally dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal dismissal from work. [45] The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiters ruling and categorically declared Astorgas dismissal valid. This ruling was affirmed by the CA in its assailed Decision. Since Astorgas dismissal is for an authorized cause, she is not entitled to backwages. The CAs award of backwages is totally inconsistent with its finding of valid dismissal. WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28, 2000 Decision and the May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of Makati City, Branch 57 is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and render its Decision with reasonable dispatch.

On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED. The June 11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is declared validly dismissed. However, SMART is ordered to pay AstorgaP50,000.00 as indemnity for its non-compliance with procedural due process, her separation pay equivalent to one (1) month pay, and her salary from February 15, 1998 until the effective date of her termination on April 3, 1998. The award of backwages is DELETED for lack of basis. SO ORDERED.

G.R NO. 168120, 25 JANUARY 2012 MANSION PRINTING CENTER vs BITARA JR. Before us is a petition for review on certiorari seeking to reverse and set aside the issuances of the Court of Appeals in CA-GR. SP No. 70965, to wit: (a) the Decision1 dated 18 March 2004 granting the petition for certiorari under Rule 65 of herein respondent Diosdado Bitara, Jr.; and (b) the Resolution2 dated 10 May 2005 denying the petitioners Motion for Reconsideration of the Decision. The assailed decision of the Court of Appeals reversed the findings of the National Labor Relations Commission3 and the Labor Arbiter4 that respondent was validly dismissed from the service. The Antecedents Petitioner Mansion Printing Center is a single proprietorship registered under the name of its president and co-petitioner Clement Cheng. It is engaged in the printing of quality self-adhesive labels, brochures, posters, stickers, packaging and the like. 5

Sometime in August 1998, petitioners engaged the services of respondent as a helper (kargador). Respondent was later promoted as the companys sole driver tasked to pick-up raw materials for the printing business, collect account receivables and deliver the products to the clients within the delivery schedules. 6

Petitioners aver that the timely delivery of the products to the clients is one of the foremost considerations material to the operation

of the business.7 It being so, they closely monitored the attendance of respondent. They noted his habitual tardiness and absenteeism. Thus, as early as 23 June 1999, petitioners issued a Memorandum8 requiring respondent to submit a written explanation why no administrative sanction should be imposed on him for his habitual tardiness.

Despite respondents undertaking to report on time, however, he continued to disregard attendance policies. His weekly time record for the first quarter of the year 200010revealed that he came late nineteen (19) times out of the forty-seven (47) times he reported for work. He also incurred nineteen (19) absences out of the sixty-six (66) working days during the quarter. His absences without prior notice and approval from March 11-16, 2000 were considered to be the most serious infraction of all11 because of its adverse effect on business operations.

Several months after, respondents attention on the matter was again called to which he replied:

29 NOV. 1999

Consequently, Davis Cheng, General Manager of the company and son of petitioner Cheng, issued on 17 March 2000 another Memorandum12 (Notice to Explain) requiring respondent to explain why his services should not be terminated. He personally handed the Notice to Explain to respondent but the latter, after reading the directive, refused to acknowledge receipt thereof.13 He did not submit any explanation and, thereafter, never reported for work.

MR. CLEMENT CHENG

SIR:

On 21 March 2000, Davis Cheng personally served another Memorandum14 (Notice of Termination) upon him informing him that the company found him grossly negligent of his duties, for which reason, his services were terminated effective 1 April 2000.

I UNDERSTAND MY TARDINESS WHATEVER REASON I HAVE AFFECTS SOMEHOW THE DELIVERY SCHEDULE OF THE COMPANY, THUS DISCIPLINARY ACTION WERE IMPOSED TO ME BY THE MANAGEMENT. AND ON THIS END, ACCEPT MY APOLOGIES AND REST ASSURED THAT I WILL COME ON TIME (ON OR BEFORE 8:30 AM) AND WILLINGNESS TO EXTEND MY SERVICE AS A COMPANY DRIVER. WHATEVER HELP NEEDED. (sic)

RESPECTFULLY YOURS, (SGD.) DIOSDADO BITARA, JR.9

On even date, respondent met with the management requesting for reconsideration of his termination from the service. However, after hearing his position, the management decided to implement the 21 March 2000 Memorandum. Nevertheless, the management, out of generosity, offered respondent financial assistance in the amount of P6,110.00 equivalent to his one month salary. Respondent demanded that he be given the amount equivalent to two (2) months salary but the management declined as it believed it would, in effect, reward respondent for being negligent of his duties.15

On 27 April 2000, respondent filed a complaint 16 for illegal dismissal against the petitioners before the Labor Arbiter. He prayed for his reinstatement and for the payment of full backwages, legal

holiday pay, service incentive leave pay, damages and attorneys fees.17

Neither are we persuaded to disturb the factual findings of the Labor Arbiter a quo. The material facts as found are all in accordance with the evidence presented during the hearing as shown by the record.

In his Position Paper18 filed with the Labor Arbiter, respondent claimed that he took a leave of absence from March 17-23, 2000 19 due to an urgent family problem. He returned to work on 24 March 200020 but Davis Cheng allegedly refused him admission because of his unauthorized absences.21 On 1 April 2000, respondent was summoned by Davis Cheng who introduced him to a lawyer, who, in turn, informed him that he will no longer be admitted to work because of his 5-day unauthorized absences. Respondent explained that he was compelled to immediately leave for the province on 17 March 2000 22 due to the urgency of the matter and his wife informed the office that he will be absent for a week. The management found his explanation unacceptable and offered him an amount equivalent to his one (1) month salary as separation pay but respondent refused the offer because he wanted to keep the job.23 In his Reply to Respondents Position Paper,24 however, respondent averred that he rejected the offer because he wanted an amount equivalent to one and a half months pay.

WHEREFORE, finding no cogent reason to modify, alter, much less reverse the decision appealed from, the same is AFFIRMED en toto and the instant appeal DISMISSED for lack of merit.26

It likewise denied respondents Motion for Reconsideration of the Resolution on 21 February 2002. 27

Before the Court of Appeals, respondent sought the annulment of the Commissions Resolution dated 29 June 2001 and Order dated 21 February 2002 on the ground that they were rendered with grave abuse of discretion and/or without or in excess of jurisdiction. 28

On 21 December 2000, the Labor Arbiter dismissed the complaint for lack of merit.25 The Court of Appeals found for the respondent and reversed the findings of the Commission. The dispositive portion of its Decision dated 18 March 2004 reads: On appeal to the National Labor Relations Commission (hereinafter referred to as the Commission), the findings of the Labor Arbiter was AFFIRMED en toto. Thus, in its Resolution of 29 June 2001 in NLRC NCR CA No. 027871-01, the Commission declared:

Upon Our review of the record of the case, We perceive no abuse of discretion as to compel a reversal. Appellant failed to adduce convincing evidence to show that the Labor Arbiter in rendering the assailed decision has acted in a manner inconsistent with the criteria set forth in the foregoing pronouncement.

WHEREFORE, the petition is GRANTED. In lieu of the assailed Resolution and Order of the respondent NLRC, a NEW DECISION is hereby rendered declaring petitioner Diosdado Bitara, Jr. to have been Illegally Dismissed and, thus, entitled to the following:

1.

Reinstatement or if no longer feasible, Separation Pay to be computed from the commencement of his employment in August 1988 up to the time of his

termination on April 1, 2000, including his imputed service from April 1, 2000 until the finality of this decision, based on the salary rate prevailing at the said finality;

The petition is meritorious.

The special civil action for certiorari seeks to correct errors of jurisdiction and not errors of judgment. 32

2.

Backwages, inclusive of allowances and other benefits, computed from April 1, 2000 up to the finality of this decision, without qualification or deduction; and

3.

5-day Service Incentive Leave Pay for every year of service from the commencement of his employment in August 1988 up to its termination on April 1, 2000. 29

On 10 May 2005, the Court of Appeals denied respondents Motion for Reconsideration of the decision for lack of merit. 30 Hence, the instant petition.31 Issue

xxx The raison detre for the rule is when a court exercises its jurisdiction, an error committed while so engaged does not deprive it of the jurisdiction being exercised when the error is committed. If it did, every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void judgment. xxx Hence, where the issue or question involved affects the wisdom or legal soundness of the decision not the jurisdiction of the court to render said decision the same is beyond the province of a special civil action for certiorari . xxx33

The core issue in this case is whether or not the Court of Appeals correctly found that the Commission acted without and/or in excess of jurisdiction and with grave abuse of discretion amounting to lack or excess of jurisdiction (a) in upholding the termination of respondents employment and (b) in affirming the denial of his claim for non-payment of holiday pay, service incentive leave pay, moral and exemplary damages.

Our Ruling

xxx [J]udicial review does not go as far as to evaluate the sufficiency of evidence upon which the Labor Arbiter and NLRC based their determinations, the inquiry being limited essentially to whether or not said public respondents had acted without or in excess of its jurisdiction or with grave abuse of discretion. 34 The said rule directs us to merely determine whether there is basis established on record to support the findings of a tribunal and such findings meet the required quantum of proof, which in this case, is substantial evidence. Our deference to the expertise acquired by quasi-judicial agencies and the limited scope granted to us in the exercise of certiorari jurisdiction restrain us from going so far as to probe into the correctness of a tribunals evaluation of evidence, unless there is palpable mistake and complete disregard thereof in which case certiorari would be proper.35

It is on the alleged lack of substantial evidence that the Court of Appeals found for the respondents, thereby reversing the decision of the Commission.

We hold otherwise.

We are seriously considering your termination from service, and for this reason you are directed to submit a written explanation, within seventy-two hours from your receipt of this notice, why you should not be terminated from service for failure to report for work without verbal or written notice or permission on March 11, 13, 14, 15 and 16, 2000. xxx (Emphasis supplied.)

Upon examination of the documents presented by the parties, we are convinced that the finding of facts on which the conclusions of the Commission and the Labor Arbiter were based was actually supported by substantial evidence that amount of relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise.36 (Emphasis supplied.)

To give full meaning and substance to the Notice to Explain, however, the paragraph should be read together with its preceding paragraph, to wit:

We have time and again, verbally and formally, called your attention to your negligence from your tardiness and your frequent absences without any notice but still, you remain to ignore our reminder. As you know, we are in need of a regular driver and your action greatly affected the operation of our company. (Emphasis supplied.)

In order to validly dismiss an employee, the employer is required to observe both substantive and procedural aspects the termination of employment must be based on a just or authorized cause of dismissal and the dismissal must be effected after due notice and hearing.37

Necessarily, he was considered for termination of employment because of his previous infractions capped by his recent unauthorized absences from March 11-16, 2000.

Substantive Due Process

We cannot agree with the Court of Appeals that the sole basis of the termination of respondents employment was his absences from March 11-16, 2000. Indeed, the Notice to Explain38 clearly stated:

That the recent absences were unauthorized were satisfactorily established by petitioners. Two (2) employees of the company belied the claim of respondents wife Mary Ann Bitara that she called the office on 11 March 2000, and, through a certain Delia, as allegedly later identified by respondent, informed petitioners that her husband would take a leave of absence for a week because he went to the province.39

Delia Abalos, a binder/finisher of the company, stated in her Affidavit that she never received a call from respondent nor his wife regarding his absences from March 11-16 and 17-23 during the month of March 2000.40 On the other hand, Ritchie Distor, a messenger of the company, narrated in his Affidavit that, upon instruction of the Management, he went to respondents house on 13 March 2000 to require him to report for work. Instead of relaying the message to him, as respondent would have it, the wife informed him that respondent had already left the house but that she did not know where he was going.41

We, therefore, agree with the Labor Arbiters findings, to wit:

The Court of Appeals relied heavily on our ruling in Stellar Industrial Services, Inc. vs. NLRC,42 which is not on all fours with the present case. In that case, the employer dismissed respondent for nonobservance of company rules and regulations. On the basis of the facts presented, this Court honored the questioned medical certificate justifying the absences he incurred. It further ratiocinated:

The imputed absence and tardiness of the complainant are documented. He faltered on his attendance 38 times of the 66 working days. His last absences on 11, 13, 14, 15 and 16 March 2000 were undertaken without even notice/permission from management. These attendance delinquencies may be characterized as habitual and are sufficient justifications to terminate the complainants employment.44

On this score, Valiao v. Court of Appeals45 is instructive:

xxx [P]rivate respondents absences, as already discussed, were incurred with due notice and compliance with company rules and he had not thereby committed a similar offense as those he had committed in the past [to wit: gambling, for which he was preventively suspended; habitual tardiness for which he received several warnings; and violation of company rules for carrying three sacks of rice, for which he was required to explain.] xxx To refer to those earlier violations as added grounds for dismissing him is doubly unfair to private respondent.43 (Emphasis supplied.)

xxx It bears stressing that petitioners absences and tardiness were not isolated incidents but manifested a pattern of habituality. xxx The totality of infractions or the number of violations committed during the period of employment shall be considered in determining the penalty to be imposed upon an erring employee. The offenses committed by him should not be taken singly and separately but in their totality. Fitness for continued employment cannot be compartmentalized into tight little cubicles of aspects of character, conduct, and ability separate and independent of each other.46

In the present case, however, petitioners have repeatedly called the attention of respondent concerning his habitual tardiness. The Memorandum dated 23 June 1999 of petitioner Cheng required him to explain his tardiness. Also in connection with a similar infraction, respondent even wrote petitioner Cheng a letter dated 29 November 1999 where he admitted that his tardiness has affected the delivery schedules of the company, offered an apology, and undertook to henceforth report for duty on time. Despite this undertaking, he continued to either absent himself from work or report late during the first quarter of 2000.

There is likewise no merit in the observation of the Court of Appeals that the petitioners themselves are not certain of the official time of their employees after pointing out the seeming inconsistencies between the statement of the petitioners that there is no need for written rules since even the [respondent] is aware that his job starts from 8 am to 5 pm47 and its Memorandum of 23 June 1999, where it was mentioned that respondents official time was from 8:30 a.m. to 5:30 p.m. On the contrary, it was clearly stated in the Memorandum

that the Management adjusted his official time from 8:00 a.m. to 5:00 p.m. to 8:30 a.m. to 5:30 p.m. to hopefully solve the problem on his tardiness.48

We cannot simply tolerate injustice to employers if only to protect the welfare of undeserving employees. As aptly put by then Associate Justice Leonardo A. Quisumbing:

Neither is there basis to hold that the company tolerates the offsetting of undertime with overtime services. The Weekly Time Record relied upon by respondent does not conclusively confirm the alleged practice.

In Valiao,49 we defined gross negligence as want of care in the performance of ones duties50 and habitual neglect as repeated failure to perform ones duties for a period of time, depending upon the circumstances.51 These are not overly technical terms, which, in the first place, are expressly sanctioned by the Labor Code of the Philippines, to wit:

Needless to say, so irresponsible an employee like petitioner does not deserve a place in the workplace, and it is within the managements prerogative xxx to terminate his employment. Even as the law is solicitous of the welfare of employees, it must also protect the rights of an employer to exercise what are clearly management prerogatives. As long as the companys exercise of those rights and prerogative is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such exercise will be upheld.52

ART. 282. Termination by employer. - An employer may terminate an employment for any of the following causes: (a) xxx (b) Gross and habitual neglect by the employee of his duties; xxx

And, in the words of then Associate Justice Ma. Alicia AustriaMartinez in Philippine Long Distance and Telephone Company, Inc. v. Balbastro:53

Clearly, even in the absence of a written company rule defining gross and habitual neglect of duties, respondents omissions qualify as such warranting his dismissal from the service.

While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes neither oppression nor selfdestruction of the employer.54 It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the

employer. Justitia nemini neganda est (Justice is to be denied to none).55

immediate filing of a complaint for illegal dismissal on April 27, 2000 reinforced Our belief that petitioner was illegally dismissed and was denied due process.58 (Emphasis in the original.)

Procedural Due Process Procedural due process entails compliance with the two-notice rule in dismissing an employee, to wit: (1) the employer must inform the employee of the specific acts or omissions for which his dismissal is sought; and (2) after the employee has been given the opportunity to be heard, the employer must inform him of the decision to terminate his employment.56 Respondent claimed that he was denied due process because the company did not observe the two-notice rule. He maintained that the Notice of Explanation and the Notice of Termination, both of which he allegedly refused to sign, were never served upon him. 57 We rule otherwise.

In Bughaw v. Treasure Island Industrial Corporation ,59 this Court, in verifying the veracity of the allegation that respondent refused to receive the Notice of Termination, essentially looked for the following: (1) affidavit of service stating the reason for failure to serve the notice upon the recipient; and (2) a notation to that effect, which shall be written on the notice itself.60 Thus:

The Court of Appeals favored respondent and ruled in this wise:

Furthermore, We believe that private respondents failed to afford petitioner due process. The allegation of private respondents that petitioner refused to sign the memoranda dated March 17 and 21, 2000 despite receipt thereof is not only lame but also implausible. First, the said allegation is self-serving and unsubstantiated. Second, a prudent employer would simply not accept such mere refusal, but would exert effort to observe the mandatory requirement of due process. We cannot accept the self-serving claim of respondents that petitioner refused to sign both memoranda. Otherwise, We would be allowing employers to do away with the mandatory twin-notice rule in the termination of employees. We find more credible the claim of petitioner that he was illegally dismissed on April 1, 2000 when the lawyer of the company informed him, without prior notice and in derogation of his right to due process, of his termination by offering him a 1-month salary as separation pay. The petitioners

xxx Bare and vague allegations as to the manner of service and the circumstances surrounding the same would not suffice. A mere copy of the notice of termination allegedly sent by respondent to petitioner, without proof of receipt, or in the very least, actual service thereof upon petitioner, does not constitute substantial evidence. It was unilaterally prepared by the petitioner and, thus, evidently self-serving and insufficient to convince even an unreasonable mind.61

Davis Cheng, on the other hand, did both. First, he indicated in the notices the notation that respondent refused to sign together with the corresponding dates of service. Second, he executed an Affidavit dated 29 July 2000 stating that: (1) he is the General Manager of the company; (2) he personally served each notice upon respondent, when respondent went to the office/factory on 17 March 2000 and 21 March 2000, respectively; and (3) on both occasions, after reading the contents of the memoranda, respondent refused to acknowledge receipt thereof. We are, thus, convinced that the notices have been validly served. Premises considered, we find that respondent was accorded both substantive and procedural due process.

absences, as acknowledged by the absentee, if such is the company policy. Petitioners presented none. II

As to respondents monetary claims, petitioners did not deny respondents entitlement to service incentive leave pay as, indeed, it is indisputable that he is entitled thereto. InFernandez v. NLRC,62 this Court elucidated:

We thus quote with approval the findings of the Court of Appeals on the following:

The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations63 provides that [e]very employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay. Service incentive leave is a right which accrues to every employee who has served within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as one year.64 It is also commutable to its money equivalent if not used or exhausted at the end of the year.65 In other words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its monetary value. xxx66 (Emphasis supplied.)

[P]rivate respondents bear the burden to prove that employees have received these benefits in accordance with law. It is incumbent upon the employer to present the necessary documents to prove such claim. Although private respondents labored to show that they paid petitioner his holiday pay, no similar effort was shown with regard to his service incentive leave pay. We do not agree with the Labor Arbiters conclusion that petitioners service incentive leave pay has been used up by his numerous absences, there being no proof to that effect.68

As to the payment of holiday pay, we are convinced that respondent had already received the same based on the cash vouchers on record.

Be that as it may, petitioners failed to establish by evidence that respondent had already used the service incentive leave when he incurred numerous absences notwithstanding that employers have complete control over the records of the company so much so that they could easily show payment of monetary claims against them by merely presenting vouchers or payrolls,67 or any document showing the off-setting of the payment of service incentive leave with the

Accordingly, we affirm the ruling of the National Labor Relations Commission that the dismissal was valid. However, respondent shall be entitled to the money equivalent of the five-day service incentive leave pay for every year of service from the commencement of his employment in August 1988 up to its termination on 1 April 2000. The Labor Arbiter shall compute the corresponding amount.

WHEREFORE, the Resolution dated 29 June 2001 and the Order dated 21 February 2002 of the National Labor Relations Commission in NLRC NCR CASE No. 027871-01 are hereby REINSTATED with the MODIFICATION that petitioners are ORDERED to pay respondent the money equivalent of the five-day

service incentive leave for every year of service covering his employment period from August 1988 to 1 April 2000. This case is hereby REMANDED to the Labor Arbiter for the computation of respondents service incentive leave pay.

Petitioner Ernesto G. Ymbong started working for ABS-CBN Broadcasting Corporation (ABS-CBN) in 1993 at its regional station in Cebu as a television talent, co-anchoring Hoy Gising and TV Patrol Cebu. His stint in ABS-CBN later extended to radio when ABS-CBN Cebu launched its AM station DYAB in 1995 where he worked as drama and voice talent, spinner, scriptwriter and public affairs program anchor. Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. Starting 1995, he worked as talent, director and scriptwriter for various radio programs aired over DYAB. On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy No. HR-ER-016 or the Policy on Employees Seeking Public Office. The pertinent portions read:
1. Any employee who intends to run for any public office position, must file his/her letter of resignation , at least thirty (30) days prior to the official filing of the certificate of candidacy either for national or local election. xxxx 3. Further, any employee who intends to join a political group/party or even with no political affiliation but who intends to openly and aggressively campaign for a candidate or group of candidates (e.g. publicly speaking/endorsing candidate, recruiting campaign workers, etc.) must file a request for leave of absence subject to managements approval . For this particular reason, the employee should file the leave request at least thirty (30) days prior to the start of the planned leave period.

SO ORDERED.

G.R. 184885, MARCH 7, 2012 YMBONG VS ABS-CBN DECISION

Because of the impending May 1998 elections and based on his immediate recollection of the policy at that time, Dante Luzon, Assistant Station Manager of DYAB issued the following memorandum: TO : : : : ALL CONCERNED DANTE LUZON MARCH 25, 1998 AS STATED

Before us is a Rule 45 Petition seeking to set aside the August 22, 2007 Decision[1] and September 18, 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 86206 declaring petitioner to have resigned from work and not illegally dismissed. The antecedent facts follow:

FROM DATE SUBJECT

Please be informed that per company policy, any employee/talent who wants to run for any position in the coming election will have to file a leave of absence the moment he/she files his/her certificate of candidacy. The services rendered by the concerned employee/talent to this company will then be temporarily suspended for the entire campaign/election period. For strict compliance. [4] [Emphasis and underscoring supplied.]

connected again with your prestigious company after the election[s] should you feel that Im still an asset to your drama production department. Im looking forward to that day and Im very happy and proud that I have served for two and a half years the most stable and the most prestigious Radio and TV Network in the Philippines. As a friend[,] wish me luck and Pray for me. Thank Very (Sgd.) Leandro Truly Boy

you. Yours,

Patalinghug[6]

Luzon, however, admitted that upon double-checking of the exact text of the policy and subsequent confirmation with the ABS-CBN Head Office, he saw that the policy actually required suspension for those who intend to campaign for a political party or candidate and resignation for those who will actually run in the elections. [5] After the issuance of the March 25, 1998 Memorandum, Ymbong got in touch with Luzon. Luzon claims that Ymbong approached him and told him that he would leave radio for a couple of months because he will campaign for the administration ticket. It was only after the elections that they found out that Ymbong actually ran for public office himself at the eleventh hour. Ymbong, on the other hand, claims that in accordance with the March 25, 1998 Memorandum, he informed Luzon through a letter that he would take a few months leave of absence from March 8, 1998 to May 18, 1998 since he was running for councilor of Lapu-Lapu City. As regards Patalinghug, Patalinghug approached Luzon and advised him that he will run as councilor for Naga, Cebu. According to Luzon, he clarified to Patalinghug that he will be considered resigned and not just on leave once he files a certificate of candidacy. Thus, Patalinghug wrote Luzon the following letter on April 13, 1998:
Dear Mr. Luzon, Im submitting to you my letter of resignation as your Drama Production Chief and Talent due to your companys policy that every person connected to ABS-CBN that should seek an elected position in the government will be forced to resigned (sic) from his position. So herewith Im submitting my resignation with a hard heart. But Im still hoping to be

Unfortunately, both Ymbong and Patalinghug lost in the May 1998 elections. Later, Ymbong and Patalinghug both tried to come back to ABSCBN Cebu. According to Luzon, he informed them that they cannot work there anymore because of company policy. This was stressed even in subsequent meetings and they were told that the company was not allowing any exceptions. ABS-CBN, however, agreed out of pure liberality to give them a chance to wind up their participation in the radio drama, Nagbabagang Langit, since it was rating well and to avoid an abrupt ending. The agreed winding-up, however, dragged on for so long prompting Luzon to issue to Ymbong the following memorandum dated September 14, 1998:
TO FROM SUBJECT DATE : : : : NESTOR YMBONG DANTE LUZON AS STATED 14 SEPT. 1998

Please be reminded that your services as drama talent had already been automatically terminated when you ran for a local government position last election. The Management however gave you more than enough time to end your drama participation and other involvement with the drama department. It has been decided therefore that all your drama participation shall be terminated effective immediately. However, your involvement as drama spinner/narrator of the drama

NAGBA[BA]GANG LANGIT continues until its writer/director Mr. Leandro Patalinghug wraps it up one week upon receipt of a separate memo issued to him.[7]

Ymbong in contrast contended that after the expiration of his leave of absence, he reported back to work as a regular talent and in fact continued to receive his salary. OnSeptember 14, 1998, he received a memorandum stating that his services are being terminated immediately, much to his surprise. Thus, he filed an illegal dismissal complaint[8]against ABS-CBN, Luzon and DYAB Station Manager Veneranda Sy. He argued that the ground cited by ABS-CBN for his dismissal was not among those enumerated in theLabor Code, as amended. And even granting without admitting the existence of the company policy supposed to have been violated, Ymbong averred that it was necessary that the company policy meet certain requirements before willful disobedience of the policy may constitute a just cause for termination. Ymbong further argued that the company policy violates his constitutional right to suffrage.[9] Patalinghug likewise complaint[10] against ABS-CBN. filed an illegal dismissal

The Labor Arbiter found that there exists an employer-employee relationship between ABS-CBN and Ymbong and Patalinghug considering the stipulations in their appointment letters/talent contracts. The Labor Arbiter noted particularly that the appointment letters/talent contracts imposed conditions in the performance of their work, specifically on attendance and punctuality, which effectively placed them under the control of ABS-CBN. The Labor Arbiter likewise ruled that although the subject company policy is reasonable and not contrary to law, the same was not made known to Ymbong and Patalinghug and in fact was superseded by another one embodied in the March 25, 1998 Memorandum issued by Luzon. Thus, there is no valid or authorized cause in terminating Ymbong and Patalinghug from their employment. In its memorandum of appeal[14] before the National Labor Relations Commission (NLRC), ABS-CBN contended that the Labor Arbiter has no jurisdiction over the case because there is no employeremployee relationship between the company and Ymbong and Patalinghug, and that Sy and Luzon mistakenly assumed that Ymbong and Patalinghug could just file a leave of absence since they are only talents and not employees. In its Supplemental Appeal,[15] ABS-CBN insisted that Ymbong and Patalinghug were engaged as radio talents for DYAB dramas and personality programs and their contract is one between a selfemployed contractor and the hiring party which is a standard practice in the broadcasting industry. It also argued that the Labor Arbiter should not have made much of the provisions on Ymbongs attendance and punctuality since such requirement is a dictate of the programming of the station, the slating of shows at regular time slots, and availability of recording studios not an attempt to exercise control over the manner of his performance of the contracted anchor work within his scheduled spot on air. As for the pronouncement that the company policy has already been superseded by the March 25, 1998 Memorandum issued by Luzon, the latter already clarified that it was the very policy he sought to enforce. This matter was relayed by Luzon to Patalinghug when the latter disclosed his plans to join the 1998 elections while Ymbong only informed the company that he was campaigning for the administration ticket and the company had no inkling that he will actually run until the issue was already moot and academic. ABS-CBN further contended that Ymbong and Patalinghugs reinstatement is legally and physically impossible as the talent positions they vacated no longer exist. Neither is there basis for the award of back wages since they were not earning a monthly salary but paid talent fees on a per production/per script basis. Attached to the Supplemental Appeal is a Sworn Statement [16] of Luzon.

ABS-CBN prayed for the dismissal of the complaints arguing that there is no employer-employee relationship between the company and Ymbong and Patalinghug. ABS-CBN contended that they are not employees but talents as evidenced by their talent contracts. However, notwithstanding their status, ABS-CBN has a standing policy on persons connected with the company whenever they will run for public office.[11] On July 14, 1999, the Labor Arbiter rendered a decision [12] finding the dismissal of Ymbong and Patalinghug illegal, thus:
WHEREFORE, in the light of the foregoing, judgment is rendered finding the dismissal of the two complainants illegal. An order is issued directing respondent ABS[-]CBN to immediately reinstate complainants to their former positions without loss of seniority rights plus the payment of backwages in the amount of P200,000.00 to each complainant. All other claims are dismissed. SO ORDERED.[13]

On March 8, 2004, the NLRC rendered a decision [17] modifying the labor arbiters decision. The fallo of the NLRC decision reads: WHEREFORE, premises considered, the decision of Labor Arbiter Nicasio C. Aninon dated 14 July 1999 is MODIFIED, to wit: Ordering respondent ABS-CBN to reinstate complainant Ernesto G. Ymbong and to pay his full backwages computed from 15 September 1998 up to the time of his actual reinstatement. SO ORDERED.[18]

I. RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND SERIOUSLY MISAPPRECIATED THE FACTS IN NOT HOLDING THAT RESPONDENT YMBONG IS A FREELANCE RADIO TALENT AND MEDIA PRACTITIONERNOT A REGULAR EMPLOYEE OF PETITIONERTO WHOM CERTAIN PRODUCTION WORK HAD BEEN OUTSOURCED BY ABS-CBN CEBU UNDER AN INDEPENDENT CONTRACTORSHIP SITUATION, THUS RENDERING THE LABOR COURTS WITHOUT JURISDICTION OVER THE CASE IN THE ABSENCE OF EMPLOYMENT RELATIONS BETWEEN THE PARTIES. II. RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN DECLARING RESPONDENT YMBONG TO BE A REGULAR EMPLOYEE OF PETITIONER AS TO CREATE A CONTRACTUAL EMPLOYMENT RELATION BETWEEN THEM WHEN NONE EXISTS OR HAD BEEN AGREED UPON OR OTHERWISE INTENDED BY THE PARTIES. III. EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION TO EXIST FOR THE SAKE OF ARGUMENT, RESPONDENT NLRC IN ANY CASE COMMITTED A GRAVE ABUSE OF DISCRETION IN NOT SIMILARLY UPHOLDING AND APPLYING COMPANY POLICY NO. HR-ER-016 IN THE CASE OF RESPONDENT YMBONG AND DEEMING HIM AS RESIGNED AND DISQUALIFIED FROM FURTHER ENGAGEMENT AS A RADIO TALENT IN ABS-CBN CEBU AS A CONSEQUENCE OF HIS CANDIDACY IN THE 1998 ELECTIONS, AS RESPONDENT NLRC HAD DONE IN THE CASE OF PATALINGHUG. IV. RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION AND DENIED DUE PROCESS TO PETITIONER IN REFUSING TO CONSIDER ITS SUPPLEMENTAL APPEAL, DATED OCTOBER 18, 1999, FOR BEING FILED OUT OF TIME CONSIDERING THAT THE FILING OF SUCH A PLEADING IS NOT IN ANY CASE PROSCRIBED AND RESPONDENT NLRC IS AUTHORIZED TO CONSIDER ADDITIONAL EVIDENCE ON APPEAL; MOREOVER, TECHNICAL RULES OF EVIDENCE DO NOT APPLY IN LABOR CASES. V. RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF DISCRETION IN GRANTING THE RELIEF OF REINSTATEMENT AND BACKWAGES TO RESPONDENT YMBONG SINCE HE NEVER OCCUPIED ANY REGULAR POSITION IN PETITIONER FROM WHICH HE COULD HAVE BEEN ILLEGALLY DISMISSED, NOR ARE ANY OF THE RADIO PRODUCTIONS IN WHICH HE HAD DONE TALENT WORK FOR PETITIONER STILL EXISTING. INDEED, THERE IS NO BASIS WHATSOEVER FOR THE AWARD OF BACKWAGES TO RESPONDENT YMBONG IN THE AMOUNT OF P200,000.00 CONSIDERING THAT, AS SHOWN BY THE

The NLRC dismissed ABS-CBNs Supplemental Appeal for being filed out of time. The NLRC ruled that to entertain the same would be to allow the parties to submit their appeal on piecemeal basis, which is contrary to the agencys duty to facilitate speedy disposition of cases. The NLRC also held that ABS-CBN wielded the power of control over Ymbong and Patalinghug, thereby proving the existence of an employer-employee relationship between them. As to the issue of whether they were illegally dismissed, the NLRC treated their cases differently. In the case of Patalinghug, it found that he voluntarily resigned from employment on April 21, 1998 when he submitted his resignation letter. The NLRC noted that although the tenor of the resignation letter is somewhat involuntary, he knew that it is the policy of the company that every person connected therewith should resign from his employment if he seeks an elected position in the government. As to Ymbong, however, the NLRC ruled otherwise. It ruled that the March 25, 1998 Memorandum merely states that an employee who seeks any elected position in the government will only merit the temporary suspension of his services. It held that under the principle of social justice, the March 25, 1998 Memorandum shall prevail and ABS-CBN is estopped from enforcing the September 14, 1998 memorandum issued to Ymbong stating that his services had been automatically terminated when he ran for an elective position. ABS-CBN moved to reconsider the NLRC decision, but the same was denied in a Resolution dated June 21, 2004.[19] Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a petition for certiorari [20] before the CA alleging that:

UNCONTROVERTED EVIDENCE, HE WAS NOT EARNING A MONTHLY SALARY OF P20,000.00, AS HE FALSELY CLAIMS, BUT WAS PAID TALENT FEES ON A PER PRODUCTION/PER SCRIPT BASIS WHICH AVERAGED LESS THAN P10,000.00 PER MONTH IN TALENT FEES ALL IN ALL.[21]

Petitioner argues that the CA gravely erred: (1) in upholding Policy No. HR-ER-016; (2) in upholding the validity of the termination of Ymbongs services; and (3) when it reversed the decision of the NLRC 4th Division of Cebu City which affirmed the decision of Labor Arbiter Nicasio C. Anion.[22] Ymbong argues that the subject company policy is a clear interference and a gross violation of an employees right to suffrage. He is surprised why it was easy for the CA to rule that Luzons memorandum ran counter to an existing policy while on the other end, it did not see that it was in conflict with the constitutional right to suffrage. He also points out that the issuance of the March 25, 1998 Memorandum was precisely an exercise of the management power to which an employee like him must respect; otherwise, he will be sanctioned for disobedience or worse, even terminated. He was not in a position to know which between the two issuances was correct and as far as he is concerned, the March 25, 1998 Memorandum superseded the subject company policy. Moreover, ABS-CBN cannot disown acts of its officers most especially since it prejudiced his property rights. [23] As to the validity of his dismissal, Ymbong contends that the ground relied upon by ABS-CBN is not among the just and authorized causes provided in the Labor Code, as amended. And even assuming the subject company policy passes the test of validity under the pretext of the right of the management to discipline and terminate its employees, the exercise of such right is not without bounds. Ymbong avers that his automatic termination was a blatant disregard of his right to due process. He was never asked to explain why he did not tender his resignation before he ran for public office as mandated by the subject company policy.[24] Ymbong likewise asseverates that both the Labor Arbiter and the NLRC were consistent in their findings that he was illegally dismissed. It is settled that factual findings of labor administrative officials, if supported by substantial evidence, are accorded not only great respect but even finality. [25] ABS-CBN, for its part, counters that the validity of policies such as Policy No. HR-ER-016 has long been upheld by this Court which has ruled that a media company has a right to impose a policy providing that employees who file their certificates of candidacy in any election shall be considered resigned. [26] Moreover, case law has upheld the validity of the exercise of management prerogatives even if they appear to limit the rights of employees as long as there is no showing

On August 22, 2007, the CA rendered the assailed decision reversing and setting aside the March 8, 2004 Decision and June 21, 2004 Resolution of the NLRC. The CA declared Ymbong resigned from employment and not to have been illegally dismissed. The award of full back wages in his favor was deleted accordingly. The CA ruled that ABS-CBN is estopped from claiming that Ymbong was not its employee after applying the provisions of Policy No. HR-ER-016 to him. It noted that said policy is entitled Policy on Employees Seeking Public Office and the guidelines contained therein specifically pertain to employees and did not even mention talents or independent contractors. It held that it is a complete turnaround on ABS-CBNs part to later argue that Ymbong is only a radio talent or independent contractor and not its employee. By applying the subject company policy on Ymbong, ABS-CBN had explicitly recognized him to be an employee and not merely an independent contractor. The CA likewise held that the subject company policy is the controlling guideline and therefore, Ymbong should be considered resigned from ABS-CBN. While Luzon has policy-making power as assistant radio manager, he had no authority to issue a memorandum that had the effect of repealing or superseding a subsisting policy. Contrary to the findings of the Labor Arbiter, the subject company policy was effective at that time and continues to be valid and subsisting up to the present. The CA cited Patalinghugs resignation letter to buttress this conclusion, noting that Patalinghug openly admitted in his letter that his resignation was in line with the said company policy. Since ABS-CBN applied Policy No. HR-ER-016 to Patalinghug, there is no reason not to apply the same regulation to Ymbong who was on a similar situation as the former. Thus, the CA found that the NLRC overstepped its area of discretion to a point of grave abuse in declaring Ymbong to have been illegally terminated. The CA concluded that there is no illegal dismissal to speak of in the instant case as Ymbong is considered resigned when he ran for an elective post pursuant to the subject company policy. Hence, this petition.

that management prerogatives were exercised in a manner contrary to law.[27] ABS-CBN contends that being the largest media and entertainment company in the country, its reputation stems not only from its ability to deliver quality entertainment programs but also because of neutrality and impartiality in delivering news. [28] ABS-CBN further argues that nothing in the company policy prohibits its employees from either accepting a public appointive position or from running for public office. Thus, it cannot be considered as violative of the constitutional right of suffrage. Moreover, the Supreme Court has recognized the employers right to enforce occupational qualifications as long as the employer is able to show the existence of a reasonable business necessity in imposing the questioned policy. Here, Policy No. HR-ER-016 itself states that it was issued to protect the company from any public misconceptions and [t]o preserve its objectivity, neutrality and credibility. Thus, it cannot be denied that it is reasonable under the circumstances. [29] ABS-CBN likewise opposes Ymbongs claim that he was terminated. ABS-CBN argues that on the contrary, Ymbongs unilateral act of filing his certificate of candidacy is an overt act tantamount to voluntary resignation on his part by virtue of the clear mandate found in Policy No. HR-ER-016. Ymbong, however, failed to file his resignation and in fact misled his superiors by making them believe that he was going on leave to campaign for the administration candidates but in fact, he actually ran for councilor. He also claims to have fully apprised Luzon through a letter of his intention to run for public office, but he failed to adduce a copy of the same.[30] As to Ymbongs argument that the CA should not have reversed the findings of the Labor Arbiter and the NLRC, ABS-CBN asseverates that the CA is not precluded from making its own findings most especially if upon its own review of the case, it has been revealed that the NLRC, in affirming the findings of the Labor Arbiter, committed grave abuse of discretion amounting to lack or excess of jurisdiction when it failed to apply the subject company policy in Ymbongs case when it readily applied the same to Patalinghug. [31] Essentially, the issues to be resolved in the instant petition are: (1) whether Policy No. HR-ER-016 is valid; (2) whether the March 25, 1998 Memorandum issued by Luzonsuperseded Policy No. HR-ER-016; and (3) whether Ymbong, by seeking an elective post, is deemed to have resigned and not dismissed by ABS-CBN.

Policy No. HR-ER-016 is valid. This is not the first time that this Court has dealt with a policy similar to Policy No. HR-ER-016. In the case of Manila Broadcasting Company v. NLRC,[32] this Court ruled: What is involved in this case is an unwritten company policy considering any employee who files a certificate of candidacy for any elective or local office as resigned from the company. Although 11(b) of R.A. No. 6646 does not require mass media commentators and announcers such as private respondent to resign from their radio or TV stations but only to go on leave for the duration of the campaign period, we think that the company may nevertheless validly require them to resign as a matter of policy. In this case, the policy is justified on the following grounds: Working for the government and the company at the same time is clearly disadvantageous and prejudicial to the rights and interest not only of the company but the public as well. In the event an employee wins in an election, he cannot fully serve, as he is expected to do, the interest of his employer. The employee has to serve two (2) employers, obviously detrimental to the interest of both the government and the private employer. In the event the employee loses in the election, the impartiality and cold neutrality of an employee as broadcast personality is suspect, thus readily eroding and adversely affecting the confidence and trust of the listening public to employers station.[33]

ABS-CBN, like Manila Broadcasting Company, also had a valid justification for Policy No. HR-ER-016. Its rationale is embodied in the policy itself, to wit: Rationale:
ABS-CBN BROADCASTING CORPORATION strongly believes that it is to the best interest of the company to continuously remain apolitical. While it encourages and

supports its employees to have greater political awareness and for them to exercise their right to suffrage, the company, however, prefers to remain politically independent and unattached to any political individual or entity. Therefore, employees who [intend] to run for public office or accept political appointment should resign from their positions, in order to protect the company from any public misconceptions. To preserve its objectivity, neutrality and credibility , the company reiterates the following policy guidelines for strict implementation. x x x x[34] [Emphasis supplied.]

Policy No. HR-ER-016 was not superseded by the March 25, 1998 Memorandum

We have consistently held that so long as a companys management prerogatives are exercised in good faith for the advancement of the employers interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold them. [35] In the instant case, ABS-CBN validly justified the implementation of Policy No. HR-ER-016. It is well within its rights to ensure that it maintains its objectivity and credibility and freeing itself from any appearance of impartiality so that the confidence of the viewing and listening public in it will not be in any way eroded. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.[36] It is worth noting that such exercise of management prerogative has earned a stamp of approval from no less than our Congress itself when on February 12, 2001, it enacted Republic Act No. 9006, otherwise known as the Fair Election Act. Section 6.6 thereof reads:
6.6. Any mass media columnist, commentator, announcer, reporter, on-air correspondent or personality who is a candidate for any elective public office or is a campaign volunteer for or employed or retained in any capacity by any candidate or political party shall be deemed resigned, if so required by their employer, or shall take a leave of absence from his/her work as such during the campaign period: Provided, That any media practitioner who is an official of a political party or a member of the campaign staff of a candidate or political party shall not use his/her time or space to favor any candidate or political party. [Emphasis and underscoring supplied.]

The CA correctly ruled that though Luzon, as Assistant Station Manager for Radio of ABS-CBN, has policy-making powers in relation to his principal task of administering the networks radio station in the Cebu region, the exercise of such power should be in accord with the general rules and regulations imposed by the ABS-CBN Head Office to its employees. Clearly, the March 25, 1998 Memorandum issued by Luzon which only requires employees to go on leave if they intend to run for any elective position is in absolute contradiction with Policy No. HR-ER-016 issued by the ABS-CBN Head Office in Manila which requires the resignation, not only the filing of a leave of absence, of any employee who intends to run for public office. Having been issued beyond the scope of his authority, the March 25, 1998 Memorandum is therefore void and did not supersede Policy No. HR-ER-016. Also worth noting is that Luzon in his Sworn Statement admitted the inaccuracy of his recollection of the company policy when he issued the March 25, 1998 Memorandum and stated therein that upon double-checking of the exact text of the policy statement and subsequent confirmation with the ABS-CBN Head Office in Manila, he learned that the policy required resignation for those who will actually run in elections because the company wanted to maintain its independence. Since the officer who himself issued the subject memorandum acknowledged that it is not in harmony with the Policy issued by the upper management, there is no reason for it to be a source of right for Ymbong.

Ymbong is deemed resigned when he ran for councilor.

As Policy No. HR-ER-016 is the subsisting company policy and not Luzons March 25, 1998 Memorandum, Ymbong is deemed resigned when he ran for councilor. We find no merit in Ymbongs argument that [his] automatic termination x x x was a blatant [disregard] of [his] right to due process as he was never asked to explain why he did not tender his resignation before he ran for public office as mandated by [the subject company policy].[37] Ymbongs overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was

separated from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination to speak of, the requirement of due process in dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain why he did not tender his resignation before he ran for public office as mandated by the subject company policy. In addition, we do not subscribe to Ymbongs claim that he was not in a position to know which of the two issuances was correct. Ymbong most likely than not, is fully aware that the subsisting policy is Policy No. HR-ER-016 and not the March 25, 1998 Memorandum and it was for this reason that, as stated by Luzon in his Sworn Statement, he only told the latter that he will only campaign for the administration ticket and not actually run for an elective post. Ymbong claims he had fully apprised Luzon by letter of his plan to run and even filed a leave of absence but records are bereft of any proof of said claim. Ymbong claims that the letter stating his intention to go on leave to run in the election is attached to his Position Paper as Annex A, a perusal of said pleading attached to his petition before this Court, however, show that Annex A was not his letter to Luzon but the September 14, 1998 Memorandum informing Ymbong that his services had been automatically terminated when he ran for a local government position. Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his superiors, they would have been able to clarify to him the prevailing company policy and inform him of the consequences of his decision in case he decides to run, as Luzon did in Patalinghugs case. WHEREFORE, the is DENIED for lack of merit. petition for review on certiorari

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 Pharmaceuticals 3(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. 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.

With costs against petitioner. SO ORDERED. G.R. No. 162994 September 17, 2004DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs.GLAXO WELLCOME PHILIPPINES, INC., Respondent. 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.

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 CitySurigao 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-SurigaoAgusan 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 NorteCamarines 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 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 coemployees 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: 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

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, an employees personal

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

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.

G.R. No. 164774

April 12, 2006

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

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

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 co-worker 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.: [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

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

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.

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:
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.

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. 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.

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-thirddegree-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 courts 21 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 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. 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.

AVON COSMETICS, INCORPORATED and JOSE MARIE FRANCO, petitioners, vs.LETICIA H. LUNA, respondent.

DECISION

The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse and set aside the Decision 1 dated 20 May 2002 of the Court of Appeals in CA-G.R. CV No. 52550, which affirmed in totothe Decision2 dated 26 January 1996 of the Regional Trial Court (RTC) of Makati City, Branch 138, in Civil Case No. 88-2595, in favor of herein respondent Leticia H. Luna (Luna), rendered by the Honorable Ed Vicente S. Albano, designated as the "assisting judge" pursuant to Supreme Court Administrative Order No. 70-94, dated 16 June 1994. The Facts The facts of the case are not in dispute. As culled from the records, they are as follows: The present petition stemmed from a complaint 3 dated 1 December 1988, filed by herein respondent Luna alleging, inter alia that she began working for Beautifont, Inc. in 1972, first as a franchise dealer and then a year later, as a Supervisor. Sometime in 1978, Avon Cosmetics, Inc. (Avon), herein petitioner, acquired and took over the management and operations of Beautifont, Inc. Nonetheless, respondent Luna continued working for said successor company. Aside from her work as a supervisor, respondent Luna also acted as a make-up artist of petitioner Avons Theatrical Promotions Group, for which she received a per diem for each theatrical performance. On 5 November 1985, petitioner Avon and respondent Luna entered into an agreement, entitled Supervisors Agreement, whereby said parties contracted in the manner quoted below:

G.R. No. 153674

December 20, 2006

The Company agrees: xxxx 1) To allow the Supervisor to purchase at wholesale the products of the Company. xxxx The Supervisor agrees: 1) To purchase products from the Company exclusively for resale and to be responsible for obtaining all permits and licenses required to sell the products on retail. xxxx The Company and the Supervisor mutually agree: xxxx 2) That this agreement in no way makes the Supervisor an employee or agent of the Company, therefore, the Supervisor has no authority to bind the Company in any contracts with other parties. 3) That the Supervisor is an independent retailer/dealer insofar as the Company is concerned, and shall have the sole discretion to determine where and how products purchased from the Company will be sold. However, the Supervisor shall not sell such products to stores, supermarkets or to any entity or person who sells things at a fixed place of business. 4) That this agreement supersedes any agreement/s between the Company and the Supervisor. 5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company. 6) Either party may terminate this agreement at will, with or without cause, at any time upon notice to the other. x x x x.4

Sometime in the latter part of 1988, respondent Luna was invited by a former Avon employee who was then currently a Sales Manager of Sandr Philippines, Inc., a domestic corporation engaged in direct selling of vitamins and other food supplements, to sell said products. Respondent Luna apparently accepted the invitation as she then became a Group Franchise Director of Sandr Philippines, Inc. concurrently with being a Group Supervisor of petitioner Avon. As Group Franchise Director, respondent Luna began selling and/or promoting Sandr products to other Avon employees and friends. On 23 September 1988, she requested a law firm to render a legal opinion as to the legal consequence of the Supervisors Agreement she executed with petitioner Avon. In response to her query, a lawyer of the firm opined that the Supervisors Agreement was "contrary to law and public policy." Wanting to share the legal opinion she obtained from her legal counsel, respondent Luna wrote a letter to her colleagues and attached mimeographed copies of the opinion and then circulated them. The full text of her letter reads: We all love our work as independent dealers and we all love to continue in this livelihood. Because my livelihood is important to me, I have asked the legal opinion of a leading Makati law office regarding my status as an independent dealer, I am sharing this opinion with you. I have asked their advice on three specific things: 1) May the company legally change the conditions of the existing "Supervisors Agreement" without the Supervisors consent? If I should refuse to sign the new Agreement, may the company terminate my dealership? On the first issue, my lawyers said that the company cannot change the existing "Agreement" without my consent, and that it would be illegal if the company will compel me to sign the new agreement. 2) Is Section 5 of the "Supervisors Agreement" which says that a dealer may only sell products sold by the company, legal? My lawyers said that Section 5 of the Supervisors Agreement is NOT valid because it is contrary to public policy, being an unreasonable restraint of trade.

By virtue of the execution of the aforequoted Supervisors Agreement, respondent Luna became part of the independent sales force of petitioner Avon.

3) Is Section 6 of the "Supervisors Agreement" which authorizes the company to terminate the contract at any time, with or without cause, legal? My lawyer said Section 6 is NOT valid because it is contrary to law and public policy. The company cannot terminate the "Supervisors Agreement" without a valid cause. Therefore, I can conclude that I dont violate Section 5 if I sell any product which is not in direct competition with the companys products, and there is no valid reason for the company to terminate my dealership contract if I sell a noncompetitive product. Dear co-supervisor[s], let us all support the reasonable and legal policies of the company. However, we must all be conscious of our legal rights and be ready to protect ourselves if they are trampled upon. I hope we will all stay together selling Avon products for a long time and at the same time increase our earning opportunity by engaging in other businesses without being afraid to do so. In a letter5 dated 11 October 1988, petitioner Avon, through its President and General Manager, Jose Mari Franco, notified respondent Luna of the termination or cancellation of her Supervisors Agreement with petitioner Avon. Said letter reads in part:
In September, (sic) 1988, you brought to our attention that you signed up as example to SPI Invoice No. 1695 dated Sept. 30, 1988). Worse, you promoted/sold SPI products even to several employees of our company including Mary Arlene Nolasco, Regina Porter, Emelisa Aguilar, Hermie Esteller and Emma Ticsay. To compound your violation of the above-quoted provision, you have written letters to other members of the Avon salesforce inducing them to violate their own contracts with our company. x x x. For violating paragraph 5 x x x, the Company, pursuant to paragraph 6 of the same Agreement, is terminating and canceling its Supervisors Agreement with you effective upon your receipt of this notice. We regret having to do this, but your repeated disregard of the Agreement, despite warnings, leaves (sic) the Company no other choice.

Group Franchise Director of another company, Sandr Philippines, Inc. (SPI). Not only that. You have also sold and promoted products of SPI (please refer for xxxx

Aggrieved, respondent Luna filed a complaint for damages before the RTC of Makati City, Branch 138. The complaint was docketed as Civil Case No. 88-2595. On 26 January 1996, after trial on the merits, the RTC rendered judgment in favor of respondent Luna stating that: WHEREFORE, in view of the foregoing premises, judgment is hereby rendered in favor of the plaintiff, and against defendant, Avon, ordering the latter: 1) to pay moral damages to the plaintiff in the amount of P100,000.00 with interest from the date of this judgment up to the time of complete payment; 2) to pay attorneys fees in the amount of P20,000.00; 3) to pay the costs.6 On 8 February 1996, petitioner Avon filed a Notice of Appeal dated the same day. In an Order7 dated 15 February 1996, the RTC gave due course to the appeal and directed its Branch Clerk of Court to transmit the entire records of the case to the Court of Appeals, which docketed the appeal as CA G.R. CV No. 52550. On 20 May 2002, the Court of Appeals promulgated the assailed Decision, the dispositive part of which states thus: WHEREFORE, the foregoing premises considered, the decision appealed from is hereby AFFIRMED in toto.8 The Issues In predictable displeasure with the conclusions reached by the appellate court, petitioner Avon now implores this Court to review, via a petition for review on certiorari under Rule 45 of the

Revised Rules of Court, the formers decision and to resolve the following assigned errors:9
I. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN DECLARING THAT THE SUPERVISORS AGREEMENT EXECUTED BETWEEN AVON AND RESPONDENT LUNA AS NULL AND VOID FOR BEING AGAINST PUBLIC POLICY; II. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT AVON HAD NO RIGHT TO TERMINATE OR CANCEL THE SUPERVIOSRS AGREEMENT; III. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN UPHOLDING THE AWARD OF MORAL DAMAGES AND ATTORNEYS FEES IN FAVOR OF RESPONDENT LUNA; and IV. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT AWARDING ATTORNEYS FEES AND LITIGATION EXPENSES IN FAVOR OF PETITIONER.

Supervisors Agreement which authorizes petitioner Avon to terminate or cancel the agreement at will is void for being contrary to law and public policy. Certainly, it is quite obvious that the foregoing issues are questions of law. In affirming the decision of the RTC declaring the subject contract null and void for being against public policy, the Court of Appeals ruled that the exclusivity clause, which states that: The Company and the Supervisor mutually agree: xxxx 5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company. [Emphasis supplied.] should be interpreted to apply solely to those products directly in competition with those of petitioner Avons, i.e., cosmetics and/or beauty supplies and lingerie products. Its declaration is anchored on the fact that Avon products, at that time, were not in any way similar to the products sold by Sandr Philippines, Inc. At that time, the latter was merely selling vitamin products. Put simply, the products of the two companies do not compete with each other. The appellate court ratiocinated that: x x x If the agreement were interpreted otherwise, so as to include products that do not directly compete with the products of defendant-appellant Avon, such would result in absurdity. x x x [A]greements which prohibit a person from engaging in any enterprise whether similar or not to the enterprise of the employer constitute an unreasonable restraint of trade, thus, it is void as against public policy. 11 Petitioner Avon disputes the abovestated conclusion reached by the Court of Appeals. It argues that the latter went beyond the literal and obvious intent of the parties to the subject contract when it interpreted the abovequoted clause to apply only to those products that do not compete with that of petitioner Avons; and that the words "only and exclusively" need no other interpretation other than the literal meaning that "THE SUPERVISORS CANNOT SELL THE PRODUCTS OF OTHER COMPANIES WHETHER OR NOT THEY ARE COMPETING PRODUCTS."12 Moreover, petitioner Avon reasons that:

The Courts Ruling A priori, respondent Luna objects to the presentation, and eventual resolution, of the issues raised herein as they allegedly involve questions of facts. To be sure, questions of law are those that involve doubts or controversies on what the law is on certain state of facts; and questions of fact, on the other hand, are those in which there is doubt or difference as to the truth or falsehood of the alleged facts. One test, it has been held, is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case it is a question of law, otherwise it will be a question of fact. 10 In the present case, the threshold issues are a) whether or not paragraph 5 of the Supervisors Agreement is void for being violative of law and public policy; and b) whether or not paragraph 6 of the

The exclusivity clause was directed against the supervisors selling other products utilizing their training and experience, and capitalizing on Avons existing network for the promotion and sale of the said products. The exclusivity clause was meant to protect Avon from other companies, whether competitors or not, who would exploit the sales and promotions network already established by Avon at great expense and effort. xxxx Obviously, Sandre Phils., Inc. did not have the (sic) its own trained personnel and network to sell and promote its products. It was precisely why Sandre simply invited, and then and there hired Luna and other Avon supervisors and dealers to sell and promote its products. They had the training and experience, they also had a ready market for the other products the customers to whom they had been selling the Avon products. It was easy to entice the supervisors to sign up. The supervisors could continue to sell Avon products, and at the same time earn additional income by selling other products. This is most unfair to Avon. The other companies cannot ride on and exploit the training and experience of the Avon sales force to sell and promote their own products. [Emphasis supplied.] On the other hand, in her Memorandum, respondent Luna counters that "there is no allegation nor any finding by the trial court or the Court of Appeals of an existing nationwide sales and promotions network established by Avon or Avons existing sales promotions network or Avons tried and tested sales and promotions network nor the alleged damage caused to such system caused by other companies." Further, well worth noting is the opinion of respondent Lunas counsel which started the set off the series of events which culminated to the termination or cancellation of the Supervisors Agreement. In response to the query-letter 13 of respondent Luna, the latters legal counsel opined that, as allegedly held in the case of Ferrazzini v. Gsell,14 paragraph 5 of the subject Supervisors Agreement "not only prohibits the supervisor from selling products which compete with the companys product but restricts likewise the supervisor from engaging in any industry which involves sales in general."15 Said counsel thereafter concluded that the subject provision in the Supervisors Agreement constitutes an unreasonable restraint of trade and, therefore, void for being contrary to public policy.

At the crux of the first issue is the validity of paragraph 5 of the Supervisors Agreement, viz: The Company and the Supervisor mutually agree: xxxx 5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the Company. [Emphasis supplied.] In business parlance, this is commonly termed as the "exclusivity clause." This is defined as agreements which prohibit the obligor from engaging in "business" in competition with the obligee. This exclusivity clause is more often the subject of critical scrutiny when it is perceived to collide with the Constitutional proscription against "reasonable restraint of trade or occupation." The pertinent provision of the Constitution is quoted hereunder. Section 19 of Article XII of the 1987 Constitution on the National Economy and Patrimony states that: SEC. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. First off, restraint of trade or occupation embraces acts, contracts, agreements or combinations which restrict competition or obstruct due course of trade.16 Now to the basics. From the wordings of the Constitution, truly then, what is brought about to lay the test on whether a given agreement constitutes an unlawful machination or combination in restraint of trade is whether under the particular circumstances of the case and the nature of the particular contract involved, such contract is, or is not, against public interest.17 Thus, restrictions upon trade may be upheld when not contrary to public welfare and not greater than is necessary to afford a fair and reasonable protection to the party in whose favor it is imposed. 18 Even contracts which prohibit an employee from engaging in business in competition with the employer are not necessarily void for being in restraint of trade.

In sum, contracts requiring exclusivity are not per se void. Each contract must be viewed vis--vis all the circumstances surrounding such agreement in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition. The question that now crops up is this, when is a restraint in trade unreasonable? Authorities are one in declaring that a restraint in trade is unreasonable when it is contrary to public policy or public welfare. As far back as 1916, in the case of Ferrazzini v. Gsell,19 this Court has had the occasion to declare that: There is no difference in principle between the public policy ( orden pblico) in the in the two jurisdictions (United States and the Philippine Islands) as determined by the Constitution, laws, and judicial decisions. In the United States it is well settled that contracts in undue or unreasonable restraint of trade are unenforcible because they are repugnant to the established public policy in that country. Such contracts are illegal in the sense that the law will not enforce them. The Supreme Court in the United States, in Oregon Steam Navigation Co. vs. Winsor )20 Will., 64), quoted with approval in Gibbs v. Consolidated gas Co. of Baltimore (130 U.S., 396), said: Cases must be judged according to their circumstances, and can only be rightly judged when reason and grounds of the rule are carefully considered. There are two principle grounds on which the doctrine is founded that a contract in restraint of trade is void as against public policy. One is, the injury to the public by being deprived of the restricted partys industry; and the other is, the injury to the party himself by being precluded from pursuing his occupation, and thus being prevented from supporting himself and his family. And what is public policy? In the words of the eminent Spanish jurist, Don Jose Maria Manresa, in his commentaries of the Codigo Civil, public policy (orden pblico): Represents in the law of persons the public, social and legal interest, that which is permanent and essential of the institutions, that which, even if favoring an individual in whom the right lies, cannot be left to his own will. It is an idea which, in cases of the waiver of any right, is manifested with clearness and force. 20

As applied to agreements, Quintus Mucius Scaevola, another distinguished civilist gives the term "public policy" a more defined meaning: Agreements in violation of orden pblico must be considered as those which conflict with law, whether properly, strictly and wholly a public law (derecho) or whether a law of the person, but law which in certain respects affects the interest of society. 21 Plainly put, public policy is that principle of the law which holds that no subject or citizen can lawfully do that which has a tendency to be injurious to the public or against the public good.22 As applied to contracts, in the absence of express legislation or constitutional prohibition, a court, in order to declare a contract void as against public policy, must find that the contract as to the consideration or thing to be done, has a tendency to injure the public, is against the public good, or contravenes some established interests of society, or is inconsistent with sound policy and good morals, or tends clearly to undermine the security of individual rights, whether of personal liability or of private property.23 From another perspective, the main objection to exclusive dealing is its tendency to foreclose existing competitors or new entrants from competition in the covered portion of the relevant market during the term of the agreement.24Only those arrangements whose probable effect is to foreclose competition in a substantial share of the line of commerce affected can be considered as void for being against public policy. The foreclosure effect, if any, depends on the market share involved. The relevant market for this purpose includes the full range of selling opportunities reasonably open to rivals, namely, all the product and geographic sales they may readily compete for, using easily convertible plants and marketing organizations.25 Applying the preceding principles to the case at bar, there is nothing invalid or contrary to public policy either in the objectives sought to be attained by paragraph 5, i.e., the exclusivity clause, in prohibiting respondent Luna, and all other Avon supervisors, from selling products other than those manufactured by petitioner Avon. We quote with approval the determination of the U.S. Supreme Court in the case of Board of Trade of Chicago v. U.S.26 that "the question to be determined is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition."

Such prohibition is neither directed to eliminate the competition like Sandr Phils., Inc. nor foreclose new entrants to the market. In its Memorandum, it admits that the reason for such exclusion is to safeguard the network that it has cultivated through the years. Admittedly, both companies employ the direct selling method in order to peddle their products. By direct selling, petitioner Avon and Sandre, the manufacturer, forego the use of a middleman in selling their products, thus, controlling the price by which they are to be sold. The limitation does not affect the public at all. It is only a means by which petitioner Avon is able to protect its investment. It was not by chance that Sandr Philippines, Inc. made respondent Luna one of its Group Franchise Directors. It doesnt take a genius to realize that by making her an important part of its distribution arm, Sandr Philippines, Inc., a newly formed direct-selling business, would be saving time, effort and money as it will no longer have to recruit, train and motivate supervisors and dealers. Respondent Luna, who learned the tricks of the trade from petitioner Avon, will do it for them. This is tantamount to unjust enrichment. Worse, the goodwill established by petitioner Avon among its loyal customers will be taken advantaged of by Sandre Philippines, Inc. It is not so hard to imagine the scenario wherein the sale of Sandr products by Avon dealers will engender a belief in the minds of loyal Avon customers that the product that they are buying had been manufactured by Avon. In other words, they will be misled into thinking that the Sandr products are in fact Avon products. From the foregoing, it cannot be said that the purpose of the subject exclusivity clause is to foreclose the competition, that is, the entrance of Sandr products in to the market. Therefore, it cannot be considered void for being against public policy. How can the protection of ones property be violative of public policy? Sandr Philippines, Inc. is still very much free to distribute its products in the market but it must do so at its own expense. The exclusivity clause does not in any way limit its selling opportunities, just the undue use of the resources of petitioner Avon. It has been argued that the Supervisors Agreement is in the nature of a contract of adhesion; but just because it is does not necessarily mean that it is void. A contract of adhesion is so-called because its terms are prepared by only one party while the other party merely affixes his signature signifying his adhesion thereto. 27 Such contract is just as binding as ordinary contracts. "It is true that we have, on occasion, struck down such contracts as void when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing. Nevertheless, contracts of adhesion are not invalid per se and they are not entirely prohibited. The one who adheres to the contract is in reality free to

reject it entirely, if he adheres, he gives his consent." 28 In the case at bar, there was no indication that respondent Luna was forced to sign the subject agreement. Being of age, financially stable and with vast business experience, she is presumed to have acted with due care and to have signed the assailed contract with full knowledge of its import. Under the premises, it would be difficult to assume that she was morally abused. She was free to reject the agreement if she wanted to. Accordingly, a contract duly executed is the law between the parties, and they are obliged to comply fully and not selectively with its terms. A contract of adhesion is no exception. 29 The foregoing premises noted, the Court of Appeals, therefore, committed reversible error in interpreting the subject exclusivity clause to apply merely to those products in direct competition to those manufactured and sold by petitioner Avon. When the terms of the agreement are clear and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract.30 Thus, in order to judge the intention of the contracting parties, "the circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown, so that the judge may be placed in the position of those whose language he is to interpret." 31 It has been held that once this intention of the parties has been ascertained, it becomes an integral part of the contract as though it has been originally expressed therein in unequivocal terms.32 Having held that the "exclusivity clause" as embodied in paragraph 5 of the Supervisors Agreement is valid and not against public policy, we now pass to a consideration of respondent Lunas objections to the validity of her termination as provided for under paragraph 6 of the Supervisors Agreement giving petitioner Avon the right to terminate or cancel such contract. The paragraph 6 or the "termination clause" therein expressly provides that: The Company and the Supervisor mutually agree: xxxx
6) Either party may terminate this agreement at will, with or without cause, at any time upon notice to the other. [Emphasis supplied.]

In the case of Petrophil Corporation v. Court of Appeals,33 this Court already had the opportunity to opine that termination or cancellation

clauses such as that subject of the case at bar are legitimate if exercised in good faith. The facts of said case likewise involved a termination or cancellation clause that clearly provided for two ways of terminating the contract, i.e., with or without cause. The utilization of one mode will not preclude the use of the other. Therein, we stated that the finding that the termination of the contract was "for cause," is immaterial. When petitioner terminated the contract "without cause," it was required only to give x x x a 30-day prior written notice, which it did. In the case at bar, the termination clause of the Supervisors Agreement clearly provides for two ways of terminating and/or canceling the contract. One mode does not exclude the other. The contract provided that it can be terminated or cancelled for cause, it also stated that it can be terminated without cause, both at any time and after written notice. Thus, whether or not the termination or cancellation of the Supervisors Agreement was "for cause," is immaterial. The only requirement is that of notice to the other party. When petitioner Avon chose to terminate the contract, for cause, respondent Luna was duly notified thereof. Worth stressing is that the right to unilaterally terminate or cancel the Supervisors Agreement with or without cause is equally available to respondent Luna, subject to the same notice requirement. Obviously, no advantage is taken against each other by the contracting parties.
WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The Decision dated 20 May 2002 rendered by the Court of Appeals in CA-G.R. CV No. 52550, affirming the judgment of the RTC of Makati City, Branch 138, in Civil Case No. 88-2595, are hereby REVERSED and SET ASIDE. Accordingly, let a new one be entered dismissing the complaint for damages. Costs against respondent Leticia Luna. SO ORDERED.

Linton is a domestic corporation engaged in the business of importation, wholesale, retail and fabrication of steel and its byproducts.[3] Petitioner Desiree Ong is Lintons vice president. [4] On 17 December 1997, Linton issued a memorandum [5] addressed to its employees informing them of the companys decision to suspend its operations from18 December 1997 to 5 January 1998 due to the currency crisis that affected its business operations. Linton submitted an establishment termination report [6] to the Department of Labor and Employment (DOLE) regarding the temporary closure of the establishment covering the said period. The companys operation was to resume on 6 January 1998. On 7 January 1997,[7] Linton issued another [8] memorandum informing them that effective 12 January 1998, it would implement a new compressed workweek of three (3) days on a rotation basis. In other words, each worker would be working on a rotation basis for three working days only instead for six days a week. On the same day, Linton submitted an establishment termination report[9] concerning the rotation of its workers. Linton proceeded with the implementation of the new policy without waiting for its approval by DOLE. Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal reduction of workdays with the Arbitration Branch of the NLRC on 17 July 1998. On the other hand, the workers pointed out that Linton implemented the reduction of work hours without observing Article 283 of the Labor Code, which required submission of notice thereof to DOLE one month prior to the implementation of reduction of personnel, since Linton filed only the establishment termination report enacting the compressed workweek on the very date of its implementation. [10] Petitioners, on the other hand, contended that the devaluation of the peso created a negative impact in international trade and affected their business because a majority of their raw materials were imported. They claimed that their business suffered a net loss of P3,569,706.57 primarily due to currency devaluation and the slump in the market. Consequently, Linton decided to reduce the working days of its employees to three (3) days on a rotation basis as a costcutting measure. Further, petitioners alleged that the compressed workweek was actually implemented on 12 January 1998 and not on 7 January 1998, and that Article 283 was not applicable to the instant case.[11] Pending decision of the Labor Arbiter, twenty-one (21) of the workers signed individual release and quitclaim documents stating that

LINTON COMMERCIAL VS HELLERA DECISION This is a petition for review under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Decision [1] of the Court of Appeals promulgated on 12 December 2003 as well as its Resolution[2] promulgated on 2 April 2004 denying petitioners motion for reconsideration. This case originated from a labor complaint filed before the National Labor Relations Commission (NLRC) in which herein respondents contended that petitioner Linton Commercial Company, Inc. (Linton) had committed illegal reduction of work when it imposed a reduction of work hours thereby affecting its employees.

they had voluntarily tendered their resignation as employees of Linton and that they had been fully paid of all monetary compensation due them.[12] On 28 January 2000, the Labor Arbiter rendered a Decision[13] finding petitioners guilty of illegal reduction of work hours and directing them to pay each of the workers their three (3) days/weeks worth of work compensation from 12 January 1998 to 13 July 1998. Petitioners appealed to the National Labor Relations Commission (NLRC). In a Resolution [14] promulgated on 29 June 2001, the NLRC reversed the decision of the Labor Arbiter. The NLRC held that an employer has the prerogative to control all aspects of employment in its business organization, including the supervision of workers, work regulation, lay-off of workers, dismissal and recall of workers. The NLRC took judicial notice of the Asian currency crisis in 1997 and 1998 thus finding Lintons decision to implement a compressed workweek as a valid exercise of management prerogative. Moreover, the NLRC ruled that Article 283 of the Labor Code, which requires an employer to submit a written notice to DOLE one (1) month prior to the closure or reduction of personnel, is not applicable to the instant case because no closure was undertaken and no reduction of employees was implemented by Linton. Lastly, the NLRC took note that there were twenty-one (21) complainants-workers [15] who had already resigned and executed individual waivers and quitclaims. Consequently, the NRLC considered them as dropped from the list of complainants. The workers motion for reconsideration was denied in a Resolution[16] dated 24 September 2001. The workers then filed before the Court of Appeals [17] a petition for certiorari under Rule 65 of the Rules of Civil Procedure assailing the decision[18] of the NLRC and its resolution [19] that denied their Motion for Reconsideration. In the petition, the workers claimed that the NLRC erred in finding that the one (1) month notice requirement under Article 283 of the Labor Code did not apply to the instant case; that Linton did not exceed the limits of its business prerogatives; and that Linton was able to establish a factual basis on record to justify the reduction of work days. In its Comment,[20] Linton highlighted the fact that the caption, the body as well as the verification of the petition submitted by complainants-workers indicated solely Alex Hellera, et al. as petitioners. Linton argued that the petition was defective and did not necessarily include the other workers in the proceedings before the NLRC. Linton also mentioned that 21 out of the 68 complainantsworkers executed individual resignation letters and individual waivers and quitclaims.[21] With these waivers and quitclaims, Linton raised in issue whether the petition still included the signatories of said

documents. Moreover, Linton pointed out that the caption of the petition did not include the NLRC as party respondent, which made for another jurisdictional defect. The rest of its arguments were merely a reiteration of its arguments before the NLRC. In reversing the NLRC, the Court of Appeals, in its Decision[22] dated 12 December 2003 ruled that the failure to indicate all the names of petitioners in the caption of the petition was not violative of the Rules of Court because the records of the case showed that there were sixty-eight (68) original complainants who filed the complaint before the Arbitration Branch of the NLRC. The appellate court likewise considered the quitclaims and release documents as ready documents which did not change the fact that the 21 workers were impelled to sign the same. The appellate court gave no credence to the said quitclaims, considering the economic disadvantage that would be suffered by the employees. The appellate court also noted that the records did not show that the 21 workers desisted from pursuing the petition and that the waivers and quitclaims would not bar the 21 complainants from continuing the action. [23] On the failure to include the NLRC as party respondent, the appellate court treated the NLRC as a nominal party which ought to be joined as party to the petition simply because the technical rules require its presence on record. The inclusion of the NLRC in the body of the petition was deemed by the appellate court as substantial compliance with the rules. On the main issues, the Court of Appeals ruled that the employees were constructively dismissed because the short period of time between the submission of the establishment termination report informing DOLE of its intention to observe a compressed workweek and the actual implementation thereat was a manifestation of Lintons intention to eventually retrench the employees. It found that Linton had failed to observe the substantive and procedural requirements of a valid dismissal or retrenchment to avoid or minimize business losses since it had failed to present adequate, credible and persuasive evidence that it was indeed suffering, or would imminently suffer, from drastic business losses. Lintons financial statements for 1997-1998 showed no indication of financial losses, and the alleged loss of P3,645,422.00 in 1997 was considered insubstantial considering its total asset of P1,065,948,601.00.Hence, the appellate court considered Lintons losses as de minimis.[24] Lastly, the appellate court found Linton to have failed to adopt a more sensible means of cutting the costs of its operations in less drastic measures not grossly unfavorable to labor. Hence, Linton failed to establish enough factual basis to justify the necessity of a reduced workweek.[25]

Petitioners filed a motion for reconsideration [26] which the appellate court denied through a Resolution [27] dated 2 April 2004. In filing the instant petition for review, petitioners allege that the Court of Appeals erred when it considered the petition as having been filed by all sixty (68) workers, in disregard of the fact that only Alex Hellera, et al. was indicated as petitioner in the caption, body and verification of the petition and twenty-one (21) of the workers executed waivers and quitclaims. Petitioners further argue that the Court of Appeals erred in annulling the release and quitclaim documents signed by 21 employees because no such relief was prayed for in the petition. The validity of the release and quitclaim was also not raised as an issue before the labor arbiter nor the NLRC. Neither was it raised in the very petition filed before the Court of Appeals. Petitioners conclude that the Court of Appeals, therefore, had invalidated the waivers and quitclaims motu proprio. Petitioners also allege that the Court of Appeals erred when it held that the reduction of workdays is equivalent to constructive dismissal. They posit that there was no reduction of salary but instead only a reduction of working days from six to three days per week. Petitioners add that the reduction of workdays, while not expressly covered by any of the provisions of the Labor Code, is analogous to the situation contemplated in Article 286[28] of the Labor Code because the company implemented the reduction of workdays to address its financial losses. Lastly, they note that since there was no retrenchment, the one-month notice requirement under Article 283 of the Labor Code is not applicable. First, we resolve the procedural issues of the case. Rule 7, Section 1 of the Rules of Court states that the names of the parties shall be indicated in the title of the original complaint or petition. However, the rules itself endorses its liberal construction if it promotes the objective of securing a just, speedy and inexpensive disposition of the action or proceeding. [29] Pleadings shall be construed liberally so as to render substantial justice to the parties and to determine speedily and inexpensively the actual merits of the controversy with the least regard to technicalities. [30] In Vlason Enterprises Corporation v. Court of Appeals[31] the Court pronounced that, while the general rule requires the inclusion of the names of all the parties in the title of a complaint, the noninclusion of one or some of them is not fatal to the cause of action of a plaintiff, provided there is a statement in the body of the petition indicating that a defendant was made a party to such action. If in Vlason the Court found that the absence of defendants name in the caption would not cause the dismissal of the action, more so in this

case where only the names of some of petitioners were not reflected. This is consistent with the general rule that mere failure to include the name of a party in the title of a complaint is not fatal by itself. [32] Petitioners likewise challenge the absence of the names of the other workers in the body and verification of the petition. The workers petition shows that the petition stipulated as parties-petitioners Alex A. Hellera, et al. as employees of Linton, meaning that there were more than one petitioner who were all workers of Linton. The petition also attached the resolution[33] of the NLRC where the names of the workers clearly appear. As documents attached to a complaint form part thereof,[34] the petition, therefore has sufficiently indicated that the rest of the workers were parties to the petition. With respect to the absence of the workers signatures in the verification, the verification requirement is deemed substantially complied with when some of the parties who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have been made in good faith or are true and correct, and not merely speculative. [35] The verification in the instant petition states that Hellera, the affiant, is the president of the union of which complainants are all members and officers.[36] As the matter at hand is a labor dispute between Linton and its employees, the union president undoubtedly has sufficient knowledge to swear to the truth of the allegations in the petition. Helleras verification sufficiently meets the purpose of the requirements set by the rules. Moreover, the Court has ruled that the absence of a verification is not jurisdictional, but only a formal defect. [37] Indeed, the Court has ruled in the past that a pleading required by the Rules of Court to be verified may be given due course even without a verification if the circumstances warrant the suspension of the rules in the interest of justice.[38] We turn to the propriety of the Court of Appeals ruling on the invalidity of the waivers and quitclaims executed by the 21 workers. It must be remembered that the petition filed before the Court of Appeals was a petition for certiorari under Rule 65 in which, as a rule, only jurisdictional questions may be raised, including matters of grave abuse of discretion which are equivalent to lack of jurisdiction. [39] The issue on the validity or invalidity of the waivers and quitclaims was not raised as an issue in the petition. Neither was it raised in the NLRC. There is no point of reference from which one can determine whether or not the NLRC committed grave abuse of discretion in its finding on the validity and binding effect of the waivers and quitclaims since this matter was never raised in issue in the first place.

In addition, petitioners never had the opportunity to support or reinforce the validity of the waivers and quitclaims because the authenticity and binding effect thereof were never challenged. In the interest of fair play, justice and due process, the documents should not have been unilaterally evaluated by the Court of Appeals. Thus, the corresponding modification of its Decision should be ordained. After resolving the technical aspects of this case, we now proceed to the merits thereof. The main issue in this labor dispute is whether or not there was an illegal reduction of work when Linton implemented a compressed workweek by reducing from six to three the number of working days with the employees working on a rotation basis. In Philippine Graphic Arts, Inc. v. NLRC,[40] the Court upheld for the validity of the reduction of working hours, taking into consideration the following: the arrangement was temporary, it was a more humane solution instead of a retrenchment of personnel, there was notice and consultations with the workers and supervisors, a consensus were reached on how to deal with deteriorating economic conditions and it was sufficiently proven that the company was suffering from losses. The Bureau of Working Conditions of the DOLE, moreover, released a bulletin[41] providing for in determining when an employer can validly reduce the regular number of working days. The said bulletin states that a reduction of the number of regular working days is valid where the arrangement is resorted to by the employer to prevent serious losses due to causes beyond his control, such as when there is a substantial slump in the demand for his goods or services or when there is lack of raw materials. Although the bulletin stands more as a set of directory guidelines than a binding set of implementing rules, it has one main consideration, consistent with the ruling in Philippine Graphic Arts Inc., in determining the validity of reduction of working hoursthat the company was suffering from losses. Petitioners attempt to justify their action by alleging that the company was suffering from financial losses owing to the Asian currency crisis. Was petitioners claim of financial losses supported by evidence? The lower courts did not give credence to the income statement submitted by Linton because the same was not audited by an independent auditor.[42] The NLRC, on the other hand, took judicial notice of the Asian currency crisis which resulted in the devaluation of the peso and a slump in market demand. [43] The Court of Appeals for its

part held that Linton failed to present adequate, credible and persuasive evidence to show that it was in dire straits and indeed suffering, or would imminently suffer, from drastic business losses. It did not find the reduction of work hours justifiable, considering that the alleged loss of P3,645,422.00 in 1997 is insubstantial compared to Lintons total asset ofP1,065,948,601.76.[44]

A close examination of petitioners financial reports for 19971998 shows that, while the company suffered a loss of P3,645,422.00 in 1997, it retained a considerable amount of earnings [45] and operating income.[46] Clearly then, while Linton suffered from losses for that year, there remained enough earnings to sufficiently sustain its operations. In business, sustained operations in the black is the ideal but being in the red is a cruel reality. However, a year of financial losses would not warrant the immolation of the welfare of the employees, which in this case was done through a reduced workweek that resulted in an unsettling diminution of the periodic pay for a protracted period. Permitting reduction of work and pay at the slightest indication of losses would be contrary to the States policy to afford protection to labor and provide full employment. [47] Certainly, management has the prerogative to come up with measures to ensure profitability or loss minimization. However, such privilege is not absolute. Management prerogative must be exercised in good faith and with due regard to the rights of labor. [48] As previously stated, financial losses must be shown before a company can validly opt to reduce the work hours of its employees. However, to date, no definite guidelines have yet been set to determine whether the alleged losses are sufficient to justify the reduction of work hours. If the standards set in determining the justifiability of financial losses under Article 283 ( i.e., retrenchment) or Article 286 (i.e., suspension of work) of the Labor Code were to be considered, petitioners would end up failing to meet the standards. On the one hand, Article 286 applies only when there is a bona fide suspension of the employers operation of a business or undertaking for a period not exceeding six (6) months. [49] Records show that Linton continued its business operations during the effectivity of the compressed workweek, which spanned more than the maximum period. On the other hand, for retrenchment to be justified, any claim of actual or potential business losses must satisfy the following standards: (1) the losses incurred are substantial and not de minimis; (2) the losses are actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in preventing the expected losses; and (4) the alleged losses, if already incurred, or the

expected imminent losses sought to be forestalled, are proven by sufficient and convincing evidence. [50] Linton failed to comply with these standards. All taken into account, the compressed workweek arrangement was unjustified and illegal. Thus, petitioners committed illegal reduction of work hours. In assessing the monetary award in favor of respondents, the Court has taken the following factors into account: (1) The compressed workweek arrangement was lifted after six (6) months, or on 13 July 1998.[51] Thus, Linton resumed its regular operations and discontinued the emergency measure; (2) The claims of the workers, as reflected in their pleadings, were narrowed to petitioners illegal reduction of their work hours and the non-payment of their compensation for three (3) days a week from 12 January 1998 to 13 July 1998. They did not assert any other claims; (3) As found by the NLRC, 21 of the workers are no longer entitled to any monetary award since they had already executed their respective waivers and quitclaims. We give weight to the finding and exclude the 21 workers as recipients of the award to be granted in this case. Consequently, only the following workers are entitled to the award, with the amounts respectively due them stated opposite their names:
1. Alex A. Hellera 2. Francisco Racasa 3. Dante Escarlan 4. Donato Sasa 5. Rodolfo Olinar 6. Daniel Custodio 7. Arturo Pollo 8. B. Pilapil 9. Donato Bonete 10. Isagani Yap 11. Cesar Ragonon 12. Benedicto Bagan 13. Rexte Solanoy 14. Felipe Cagoco, Jr. 15. Jose Narce 16. Quirino C. Ada 17. Salfaram Elmer 18. Romeo Balais 19. Claudio S. Morales 20. Elpidio E. Vergabinia 21. Conrado Cagoco 22. Roy Boragoy 23. Reynaldo Santos 24. Lino Valencia 25. Roy Durano 26. Leo Valencia 27. Jayoma A. 28. Ramon Olinar III P16,368.30 16,458.00 15,912.00 15,580.50 15,912.00 15,912.00 16,660.80 16,075.80 15,600.00 15,678.00 16,068.00 15,775.50 15,678.00 15,990.00 16,348.80 15,990.00 16,302.00 16,302.00 15,947.10 15,561.00 15,990.00 15,892.50 16,200.60 15,678.00 15,678.00 15,678.00 15,561.00 15,678.00 -

29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47.

Saturnino C. Ebaya Nicanor L. de Castro Eduardo Gonzales Isagani Gonzales Thomas Andrab, Jr. Minieto Durano Ernesto Vallente Nestor M. Bonete Jose Salonoy Alberto Lagman Rolando Torres Rolindo Cualquiera Armando Lima Alfredo Selapio Martin V. Villacampa Carlito Pable Dante Escarlan M. Durano Ramon Roso

15,919.80 16,614.00 15,678.00 16,469.70 15,912.00 16,660.80 15,997.80 15,705.30 16,458.00 16,660.80 15,678.00 16,068.00 16,426.80 16,060.20 15,939.30 16,263.00 15,912.00 16,614.00 16,302.00[52]

(4) The Labor Arbiters decision in favor of respondents was reversed by the NLRC. Considering that there is no provision for appeal from the decision of the NLRC,[53]petitioners should not be deemed at fault in not paying the award as ordered by the Labor Arbiter. Petitioners liability only gained a measure of certainty only when the Court of Appeals reversed the NLRC decision. In the interest of justice, the 6% legal interest on the award should commence only from the date of promulgation of the Court of Appeals Decision on 12 December 2003. WHEREFORE, the Petition is GRANTED IN PART. The decision of the Court of Appeals reinstating the decision of the Labor Arbiter is AFFIRMED with MODIFICATION to the effect that the 21 workers who executed waivers and quitclaims are no longer entitled to back payments. Petitioners are ORDERED TO PAY respondents, except the aforementioned 21 workers, the monetary award as computed, [54] pursuant to the decision of the Labor Arbiter [55] with interest at the rate of 6% per annum from 12 December 2003, the date of promulgation of the Court of Appeals decision, until the finality of this decision, and thereafter at the rate of 12% per annum until full payment. SO ORDERED.

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