Republic of the Philippines SUPREME COURT SECOND DIVISION G.R. No.

L-25246 September 12, 1974 BENJAMIN VICTORIANO, plaintiff-appellee, vs. ELIZALDE ROPE WORKERS' UNION and ELIZALDE ROPE FACTORY, INC., defendants, ELIZALDE ROPE WORKERS' UNION, defendant-appellant. ZALDIVAR, J.:p Appeal to this Court on purely questions of law from the decision of the Court of First Instance of Manila in its Civil Case No. 58894. The undisputed facts that spawned the instant case follow: Benjamin Victoriano (hereinafter referred to as Appellee), a member of the religious sect known as the "Iglesia ni Cristo", had been in the employ of the Elizalde Rope Factory, Inc. (hereinafter referred to as Company) since 1958. As such employee, he was a member of the Elizalde Rope Workers' Union (hereinafter referred to as Union) which had with the Company a collective bargaining agreement containing a closed shop provision which reads as follows: Membership in the Union shall be required as a condition of employment for all permanent employees workers covered by this Agreement. The collective bargaining agreement expired on March 3, 1964 but was renewed the following day, March 4, 1964. Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its amendment by Republic Act No. 3350, the employer was not precluded "from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees." On June 18, 1961, however, Republic Act No. 3350 was enacted, introducing an amendment to paragraph (4) subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but such agreement shall not cover members of any religious sects which prohibit affiliation of their members in any such labor organization". Being a member of a religious sect that prohibits the affiliation of its members with any labor organization, Appellee presented his resignation to appellant Union in 1962, and when no action was taken thereon, he reiterated his resignation on September 3, 1974. Thereupon, the Union wrote a formal letter to the Company asking the latter to separate Appellee from the service in view of the fact that he was resigning from the Union as a member. The management of the Company in turn notified Appellee and his counsel that unless the Appellee could achieve a satisfactory arrangement with the Union, the Company would be constrained to dismiss him from the service. This prompted Appellee to file an action for injunction, docketed as Civil Case No. 58894 in the Court of First Instance of Manila to enjoin the Company and the Union from dismissing Appellee. 1 In its answer, the Union invoked the "union security clause" of the collective bargaining agreement; assailed the constitutionality of Republic Act No. 3350; and contended that the Court had no jurisdiction over the case, pursuant to Republic Act No. 875, Sections 24 and 9 (d) and (e). 2 Upon the facts agreed upon by the parties during the pre-trial conference, the Court a quorendered its decision on August 26, 1965, the dispositive portion of which reads: IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant Elizalde Rope Factory, Inc. from dismissing the plaintiff from his present employment and sentencing the defendant Elizalde Rope Workers' Union to pay the plaintiff P500 for attorney's fees and the costs of this action. 3 From this decision, the Union appealed directly to this Court on purely questions of law, assigning the following errors: I. That the lower court erred when it did not rule that Republic Act No. 3350 is unconstitutional. II. That the lower court erred when it sentenced appellant herein to pay plaintiff the sum of P500 as attorney's fees and the cost thereof.

In support of the alleged unconstitutionality of Republic Act No. 3350, the Union contented, firstly, that the Act infringes on the fundamental right to form lawful associations; that "the very phraseology of said Republic Act 3350, that membership in a labor organization is banned to all those belonging to such religious sect prohibiting affiliation with any labor organization" 4 , "prohibits all the members of a given religious sect from joining any labor union if such sect prohibits affiliations of their members thereto" 5 ; and, consequently, deprives said members of their constitutional right to form or join lawful associations or organizations guaranteed by the Bill of Rights, and thus becomes obnoxious to Article III, Section 1 (6) of the 1935 Constitution. 6 Secondly, the Union contended that Republic Act No. 3350 is unconstitutional for impairing the obligation of contracts in that, while the Union is obliged to comply with its collective bargaining agreement containing a "closed shop provision," the Act relieves the employer from its reciprocal obligation of cooperating in the maintenance of union membership as a condition of employment; and that said Act, furthermore, impairs the Union's rights as it deprives the union of dues from members who, under the Act, are relieved from the obligation to continue as such members. 7 Thirdly, the Union contended that Republic Act No. 3350 discriminatorily favors those religious sects which ban their members from joining labor unions, in violation of Article Ill, Section 1 (7) of the 1935 Constitution; and while said Act unduly protects certain religious sects, it leaves no rights or protection to labor organizations. 8 Fourthly, Republic Act No. 3350, asserted the Union, violates the constitutional provision that "no religious test shall be required for the exercise of a civil right," in that the laborer's exercise of his civil right to join associations for purposes not contrary to law has to be determined under the Act by his affiliation with a religious sect; that conversely, if a worker has to sever his religious connection with a sect that prohibits membership in a labor organization in order to be able to join a labor organization, said Act would violate religious freedom. 9 Fifthly, the Union contended that Republic Act No. 3350, violates the "equal protection of laws" clause of the Constitution, it being a discriminately legislation, inasmuch as by exempting from the operation of closed shop agreement the members of the "Iglesia ni Cristo", it has granted said members undue advantages over their fellow workers, for while the Act exempts them from union obligation and liability, it nevertheless entitles them at the same time to the enjoyment of all concessions, benefits and other emoluments that the union might secure from the employer. 10 Sixthly, the Union contended that Republic Act No. 3350 violates the constitutional provision regarding the promotion of social justice. 11 Appellant Union, furthermore, asserted that a "closed shop provision" in a collective bargaining agreement cannot be considered violative of religious freedom, as to call for the amendment introduced by Republic Act No. 3350; 12and that unless Republic Act No. 3350 is declared unconstitutional, trade unionism in this country would be wiped out as employers would prefer to hire or employ members of the Iglesia ni Cristo in order to do away with labor organizations. 13 Appellee, assailing appellant's arguments, contended that Republic Act No. 3350 does not violate the right to form lawful associations, for the right to join associations includes the right not to join or to resign from a labor organization, if one's conscience does not allow his membership therein, and the Act has given substance to such right by prohibiting the compulsion of workers to join labor organizations; 14 that said Act does not impair the obligation of contracts for said law formed part of, and was incorporated into, the terms of the closed shop agreement; 15 that the Act does not violate the establishment of religion clause or separation of Church and State, for Congress, in enacting said law, merely accommodated the religious needs of those workers whose religion prohibits its members from joining labor unions, and balanced the collective rights of organized labor with the constitutional right of an individual to freely exercise his chosen religion; that the constitutional right to the free exercise

of one's religion has primacy and preference over union security measures which are merely contractual16 ; that said Act does not violate the constitutional provision of equal protection, for the classification of workers under the Act depending on their religious tenets is based on substantial distinction, is germane to the purpose of the law, and applies to all the members of a given class; 17 that said Act, finally, does not violate the social justice policy of the Constitution, for said Act was enacted precisely to equalize employment opportunities for all citizens in the midst of the diversities of their religious beliefs." 18 I. Before We proceed to the discussion of the first assigned error, it is necessary to premise that there are some thoroughly established principles which must be followed in all cases where questions of constitutionality as obtains in the instant case are involved. All presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt, that a law may work hardship does not render it unconstitutional; that if any reasonable basis may be conceived which supports the statute, it will be upheld, and the challenger must negate all possible bases; that the courts are not concerned with the wisdom, justice, policy, or expediency of a statute; and that a liberal interpretation of the constitution in favor of the constitutionality of legislation should be adopted. 19 1. Appellant Union's contention that Republic Act No. 3350 prohibits and bans the members of such religious sects that forbid affiliation of their members with labor unions from joining labor unions appears nowhere in the wording of Republic Act No. 3350; neither can the same be deduced by necessary implication therefrom. It is not surprising, therefore, that appellant, having thus misread the Act, committed the error of contending that said Act is obnoxious to the constitutional provision on freedom of association. Both the Constitution and Republic Act No. 875 recognize freedom of association. Section 1 (6) of Article III of the Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973, provide that the right to form associations or societies for purposes not contrary to law shall not be abridged. Section 3 of Republic Act No. 875 provides that employees shall have the right to self-organization and to form, join of assist labor organizations of their own choosing for the purpose of collective bargaining and to engage in concerted activities for the purpose of collective bargaining and other mutual aid or protection. What the Constitution and the Industrial Peace Act recognize and guarantee is the "right" to form or join associations. Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely said that whatever theory one subscribes to, a right comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being prevented by law; and second, power, whereby an employee may, as he pleases, join or refrain from Joining an association. It is, therefore, the employee who should decide for himself whether he should join or not an association; and should he choose to join, he himself makes up his mind as to which association he would join; and even after he has joined, he still retains the liberty and the power to leave and cancel his membership with said organization at any time. 20 It is clear, therefore, that the right to join a union includes the right to abstain from joining any union. 21 Inasmuch as what both the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd to say that the law also imposes, in the same breath, upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any association. The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however, limited. The legal protection granted to such right to refrain from joining is withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of which the employer may employ only member of the collective bargaining union, and the employees must continue to be members of the union for the duration of the contract in order to keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350, provides that although it would be

an unfair labor practice for an employer "to discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization" the employer is, however, not precluded "from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees". By virtue, therefore, of a closed shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs, wishes to be employed or to keep his employment, he must become a member of the collective bargaining union. Hence, the right of said employee not to join the labor union is curtailed and withdrawn. To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced an exception, when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: "but such agreement shall not cover members of any religious sects which prohibit affiliation of their members in any such labor organization". Republic Act No. 3350 merely excludes ipso jure from the application and coverage of the closed shop agreement the employees belonging to any religious sects which prohibit affiliation of their members with any labor organization. What the exception provides, therefore, is that members of said religious sects cannot be compelled or coerced to join labor unions even when said unions have closed shop agreements with the employers; that in spite of any closed shop agreement, members of said religious sects cannot be refused employment or dismissed from their jobs on the sole ground that they are not members of the collective bargaining union. It is clear, therefore, that the assailed Act, far from infringing the constitutional provision on freedom of association, upholds and reinforces it. It does not prohibit the members of said religious sects from affiliating with labor unions. It still leaves to said members the liberty and the power to affiliate, or not to affiliate, with labor unions. If, notwithstanding their religious beliefs, the members of said religious sects prefer to sign up with the labor union, they can do so. If in deference and fealty to their religious faith, they refuse to sign up, they can do so; the law does not coerce them to join; neither does the law prohibit them from joining; and neither may the employer or labor union compel them to join. Republic Act No. 3350, therefore, does not violate the constitutional provision on freedom of association. 2. Appellant Union also contends that the Act is unconstitutional for impairing the obligation of its contract, specifically, the "union security clause" embodied in its Collective Bargaining Agreement with the Company, by virtue of which "membership in the union was required as a condition for employment for all permanent employees workers". This agreement was already in existence at the time Republic Act No. 3350 was enacted on June 18, 1961, and it cannot, therefore, be deemed to have been incorporated into the agreement. But by reason of this amendment, Appellee, as well as others similarly situated, could no longer be dismissed from his job even if he should cease to be a member, or disaffiliate from the Union, and the Company could continue employing him notwithstanding his disaffiliation from the Union. The Act, therefore, introduced a change into the express terms of the union security clause; the Company was partly absolved by law from the contractual obligation it had with the Union of employing only Union members in permanent positions, It cannot be denied, therefore, that there was indeed an impairment of said union security clause. According to Black, any statute which introduces a change into the express terms of the contract, or its legal construction, or its validity, or its discharge, or the remedy for its enforcement, impairs the contract. The extent of the change is not material. It is not a question of degree or manner or cause, but of encroaching in any respect on its obligation or dispensing with any part of its force. There is an impairment of the contract if either party is absolved by law from its performance. 22 Impairment has also been predicated on laws which, without destroying contracts, derogate from substantial contractual rights. 23 It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the details. The prohibition is not to be read with literal exactness like a

mathematical formula, for it prohibits unreasonable impairment only. 24 In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interests may modify or abrogate contracts already in effect. 25 For not only are existing laws read into contracts in order to fix the obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. All contracts made with reference to any matter that is subject to regulation under the police power must be understood as made in reference to the possible exercise of that power. 26 Otherwise, important and valuable reforms may be precluded by the simple device of entering into contracts for the purpose of doing that which otherwise may be prohibited. The policy of protecting contracts against impairment presupposes the maintenance of a government by virtue of which contractual relations are worthwhile a government which retains adequate authority to secure the peace and good order of society. The contract clause of the Constitution must, therefore, be not only in harmony with, but also in subordination to, in appropriate instances, the reserved power of the state to safeguard the vital interests of the people. It follows that not all legislations, which have the effect of impairing a contract, are obnoxious to the constitutional prohibition as to impairment, and a statute passed in the legitimate exercise of police power, although it incidentally destroys existing contract rights, must be upheld by the courts. This has special application to contracts regulating relations between capital and labor which are not merely contractual, and said labor contracts, for being impressed with public interest, must yield to the common good. 27 In several occasions this Court declared that the prohibition against impairing the obligations of contracts has no application to statutes relating to public subjects within the domain of the general legislative powers of the state involving public welfare. 28 Thus, this Court also held that the Blue Sunday Law was not an infringement of the obligation of a contract that required the employer to furnish work on Sundays to his employees, the law having been enacted to secure the well-being and happiness of the laboring class, and being, furthermore, a legitimate exercise of the police power. 29 In order to determine whether legislation unconstitutionally impairs contract obligations, no unchanging yardstick, applicable at all times and under all circumstances, by which the validity of each statute may be measured or determined, has been fashioned, but every case must be determined upon its own circumstances. Legislation impairing the obligation of contracts can be sustained when it is enacted for the promotion of the general good of the people, and when the means adopted to secure that end are reasonable. Both the end sought and the means adopted must be legitimate, i.e., within the scope of the reserved power of the state construed in harmony with the constitutional limitation of that power. 30 What then was the purpose sought to be achieved by Republic Act No. 3350? Its purpose was to insure freedom of belief and religion, and to promote the general welfare by preventing discrimination against those members of religious sects which prohibit their members from joining labor unions, confirming thereby their natural, statutory and constitutional right to work, the fruits of which work are usually the only means whereby they can maintain their own life and the life of their dependents. It cannot be gainsaid that said purpose is legitimate. The questioned Act also provides protection to members of said religious sects against two aggregates of group strength from which the individual needs protection. The individual employee, at various times in his working life, is confronted by two aggregates of power collective labor, directed by a union, and collective capital, directed by management. The union, an institution developed to organize labor into a collective force and thus protect the individual employee from the power of collective capital, is, paradoxically, both the champion of employee rights, and a new source of their frustration. Moreover, when the Union interacts with management, it produces yet a third aggregate of group strength from which the individual also needs protection the collective bargaining relationship. 31

The aforementioned purpose of the amendatory law is clearly seen in the Explanatory Note to House Bill No. 5859, which later became Republic Act No. 3350, as follows: It would be unthinkable indeed to refuse employing a person who, on account of his religious beliefs and convictions, cannot accept membership in a labor organization although he possesses all the qualifications for the job. This is tantamount to punishing such person for believing in a doctrine he has a right under the law to believe in. The law would not allow discrimination to flourish to the detriment of those whose religion discards membership in any labor organization. Likewise, the law would not commend the deprivation of their right to work and pursue a modest means of livelihood, without in any manner violating their religious faith and/or belief.32 It cannot be denied, furthermore, that the means adopted by the Act to achieve that purpose exempting the members of said religious sects from coverage of union security agreements is reasonable. It may not be amiss to point out here that the free exercise of religious profession or belief is superior to contract rights. In case of conflict, the latter must, therefore, yield to the former. The Supreme Court of the United States has also declared on several occasions that the rights in the First Amendment, which include freedom of religion, enjoy a preferred position in the constitutional system. 33 Religious freedom, although not unlimited, is a fundamental personal right and liberty, 34 and has a preferred position in the hierarchy of values. Contractual rights, therefore, must yield to freedom of religion. It is only where unavoidably necessary to prevent an immediate and grave danger to the security and welfare of the community that infringement of religious freedom may be justified, and only to the smallest extent necessary to avoid the danger. 3. In further support of its contention that Republic Act No. 3350 is unconstitutional, appellant Union averred that said Act discriminates in favor of members of said religious sects in violation of Section 1 (7) of Article Ill of the 1935 Constitution, and which is now Section 8 of Article IV of the 1973 Constitution, which provides: No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free exercise and enjoyment of religious profession and worship, without discrimination and preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights. The constitutional provision into only prohibits legislation for the support of any religious tenets or the modes of worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the practice of any form of worship, 35 but also assures the free exercise of one's chosen form of religion within limits of utmost amplitude. It has been said that the religion clauses of the Constitution are all designed to protect the broadest possible liberty of conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live as he believes he ought to live, consistent with the liberty of others and with the common good. 36 Any legislation whose effect or purpose is to impede the observance of one or all religions, or to discriminate invidiously between the religions, is invalid, even though the burden may be characterized as being only indirect. 37 But if the stage regulates conduct by enacting, within its power, a general law which has for its purpose and effect to advance the state's secular goals, the statute is valid despite its indirect burden on religious observance, unless the state can accomplish its purpose without imposing such burden. 38 In Aglipay v. Ruiz 39 , this Court had occasion to state that the government should not be precluded from pursuing valid objectives secular in character even if the incidental result would be favorable to a religion or sect. It has likewise been held that the statute, in order to withstand the strictures of constitutional prohibition, must have a secular legislative purpose and a primary effect that neither advances nor inhibits religion. 40 Assessed by these criteria, Republic Act No. 3350 cannot be said to violate the constitutional inhibition of the "noestablishment" (of religion) clause of the Constitution.

The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not spiritual or religious or holy and eternal. It was intended to serve the secular purpose of advancing the constitutional right to the free exercise of religion, by averting that certain persons be refused work, or be dismissed from work, or be dispossessed of their right to work and of being impeded to pursue a modest means of livelihood, by reason of union security agreements. To help its citizens to find gainful employment whereby they can make a living to support themselves and their families is a valid objective of the state. In fact, the state is enjoined, in the 1935 Constitution, to afford protection to labor, and regulate the relations between labor and capital and industry. 41 More so now in the 1973 Constitution where it is mandated that "the State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relation between workers and employers. 42 The primary effects of the exemption from closed shop agreements in favor of members of religious sects that prohibit their members from affiliating with a labor organization, is the protection of said employees against the aggregate force of the collective bargaining agreement, and relieving certain citizens of a burden on their religious beliefs; and by eliminating to a certain extent economic insecurity due to unemployment, which is a serious menace to the health, morals, and welfare of the people of the State, the Act also promotes the well-being of society. It is our view that the exemption from the effects of closed shop agreement does not directly advance, or diminish, the interests of any particular religion. Although the exemption may benefit those who are members of religious sects that prohibit their members from joining labor unions, the benefit upon the religious sects is merely incidental and indirect. The "establishment clause" (of religion) does not ban regulation on conduct whose reason or effect merely happens to coincide or harmonize with the tenets of some or all religions. 43 The free exercise clause of the Constitution has been interpreted to require that religious exercise be preferentially aided. 44 We believe that in enacting Republic Act No. 3350, Congress acted consistently with the spirit of the constitutional provision. It acted merely to relieve the exercise of religion, by certain persons, of a burden that is imposed by union security agreements. It was Congress itself that imposed that burden when it enacted the Industrial Peace Act (Republic Act 875), and, certainly, Congress, if it so deems advisable, could take away the same burden. It is certain that not every conscience can be accommodated by all the laws of the land; but when general laws conflict with scrupples of conscience, exemptions ought to be granted unless some "compelling state interest" intervenes.45 In the instant case, We see no such compelling state interest to withhold exemption. Appellant bewails that while Republic Act No. 3350 protects members of certain religious sects, it leaves no right to, and is silent as to the protection of, labor organizations. The purpose of Republic Act No. 3350 was not to grant rights to labor unions. The rights of labor unions are amply provided for in Republic Act No. 875 and the new Labor Code. As to the lamented silence of the Act regarding the rights and protection of labor unions, suffice it to say, first, that the validity of a statute is determined by its provisions, not by its silence 46 ; and, second, the fact that the law may work hardship does not render it unconstitutional. 47 It would not be amiss to state, regarding this matter, that to compel persons to join and remain members of a union to keep their jobs in violation of their religious scrupples, would hurt, rather than help, labor unions, Congress has seen it fit to exempt religious objectors lest their resistance spread to other workers, for religious objections have contagious potentialities more than political and philosophic objections. Furthermore, let it be noted that coerced unity and loyalty even to the country, and a fortiori to a labor union assuming that such unity and loyalty can be attained through coercion is not a goal that is constitutionally obtainable at the expense of religious liberty. 48 A desirable end cannot be promoted by prohibited means.

4. Appellants' fourth contention, that Republic Act No. 3350 violates the constitutional prohibition against requiring a religious test for the exercise of a civil right or a political right, is not well taken. The Act does not require as a qualification, or condition, for joining any lawful association membership in any particular religion or in any religious sect; neither does the Act require affiliation with a religious sect that prohibits its members from joining a labor union as a condition or qualification for withdrawing from a labor union. Joining or withdrawing from a labor union requires a positive act. Republic Act No. 3350 only exempts members with such religious affiliation from the coverage of closed shop agreements. So, under this Act, a religious objector is not required to do a positive act to exercise the right to join or to resign from the union. He is exempted ipso jure without need of any positive act on his part. A conscientious religious objector need not perform a positive act or exercise the right of resigning from the labor union he is exempted from the coverage of any closed shop agreement that a labor union may have entered into. How then can there be a religious test required for the exercise of a right when no right need be exercised? We have said that it was within the police power of the State to enact Republic Act No. 3350, and that its purpose was legal and in consonance with the Constitution. It is never an illegal evasion of a constitutional provision or prohibition to accomplish a desired result, which is lawful in itself, by discovering or following a legal way to do it. 49 5. Appellant avers as its fifth ground that Republic Act No. 3350 is a discriminatory legislation, inasmuch as it grants to the members of certain religious sects undue advantages over other workers, thus violating Section 1 of Article III of the 1935 Constitution which forbids the denial to any person of the equal protection of the laws. 50 The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity of rights. The Constitution does not require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different. 51 It does not prohibit legislation which is limited either in the object to which it is directed or by the territory within which it is to operate. The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with one another in certain particulars. A law is not invalid because of simple inequality. 52 The very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality. 53 All that is required of a valid classification is that it be reasonable, which means that the classification should be based on substantial distinctions which make for real differences; that it must be germane to the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each member of the class. 54 This Court has held that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary. 55 In the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction, the state is recognized as enjoying a wide range of discretion. 56 It is not necessary that the classification be based on scientific or marked differences of things or in their relation. 57 Neither is it necessary that the classification be made with mathematical nicety. 58 Hence legislative classification may in many cases properly rest on narrow distinctions, 59 for the equal protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may appear.

We believe that Republic Act No. 3350 satisfies the aforementioned requirements. The Act classifies employees and workers, as to the effect and coverage of union shop security agreements, into those who by reason of their religious beliefs and convictions cannot sign up with a labor union, and those whose religion does not prohibit membership in labor unions. Tile classification rests on real or substantial, not merely imaginary or whimsical, distinctions. There is such real distinction in the beliefs, feelings and sentiments of employees. Employees do not believe in the same religious faith and different religions differ in their dogmas and cannons. Religious beliefs, manifestations and practices, though they are found in all places, and in all times, take so many varied forms as to be almost beyond imagination. There are many views that comprise the broad spectrum of religious beliefs among the people. There are diverse manners in which beliefs, equally paramount in the lives of their possessors, may be articulated. Today the country is far more heterogenous in religion than before, differences in religion do exist, and these differences are important and should not be ignored. Even from the phychological point of view, the classification is based on real and important differences. Religious beliefs are not mere beliefs, mere ideas existing only in the mind, for they carry with them practical consequences and are the motives of certain rules. of human conduct and the justification of certain acts. 60 Religious sentiment makes a man view things and events in their relation to his God. It gives to human life its distinctive character, its tone, its happiness or unhappiness its enjoyment or irksomeness. Usually, a strong and passionate desire is involved in a religious belief. To certain persons, no single factor of their experience is more important to them than their religion, or their not having any religion. Because of differences in religious belief and sentiments, a very poor person may consider himself better than the rich, and the man who even lacks the necessities of life may be more cheerful than the one who has all possible luxuries. Due to their religious beliefs people, like the martyrs, became resigned to the inevitable and accepted cheerfully even the most painful and excruciating pains. Because of differences in religious beliefs, the world has witnessed turmoil, civil strife, persecution, hatred, bloodshed and war, generated to a large extent by members of sects who were intolerant of other religious beliefs. The classification, introduced by Republic Act No. 3350, therefore, rests on substantial distinctions. The classification introduced by said Act is also germane to its purpose. The purpose of the law is precisely to avoid those who cannot, because of their religious belief, join labor unions, from being deprived of their right to work and from being dismissed from their work because of union shop security agreements. Republic Act No. 3350, furthermore, is not limited in its application to conditions existing at the time of its enactment. The law does not provide that it is to be effective for a certain period of time only. It is intended to apply for all times as long as the conditions to which the law is applicable exist. As long as there are closed shop agreements between an employer and a labor union, and there are employees who are prohibited by their religion from affiliating with labor unions, their exemption from the coverage of said agreements continues. Finally, the Act applies equally to all members of said religious sects; this is evident from its provision. The fact that the law grants a privilege to members of said religious sects cannot by itself render the Act unconstitutional, for as We have adverted to, the Act only restores to them their freedom of association which closed shop agreements have taken away, and puts them in the same plane as the other workers who are not prohibited by their religion from joining labor unions. The circumstance, that the other employees, because they are differently situated, are not granted the same privilege, does not render the law unconstitutional, for every classification allowed by the Constitution by its nature involves inequality. The mere fact that the legislative classification may result in actual inequality is not violative of the right to equal protection, for every classification of persons or things for regulation by law produces inequality in some degree, but the law is not thereby rendered invalid. A classification otherwise reasonable does not offend the constitution simply because in practice it results in some inequality. 61 Anent this matter, it has been said that whenever it is apparent

from the scope of the law that its object is for the benefit of the public and the means by which the benefit is to be obtained are of public character, the law will be upheld even though incidental advantage may occur to individuals beyond those enjoyed by the general public. 62 6. Appellant's further contention that Republic Act No. 3350 violates the constitutional provision on social justice is also baseless. Social justice is intended to promote the welfare of all the people. 63 Republic Act No. 3350 promotes that welfare insofar as it looks after the welfare of those who, because of their religious belief, cannot join labor unions; the Act prevents their being deprived of work and of the means of livelihood. In determining whether any particular measure is for public advantage, it is not necessary that the entire state be directly benefited it is sufficient that a portion of the state be benefited thereby. Social justice also means the adoption by the Government of measures calculated to insure economic stability of all component elements of society, through the maintenance of a proper economic and social equilibrium in the inter-relations of the members of the community. 64 Republic Act No. 3350 insures economic stability to the members of a religious sect, like the Iglesia ni Cristo, who are also component elements of society, for it insures security in their employment, notwithstanding their failure to join a labor union having a closed shop agreement with the employer. The Act also advances the proper economic and social equilibrium between labor unions and employees who cannot join labor unions, for it exempts the latter from the compelling necessity of joining labor unions that have closed shop agreements and equalizes, in so far as opportunity to work is concerned, those whose religion prohibits membership in labor unions with those whose religion does not prohibit said membership. Social justice does not imply social equality, because social inequality will always exist as long as social relations depend on personal or subjective proclivities. Social justice does not require legal equality because legal equality, being a relative term, is necessarily premised on differentiations based on personal or natural conditions. 65 Social justice guarantees equality of opportunity 66 , and this is precisely what Republic Act No. 3350 proposes to accomplish it gives laborers, irrespective of their religious scrupples, equal opportunity for work. 7. As its last ground, appellant contends that the amendment introduced by Republic Act No. 3350 is not called for in other words, the Act is not proper, necessary or desirable. Anent this matter, it has been held that a statute which is not necessary is not, for that reason, unconstitutional; that in determining the constitutional validity of legislation, the courts are unconcerned with issues as to the necessity for the enactment of the legislation in question. 67 Courts do inquire into the wisdom of laws. 68 Moreover, legislatures, being chosen by the people, are presumed to understand and correctly appreciate the needs of the people, and it may change the laws accordingly. 69 The fear is entertained by appellant that unless the Act is declared unconstitutional, employers will prefer employing members of religious sects that prohibit their members from joining labor unions, and thus be a fatal blow to unionism. We do not agree. The threat to unionism will depend on the number of employees who are members of the religious sects that control the demands of the labor market. But there is really no occasion now to go further and anticipate problems We cannot judge with the material now before Us. At any rate, the validity of a statute is to be determined from its general purpose and its efficacy to accomplish the end desired, not from its effects on a particular case. 70 The essential basis for the exercise of power, and not a mere incidental result arising from its exertion, is the criterion by which the validity of a statute is to be measured. 71 II. We now pass on the second assignment of error, in support of which the Union argued that the decision of the trial court ordering the Union to pay P500 for attorney's fees directly contravenes Section 24 of Republic Act No. 875, for the instant action involves an industrial dispute wherein the Union was a party, and said Union merely acted in the exercise of its rights under the union shop provision of its existing collective bargaining contract with the Company; that said order also contravenes Article 2208 of the Civil Code; that, furthermore,

Appellee was never actually dismissed by the defendant Company and did not therefore suffer any damage at all . 72 In refuting appellant Union's arguments, Appellee claimed that in the instant case there was really no industrial dispute involved in the attempt to compel Appellee to maintain its membership in the union under pain of dismissal, and that the Union, by its act, inflicted intentional harm on Appellee; that since Appellee was compelled to institute an action to protect his right to work, appellant could legally be ordered to pay attorney's fees under Articles 1704 and 2208 of the Civil Code. 73 The second paragraph of Section 24 of Republic Act No. 875 which is relied upon by appellant provides that: No suit, action or other proceedings shall be maintainable in any court against a labor organization or any officer or member thereof for any act done by or on behalf of such organization in furtherance of an industrial dispute to which it is a party, on the ground only that such act induces some other person to break a contract of employment or that it is in restraint of trade or interferes with the trade, business or employment of some other person or with the right of some other person to dispose of his capital or labor. (Emphasis supplied) That there was a labor dispute in the instant case cannot be disputed for appellant sought the discharge of respondent by virtue of the closed shop agreement and under Section 2 (j) of Republic Act No. 875 a question involving tenure of employment is included in the term "labor dispute". 74 The discharge or the act of seeking it is the labor dispute itself. It being the labor dispute itself, that very same act of the Union in asking the employer to dismiss Appellee cannot be "an act done ... in furtherance of an industrial dispute". The mere fact that appellant is a labor union does not necessarily mean that all its acts are in furtherance of an industrial dispute. 75 Appellant Union, therefore, cannot invoke in its favor Section 24 of Republic Act No. 875. This case is not intertwined with any unfair labor practice case existing at the time when Appellee filed his complaint before the lower court. Neither does Article 2208 of the Civil Code, invoked by the Union, serve as its shield. The article provides that attorney's fees and expenses of litigation may be awarded "when the defendant's act or omission has compelled the plaintiff ... to incur expenses to protect his interest"; and "in any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered". In the instant case, it cannot be gainsaid that appellant Union's act in demanding Appellee's dismissal caused Appellee to incur expenses to prevent his being dismissed from his job. Costs according to Section 1, Rule 142, of the Rules of Court, shall be allowed as a matter of course to the prevailing party. WHEREFORE, the instant appeal is dismissed, and the decision, dated August 26, 1965, of the Court of First Instance of Manila, in its Civil Case No. 58894, appealed from is affirmed, with costs against appellant Union. It is so ordered.

SUPREME COURT SECOND DIVISION KAISAHAN NG MGA MANGGAGAWA SA LA CAMPANA, ET AL., Petitioners, -versus- G.R. No. L-47853 November 16, 1984

HON. JUDGE ULPIANO SARMIENTO and LA CAMPANA, INCORPORATED, Respondents. x----------------------------------------------------x DECISION CUEVAS, J.: Petition for Certiorari with prayer that judgment be rendered annulling or modifying the restraining order dated October 20, 1976[1] issued by the former Court of First Instance of Rizal and Quezon City Branch IX, in Civil Case No. Q-20414, entitled, La Campana, Incorporated versus Kaisahan Ng Mga Manggagawa sa La Campana (KKM), et al. chanroblespublishingcompany Wayback in June 19, 1951, petitioner Union submitted to the respondent company a petition demanding for better working conditions and other benefits including the reinstatement of nine (9) dismissed workers. Upon refusal of the company to grant said demands, the case was elevated to the Department (now Ministry) of Labor for conciliation. When no agreement was reached, the case was certified to the defunct Court of Industrial Relations (CIR) on July 19, 1951, where it was docketed as Case No. 584-V. On July 21, 1951, the CIR issued a return-to-work order and enjoined the company from further laying off or dismissing laborers as well as hiring new employees without express authority from the court. chanroblespublishingcompanyDespite said order, the company hired 21 new workers during the pendency of the case, hence, the union filed a Petition for Contempt docketed as Case No. 584-V(1). On July 26, 1951, the company requested the CIR for authority to dismiss Loreto Bernabe, the President of the Union, docketed as Case No. 584V(2). Bonifacio Calderon, the Unions treasurer, was refused admittance by the company when he presented himself for work along with other workers pursuant to the return-to-work order of July 21, 1951. The Union then filed Case No. 584-V(3) for Calderons reinstatement with backwages. Cra chanroblespublishingcompany On August 24, 1951, the company petitioned the court in Case No. 584-V(4) for authority to rotate workers which case was subsequently withdrawn before judgment could be rendered. On February 13, 1952, the union again filed Case No. 584-V(5) for the dismissal by the company of Marcelo Estrada and Exequiel Rapiz without just cause and authority from the court. chanroblespublishingcompany Petitioners filed Case No. 584-V(6) with the CIR seeking the reinstatement of Messrs. Loreto Bernabe and Timoteo Foronda, President and Vice-President of the Union, respectively, who were dismissed by respondent along with other eight workers. On July 9, 1953, respondent requested the CIR to order a certification election to determine who, between petitioner and the Consolidated Labor Association of the Philippines, should be considered as the appropriate bargaining representative of the employees. It was likewise averred by respondent that Tan Tong, the owner-proprietor of the business had been authorized by a court order to change his name to Ramon Tantongco and had in fact taken his oath as a Filipino citizen in December 1952; and that the corporate name of respondent had been changed to La Campana Food Products, Incorporated, effective as of January 30, 1953. chanroblespublishingcompanyPetitioner moved for the inclusion of Ricardo Tantongco, as administrator of the estate of Ramon Tantongco who died on May 16, 1956. Ricardo Tantongco moved for the dismissal of Cases Nos. 584-V(1-6) on the ground that said cases partake of money claims which

should therefore be filed instead with the probate court in charge of the settlement of the decedents estate. chanroblespublishingcompanyOn November 12, 1956, the CIR rendered a partial decision in Case No. 584-V, declaring respondent guilty of unfair labor practice for dismissing certain members of petitioner and hiring new workers without first securing authority from the court. Respondents motion for reconsideration was denied, and after which, the CIR ordered the Chief Examiner to submit a report of the computation of the wages due the laborers involved. Respondents appealed to this Court. On February 18, 1957, the CIR issued another order embodying its separate resolutions in Cases Nos. 584-V(1-6) wherein respondents were found guilty of violating the return-to-work order of July 21, 1951 but were absolved from any criminal liability since the death of Ramon Tantongco occurred before the finality of the decision and decreed the reinstatement with backwages of the illegally dismissed workers, with the exception of Gerardo Ligutan. Again, respondents appealed the said order of February 18, 1957 to this Court[2] after their motion for reconsideration was denied by the CIR on April 29, 1957. Meanwhile, this Court dismissed respondents appeal on June 12, 1957. On July 17, 1957, the CIR ordered the respondents to deposit the amount of P61,770.77 and thereafter to make a monthly deposit equivalent to the salaries of the laborers involved in Case No. 584-V until actual reinstatement. Respondents asked for reconsideration on the ground of prescription for failure to present the claim before the probate court during the deceaseds estate settlement proceedings. Meanwhile, the CIRs Chief Examiner rendered a report computing the total backwages of the laborers which amounted to P65,534.01. The state settlement proceedings were completely terminated on April 29, 1957, thus Ricardo Tantongco notified the workers that the La Campana Starch & Packing Company, the business name by which all the businesses of Ramon Tantongco were carried on, would be closed on September 14, 1957. Respondents failed to comply with the CIRs order of February 18, 1957 to readmit the 12 workers who reported for work and for such failure, petitioners moved for the execution of said order and thereafter, filed a petition for contempt on August 30, 1957. Respondents moved for the dismissal of the contempt petition on the ground that Ricardo Tantongco had been discharged as administrator of the estate effective as of April 29, 1957. On September 16, 1957, petitioners filed the instant case[3] praying for the reopening of respondents business and reinstatement of all the illegally dismissed workers with backwages and for the issuance of an order citing respondents in contempt of court. Red The CIR on September 30, 1957, directed the respondent company or its manager or the persons in charge of the management and the administrator of Ramon Tantongcos estate, to comply with the Order of February 18, 1957 by reinstating the workers named therein and depositing in Court the amount of P65,534.01. A complaint for indirect contempt was filed against Ricardo Tantongco for his refusal to admit the workers who reported for work pursuant to the returnto-work order of the Court. On the other hand, Tantongco filed a petition for certiorari with preliminary injunction[4] with this court to enjoin the CIR from proceeding with the contempt case and from enforcing its Order of September 30, 1957. chanroblespublishingcompanyThis Court enjoined the CIR from enforcing its order of September 30, 1957 which prompted respondents to move for the dismissal of Case No. 584V(7), alleging that the main case[5] is still pending consideration. The CIR denied said motion to dismiss on the ground that the writ issued had particular reference to Cases Nos. 584-V(1-6) not to Case No. 584-V(7). However, the CIR likewise suspended the proceedings in Case No. 584-V(7) just the same in view of the pendency of the main case before this Court. chanroblespublishingcompanyOn September 22, 1959, this Court dismissed Tantongcos petition in G.R. No. L-13119 and dissolved the writ of preliminary injunction issued on November 21, 1957, on a finding that the La Campana Starch & Food Products Company

which stands for the La Campana Starch & Coffee Factory are entities with legal personalities distinct from that of Ramon Tantongco; that after the death of Ramon, these two entities continued to exist and operate under the management of petitioner (Ricardo Tantongco) and that consequently the latter is the proper person and official to which the orders of the CIR are addressed and who is duty bound to comply with the same.[6]On June 16, 1962, the Supreme Court dismissed respondents appeal from the CIRs partial decision in Case No. 584-V dated November 12, 1956. The CIR examiner submitted another report pegging the additional backwages due the laborers at P63,588.00 for the period from August 1, 1957 to August 31, 1962 in addition to the amount of P65,534.01 set forth in his first report. chanroblespublishingcompanyThe CIR issued a writ of execution on January 25, 1966 and directed the Sheriff of Manila to cause respondents to reinstate the nine (9) workers and to collect from the latter the amount of P65,534.01 as backwages in Case No. 584-V(1); P61,770.77 plus P65,006.50 representing the backwages in Cases Nos. 584-V(1), (3), (5) and (6) from August 1, 1957 to August 31, 1962 and to turn them over to the court for further disposition. Upon motion of petitioner, the CIR issued an amended writ of execution on July 3, 1967 so as to include La Campana Gaugau Packing Company, La Campana Coffee Factory, Inc., La Campana Food Products, Inc. and/or Ricardo Tantongco for the latters continued refusal to acknowledge receipt of the writ of execution. The examiners Second Updated report showed a total backwages due to the laborers in the amount of P128,356.50, and again respondents were directed to deposit the said amount in court. For failure of respondents to comply with the said directive, the court issued another writ of execution on October 27, 1971. The Second Updated Report expired on July 31, 1968 without respondents having reinstated the laborers nor paid their backwages. Petitioner then filed a motion on May 29, 1972 to update the computation of the backwages to be reckoned from August 1, 1968 up to the date of their actual reinstatement. Respondents opposed said request, contending that the judgment in Cases Nos. 584-V (1-6) may no longer be executed inasmuch as ten (10) years had already elapsed since its rendition; that the officers of the union had disauthorized its counsel from seeking a writ of execution;and that the parties had entered into a collective bargaining agreement on October 12, 1970. The CIR issued an alias amended writ of execution on March 15, 1973, stating that no ten years had elapsed since its last execution and that the resolution of July 3, 1967 from which the amended writ arose, had long become final and executory. Their motion for reconsideration having been denied, respondents again appealed to this court which dismissed the same on March 15, 1974. The dismissalorder had become final on April 6, 1974, hence, the CIR again issued an alias amended writ of execution on August 8, 1974, directing the Sheriff to cause respondents to reinstate the dismissed workers and to pay them backwages which now amounted to P255,899.28, for the period covering August 1, 1957 to August 31, 1962, as well as to require respondents to sign a receipt showing that the workers have in fact been reinstated. Case No. 584-V(7), subject of the present petition was set for hearing on August 29, 1974, after which the case was transferred to the newly constituted National Labor Relations Commission (NLRC) on September 17, 1974. The case was heard by Labor Arbiter Francisco de los Reyes who issued an order on February 4, 1975 directing the reinstatement of the dismissed workers and payment of their backwages for 10 years based on the salary they were receiving at the time of their separation. Of the 75 workers who initiated Case No. 584-V(7), 21 of them were subsequently involved in incident nos.(1) to (6), thereby leaving 53 complainants in incident no.(7). Respondents appealed to the NLRC the order of

Arbiter de los Reyes. On February 14, 1975, a joint Report of Examiner was submitted to the Commission showing a total amount of P704,582.00 representing 10 years backwages of the 53 complainants. Petitioner requested the NLRC to cite Ricardo Tantongco, Angelina Nepomuceno, the President of the Union and Atty. Herenio E. Martinez, counsel for respondent, in contempt of court for failure to implement the alias writ of execution issued by the Arbiter. The contempt petition was set for hearing by the Labor Arbiter on July 15, 1975.On July 29, 1975, the NLRC en banc dismissed respondents appeal for lack of merit. Pursuant to the CIR writ of execution dated July 3, 1967, the labor arbiter issued on August 19, 1975, an alias amended writ of execution in Cases Nos. 584-V(3), 584V(5) and 584-V(6). Respondents then appealed to the Secretary (now Minister) of Labor, who affirmed the arbiters decision appealed from but modified the award of backwages to the 53 workers by limiting the same to a period of three (3) years instead of ten (10) years, or in the amount of P211,374.60 instead of the original amount of P704,582.00. Petitioner moved for the execution of the decision while respondents brought their appeal to the Office of the President, which, affirmed the appealed decision as thus modified by the Secretary of Labor. chanroblespublishingcompanyThe decision of the Office of the President was rendered on July 20, 1976. In the meantime, while the appeal was still pending in Malacaang, respondent company, on August 20, 1975, filed Civil Case No. Q-20414 with the Quezon City Court of First Instance, Branch IX, for Specific Performance and damages against the new set of officers of the union for breach of contract, it appearing that these union officers entered into a Collective Bargaining Agreement[7] with the management on September 16, 1969 withdrawing and waiving all and whatever benefits the individual union members are or may be entitled to as a result of the judgment in Case No. 584-V(7) and that they (union officers) did not take any step to dismiss the said case in violation of the said contract. The union, through its Secretary, Clarita de la Cruz, assisted by counsel, entered into a Compromise Agreement with Ricardo S. Tantongco, assisted by his counsel, on October 10, 1975 waiving all claims and counterclaims of whatever nature arising out of or in connection with the present case.[8] The Compromise Agreement, which was approved by the Court of First Instance on November 14, 1975 reads, thus: chanroblespublishingcompanyCOME NOW, the parties in the above-entitled case, plaintiff represented by its Vice-President, Ricardo Tantongco and defendants Kaisahan Ng Mga Manggagawa sa La Campana (KKM), represented by its Secretary, Clarita de la Cruz, both assisted by their respective counsels, respectfully submit this Compromise Agreement, the terms of which are as follows: chanroblespublishingcompany1. Defendants recognize as their obligations under their Contract, Annex A of the Complaint, particularly under Par. 3, Art. IV, on Precedent Declaration, to dismiss and/or withdraw CIR Case No. 584-V(7) as the defendants had nomore claims against the plaintiff and or respondents therein and the issues in said case having become moot and academic, and they hereby waived any and all right to execute whatever final judgment rendered in said case; 2. The union had agreed to the dismissal of the Case No. 584-V(7) in view of the fact that the original petition was filed against the La Campana Starch & Office Factory, a sole proprietorship of the late Ramon Tantongco, and who upon his death was substituted by Ricardo Tantongco as administrator of the intestate estate of the deceased Ramon Tantongco and after the Court order in Special Proceedings Case Q-1879 in Quezon City dated April 29, 1977 of the termination of the Intestate Proceedings, all the business of the (late Ramon Tantongco) were automatically closed, and cannot possibly be reopened, hence, it would be futile and useless for the

union to proceed with the case unless reopened by the compulsory heirs which they did not; 3. Defendants further agree that any and all writs of executions that may have been issued or in the future may be issued shall be void and shall have no force and effect, whatsoever judicial or quasijudicial body may have issued the same; chanroblespublishingcompany4. Parties agree to waive all claims and counterclaims of whatsoever nature or kind arising out of or in connection with the present case. WHEREFORE, it is respectfully prayed that the foregoing Compromise Agreement be approved and a Decision be ordered approving the terms of the same. Other reliefs just and equitable in the premises are also prayed for. Manila, Philippines, October 10, 1975. (SGD.) CLARITA DE LA CRUZ In her capacity as Secretary of Kaisahan Ng Mga Manggagawa sa La Campana (KKM) (SGD.) RICARDO S. TANTONGCO Vice-President La Campana, Inc. Assisted by: (SGD.) JUANITO A. VELASCO Counsel for Defendants R-400 Republic Supermarket Building 723 Rizal Ave., Manila. (SGD.) HERENIO E. MARTINEZ Counsel for Plaintiff Suite 301-302 Goiti Bldg. Plaza Lacson, Manila On September 20, 1976, a deputy sheriff of the NLRC went to the premises of the company and served a copy of the Writ of Execution dated September 17, 1976 to enforce the Labor Arbiters Order of February 4, 1975, directing the reinstatement with backwages of the 53 complainants in Case No. 584-V(7). Counsel for respondent company filed with the Court of First Instance an ex-parte motion to restrain execution on the ground that the subject case has already been considered as dismissed and/or abandoned by virtue of the courts approval of the Compromise Agreement. On October 20, 1976, the Court of First Instance issued an order restraining the sheriff from implementing the writ of execution until further orders. The individual complainants, through counsel, filed a motion for reconsideration of the said order which motion, was however denied by the court on December 14, 1977. chanroblespublishingcompany Hence, the instant petition. The complainants, now petitioners, question the jurisdiction of the Court of First Instance, in issuing the restraining order, contending that all matters arising out of employer-employee relations as well as those arising from unfair labor practice are exclusively vested upon the National Labor Relations Commission not upon the regular courts. Petitioners further alleged that the restraining order cannot and should not prejudice them because the union officers did not have the authority to compromise Case No. 584-V(7) much less represent or act for or in behalf of the individual members of the union in as much as the officers who signed the compromise agreement were not in any way involve in the labor case since they became members and eventually officers only long after the dismissal of petitioners and the subsequent institution of Case No. 584-V(7); and that to allow the union officers to compromise or withdraw the case without the knowledge of the individual complainants who are real parties in interest would in effect be a patent subversion of justice and fair play. In its COMMENT, respondent company submits that petitioners have no legal personality nor capacity to question any order or decision emanating from Civil Case No. Q20414 since they are not parties in the said case and should have intervened therein if they have legal interest in the subject matter. We find merit in the petition. The order of the then Court of First Instance dated October 20, 1976 sought to restrain the deputy sheriffs from implementing or enforcing the writ of execution issuedin CIR Case No. 584-V(7). The first question that confronts US is whether or not the Court of First Instance has jurisdiction to restrain the enforcement of the judgment in CIR Case No. 584V(7). The defunct Court of Industrial Relations was vested by law with powers that generally pertain to courts of justice, one of which, is the power to control, in the furtherance of justice, the conduct of its ministerial officers and of all other persons in any manner connected with a case before it. Its successor, the National Labor Relations Commission, through its

Commissioner or any Labor Arbiter, may issue writs of execution requiring a sheriff or a proper officer to execute final decisions, orders, or awards of the Commission, Labor Arbiters or Arbitrators, and appoint sheriffs and take any measure under existing laws and decrees as may be necessary to ensure compliance with their decisions, orders or awards. Within the framework of the facts aforementioned, the Sheriff is undoubtedly acting in his capacity as a ministerial officer of the CIR or the NLRC, as the case may be, and therefore the power of control over him lies in the said agencies. To sanction the assumption by the Court of First Instance of jurisdiction by issuing a restraining order directed against said sheriff, will in effect curtail the powers vested by law with the industrial court or labor agency. chanroblespublishingcompanyThe complaint[9] before the Court of First Instance made particular reference to the fact that there was an existing labor dispute between plaintiff company and the labor union. The Court of First Instance should have exercised caution in issuing the restraining order prayed for, since the very face of the complaint clearly indicate that CIR Case No. 584-V(7) principally involved an employer-employee relationship. The criterion to determine which court has the jurisdiction to issue injunction in labor dispute is whether the acts complained of arose out of, or are connected or interwoven with the cases which fall within the exclusive jurisdiction of the CIR (now vested with the National Labor Relations Commission). To allow the Court of First Instance to pass upon the issue of damages would be to sanction split jurisdiction which is prejudicial to the orderly administration of justice.[10] Furthermore, there was an utter disregard of repeated pronouncement by this Court against grant of ex-parte injunctions and restraining orders. Injunctions in Labor disputes are not favored and may issue only after strict compliance with statutory requirements. Under the circumstances, the Court of First Instance should have dismissed the complaint or at least, should have suspended action thereon until after the labor dispute had beenfinally settled. It must be recalled that the complaint was filled by the company during the pendency of the labor case before the Office of the President. Respondent court acted with grave abuse of discretion amounting to lack of jurisdiction in taking action over the complaint and in issuing a restraining order. chanroblespublishingcompanyArticle 255 of the New Labor Code, as amended by Section 4 of Batas Pambansa Blg. 227, provides: Art. 255. Injunction prohibited. No temporary or permanent injunction or restraining order in any case involving or growing out of labor disputes shall be issued by any court or other entity, except as otherwise provided in Articles 218 and 264 of this Code. chanroblespublishingcompanyUnder Art. 218, of the Code, as amended by Sec. 3, B.P. Blg. 227, the Commission shall have the power and authority to enjoin or restrain any actual or threatened commission of any or all prohibited or unlawful acts in any labor dispute which may cause grave or irreparable damage to any party provided that said injunction shall be issued only after due notice and hearing. chanroblespublishingcompanyUnder Art. 264 of the Code as amended by Sec. 5, B.P. Blg. 227, the Minister of Labor and Employment shall assume jurisdiction or decide a labor dispute which in his opinion is likely to cause strikes or lockouts adversely affecting the national interest or he may certify the same to the commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout. It is therefore crystal clear, that the NLRC which took the place of the defunct CIR has exclusive jurisdiction over all matters and incidents prior to and after a decision has been rendered arising out of and in connection with a labor dispute, thus respondent Court of First Instance cannot enjoin the enforcement of any decision or awards rendered by the Commission. We now come to the issue of whether or not petitioners-members have the necessary legal personality to bring suit against respondents for their (members) failure to intervene in Civil Case No. Q-20414. Although petitionersmembers are not the original parties in Civil Case No. Q-20414, they should not be deprived of their right to question the order of

the Court of First Instance approving the Compromise Agreement since they are the ones who will stand to suffer and will be greatly prejudiced by the dismissal of the case. Petitioners failure to intervene in the Civil Case is not without remedy. They can still avail of the writ of certiorari since the order in question would result in an immediate and direct injury to their respective interests. The labor union as a body does not in reality have a material interest in the outcome of the case. It is indeed the individual members who would be adversely affected in the event of the dismissal of the case after an extended litigation. One would hardly imagine the hardships suffered by the union members during all these years. chanroblespublishingcompanyOur consistent holding that when it comes to individual benefits accruing to members of a union from a favorable final judgment of any court, the members themselves become the real parties in interest and it is for them, rather than for the union, to accept or reject individually the fruits of the litigation. Those who stand to benefit from Our decision are entitled if they so desire, to take advantage thereof regardless of whatever stand the other members otherwise affected thereby may take.It has been held time and again that courts may set aside technicalities, all in the interest of substantial justice.Anent the issue of the validity of the Compromise Agreement allegedly entered into by and between the Union represented by its Secretary, Clarita de la Cruz, and the company, represented by its VicePresident Ricardo Tantongco, the Secretary (now Minister) of Labor held that said agreement is void there being no ratification by the individual members of the union and that the presence of complainants during the proceedings before the Labor Arbiter and the presentation of evidence relative to the prosecution of their case are eloquent indication of their interest in pursuing their claims which negate the assertion that they have consented to the withdrawal thereof. We find no cogent reason to disturb the findings ofthe Secretary of Labor absent any showing of abuse of discretion, it appearing that such findings are supported by substantial evidence. Generally, a judgment on a compromise agreement puts an end to a litigation and is immediately executory. However, the Rules require a special authority before an attorney can compromise the litigation of their clients. The authority to compromise cannot lightly be presumed and should be duly established by evidence.As aptly held by the Secretary of Labor, the records are bereft of showing that the individual members consented to the said agreement. Now were the members informed of the filing of the civil case before the Court of First Instance. If the parties to said agreement acted in good faith, why did they not furnish the Office of the President with a copy of the agreement when they knew all the while that the labor case was then pending appeal therein? Undoubtedly, the compromise agreement was executed to the prejudice of the complainants who never consented thereto, hence, it is null and void. The judgment based on such agreement does not bind the individual members or complainants who are not parties thereto nor signatories therein. Money claims due to laborers cannot be the object of settlement or compromise effected by a union or counsel without the specific individual consent of each laborer concerned. The beneficiaries are the individual complainants themselves. The union to which they belong can only assist them but cannot decide for them. Awards in favor of laborers after long years of litigation must be attended to with mutual openness and in the best of faith.[13] Only thus can we really give meaning to the constitutional mandate of giving laborers maximum protection and security. It is about time that the judgment in Case No. 584-V(7) be fully implemented considering the unreasonable delay in the satisfaction thereof. This unfortunate incident may only weaken the workingmens faith in the judiciarys capacity to give them justice when due.The fact that petitioners ceased to be connected with the company and that reinstatement may no longer be possible is no obstacle to the grant of the money claims to the petitioners considering that the claims had already been adjudicatedby final judgment and all that was being sought is its enforcement. chanroblespublishingcompanyWHEREFORE, the petition is granted. The Decision dated

November 14, 1975 and the October 20, 1976 and December 14, 1977 Orders issued in Civil Case No. Q-20414 are hereby declared NULL and VOID for want of jurisdiction and accordingly set aside. chanroblespublishingcompanyThe Ministry of Labor is hereby directed to cause the implementation of the judgment in CIR Case No. 584-V(7) in accordance with the above pronouncement. Chanroblespublishingcompany.No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 82914 June 20, 1988 KAPATIRAN SA MEAT AND CANNING DIVISION (TUPAS Local Chapter No. 1027), petitioner, vs. THE HONORABLE BLR DIRECTOR PURA FERRER CALLEJA, MEAT AND CANNING DIVISION UNIVERSAL ROBINA CORPORATION and MEAT AND CANNING DIVISION NEW EMPLOYEES AND WORKERS UNITED LABOR ORGANIZATION, respondents. GRIO-AQUINO, J.: The petitioner, Kapatiran sa Meat and Canning Division TUPAS Local Chapter No. 1027) hereinafter referred to as "TUPAS," seeks a review of the resolution dated January 27, 1988 (Annex D) of public respondent Pura Ferrer-Calleja, Director of the Bureau of Labor Relations, dismissing its appeal from the Order dated November 17, 1987 (Annex C) of the Med-Arbiter Rasidali C. Abdullah ordering a certification election to be conducted among the regular daily paid rank and file employees/workers of Universal Robina Corporation-Meat and Canning Division to determine which of the contending unions: a) Kapatiran sa Meat and Canning Division TUPAS Local Chapter No. 1027 (or "TUPAS" for brevity); b) Meat and Canning Division New Employees and Workers United Labor Organization (or "NEW ULO" for brevity); c) No union. shall be the bargaining unit of the daily wage rank and file employees in the Meat and Canning Division of the company. From 1984 to 1987 TUPAS was the sole and exclusive collective bargaining representative of the workers in the Meat and Canning Division of the Universal Robina Corporation, with a 3year collective bargaining agreement (CBA) which was to expire on November 15, 1987. Within the freedom period of 60 days prior to the expiration of its CBA, TUPAS filed an amended notice of strike on September 28, 1987 as a means of pressuring the company to extend, renew, or negotiate a new CBA with it. On October 8, 1987, the NEW ULO, composed mostly of workers belonging to the IGLESIA NI KRISTO sect, registered as a labor union. On October 12, 1987, the TUPAS staged a strike. ROBINA obtained an injunction against the strike, resulting in an agreement to return to work and for the parties to negotiate a new CBA. The next day, October 13, 1987, NEW ULO, claiming that it has "the majority of the daily wage rank and file employees numbering 191," filed a petition for a certification election at the Bureau of Labor Relations (Annex A). TUPAS moved to dismiss the petition for being defective in form and that the members of the NEW ULO were mostly members of the Iglesia ni Kristo sect which three (3) years previous refused to affiliate with any labor union. It also accused the company of using the NEW ULO to defeat TUPAS' bargaining rights (Annex B). On November 17, 1987, the Med-Arbiter ordered the holding of a certification election within 20 days (Annex C). TUPAS appealed to the Bureau of Labor Relations BLR. In the meantime, it was able to negotiate a new 3-year CBA with ROBINA, which was signed on December 3, 1987 and to expire on November 15, 1990. On January 27, 1988, respondent BLR Director Calleja dismissed the appeal (Annex D). TUPAS' motion for reconsideration (Annex E) was denied on March 17, 1988 (Annex F). On April 30, 1988, it filed this petition alleging that the public respondent acted in excess of her jurisdiction and with grave abuse of discretion in affirming the Med-Arbiter's order for a certification election.

After deliberating on the petition and the documents annexed thereto, We find no merit in the Petition. The public respondent did not err in dismissing the petitioner's appeal in BLR Case No. A-12-389-87. This Court's decision inVictoriano vs. Elizalde Rope Workers' Union, 59 SCRA 54, upholding the right of members of the IGLESIA NI KRISTO sect not to join a labor union for being contrary to their religious beliefs, does not bar the members of that sect from forming their own union. The public respondent correctly observed that the "recognition of the tenets of the sect ... should not infringe on the basic right of self-organization granted by the constitution to workers, regardless of religious affiliation." The fact that TUPAS was able to negotiate a new CBA with ROBINA within the 60-day freedom period of the existing CBA, does not foreclose the right of the rival union, NEW ULO, to challenge TUPAS' claim to majority status, by filing a timely petition for certification election on October 13, 1987 before TUPAS' old CBA expired on November 15, 1987 and before it signed a new CBA with the company on December 3, 1987. As pointed out by Med-Arbiter Abdullah, a "certification election is the best forum in ascertaining the majority status of the contending unions wherein the workers themselves can freely choose their bargaining representative thru secret ballot." Since it has not been shown that this order is tainted with unfairness, this Court will not thwart the holding of a certification election (Associated Trade Unions [ATU] vs. Noriel, 88 SCRA 96). WHEREFORE, the petition for certiorari is denied, with costs against the petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 117211 March 1, 1995 PROTECTION TECHNOLOGY, petitioner, vs. HONORABLE SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, MEDARBITER BRIGIDA C. FADRIGON and SAMAHAN NG MANGGAGAWA SA PROTECTIONALLIANCE OF NATIONALIST AND GENUINE LABOR ORGANIZATION (SMPANGLO), respondents. RESOLUTION FELICIANO, J.: On 12 January 1994, private respondent Samahan ng Manggagawa sa Protection Alliance of Nationalist and Genuine Labor Organizations ("Union"), a newly organized union affiliated with a federation, filed a Petition for direct certification or for certification election to determine the exclusive collective bargaining representative of the regular rank and file employees of petitioner Protection Technology Inc. ("Company"), at its Pasay City and Guiguinto, Bulacan offices, with the National Capital Region Med Arbitration Branch, Department of Labor and Employment ("DOLE"). 1 In its Comment on the petition, petitioner Company stated that the Union was not a legitimate labor organization capable of filing the petition because it had failed to submit its books of account with the Bureau of Labor Relations ("BLR") at the time it was registered as a legitimate labor organization. Submission of such documentation is a "mandatory" requirement before a union can exercise the rights and privileges of a legitimate labor organization, pursuant to the Court's ruling in ruling Progressive Development Corporation v. Secretary, Department of Labor and Employment. 2

In an Order dated 14 March 1994, Med Arbiter Brigida C. Fadrigon dismissed the Union's petition and held further that the submission of the books of account, consisting of journals, ledgers and other accounting books, was one of several "preventive measures against commission of fraud" arising from "improper or incorrect recording of union funds, inefficient administration and even malversation of union funds." 3 The Union appealed to the Secretary, DOLE, contending that the Labor Code and Progressive Development"never mentioned journals and ledgers" as part of the documentation requirements for registration of a newly-organized local union. 4 In a Resolution dated 6 July 1994, public respondent DOLE Undersecretary, Bienvenido Laguesma, set aside the Order of the Med Arbiter, holding that the requirement to submit books of account applies only to labor organizations already existing for at least a year. Undersecretary Laguesma ordered the holding of a certification election at petitioner's establishment with the following as choices: (1) the Union; and (2) no union. He also took note of the Union's submission of one sheet of paper captioned a "Statement of Income and Expenses for the month ended September 28, 1993." This "Statement" contained only one entry: "Cash on hand P590.00;" the sheet was certified correct by the Union secretary, attested by the Union president and duly subscribed. 5 Petitioner's motion for reconsideration therefrom having been unsuccessful, it is now before the Court on Petition for Certiorari with prayer for a temporary restraining order (TRO), seeking annulment of the Resolution and Order of the public respondent DOLE Undersecretary as products of grave abuse of discretion. 6 In a Resolution dated 19 October 1994, the Court required the respondents to comment upon the Petition. On 9 November 1994, after the Union had filed its Comment and prior to the filing of public respondent's Comment, the Court issued a TRO upon petitioner's posting of a sufficient cash bond. 7 This notwithstanding, the certification election was conducted on 10 November 1994 in the presence and under the supervision of DOLE representation officers. 8 Of the fifty-eight (58) votes validly cast, the Union obtained fifty-three (53) votes. 9 In a Manifestation dated 17 November 1994, the Union prayed that the main Petition should be considered moot and academic since the results of the certification election showed that an "overwhelming majority" of the employees had chosen it to be their collective bargaining representative vis-a-vis management. 10 Upon the other hand, in a Manifestation and Motion dated 25 November 1994, the Company moved that public respondents be "admonished" for hastily conducting the certification election, "just to accommodate" the Union. 11 The Court required public and private respondents to comment on the Company's Manifestation and Motion. 12 Pending receipt of such comments, the Court will deal with the merits of the Petition for Certiorari, that is, whether or not the Undersecretary's decision to grant the Union's petition for a certification election constituted a grave abuse of discretion correctible on certiorari. In its Petition for Certiorari, the Company contends that the statement of income and expenses submitted by the Union is actually an annual financial statement which is required, under Articles 234 and 241(1-1) of the Labor Code, to be submitted by unions organized and existing for a period of at least one year or more prior to the filing of their application for registration as a legitimate labor organization. Having reference to ordinary accounting practice, the Company continues, such document cannot possibly be the "books of account" demanded both by the Progressive Development Corporation case and by Section 3, Rule 2 of the Omnibus Rules Implementing the Labor Code, as a prerequisite for due registration of a newly organized union affiliated with a federation. 13 Undersecretary Laguesma, through the Solicitor-General, on the other hand, contends that submission of the statement of income and expenses is "substantial compliance" with the requirements of the law for the registration of labor organizations because a newly organized union like the private respondent, which had been operating for just four (4) months prior to the filing of its application for registration with the BLR, was in no position to submit books of

account, for "it (had) no daily transaction to be entered everyday in the books except the receipt of union dues from its members which are remitted to it only during certain periods of time." 14 Undersecretary Laguesma argues further that the juridical existence of the Union as a legitimate labor organization had commenced from the moment its application for registration was approved; "its subsequent non-compliance with the requirements of the Labor Code relative to the keeping of books of account, if at all, would only be a ground for the cancellation of its registration." Until such due cancellation is made, Laguesma argues, the Union is not to be prevented from exercising its rights, powers and privileges as a legitimate labor organization. 15 The Union, in its own Comment on the Petition, adds that the DOLE Undersecretary's factual findings and administrative interpretation of the Labor Code and its Implementing Rules, an area within his special expertise and arrived at by him after "a thorough and extensive examination of the entire records of the case," is entitled to great respect by the courts and "should no longer be subject to the review of this Honorable Supreme Court." 16 Deliberating upon the present Petition for Certiorari, the Court considers that petitioner Company has shown that public respondent DOLE Undersecretary had indeed committed a grave abuse of discretion, amounting to an act without or in excess of jurisdiction, in rendering his assailed Resolution and Order granting the Petition for the holding of a certification election. The principal issue here posed is whether books of account, consisting of ledgers, journals and other accounting books, form part of the mandatory documentation requirements for registration of a newly organized union affiliated with a federation, or a local or chapter of such a federation, as a legitimate labor organization. The above issue was addressed several years ago and answered in the affirmative by this Court in Progressive Development Corporation v. Secretary, DOLE. 17 There, the Court said: In the case of union affiliation with a federation , the documentary requirements are found in Rule II Section 3(e), Book V of the Implementing Rules, which we again quote as follows: (c) The local or chapter of a labor federation or national union shall have and maintain a constitution and by-laws, set of officers and books of accounts. For reporting purposes, the procedure governing the reporting of independently registered unions, federations or national unions shall be observed. Since the "procedure governing the reporting of independently registered unions" refers to the certification and attestation requirements contained in Article 235, paragraph 2, it follows that the constitution and by-laws, set of officers and books of accounts submitted by the local and chapter must likewise comply with these requirements. The same rationale for requiring the submission of duly subscribed documents upon union registration exists in the case of union affiliation. Moreover, there is greater reason to exact compliance with the certification and attestation requirements because, as previously mentioned, several requirements applicable to independent union registration are no longer required in the case of the formation of a local or chapter. The policy of the law in conferring greater bargaining power upon labor unions must be balanced with the policy of providing preventive measures against the commission of fraud. A local or chapter therefore becomes a legitimate labor organization only upon submission of the following to the BLR: 1) A chapter certificate within 30 days from its issuance by the labor federation or national union, and 2) The constitution and by-laws, a statement on the set of officers and the books of accounts all of which are certified under oath by the secretary or treasurer, as the case may be, of such local or chapter, and attested to by its president . Absent compliance with these mandatory requirements, the local or chapter does not become a legitimate labor organization.

In the case at bar, the failure of the secretary of PDEU-Kilusan to certify the required documentsunder oath is fatal to its acquisition of a legitimate status.Non-submission of such books of account certified by and attested to by the appropriate officer is a ground which the employer can invoke legitimately to oppose a petition for certification election filed by the local or chapter concerned. Although the federation with which the Union is affiliated submitted documents purporting to show that the latter had offered books of account to support its (the Union's) application for registration as a legitimate labor organization, what had been actually submitted to the BLR by the Union was a mere "financial statement," 19 a generous description considering the sheet of paper in fact submitted by the Union. Books of account are quite different in their essential nature from financial statements. In generally accepted accounting practice, the former consist of journals, ledgers and other accounting books (which are registered with the Bureau of Internal Revenue) containing a record of individual transactions wherein monies are received and disbursed by an establishment or entity; entries are made on such books on a day-to-day basis (or as close thereto as is possible). Statements of accounts or financial reports, upon the other hand, merely summarize such individual transactions as have been set out in the books of account and are usually prepared at the end of an accounting period, commonly corresponding to the fiscal year of the establishment or entity concerned. 20Statements of account and financial reports do not set out or repeat the basic data ( i.e., the individual transactions) on which they are based and are, therefore, much less informative sources of cash flow information. Books of account are kept and handled by bookkeepers (employees) of the company or agency; financial statements may be audited statements, i.e., prepared by external independent auditors (certified public accountants). It is immaterial that the Union, having been organized for less than a year before its application for registration with the BLR, would have had no real opportunity to levy and collect dues and fees from its members which need to be recorded in the books of account. Such accounting books can and must be submitted to the BLR, even if they contain no detailed or extensive entries as yet. The point to be stressed is that the applicant local or chapter must demonstrate to the BLR that it is entitled to registered status because it has in place a system for accounting for members' contributions to its fund even before it actually receives dues or fees from its members. The controlling intention is to minimize the risk of fraud and diversion in the course of the subsequent formation and growth of the Union fund. The public respondent Undersecretary thus acted arbitrarily in disregarding the plain terms of the Omnibus Implementing Rules (Section 3(e), Rule III Book V, Omnibus Rules Implementing the Labor Code), and as well the rule laid down by this court in the Progressive Development Corporation case. The statutory and regulatory provisions defining the requirements of registration of legitimate labor organizations are an exercise of the overriding police power of the State, designed for the protection of workers against potential abuse by unions and federations of unions that recruit them. 21 This purpose is obviously defeated if the registration requirements are relaxed arbitrarily by the very officials supposed to administer such requirements and registered status extended to an organization not entitled to such status, as in the case at bar. The Court is not closing its eyes to the certification election actually, if precipitately, held in this case notwithstanding the prior issuance of the temporary restraining order of this Court. So far as the record of this case is concerned, that certification election was held in the presence of representatives of the DOLE and presumably reflected the free and democratic will of the workers of petitioner Company. The Court will not set aside that will, in the absence of compelling reasons to do so. Nevertheless, private respondent Union must comply with all the requirements of registration as a legitimate labor organization before it may enjoy the fruits of its certification election victory and before it may exercise the rights of a legitimate labor organization . Registration is a

condition sine qua non for the acquisition of legal personality by a labor organization and the exercise of the rights and privileges granted by law to legitimate labor organizations. 22 We hold, therefore, that private respondent Union must submit its books of account certified under oath by its treasurer and attested to by its president before such Union may demand recognition by the Company as exclusive bargaining agent of the members of the bargaining unit and before the Union may exercise any of the rights pertaining to such an agent. ACCORDINGLY, the Court Resolved to DISMISS the Petition for Certiorari for having become moot and academic and to LIFT the Temporary Restraining Order issued by this Court dated 9 November 1994. However, private respondent Union is hereby ENJOINED from exercising the rights and privileges of a legitimate labor organization and duly authorized collective bargaining representative UNTIL it shall have submitted the required books of account, duly certified and attested, with the Bureau of Labor Relations. This Resolution shall be without prejudice to the liability, if any, which public and private respondents may have incurred in connection with their alleged failure to comply with the Court's Temporary Restraining Order dated 9 November 1994. The Court hereby REITERATES its Resolution dated 18 January 1995 requiring public and private respondents to comment on the petitioner Company's Manifestation and Motion dated 25 November 1994 within ten (10) days from notice hereof.

Republic of the Philippines SUPREME COURT G.R. No. L-87672 October 13, 1989 WISE AND CO., INC., petitioner, vs. WISE & CO., INC. EMPLOYEES UNION-NATU AND HONORABLE BIENVENIDO G. LAGUESMA, in his capacity as voluntary Arbitrator, respondents. GANCAYCO, J.: The center of controversy in this petition is whether the grant by management of profit sharing benefits to its non-union member employees is discriminatory against its workers who are union members. The facts are undisputed. On April 3,1987 the management issued a memorandum circular introducing a profit sharing scheme for its managers and supervisors the initial distribution of which was to take effect March 31, 1988. On July 3,1987 the respondent union wrote petitioner through its president asking for participation in this scheme. This was denied by petitioner on the ground that it had to adhere strictly to the Collective Bargaining Agreement (CBA). In the meantime, talks were underway for early negotiation by the parties of the CBA which was due to expire on April 30, 1988. The negotiation thus begun earlier than the freedom period. On November 11, 1987 petitioner wrote respondent union advising the latter that they were prepared to consider including the employees covered by the CBA in the profit sharing scheme beginning the year 1987 provided that the ongoing negotiations were concluded prior

to December 1987. However, the collective bargaining negotiations reached a deadlock on the issue of the scope of the bargaining unit. Conciliation efforts to settle the dispute on 29 March 1988 were made but no settlement was reached. On March 30, 1988, petitioner distributed the profit sharing benefit not only to managers and supervisors but also to all other rank and file employees not covered by the CBA. This caused the respondent union to file a notice of strike alleging that petitioner was guilty of unfair labor practice because the union members were discriminated against in the grant of the profit sharing benefits. Consequently, management refused to proceed with the CBA negotiations unless the last notice of strike was first resolved. The union agreed to postpone discussions on the profit sharing demand until a new CBA was concluded. After a series of conciliation conferences, the parties agreed to settle the dispute through voluntary arbitration. After the parties submitted their position papers, a rejoinder and reply, on March 20,1989 the voluntary arbitrator issued an award ordering petitioner to likewise extend the benefits of the 1987 profit sharing scheme to the members of respondent union. 1 Hence, this petition wherein petitioner alleged the following grounds in support thereof I THE HONORABLE VOLUNTARY ARBITRATOR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN HE ORDERED THE EXTENSION OF PROFIT SHARING BENEFITS TO THOSE EMPLOYEES COVERED BY THE CBA DESPITE PATENT LACK OF FACTUAL AND LEGAL BASIS THEREFOR IN THAT1. DISCRIMINATION PER SE IS NOT UNLAWFUL ESPECIALLY WHEN THE EMPLOYEES ARE NOT SIMILARLY SITUATED. 2. THE TERMS AND CONDITIONS STIPULATED IN THE CBA HAVE THE FORCE AND EFFECT OF A LAW BETWEEN THE PARTIES. PRIVATE RESPONDENT, THEREFORE CANNOT DEMAND, AS A MATTER OF RIGHT, WHAT IS NOT STIPULATED IN THE CBA. 3. THE ACT OF THE UNION IN NEGOTIATING FOR THE INCLUSION OF THE PROFIT SHARING BENEFIT IN THE PRESENT CBA IS AN IMPLIED ADMISSION THAT THEY WERE NOT ENTITLED TO IT IN 1987. II THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN HE MADE THE CLEARLY BASELESS CONCLUSION THAT THE PETITIONER WAS MOTIVATED BY ITS DESIRE TO DEFEAT OR OTHERWISE PREJUDICE THE BASIC RIGHTS OF ITS EMPLOYEES. 2 The petition is impressed with merit. Under the CBA between the parties that was in force and effect from May 1, 1985 to April 30,1988 it was agreed that the "bargaining unit" covered by the CBA "consists of all regular or permanent employees, below the rank of assistant supervisor, 3 Also expressly excluded from the term "appropriate bargaining unit" are all regular rank and file employees in the office of the president, vice-president, and the other offices of the company personnel office, security office, corporate affairs office, accounting and treasurer department . 4 It is to this class of employees who were excluded in the "bargaining unit" and who do not derive benefits from the CBA that the profit sharing privilege was extended by petitioner. There can be no discrimination committed by petitioner thereby as the situation of the union employees are different and distinct from the non-union employees. 5 Indeed, discrimination per se is not unlawful. There can be no discrimination where the employees concerned are not similarly situated. Respondent union can not claim that there is grave abuse of discretion by the petitioner in extending the benefits of profit sharing to the non-union employees as they are two (2) groups not similarly situated. These non-union employees are not covered by the CBA. They do not derive and enjoy the benefits under the CBA.

The contention of the respondent union that the grant to the non-union employees of the profit sharing benefits was made at a time when there was a deadlock in the CBA negotiation so that apparently the motive thereby was to discourage such non-union employees from joining the union is not borne by the record. Petitioner denies this accusation and instead points out that inspite of this benefit extended to them, some non-union workers actually joined the respondent union thereafter. Respondent union also decries that no less than the president of the petitioner agreed to include its members in the coverage of the 1987 profit sharing benefit provided that they would agree to an earlier negotiation for the renewal of the CBA which expired in 1988. Be this as it may, since there was actually a deadlock in the negotiation and it was not resolved and consummated on the period expected, private respondent can not now claim that petitioner has a duty to extend the profit sharing benefit to the union members. The Court holds that it is the prerogative of management to regulate, according to its discretion and judgment, all aspects of employment. This flows from the established rule that labor law does not authorize the of the employer in the conduct of its business. 6 such management prerogative may be availed of without fear of any liability so long as it is exercised in good faith for the advancement of the employers' interest and not for the purpose of defeating or circumventing the rights of employees under special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite. 7 The grant by petitioner of profit sharing benefits to the employees outside the "bargaining unit" falls under the ambit of its managerial prerogative. It appears to have been done in good faith and without ulterior motive. More so when as in this case there is a clause in the CBA where the employees are classified into those who are members of the union and those who are not. In the case of the union members, they derive their benefits from the terms and conditions of the CBA contract which constitute the law between the contracting parties. 8 Both the employer and the union members are bound by such agreement. However, the court serves notice that it will not hesitate to strike down any act of the employer that tends to be discriminatory against union members. It is only because of the peculiar circumstances of this case showing there is no such intention that this court ruled otherwise. WHEREFORE, the petition is GRANTED and the award of respondent Voluntary Arbitrator dated March 20,1989 is hereby REVERSED AND SET ASIDE being null and void, without pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 102672 October 4, 1995 PANAY ELECTRIC COMPANY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION AND PANAY ELECTRIC COMPANY EMPLOYEES AND WORKERS ASSOCIATION, respondents. VITUG, J.: In this petition for certiorari, petitioner Panay Electric Company, Inc., seeks to set aside the questioned resolution of the National Labor Relations Commission ("NLRC") in granting separation benefits to Enrique Huyan and Prescilla Napiar, in awarding moral and exemplary damages to Enrique Huyan, and in merely sanctioning the suspension, instead of terminating the employment status, of other officers and members of respondent labor union. Here following is a factual backdrop of the case. On 30 October 1990, petitioner Panay Electric Company, Inc., posted in its premises a notice announcing the need for a "Report Clerk" who could assume the responsibility of gathering accounting and computer data at its power plant. The position was open to any employee, "with Pay Class V," of petitioner company. When nobody applied for the position, the EDP/Personnel Manager recommended Enrique Huyan who was at the time an Administrative Personnel Assistant at the head office. Huyan was then also a Vice President of respondent union. The recommendation was approved by the company's President and General Manager. In a letter, dated 09 November 1990, Enrique Huyan informed petitioner that he was not interested in accepting the new position. He gave the following reasons: a. The manner or procedure of implementing this notice of transfer is skeptical since from Administrative Personnel Assistant to Report Clerk is apparently a demotion in my part. b. The position of Report Clerk is Pay Class III per our Organizational Chart. c. Being the Vice-President of PECEWA, my transfer would certainly hinder my function in settling labor matters and other problems with other PECEWA Officers. d. Currently, the activation of geothermal power plant in Palimpinon, Negros had gave rise to additional displaced workers in which my transfer would be another onus to the Power Plant supervisor and my lack of technical knowhow, I presumed would obstruct the flow of operation in the said department. 1 On 20 November 1990, the EDP/Personnel Manager required Huyan to explain within 48 hours why no disciplinary action should be taken against him for gross insubordination and for failure to follow the General Manager's approved directive. Eventually, on 03 December 1990, Huyan was given a "notice of dismissal" for: 1. Failure to comply with the GM's general directive of 11/9/90 to a new assigned task in the Power Plant;

2. Failure to comply with your direct superior's (AO) verbal directive to proceed to the Power Plant 11/10/90 & 11/19/90; 3 Failure to comply with the undersigned's, as personnel manager, verbal directive to proceed to the Power Plant last 11/16/90; 4. Continued & unauthorized entry & use of the Personnel Section & property from 11/16/90 up to the present; (and) 5. Failure to report to your assigned task in the Power Plant for a period of more than seven consecutive days from November 16, 1990 up to the present. 2 An administrative investigation was conducted; thereafter, Huyan was ordered dismissed effective 10 December 1990. Respondent union, on 20 December 1990, filed a notice of strike. On 02 January 1990, a strike vote was taken where 113 out of 149 union members voted; the result showed 108 "yes" votes, 1 "no" vote, and 4 abstentions. On 22 January 1991, the union went on strike. Forthwith, the company filed a petition to declare the strike illegal. On 25 January 1991, upon receipt of an order from the Secretary of Labor and Employment certifying the dispute to the NLRC, the union lifted its strike and, on the day following, the striking employees, including Huyan, reported for work. In its position paper and memorandum before the NLRC, the union averred that the real reason for ordering the transfer of Huyan was to penalize him for his union activities, particularly for being the suspected "Mao," author of the column "Red Corner," in the Union's New Digest which featured an item on alleged wrongdoings by top company officials at the power plant; that in a letter, dated 10 October 1990, addressed by the Company's Operation Manager to the General Manager, it was suggested that an investigation of "Mao's" real identity be conducted and, once ascertained, to have him dismissed from the company; that the company had singled out Huyan for transfer to the power plant; that the Personnel Manager's recommendation for such transfer was made without Huyan's prior knowledge; that upon learning of his impending reassignment, Huyan requested for a reconsideration but the Personnel Manager did not bother to reply, that the transfer of Huyan was a demotion; and that, per the Company's Code Offenses, the "insubordination" charged was punishable with dismissal only after a fourth commission of the offense. Petitioner company, in turn, maintained that Huyan's inexplicable refusal to assume his new position was an act of insubordination for which reason he was aptly dismissed; that the company's directive was a valid exercise of management prerogative; that in declaring a strike, the Union, including its officers and members, committed a serious breach of the "no strike, no lock out clause," of the Collective Bargaining Agreement ("CBA"); and that during the strike, illegal acts were committed by the union officers and members, e.g., a) . . . union director Rey Espinal blocked the service vehicle of PECO collectors Domingo Tabobo and James Russel Balin, hurled invectives at them and challenged them to fight. b) . . . union (vice-president) Prescilla Napiar, together with union member Ma. Teresa Cruz approached PECO messenger Douglas Legada . . . and snatched from him the envelope containing . . . passbooks. c) when PECO employees Carlos Miguel Borja and Joemar Paloma were on their way to deliver bank passbook to PECO messengers riding in the car of Willy Hallares, union (vicepresident) Prescilla Napiar blocked their way at the gate and demanded that the car be inspected for PECO bills. An unidentified union member placed a big stone against the right front tire. Union auditor, Allen Aquino insisted on inspecting the glove compartment of the car. 3 The NLRC, in its resolution of 18 October 1991, concluded: WHEREFORE, in view of all the foregoing, we resolve as follows: 1. We find the strike conducted by the Union from January 22 to 25, 1991 to be illegal as the same was staged in violation of the no strike, no lock-out clause in the Collective Bargaining Agreement existing between the parties and also because the same disregarded the grievance procedure.

2. Enrique Huyan and Prescilla Napiar are deemed to have lost their employment status but they shall be entitled to separation benefits under the CBA, or one (1) month pay for every year of service, whichever is higher. Further, Enrique Huyan shall be paid the wages withheld from him, moral damages in the sum of TWENTY FIVE THOUSAND (P25,000.00) PESOS and exemplary damages in the amount of TEN THOUSAND (P10,000.00) PESOS. 3. Rey Espinal and Allen Aquino are penalized by suspension for THREE (3) months. 4. The other officers of the Union, namely: Nieva Glenna Abeto, Noel Orquinaza, Alex Atutubo, Federico Anatado, and Efren Lopez are penalized with suspension for ONE (1) month. No pronouncement as to costs. SO ORDERED. 4 Petitioner assails NLRC's decision insofar as it has adjudged monetary awards to private respondents Huyan and Napiar and in not sanctioning the dismissal of other union officers and members. We begin by restating the well-settled rule that the findings of fact of the NLRC, except when there is a grave abuse of discretion committed by it, are practically conclusive on this Court. 5 It is only when NLRC's findings are bereft of any substantial support from the records that the Court can step in and proceed to make its own and independent evaluation of the facts. In rejecting petitioner's theory, the NLRC, in a carefully considered assessment, said: The company's contention that the decision to transfer Huyan was done in the normal course of business cannot be sustained in the light of the attendant circumstances. We note that the request of the Company's Operations Manager which was used as the basis for Huyan's transfer was made as early as June 18, 1990 but it was acted only on October 15, 1990 as shown by the handwritten notations thereon changing the designation of Computer Data Clerk to Report Clerk. Perhaps, it may only be a pure coincidence that such action came a few days after the Operations Manager made a strong recommendation to the General Manager to investigate and find out who "MAO" is and to have him dismissed.The company argues that, contrary to the Union's claim, Huyan was not being singled out as shown by the fact that there was an announcement posted in all bulletin boards of the Company inviting applications for the position of Report Clerk at the power plant. On its face, this circumstance may indeed show bona fides on the part of the Company. However, the announcement limited those who are qualified to employees in the Pay Class V only and there were only 6 or 7 employees in the entire work force that can qualify. Again, maybe it is purely coincidental that Enrique Huyan was one of those in the Pay Class V. The point is, what is the logic and rationale behind posting a general announcement when the Company fully knows that only 6 or 7 out of over a hundred employees can qualify? To Our mind, the posting of the announcement stands out as evidence of the Company's attempt to camouflage its plan to target Huyan. Not only that, even the Company's EDP/Personnel Manager admitted in his testimony that only Huyan had the best qualifications among the Pay Class V employees, thus: The conclusion is irresistible that even before the announcement was posted, the Company, or at least the EDP/Personnel Manager, knew that it was Huyan who will be transferred. After all, when the Company limited the choice to the Pay Class V employees, it can be assumed that the Company had already reviewed their qualifications. That indeed the plan was directed against Huyan is made more evident by the fact that the EDP/Personnel Manager did not even discuss the matter of the transfer with Huyan before, and even after, making his recommendation. This circumstance does not exactly speak well of the way the personnel policies of the company is being managed. It simply shows that the concern for the well-being and welfare of its employees is sorely lacking. It reduces the employees to mere pawns that can be sacrificed whenever the Company or its managers feel like it. We cannot understand why the Company will dispensed with this elementary courtesy on a very important matter affecting the work and even the future of the employee. This, by itself, is more than sufficient evidence to show the arbitrariness of the Company's decision to transfer Huyan.

We cannot also blame Huyan if he felt, at that time, that he was being demoted. The announcement did not state that the position of Report Clerk which was formerly Pay Class III had already been upgraded to Pay Class V. Of course, it may be argued that because only those employees with Pay Class V are qualified it follows that the position of Report clerk must be at least Pay Class V. However, it is the Company's fault that it did not clarify this matter in the announcement. Perhaps had the EDP/Personnel Manager discussed the matter with Huyan before reassigning the latter, the misunderstanding could have been avoided. In fact, from Huyan's letter to the EDP/Personnel Manager, it can be deduced that he did not know about the upgrading of the position. The least that the EDP/Personnel Manager could have done was to clarify the matter upon receipt of Huyan's letter. However, it would appear that the EDP/Personnel Manager was concerned of enforcing his recommendation to transfer Huyan more than anything else. As to the subsequent dismissal of Huyan, the grounds therefor arose out of the disputed transfer. There was never any official written notice addressed to Huyan concerning his reassignment. The Company's evidence consists simply of the approved Memorandum from the EDP/Personnel Manager to the General Manager, a copy of which was furnished to the Union and Huyan. Why no official notice was ever given to Huyan baffles Us. Even granting for the sake of argument that such is a mere formality, it betrays the insensitivity of the Company for its employee for it expects him to rely on and act upon a piece of paper that is not even addressed to him. Circumstances like this, no matter how trivial, indicate the propensity of the Company to disregard the feelings of its employees. To top it all, the Company saw no need to respond to Huyan's letter for reconsideration which was courteous and respectful. We grant that Huyan did not comply with the directives of the EDP/PersonnelManager to transfer. However, We find that his refusal to do so was not without reason or justification. As We see it, Huyan did not have it in his mind to be defiant, otherwise he would not have written his superior seeking reconsideration. He had to stand up for his rights and rightly so, considering the treatment he received. To Our mind, therefore, in the context of the antecedent circumstances there was no serious misconduct or willful disobedience committed by Huyan that would warrant his dismissal. It is as if he was provoked into resisting by what he believed was an affront to his dignity as a union officer and as a human being. Neither could there be abandonment, as this concept is understood in termination disputes. Be that as it may, we cannot sustain the charge of unfair labor practice against the Company. As admitted by Huyan and the Union, the principal cause behind this controversy is the Company's suspicion that Huyan was "MAO." That Huyan was the Union vice-president was purely incidental. Put in another way, any employee who was suspected of being "MAO" would have been the object of the Company's moves, irrespective of whether that employee is a union officer or not. Huyan was not pinpointed because he was a union officer or because the Company is anti-union but rather because of the suspicion that he wrote the column that caught the ire of the company's Operations Manager. No matter how detestable, the resultant moves of the company cannot be considered unfair labor practice. On the basis of the foregoing, we rule that while the conduct of the company cannot be strictly considered an unfair labor practice, still, the exercise of its management prerogative cannot be sustained. The dismissal of Enrique Huyan, is illegal. Ordinarily, when there is a finding of illegal dismissal, under Article 279 of the Labor Code, the employee is entitled to reinstatement and the payment of his backwages. However, in the case at bar, we are of the opinion that reinstatement cannot be ordered not only because of the strained relationship between the parties herein but also because Huyan's conduct as a union officer leaves much to be desired . ... Considering also the motivations and actuations of the company in orchestrating the transfer and dismissal of Huyan, we shall award Moral Damages in the sum of TWENTY FIVE THOUSAND (P25,000.00) PESOS, and Exemplary Damages in the amount of TEN THOUSAND (P10,000.00) PESOS. After all Huyan's dismissal was tainted with bad faith and

the motive of the Company for dismissing Huyan was far from noble as shown by the circumstances surrounding the dismissal. The Company and its managers are admonished to change their attitude and manner in dealing with their employees, especially in matters such as this. . . . The absence of good faith or the honest belief that the company is committing Unfair Labor Practice, therefore, is what inclines us to rule that the strike conducted by the union from January 22 to 25, 1991 is illegal for being in violation of the "no strike, no lock-out" proviso and the failure to bring the Union's grievance under the grievance procedure in the CBA. 6 The State guarantees the right of all workers to self-organization, collective bargaining and negotiations, as well as peaceful concerted activities, including the right to strike, in accordance with law. 7 The right to strike, however, is not absolute. It has heretofore been held that a "no strike, no lock-out" provision in the Collective Bargaining Agreement ("CBA") is a valid stipulation although the clause may be invoked by an employer only when the strike is economic in nature or one which is conducted to force wage or other concessions from the employer that are not mandated to be granted by the law itself. 8 It would be inapplicable to prevent a strike which is grounded on unfair labor practice. In this situation, it is not essential that the unfair labor practice act has, in fact, been committed; it suffices that the striking workers are shown to have acted honestly on an impression that the company has committed such unfair labor practice and the surrounding circumstances could warrant such a belief in good faith. 9 In the instant case, the NLRC found Enrique Huyan and Prescilla Napiar, the "principal leaders" of the strike, not to have acted in good faith. The NLRC said: It is bad enough that the Union struck despite the prohibition in the CBA. What is worse is that its principal leaders, Napiar and Huyan, cannot honestly claim that they were in good faith in their belief that the Company was committing unfair labor practice. The absence of good faith or the honest belief that the Company is committing Unfair Labor Practice, therefore, is what inclines us to rule that the strike conducted by the Union from January 22 to 25, 1991 is illegal for being in violation of the "no strike, no lock-out" proviso and the failure to bring the union's grievances under the grievance procedure in the CBA. It must be borne in mind that prior to the dismissal of Huyan, there was sufficient time to have the matter of Huyan's transfer subjected to the grievance procedure. That the Union considered the procedure an exercise in futility is not reason enough to disregard the same given the circumstances in this case. Whatever wrong the Union felt the Company committed cannot be remedied by another wrong on the part of the Union. 10 Given its own above findings, the NLRC's grant of separation benefits and damages to Huyan and Napiar would indeed appear to be unwarranted. Article 264, Title VIII, Book V, of the Labor Code provides that "(a)ny union officer who knowingly participates in an illegal strike and any worker or union officer whoknowingly, participates in the commission of illegal acts during a strike may be declared to have lost his employment status." In the case of the other union officers, however, the NLRC, having found no sufficient proof to hold them guilty of "bad faith" in taking part in the strike or of perpetrating "serious disorders" during the concerted activity, merely decreed suspension. We see no grave abuse of discretion by the NLRC in this regard and in not thus ordering the dismissal of said officers. Finally, in the case of Huyan, we sustain the NLRC in holding that he, during the period of his illegal suspension(from 09 November 1990 when he was effectively suspended until 25 January 1991 when he, along with the striking employees, were directed by the Secretary of Labor and Employment to return to the work premises), should be entitled to back salaries and benefits plus moral damages, but in the reduced amount of P10,000.00, in view of the findings of the NLRC, with which we concur, that petitioner company acted arbitrarily in its decision to transfer Huyan. Exemplary damages, upon the other hand, are awarded only when a person acts in a wanton, fraudulent, reckless, oppressive or malevolent manner (Art. 2232, Civil Code). NLRC's findings fall short of the underhandedness required so as to justify this award.

WHEREFORE, all considered, the questioned decision of public respondent NLRC, dated 18 October 1991, is hereby MODIFIED in that the award of separation benefits in favor of Enrique Huyan and Prescilla Napiar is DELETED; the award to Huyan of moral damages is REDUCED to P10,000.00; and the grant of exemplary damages is DELETED. The decision is AFFIRMED in all other respects. No special pronouncement on costs. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 103560 July 6, 1995 GOLD CITY INTEGRATED PORT SERVICE, INC. (INPORT), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fifth Division) ADELO EBUNA, EMMANUEL VALMORIDA, RODOLFO PEREZ, ROGER ZAGADO, MARCOS GANZAN, AND REY VALLE, (WILFREDO DAHAN, ROGELIO VILLAFUERTE, WILFREDO AMPER, RICARDO ABA, YOLITO AMBUS, FIDEL CALIO, VICENTE CAHATOL, SOTECO CUENCA, NICOLAS DALAGUAN, BALBINO FAJARDO, ROLANDO JAMILA, RICARDO LAURETO, RUDY LAURETO, QUIRICO LEJANIO, OSCAR LAPINIG, FELIPE LAURETE, JESUSTUDY OMISOL, ZOSIMO OMISOL, PEDRO SUAREZ, SATURNINO SISIBAN and MANUEL YANEZ), respondents. G.R. No. 103599 July 6, 1995 ADELO EBUNA, WILFREDO DAHAN, RICARDO LAURETO, REY VALLE, VICENTE CAHATOL, MARCOS GANZAN, RODOLFO PEREZ, ROEL SAA, ROGELIO VILLAFUERTE, MANUEL YANEZ, WILFREDO AMPER, QUIRECO LEJANO, EMMANUEL VALMORIA, ROLANDO JAMILLA, NICOLAS DALAGUAN, BALBINO FAJARDO, PEDRO SUAREZ, ELPIDIO ESTROGA, RUBEN PAJO, JESUSTODY OMISOL, RICARDO ABA, FIDEL CALIO, SATURNINO SESYBAN, RUDY LAURETO, OSCAR LAPINIG, FELIPE LAURENTE,

ROGER ZAGADO, SOTECO CUENCA, FIDEL ESLIT, ZOSIMO OMISOL, ANGEL BERNIDO, and MICHAEL YAGOTYOT, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, FIFTH DIVISION, and GOLD CITY INTEGRATED PORT SERVICES, INC. (INPORT), respondents. ROMERO, J.: Should separation pay and backwages be awarded by public respondent NLRC to participants of an illegal strike? This is the core issue to be decided in these two petitions. Gold City Integrated Port Service, Inc. (INPORT) filed a petition for certiorari against the National Labor Relations Commission (NLRC) assailing the latter's decision in "Gold City Integrated Port Services, Inc. v. Adelo Ebuna, et al." (NLRC RAB X Case No. 5-0405-85) with twenty-seven private respondents (G.R. No. 103599). 1 This petition has been consolidated with G.R. No. 103599 where the petitioners are the private respondents in instant case and the private respondent is INPORT. For the sake of clarity, INPORT shall be denominated in the case at bench as the petitioner and the employees as private respondents. Instant case arose from the following facts: Early in the morning of April 30, 1985, petitioner's employees stopped working and gathered in a mass action to express their grievances regarding wages, thirteenth month pay and hazard pay. Said employees were all members of the Macajalar Labor Union Federation of Free Workers (MLU-FFW) with whom petitioner had an existing collective bargaining agreement. Petitioner was engaged in stevedoring and arrastre services at the port of Cagayan de Oro. The strike paralyzed operations at said port. On the same morning, the strikers filed individual notices of strike ("Kaugalingon nga Declarasyon sa Pag-Welga") with the then Ministry of Labor and Employment. With the failure of conciliation conferences between petitioner and the strikers, INPORT filed a complaint before the Labor Arbiter for Illegal Strike with prayer for a restraining order/preliminary injunction. On May 7, 1985, the National Labor Relations Commission issued a temporary restraining order. Thereafter, majority of the strikers returned to work, leaving herein private respondents who continued their protest. 2 Counsel for private respondents filed a manifestation that petitioner required prior screening conducted by the MLU-FFW before the remaining strikers could be accepted back to work. Meanwhile, counsel for the Macajalar Labor Union (MLU-FFW) filed a "Motion to Drop Most of the Party Respondents From the Above Entitled Case." The 278 employees on whose behalf the motion was filed, claimed that they were duped or tricked into signing the individual notices of strike. After discovering this deception and verifying that the strike was staged by a minority of the union officers and members and without the approval of, or consultation with, majority of the union members, they immediately withdrew their notice of strike and returned to work. The petitioner INPORT, not having interposed any objection, the Labor Arbiter, in his decision dated July 23, 1985, granted their prayer to be excluded as respondents in the complaint for illegal strike. Moreover, petitioner's complaint was directed against the 31 respondents who did not return to work and continued with the strike. For not having complied with the formal requirements in Article 264 of the Labor Code, 3 the strike staged by petitioner's workers on April 30, 1985 was found by the Labor Arbiter to be illegal. 4 The workers who participated in the illegal strike did not, however, lose their employment, since there was no evidence that they participated in illegal acts. After noting that petitioner accepted the other striking employees back to work, the Labor Arbiter held that the private respondents should similarly be allowed to return to work without having to undergo the required screening to be undertaken by their union (MLU-FFW). As regards the six private respondents who were union officers, the Labor Arbiter ruled that they could not have possibly been "duped or tricked" into signing the strike notice for they were active participants in the conciliation meetings and were thus fully aware of what was going on.

Hence, said union officers should be accepted back to work after seeking reconsideration from herein petitioner. 5 The dispositive portion of the decision reads: IN VIEW OF THE FOREGOING, it is hereby ordered that the strike undertaken by the officers and majority union members of Macajalar Labor Union-FFW is ILLEGAL contrary to Article 264 of the Labor Code, as amended. Our conclusion on the employment status of the illegal strikers is subject to our discussion above. 6 Both petitioner and private respondents filed motions for reconsideration, which public respondent NLRC treated as appeals. 7 On January 14, 1991, the NLRC affirmed with modification 8 the Arbiter's decision. It held that the concerted action by the workers was more of a "protest action" than a strike. Private respondents, including the six union officers, should also be allowed to work unconditionally to avoid discrimination. However, in view of the strained relations between the parties, separation pay was awarded in lieu of reinstatement. The decretal portion of the Resolution reads: WHEREFORE, the decision appealed from is Affirmed with modification in accordance with the foregoing resolution. Complainant INPORT is hereby ordered, in lieu of reinstatement, to pay respondents the equivalent of twelve (12) months salaries each as separation pay. Complainant is further ordered to pay respondents two (2) years backwages based on their last salaries, without qualification or deduction. The appeal of complainant INPORT is Dismissed for lack of merit. 9 Upon petitioner's motion for reconsideration, public respondent modified the above resolution on December 12, 1991. 10 The Commission ruled that since private respondents were not actually terminated from service, there was no basis for reinstatement. However, it awarded six months' salary as separation pay or financial assistance in the nature of "equitable relief." The award for backwages was also deleted for lack of factual and legal basis. In lieu of backwages, compensation equivalent to P1,000.00 was given. The dispositive portion of the assailed Resolution reads: WHEREFORE, the resolution of January 14, 1991 is Modified reducing the award for separation pay to six (6) months each in favor of respondents, inclusive of lawful benefits as well as those granted under the CBA, if any, based on the latest salary of respondents, as and by way of financial assistance while the award for backwages is Deleted and Set Aside. In lieu thereof, respondents are granted compensation for their sudden loss of employment in the sum of P1,000.00 each. The motion of respondents to implead PPA as third-party respondent is Noted. Except for this modification the rest of the decision sought to be reconsidered shall stand. 11 In the instant petitions for certiorari, petitioner alleges that public respondent Commission committed grave abuse of discretion in awarding private respondents separation pay and backwages despite the declaration that the strike was illegal. On the other hand, private respondents, in their petition, assail the reduction of separation pay and deletion of backwages by the NLRC as constituting grave abuse of discretion. They also allege that the Resolution of January 14, 1991 could not be reconsidered after the unreasonable length of time of eleven months. Before proceeding with the principal issues raised by the parties, it is necessary to clarify public respondent's statements concerning the strike staged by INPORT's employees. In its resolution dated January 14, 1991, the NLRC held that the facts prevailing in the case at bench require a relaxation of the rule that the formal requisites for a declaration of a strike are mandatory. Furthermore, what the employees engaged in was more of a spontaneous protest action than a strike. 12 Nevertheless, the Commission affirmed the Labor Arbiter's decision which declared the strike illegal.

A strike, considered as the most effective weapon of labor, 13 is defined as any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute. 14 A labor dispute includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment, regardless of whether or not the disputants stand in the proximate relation of employers and employees. 15 Private respondents and their co-workers stopped working and held the mass action on April 30, 1985 to press for their wages and other benefits. What transpired then was clearly a strike, for the cessation of work by concerted action resulted from a labor dispute. The complaint before the Labor Arbiter involved the legality of said strike. The Arbiter correctly ruled that the strike was illegal for failure to comply with the requirements of Article 264 (now Article 263) paragraphs (c) and (f) of the Labor Code. 16 The individual notices of strike filed by the workers did not conform to the notice required by the law to be filed since they were represented by a union (MLU-FFW) which even had an existing collective bargaining agreement with INPORT. Neither did the striking workers observe the strike vote by secret ballot, cooling-off period and reporting requirements. As we stated in the case of National Federation of Sugar Workers v. Ovejera, 17 the language of the law leaves no room for doubt that the cooling-off period and the seven-day strike ban after the strike-vote report were intended to be mandatory. 18 Article 265 of the Labor Code reads, inter alia: (i)t SHALL be unlawful for any labor organization . . . to declare a strike . . . without first having filed the notice required in the preceding Article or without the necessary strike vote first having been obtained and reported to the Ministry. (Emphasis ours) In explaining the above provision, we said: In requiring a strike notice and a cooling-off period, the avowed intent of the law is to provide an opportunity for mediation and conciliation. It thus directs the MOLE to exert all efforts at mediation and conciliation to effect a voluntary settlement' during the cooling-off period. . . . The cooling-off period and the 7-day strike ban after the filing of a strike-vote report, as prescribed in Art. 264 of the Labor Code, are reasonable restrictions and their imposition is essential to attain the legitimate policy objectives embodied in the law. We hold that they constitute a valid exercise of the police power of the state. 19 From the foregoing, it is patent that the strike on April 30, 1985 was illegal for failure to comply with the requirements of the law. The effects of such illegal strikes, outlined in Article 265 (now Article 264) of the Labor Code, make a distinction between workers and union officers who participate therein. A union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost their employment status. 20 An ordinary striking worker cannot be terminated for mere participation in an illegal strike. There must be proof that he committed illegal acts during a strike. A union officer, on the other hand, may be terminated from work when he knowingly participates in an illegal strike, and like other workers, when he commits an illegal act during a strike. In the case at bench, INPORT accepted the majority of the striking workers, including union officers, back to work. Private respondents were left to continue with the strike after they refused to submit to the "screening" required by the company. 21 The question to be resolved now is what these remaining strikers, considering the circumstances of the case, are entitled to receive under the law, if any. Are they entitled, as they claim, to reinstatement or separation pay and backwages? In his decision, the Labor Arbiter ordered INPORT to reinstate/accept the remaining workers as well as to accept the remaining union officers after the latter sought reconsideration from INPORT. 22

The NLRC on January 14, 1991, modified the above decision by ordering INPORT to pay private respondents the equivalent of twelve months in salary as separation pay in lieu of reinstatement and two years' backwages. 23 On reconsideration, public respondent modified its original award and reduced the separation pay to six months, deleted the award for backwages and instead awarded P1,000.00 as compensation for their sudden loss of employment. 24 Under the law, an employee is entitled to reinstatement and to his full backwages when he is unjustly dismissed. 25 Reinstatement means restoration to a state or condition from which one had been removed or separated. Reinstatement and backwages are separate and distinct reliefs given to an illegally dismissed employee. 26 Separation pay is awarded when reinstatement is not possible, due, for instance, to strained relations between employer and employee. It is also given as a form of financial assistance when a worker is dismissed in cases such as the installation of labor saving devices, redundancy, retrenchment to prevent losses, closing or cessation of operation of the establishment, or in case the employee was found to have been suffering from a disease such that his continued employment is prohibited by law. 27 Separation pay is a statutory right defined as the amount that an employee receives at the time of his severance from the service and is designed to provide the employee with the wherewithal during the period that he is looking for another employment. 28 It is oriented towards the immediate future, the transitional period the dismissed employee must undergo before locating a replacement job. 29 Hence, an employee dismissed for causes other than those cited above is not entitled to separation pay. 30Well-settled is it that separation pay shall be allowed only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. 31 Backwages, on the other hand, is a form of relief that restores the income that was lost by reason of unlawful dismissal. 32 It is clear from the foregoing summary of legal provisions and jurisprudence that there must generally be unjust or illegal dismissal from work, before reinstatement and backwages may be granted. And in cases where reinstatement is not possible or when dismissal is due to valid causes, separation pay may be granted. Private respondents contend that they were terminated for failure to submit to the controversial "screening" requirement. Public respondent Commission took the opposite view and held: As the evidence on record will show, respondents were not actually terminated from the service. They were merely made to submit to a screening committee as a prerequisite for readmission to work. While this condition was found not wholly justified, the fact remains that respondents who are resistant to such procedure are partly responsible for the delay in their readmission back to work. Thus, We find justifiable basis in further modifying our resolution of January 14, 1991 in accordance with the equities of the case. We shall therefore recall the award for backwages for lack of factual and legal basis. The award for separation pay shall likewise (be) reasonably reduced. Normally, severance benefit is granted as an alternative remedy to reinstatement. And since there is no dismissal to speak of, there is no basis for awarding reinstatement as a legal remedy. In lieu thereof, We shall grant herein respondents separation pay as and by way of financial assistance in the nature of an "equitable relief". 33 We find that private respondents were indeed dismissed when INPORT refused to accept them back to work after the former refused to submit to the "screening" process. Applying the law (Article 264 of the Labor Code) which makes a distinction, we differentiate between the union members and the union officers among private respondents in granting the reliefs prayed for.

Under Article 264 of the Labor Code, a worker merely participating in an illegal strike may not be terminated from his employment. It is only when he commits illegal acts during a strike that he may be declared to have lost his employment status. Since there appears no proof that these union members committed illegal acts during the strike, they cannot be dismissed. The striking union members among private respondents are thus entitled to reinstatement, there being no just cause for their dismissal. However, considering that a decade has already lapsed from the time the disputed strike occurred, we find that to award separation pay in lieu of reinstatement would be more practical and appropriate. No backwages will be awarded to private respondent-union members as a penalty for their participation in the illegal strike. Their continued participation in said strike, even after most of their co-workers had returned to work, can hardly be rewarded by such an award. The fate of private respondent-union officers is different. Their insistence on unconditional reinstatement or separation pay and backwages is unwarranted and unjustified. For knowingly participating in an illegal strike, the law mandates that a union officer may be terminated from employment. 34 Notwithstanding the fact that INPORT previously accepted other union officers and that the screening required by it was uncalled for, still it cannot be gainsaid that it possessed the right and prerogative to terminate the union officers from service. The law, in using the word may, grants the employer the option of declaring a union officer who participated in an illegal strike as having lost his employment. 35 Moreover, an illegal strike which, more often than not, brings about unnecessary economic disruption and chaos in the workplace should not be countenanced by a relaxation of the sanctions prescribed by law. The union officers are, therefore, not entitled to any relief. However, the above disquisition is now considered moot and academic and cannot be effected in view of a manifestation filed by INPORT dated May 15, 1987. 36 In said Manifestation, it attached a Certification by the President of the Macajalar Labor Union (MLU-FFW) to the effect that the private respondents/remaining strikers have ceased to be members of said union. The MLU-FFW had an existing collective bargaining agreement with INPORT containing a union security clause. Article 1, Section 2(b) of the CBA provides: The corporation shall discharge, dismiss or terminate any employee who may be a member of the Union but loses his good standing with the Union and or corporation, upon proper notice of such fact made by the latter; provided, however, . . . after they shall have received the regular appointment as a condition for his continued employment with the corporation. . . . 37 Since private respondents (union members) are no longer members of the MLU, they cannot be reinstated. In lieu of reinstatement, which was a proper remedy before May 1987 when they were dismissed from the union, we award them separation pay. We find that to award one month salary for every year of service until 1985, after April of which year they no longer formed part of INPORT's productive work force partly through their own fault, is a fair settlement. Finally, there is no merit in INPORT's statement that a Resolution of the NLRC cannot be modified upon reconsideration after the lapse of an unreasonable period of time. Under the present circumstances, a period of eleven months is not an unreasonable length of time. The Resolution of the public respondent dated January 14, 1991 did not acquire finality in view of the timely filing of a motion for reconsideration. Hence, the Commission's modified Resolution issued on December 12, 1991 is valid and in accordance with law. In sum, reinstatement and backwages or, if no longer feasible, separation pay, can only be granted if sufficient bases exist under the law, particularly after a showing of illegal dismissal. However, while the union members may thus be entitled under the law to be reinstated or to receive separation pay, their expulsion from the union in accordance with the collective bargaining agreement renders the same impossible.

The NLRC's award of separation pay as "equitable relief" and P1,000.00 as compensation should be deleted, these being incompatible with our findings detailed above. WHEREFORE, from the foregoing premises, the petition in G.R. No. 103560 ("Gold City Integrated Port Service Inc. v. National Labor Relations Commission, et al.") is GRANTED. One month salary for each year of service until 1985 is awarded to private respondents who were not union officers as separation pay. The petition in G.R. No. 103599 ("Adelo Ebuna, et al. v. National Labor Relations Commission, et al.") is DISMISSED for lack of merit. No costs.SO ORDERED. Republic of the Philippines SUPREME COURT SECOND DIVISION October 19,2007 G.R. Nos. 158786 &158789 TOYOTA MOTOR PHILS. CORPORATION petitioner vs. NLRC TOYOTA MOTOR PHILS. CORPORATION petitioner VS. TOYOTA MOTOR PHILS. CORP. WORKERS respondent g.r. no. 158798-99 The Case Inthe instant petition under Rule 45 subject of G.R. Nos. 158786 and 158789, Toyota Motor Philippines Corporation Workers Association (Union) and its dismissed officers and members seek to set aside the February 27, 2003 Decision [1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001 Decision [2] and September 14, 2001 Resolution[3] of the National Labor Relations Commission (NLRC), declaring illegal the strikes staged by the Union and upholding the dismissal of the 227 Union officers and members. On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota Motor Philippines Corporation (Toyota) prays for the recall of the award of severance compensation to the 227 dismissed employees, which was granted under the June 20, 2003 CA Resolution[4] in CA-G.R. SP Nos. 67100 and 67561. In view of the fact that the parties are petitioner/s and respondent/s and vice-versa in the four (4) interrelated cases, they will be referred to as simply the Union and Toyotahereafter. The Facts The Union is a legitimate labor organization duly registered with the Department of Labor and Employment (DOLE) and is the sole and exclusive bargaining agent of allToyota rank and file employees.[5] Toyota, on the other hand, is a domestic corporation engaged in the assembly and sale of vehicles and parts.[6] It is a Board of Investments (BOI) participant in the Car Development Program and the Commercial Vehicle Development Program. It is likewise a BOI-preferred non-pioneer export trader of automotive parts and is under the Special Economic Zone Act of 1995. It is one of the largest motor vehicle manufacturers in the country employing around 1,400 workers for its plants in Bicutan and Sta. Rosa, Laguna. It is claimed that its assets amount to PhP 5.525 billion, with net sales of PhP 14.646 billion and provisions for income tax

of PhP 120.9 million. On February 14, 1999, the Union filed a petition for certification election among the Toyota rank and file employees with the National Conciliation and Mediation Board (NCMB), which was docketed as Case No. NCR-OD-M-9902-001. Med-Arbiter Ma. Zosima C. Lameyra denied the petition, but, on appeal, the DOLE Secretary granted theUnions prayer, and, through the June 25, 1999 Order, directed the immediate holding of the certification election.[7] After Toyotas plea for reconsideration was denied, the certification election was conducted. Med-Arbiter Lameyras May 12, 2000 Order certified the Union as the sole and exclusive bargaining agent of all the Toyota rank and file employees. Toyota challenged said Order via an appeal to the DOLE Secretary.[8] In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals to Toyota, but the latter refused to negotiate in view of its pending appeal. Consequently, the Union filed a notice of strike on January 16, 2001 with the NCMB, docketed as NCMBNCR-NS-01-011-01, based on Toyotas refusal to bargain. On February 5, 2001, the NCMBNCR converted the notice of strike into a preventive mediation case on the ground that the issue of whether or not the Union is the exclusive bargaining agent of all Toyota rank and file employees was still unresolved by the DOLE Secretary. In connection with Toyotas appeal, Toyota and the Union were required to attend a hearing on February 21, 2001 before the Bureau of Labor Relations (BLR) in relation to the exclusion of the votes of alleged supervisory employees from the votes cast during the certification election. The February 21, 2001 hearing was cancelled and reset to February 22, 2001. On February 21, 2001, 135 Union officers and members failed to render the required overtime work, and instead marched to and staged a picket in front of the BLR office in Intramuros, Manila.[9] The Union, in a letter of the same date, also requested that its members be allowed to be absent on February 22, 2001 to attend the hearing and instead work on their next scheduled rest day. This request however was denied by Toyota. Despite denial of the Unions request, more than 200 employees staged mass actions on February 22 and 23, 2001 in front of the BLR and the DOLE offices, to protest the partisan and anti-union stance of Toyota. Due to the deliberate absence of a considerable number of employees on February 22 to 23, 2001, Toyota experienced acute lack of manpower in its manufacturing and production lines, and was unable to meet its production goals resulting in huge losses of PhP 53,849,991. Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360 employees requiring them to explain within 24 hours why they should not be dismissed for their obstinate defiance of the companys directive to render overtime work on February 21, 2001, for their failure to report for work on February 22 and 23, 2001, and for their participation in the concerted actions which severely disrupted and paralyzed the plants operations. [10] These letters specifically cited Section D, paragraph 6 of the Companys Code of Conduct, to wit: Inciting or participating in riots, disorders, alleged strikes, or concerted actions detrimental to [Toyotas] interest 1st offense dismissal.[11] Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which urged its members to participate in a strike/picket and to abandon their posts, the pertinent portion of which reads, as follows: YANIG sa kanyang komportableng upuan ang management ng TOYOTA. And dating takot, kimi, at mahiyaing manggagawa ay walang takot na nagmartsa at nagprotesta laban sa desperadong pagtatangkang baguhin ang desisyon ng DOLE na pabor sa UNYON. Sa tatlong araw na protesta, mahigit sa tatlong daang manggagawa ang lumahok. HANDA na tayong lumabas anumang oras kung patuloy na ipagkakait ng management ang CBA. Oo maari tayong masaktan sa welga. Oo, maari tayong magutom sa piketlayn.Subalit may pagkakaiba ba ito sa unti-unting pagpatay sa atin sa loob ng 12 taong makabaling likod ng pagtatrabaho? Ilang taon na lang ay

magkakabutas na ang ating mga baga sa mga alipato at usok ng welding. Ilang taon na lang ay marupok na ang ating mga buto sa kabubuhat. Kung dumating na ang panahong ito at wala pa tayong CBA, paano na? Hahayaan ba nating ang kumpanya lang ang makinabang sa yamang likha ng higit sa isang dekadang pagpapagal natin? HUWAG BIBITIW SA NASIMULANG TAGUMPAY!PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG MAKATARUNGANG CBA!HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA MANGGAGAWA SA TOYOTA! On the next day, the Union filed with the NCMB another notice of strike docketed as NCMB-NCR-NS-02-061-01 for union busting amounting to unfair labor practice. On March 1, 2001, the Union nonetheless submitted an explanation in compliance with the February 27, 2001 notices sent by Toyota to the erring employees. The Union members explained that their refusal to work on their scheduled work time for two consecutive days was simply an exercise of their constitutional right to peaceably assemble and to petition the government for redress of grievances. It further argued that the demonstrations staged by the employees on February 22 and 23, 2001 could not be classified as an illegal strike or picket, and that Toyota had already condoned the alleged acts when it accepted back the subject employees. Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the concerned employees to clarify whether or not they are adopting the March 1, 2001 Unions explanation as their own. The employees were also required to attend an investigative interview,[14] but they refused to do so.On March 16, 2001, Toyota terminated the employment of 227 employees[15] for participation in concerted actions in violation of its Code of Conduct and for misconduct under Article 282 of the Labor Code. The notice of termination reads: After a careful evaluation of the evidence on hand, and a thorough assessment of your explanation, TMP has concluded that there are overwhelming reasons to terminate your services based on Article 282 of the Labor Code and TMPs Code of Conduct. Your repeated absences without permission on February 22 to 23, 2001 to participate in a concerted action against TMP constitute abandonment of work and/or very serious misconduct under Article 282 of the Labor Code. The degree of your offense is aggravated by the following circumstances: You expressed to management that you will adopt the unions letter dated March 1, 2001, as your own explanation to the charges contained in the Due Process Form dated February 27, 2001. It is evident from such explanation that you did not come to work because you deliberately participated together with other Team Members in a plan to engage in concerted actions detrimental to TMPs interest. As a result of your participation in the widespread abandonment of work by Team Members from February 22 to 23, 2001, TMP suffered substantial damage. It is significant that the absences you incurred in order to attend the clarificatory hearing conducted by the Bureau of Labor Relations were unnecessary because the union was amply represented in the said hearings by its counsel and certain members who sought and were granted leave for the purpose. Your reason for being absent is, therefore, not acceptable; and Your participation in the organized work boycott by Team Members on February 22 and 23 led to work disruptions that prevented the Company from meeting its production targets, resulting [in] foregone sales of more than eighty (80) vehicles, mostly newmodel Revos, valued at more than Fifty Million Pesos (50,000,000.00). The foregoing is also a violation of TMPs Code of Conduct (Section D, Paragraph 6) to wit: Inciting or participating in riots, disorders, illegal strikes or concerted actions detrimental to TMPs interest.

Based on the above, TMP Management is left with no other recourse but to terminate your employment effective upon your receipt thereof. [Sgd.] JOSE MARIA ALIGADA Deputy Division Manager[16] In reaction to the dismissal of its union members and officers, the Union went on strike on March 17, 2001. Subsequently, from March 28, 2001 to April 12, 2001, theUnion intensified its strike by barricading the gates of Toyotas Bicutan and Sta. Rosa plants. The strikers prevented workers who reported for work from entering the plants. In his Affidavit, Mr. Eduardo Nicolas III, Security Department Head, stated that: On March 17, 2001, members of the Toyota Motor Philippines Corporation Workers Association (TMPCWA), in response to the dismissal of some two hundred twenty seven (227) leaders and members of TMPCWA and without observing the requirements mandated by the Labor Code, refused to report for work and picketed TMPC premises from 8:00 a.m. to 5:00 p.m. The strikers badmouthed people coming in and hurled invectives such as bakeru at Japanese officers of the company. The strikers likewise pounded the officers vehicle as they tried to enter the premises of the company. On March 28, 2001, the strikers intensified their picketing and barricaded the gates of TMPCs Bicutan and Sta. Rosa plants, thus, blocking the free ingress/egress to and from the premises. Shuttle buses and cars containing TMPC employees, suppliers, dealers, customers and other people having business with the company, were prevented by the strikers from entering the plants. As a standard operating procedure, I instructed my men to take photographs and video footages of those who participated in the strike. Seen on video footages taken on various dates actively participating in the strike were union officers Emilio C. Completo, Alexander Esteva, Joey Javellonar and Lorenzo Caraqueo. Based on the pictures, among those identified to have participated in the March 28, 2001 strike were Grant Robert Toral, John Posadas, Alex Sierra, Allan John Malabanan, Abel Bersos, Ernesto Bonavente, Ariel Garcia, Pablito Adaya, Feliciano Mercado, Charlie Oliveria, Philip Roxas, June Lamberte, Manjolito Puno, Baldwin San Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani, Allan Oclarino, Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy Hembra, Albert Mariquit, Ramil Gecale, Jimmy Palisoc, Normandy Castalone, Joey Llanera, Greg Castro, Felicisimo Escrimadora, Rodolfo Bay, Ramon Clemente, Dante Baclino, Allan Palomares, Arturo Murillo and Robert Gonzales. Attached hereto as Annexes 1 to 18 are the pictures taken on March 28, 2001 at the Bicutan and Sta. Rosa plants. From March 29 to 31, 2001, the strikers continued to barricade the entrances to TMPCs two (2) plants. Once again, the strikers hurled nasty remarks and prevented employees aboard shuttle buses from entering the plants. Among the strikers were Christopher Saldivar, Basilio Laqui, Sabas Bernabise, Federico Torres, Freddie Olit, Josel Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial, Manjolito Puno, Delmar Espadilla, Domingo Javier, Apollo Violeta and Elvis Tabinao. [17] On March 29, 2001, Toyota filed a petition for injunction with a prayer for the issuance of a temporary restraining order (TRO) with the NLRC, which was docketed as NLRC NCR Case No. INJ-0001054-01. It sought free ingress to and egress from its Bicutan and Sta. Rosa manufacturing plants. Acting on said petition, the NLRC, on April 5, 2001, issued a TRO against the Union, ordering its leaders and members as well as its sympathizers to remove their barricades and all forms of obstruction to ensure free ingress to and egress from the companys premises. In addition, the NLRC rejected the Unions motion to dismiss based on lack of jurisdiction.Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration branch, which was docketed as NLRC NCR (South) Case No. 30-0401775-01, and prayed that the erring Union officers, directors, and members be

dismissed. On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued an Order[20] certifying the labor dispute to the NLRC. In said Order, the DOLE Secretary directed all striking workers to return to work at their regular shifts by April 16, 2001. On the other hand, it ordered Toyota to accept the returning employees under the same terms and conditions obtaining prior to the strike or at its option, put them under payroll reinstatement. The parties were also enjoined from committing acts that may worsen the situation. The Union ended the strike on April 12, 2001. The union members and officers tried to return to work on April 16, 2001 but were told that Toyota opted for payroll-reinstatement authorized by the Order of the DOLE Secretary. In the meantime, the Union filed a motion for reconsideration of the DOLE Secretarys April 10, 2001 certification Order, which, however, was denied by the DOLE Secretary in her May 25, 2001 Resolution. Consequently, a petition for certiorari was filed before the CA, which was docketed as CA-G.R. SP No. 64998. In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of the DOLE Secretary, docketed the case as Certified Case No. 000203-01. Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the DOLE Secretarys certification Order, several payroll-reinstated members of the Union staged a protest rally in front of Toyotas Bicutan Plant bearing placards and streamers in defiance of the April 10, 2001 Order. Then, on May 28, 2001, around forty-four (44) Union members staged another protest action in front of the Bicutan Plant. At the same time, some twenty-nine (29) payroll-reinstated employees picketed in front of the Santa Rosa Plants main entrance, and were later joined by other Union members. On June 5, 2001, notwithstanding the certification Order, the Union filed another notice of strike, which was docketed as NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE Secretary directed the second notice of strike to be subsumed in the April 10, 2001 certification Order. In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties to submit their respective position papers on June 8, 2001. The union, however, requested for abeyance of the proceedings considering that there is a pending petition for certiorari with the CA assailing the validity of the DOLE Secretarys Assumption of Jurisdiction Order. Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous order for both parties to submit their respective position papers on or before June 2, 2001. The same Order also denied the Unions verbal motion to defer hearing on the certified cases. On June 27, 2001, the Union filed a Motion for Reconsideration of the NLRCs June 19, 2001 Order, praying for the deferment of the submission of position papers until its petition for certiorari is resolved by the CA. On June 29, 2001, only Toyota submitted its position paper. On July 11, 2001, the NLRC again ordered the Union to submit its position paper by July 19, 2001, with a warning that upon failure for it to do so, the case shall be considered submitted for decision. Meanwhile, on July 17, 2001, the CA dismissed the Unions petition for certiorari in CA-G.R. SP No. 64998, assailing the DOLE Secretarys April 10, 2001 Order.Notwithstanding repeated orders to file its position paper, the Union still failed to submit its position paper on July 19, 2001. Consequently, the NLRC issued an Order directing the Union to submit its position paper on the scheduled August 3, 2001 hearing; otherwise, the case shall be deemed submitted for resolution based on the evidence on record. During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to submit its position paper. Later that day, the Union claimed it filed its position paper by registered mail. Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by the Union on February 21 to 23, 2001 and May 23 and 28, 2001 as illegal. The decretal portion reads: WHEREFORE, premises considered, it is hereby ordered:

Declaring the strikes staged by the Union to be illegal. Declared [sic] that the dismissal of the 227 who participated in the illegal strike on February 21-23, 2001 is legal. However, the Company is ordered to pay the 227 Union members, who participated in the illegal strike severance compensation in an amount equivalent to one month salary for every year of service, as an alternative relief to continued employment.Declared [sic] that the following Union officers and directors to have forfeited their employment status for having led the illegal strikes on February 21-23, 2001 and May 23 and 28, 2001: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo Mata.[21]SO ORDERED.[22] The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal as the Union failed to comply with the procedural requirements of a valid strike under Art. 263 of the Labor Code. After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001, the Union again staged strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as they violated Art. 264 of the Labor Code which proscribes any strike or lockout after jurisdiction is assumed over the dispute by the President or the DOLE Secretary. The NLRC held that both parties must have maintained the status quo after the DOLE Secretary issued the assumption/certification Order, and ruled that the Union did not respect the DOLE Secretarys directive. Accordingly, both Toyota and the Union filed Motions for Reconsideration, which the NLRC denied in its September 14, 2001 Resolution.[23] Consequently, both parties questioned the August 9, 2001 Decision[24] and September 14, 2001 Resolution of the NLRC in separate petitions for certiorari filed with the CA, which were docketed as CA-G.R. SP Nos. 67100 and 67561, respectively. The CA then consolidated the petitions.In its February 27, 2003 Decision, [25] the CA ruled that the Unions petition is defective in form for its failure to append a proper verification and certificate of non-forum shopping, given that, out of the 227 petitioners, only 159 signed the verification and certificate of non-forum shopping. Despite the flaw, the CA proceeded to resolve the petitions on the merits and affirmed the assailed NLRC Decision and Resolution with a modification, however, of deleting the award of severance compensation to the dismissed Union members. In justifying the recall of the severance compensation, the CA considered the participation in illegal strikes as serious misconduct. It defined serious misconduct as a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. It cited Panay Electric Company, Inc. v. NLRC,[26] where we revoked the grant of separation benefits to employees who lawfully participated in an illegal strike based on Art. 264 of the Labor Code, which states that any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status.[27] However, in its June 20, 2003 Resolution,[28] the CA modified its February 27, 2003 Decision by reinstating severance compensation to the dismissed employees based on social justice. The Issues Petitioner Union now comes to this Court and raises the following issues for our consideration: Whether the mere participation of ordinary employees in an illegal strike is enough reason to warrant their dismissal. Whether the Union officers and members act of holding the protest rallies in front of the BLR office and the Office of the Secretary of Labor and Employment on February 22

and 23, 2001 should be held as illegal strikes. In relation hereto, whether the protests committed on May 23 and 28, 2001, should be held as illegal strikes. Lastly, whether the Union violated the Assumption of Jurisdiction Order issued by the Secretary of Labor and Employment. Whether the dismissal of 227 Union officers and members constitutes unfair labor practice. Whether the CA erred in affirming the Decision of the NLRC which excluded the Unions Position Paper which the Union filed by mail. In the same vein, whether the Unions right to due process was violated when the NLRC excluded their Position Paper. V. Whether the CA erred in dismissing the Unions Petition for Certiorari. Toyota, on the other hand, presents this sole issue for our determination: Whether the Court of Appeals erred in issuing its Resolution dated June 20, 2003, partially modifying its Decision dated February 27, 2003, and awarding severance compensation to the dismissed Union members. In sum, two main issues are brought to the fore: (1) Whether the mass actions committed by the Union on different occasions are illegal strikes; and (2) Whether separation pay should be awarded to the Union members who participated in the illegal strikes. The Courts Ruling The Union contends that the NLRC violated its right to due process when it disregarded its position paper in deciding Toyotas petition to declare the strike illegal. We rule otherwise. It is entirely the Unions fault that its position paper was not considered by the NLRC. Records readily reveal that the NLRC was even too generous in affording due process to the Union. It issued no less than three (3) orders for the parties to submit its position papers, which the Union ignored until the last minute. No sufficient justification was offered why the Union belatedly filed its position paper. In Datu Eduardo Ampo v. The Hon. Court of Appeals, it was explained that a party cannot complain of deprivation of due process if he was afforded an opportunity to participate in the proceedings but failed to do so. If he does not avail himself of the chance to be heard, then it is deemed waived or forfeited without violating the constitutional guarantee.[29] Thus, there was no violation of the Unions right to due process on the part of the NLRC. On a procedural aspect, the Union faults the CA for treating its petition as an unsigned pleading and posits that the verification signed by 159 out of the 227 petitioners has already substantially complied with and satisfied the requirements under Secs. 4 and 5 of Rule 7 of the Rules of Court. The Unions proposition is partly correct. Sec. 4 of Rule 7 of the Rules of Court states: Sec. 4. Verification.Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by affidavit. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. A pleading required to be verified which contains a verification based on information and belief or upon knowledge, information and belief, or lacks a proper verification, shall be treated as an unsigned pleading. The verification requirement is significant, as it is intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation.[30] This requirement is simply a condition affecting the form of pleadings, and noncompliance with the requirement does not necessarily render it fatally defective. Indeed, verification is only a formal and not a jurisdictional requirement. [31] In this case, the problem is not the absence but the adequacy of the Unions verification, since only 159 out of the 227 petitioners executed the verification. Undeniably, the petition meets the

requirement on the verification with respect to the 159 petitioners who executed the verification, attesting that they have sufficient knowledge of the truth and correctness of the allegations of the petition. However, their signatures cannot be considered as verification of the petition by the other 68 named petitioners unless the latter gave written authorization to the 159 petitioners to sign the verification on their behalf. Thus, in Loquias v. Office of the Ombudsman, we ruled that the petition satisfies the formal requirements only with regard to the petitioner who signed the petition but not his co-petitioner who did not sign nor authorize the other petitioner to sign it on his behalf. [32] The proper ruling in this situation is to consider the petition as compliant with the formal requirements with respect to the parties who signed it and, therefore, can be given due course only with regard to them. The other petitioners who did not sign the verification and certificate against forum shopping cannot be recognized as petitioners have no legal standing before the Court. The petition should be dismissed outright with respect to the non-conforming petitioners. In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly apply the ruling in Loquias and instead proceeded to decide the case on the merits. The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the Toyota plants constituted illegal strikes When is a strike illegal? Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz: (1) [when it] is contrary to a specific prohibition of law, such as strike by employees performing governmental functions; or (2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor Code on the requisites of a valid strike]; or (3) [when it] is declared for an unlawful purpose, such as inducing the employer to commit an unfair labor practice against non-union employees; or (4) [when it] employs unlawful means in the pursuit of its objective, such as a widespread terrorism of non-strikers [for example, prohibited acts under Art. 264(e) of the Labor Code]; or (5) [when it] is declared in violation of an existing injunction[, such as injunction, prohibition, or order issued by the DOLE Secretary and the NLRC under Art. 263 of the Labor Code]; or (6) [when it] is contrary to an existing agreement, such as a no-strike clause or conclusive arbitration clause.[33] Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001 are not within the ambit of strikes as defined in the Labor Code, since they were legitimate exercises of their right to peaceably assemble and petition the government for redress of grievances. Mainly relying on the doctrine laid down in the case of Philippine Blooming Mills Employees Organization v. Philippine Blooming Mills Co., Inc. ,[34] it argues that the protest was not directed at Toyota but towards the Government (DOLE and BLR). It explains that the protest is not a strike as contemplated in the Labor Code. The Union points out that in Philippine Blooming Mills Employees Organization , the mass action staged in Malacaang to petition the Chief Executive against the abusive behavior of some police officers was a proper exercise of the employees right to speak out and to peaceably gather and ask government for redress of their grievances. The Unions position fails to convince us. While the facts in Philippine Blooming Mills Employees Organization are similar in some respects to that of the present case, the Union fails to realize one major difference: there was no labor dispute in Philippine Blooming Mills Employees Organization . In the present case, there was an on-going labor dispute arising from Toyotas refusal to recognize and negotiate with the Union, which was the subject of the notice of strike filed by the Union on January 16, 2001. Thus, the Unions reliance on Phililippine Blooming Mills Employees Organization is misplaced, as it cannot be considered a precedent to the case at bar.

A strike means any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute. A labor dispute, in turn, includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of the employer and the employee.[35] In Bangalisan v. Court of Appeals, it was explained that [t]he fact that the conventional term strike was not used by the striking employees to describe their common course of action is inconsequential, since the substance of the situation and not its appearance, will be deemed controlling.[36] The term strike has been elucidated to encompass not only concerted work stoppages, but also slowdowns, mass leaves, sit-downs, attempts to damage, destroy, or sabotage plant equipment and facilities, and similar activities.
[37]

Applying pertinent legal provisions and jurisprudence, we rule that the protest actions undertaken by the Union officials and members on February 21 to 23, 2001 are not valid and proper exercises of their right to assemble and ask government for redress of their complaints, but are illegal strikes in breach of the Labor Code. The Unions position is weakened by the lack of permit from the City of Manila to hold rallies. Shrouded as demonstrations, they were in reality temporary stoppages of work perpetrated through the concerted action of the employees who deliberately failed to report for work on the convenient excuse that they will hold a rally at the BLR and DOLE offices in Intramuros, Manila, on February 21 to 23, 2001. The purported reason for these protest actions was to safeguard their rights against any abuse which the med-arbiter may commit against their cause. However, the Union failed to advance convincing proof that the med-arbiter was biased against them. The acts of the medarbiter in the performance of his duties are presumed regular. Sans ample evidence to the contrary, the Union was unable to justify the February 2001 mass actions. What comes to the fore is that the decision not to work for two days was designed and calculated to cripple the manufacturing arm of Toyota. It becomes obvious that the real and ultimate goal of the Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining agent of the company. This is not a legal and valid exercise of the right of assembly and to demand redress of grievance. We sustain the CAs affirmance of the NLRCs finding that the protest rallies staged on February 21 to 23, 2001 were actually illegal strikes. The illegality of the Unions mass actions was succinctly elaborated by the labor tribunal, thus: We have stated in our questioned decision that such mass actions staged before the Bureau of Labor Relations on February 21-23, 2001 by the union officers and members fall squarely within the definition of a strike (Article 212 (o), Labor Code). These concerted actions resulted in the temporary stoppage of work causing the latter substantial losses. Thus, without the requirements for a valid strike having been complied with, we were constrained to consider the strike staged on such dates as illegal and all employees who participated in the concerted actions to have consequently lost their employment status.If we are going to stamp a color of legality on the two (2) [day-] walk out/strike of respondents without filing a notice of strike, in effect we are giving license to all the unions in the country to paralyze the operations of their companies/employers every time they wish to hold a demonstration in front of any government agency . While we recognize the right of every person or a group to peaceably assemble and petition the government for redress of grievances, the exercise of such right is governed by existing laws, rules and regulations. Although the respondent union admittedly made earnest representations with the company to hold a mass protest before the BLR, together with their officers and members, the denial of the request by the management should have been heeded and

ended their insistence to hold the planned mass demonstration. Verily, the violation of the company rule cannot be dismissed as mere absences of two days as being suggested by the union [are but] concerted actions detrimental to Petitioner Toyotas interest.[38] (Emphasis supplied.) It is obvious that the February 21 to 23, 2001 concerted actions were undertaken without satisfying the prerequisites for a valid strike under Art. 263 of the Labor Code. The Union failed to comply with the following requirements: (1) a notice of strike filed with the DOLE 30 days before the intended date of strike, or 15 days in case of unfair labor practice;[39] (2) strike vote approved by a majority of the total union membership in the bargaining unit concerned obtained by secret ballot in a meeting called for that purpose; and (3) notice given to the DOLE of the results of the voting at least seven days before the intended strike. These requirements are mandatory and the failure of a union to comply with them renders the strike illegal. [40] The evident intention of the law in requiring the strike notice and the strike-vote report is to reasonably regulate the right to strike, which is essential to the attainment of legitimate policy objectives embodied in the law.[41] As they failed to conform to the law, the strikes on February 21, 22, and 23, 2001 were illegal. Moreover, the aforementioned February 2001 strikes are in blatant violation of Sec. D, par. 6 of Toyotas Code of Conduct which prohibits inciting or participating in riots, disorders, alleged strikes or concerted actions detrimental to [Toyotas] interest. The penalty for the offense is dismissal. The Union and its members are bound by the company rules, and the February 2001 mass actions and deliberate refusal to render regular and overtime work on said days violated these rules. In sum, the February 2001 strikes and walk-outs were illegal as these were in violation of specific requirements of the Labor Code and a company rule against illegal strikes or concerted actions.With respect to the strikes committed from March 17 to April 12, 2001, those were initially legal as the legal requirements were met. However, on March 28 to April 12, 2001, the Union barricaded the gates of the Bicutan and Sta. Rosa plants and blocked the free ingress to and egress from the company premises. Toyota employees, customers, and other people having business with the company were intimidated and were refused entry to the plants. As earlier explained, these strikes were illegal because unlawful means were employed. The acts of the Union officers and members are in palpable violation of Art. 264(e), which proscribes acts of violence, coercion, or intimidation, or which obstruct the free ingress to and egress from the company premises. Undeniably, the strikes from March 28 to April 12, 2001 were illegal. Petitioner Union also posits that strikes were not committed on May 23 and 28, 2001. The Union asserts that the rallies held on May 23 and 28, 2001 could not be considered strikes, as the participants were the dismissed employees who were on payroll reinstatement. It concludes that there was no work stoppage.This contention has no basis. It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and certifies the case for compulsory arbitration with the NLRC, the parties have to revert to the status quo ante (the state of things as it was before). The intended normalcy of operations is apparent from the fallo of the April 10, 2001 Order of then DOLE Secretary Patricia A. Sto. Tomas, which reads: WHEREFORE, PREMISES CONSIDERED, this Office hereby CERTIFIES the labor dispute at Toyota Motors Philippines Corporation to the [NLRC] pursuant to Article 263 (g) of the Labor Code, as amended. This Certification covers the current labor cases filed in relation with the Toyota strike, particularly, the Petition for Injunction filed with the National Labor Relations Commission entitled Toyota Motor Philippines Corporation vs. Toyota Motor Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al., NLRC Injunction Case No. 3401054-01; Toyota Motor Philippines Corporation vs.

Toyota Motor Philippines Corporation Workers Association, et al. , NLRC NCR Case No. 3004-01775-01, and such other labor cases that the parties may file relating to the strike and its effects while this Certification is in effect. As provided under Article 2634(g) of the Labor Code, all striking workers are directed to return to work at their regular shifts by April 16, 2001; the Company is in turn directed to accept them back to work under the same terms and conditions obtaining prior to the work stoppage, subject to the option of the company to merely reinstate a worker or workers in the payroll in light of the negative emotions that the strike has generated and the need to prevent the further deterioration of the relationship between the company and its workers.Further, the parties are hereby ordered to cease and desist from committing any act that might lead to the worsening of an already deteriorated situation.It is explicit from this directive that the Union and its members shall refrain from engaging in any activity that might exacerbate the tense labor situation in Toyota, which certainly includes concerted actions. This was not heeded by the Union and the individual respondents who staged illegal concerted actions on May 23 and 28, 2001 in contravention of the Order of the DOLE Secretary that no acts should be undertaken by them to aggravate the already deteriorated situation.While it may be conceded that there was no work disruption in the two Toyota plants, the fact still remains that the Union and its members picketed and performed concerted actions in front of the Company premises. This is a patent violation of the assumption of jurisdiction and certification Order of the DOLE Secretary, which ordered the parties to cease and desist from committing any act that might lead to the worsening of an already deteriorated situation. While there are no work stoppages, the pickets and concerted actions outside the plants have a demoralizing and even chilling effect on the workers inside the plants and can be considered as veiled threats of possible trouble to the workers when they go out of the company premises after work and of impending disruption of operations to company officials and even to customers in the days to come. The pictures presented by Toyota undoubtedly show that the company officials and employees are being intimidated and threatened by the strikers. In short, the Union, by its mass actions, has inflamed an already volatile situation, which was explicitly proscribed by the DOLE Secretarys Order. We do not find any compelling reason to reverse the NLRC findings that the pickets on May 23 and 28, 2001 were unlawful strikes.From the foregoing discussion, we rule that the February 21 to 23, 2001 concerted actions, the March 17 to April 12, 2001 strikes, and the May 23 and 28, 2001 mass actions were illegal strikes. Union officers are liable for unlawful strikes or illegal acts during a strike Art. 264 (a) of the Labor Code provides: ART. 264. PROHIBITED ACTIVITIES Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to reinstatement with full backwages. Any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a replacement had been hired by the employer during such lawful strike. Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal strike or who knowingly participates in the commission of illegal acts during a lawful strike. It is clear that the responsibility of union officials is greater than that of the members. They are tasked with the duty to lead and guide the membership in decision making on union activities in accordance with the law, government rules and regulations, and established labor practices. The leaders are expected to recommend actions that are arrived at with circumspection and contemplation, and always keep paramount the best interests of the members and union within the bounds of law. If the implementation of an illegal strike is

recommended, then they would mislead and deceive the membership and the supreme penalty of dismissal is appropriate. On the other hand, if the strike is legal at the beginning and the officials commit illegal acts during the duration of the strike, then they cannot evade personal and individual liability for said acts. The Union officials were in clear breach of Art. 264(a) when they knowingly participated in the illegal strikes held from February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001. We uphold the findings of fact of the NLRC on the involvement of said union officials in the unlawful concerted actions as affirmed by the CA, thus: As regards to the Union officers and directors, there is overwhelming justification to declare their termination from service. Having instigated the Union members to stage and carry out all illegal strikes from February 21-23, 2001, and May 23 and 28, 2001, the following Union officers are hereby terminated for cause pursuant to Article 264(a) of the Labor Code: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo Mata.[43] The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when affirmed by the appellate court, are generally accorded great respect, even finality.[44] Likewise, we are not duty-bound to delve into the accuracy of the factual findings of the NLRC in the absence of clear showing that these were arbitrary and bereft of any rational basis.[45] In the case at bench, the Union failed to convince us that the NLRC findings that the Union officials instigated, led, and knowingly participated in the series of illegal strikes are not reinforced by substantial evidence. Verily, said findings have to be maintained and upheld. We reiterate, as a reminder to labor leaders, the rule that [u]nion officers are duty bound to guide their members to respect the law.[46] Contrarily, if the officers urge the members to violate the law and defy the duly constituted authorities, their dismissal from the service is a just penalty or sanction for their unlawful acts.[47] Members liability depends on participation in illegal acts Art. 264(a) of the Labor Code provides that a member is liable when he knowingly participates in an illegal act during a strike. While the provision is silent on whether the strike is legal or illegal, we find that the same is irrelevant. As long as the members commit illegal acts, in a legal or illegal strike, then they can be terminated. [48] However, when union members merely participate in an illegal strike without committing any illegal act, are they liable?This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC,[49] where it was held that an ordinary striking worker cannot be terminated for mere participation in an illegal strike. This was an affirmation of the rulings in Bacus v. Ople[50] and Progressive Workers Union v. Aguas, [51] where it was held that though the strike is illegal, the ordinary member who merely participates in the strike should not be meted loss of employment on the considerations of compassion and good faith and in view of the security of tenure provisions under the Constitution. In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME) , it was explained that a member is not responsible for the unions illegal strike even if he voted for the holding of a strike which became illegal.[52]Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the liability of a union member in an illegal strike, starting with the rule of vicarious liability, thus: Under [the rule of vicarious liability], mere membership in a labor union serves as basis of liability for acts of individuals, or for a labor activity, done on behalf of the union. The union member is made liable on the theory that all the members are engaged in a general conspiracy, and the unlawful acts of the particular members are viewed as

necessary incidents of the conspiracy. It has been said that in the absence of statute providing otherwise, the rule of vicarious liability applies. Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt the vicarious liability concept. It expressly provided that: No officer or member of any association or organization, and no association or organization participating or interested in a labor dispute shall be held responsible or liable for the unlawful acts of individual officers, members, or agents, except upon proof of actual participation in, or actual authorization of, such acts or of ratifying of such acts after actual knowledge thereof. Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability rule. [53] Thus, the rule on vicarious liability of a union member was abandoned and it is only when a striking worker knowingly participates in the commission of illegal acts during a strike that he will be penalized with dismissal.Now, what are considered illegal acts under Art. 264(a)?No precise meaning was given to the phrase illegal acts. It may encompass a number of acts that violate existing labor or criminal laws, such as the following:(1) Violation of Art. 264(e) of the Labor Code which provides that [n]o person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the employers premises for lawful purposes, or obstruct public thoroughfares;(2) Commission of crimes and other unlawful acts in carrying out the strike;[54] and(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary or NLRC in connection with the assumption of jurisdiction/certification Order under Art. 263(g) of the Labor Code.As earlier explained, this enumeration is not exclusive and it may cover other breaches of existing laws.In the cases at bench, the individual respondents participated in several mass actions, viz: (1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001; (2) The strikes held on March 17 to April 12, 2001; and (3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan and Sta. Rosa plants. Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March 17 to April 12, 2001, and on May 23 and 28, 2001? The answer is in the affirmative. As we have ruled that the strikes by the Union on the three different occasions were illegal, we now proceed to determine the individual liabilities of the affected union members for acts committed during these forbidden concerted actions. Our ruling in Association of Independent Unions in the Philippines v. NLRC lays down the rule on the liability of the union members: Decisive on the matter is the pertinent provisions of Article 264 ( a) of the Labor Code that: [x x x] any worker [x x x] who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status. [x x x] It can be gleaned unerringly from the aforecited provision of law in point, however, that an ordinary striking employee can not be terminated for mere participation in an illegal strike. There must be proof that he committed illegal acts during the strike and the striker who participated in the commission of illegal act[s] must be identified. But proof beyond reasonable doubt is not required. Substantial evidence available under the circumstances, which may justify the imposition of the penalty of dismissal, may suffice.

In the landmark case of Ang Tibay vs. CIR, the court ruled Not only must there be some evidence to support a finding or conclusion, but the evidence must be substantial. Substantial evidence is more than a mere scintilla. It means such relevant evidence that a reasonable mind might accept as sufficient to support a conclusion.[55] (Emphasis supplied.) Thus, it is necessary for the company to adduce proof on the participation of the striking employee in the commission of illegal acts during the strikes. After a scrutiny of the records, we find that the 227 employees indeed joined the February 21, 22, and 23, 2001 rallies and refused to render overtime work or report for work. These rallies, as we earlier ruled, are in reality illegal strikes, as the procedural requirements for strikes under Art. 263 were not complied with. Worse, said strikes were in violation of the company rule prohibiting acts in citing or participating in riots, disorders, alleged strikes or concerted action detrimental to Toyotas interest. With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota submitted the list of employees who did not render overtime work on February 21, 2001 and who did not report for work on February 22 and 23, 2001 as shown by Annex I of Toyotas Position Paper in NLRC Certified Case No. 000203-01 entitled In Re: Labor Dispute at Toyota Motor Philippines Corp. The employees who participated in the illegal concerted actions were as follows: 1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo, Alex; 6. Alfonso, Erwin; 7. Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano, Ruel; 11. Ariate, Abraham; 12. Arollado, Daniel; 13. Arriola, Dominador; 14. Atun, Lester; 15. Bala, Rizalino; 16. Baluyut, Rolando; 17. Banzuela, Tirso Jr.; 18. Bayani, Roderick; 19. Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22. Birondo, Alberto; 23. Blanco, Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert; 28. Borsigue, Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto Jr.; 32. Caalim, Alexander; 33. Cabahug, Nelson; 34. Cabatay, Jessie; 35. Cabezas, Marcelo; 36. Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate, Leo Nelson; 39. Carandang, Resty; 40. Caraqueo, Lorenzo; 41. Caringal, Dennis; 42. Casaba, Gienell; 43. Catapusan, Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46. Cinense, Joey; 47. Cometa, Julius; 48. Completo, Emilio; 49. Consignado, Randy; 50. Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52. Cuevas, Reynaldo; 53. Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay, Rene; 57. David, Benigno Jr.; 58. De Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz, Ferdinand; 61. Dela Torre, Heremo; 62. De Leon, Leonardo; 63. Delos Santos, Rogelio; 64. De Ocampo, Joselito; 65. De Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68. Dela Ysla, Alex; 69. Dia, Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72. Dumalag, Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76. Espejo, Lionel; 77. Espeloa, Dennis; 78. Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo, George; 81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco, Melencio; 84. Franco, Nikko; 85. Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88. Galang, Erwin; 89. Gamit, Rodel; 90. Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro Jr.; 95. Gerola, Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99. Gonzales, Roberto; 100. Gutierrez, Bernabe; 101. Hilaga, Edgar; 102. Hilanga, Melchor; 103. Hondrada, Eugene Jay; 104. Imperial, Alejandro; 105. Jaen, Ferdinand; 106. Jalea, Philip; 107. Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio; 110. Landicho, Danny; 111. Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro, Orlando; 114. Legaspi, Noel; 115. Lising, Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada, Jude Jonobell; 120. Lucido, Johny; 121. Macalindong, Rommel; 122. Madrazo,

Nixon; 123. Magbalita, Valentin; 124. Magistrado, Rogelio Jr.; 125. Magnaye, Philip John; 126. Malabanan, Allan John; 127. Malabrigo, Angelito; 128. Malaluan, Rolando Jr.; 129. Malate, Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132. Manalang, Joseph Patrick; 133. Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135. Manaog, Melchor; 136. Mandolado, Melvin; 137. Maneclang, Jovito; 138. Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June; 141. Manjares, Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito; 144. Marcial, Nilo; 145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit; 148. Mendoza, Roberto; 149. Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero, Ericson; 153. Montero, Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad, Kenneth; 157. Nava, Ronaldo; 158. Nevalga, Alexander; 159. Nicanor, Edwin; 160. Nierves, Roderick; 161. Nunez, Alex; 162. Nunez, Lolito; 163. Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo; 166. Olit, Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169. Operana, Danny; 170. Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173. Paniterce, Alvin; 174. Parallag, Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante, Jowald; 178. Piamonte, Melvin; 179. Piamonte, Rogelio; 180. Platon, Cornelio; 181. Polutan, Jorge; 182. Posada, John; 183. Puno, Manjolito; 184. Ramos, Eddie; 185. Reyes, Rolando; 186. Roxas, Philip; 187. Sales, Paul Arthur; 188. Sallan, David Jr.; 189. Salvador, Bernardo; 190. Sampang, Alejandro; 191. San Pablo, Baldwin; 192. Sangalang, Jeffrey; 193. Santiago, Eric; 194. Santos, Raymond; 195. Sapin, Al Jose; 196. Saquilabon, Bernabe; 197. Serrano, Ariel; 198. Sierra, Alex; 199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao, Elvisanto; 202. Tablizo, Edwin; 203. Taclan, Petronio; 204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206. Tecson Alexander; 207. Templo, Christopher; 208. Tenorio, Roderick; 209. Tolentino, Rodel; 210. Tolentino, Rommel; 211. Tolentino, Romulo Jr.; 212. Tomas, Rolando; 213. Topaz, Arturo Sr.; 214. Toral, Grant Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona, Jose Rommel; 218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221. Vergara, Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo Sr.; 224. Vistal, Alex; 225. Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and 227. Zamora, Dominador Jr. Toyotas Position Paper containing the list of striking workers was attested to as true and correct under oath by Mr. Jose Ma. Aligada, First Vice President of the Group Administration Division of Toyota. Mr. Emerito Dumaraos, Assistant Department Manager of the Production Department of Toyota, likewise submitted a June 29, 2001 Affidavit[56] confirming the low attendance of employees on February 21, 22, and 23, 2001, which resulted from the intentional absences of the aforelisted striking workers. TheUnion, on the other hand, did not refute Toyotas categorical assertions on the participation of said workers in the mass actions and their deliberate refusal to perform their assigned work on February 21, 22, and 23, 2001. More importantly, it did not deny the fact of absence of the employees on those days from the Toyota manufacturing plants and their deliberate refusal to render work. Their admission that they participated in the February 21 to 23, 2001 mass actions necessarily means they were absent from their work on those days. Anent the March 28 to April 12, 2001 strikes, evidence is ample to show commission of illegal acts like acts of coercion or intimidation and obstructing free ingress to or egress from the company premises. Mr. Eduardo Nicolas III, Toyotas Security Chief, attested in his affidavit that the strikers badmouthed people coming in and shouted invectives such as bakeru at Japanese officers of the company. The strikers even pounded the vehicles of Toyota officials. More importantly, they prevented the ingress ofToyota employees, customers, suppliers, and other persons who wanted to transact business with the

company. These were patent violations of Art. 264(e) of the Labor Code, and may even constitute crimes under the Revised Penal Code such as threats or coercion among others. On March 28, 2001, the following have committed illegal actsblocking the ingress to or egress from the two (2) Toyota plants and preventing the ingress of Toyotaemployees on board the company shuttle at the Bicutan and Sta. Rosa Plants, viz: Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan; 5. Abel Berces; 6. Ariel Garcia; 7. Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10. Federico Torres; 11. Larry Gerola; 12. Roderick Bayani; 13. Allan Oclarino; 14. Reynaldo Cuevas; 15. George Polutan; 16. Arman Ercillo; 17. Joey Llanera; and 18. Roberto Gonzales Photographs were submitted by Toyota marked as Annexes 1 through 18 of its Position Paper, vividly showing the participation of the aforelisted employees in illegal acts.[57] To further aggravate the situation, a number of union members committed illegal acts (blocking the ingress to and egress from the plant) during the strike staged on March 29, 2001 at the Toyota plant in Bicutan, to wit: 1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5. Joel Agosto Pictures marked as Annexes 21 to 22 of Toyotas Position Paper reveal the illegal acts committed by the aforelisted workers.[58] On the next day, March 30, 2001, several employees again committed illegal acts (blocking ingress to and egress from the plant) during the strike at the Bicutan plant, to wit: 1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5. Wilfredo Tagle; 6. Alejandro Imperial; 7. Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10. Elvis Tabirao

Pictures marked as Annexes 25 to 26 and 28 of Toyotas Position Paper show the participation of these workers in unlawful acts.[59] On April 5, 2001, seven (7) Toyota employees were identified to have committed illegal acts (blocking ingress to and egress from the plant) during the strike held at the Bicutan plant, to wit: 1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador; 5. Antonio Dimayuga; 6. Rurel Borebor; and 7. Alberto Lomboy The participations of the strikers in illegal acts are manifest in the pictures marked as Annexes 32 and 33 of Toyotas Position Paper.[60] On April 6, 2001, only Rogelio Piamonte was identified to have committed illegal acts (blocking ingress to and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant. [61] Then, on April 9, 2001, Alvin Paniterce, Dennis Apolinario, and Eduardo Miranda [62] were identified to have committed illegal acts (blocking ingress to and egress from the Toyota plant) during the strike at the Toyota Santa Rosa plant and were validly dismissed by Toyota.

Lastly, the strikers, though on payroll reinstatement, staged protest rallies on May 23, 2001 and May 28, 2001 in front of the Bicutan and Sta. Rosa plants. These workers acts in joining and participating in the May 23 and 28, 2001 rallies or pickets were patent violations of the April 10, 2001 assumption of jurisdiction/certification Order issued by the DOLE Secretary, which proscribed the commission of acts that might lead to the worsening of an already deteriorated situation. Art. 263(g) is clear that strikers who violate the assumption/certification Order may suffer dismissal from work. This was the situation in the May 23 and 28, 2001 pickets and concerted actions, with the following employees who committed illegal acts: a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis Apolinario; (2) Abel Berces; (3) Benny Bering; (4) Dexter Bolaos; (5) Freddie Busano; (6) Ernesto Bustillo, Jr.; (7) Randy Consignado; (8) Herbert Dalanon; (9) Leodegario De Silva; (10) Alexander Esteva; (11) Jason Fajilagutan; (12) Nikko Franco; (13) Genaro Gerola, Jr.; (14) Michael Gohilde; (15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18) Edwin Manzanilla; (19) Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla; (22) Filemon Ortiz; (23) Cornelio Platon; (24) Alejandro Sampang; (25) Eric Santiago; (26) Romualdo Simborio; (27) Lauro Sulit; and (28) Rommel Tagala. Pictures show the illegal acts (participation in pickets/strikes despite the issuance of a returnto-work order) committed by the aforelisted strikers.[63] b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2) Alex Alejo; (3) Erwin Alfonso; (4) Dennis Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter Bolanos; (11) Marcelo Cabezas; (12) Nelson Leo Capate; (13) Lorenzo Caraqueo; (14) Christopher Catapusan; (15) Ricky Chavez; (16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo; (19) Reynaldo Cuevas; (20) Rene Dalisay; (21) Benigno David, Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24) Roel Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar Espadilla; (28) Alexander Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31) Dante Fulo; (32) Eduardo Gado; (33) Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey Javillonar; (36) Basilio Laqui; (37) Alberto Lomboy; (38) Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon Madrazo; (41) Valentin Magbalita; (42) Allan Jon Malabanan; (43) Jonamar Manaog; (44) Bayani Manguil; (45) June Manigbas; (46) Alfred Manjares; (47) Edwin Manzanilla; (48) Mayo Mata; (49) Leo Ojenal; (50) Allan Oriana; (51) Rogelio Piamonte; (52) George Polutan; (53) Eric Santiago; (54) Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo Simborio; (57) Lauro Sulit; (58) Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten; (62) Joseph Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon. Toyota presented photographs which show said employees conducting mass pickets and concerted actions.[64] Anent the grant of severance compensation to legally dismissed union members, Toyota assails the turn-around by the CA in granting separation pay in its June 20, 2003 Resolution after initially denying it in its February 27, 2003 Decision. The company asseverates that based on the CA finding that the illegal acts of said union members constitute gross misconduct, not to mention the huge losses it suffered, then the grant of separation pay was not proper. The general rule is that when just causes for terminating the services of an employee under Art. 282 of the Labor Code exist, the employee is not entitled to separation pay. The apparent reason behind the forfeiture of the right to termination pay is that lawbreakers should not benefit from their illegal acts. The dismissed employee, however, is entitled to whatever rights, benefits and privileges [s/he] may have under the applicable individual or collective bargaining agreement with the employer or voluntary employer policy or practice [65] or under

the Labor Code and other existing laws. This means that the employee, despite the dismissal for a valid cause, retains the right to receive from the employer benefits provided by law, like accrued service incentive leaves. With respect to benefits granted by the CBA provisions and voluntary management policy or practice, the entitlement of the dismissed employees to the benefits depends on the stipulations of the CBA or the company rules and policies. As in any rule, there are exceptions. One exception where separation pay is given even though an employee is validly dismissed is when the court finds justification in applying the principle of social justice well entrenched in the 1987 Constitution. In Phil. Long Distance Telephone Co. (PLDT) v. NLRC, the Court elucidated why social justice can validate the grant of separation pay, thus: The reason is that our Constitution is replete with positive commands for the promotion of social justice, and particularly the protection of the rights of the workers. The enhancement of their welfare is one of the primary concerns of the present charter. In fact, instead of confining itself to the general commitment to the cause of labor in Article II on the Declaration of Principles of State Policies, the new Constitution contains a separate article devoted to the promotion of social justice and human rights with a separate sub-topic for labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the advancement of the national economy and the welfare of the people in general. The categorical mandates in the Constitution for the improvement of the lot of the workers are more than sufficient basis to justify the award of separation pay in proper cases even if the dismissal be for cause. [66] In the same case, the Court laid down the rule that severance compensation shall be allowed only when the cause of the dismissal is other than serious misconduct or that which reflects adversely on the employees moral character. The Court succinctly discussed the propriety of the grant of separation pay in this wise: We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than punishing the erring employee for his offense. And we do not agree that the punishment is his dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of course it has. Indeed, if the employee who steals from the company is granted separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next employment because he thinks he can expect a like leniency if he is again found out. This kind of misplaced compassion is not going to do labor in general any good as it will encourage the infiltration of its ranks by those who do not deserve the protection and concern of the Constitution. The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense. Compassion for the poor is an imperative of every humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice may do so only if their hands are clean and their motives blameless and not simply because they happen to be poor. This great policy of our Constitution is not

meant for the protection of those who have proved they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their own character.
[67]

Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation pay based on social justiceserious misconduct (which is the first ground for dismissal under Art. 282) or acts that reflect on the moral character of the employee. What is unclear is whether the ruling likewise precludes the grant of separation pay when the employee is validly terminated from work on grounds laid down in Art. 282 of the Labor Code other than serious misconduct. A recall of recent cases decided bearing on the issue reveals that when the termination is legally justified on any of the grounds under Art. 282, separation pay was not allowed. In Ha Yuan Restaurant v. NLRC,[68] we deleted the award of separation pay to an employee who, while unprovoked, hit her co-workers face, causing injuries, which then resulted in a series of fights and scuffles between them. We viewed her act as serious misconduct which did not warrant the award of separation pay. In House of Sara Lee v. Rey,[69] this Court deleted the award of separation pay to a branch supervisor who regularly, without authorization, extended the payment deadlines of the companys sales agents. Since the cause for the supervisors dismissal involved her integrity (which can be considered as breach of trust), she was not worthy of compassion as to deserve separation pay based on her length of service. In Gustilo v. Wyeth Phils., Inc.,[70] this Court found no exceptional circumstance to warrant the grant of financial assistance to an employee who repeatedly violated the companys disciplinary rules and regulations and whose employment was thus terminated for gross and habitual neglect of his duties. In the doctrinal case of San Miguel v. Lao,[71] this Court reversed and set aside the ruling of the CA granting retirement benefits or separation pay to an employee who was dismissed for willful breach of trust and confidence by causing the delivery of raw materials, which are needed for its glass production plant, to its competitor. While a review of the case reports does not reveal a case involving a termination by reason of the commission of a crime against the employer or his/her family which dealt with the issue of separation pay, it would be adding insult to injury if the employer would still be compelled to shell out money to the offender after the harm done. In all of the foregoing situations, the Court declined to grant termination pay because the causes for dismissal recognized under Art. 282 of the Labor Code were serious or grave in nature and attended by willful or wrongful intent or they reflected adversely on the moral character of the employees. We therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art. 282 like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the employer or his family, separation pay should not be conceded to the dismissed employee. In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts may opt to grant separation pay anchored on social justice in consideration of the length of service of the employee, the amount involved, whether the act is the first offense, the performance of the employee and the like, using the guideposts enunciated in PLDT on the propriety of the award of separation pay. In the case at bench, are the 227 striking employees entitled to separation pay? In the instant case, the CA concluded that the illegal strikes committed by the Union members constituted serious misconduct.[72] The CA ratiocinated in this manner: Neither can social justice justify the award to them of severance compensation or any other form of financial assistance.

Considering that the dismissal of the employees was due to their participation in the illegal strikes as well as violation of the Code of Conduct of the company, the same constitutes serious misconduct. A serious misconduct is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. In fact, in Panay Electric Company, Inc. v. NLRC, the Supreme Court nullified the grant of separation benefits to employees who unlawfully participated in an illegal strike in light of Article 264, Title VIII, Book V of the Labor Code, that, any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status. The constitutional guarantee on social justice is not intended only for the poor but for the rich as well. It is a policy of fairness to both labor and management . [73] (Emphasis supplied.) In disposing of the Unions plea for reconsideration of its February 27, 2003 Decision, the CA however performed a volte-face by reinstating the award of separation pay. The CAs grant of separation pay is an erroneous departure from our ruling in Phil. Long Distance Telephone Co. v. NLRC that serious misconduct forecloses the award of separation pay. Secondly, the advertence to the alleged honest belief on the part of the 227 employees that Toyota committed a breach of the duty to bargain collectively and an abuse of valid exercise of management prerogative has not been substantiated by the evidence extant on record. There can be no good faith in intentionally incurring absences in a collective fashion from work on February 22 and 23, 2001 just to attend the DOLE hearings. The Unions strategy was plainly to cripple the operations and bring Toyota to its knees by inflicting substantial financial damage to the latter to compel union recognition. The Union officials and members are supposed to know through common sense that huge losses would befall the company by the abandonment of their regular work. It was not disputed that Toyota lost more than PhP 50 million because of the willful desertion of company operations in February 2001 by the dismissed union members. In addition, further damage was experienced by Toyota when the Union again resorted to illegal strikes from March 28 to April 12, 2001, when the gates of Toyota were blocked and barricaded, and the company officials, employees, and customers were intimidated and harassed. Moreover, they were fully aware of the company rule on prohibition against concerted action inimical to the interests of the company and hence, their resort to mass actions on several occasions in clear violation of the company regulation cannot be excused nor justified. Lastly, they blatantly violated the assumption/certification Order of the DOLE Secretary, exhibiting their lack of obeisance to the rule of law. These acts indeed constituted serious misconduct. A painstaking review of case law renders obtuse the Unions claim for separation pay. In a slew of cases, this Court refrained from awarding separation pay or financial assistance to union officers and members who were separated from service due to their participation in or commission of illegal acts during strikes. In the recent case of Pilipino Telephone Corporation v. Pilipino Telephone Employees Association (PILTEA) ,[74] this Court upheld the dismissal of union officers who participated and openly defied the return-to-work order issued by the DOLE Secretary. No separation pay or financial assistance was granted. In Sukhothai Cuisine and Restaurant v. Court of Appeals,[75] this Court declared that the union officers who participated in and the union members who committed illegal acts during the illegal strike have lost their employment status. In this case, the strike was held illegal because it violated agreements

providing for arbitration. Again, there was no award of separation pay nor financial assistance. In Philippine Diamond Hotel and Resort, Inc. v. Manila Diamond Hotel Employees Union,[76] the strike was declared illegal because the means employed was illegal. We upheld the validity of dismissing union members who committed illegal acts during the strike, but again, without awarding separation pay or financial assistance to the erring employees. In Samahang Manggagawa sa Sulpicio Lines, Inc. v. Sulpicio Lines ,[77] this Court upheld the dismissal of union officers who participated in an illegal strike sans any award of separation pay. Earlier, in Grand Boulevard Hotel v. Genuine Labor Organization of Workers in Hotel, Restaurant and Allied Industries,[78] we affirmed the dismissal of the Unions officers who participated in an illegal strike without awarding separation pay, despite the NLRCs declaration urging the company to give financial assistance to the dismissed employees. [79] In Interphil Laboratories Union-FFW, et al. v. Interphil Laboratories, Inc. ,[80] this Court affirmed the dismissal of the union officers who led the concerted action in refusing to render overtime work and causing work slowdowns. However, no separation pay or financial assistance was allowed. In CCBPI Postmix Workers Union v. NLRC,[81] this Court affirmed the dismissal of union officers who participated in the strike and the union members who committed illegal acts while on strike, without awarding them separation pay or financial assistance. In 1996, in Allied Banking Corporation v. NLRC,[82] this Court affirmed the dismissal of Union officers and members, who staged a strike despite the DOLE Secretarys issuance of a return to work order but did not award separation pay. In the earlier but more relevant case of Chua v. NLRC,[83] this Court deleted the NLRCs award of separation benefits to an employee who participated in an unlawful and violent strike, which strike resulted in multiple deaths and extensive property damage. In Chua, we viewed the infractions committed by the union officers and members as a serious misconduct which resulted in the deletion of the award of separation pay in conformance to the ruling in PLDT. Based on existing jurisprudence, the award of separation pay to the Union officials and members in the instant petitions cannot be sustained. One last point to considerit is high time that employer and employee cease to view each other as adversaries and instead recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure the success of the business. When they consider only their own self-interests, and when they act only with their own benefit in mind, both parties suffer from short-sightedness, failing to realize that they both have a stake in the business. The employer wants the business to succeed, considering the investment that has been made. The employee in turn, also wants the business to succeed, as continued employment means a living, and the chance to better ones lot in life. It is clear then that they both have the same goal, even if the benefit that results may be greater for one party than the other. If this becomes a source of conflict, there are various, more amicable means of settling disputes and of balancing interests that do not add fuel to the fire, and instead open avenues for understanding and cooperation between the employer and the employee. Even though strikes and lockouts have been recognized as effective bargaining tools, it is an antiquated notion that they are truly beneficial, as they only provide short-term solutions by forcing concessions from one party; but staging such strikes would damage the working relationship between employers and employees, thus endangering the business that they both want to succeed. The more progressive and truly effective means of dispute resolution lies in mediation, conciliation, and arbitration, which do not increase tension but instead provide relief from them. In the end, an atmosphere of trust and understanding has much more to offer a business relationship than the traditional enmity that has long divided the employer and the employee. WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in G.R. Nos. 158798-99 are GRANTED. The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of severance compensation is ANNULLED and SET ASIDE.

The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed the August 9, 2001 Decision of the NLRC but deleted the grant of severance compensation, is REINSTATED and AFFIRMED.No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 120319 October 6, 1995 LUZON DEVELOPMENT BANK, petitioner, vs. ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA in her capacity as VOLUNTARY ARBITRATOR, respondents. ROMERO, J.: From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development Bank Employees (ALDBE) arose an arbitration case to resolve the following issue: Whether or not the company has violated the Collective Bargaining Agreement provision and the Memorandum of Agreement dated April 1994, on promotion. At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S. Garcia, in her capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995. LDB, on the other hand, failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding them to do so. As of May 23, 1995 no Position Paper had been filed by LDB. On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows: WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining Agreement provision nor the Memorandum of Agreement on promotion. Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibit her from enforcing the same. In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the basis of evidence and arguments presented by such parties who have bound themselves to accept the decision of the arbitrator as final and binding. Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary.

Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their right to strike and are compelled to accept the resolution of their dispute through arbitration by a third party. 1The essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested third party whose decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally appointed by the government. Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary arbitration clause in their collective agreement, to an impartial third person for a final and binding resolution. 2Ideally, arbitration awards are supposed to be complied with by both parties without delay, such that once an award has been rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they are presumed to have freely chosen arbitration as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case. Above all, they have mutually agreed to de bound by said arbitrator's decision. In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein provisions for a machinery for the resolution of grievances arising from the interpretation or implementation of the CBA or company personnel policies. 3 For this purpose, parties to a CBA shall name and designate therein a voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those accredited by the National Conciliation and Mediation Board (NCMB). Article 261 of the Labor Code accordingly provides for exclusive original jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the interpretation or implementation of the CBA and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction over other labor disputes. On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following enumerated cases: . . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or nonagricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. xxx xxx xxx It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National Labor Relations Commission (NLRC) for that matter. 4 The state of our present law relating to voluntary arbitration provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties," 5 while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any

or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders." 6 Hence, while there is an express mode of appeal from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the decision of a voluntary arbitrator. Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the Supreme Court itself on a petition for certiorari, 7 in effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In the view of the Court, this is illogical and imposes an unnecessary burden upon it. In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., 9 this Court ruled that "a voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency but independent of, and apart from, the NLRC since his decisions are not appealable to the latter. 10 Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise: xxx xxx xxx (B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. xxx xxx xxx Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction Industry Arbitration Commission, 11 that the broader term "instrumentalities" was purposely included in the above-quoted provision. An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency" or "instrumentality" are synonymous in the sense that either of them is a means by which a government acts, or by which a certain government act or function is performed. 13 The word "instrumentality," with respect to a state, contemplates an authority to which the state delegates governmental power for the performance of a state function. 14 An individual person, like an administrator or executor, is a judicial instrumentality in the settling of an estate, 15 in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the court,16 and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state. 17 The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that, although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions

to the Court of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129. A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated therein. This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities 18 not expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter. In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration Law, arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none be specified, the Regional Trial Court for the province or city in which one of the parties resides or is doing business, or in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made, apply to the court having jurisdiction for an order confirming the award and the court must grant such order unless the award is vacated, modified or corrected. 19 In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court. Consequently, in a petition for certiorari from that award or decision, the Court of Appeals must be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the Court of Appeals petitions of this nature for proper disposition. ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals. SO ORDERED.

[G.R. Nos. 88710-13 : December 19, 1990.] 192 SCRA 396 UNION OF FILIPRO EMPLOYEES (UFE), MANUEL L. SARMIENTO, BENJAMIN M. ALTAREJOS, RODOLFO D. PAGLINAWAN, CARMELITA G. NUQUI, CORAZON Y SAZON, RODRIGO P. LUCAS, RUDOLPH C. ARMAS, EDUARDO A. ABELLA, ANGEL A. CANETE, JUANITO T. CAPILI, ADOLFO S. CASTILLO, JR., PONCIANO A. CARINGAL, ERIBERTO S. LEONARDO, ADELAIDA B. MIRA, EUGENIA C. NUEZ, PAZ B. SAN JOSE, VENUSITO S. SOLIS, EMMANUEL S. VILLENA, ALFONSO R. RICAFRENTE, MELANIO C. LANTIN, AMADOR M. MONTOJO, RODOLFO M. MUNSOD, RENATO P. DIAZ, RODRIGO M. URGELLES, CARLOS B. SAN JOSE, EUSTAQUIO E. BUNYI, NELSON P. CENTENO, SOTERO A. GACUTAN, GUILLERMO G. DE BORJA, DIONISIO H. NIPALES, EUGENIO S. SAN PEDRO, MANUEL DELA FUENTE, CARLO MEDINA, CESAR B. PONCE, JORGE B. CASTRO, JR., RICARDO AREVALO, REY M. BEO, FELIX ESGUERRA, REYNALDO ALMENANZA, MELITON C. ROXAS (as represented by his surviving spouse, MA. CORAZON ROXAS), ROMEO A. ARANDELA, ISIDRO A. NATIVIDAD, EMILIANO M. SAYAO, CELSO J. CENIDO, PAUL C. MEJARES, SILVERIO C. PAMPANG, DIONISIO S. CANLOBO, GILBERT C. NOBLE, RODOLFO D. CALONG-CALONG, SR., PEPITO Q. QUITLONG, DIONISIO C. COMPLETO, ANTONIO T. AVELINO, ANGELITO PAYABYAB, ISAIAS A. RIEZA, DEODITO M. BELARMINO, QUEZON G. MATEO, CARLITO PRE, CIPRIANO P. LUPEBA, EFREN P. DINSAY, WILDON C. BARROS, SUSAN A. BERRO, MANUEL A. LAVIN, ROY U. BACONGUIS, JEROME T. FIEL, ANASTACIO G. CABALLERO, JR., ROGELIO E. RAIZ, JOSE T. ISIDTO, ANGELITO M. ANICIETE, RAUL ROBERTO C. NANQUIL, LIZA T. VILLANUEVA, CESAR S. CRUZ, REYNALDO L. CALIGUIA, ERNESTO M. SOLOMON, OSCAR G. AGUINALDO, DIEGO P. OLIVA, JAIME D. NILLAS, ELPIDIO A. HERMOCILLA, DANTE L. ESCOSURA, FEDERICO P. CONTEMPRATO, LAURO C. MAKILING, RENATO O. MINDANAO, RAFAEL C. TURA AND QUINTIN J. PEDRIDO, JR., Petitioners, vs. NESTL PHILIPPINES, INC., NATIONAL LABOR RELATIONS COMMISSION, HON. EDUARDO G. MAGNO, HON. ZOSIMO T. VASALLO and HON. EVANGELINE S. LUBATON , Respondents.

DECISION MEDIALDEA, J.: This petition assails the decision of the NLRC, dated November 2, 1988 on the consolidated appeals of petitioners, the dispositive portion of which provides as follows: "1. In NLRC Case No. NCR-12-4007-85 and NLRC Case No. NCR-1-295-86 a. Declaring the strike illegal; b. Declaring the following respondent union officers, namely; M.L. Sarmiento, B.M. Altarejos, R.D. Paglinawan, C.G. Nuqui, C.Y. Sazon, R. Armas, E. Abella, A.A. Caete, A.B. Mira, P.C. Caringal, E. Leonardo E.C. Nuez, P.D. San Jose, E. Villena A. Ricafrente, M. Lantin, A. Montojo, R. Monsud, R. Diaz, R. Urgelles, C. San Jose, E. Bunyi, N. Centeno, R. Gacutan, G. de Borja, N. Nipales, E. San Pedro, C. Ponce, J. Castro, R. Beo, E. Quino, M. Roxas, R. Arandela, W. Ramirez, I. Natividad, S. Pampang, D. Canlobo, R. Calong-Calong, G. Noble, E. Sayao, C. Cenido, P. Mijares, P. Quitlong, A. Avelino, L. Payabyab, I. Rieza, C. Pre, D. Belarmino, to have lost their employment status; c. Ordering the reinstatement of the following respondents-appellants: Juanito Capili, Carlo Medina, Rodrigo Lucas, Adoho Castillo, Jr., Venusito Solis, Ricardo Arevalo, Quezon G. Mateo, Jr., Dionisio Completo, Felix Esguerra, Manuel dela Fuente and Reymundo Almenanza, to their former or equivalent positions without loss of seniority rights but without backwages; d. Declaring the union (UFE) guilty of unfair labor practice; and e. Dismissing the union complaint for unfair labor practice.- nad 2. In RAB-X-2-0047-86, the decision sought to be set aside is AFFIRMED and the individual respondents-appellants namely: Roy Baconguis, Jerome T. Fiel, Efren P. Dinsay, Anastacio G. Caballero, Susan E. Berro, Jose T. Isidto, Wilson C. Barros, Rogelio E. Raiz, Manuel A. Lavin, Cipriano P. Lupeba are hereby declared to have lost their employment status;. 3. In NLRC-00-09-0385-87, the challenged decision is likewise AFFIRMED, except as it affects Cesar S. Cruz, who is ordered reinstated to his former or equivalent position without backwages." (pp. 417-418, Rollo) and the resolution dated March 7, 1989, quoted as follows: "NLRC CASE NO. NCR-12-4007-85 entitled Union of Filipro Employees (UFE), PetitionerAppellants, versus, Filipro, Inc., et al., Respondents-Appellees, NLRC CASE NO. NCR-1-29586 entitled Nestle Phils., Inc., Petitioner-Appellee, versus, Union of Filipro Employees, et al., Respondents-Appellants, NLRC CASE NO. RAB-X-2-0047-86 entitled Nestle Phils., Inc., Petitioner-Appellee, versus, Cagayan de Oro Filipro Workers Union-WATU, et al., Respondents-Appellants, NCR-00-09-0385-87 entitled Union of Filipro Employees (UFE) and its officers, Complainants-Appellants, versus, Nestle Phils., et al., Respondents-Appellees. The Commission sitting en banc, after deliberation, resolved to rectify par. 3 of the dispositive portion of our November 2, 1988 resolution by ordering the reinstatement of Quezon G. Mateo, Jr. and Dionisio Completo to their former or equivalent position without backwages and to deny the motion for reconsideration filed by appellants UFE and its Officials adversely affected by said resolution." (p. 429, Rollo) In a lengthy and voluminous petition, dwelling largely on facts, petitioner Union of Filipro Employees and 70 union officers and a member (henceforth "UFE") maintain that public respondent NLRC had acted with grave abuse of discretion in its affirmance of the decisions of the Labor Arbiters a quo, declaring illegal the strikes staged by UFE. Respondent NLRC premised its decision on the following sets of facts: 1. In NCR 12-4007-85 and NCR 1-295-86: UFE filed a notice of strike on November 14, 1985, (BLR-NS-11-344-85) with the Bureau of Labor Relations against Filipro (now Nestle Philippines, Inc., ["Nestle"]). On December 4, 1988, UFE filed a complaint for Unfair Labor Practice (ULP) against Nestle and its officials for violation of the Labor Code (Art. 94) on Holiday Pay, non-implementation of the CBA

provisions (Labor Management Corporation scheme), Financial Assistance and other unfair labor practice (p. 381, Rollo).:- nad Acting on Nestle's petition seeking assumption of jurisdiction over the labor dispute or its certification to the NLRC for compulsory arbitration, then Minister of Labor and Employment Blas F. Ople assumed jurisdiction over the dispute and issued the following order on December 11, 1985: "WHEREFORE, this Office hereby assumes jurisdiction over the labor dispute at Filipino, Inc. pursuant to Article 264(g) of the Labor Code of the Philippines, as amended. In lime with this assumption a strike, lockout, or any other form of concerted action such as slowdowns, sitdowns, noise barrages during office hours, which tend to disrupt company operations, are strictly enjoined. Let a copy of this Order be published in three (3) conspicuous places inside company premises for strict compliance of all concerned." (p. 381-382, Rollo) On December 20, 1985, UFE filed a petition for Certiorari with prayer for issuance of temporary restraining order, with this Court (G.R. No. 73129) assailing the assumption of jurisdiction by the Minister. Notwithstanding the automatic injunction against any concerted activity, and an absence of a restraining order, the union members, at the instigation of its leaders, and in clear defiance of Minister Ople's Order of December 11, 1986, staged a strike and continued to man picket lines at the Makati Administrative Office and all of Nestle's factories and warehouses at Alabang, Muntinlupa, Cabuyao, Laguna, and Cagayan de Oro City. Likewise, the union officers and members distributed leaflets to employees and passersby advocating a boycott of company products (p. 383, Rollo). On January 23, 1986, Nestle filed a petition to declare the strike illegal (NCR-1-295-86) premised on violation of the CBA provisions on "no strike/no lockout" clause and the grievance machinery provisions on settlement of disputes. On January 30, 1986, then Labor Minister Ople issued another Order, with this disposition: "WHEREFORE, in line with the Order of December 11, 1985, this Office hereby orders all the striking workers to report for work and the company to accept them under the same terms and conditions prevailing before the work stoppage within forty eight (48) hours from notice of this Order. The Director of Labor Relations is designated to immediately conduct appropriate hearings and meetings and submit his recommendations to enable this Office to decide the issues within thirty (30) days." (p. 383, Rollo) Despite receipt of the second order dated January 30, 1986, and knowledge of a notice caused to be published by Nestle in the Bulletin on February 1, 1986, advising all workers to report to work not later than February 3, 1986, the officers and members of UFE continued with the strike. On February 4, 1986, the Minister B. Ople denied their motion for reconsideration of the returnto-work order portion as follows: "WHEREFORE, the motion for reconsideration is hereby denied and no further motion of similar nature shall be entertained.: nad "The parties are further enjoined from committing acts that will disrupt the peaceful and productive relations between the parties while the dispute is under arbitration as well as acts considered illegal by law for the orderly implementation of this Order like acts of coercion, harassment, blocking of public thoroughfares, ingress and egress to company premises for lawful purposes or those undertaken without regard to the rights of the other party. "Police and military authorities are requested to assist in the proper and effective implementation of this Order." (p. 384, Rollo) UFE defied the Minister and continued with their strike. Nestle filed criminal charges against those involved. On March 13, 1986, the new Minister of Labor and Employment, Augusto B. Sanchez, issued a Resolution, the relevant portions of which stated thus:

"This Office hereby enjoins all striking workers to return-to-work immediately and management to accept them under the same terms and conditions prevailing previous to the work stoppage except as qualified in this resolution. The management of Nestle Philippines is further directed to grant a special assistance as suggested by this Ministry in an order dated 30 January 1986 to all striking employees covered by the bargaining units at Makati, Alabang, Cabuyao and Cagayan de Oro City in an amount equivalent to their weighted average monthly basic salary, plus the cash conversion value of the vacation leave credits for the year 1986, payable not later than five (5) days from the date of the actual return to work by the striking workers." (p. 385, Rollo) On March 17, 1986, the strikers returned to work. On March 31, 1986, We granted UFE's Motion to Withdraw its Petition for Certiorari(G.R. No. 73129) (p. 385, Rollo) On April 23, 1986, Minister Sanchez rendered a Decision, the dispositive portion of which reads: WHEREFORE, the Union charge for unfair labor practices is hereby dismissed for want of merit. Nestle Philippines is hereby directed to make good its promise to grant an additional benefit in the form of bonus equivalent to one (1) month's gross compensation to all employees entitled to the same in addition to the one-month weighted average pay granted by this office in the return-to-work Order." (p. 786, Rollo) On June 6, 1986, Minister Sanchez modified the foregoing decision as follows: "WHEREFORE, our 23 April 1986 Decision is hereby modified as follows: "1. Nestle Philippines is directed to pay the Anniversary bonus equivalent to one month basic salary to all its employees in lieu of the one month gross compensation previously ordered by this office." (p. 787, Rollo) On November 13, 1987, after trial on the merits, Labor Arbiter Eduardo G. Magno issued his decision, disposing as follows: "WHEREFORE, judgment is hereby rendered: "1. Declaring the strike illegal.: nad "2. Declaring all the respondent union officers, namely: M.L. Sarmiento, R.M. Alterejos, R.D. Paglinawan, C.G. Nuqui, C.Y. Sazon, R. Lucas, R. Armas, E. Abella, A.A. Caete, J.T. Capili, A.S. Castillo, Jr., P.C. Caringal, E. Leonardo, E.B. Mira, E.C. Nuez, P.D. San Jose, V. Solis, E. Villena, A. Ricafrente, M. Lantin, A. Mortojo, R. Munsod, R. Diaz, R. Urgelles, C. San Jose, E. Bunyi, N. Centeno, R. Gacutan, G. de Borja, N. Nipales, E. San Pedro, M. de la Fuente, C. Medina, C. Ponce, J. Castro Jr., R. Arevalo, R. Beo, F. Esguerra, R. Almenanza, E. Quino, M. Roxas, R. Arandela, W. Ramirez, I. Natividad, S. Pampang, D. Canlobo, G. Noble, E. Sayao, C. Cenido, F. Mijares, R. Calong-Calong, P. Quitlong, D. Completo, A. Avelino, L. Payabyab, I. Rieza, D. Belarmino, Q. Mateo, and C. Pre to have lost their employment status. "3. Declaring the union guilty of unfair labor practice; and "4. Dismissing the Union complaint for unfair labor practice." (pp. 380-381, Rollo) 2. In RAB-X-2-0047-86: Filipro (Nestle) and the Cagayan de Oro Filipro Workers Union-WATU, renewed a 3-year contract, made effective from December 1, 1984 up to June 30, 1987. Petitioners signed the CBA as the duly-elected officers of the Union. On January 19, 1985, the union officers, together with other members of the union sent a letter to Workers Alliance Trade Unions (WATU), advising them "that henceforth we shall administer the CBA by ourselves and with the help of the Union of Filipro Employees (UFE) to where we have allied ourselves." WATU disregarded the unions's advice, claiming to be the contracting party of the CBA. UFE filed a petition (Case No. CRD-M-88-326-85) for administration of the existing CBAs at Cebu, Davao and Cagayan de Oro bargaining units against TUPAS and WATU. From January 22, 1986 to March 14, 1986, the rank and file employees of the company staged a strike at the instigation of the UFE officers, who had represented themselves as officers.

Nestle filed a petition to declare the strike illegal. The strikers countered that their strike was legal because the same was staged pursuant to the notice of strike filed by UFE on November 14, 1985 (BLR-NS-11-344-85), of which they claim to be members, having disaffiliated themselves from CDO-FWU-WATU. On November 24, 1987, Executive Labor Arbiter Zosimo Vasallo issued his decision, disposing as follows: "WHEREFORE, in view of the foregoing, judgment is hereby rendered: "1. Declaring the strike illegal; "2. Declaring respondent union guilty of unfair labor practice; and "3. Declaring the following individual respondent Union officers namely: Roy Y. Baconguis, Jerome T. Fiel, Efren P. Dinsay, Anastacio G. Caballero, Susan E. Berro, Jose T. Isidto, Wilson C. Barros, Rogelio E. Raiz, Manuel A. Lavin and Cipriano P. Lupeba to have lost their employment status." (p. 388, Rollo) 3. In NCR-00-09-03285-87. (a) On August 13, 1986, UFE, its officers and members staged a walkout from their jobs, and participated in the Welga ng Bayan. Nestl filed a petition to declare the walkout illegal (NLRC Case No. SRB-IV-1831-87) (p. 392, Rollo); (b) On September 21, 1986, complainants (UFE) again did not proceed to their work, but joined the picket line in sympathy with the striking workers of Southern Textile Mills, which became the subject of an Illegal Strike Petition (NLRC Case SRB-IV-I 1831-87) (p. 392, Rollo); (c) On November 12, 1986, UFE its officers and members just left their work premises and marched towards Calamba in a demonstration over the slaying of a labor leader, . . . hence a complaint for Illegal Walkout (NLRC Case No. SRB-IV-1833-87) was filed by Nestle (p. 392, Rollo); (d) On December 4, 1986, UFE filed a Notice of Strike with the Bureau of Labor Relations (BLR-NS-12-531-86) (to protest the unfair labor practices of Nestle, such as hiring of contractual workers to perform regular jobs and wage discrimination) (p. 392, Rollo); (e) On December 23, 1986, then Minister Augusto S. Sanchez certified the labor dispute to the Commission for compulsory arbitration, strictly enjoining any intended or actual strike or lockout (p. 392, Rollo); (f) On August 18, 1987, UFE union officers and members at the Cabuyao factory again abandoned their jobs and just walked out, leaving unfinished products on line and raw materials leading to their spoilage. The walk-out resulted in economic losses to the company. Nestle filed a Petition to Declare the Walkout Illegal. (NLRC Case No. SRB-IV-3-1898-87) (p. 407, Rollo); (g) On August 21, 1987, UFE union officers and members at the Alabang factory also left their jobs in sympathy with the walkout staged by their Cabuyao counterparts. Nestle filed again a Petition to Declare the Strike Illegal (NLRC-NCR-Case No. 00-08-03003-87) (p. 407, Rollo); (h) On August 27, 1987, UFE union members at the Alabang and Cabuyao factories, in disregard of the Memorandum of Agreement entered into by the Union and Management on August 21, 1987, (to exert their best efforts for the normalization of production targets and standards and to consult each other on any matter that may tend to disrupt production to attain industrial peace) participated in an indignation rally in Cabuyao because of the death of two (2) members of PAMANTIC, and in Alabang because one of their members was allegedly mauled by a policeman during the nationwide strike on August 26, 1987 (p. 408, Rollo); (i) On September 4, 1987, around 6:00 P.M. all sections at the Alabang factory went on a 20minute mealbreak simultaneously, contrary to the agreement and despite admonition of supervisors, resulting in complete stoppage of their production lines. Responsible officials namely: Eugenio San Pedro, Carlos Jose, and Cesar Ponce, were suspended from work for six (6) days without pay (p. 408, Rollo); (j) From September 5 to 8, 1987, at the instigation of UFE union officers, all workers staged a sitdown strike; and

(k) On September 7, 1987, Cabuyao's culinary section's union members sympathized with the sitdown strike at Alabang, followed at 12:30 P.M. by the whole personnel of the production line and certain areas in the Engineering Department. These sitdown strikes at the Alabang and Cabuyao factories became the subject of two separate petitions to declare the strike illegal (NCR-Case No. 00-09-03168-87 and SRB-IB-9-1903-87, respectively) (p. 408, Rollo); (l) On September 8, 1987, Hon. F. Drilon issued the following order: "All the workers are hereby directed to return to work immediately, refrain from resorting to any further slowdown, sitdown strike, walkout and any other kind of activities that may tend to disrupt the normal operations of the company. The company is directed to accept all employees and to resume normal operations.: nad Parties are likewise directed to cease and desist from committing any and all acts that would aggravate the situation." (p. 394, Rollo) (m) Despite the order, UFE staged a strike on September 11, 1987, without notice of strike, strike vote and in blatant defiance of then Labor Minister Sanchez's certification order dated November 23, 1986 and Secretary Drilon's return-to-work order dated September 8, 1987." (p. 409, Rollo); (n) Nestle sent individual letter of termination dated September 14, 1987 dismissing them from the service effective immediately for knowingly instigating and participating in an illegal strike, defying the order of the Secretary of Labor, dated September 8, 1987, and other illegal acts (pp. 394-395, Rollo). On September 22, 1987, UFE filed a complaint for Illegal Dismissal, ULP and damages (NLRC NCR-00-03285-87). Labor Arbiter Evangeline Lubaton ruled on both issues of dismissal and strike legality, upon the premise that the issue on validity of the dismissal of the individual complainants from employment "depends on the resolution of the issue on whether or not the strike declared by complainants was illegal." The decision dated January 12, 1988, disposed as follows: "WHEREFORE, in view of the foregoing, judgment is hereby rendered: 1. Dismissing the instant complaint for lack of merit; and 2. Confirming the dismissal of all individual complainants herein as valid and legally justified." (p. 376, Rollo) UFE appealed, assailing the three decisions, except that rendered in Case No. NLRC-NCR12-4007-85 (Complaint for Unfair Labor Practice Against UFE) "because it was already rendered moot and academic by the return to work agreement and order dated March 10 and 13, 1986, respectively." (p. 49, Rollo). Upon UFE's subsequent motion, the three appeals were ordered consolidated and elevated to the NLRC en banc (p, 95, Rollo) The NLRC affirmed the unanimous decisions of the three labor arbiters which declared the strikes illegal, premised on the view that "the core of the controversy rests upon the legality of the strikes." In the petition before Us, UFE assigns several errors (pp. 63-321, Rollo), which We have summarized as follows: 1. that Articles 263 and 264 are no longer good laws, since compulsory arbitration has been curtailed under the present Constitution. 2. that the question on the legality of the strike was rendered moot and academic when Nestle management accepted the striking workers in compliance with the return-to-work order of then Minister of Labor Augusto Sanchez dated March 13, 1986, (citing the case of Bisayan Land Transportation Co. v. CIR (102 Phil. 439) and affirmed in the case of Feati University Faculty Club (PAFLU) v. Feati University, G.R. No. L-31503, August 15, 1974, 58 SCRA 395).chanrobles virtual law library 3. that the union did not violate the no-strike/no lock-out clause, considering that the prohibition applies to economic strikes, pursuant to Philippine Metal Foundries v. CIR, G.R. No. L-34948-

49, May 15, 1979, 90 SCRA 135. UFE, it is claimed, premised their strike on a violation of the labor standard laws or non-payment of holiday pay, which is, in effect, a violation of the CBA. 4. on the commission of illegal and prohibited acts which automatically rendered the strike illegal, UFE claimed that there were no findings of specific acts and identifies of those participating as to render them liable (ESSO Phils. v. Malayang Manggagawa sa ESSO, G.R. No. L-36545, January 26, 1977, 75 SCRA 72; Shell Oil Workers Union v. CIR, G.R. No. L28607, February 12, 1972, 43 SCRA 224). By holding the officers liable for the illegal acts of coercion, or denial of free ingress and egress, without specifying and finding out their specific participation therein, the Labor Arbiter resorted to the principle of vicarious liability which has since been discarded in the case of Benguet Consolidated v. CIR, G.R. No. L-24711, April 30, 1968, 23 SCRA 465. We agree with the Solicitor General that the petition failed to show that the NLRC committed grave abuse of discretion in its affirmance of the decisions of the Labor Arbiters a quo. At the outset, UFE questions the power of the Secretary of Labor under Art. 263(g) of the Labor Code to assume jurisdiction over a labor dispute tainted with national interests, or to certify the same for compulsory arbitration. UFE contends that Arts. 263 and 264 are based on the 1973 Constitution, specifically Sec. 9 of Art. II thereof, the pertinent portion of which reads: "Sec. 9. . . . The State may provide for compulsory arbitration." (p. 801, Rollo) UFE argues that since the aforecited provision of Sec. 9 is no longer found in the 1987 Constitution, Arts. 263(g) and 264 of the Labor Code are now "unconstitutional and must be ignored." We are not persuaded. We agree with the Solicitor General that on the contrary, both provisions are still applicable. We quote: "Article 7 of the New Civil Code declares that: 'Article 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not be excused by disuse or custom or practice to the contrary. x x x' "In the case at bar, no law has ever been passed by Congress expressly repealing Articles 263 and 264 of the Labor Code. Neither may the 1987 Constitution be considered to have impliedly repealed the said Articles considering that there is no showing that said articles are inconsistent with the said Constitution. Moreover, no court has ever declared that the said articles are inconsistent with the 1987 Constitution. "On the contrary, the continued validity and operation of Articles 263 and 264 of the Labor Code has been recognized by no less than the Congress of the Philippines when the latter enacted into law R.A. 6715, otherwise known as Herrera Law, Section 27 of which amended paragraphs (g) and (i) of Article 263 of the Labor Code. "At any rate, it must be noted that Articles 263 (g) and 264 of the Labor Code have been enacted pursuant to the police power of the State, which has been defined as the power inherent in a Government to enact laws, within constitutional limits, to promote the order, safety, health, morals and general welfare of society (People vs. Vera Reyes, 67 Phil. 190). The police power, together with the power of eminent domain and the power of taxation, is an inherent power of government and does not need to be expressly conferred by the Constitution. Thus, it is submitted that the argument of petitioners that Articles 263 (g) and 264 of the Labor Code do not have any constitutional foundation is legally inconsequential." (pp. 801-803, Rollo) On the issue of the legality of the strike committed, UFE seeks to absolve itself by pointing out qualifying factors such as motives, good faith, absence of findings on specific participation and/or liability, and limiting the no-strike provision to economic strikes. UFE completely misses the underlying principle embodied in Art. 264(g) on the settlement of labor disputes and this is, that assumption and certification orders are executory in character and are to be strictly complied with by the parties even during the pendency of any petition

questioning their validity. This extraordinary authority given to the Secretary of Labor is aimed at arriving at a peaceful and speedy solution to labor disputes, without jeopardizing national interests. Regardless therefore of their motives, or the validity of their claims, the striking workers must cease and/or desist from any and all acts that tend to, or undermine this authority of the Secretary of Labor, once an assumption and/or certification order is issued. They cannot, for instance, ignore return-to-work orders, citing unfair labor practices on the part of the company, to justify their actions. Thus, the NLRC in its decision, re-emphasized the nature of a return-towork order within the context of Art. 264(g) as amended by BP Nos. 130 and 227: "x x x "One other point that must be underscored is that the return-to-work order is issued pending the determination of the legality or illegality of the strike. It is not correct to say that it may be enforced only if the strike is legal and may be disregarded if the strike is illegal, for the purpose precisely is to maintain the status quo while the determination is being made. Otherwise, the workers who contend that their strike is legal can refuse to return to work to their work and cause a standstill on the company operations while retaining the positions they refuse to discharge or allow the management to fill. Worse, they will also claim payment for work not done, on the ground that they are still legally employed although actually engaged in the activities inimical to their employer's interest. (Emphasis supplied) "This is like eating one's cake and having it too, and at the expense of the management. Such an unfair situation surely was not contemplated by our labor laws and cannot be justified under the social justice policy, which is a policy of fairness to both labor and management. Neither can this unseemly arrangement be sustained under the due process clause as the order, if thus interpreted, would be plainly oppressive and arbitrary. ". . ." (p. 415, Rollo) Also, in the cases of Sarmiento v. Judge Tuico, (G.R. No. 75271-73; Asian Transmission Corporation v. National Labor Relations Commission, G.R. 77567, 27 June 88, 162 SCRA 676). We stated: "The return to work order does not so much confer a right as it imposes a duty; and while as a right it may be waived, it must be discharged as a duty even against the worker's will. Returning to work in this situation is not a matter of option or voluntariness but of obligation. The worker must return to his job together with his co-workers so the operations of the company can be resumed and it can continue serving the public and promoting its interest.": nad We also wish to point out that an assumption and/or certification order of the Secretary of Labor automatically results in a return-to-work of all striking workers, whether or not a corresponding order has been issued by the Secretary of Labor. Thus, the striking workers erred when they continued with their strike alleging absence of a return-to-work order. Article 264(g) is clear. Once an assumption/certification order is issued, strikes are enjoined, or if one has already taken place, all strikers shall immediately return to work. A strike that is undertaken despite the issuance by the Secretary of Labor of an assumption or certification order becomes a prohibited activity and thus illegal, pursuant to the second paragraph of Art. 264 of the Labor Code as amended (Zamboanga Wood Products, Inc. v. NLRC, G.R. 82088, October 13, 1989; 178 SCRA 482). The Union officers and members, as a result, are deemed to have lost their employment status for having knowingly participated in an illegal act. The NLRC also gave the following reasons: 1. The strike was staged in violation of the existing CBA provisions on "No Strike/No Lockout Clause" stating that a strike, which is in violation of the terms of the collective bargaining statement, is illegal, especially when such terms provide for conclusive arbitration clause (Liberal Labor Union vs. Phil. Can Co., 91 Phil. 72; Phil. Airlines vs. PAL Employees Association, L-8197, October 31, 1958). The main purpose of such an agreement is to prevent

a strike and it must, therefore, be adhered to strictly and respected if their ends are to be achieved (pp. 397-398, Rollo) 2. Instead of exhausting all the steps provided for in the grievance machinery provided for in the collective bargaining agreement to resolve the dispute amicably and harmoniously within the plant level, UFE went on strike (p. 398, Rollo) 3. The prescribed mandatory cooling-off period and then 7-day strike and after submission of the report of strike vote at Nestle's Makati Offices and Muntinlupa and Cabuyao Plants were not complied with (NLRC-NCR-124007-85 & NCR-1-295-86), while no notice of strike was filed by respondents when they staged the strike at Nestle's Cagayan de Oro Plant (RABX-2-004786) contrary to the pertinent provision of Articles 263 and 264 of the Labor Code, emphasizing that "the mandatory character of these cooling-off periods has already been categorically ruled upon by the Supreme Court" (National Federation of Sugar Workers (NFSW) vs. Ovejera, et al., 114 SCRA 354) (p. 402, Rollo)- nad 4. In carrying out the strike, coercion, force, intimidation, violence with physical injuries, sabotage, and the use of unnecessary and obscene language or epithets were committed by the respondent officials and members of either UFE or WATU. It is well-settled that a strike conducted in this manner is illegal (United Seamen's Union vs. Davao Shipowners Association, 20 SCRA 1226). In fact, criminal cases were filed with the Makati Fiscal's Office (p. 402, Rollo). Thus, the NLRC correctly upheld the illegality of the strikes and the corresponding dismissal of the individual complainants because of their "brazen disregard of successive lawful orders of then Labor Ministers Blas F. Ople, Augusto Sanchez and Labor Secretary Franklin Drilon dated December 11, 1985, January 30, 1986 and February 4, 1986, respectively, and the cavalier treatment of the provisions of the Labor Code and the return-to-work orders of the Minister (now Secretary) of Labor and Employment, or Articles 264 and 265 (now renumbered Arts. 263 and 264), providing in part as follows: "ART. 263. Strikes, picketing and lockouts. x x x "(g) When in his opinion there exists a labor dispute causing or likely to cause strikes or lockouts adversely affecting the national interest, such as may occur in but not limited to public utilities, companies engaged in the generation or distribution of energy, banks, hospitals, and export-oriented industries including those within export processing zones, the Minister of Labor and Employment shall assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Minister may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same. (Italics supplied)- nad "The foregoing notwithstanding, the President of the Philippines shall not be precluded from determining the industries wherein (sic) his opinion labor disputes may adversely affect the national interest, and from intervening at any time and assuming jurisdiction over any labor dispute adversely affecting the national interest in order to settle or terminate the same. x x x ART. 264. Prohibited activities. (a) No labor organization or employer shall declare a strike or lockout without first having bargained collectively in accordance with Title VII of this Book or without first having filed the notice required in the preceding Article or without the necessary strike or lockout vote first having been obtained and reported to the Ministry. No strike or lockout shall be declared after assumption of jurisdiction by the President or the Minister or after certification or submission of the dispute to compulsory or voluntary arbitration

or during the pendency o f cases involving the same grounds for the strike or lockout." ([pp. 399-401, Rollo]) (Emphasis supplied) On the alleged lack of jurisdiction of Labor Arbiter Lubaton, NLRC has clarified that the question on the legality of strike was properly resolved by the Labor Arbiter, not only because the question is perfectly within the original and exclusive jurisdiction of the Labor Arbiter to adjudicate, but also because the issue was not subsumed by the Order of Labor Minister Sanchez, dated December 23, 1986, certifying the Notice of Strike dated December 4, 1986 for compulsory arbitration, further clarifying that the issue of whether or not the strike staged on September 11, 1987 by UFE and its officials and members was illegal is a prejudicial question to the issue of whether or not the complainants were illegally dismissed. We shall not belabor the issue any further.: nad ACCORDINGLY, the petition is DISMISSED, and the decision of public respondent NLRC, dated November 2, 1988, and its Resolution, dated March 7, 1989, are both AFFIRMED in their entirety. No costs. SO ORDERED.

Republic of the Philippines Supreme Court BRISTOL MYERS SQUIBB G.R. No. 167449 (PHILS.), INC., Petitioner - versus RICHARD NIXON A. BABAN, Respondent. December 17, 2008 DECISION REYES, R.T., J.: A MEDICAL representative should distribute his employers products per company directions or risk termination. The willful breach of the trust reposed in him by his employer is a cause for the termination of his employment. In this petition for review on certiorari under Rule 45, petitioner seeks to set aside the following dispositions of the Court of Appeals (CA) in CA-G.R. CV No. 66590: (a) Decision[1] dated September 24, 2004 which annulled and set aside the Decision [2] of the National Labor Relations Commission (NLRC), and (b) Resolution [3] dated March 9, 2005 which denied petitioners motion for reconsideration. In 1992, petitioner Bristol Myers Squibb Philippines, Inc. hired respondent Richard Nixon A. Baban as district manager of the company. He was assigned to handle the companys clients in Cagayan de Oro-Northern Mindanao area and its immediate vicinities. His duties included the promotion of nutritional products of petitioner to medical practitioners, sale to drug outlets and the supervision of territory managers detailed in his district. On June 22, 1998, while conducting a field audit in Mindanao, petitioners auditor, Sheela Torreja, found twenty (20) packs of Mamacare samples in the baggage compartment of a company car with an accompanying note with political overtones. A note stapled on the package reads: Maskin perdido, muchos gracias por el suporta. Con ustedes ta despidi 36 anos de servicio public. Ay continua ayuda para bien del puebloZambo. Atty. Ricardo S. Baban, Jr. The English translation of the above notation is as follows: Even if Ive lost (sic) thank you so much for the support. Bidding you farewell for 36 years of public service. Will continue to help for the good of the city of Zamboanga. Atty. Ricardo S. Baban, Jr. Atty. Ricardo S. Baban, Jr., referred to in the note, is respondents father who had served as councilor in Zamboanga City for thirty-six (36) years but lost in his bid for the vice-mayoralty post in the May 11, 1998 elections. Apparently, respondents father was thanking supporters through distribution of company sample products. On July 2, 1998, the auditor reported the incident, prompting the companys Medical Sales Director, Ferdinand Sarfati, to issue a Memorandum requiring respondent to explain in writing within seventy-two (72) hours from notice why he should not be terminated for the infraction. On July 10, 1998, respondent admitted that he had caused the attachment of the notes to the product samples. He argued that there was no unauthorized distribution of the samples since he intended to give them only to doctors who requested them. To support his claim, he asserted that the samples found by Ms. Torreja were actually to be given to

Dr. Kibtiya Gustahan and to Rosita Jacoba, a registered midwife of Sta. Catalina Health Center, Zamboanga City, for distribution to the center. Furthermore, respondent admitted that he committed an honest mistake, an irresponsible act to have succumbed to the suggestion of Dr. Gustahan. He pleaded for consideration for the lapse, insisting that he has not caused any damage nor injury to the image of the company as the samples were not, in fact, distributed and that no gain was derived by him or his family. In a private conference held on July 27, 1998 with Mr. Sarfati, respondent was asked to explain the incident. On July 29, 1998, he was required by Atty. Hilario Marbella, manager, to appear for a conference to be held on August 6, 1998. He was given the chance to submit evidence and to be assisted by counsel during the conference. On August 25, 1998, he received under protest the companys memorandum dismissing him from employment. Questioning the validity of his dismissal, respondent filed a complaint for illegal dismissal with a claim for moral and exemplary damages plus attorneys fees with the Regional Arbitration Branch No. 10 of the National Labor Relations Commission (NLRC) against petitioner. Likewise impleaded were the companys General Manager, Medical Sales Director, HR Director, Personnel Manager, Auditor and Finance Director.[4] Labor Arbiter Disposition On August 30, 1999, the Labor Arbiter dismissed respondents complaint. The dispositive portion of the Decision reads: WHEREFORE, IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering the dismissal of the above-captioned case for lack of merit.However, Respondent Bristol Myers Squibb Phils., Inc., through a responsible officer, is hereby ordered to pay Complainant the total amount of P297,009.84 representing admitted monetary liabilities. SO ORDERED.[5] In sustaining the validity of respondents dismissal, the Labor Arbiter ruled that respondent had violated company rules and regulations by his unauthorized use of its property. Petitioner is therefore justified to declare respondent unworthy of the trust and confidence formerly imposed in him. Not satisfied with the Decision, petitioner appealed to the NLRC. NLRC Disposition In a Resolution dated March 15, 2000, the NLRC modified the Labor Arbiters decision as follows: WHEREFORE, premises considered, the decision appealed from is hereby modified: Declaring illegal the dismissal from the service of the complainant; Suspending complainant for a period of one (1) month effective 20 August 1998 without pay; Ordering respondent Bristol Myers Squibb Phils., Inc., to reinstate Complainant Richard Nixon A. Baban, without loss of seniority rights, to pay him backwages without qualification or deduction from the time his suspension had lapsed until his reinstatement to include 13th month pay and other benefits, allowances and incentives due him attached to his position as District Manager; The award of P297,009.84 as admitted monetary liabilities is hereby affirmed in toto;Ordering respondent to pay complainant the amount of P50,000.00 as moral damages and P30,000.00 as exemplary damages and ten (10%) percent attorneys fee.SO ORDERED.[6] Petitioner filed a motion for reconsideration. In a Resolution dated October 23, 2000, the NLRC disposed in the following tenor: WHEREFORE, the foregoing considered, we hereby MODIFY and SET ASIDE our pertinent findings in the Decision dated March 15, 2000, and hereby enter a new one thus: The Decision of the Labor Arbiter dated 30 August 1999, upholding the termination of complainant, is hereby reinstated; The award of P297,009.84 as admitted liability of respondent is affirmed; An award of financial assistance in favor of complainant by way of separation pay equivalent to one (1) month pay for every year of service covering the

period from the date of his regular employment up to 25 August 1998, a fraction of six (6) months being considered one (1) year;All other claims of the complainant are hereby dismissed.SO ORDERED.[7] Respondent moved for reconsideration but the NLRC denied the same in a Resolution dated August 3, 2001. Unconvinced, respondent then filed a petition for certiorari under Rule 65 with the CA. CA Disposition In a Decision dated September 24, 2004, the CA reinstated the original NLRC Decision dated March 15, 2000. In ruling in favor of respondent, the CA reasoned that the right of a worker to security of tenure is constitutionally guaranteed. It further declared that, when a person has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should be protected against any arbitrary deprivation of his job. In sum, the CA found the penalty of dismissal unjustified, much too harsh and not commensurate with the alleged infraction. The motion for reconsideration having been denied in a Resolution dated March 9, 2005, petitioner filed the instant petition. Issue Petitioner raises a solitary question for Our consideration: May the CA order the reinstatement, with full backwages and damages, of a confidential employee whom it had found to be guilty of breach of trust?[8] Our Ruling Petitioner argues that respondent, an employee occupying a position of trust and confidence, admitted attaching his fathers political thank you note on the product samples. Respondent likewise confirmed his intention to distribute them to his fathers political supporters to thank them for their help in the last election. The act constituted an infraction of company rules. Respondent had breached his employers trust, meriting a penalty of dismissal. Articles 282, 283, and 284 of the Labor Code enumerate the just and authorized causes for the dismissal of an employee. Article 282 provides: ART. 282. Termination by employer. An employer may terminate an employment for any of the following causes: c) Fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative. It is clear that Article 282(c) of the Labor Code allows an employer to terminate the services of an employee for loss of trust and confidence. The right of employers to dismiss employees by reason of loss of trust and confidence is well established in jurisprudence. [9] The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust and confidence. Verily, We must first determine if respondent holds such a position. There are two (2) classes of positions of trust.[10] The first class consists of managerial employees. [11] They are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions.[12] The second class consists of cashiers, auditors, property custodians, etc.[13] They are defined as those who in the normal and routine exercise of their functions, regularly handle significant amounts of money or property. [14] In this case, respondent was employed as district manager for Cagayan de OroNorth Mindanao and its immediate vicinities.[15] It is not the job title but the actual work that the employee performs.[16] He was employed to handle pharmaceutical products for distribution to medical practitioners and sale to drug outlets.[17] As a result of his handling of large amounts of petitioners samples, respondent is, by law, an employee with a position of trust, falling under the second class.[18] The second requisite is that there must be an act that would justify the loss of trust and confidence.[19] Loss of trust and confidence to be a valid cause for dismissal must be based on

a willful breach of trust and founded on clearly established facts. The basis for the dismissal must be clearly and convincingly established but proof beyond reasonable doubt is not necessary.[20] Respondents act of stapling a thank you note from his father warrants the loss of petitioners trust and confidence. As the supervisor of fellow medical representatives, he had the duty to set a good example to his colleagues. A higher standard of confidence was reposed in him. There is no doubt that respondent willfully breached the trust and confidence reposed in him by not asking for permission before using company property for his own or anothers benefit, as required in the Company Standards of Business Conduct. [21] Moreover, when respondent failed to turn over the samples left in his care and stapled the political thank you note with the intention of distributing them to his fathers supporters, he had, in effect appropriated company property for personal gain and benefit. Respondent anchors his plea of mercy on filial loyalty to his father and the fact that the samples were still going to the proper parties. His fathers loss is of no moment since petitioner has a right not to associate their product with winning or losing politicians. It has every right to ensure that the distribution of medical samples is done in the manner exactly prescribed. Moreover, his claim that the samples would have still gone to the proper parties is wrong. These products were supposed to have been returned to petitioner or one of its agents. The CA apparently granted his plea for mercy when it ruled that his action while censurable did not merit termination.[22] The CA characterized his action as a mere lapse of human frailty considering the elections were over.[23] Moreover, the stapling of the thank you notes did not give rise to any undue advantage to respondent or his father. [24] The CA anchored its leniency on Caltex Refinery Employees Association (CREA) v. National Labor Relations Commission (Third Division).[25] In Caltex, an employee named Arnelio M. Clarete was found to have willfully breached the trust and confidence in him by taking a bottle of lighter fluid.[26] However, the Court refrained from imposing the supreme penalty of dismissal since Clarete had no violations in his eight (8) years of service and the value of the lighter fluid was minimal compared to his salary. [27] The CA reliance on Caltex is misplaced. A closer examination of the two cases reveals that the facts are different. The only similarity is that both respondent and Claretehad no prior violations. However, unlike Clarete, respondent qualifies as a confidential employee. It bears emphasis that there is a well-settled distinction between the treatment of a confidential employee and rank-and-file personnel, insofar as the application of the doctrine of trust and confidence is concerned.[28] There was also no finding that the value of the goods was minimal compared to respondents salary. Another glaring difference between the two cases is that respondent had people under his supervision and he engaged them to help commit his infraction.[29] The two requisites for dismissal for loss of trust and confidence having been met, petitioner is well within its rights to dismiss respondent. While the State can regulate the right of an employer to select and discharge his employees, an employer cannot be compelled to continue the employment of an employee in whom there has been a legitimate loss of trust and confidence.[30] In Atlas Fertilizer Corporation v. National Labor Relations Commission ,[31] We held that as a general rule, employers are allowed a wider latitude of discretion in terminating the services of employees who perform functions by which their nature require the employers full trust and confidence. Mere existence of basis for believing that the employee has breeched the trust and confidence of the employer is sufficient and does not require proof beyond reasonable doubt. Thus, when an employee has been guilty of breach of trust or his employer has ample reason to distrust him, a labor tribunal cannot deny the employer the authority to dismiss him. However, while We find that the dismissal is valid, We are not deaf to respondents plea for mercy. In a line of cases We have held that separation pay may be awarded as

some equitable relief in consideration of the past services rendered.[32] Since respondent was validly dismissed for a cause other than serious misconduct or those that negatively reflect on his moral character,[33] the award of separation pay is justifiable. This award is merely to coat the bitter termination experienced by respondent with a little social justice. [34] Separation pay at the rate of one month salary for every year of service is proper. [35] WHEREFORE, the petition is GRANTED. The Court of Appeals decision is REVERSED AND SET ASIDE. The Resolution of the National Labor Relations Commission as modified on October 23, 2000 is REINSTATED.SO ORDERED.

MCDONALDS (KATIPUNAN BRANCH) and/or MCGEORGE FOOD INDUSTRIES, INC., Petitioners, versus MA. DULCE ALBA,

G.R. No. 156382

December 18, 2008 Respondent. x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CARPIO MORALES, J.: Ma. Dulce Alba (respondent) was hired as part of the service crew of petitioner McDonalds Katipunan Road, Loyola Heights branch on November 15, 1993. During the orientation of newly hired employees, petitioner provided respondent with a copy of the Crew Employee Handbook on rules and regulations including its meal policy which instructs: 1. GUIDELINES FOR MEAL POLICY All breaks must be consumed in the crewroom or designated area.

2. Crew are prohibited from taking their meals in the lobby when there are a lot customer [sic] (for stores without a crewroom) 3. Crew are advised to follow these steps in requesting for their meal breaks: a. Inform crews zone manager he/she wishes to take a break. b. Punch out for break and proceed to assemble meal. Sandwiches/Entrees must be taken from the warming bin. c. Crew brings assembled meal to zone manager for checking and signing of the timecard. d. Crew takes his/her break in the crewroom. e. Upon completion of allotted break time, crew punches in for work and has same zone manager sign the timecard. (NOTE: Crew must consume the allotted break time completely before he punches back in for work). EXAMPLES OF MISCONDUCT RESULTING IN SUMMARY DISMISSAL Consuming any food without authority or payment including deviation from the employee meal policy, (i.e. eating from breaks of other crew or food offered by friends or family while you are on duty). This includes sampling uncompleted/completed products during operations while crew is on duty . Rizza Santiago, also a crew member, witnessed respondent eating inside the crew room while on duty[2] on April 8, 1995 which she reported to the store manager Kit

Alvarez (Alvarez) by an undated written account. [3] Petitioner McDonalds thus suspended respondent for five days starting April 14 until April 18, 1995.[4] Explaining her questioned act, respondent, whose duty on April 8, 1995 was from 5:45 a.m. to 1:00 p.m., in a written but unsigned letter dated April 15, 1995, stated as follows, quoted verbatim: Saturday (April 8) at around 10:45 in the morning, Zel took her break and I came with her. I ask her if I can have a piece of her chicken because Iam hungry, and my stomach was aching bad. She told someone might see it, but I told just a piece just to ease the pain of my stomach. I do feel this pain, but it was only last Saturday that I cant control it bec. I wasnt able to drink medicine. I do not do this everytime. It was just last Saturday. Because I know its wrong and against the policies of the store.[5] (Underscoring supplied) Petitioner thereafter sent a show cause notice to respondent why no disciplinary action should be meted against her.[6] Replying, respondent, despite her initial above-quoted written admission of the questioned act, denied having violated the meal policy. [7] After petitioner conducted what it claimed to be a thorough investigation, it found respondent guilty of flouting company regulations and immediately terminated her services in a letter of April 27, 1995 reading: We believe that based on the incident report you made and submitted to me [ sic] last April 15, 1995, you acknowledge[d] having eaten a piece of fried chicken because you were hungry and you were having a stomach ache[.] [I]n fact[,] on the said incident report[,] you acknowledge[d] that the said act is againts [ sic] the company policy and in addition, to the incident report of Rizza Santiago who personally witness [ sic] your act of eating a piece of fried chicken without authorization or payment and in violation of employee meal policy. Respondent thus lodged a complaint against petitioners McDonalds and/or McGeorge Food Industries, Inc. before the National Labor Relations Commission (NLRC) NCR Arbitration Branch which dismissed it without prejudice, for failure to prosecute, by Order of October 30, 1995.[9] Respondent refiled her complaint on January 24, 1996. After the submission of the parties respective position papers and responsive pleadings, petitioners moved to have a clarificatory hearing before the Arbitration Branch. The motion was, however, denied. Finding for respondent, Labor Arbiter Pablo Espiritu Jr., by Decision [10] of August 22, 1997, held that while respondent violated the meal policy of McDonalds, dismissal was too harsh a penalty, and suspension without pay would have sufficed. The fallo of the decision reads: WHEREFORE, premises considered[,] judgment is hereby rendered finding Respondents [petitioners herein] liable for illegal dismissal and concomitantly[,] Respondents are liable to pay complainant full backwages in the amount of P113,922.90 from her dismissal till promulgation since reinstatement is no longer decreed. Respondents are further ordered to pay separation pay based on month salary for every year of credited service a fraction of at least six (6) months to be considered as one (1) whole year in the amount of P7,789.60; Furthermore, Respondents are ordered to pay 10% attorneys fees based on the total judgment award. All other monetary claims are hereby disallowed for lack of merit. SO ORDERED. On appeal to the NLRC, petitioners raised as errors the Labor Arbiters finding of illegal dismissal and the judgment award.[11] By Decision[12] of March 31, 1998, the NLRC denied the appeal and ruled that there was no intentional or willful conduct on the part of the [respondent] to disregard the rules regarding meal policy. After filing a Motion for Reconsideration, petitioners filed a Manifestation and Motion on June 18, 1998 to present three payroll sheets to show that respondent did not render eight (8) hours a day of work.[13]

Their Motion for Reconsideration having been denied, petitioners went to the Court of Appeals on certiorari[14] wherein, in addition to imputing grave abuse of discretion on the part of the NLRC, it raised as new issue the denial of their constitutional right to due process, the Arbiter having failed to set the case for hearing. The appellate court, by Decision[15] of May 23, 2002, affirmed the decision of the NLRC, it finding in order the NLRC resolution of the case on the basis of the parties position papers, responsive pleadings and documentary evidence. It bewailed petitioners belated presentation of the payroll sheets only when they filed their Motion for Reconsideration of the NLRC decision. Hence, the present petition for review, petitioners contending that: THE LABOR ARBITER SHOULD HAVE CONDUCTED A CLARIFICATORY HEARING TO RESOLVE THE FACTUAL ISSUES IN THE INSTANT CASE. THE PENALTY IMPOSED UPON RESPONDENT WAS [NOT] EXCESSIVE.THE PAYROLL SHEETS FILED BY THE COMPANY DURING APPEAL SHOULD HAVE BEEN GIVEN APPRECIATION. The petition fails. On the procedural issue, the Court finds the Arbiters not conducting a clarificatory hearing unavailing. This issue was raised for the first time before the appellate court, hence, it may not be considered.[16] In any event, the NLRC Rules allow the Labor Arbiter to motu proprio determine whether there is a need for a hearing or clarificatory conference. [17] In this case, the Labor Arbiter prudently saw it best to dispense with a hearing since the position papers and responsive pleadings, together with the attached documentary evidence, provided more than sufficient bases to resolve the case. Petitioners right to due process was thus not violated. Respecting petitioners submission of additional evidence on appeal, the same may be allowed as the rules of evidence prevailing in courts of law or equity are not controlling in labor proceedings.[18] What the Court disallows, however, is the tardy submission of the supposed additional evidence. As reflected above, petitioners presented payroll sheets only when they moved for a reconsideration of the NLRC decision. At any rate, the NLRC did not find those payroll sheets compelling enough to warrant a reversal of its decision. Indeed, payroll sheets are inconclusive to disprove respondents eight-hour-per-day work shift. Instead of payroll sheets, the time cards would have been more reliable. Petitioners, however, did not present the same. When a party has in its power to produce evidence that would overthrow the case made against it but fails to do so, the presumption arises that such evidence, if produced, would operate to its prejudice and support the case of the other party.
[19]

On the substantive issue, there is no dispute that respondent violated petitioners meal policy. The only issue is whether such violation amounts to or borders on serious or willful misconduct or willful disobedience, as petitioners posit, to call for respondents dismissal. By any measure, the Court holds not. Under Article 282 (a) of the Labor Code,[20] willful disobedience to the employer's lawful orders as a just cause for termination of employment needs the concurrence of at least two requisites, viz: (1) the employee's assailed conduct must have been willful or intentional, the willfulness being characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which one has been engaged to discharge. [21] With respect to serious misconduct, it is not sufficient that the act or the conduct complained of must have violated some established rules or policies. It must have been performed with wrongful intent.[22] Petitioners, on which the onus of proving lawful cause in sustaining the dismissal of respondent lies,[23] failed to prove that respondents misconduct was induced by a perverse and

wrongful intent, they having merely anchored their claim that she was on her knowledge of the meal policy. While petitioners wield a wide latitude of discretion in the promulgation of policies, rules and regulations on work-related activities of its employees, these must, however, be fair and reasonable at all times, and the corresponding sanctions for violations thereof, when prescribed, must be commensurate thereto as well as to the degree of the infraction. [24] Given respondents claim that she was having stomach pains due to hunger, which is not implausible, the same should have been properly taken into account in the imposition of the appropriate penalty for violation of the meal policy. Respondents suspension for five days sufficed. With that penalty, the necessity of cautioning other employees who may be wont to violate the same policy was not compromised. Moreover, petitioners likewise failed to prove any resultant material damage or prejudice on their part as a consequence of respondent's questioned act. Their claim that the act would cause irremediable harm to the companys business is too vague to merit consideration. Petitioners finally harp on the supposed checkered employment record of respondent to justify her dismissal, viz: Her employment record was marred by numerous infractions of Company rules for which she was repeatedly sanctioned by her superiors, to wit: a written warning for failing to report for work (07 December 1994); a three-day suspension (14 to 16 February 1995) for incurring several absences; two (2) verbal warnings (10 January and 24 March 1995) for incurring cash shortages of P61.00 and P80.00 and a written warning (11 January 1995) for incurring a cash shortage of P52.00. Furthermore, respondent was given five (5) verbal warnings for reporting late for work on 01 December 1993, 25 March, 02 May, 17 July and 05 November, all in the year 1994. The resort by petitioners to respondents past conduct is a desultory attempt to explain their drastic action. Previous offenses may be used as valid justification for dismissal from work only if they are related to the subsequent infraction-basis of the termination of employment. Previous infractions, in other words, may be used if they have a bearing on the proximate offense warranting dismissal.[26] No such bearing exists, however, between the above-detailed alleged infractions with respondents meal policy violation. Parenthetically, the employment record of respondent reflects her fairly outstanding work ethic and performance, which is punctuated by at least 31 counts of commendations [27] from the management no less. In fine, given the totality of respondents employment record, the penalty of dismissal is too discordant with the infraction she committed. The Court, however, modifies the dispositive portion of the Labor Arbiters decision in that the award of full backwages, inclusive of allowances and other benefits, should be reckoned from the time of respondents dismissal on April 27, 1995 up to the finality of the Courts decision while the award of separation pay, in lieu of reinstatement, should be computed from the time petitioners engaged respondents services on November 15, 1993 up to the finality of this decision. WHEREFORE, the Decision of August 22, 1997 of the Labor Arbiter is AFFIRMED with MODIFICATION in that the award of full backwages, inclusive of allowances and other benefits, should be reckoned from the time of respondents dismissal on April 27, 1995 up to the finality of the Courts decision, while the award of separation pay, in lieu of reinstatement, should be computed from the time petitioners engaged the services of respondent on November 15, 1993 up to the finality of this decision. In all other respects, the Labor Arbiters decision is AFFIRMED. There being no data from which the Court can properly assess petitioners total monetary liability, the case is remanded to the Labor Arbiter only for that purpose.Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 100158 June 2, 1992 ST. SCHOLASTICA'S COLLEGE, petitioner, vs.HON. RUBEN TORRES, in his capacity as SECRETARY OF LABOR AND EMPLOYMENT, and SAMAHANG NG MANGGAGAWANG PANG-EDUKASYON SA STA. ESKOLASTIKA-NAFTEU, respondents. BELLOSILLO, J.: The principal issue to be resolved in this recourse is whether striking union members terminated for abandonment of work after failing to comply with return-to-work orders of the Secretary of Labor and Employment (SECRETARY, for brevity) should by law be reinstated. On 20 July 1990, petitioner St. Scholastica's College (COLLEGE, for brevity) and private respondent Samahan ng Manggagawang Pang-Edukasyon sa Sta. Eskolastika-NAFTEU (UNION, for brevity) initiated negotiations for a first-ever collective bargaining agreement. A deadlock in the negotiations prompted the UNION to file on 4 October 1990 a Notice of Strike with the Department of Labor and Employment (DEPARTMENT, for brevity), docketed as NCMB-NCR-NS-10-826. On 5 November 1990, the UNION declared a strike which paralyzed the operations of the COLLEGE. Affecting as it did the interest of the students, public respondent SECRETARY immediately assumed jurisdiction over the labor dispute and issued on the same day, 5 November 1990, a return-to-work order. The following day, 6 November 1990, instead of returning to work, the UNION filed a motion for reconsideration of the return-to-work order questioning inter alia the assumption of jurisdiction by the SECRETARY over the labor dispute. On 9 November 1990, the COLLEGE sent individual letters to the striking employees enjoining them to return to work not later than 8:00 o'clock A.M. of 12 November 1990 and, at the same time, giving notice to some twenty-three (23) workers that their return would be without prejudice to the filing of appropriate charges against them. In response, the UNION presented a list of (6) demands to the COLLEGE in a dialogue conducted on 11 November 1990. The most important of these demands was the unconditional acceptance back to work of the striking employees. But these were flatly rejected. Likewise, on 9 November 1990, respondent SECRETARY denied reconsideration of his returnto-work order and sternly warned the striking employees to comply with its terms. On 12 November 1990, the UNION received the Order. Thereafter, particularly on 14 and 15 November 1990, the parties held conciliation meetings before the National Conciliation and Mediation Board where the UNION pruned down its demands to three (3), viz.: that striking employees be reinstated under the same terms and conditions before the strike; that no retaliatory or disciplinary action be taken against them; and, that CBA negotiations be continued. However, these efforts proved futile as the

COLLEGE remained steadfast in its position that any return-to-work offer should be unconditional. On 16 November 1990, the COLLEGE manifested to respondent SECRETARY that the UNION continued to defy his return-to-work order of 5 November 1990 so that "appropriate steps under the said circumstances" may be undertaken by him. 1 On 23 November 1990, the COLLEGE mailed individual notices of termination to the striking employees, which were received on 26 November 1990, or later. The UNION officers and members then tried to return to work but were no longer accepted by the COLLEGE. On 5 December 1990, a Complaint for Illegal Strike was filed against the UNION, its officers and several of its members before the National Labor Relations Commission (NLRC), docketed as NLRC Case No. 00-12-06256-90. The UNION moved for the enforcement of the return-to-work order before respondent SECRETARY, citing "selective acceptance of returning strikers" by the COLLEGE. It also sought dismissal of the complaint. Since then, no further hearings were conducted. Respondent SECRETARY required the parties to submit their respective position papers. The COLLEGE prayed that respondent SECRETARY uphold the dismissal of the employees who defied his return-to-work order. On 12 April 1991, respondent SECRETARY issued the assailed Order which, inter alia, directed the reinstatement of striking UNION members, premised on his finding that no violent or otherwise illegal act accompanied the conduct of the strike and that a fledgling UNION like private respondent was "naturally expected to exhibit unbridled if inexperienced enthusiasm, in asserting its existence". 2 Nevertheless, the aforesaid Order held UNION officers responsible for the violation of the return-to-work orders of 5 and 9 November 1990 and, correspondingly, sustained their termination. Both parties moved for partial reconsideration of the Order, with petitioner COLLEGE questioning the wisdom of the reinstatement of striking UNION members, and private respondent UNION, the dismissal of its officers. On 31 May 1991, in a Resolution, respondent SECRETARY denied both motions. Hence, this Petition for Certiorari, with Prayer for the Issuance of a Temporary Restraining Order. On 26 June 1991, We restrained the SECRETARY from enforcing his assailed Orders insofar as they directed the reinstatement of the striking workers previously terminated. Petitioner questions the assumption by respondent SECRETARY of jurisdiction to decide on termination disputes, maintaining that such jurisdiction is vested instead in the Labor Arbiter pursuant to Art. 217 of the Labor Code, thus Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, the following cases involving all workers, whether agricultural or non-agricultural: . . . 2. Termination disputes . . . 5. Cases arising from any violation of Article 264 of this Code, including questions on the legality of strikes and lock-outs . . . In support of its position, petitioner invokes Our ruling in PAL v. Secretary of Labor and Employment 3 where We held: The labor Secretary exceeded his jurisdiction when he restrained PAL from taking disciplinary measures against its guilty employees, for, under Art. 263 of the Labor Code, all that the Secretary may enjoin is the holding of the strike but not the company's right to take action against union officers who participated in the illegal strike and committed illegal acts. Petitioner further contends that following the doctrine laid down in Sarmiento v. Tuico 4 and Union of Filipro Employees v. Nestle Philippines, Inc., 5 workers who refuse to obey a return-to-work order are not entitled to be paid for work not done, or to reinstatement to the positions they have abandoned of their refusal to return thereto as ordered. Taking a contrary stand, private respondent UNION pleads for reinstatement of its dismissed officers considering that the act of the UNION in continuing with its picket was never

characterized as a "brazen disregard of successive legal orders", which was readily apparent in Union Filipro Employees v. Nestle Philippines, Inc., supra, nor was it a willful refusal to return to work, which was the basis of the ruling in Sarmiento v. Tuico, supra. The failure of UNION officers and members to immediately comply with the return-to-work orders was not because they wanted to defy said orders; rather, they held the view that academic institutions were not industries indispensable to the national interest. When respondent SECRETARY denied their motion for reconsideration, however, the UNION intimated that efforts were immediately initiated to fashion out a reasonable return-to-work agreement with the COLLEGE, albeit, if failed. The issue on whether respondent SECRETARY has the power to assume jurisdiction over a labor dispute and its incidental controversies, causing or likely to cause a strike or lockout in an industry indispensable to the national interest, was already settled in International Pharmaceuticals, Inc. v. Secretary of Labor and Employment. 6 Therein, We ruled that: . . . [T]he Secretary was explicitly granted by Article 263 (g) of the Labor Code the authority to assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, and decide the same accordingly. Necessarily, this authority to assume jurisdiction over the said labor dispute must include and extend to all questions and include and extend to all questions and controversies arising therefrom, including cases over which the Labor Arbiter has exclusive jurisdiction. And rightly so, for, as found in the aforesaid case, Article 217 of the Labor Code did contemplate of exceptions thereto where the SECRETARY is authorized to assume jurisdiction over a labor dispute otherwise belonging exclusively to the Labor Arbiter. This is readily evident from its opening proviso reading "(e)xcept as otherwise provided under this Code . . . Previously, We held that Article 263 (g) of the Labor Code was broad enough to give the Secretary of Labor and Employment the power to take jurisdiction over an issue involving unfair labor practice. 7 At first glance, the rulings above stated seem to run counter to that of PAL v. Secretary of Labor and Employment, supra, which was cited by petitioner. But the conflict is only apparent, not real. To recall, We ruled in the latter case that the jurisdiction of the Secretary of Labor and Employment in assumption and/or certification cases is limited to the issues that are involved in the disputes or to those that are submitted to him for resolution. The seeming difference is, however, reconcilable. Since the matter on the legality or illegality of the strike was never submitted to him for resolution, he was thus found to have exceeded his jurisdiction when he restrained the employer from taking disciplinary action against employees who staged an illegal strike. Before the Secretary of Labor and Employment may take cognizance of an issue which is merely incidental to the labor dispute, therefore, the same must be involved in the labor disputed itself, or otherwise submitted to him for resolution. If it was not, as was the case in PAL v. Secretary or Labor and Employment, supra, and he nevertheless acted on it, that assumption of jurisdiction is tantamount to a grave abuse of discretion. Otherwise, the ruling in International Pharmaceuticals, Inc. v. Secretary of Labor and Employment, supra, will apply. The submission of an incidental issue of a labor dispute, in assumption and/or certification cases, to the Secretary of Labor and Employment for his resolution is thus one of the instances referred to whereby the latter may exercise concurrent jurisdiction together with the Labor Arbiters. In the instant petition, the COLLEGE in its Manifestation, dated 16 November 1990, asked the "Secretary of Labor to take the appropriate steps under the said circumstances." It likewise prayed in its position paper that respondent SECRETARY uphold its termination of the striking employees. Upon the other hand, the UNION questioned the termination of its officers and members before respondent SECRETARY by moving for the enforcement of the return-to-

work orders. There is no dispute then that the issue on the legality of the termination of striking employees was properly submitted to respondent SECRETARY for resolution. Such an interpretation will be in consonance with the intention of our labor authorities to provide workers immediate access to their rights and benefits without being inconvenienced by the arbitration and litigation process that prove to be not only nerve-wracking, but financially burdensome in the long run. Social justice legislation, to be truly meaningful and rewarding to our workers, must not be hampered in its application by long-winded arbitration and litigation. Rights must be asserted and benefits received with the least inconvenience. For, labor laws are meant to promote, not defeat, social justice ( Maternity Children's Hospital v. Hon. Secretary of Labor ). 8 After all, Art. 4 of the Labor Code does state that all doubts in the implementation and interpretation of its provisions, including its implementing rules and regulations, shall be resolved in favor of labor. We now come to the more pivotal question of whether striking union members, terminated for abandonment of work after failing to comply strictly with a return-to-work order, should be reinstated. We quote hereunder the pertinent provisions of law which govern the effects of defying a return-to-work order: 1. Article 263 (g) of the Labor Code Art. 263. Strikes, picketing, and lockouts. . . . (g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same . . . (as amended by Sec. 27, R.A. 6715; emphasis supplied). 2. Article 264, same Labor Code Art. 264. Prohibited activities. (a) No labor organization or employer shall declare a strike or lockout without first having bargained collectively in accordance with Title VII of this Book or without first having filed the notice required in the preceding Article or without the necessary strike or lockout vote first having been obtained and reported to the Ministry. No strike or lockout shall be declared after assumption of jurisdiction by the President or the Minister or after certification or submission of the dispute to compulsory or voluntary arbitration or during the pendency of cases involving the same grounds for the strike or lockout Any worker whose employment has been terminated as consequence of an unlawful lockout shall be entitled to reinstatement with full back wages. Any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a replacement had been hired by the employer during such lawful strike . . . (emphasis supplied). 3. Section 6, Rule IX, of the New Rules of Procedure of the NLRC (which took effect on 31 August 1990) Sec. 6. Effects of Defiance. Non-compliance with the certification order of the Secretary of Labor and Employment or a return to work order of the Commission shall be considered an illegal act committed in the course of the strike or lockout and shall authorize the Secretary of Labor and Employment or the Commission, as the case may be, to enforce the same under pain or loss of employment status or entitlement to full employment benefits from the locking-

out employer or backwages, damages and/or other positive and/or affirmative reliefs, even to criminal prosecution against the liable parties . . . (emphasis supplied). Private respondent UNION maintains that the reason they failed to immediately comply with the return-to-work order of 5 November 1990 was because they questioned the assumption of jurisdiction of respondent SECRETARY. They were of the impression that being an academic institution, the school could not be considered an industry indispensable to national interest, and that pending resolution of the issue, they were under no obligation to immediately return to work. This position of the UNION is simply flawed. Article 263 (g) of the Labor Code provides that if a strike has already taken place at the time of assumption, "all striking . . . employees shall immediately return to work." This means that by its very terms, a return-to-work order is immediately effective and executory notwithstanding the filing of a motion for reconsideration (University of Sto. Tomas v. NLRC). 9 It must be strictly complied with even during the pendency of any petition questioning its validity ( Union of Filipro Employees v. Nestle Philippines, Inc., supra). After all, the assumption and/or certification order is issued in the exercise of respondent SECRETARY's compulsive power of arbitration and, until set aside, must therefore be immediately complied with. The rationale for this rule is explained in University of Sto. Tomas v. NLRC, supra, citing Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 10 thus To say that its (return-to-work order) effectivity must wait affirmance in a motion for reconsiderationis not only to emasculate it but indeed to defeat its import, for by then the deadline fixed for the return to work would, in the ordinary course, have already passed and hence can no longer be affirmed insofar as the time element is concerned. Moreover, the assumption of jurisdiction by the Secretary of Labor and Employment over labor disputes involving academic institutions was already upheld in Philippine School of Business Administration v. Noriel 11 where We ruled thus: There is no doubt that the on-going labor dispute at the school adversely affects the national interest. The school is a duly registered educational institution of higher learning with more or less 9,000 students. The on-going work stoppage at the school unduly prejudices the students and will entail great loss in terms of time, effort and money to all concerned. More important, it is not amiss to mention that the school is engaged in the promotion of the physical, intellectual and emotional well-being of the country's youth. Respondent UNION's failure to immediately comply with the return-to-work order of 5 November 1990, therefore, cannot be condoned. The respective liabilities of striking union officers and members who failed to immediately comply with the return-to-work order is outlined in Art. 264 of the Labor Code which provides that any declaration of a strike or lockout after the Secretary of Labor and Employment has assumed jurisdiction over the labor dispute is considered an illegal. act. Any worker or union officer who knowingly participates in a strike defying a return-to-work order may, consequently, "be declared to have lost his employment status." Section 6 Rule IX, of the New Rules of Procedure of the NLRC, which provides the penalties for defying a certification order of the Secretary of Labor or a return-to-work order of the Commission, also reiterates the same penalty. It specifically states that non-compliance with the aforesaid orders, which is considered an illegal act, "shall authorize the Secretary of Labor and Employment or the Commission . . . to enforce the same under pain of loss of employment status." Under the Labor Code, assumption and/or certification orders are similarly treated. Thus, we held in Sarmiento v. Tuico, supra, that by insisting on staging the restrained strike and defiantly picketing the company premises to prevent the resumption of operations, the strikers have forfeited their right to be readmitted, having abandoned their positions, and so could be validly replaced. We recently reiterated this stance in Federation of Free Workers v. Inciong, 12 wherein we cited Union of Filipro Employees v. Nestle Philippines, Inc., supra, thus

A strike undertaken despite the issuance by the Secretary of Labor of an assumption or certification order becomes a prohibited activity and thus illegal, pursuant to the second paragraph of Art. 264 of the Labor Code as amended . . . The union officers and members, as a result, are deemed to have lost their employment status for having knowingly participated in an illegal act. Despite knowledge of the ruling in Sarmiento v. Tuico, supra, records of the case reveal that private respondent UNION opted to defy not only the return-to-work order of 5 November 1990 but also that of 9 November 1990. While they claim that after receiving copy of the Order of 9 November 1990 initiatives were immediately undertaken to fashion out a return-to-work agreement with management, still, the unrebutted evidence remains that the striking union officers and members tried to return to work only eleven (11) days after the conciliation meetings ended in failure, or twenty (20) days after they received copy of the first return-to-work order on 5 November 1990. The sympathy of the Court which, as a rule, is on the side of the laboring classes ( Reliance Surety & Insurance Co., Inc. v. NLRC), 13 cannot be extended to the striking union officers and members in the instant petition. There was willful disobedience not only to one but two returnto-work orders. Considering that the UNION consisted mainly of teachers, who are supposed to be well-lettered and well-informed, the Court cannot overlook the plain arrogance and pride displayed by the UNION in this labor dispute. Despite containing threats of disciplinary action against some union officers and members who actively participated in the strike, the letter dated 9 November 1990 sent by the COLLEGE enjoining the union officers and members to return to work on 12 November 1990 presented the workers an opportunity to return to work under the same terms and conditions or prior to the strike. Yet, the UNION decided to ignore the same. The COLLEGE, correspondingly, had every right to terminate the services of those who chose to disregard the return-to-work orders issued by respondent SECRETARY in order to protect the interests of its students who form part of the youth of the land. Lastly, the UNION officers and members also argue that the doctrine laid down in Sarmiento v. Tuico, supra, and Union of Filipro Employees v. Nestle, Philippines, Inc., supra, cannot be made applicable to them because in the latter two cases, workers defied the return-to-work orders for more than five (5) months. Their defiance of the return-to-work order, it is said, did not last more than a month. Again, this line of argument must be rejected. It is clear from the provisions above quoted that from the moment a worker defies a return-to-work order, he is deemed to have abandoned his job. It is already in itself knowingly participating in an illegal act. Otherwise, the worker will just simply refuse to return to his work and cause a standstill in the company operations while retaining the positions they refuse to discharge or allow the management to fill ( Sarmiento v. Tuico, supra).Suffice it to say, in Federation of Free Workers v. Inciong, supra, the workers were terminated from work after defying the return-to-work order for only nine (9) days. It is indeed inconceivable that an employee, despite a return-to-work order, will be allowed in the interim to stand akimbo and wait until five (5) orders shall have been issued for their return before they report back to work. This is absurd. In fine, respondent SECRETARY gravely abused his discretion when he ordered the reinstatement of striking union members who refused to report back to work after he issued two (2) return-to-work orders, which in itself is knowingly participating in an illegal act. The Order in question is, certainly, contrary to existing law and jurisprudence. WHEREFORE, the Petition for Certiorari is hereby GRANTED. The Order of 12 April 1991 and the Resolution 31 May 1991 both issued by respondent Secretary of Labor and Employment are SET ASIDE insofar as they order the reinstatement of striking union members terminated by petitioner, and the temporary restraining order We issued on June 26, 1991, is made permanent. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. Nos. 86917-18 January 25, 1991 RELIANCE SURETY & INSURANCE CO., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and RELIANCE SURETY & INSURANCE EMPLOYEES UNION,respondents. SARMIENTO, J.:p The only question in this petition for certiorari is whether or not strikers who have been found to have staged an illegal strike may be reinstated to work. The facts are as follows: It appears that to avoid unnecessary loss of productive working time due to personal and nonwork-related conversations, personal telephone calls and non-work-connected visits by personnel to other departments, the respondent Reliance Surety Insurance Co., Inc. (company for short) on 21 November 1986, thru the manager (Mr. Celso Eleazar) of its underwriting department, effected a change in the seating arrangement of its personnel in said department. Four of those affected namely: Isagani Rubio, Rosalinda Macapagal, Glene Molina, and Severa Cansino protested the transfer of their tables and seats, claiming that the change was without prior notice and was done merely to harass them as union members. When the manager insisted, a heated discussion ensued, during which Rubio and companions were alleged to have hurled unprintable insults (sipsip, balimbing, vacuum, etc.) to the manager and supervisors. Rubio, Macapagal, Molina and Cansino were asked to explain within 48 hours why no disciplinary action should be taken against them for misconduct, insubordination, and gross disrespect. The work atmosphere in the department had allegedly become charged or tense as Rubio continued to refuse to stay at his designated place, and Molina and Macapagal still levelled insults to those who testified against them. Hence, Rubio and companions were placed under preventive suspension on 3 February 1987 and ultimately dismissed after investigation on 3 March 1987. On 6 March 1987, the Reliance Surety & Insurance Employees Union (or union for short) filed in behalf of Rubio, Macapagal, Molina, and Cansino with the NLRC-NRC Branch, Manila, against the respondent company a complaint for illegal dismissal (NLRC- NCR Case No. 0003-00828-87) which it subsequently amended on 7 April 1987 to include the charge of unfair labor practice. The union claims that the company was guilty of unfair labor practice because it, among others, effected transfer and changes in the seating arrangement to pressure or intimidate union members; because it interfered in the union members' exercise of their right to selforganization by forcing them to undertake overtime work even on a non-working Saturday and in times when there were scheduled union meetings to prevent them from attending the same: and because, thru its manager and assistant managers, it caused the resignation and withdrawal of union members from the union. It also appears that on 12 March 1987, or while the complaint for illegal dismissal and ULP was hibernating in the NCR Arbitration Branch, the union filed with the DOLE a notice of strike predicated on unfair labor practices (dismissal of union officers/members, discrimination and coercion on employees) allegedly committed by the company. On 13 March 1987, the company received a copy of the notice of strike and a telegram from the DOLE setting the notice of strike for initial conciliation conference on 17 March 1987 at 2:00 p.m. But even before the initial conference could take place, the union in the morning of 17 March 1987 struck and picketed the company premises by forming human barricades, which effectively obstructed the free ingress to and egress from its premises, more particularly

at the lobby of the 8th floor of the building where it has its office, thereby preventing its officials and employees from doing their usual duties. Because of this new development, the company filed on 31 March 1987 with the NLRC-NCR Arbitration Branch, Manila, a petition to declare the strike illegal (NLRC-CR Case No. 00-03001179-87) on the grounds that the 30 or 15 day cooling-off period was blatantly defied; that the legal requirement to furnish the department with the results of the strike vote at least 7 days before the strike was ignored; just as the 24-hour period within which BLR or the Regional Office should be furnished with a written notice of the meeting to declare a strike was also not complied with. Charged, together with the union and its members, as individual respondents in the petition to declare the strike illegal were the following officers: Rolando Tugade, president; Joseph Aying, vice-president; Isagani Rubio, treasurer; Ms. Glene Molina and Ms. Rosalinda Macapagal, secretaries; Froilan Garcia and Ms. Luz Monroy, Sgts. at arms: Orlando Calma, auditor; and Manolo Que, pro, who, the company claims, should be divested of their employment status for having knowingly participated in the illegal strike and in the commission of illegal acts. 1 The Labor Arbiter found the strike to be illegal, a finding the National Labor Relations Commission, on appeal, affirmed. However, the Commission held: However, while we are convinced that the strike is illegal, we are equally convinced that it should not be visited with the consequence so harsh as the supreme penalty of dismissal, where merely reinstating them (strikers) without backwages would suffice in view of the union's belief, in proceeding with strike, that the company was committing unfair labor practice in terminating the services of some of its officers and members, in line with the Supreme Court ruling in the case of Ferrer vs. CIR, 17 SCRA 352, to that effect. In justifying the imposition of a penalty lesser than dismissal even in cases involving strikes tainted with illegality, the Supreme Court in the case of Almira vs. B.F. Goodrich Phils., Inc., 58 SCRA 120 ruled: It would imply at the very least that where a penalty less punitive would suffice, whatever missteps s may be committed by labor ought not to be visited with a consequence so severe. It is not only because of the law's concern for the workingman. There is, in addition, as family to consider. Unemployment brings untold hardships and sorrows on those depending on the wage-earner. The misery and pain attendant on the loss of jobs then could be avoided. xxx xxx xxx In other words, under the circumstances obtaining in this case, we find it more in keeping with justice and equity if the striking union officers are reinstated, instead of being dismissed, to their former positions without loss of seniority rights but without backwages to serve as penalty for their indiscretion in launching an illegal strike. 2 xxx xxx xxx The Commission then disposed as follows: WHEREFORE, under the premises, the decision appealed from is hereby AFFIRMED, subject to the modification that all the striking officers of the appellant union should be reinstated to their former positions without loss of seniority rights but without backwages except Isagani Rubio, Glene Molina, and Rosalinda Macapagal, whose dismissal due to gross disrespect was found to be justified, and Luz Monroy who, in consideration of the financial assistance of P4,500.00 had withdrawn her appeal and allowed the arbiter's order of dismissal to be binding upon her. The dismissal of Severa Cansino due to gross disrespect is likewise upheld. However, the company is directed to pay said employees, namely Isagani Rubio, Glene Molina, Rosalinda Macapagal and Severa Cansino one month salary each including cost of living allowance and other benefits. 3 The petitioner argues that in so disposing, the Commission is guilty of a grave abuse of discretion.

There is no dispute that the strike in question was illegal, for failure of the striking personnel to observe legal strike requirements, to wit: (1) as to the fifteen-day notice; (2) as to the two-thirds required vote to strike done by secret ballot; (3) as to submission of the strike vote to the Department of Labor at least seven days prior to the strike. 4 As found likewise by the Commission, in the course of the strike held on April 1, 1987, certain strikers harassed non-striking employees, called company officers names, and committed acts of violence (as a result of which, criminal charges were brought with the fiscal's office.) 5 There is no question, finally, that the strike itself was prompted by no actual, existing unfair labor practice committed by the petitioner. In effecting a change in the seating arrangement in the office of the underwriting department, the petitioner merely exercised a reasonable prerogative employees could not validly question, much less assail as an act of unfair labor practice. The Court is indeed at a loss how rearranging furniture, as it were, can justify a fourmonth-long strike. As to the private respondent's charges of harassment, the Commission found none, and as a general rule, we are bound by its findings of fact. Amid this background, the Court must grant the petition. In staging the strike in question, a strike that was illegal in more ways than one, the reinstated union officers were clearly in bad faith, and to reinstate them without, indeed, loss of seniority rights, is to reward them for an act public policy does not sanction. The private respondents can not find sanctuary in the cases of Ferrer v. Court of Industrial Relations 6 and Almira v. BF Goodrich Philippines, Inc., 7 in which we affirmed reinstatement in spite of an "illegal" strike. In the first place, neither Ferrer nor Almira involved an illegal strike. What was involved in Ferrer was a defective strike, that is, one conducted in violation of the thirty-day "cooling-off' period, but one carried out in good faith "to offset what petitioners were warranted in believing in good faith to be unfair labor practices [committed by] Management." 8What Almira on the other hand declared was that a violent strike alone does not make the action illegal, which would justify the dismissal of strikers. It is therefore clear that we ordered reinstatement in both cases not in spite of the illegality of the strike but on the contrary, because the same was "legal", that is to say, carried out in good faith. We can not apply, either, the ruling in Bacus v. Ople, 9 where we held that the mere finding of illegality attending a strike does not justify the "wholesale" dismissal of strikers who were otherwise impressed with good faith. The Court must not be understood to be abandoning the teachings of either Ferrer, Almira, or Bacus. The Court reiterates that good faith is still a valid defense against claims of illegality of a strike. We do find, however, not a semblance of good faith here, but rather, plain arrogance, pride, and cynicism of certain workers. With respect to the private respondent, Isagani Rubio, what militates against his readmission to the firm is the fact that he had accepted the sum of P2,448.80 "in full satisfaction of the . . . Decision" (of the Labor Arbiter). He can not now insist on reinstatement after accepting the legality of his dismissal. He can not have his cake and eat it too. As a general rule, the sympathy of the Court is on the side of the laboring classes, not only because the Constitution imposes sympathy but because of the one-sided relation between labor and capital. The Court must take care, however, that in the contest between labor and capital, the results achieved are fair and in conformity with the rules. We will not accomplish that objective here by approving the act of the National Labor Relations Commission which we hold to constitute a grave abuse of discretion. WHEREFORE, the petition is GRANTED.SO ORDERED. Republic of the Philippines SUPREME COURT

G.R. No. 158075 June 30, 2006 PHILIPPINE DIAMOND HOTEL AND RESORT, INC. (MANILA DIAMOND HOTEL), Petitioner,

vs. MANILA DIAMOND HOTEL EMPLOYEES UNION, Respondent. DECISION CARPIO MORALES, J.: The Court of Appeals, by the assailed decision of November 21, 2002, 1 declared the strike staged by respondent, Manila Diamond Hotel Employees Union (the union), illegal and its officers to have lost their employment status. It ordered, however, among other things, the reinstatement and payment of backwages to its members. On November 11, 1996, the union, which was registered on August 19, 1996 before the Department of Labor and Employment (DOLE),2 filed a Petition for Certification Election3 before the DOLE-National Capital Region (NCR) seeking certification as the exclusive bargaining representative of its members. 4 The DOLE-NCR denied the unions petition as it failed to comply with legal requirements, specifically Section 2, Rule V, Book V of the Rules and Regulations Implementing the Labor Code, and was seen to fragment the employees of petitioner. 5 On June 2, 1997, Francis Mendoza (Mendoza), one of the Hotels outlet cashiers, was discovered to have failed to remit to the Hotel the amount of P71,692.50 at the end of his May 31, 1997 duty.6 On being directed to explain such failure, Mendoza claimed that after accomplishing his daily cash remittance report, the union president Jose Leonardo B. Kimpo (Kimpo) also an outlet cashier, who signed the same and dropped his remittances. 7 Kimpo, who was thus directed to explain why no administrative sanction should be imposed on him for violating the standard procedure for remitting cash collections, informed that he was not aware of any such procedure. Mendoza was subsequently suspended for one week, it being "the responsibility of the cashier to personally drop-off his remittances in the presence of a witness." 8 In the meantime or on July 14, 1997,9 he was re-assigned to the Hotels Cost Control Department. 10 Through its president Kimpo, the union later notified petitioner of its intention to negotiate, by Notice to Bargain,11a Collective Bargaining Agreement (CBA) for its members. Acting on the notice, the Hotel, through its Human Resource Development Manager Mary Anne Mangalindan, advised the union that since it was not certified by the DOLE as the exclusive bargaining agent, it could not be recognized as such. 12 The union clarified that it sought to bargain "for its members only," and declared that "[the Hotels] refusal tobargain [would prompt] the union to engage in concerted activities to protect and assert its rights under the Labor Code." 13 By Notice14 to its members dated September 18, 1997, the union announced that its executive officers as well as its directors decided to go on strike in view of the managements refusal to bargain collectively, and thus called for the taking of strike vote. Petitioner thereupon issued a Final Reminder and Warning 15 to respondent against continuing misinformation campaign and activities which confused the Hotel employees and disturbed their work performance. The union went on to file a Notice of Strike 16 on September 29, 1997 with the National Conciliation and Mediation Board (NCMB) due to unfair labor practice (ULP) in that the Hotel refused to bargain with it and the rank-and-file employees were being harassed and prevented from joining it.17 Conciliation conferences were immediately conducted by the NCMB on October 6, 13, and 20, 1997 during which the union insisted on the adoption of a CBA for its members. 18 In the meantime, or on or about November 7, 1997, Kimpo filed before the Arbitration Branch a complaint for ULP against petitioner.19 More conferences took place between petitioner and the union before the NCMB. In the conference held on November 20, 1997, the union demanded the holding of a consent election to which the Hotel interposed no objection, provided the union followed the procedure under the law. Petitioner then requested that the election be held in January 1998. 20

The parties agreed to meet again on December 1, 1997. 21 In the early morning of November 29, 1997, however, the union suddenly went on strike. The following day, the National Union of Workers in the Hotel, Restaurant and Allied Industries (NUWHRAIN) joined the strike and openly extended its support to the union. 22 At about this time, Hotel supervisors Vicente T. Agustin (Agustin) and Rowena Junio (Rowena) failed to report for work and were, along with another supervisor, Mary Grace U. de Leon (Mary Grace), seen participating in and supporting the strike. 23 Petitioner thus filed on December 1, 1997 a petition for injunction before the National Labor Relations Commission (NLRC) to enjoin further commission of illegal acts by the strikers. 24 Mary Grace, who was directed to explain her participation in the strike, alleged that she was merely trying "to pacify the group."25 Petitioner, finding her explanation "arrogant" and unsatisfactory as her active participation in the strike was confirmed by an eye witness, terminated her services, by communication sent on December 9, 1997, drawing her to file a complaint for illegal dismissal against petitioner.26 Agustin, who was also terminated, filed a similar complaint against the Hotel.27 An NLRC representative who conducted an ocular inspection of the Hotel premises confirmed in his Report that the strikers obstructed the free ingress to and egress from the Hotel. 28 By Order of December 8, 1998, the NLRC thus issued a Temporary Restraining Order (TRO) directing the strikers to immediately "cease and desist from obstructing the free ingress and egress from the Hotel premises."29 The service upon the strikers of the TRO notwithstanding, they refused to dismantle the tent they put up at the employees entrance to the Hotel, prompting the Hotels security guards to, on December 10, 1997, dismantle the same during which the strikers as well as the guards were hit by rocks coming from the direction of the construction site at the nearby Land Bank Plaza, resulting to physical injuries to some of them. 30 Despite the efforts of the NCMB, which was joined by the Department of Tourism, to conciliate the parties, the same proved futile. On January 14, 1998, Rowena, whose services were terminated, also filed a complaint against petitioner for illegal dismissal. For its part, petitioner filed on January 28, 1998 a petition to declare the strike illegal. As then DOLE Secretary Cresenciano Trajanos attempts to conciliate the parties failed, he, acting on the unions Petition for Assumption of Jurisdiction, issued on April 15, 1998 an order certifying the dispute to the NLRC for compulsory arbitration, and directing the striking officers and members to return to work within 24 hours and the Hotel to accept them back under the same terms and conditions prevailing before the strike. 31 On petitioners motion for reconsideration, then DOLE Acting Secretary Jose Espaol, Jr., by Order of April 30, 1998, modified the April 15, 1998 Order of Secretary Trajano by directing the Hotel to just reinstate the strikers toits payroll, and ordering that all cases between the parties arising out of the labor disputes which were pending before different Labor Arbiters be consolidated with the case earlier certified to the NLRC for compulsory arbitration. 32 It appears that the said order of the Acting Secretary directing the reinstatement of the strikers to the Hotels payroll was carried out. By Resolution of November 19, 1999, the NLRC declared that the strike was illegal and that the union officers andmembers who were reinstated to the Hotels payroll were deemed to have lost their employment status. And it dismissed the complaints filed by Mary Grace, Agustin, and Rowena as well as the unions complaint for ULP. 33 On appeal by the union, the Court of Appeals affirmed the NLRC Resolution dismissing the complaints of Mary Grace, Agustin and Rowena and of the union. It modified the NLRC Resolution, however, by ordering thereinstatement with back wages of union members. Thus it disposed: WHEREFORE, in view of the foregoing, the petition is granted only insofar as the dismissal of the union members is concerned. Consequently, the ruling of the public respondent NLRC to

the effect that the union members lost their employment status with the Hotel is hereby reversed and set aside. Private respondent Hotel is hereby ordered to immediately reinstate the members with backwages from the time they were terminated. The Court finds no grave abuse of discretion on the part of the NLRC, and therefore affirms the ruling of the NLRC as follows: (1) that the strike is illegal; (2) that the union officers lost their employment status when they formed the illegal strike; and (3) That the dismissal of Ms. Mary Grace U. de Leon, Vicente C. Agustin and Rowena Junio is valid. SO ORDERED.34 (Underscoring supplied) In so ruling, the appellate court noted that petitioner failed to establish by convincing and substantial evidence that the union members who participated in the illegal strike committed illegal acts, and although petitioner presented photographs of the striking employees, the strikers who allegedly committed illegal acts were not named or identified. 35 Hence, the present appeal by petitioner faulting the appellate court: I IN ORDERING THE REINSTATEMENT AND THE PAYMENT OF BACKWAGES OF THE INDIVIDUAL RESPONDENTS WHOSE EMPLOYMENT STATUS WERE PREVIOUSLY DECLARED TO HAVE BEEN LOST BY THE NATIONAL LABOR RELATIONS COMMISSION, THE COURT OF APPEALS HAS IN EFFECT DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW WHICH HAS NOT YET BEFORE BEEN DETERMINED BY THIS HONORABLE COURT, [AND] II IN [THUS] DEVIAT[ING] FROM ESTABLISHED DOCTRINES LONG SETTLED BY CONSISTENT JURISPRUDENCE ENUNCIATED BY THIS HONORABLE COURT.36 (Underscoring supplied) Petitioner argues that: IT WAS THE NLRC WHICH DECLARED THAT THE UNION OFFICERS AND MEMBERS HAVE LOST THEIR EMPLOYMENT AS A CONSEQUENCE OF THEIR STRIKE WHICH IT ALSO DECLARED AND FOUND TO BE ILLEGAL. SUCH BEING THE CASE, IN THE EVENT THE NLRCs DECISION IS NOT UPHELD AS FAR AS THE UNIONMEMBERS LOSING THEIR EMPLOYMENT IS CONCERNED, PETITIONER SHOULD NOT BE HELD LIABLE TO PAY THEIR BACKWAGES. UNDER THE CIRCUMSTANCES, NEITHER CAN PETITIONER BE VALIDLY DIRECTED TO REINSTATE THEM.37(Emphasis and underscoring supplied) Respondents, upon the other hand, pray for the dismissal of the petition, they arguing that: A. Respondent [union members] must be reinstated and paid full backwages because their strike was legal and done in good faith. B. Even assuming arguendo, that the strike started as an illegal strike, the unions unconditional offer toreturn to work, coupled with the hotels unfair labor practices during the strike, transformed the strike into a legal strike. C. Even assuming arguendo, that the strike is illegal, the reinstatement of the strikers and the payment of full backwages is consistent with the ruling in Telefunken Semiconductors Employees Union-FFW v. Secretary, 283 SCRA 145 which states that the individual liability of each of the union officers and members determines whether or not strikers should be reinstated. D. Even assuming arguendo, that the strike is illegal, Article 264 of the Labor Code directs thereinstatement of and payment of full backwages to the respondents.38 (Underscoring supplied) As did the NLRC and the Court of Appeals, this Court finds the strike illegal. Article 255 of the Labor Code provides:

ART. 255. EXCLUSIVE BARGAINING REPRESENTATION AND WORKERS PARTICIPATION IN POLICY AND DECISION-MAKING The labor organization designated or selected by the majority of the employees in an appropriate collective bargaining unit shall be the exclusive representative of the employees in such unit for the purpose of collective bargaining. However, an individual employee or group of employees shall have the right at any time to present grievances to their employer. Any provision of law to the contrary notwithstanding, workers shall have the right, subject to such rules and regulations as the Secretary of Labor and Employment may promulgate, to participate in policy and decision-making process of the establishment where they are employed insofar as said processes will directly affect their rights, benefits and welfare. For this purpose, workers and employers may form labor-management councils: Provided, That the representatives of the workers in such labor management councils shall be elected by at least the majority of all employees in said establishment. (Emphasis and underscoring supplied) As the immediately quoted provision declares, only the labor organization designated or selected by the majority of the employees in an appropriate collective bargaining unit is the exclusive representative of the employees in such unit for the purpose of collective bargaining. The union (hereafter referred to as respondent) is admittedly not the exclusive representative of the majority of the employees of petitioner, hence, it could not demand from petitioner the right to bargain collectively in their behalf. Respondent insists, however, that it could validly bargain in behalf of "its members," relying on Article 242 of the Labor Code.39 Respondents reliance on said article, a general provision on the rights of legitimate labor organizations, is misplaced, for not every legitimate labor organization possesses the rights mentioned therein. 40Article 242 (a) must be read in relation to above-quoted Article 255. On respondents contention that it was bargaining in behalf only of its members, the appellate court, affirming the NLRCs observation that the same would only "fragment the employees" of petitioner,41 held that "what [respondent] will be achieving is to divide the employees, more particularly, the rank-and-file employees of [petitioner] . . . the other workers who are not members are at a serious disadvantage, because if the same shall be allowed, employees who are non-union members will be economically impaired and will not be able to negotiate their terms and conditions of work, thus defeating the very essence and reason of collective bargaining, which is an effective safeguard against the evil schemes of employers in terms and conditions of work."42 This Court finds the observation well-taken. It bears noting that the goal of the DOLE is geered towards "a single employer wide unit which is more to the broader and greater benefit of the employees working force." 43 The philosophy is to avoid fragmentation of the bargaining unit so as to strengthen the employees bargaining power with the management. To veer away from such goal would be contrary, inimical and repugnant to the objectives of a strong and dynamic unionism. 44 Petitioners refusal to bargain then with respondent can not be considered a ULP to justify the staging of the strike. The second ground alleged by respondent to justify the staging of the strike that petitioner prevented or intimidated some workers from joining the union before, during or after the strike was correctly discredited by the appellate court in this wise: . . . a careful study of the allegations of petitioners in their petition reveals that it contained general allegations that the Management of the Hotel committed unfair labor practices by refusing to bargain with the union and by alleged acts of union interference, coercion and discrimination tantamount to union-busting. Since it is the union who alleges that unfair labor practices were committed by the Hotel, the burden of proof is on the union to prove its allegations by substantial evidence. Moreover, while petitioner Union continues to accuse the private respondent Hotel of violating their constitutional right to organize by busting the Union, this Court cannot overlook the events

that transpired prior to the strike that the Union staged on November 29, 1997. It is beyond argument that a conciliatory meeting was still scheduled to be held on December 1, 1997 before the NCMB. In this conciliatory meeting, petitioner Union could have substantiated and presented additional evidences. Thus, as held by the Supreme Court in the case of Tiu vs. National Labor Relations Commission: "The Court is not unmindful of this rule, but in the case at bar the facts and the evidence did not establish events [sic] least a rational basis why the union would [wield] a strike based on alleged unfair labor practices it did not even bother to substantiate during the conciliation proceedings. It is not enough that the union believed that the employer committed acts of unfair labor practice when the circumstances clearly negate even a prima facie [showing to] warrant [such a] belief." It is also evident from the records of the instant petition, specifically from the Notice of Strike, that their principal ground for the strike was the "refusal of the Hotel Management to bargain collectively with the Union for the benefit of the latters members." In the instant case, it is not disputed that the petitioner UNION is not a certified bargaining unit to negotiate a collective bargaining agreement (CBA) with private respondent Hotel . . . 45 (Underscoring supplied) On top of the foregoing observations, this Court notes that respondent violated Article 264 which proscribes the staging of a strike on the ground of ULP during the pendency of cases involving the same grounds for the strike. Further, the photographs taken during the strike, as well as the Ocular Inspection Report of the NLRC representative, show that the strikers, with the use of ropes and footed placards, blockaded the driveway to the Hotels points of entrance and exit, 46 making it burdensome for guests and prospective guests to enter the Hotel, thus violating Article 264 (e) of the Labor Code which provides: ART. 264 (e) No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the employers premises for lawful purposes, or obstruct public thoroughfares. (Emphasis supplied) Furthermore, the photographs indicate that indeed the strikers held noise barrage 47 and threatened guests with bodily harm.48 Finally, the police reports mention about the strikers exploding of firecrackers, causing the guests to panic and transfer to other areas of the Hotel. 49 It is doctrinal that the exercise of the right of private sector employees to strike is not absolute. Thus Section 3 of Article XIII of the Constitution, provides: SECTION 3. x x x 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. (Emphasis and underscoring supplied) Even if the purpose of a strike is valid, the strike may still be held illegal where the means employed are illegal. Thus, the employment of violence, intimidation, restraint or coercion in carrying out concerted activities which are injurious to the rights to property renders a strike illegal. And so is picketing or the obstruction to the free use of property or the comfortable enjoyment of life or property, when accompanied by intimidation, threats, violence, and coercion as to constitute nuisance.50 As the appellate court correctly held, the union officers should be dismissed for staging and participating in the illegal strike, following paragraph 3, Article 264(a) of the Labor Code which provides that ". . .[a]ny union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during strike may be declared to have lost his employment status . . ."

An ordinary striking worker cannot, thus be dismissed for mere participation in an illegal strike. There must be proof that he committed illegal acts during a strike, unlike a union officer who may be dismissed by mere knowingly participating in an illegal strike and/or committing an illegal act during a strike.51 The appellate court found no convincing and substantial proof, however, that the strikersmembers of respondent who participated in the illegal strike committed illegal acts. In the present case, private respondent Hotel failed to established [ sic] by convincing and substantial evidence that these union members who participated in the illegal strike committed illegal acts. Consequently, they cannot be terminated from service for their participation in an illegal strike. Moreover, private respondent Hotel presented as evidence photographs of the striking employees, the question that comes to our mind is: why were these strikers who allegedly participated in illegal acts not identified or named? Instead the arbitral tribunal found it worthy of credence to summarily dismiss all the union members without them being named or identified . . . 52 This Court finds otherwise. As reflected above, the photographs show that some of the workers-strikers who joined the strike indeed committed illegal acts blocking the free ingress to and egress from the Hotel, holding noise barrage, threatening guests, and the like. The strikers were, in a list53 attached to petitioners Position Paper54filed with the NLRC, named. The list failed to specifically identify the ones who actually committed illegal acts, however. Such being the case, a remand of the case to the Labor Arbiter, through the NLRC, is in order for the purpose only of determining the respective liabilities of the strikers listed by petitioner. Those proven to have committed illegal acts during the course of the strike are deemed to have lost their employment, unless they have been readmitted by the Hotel, whereas those not clearly shown to have committed illegal acts should be reinstated. Whether those ordered reinstated are entitled to backwages is, however, another matter. For the general rule is that backwages shall not be awarded in an economic strike on the principle that "a fair days wage" accrues only for a "fair days labor." 55 Even in cases of ULP strikes, award of backwages rests on the courts discretion and only in exceptional instances. 56 Thus, J.P. Heilbronn Co. v. National Labor Union, 57 instructs: When in case of strikes, and according to the C[ourt of] I[ndustrial] R[elations] even if the strike is legal, strikers may not collect their wages during the days they did not go to work, for the same reasons if not more, laborers who voluntarily absent themselves from work to attend the hearing of a case in which they seek to prove and establish their demands against the company, the legality and propriety of which demands is not yet known, should lose their pay during the period of such absence from work. The age-old rule governing the relation between labor and capital or management and employee is that of a "fair days wage for a fair days labor." If there is no work performed by the employee there can be no wage or pay, unless of course, the laborer was able, willing and ready to work but was illegally locked out, dismissed or suspended. It is hardly fair or just for an employee or laborer to fight or litigate against his employer on the employers time. (Emphasis and underscoring supplied) This Court must thus hearken to its policy that "when employees voluntarily go on strike, even if in protest against unfair labor practices," no backwages during the strike is awarded. In Cromwell Commercial Employees and Laborers Union (PTUC) v. Court of Industrial Relations,58 this Court made a distinction between two types of employees involved in a ULP: those who are discriminatorily dismissed for union activities, and those who voluntarily go on strike even if it is in protest of an ULP. Discriminatorily dismissed employees were ordered entitled to backpay from the date of the act of discrimination, that is, from the day of their discharge, whereas employees who struck as a voluntary act of protest against what they considered a ULP of their employer were held generally not entitled to backpay. 59 Jurisprudential law, however, recognizes several exceptions to the "no backwages rule," to wit: when the employees were illegally locked to thus compel them to stage a strike; 60 when the employer is guilty of the grossest form of ULP;61 when the employer committed discrimination

in the rehiring of strikers refusing to readmit those against whom there were pending criminal cases while admitting nonstrikers who were also criminally charged in court; 62 or when the workers who staged a voluntary ULP strike offered to return to work unconditionally but the employer refused to reinstate them.63 Not any of these or analogous instances is, however, present in the instant case. Respondent urges this Court to apply the exceptional rule enunciated in Philippine Marine Officers Guild v. Compaia Maritima64 and similar cases where the employees unconditionally offered to return to work, it arguing that there was such an offer on its part to return to work but the Hotel screened the returning strikers and refused to readmit those whom it found to have perpetrated prohibited acts during the strike. It must be stressed, however, that for the exception in Philippine Marine Officers Guild to apply, it is required that the strike must be legal. 65 Reinstatement without backwages of striking members of respondent who did not commit illegal acts would thus suffice under the circumstances of the case. If reinstatement is no longer possible, given the lapse of considerable time from the occurrence of the strike, the award of separation pay of one (1) month salary for each year of service, in lieu of reinstatement, is in order.66 WHEREFORE, the Decision dated November 21, 2002 of the Court of Appeals is, in light of the foregoing ratiocinations, AFFIRMED with MODIFICATION in that only those members of the union who did not commit illegal acts during the course of the illegal strike should be reinstated but without backwages. The case is, therefore, REMANDED to the Labor Arbiter, through the NLRC, which is hereby directed to, with dispatch, identify said members and to thereafter order petitioner to reinstate them, without backwages or, in the alternative, if reinstatement is no longer feasible, that they be given separation pay at the rate of One (1) Month pay for every year of service. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 106246 September 1, 1994 CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY, JOSE HICETA, REGINA ILON, GILDERBRANDO GISON, EPIFANIO MUYCO, EMILIANO OQUINA, ET AL., respondents. PUNO, J.: Private respondents are employees of petitioner, an electric cooperative company. They have worked for petitioner from a high of four and one half (4 1/2) years to a low of ten (10) months. Their work forms an integral part of the business of

petitioner. Despite the length of their service, they were extended permanent appointments only on July 13, 1988, retroactive to June 16, 1988. Petitioner has a collective bargaining agreement with its employees' union for a duration of three (3) years from April 1, 1987 up to March 31, 1990. Article VII of the agreement provides for the following wage increase: Sec. 1. The Electric Cooperative hereby agrees to grant all employees covered by this agreement across the board increase on the basic monthly salary of P350.00 for the first year, effective April 1, 1987, in the following manner: 1. Partial payment of P200.00 monthly to start July 1, 1987 to March 31, 1988. 2. Differentials of : a. P350.00, for the period covering April 1, 1987 to June 30, 1987 plus and/or the additional of b. P150.00 for the period covering July 1, 1987 to March 31, 1988 shall be paid in three successive monthly installments starting April 1988. The collective bargaining agreement covers the following employees: ARTICLE I COVERAGE All the permanent employees and workers of the Central Negros Electric Cooperative, Inc. (CENECO), hereinafter referred to as the Electric Cooperative, as covered, except the following: 1. Those performing managerial functions, confidential employees regardless of status and those whom the Electric Cooperative and the Union may individually agree upon to be excluded. 2. Temporary and probationary employees or those whose period of employment is fixed and/or who are employed on a trial basis for a definite period; and those who are under special contract. Though they were made permanent in 1988, private respondents demanded payment of the three hundred fifty pesos (P350.00) wage increase for the year 1987 as provided by the above collective bargaining agreement. Petitioner denied their demand. As called for by the parties' collective bargaining agreement, the demand was treated as a grievance. The grievance remained unsettled until their collective bargaining agreement expired on April 1, 1990. Private respondents then filed their complaint with the Labor Arbiter on May 18, 1990. Labor Arbiter Cesar D. Sideno of the Regional Arbitration Branch No. VI, Bacolod City dismissed the complaint for lack of merit on March 12, 1991. His Decision was, however, reversed by the NLRC, 4th Division, Cebu City, on September 18, 1991. 1 It held that: (1) private respondents became regular employees six (6) months after hiring, and hence, entitled to the across-the-board wage increase for the first year of the collective bargaining agreement starting from April 1, 1987 to March 1988; and (2) private respondents' complaint has not prescribed. In this petition for certiorari, petitioner raises the following issues: 1. WHETHER OR NOT THE PRIVATE RESPONDENTS WERE COVERED BY THE WAGE INCREASES OF P350.00 A MONTH DURING THE FIRST YEAR OF THE COLLECTIVE BARGAINING AGREEMENT; 2. WHETHER OR NOT ARTICLES 280 AND 281 OF THE LABOR CODE WILL APPLY; 3. WHETHER OR NOT THE CAUSE OF ACTION OF THE PRIVATE RESPONDENTS HAS ALREADY PRESCRIBED; 4. WHETHER OR NOT THE PRIVATE RESPONDENTS FAILED TO EXHAUST THE REQUIRED REMEDIES AVAILABLE TO THEM PURSUANT TO THE GRIEVANCE PROCEDURE AS STIPULATED IN THE COLLECTIVE BARGAINING AGREEMENT. Petitioner contends that its collective bargaining agreement clearly excludes "temporary or probationary employees . . ." It stresses that private respondents were extended appointments as permanent workers only on July 13, 1988 retroactive to June 16, 1988. The contention overlooks Articles 280 and 281 of the Labor Code, viz.:

Art. 280. Regular and Casual Employment The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season . An employment shall be deemed to be casual if it is not covered by the preceding paragraph:Provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) Art. 281. Probationary employment Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. It cannot be denied that private respondents attained the status of regular employees even before 1988. Firstly, they perform activities which are necessary or desirable in the usual business of the petitioner as an electric cooperative. They are meter inspectors, PABX operators, utility men, disconnectors, linemen, messengers, secretaries, clerks, typists, plumbers, mechanics, draftsmen, HRD personnel, collectors and electricians. Indeed, their appointments would not have been regularized if their jobs were not indispensable in the daily operation of the petitioner's business. Secondly, they had worked for petitioner for more than six (6) months before they were given regular appointments. They had been hired on various dates starting from 1984. Petitioner's insistence that private respondents became regular employees only when they were extended appointments on July 13, 1988 is deplorable. Articles 280 and 281 of our Labor Code, supra, put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum. Thus, Article 281, supra, placed a ceiling on probationary employment, i.e., not to exceed six (6) months from the date the employee started working. On the other hand, Article 280, supra, defined when an employment shall be regular notwithstanding any written agreement to the contrary. In other words, the graduation of an employee from casual or probationary to regular does not depend on the arbitrary will of his employer. Rightly so, for if there is any group of employees that needs robust protection from the exploitation of employers, it is the casuals and probationaries. Usually the lowliest of the lowly, they are most vulnerable to abuses of management for they would rather suffer in silence than risk losing their jobs. The Labor Code has come to their succor by stopping schemes to eternalize their temporary status. Petitioner's too niggard a regard to the rights of its employees becomes more evident with its contention that even if private respondents were to be considered regular employees under Article 280 of the Labor Code, still, they can only claim security of tenure but not the benefits of the said collective bargaining agreement. Petitioner's contention does not convince for it will result in an anomalous situation where we have to categorize regular employees into two (2) kinds one entitled to security of tenure plus the benefits of the parties' collective bargaining agreement, and the other, entitled to security of tenure alone. Such a classification finds no sanction under the Labor Code for it distinguishes where there is no difference. Not even the

collective bargaining agreement of the parties justifies the submission. For reasonably read and interpreted, the parties collective bargaining agreement excludes only three classes, viz.: 1. Those performing managerial functions, confidential employees regardless of status and those whom the ELECTRIC COOPERATIVE and the UNION may individually agree upon to be excluded. 2. Temporary or probationary employees or those whose period of employment is fixed and/or who are employed on a trial basis for a definite period; and those who are under special contract. 3. Casuals and Extra Laborers. Private respondents do not belong to the excluded categories. Their employments had been regularized. There is no reason to deny them the benefits granted by their collective bargaining agreement when they contributed to the profits of management through their labors. Petitioner also clings to the contention that the claim of private respondents has already prescribed. It is alleged that the cause of action of private respondents accrued on April 1, 1987, the date of the effectivity of the collective bargaining agreement while their complaint was filed only on May 18, 1990. Our attention is called to Article 291 of the Labor Code which provides that all money claims arising from employer-employee relationship shall be filed within three (3) years from the time the cause of action accrued. We hold that the claim has not prescribed. Within the three-year prescriptive period, private respondents submitted their claim to the grievance committee as provided for in their collective bargaining agreement and as called for by our laws. Thus Articles 260 and 261 of the Labor Code provide, to wit: Art. 260. Grievance Machinery and Voluntary Arbitration. The parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the mutual observance of its terms and conditions. They shall establish a machinery for the adjustment and resolution of grievances arising from the interpretation or implementation of their Collective Bargaining Agreement and those arising from the interpretation or enforcement of company personnel policies. All grievances submitted to the grievance machinery which are not settled within seven (7) calendar days from the date of its submission shall automatically be referred to voluntary arbitration prescribed in the Collective Bargaining Agreement. xxx xxx xxx Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining Agreement and those arising from the interpretation or enforcement of company personnel policies referred to in the immediately preceding article. Accordingly, violations of Collective Bargaining Agreement, except those which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as grievances under the Collective Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement. The Commission, its Regional Offices and the Regional Directors of the Department of Labor and Employment shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately dispose and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the Collective Bargaining Agreement. Likewise, Rule XI, Omnibus Rules Implementing the Labor Code, provides: Sec. 1. Jurisdiction of voluntary arbitrator or panel of voluntary arbitrators . The voluntary arbitrator or panel of voluntary arbitrators named in the collective bargaining agreement shall have exclusive and original jurisdiction to hear and decide all grievances arising from the implementation or interpretation of the collective bargaining agreement and those arising from

the interpretation or enforcement of company personnel policies which remain unresolved after exhaustion of the grievance procedure. The voluntary arbitrator or panel of voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practice and bargaining deadlocks. Sec. 2. Referral of cases to voluntary arbitration. All grievances unsettled or unresolved withinseven (7) calendar days from the date of its submission for resolution to the last step of the grievance machinery shall automatically be referred to voluntary arbitration prescribed in the collective bargaining agreement. The Commission, its regional branches and the Regional Directors of the Department of Labor and Employment shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators and shall immediately dispose and refer the same to the appropriate grievance machinery or voluntary arbitration provided in the collective bargaining agreement. In case issues arising from the interpretation or implementing of the collective bargaining agreement or those arising from the interpretation or enforcement of company personnel policies are raised in notices of strikes or lockouts or requests for preventive mediation, the regional branch of the Board shall advise the parties to submit the issue/s to voluntary arbitration. As noted by public respondent, the grievance of private respondents remained unsettled until the parties' collective bargaining agreement expired on April 1, 1990. With the expiration of their collective bargaining agreement, its provision requiring the parties to resort to voluntary arbitration ceased to have any effect at all. Consequently, private respondents lost no time in filing their complaint with the labor arbiter on May 18, 1990. It is obvious that private respondents did not sleep on their right for more than three years as alleged by the petitioner and, hence, prescription will not lie against them. IN VIEW WHEREOF, the petition is dismissed there being no grave abuse of discretion on the part of public respondent in its Decision of September 18, 1991. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT

G.R. No. L-48494 February 5, 1990 BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, vs. RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and DOROTEO R. ALEGRE, respondents. NARVASA, J.: The question presented by the proceedings at bar 1 is whether or not the provisions of the Labor Code, 2 as amended, 3 have anathematized "fixed period employment" or employment for a term. The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. 4 The contract fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of execution of the agreement, to July 17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the same terms and conditions, including the expiry date, as those contained in the original contract of July 18, 1971. 5 Some three months before the expiration of the stipulated period, or more precisely on April 20,1976, Alegre was given a copy of the report filed by Brent School with the Department of Labor advising of the termination of his services effective on July 16, 1976. The stated ground for the termination was "completion of contract, expiration of the definite period of employment." And a month or so later, on May 26, 1976, Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase, "in full payment of services for the period May 16, to July 17, 1976 as full payment of contract." However, at the investigation conducted by a Labor Conciliator of said report of termination of his services, Alegre protested the announced termination of his employment. He argued that although his contract did stipulate that the same would terminate on July 17, 1976, since his services were necessary and desirable in the usual business of his employer , and his employment had lasted for five years, he had acquired the status of a regular employee and could not be removed except for valid cause. 6 The Regional Director considered Brent School's report as anapplication for clearance to terminate employment (not a report of termination), and accepting the recommendation of the Labor Conciliator, refused to give such clearance and instead required the reinstatement of Alegre, as a "permanent employee," to his former position without loss of seniority rights and with full back wages. The Director pronounced "the ground relied upon by the respondent (Brent) in terminating the services of the complainant (Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No. 8, series of 1969, of the Bureau of Private Schools. 7 Brent School filed a motion for reconsideration. The Regional Director denied the motion and forwarded the case to the Secretary of Labor for review. 8 The latter sustained the Regional Director. 9 Brent appealed to the Office of the President. Again it was rebuffed. That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's decision, ruling that Alegre was a permanent employee who could not be dismissed except for just cause, and expiration of the employment contract was not one of the just causes provided in the Labor Code for termination of services. 10 The School is now before this Court in a last attempt at vindication. That it will get here. The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed, the Code did not come into effect until November 1, 1974, some three years after the perfection of the employment contract, and rights and obligations thereunder had arisen and been mutually observed and enforced. At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of term employment. It was impliedly but nonetheless clearly recognized by the

Termination Pay Law, R.A. 1052, 11 as amended by R.A. 1787. 12 Basically, this statute provided that In cases of employment, without a definite period, in a commercial, industrial, or agricultural establishment or enterprise, the employer or the employee may terminate at any time the employment with just cause; or without just cause in the case of an employee by serving written notice on the employer at least one month in advance, or in the case of an employer, by serving such notice to the employee at least one month in advance or one-half month for every year of service of the employee, whichever is longer, a fraction of at least six months being considered as one whole year. The employer, upon whom no such notice was served in case of termination of employment without just cause, may hold the employee liable for damages. The employee, upon whom no such notice was served in case of termination of employment without just cause, shall be entitled to compensation from the date of termination of his employment in an amount equivalent to his salaries or wages corresponding to the required period of notice. There was, to repeat, clear albeit implied recognition of the licitness of term employment. RA 1787 also enumerated what it considered to be just causes for terminating an employment without a definite period, either by the employer or by the employee without incurring any liability therefor. Prior, thereto, it was the Code of Commerce which governed employment without a fixed period, and also implicitly acknowledged the propriety of employment with a fixed period. Its Article 302 provided that In cases in which the contract of employment does not have a fixed period, any of the parties may terminate it, notifying the other thereof one month in advance. The factor or shop clerk shall have a right, in this case, to the salary corresponding to said month. The salary for the month directed to be given by the said Article 302 of the Code of Commerce to the factor or shop clerk, was known as the mesada (from mes, Spanish for "month"). When Article 302 (together with many other provisions of the Code of Commerce) was repealed by the Civil Code of the Philippines, Republic Act No. 1052 was enacted avowedly for the precise purpose of reinstating the mesada. Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and became effective on August 30,1950, itself deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition against term-or fixed-period employment is contained in any of its articles or is otherwise deducible therefrom. It is plain then that when the employment contract was signed between Brent School and Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation fixing the duration thereof Stipulations for a term were explicitly recognized as valid by this Court, for instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March 31, 1977, 13 and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on December 29, 1983. 14 TheThompson case involved an executive who had been engaged for a fixed period of three (3) years. Bibosoinvolved teachers in a private school as regards whom, the following pronouncement was made: What is decisive is that petitioners (teachers) were well aware an the time that their tenure was for a limited duration. Upon its termination, both parties to the employment relationship were free to renew it or to let it lapse. (p. 254) Under American law 15 the principle is the same. "Where a contract specifies the period of its duration, it terminates on the expiration of such period." 16 "A contract of employment for a definite period terminates by its own terms at the end of such period." 17 The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code (Presidential Decree No. 442), which went into effect on November 1, 1974.

The Code contained explicit references to fixed period employment, or employment with a fixed or definite period. Nevertheless, obscuration of the principle of licitness of term employment began to take place at about this time Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination of employment of probationary employees and those employed WITH A FIXED PERIOD shall be subject to such regulations as the Secretary of Labor may prescribe." The asserted objective to was "prevent the circumvention of the right of the employee to be secured in their employment as provided . . . (in the Code)." Article 321 prescribed the just causes for which an employer could terminate " an employment without a definite period." And Article 319 undertook to define "employment without a fixed period" in the following manner: 18 An employment shall be deemed to be without a definite period for purposes of this Chapter where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed term or period would be valid where the employee "has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer." The definition seems a non sequitur. From the premise that the duties of an employee entail "activities which are usually necessary or desirable in the usual business or trade of the employer the" conclusion does not necessarily follow that the employer and employee should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially contradictory between a definite period of an employment contract and the nature of the employee's duties set down in that contract as being "usually necessary or desirable in the usual business or trade of the employer." The concept of the employee's duties as being "usually necessary or desirable in the usual business or trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically, the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be "that which must necessarily come, although it may not be known when." 19 Seasonal employment, and employment for a particular project are merely instances employment in which a period, where not expressly set down, necessarily implied. Of course, the term period has a definite and settled signification. It means, "Length of existence; duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A series of years, months or days in which something is completed. A time of definite length. . . . the period from one fixed date to another fixed date . . ." 20 It connotes a "space of time which has an influence on an obligation as a result of a juridical act, and either suspends its demandableness or produces its extinguishment." 21 It should be apparent that this settled and familiar notion of a period, in the context of a contract of employment, takes no account at all of the nature of the duties of the employee; it has absolutely no relevance to the character of his duties as being "usually necessary or desirable to the usual business of the employer," or not. Subsequently, the foregoing articles regarding employment with "a definite period" and "regular" employment were amended by Presidential Decree No. 850, effective December 16, 1975. Article 320, dealing with "Probationary and fixed period employment," was altered by eliminating the reference to persons "employed with a fixed period," and was renumbered (becoming Article 271). The article 22 now reads:

. . . Probationary employment.Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged in a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a) deleting mention of employment with a fixed or definite period, (b) adding a general exclusion clause declaring irrelevant written or oral agreements "to the contrary," and (c) making the provision treat exclusively of "regular" and "casual" employment. As revised, said article, renumbered 270, 23 now reads: . . . Regular and Casual Employment.The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties , an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to he casual if it is not covered by the preceding paragraph:provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. The first paragraph is identical to Article 319 except that, as just mentioned, a clause has been added, to wit: "The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties . . ." The clause would appear to be addressed inter alia to agreements fixing a definite period for employment. There is withal no clear indication of the intent to deny validity to employment for a definite period. Indeed, not only is the concept of regular employment not essentially inconsistent with employment for a fixed term, as above pointed out, Article 272 of the Labor Code, as amended by said PD 850, still impliedly acknowledged the propriety of term employment: it listed the "just causes" for which "an employer may terminate employment without a definite period," thus giving rise to the inference that if the employment be with a definite period, there need be no just cause for termination thereof if the ground be precisely the expiration of the term agreed upon by the parties for the duration of such employment. Still later, however, said Article 272 (formerly Article 321) was further amended by Batas Pambansa Bilang 130, 24to eliminate altogether reference to employment without a definite period. As lastly amended, the opening lines of the article (renumbered 283), now pertinently read: "An employer may terminate an employment for any of the following just causes: . . . " BP 130 thus completed the elimination of every reference in the Labor Code, express or implied, to employment with a fixed or definite period or term. It is in the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or fixed-period employment that the question posed in the opening paragraph of this opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in employment contracts laying down a definite period therefor? Are such stipulations in essence contrary to public policy and should not on this account be accorded legitimacy? On the one hand, there is the gradual and progressive elimination of references to term or fixed-period employment in the Labor Code, and the specific statement of the rule 25 that

. . . Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties , an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph:provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specie, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order or public policy. 26Under the Civil Code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for specific projects with pre-determined dates of completion; they also include those to which the parties by free choice have assigned a specific date of termination. Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment will all that it implies does not appear ever to have been applied, Article 280 of the Labor Code not withstanding; also appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity, without which no reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister of Labor 27 implicitly recognize that certain company officials may be elected for what would amount to fixed periods, at the expiration of which they would have to stand down, in providing that these officials," . . . may lose their jobs as president, executive vice-president or vice-president, etc. because the stockholders or the board of directors for one reason or another did not re-elect them." There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?" As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable

interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid all objecionable mischievous, undefensible, wrongful, evil and injurious consequences. 28 Nothing is better settled than that courts are not to give words a meaning which would lead to absurd or unreasonable consequences. That s a principle that does back to In re Allen decided oil October 27, 1903, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That is a strong argument against its adoption. The words of Justice Laurel are particularly apt. Thus: "The fact that the construction placed upon the statute by the appellants would lead to an absurdity is another argument for rejecting it. . . ." 29 . . . We have, here, then a case where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent of spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the statute. 30 Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. Such interpretation puts the seal on Bibiso 31 upon the effect of the expiry of an agreed period of employment as still good rulea rule reaffirmed in the recent case of Escudero vs. Office of the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being served by her school a notice of termination following the expiration of the last of three successive fixed-term employment contracts, the Court held: Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was probationary, contractual in nature, and one with a definitive period. At the expiration of the period stipulated in the contract, her appointment was deemed terminated and the letter informing her of the non-renewal of her contract is not a condition sine qua non before Reyes may be deemed to have ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes' contract of employment was due to expire and that the contract would no longer be renewed. It is not a letter of termination. The interpretation that the notice is only a reminder is consistent with the court's finding in Labajo supra. ... 32 Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his last contract with Brent School on July 16, 1976 without the necessity of any notice. The advance written advice given the Department of Labor with copy to said petitioner was a mere reminder of the impending expiration of his contract, not a letter of termination, nor an

application for clearance to terminate which needed the approval of the Department of Labor to make the termination of his services effective. In any case, such clearance should properly have been given, not denied. WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE. Respondent Alegre's contract of employment with Brent School having lawfully terminated with and by reason of the expiration of the agreed term of period thereof, he is declared not entitled to reinstatement and the other relief awarded and confirmed on appeal in the proceedings below. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT

G.R. No. 160952 August 20, 2004 MARCIAL GU-MIRO, petitioner, vs. ROLANDO C. ADORABLE and BERGESEN D.Y. MANILA, respondents. DECISION YNARES-SANTIAGO, J.: Before us is a petition for review on certiorari of the decision of the Court of Appeals in CAG.R. SP No. 66131 dated May 29, 2003,1 which modified the decision of the National Labor Relations Commission (NLRC) by increasing the incentive bonus awarded to petitioner from US$594.56 to US$1189.12. Petitioner Marcial Gu-Miro was formerly employed as a Radio Officer of respondent Bergesen D.Y. Philippines, which acted for and in behalf of its principal Bergesen D.Y. ASA, on board its different vessels. A Certification dated April 14, 1998 was issued by Bergesen D.Y. Philippines, Inc.'s President and General Manager Rolando C. Adorable showing that petitioner served in the company on board its vessels starting 1988.2 The case before us involves an employment contract signed by petitioner to commence service on board the M/V HEROS, which stipulated a monthly salary of US$929.00 for a period of eight (8) months. It also provided for overtime pay of US$495.00 per month and vacation leave with pay in the amount of US$201.00 per month equivalent to six and a half days.3 The contract of employment was signed on March 18, 1996 and petitioner commenced work on April 15, 1996. Record shows that respondent company traditionally gives an incentive bonus termed as Reemployment Bonus to employees who decide to rejoin the company after the expiration of their employment contracts. After the expiration of petitioner's contract in December 1996, the same was renewed by respondent company until September 9, 1997, as stated in the Certification issued by Bergesen D.Y. Philippines, Inc. In September 1997, petitioner's services were terminated due to the installation of labor saving devices which made his services redundant. Upon his forced separation from the company, petitioner requested that he be given the incentive bonus plus the additional allowances he was entitled to. Respondent company, however, refused to accede to his request. Thus, in June 1999 petitioner filed a complaint with the NLRC, Regional Arbitration Branch of Cebu, for payment of the incentive bonus from April 15, 1996 to September 15, 1997, 10% of the basic wage, unclaimed payment for incentive bonus from September 1993 to June 1994, non-remittance of provident fund from July 1992 to June 1994, moral and exemplary damages as well as attorney's fees. On December 29, 1999, the complaint was provisionally dismissed by the NLRC due to the failure of petitioner to file the required position paper. Petitioner re-filed the complaint on March 2, 2000 accordingly. In a Decision dated June 6, 2000, the Labor Arbiter dismissed the case for lack of merit,4 based on the following findings: x x x. "Incentive bonus" or reemployment bonus are benefits not found in the POEA approved contract. These are benefits which are specifically granted pursuant to an internal memorandum entitled "Employment Conditions for Filipino Seafarers serving on board vessels of Bergesen D.Y. ASA". As stated in the said internal memorandum, entitlement to the benefits therein (is) not automatic but (is) subject to some conditions. As clearly stated in the said memorandum, the reemployment bonus is an "incentive bonus system for reemployment upon signing for a subsequent period." x x x. In order that a seafarer, like the complainant, be entitled to reemployment/incentive bonus, he must satisfy all of the following requirements, to wit: 1) He must be employed in a vessel under a principal who is a member of the reemployment bonus scheme; 2) He must have been an officer of the principal member's vessel subject to the additional conditions stated in page 2 of the aforementioned internal memorandum; and

3) After serving in a principal-member's vessel, he must be reemployed in another or the same principal-member's vessel. To avail of the benefits under this scheme, seafarers like the complainant has to prove that he met all the foregoing conditions. It is, thus, his burden to prove that he is entitled to the said benefit. Complainant, however, miserably failed to adduce evidence that he met all the foregoing conditions for entitlement to the benefit. He relied on his unsubstantiated allegation that a certain Captain D. Ramirez received an incentive bonus even if he did not sign up with the Company. x x x. xxx xxx xxx For obvious reasons, complainant's claims for moral and exemplary damages as well as attorney's fees are denied. x x x.5 Petitioner appealed to the NLRC, which set aside the Labor Arbiter's decision and ordered respondents to pay petitioner the amount of US$594.56 in a Decision dated March 5, 2001. The pertinent portion of the NLRC's decision states: The Contract of Employment entered into between the complainant and the respondents specifically set a term of eight (8) months which was supposed to be from April 15, 1996 up to December 14, 1996. The complainant's length of service from December 15, 1996 to September 9, 1997, or a period of nine (9) months, more or less, was an extended term of employment. A closer look at the facts shows that the extended term was even longer than the original term of the contract. xxx xxx xxx [W]e construe that the extended term of the contract of employment from December 15, 1996 up to September 9, 1997 was considered as re-employment of the complainant. And when there was re-employment, it is presumed that all the conditions set forth by the respondents in their established company written policy entitled "Employment Conditions for Filipino Seafarers Serving Onboard Vessels of Bergesen D.Y. ASA" are deemed complied with. The pertinent portion of the said company policy states: 2. Re-employment bonus The company has established an incentive bonus system for re-employment upon signing for a subsequent period. The conditions are as follows: Radio Officers/Electricians Serving onboard bulk carriers- 8% of basic wage per month of actual service. To do otherwise, we would allow the respondent to circumvent its own established policy to merely extending the original contract of employment. 6 Petitioner and respondents filed separate Motions for Reconsideration which were both denied by the NLRC in its Resolution dated April 24, 2001. Not satisfied with the monetary award, petitioner filed a petition for review with the Court of Appeals claiming that there was an error in computing the amount of the incentive bonus he is entitled to. Petitioner argued that he should be considered as a regular employee of respondent company and thus, entitled to backwages or, at the very least, separation pay. The Court of Appeals, on May 29, 2003, rendered the assailed Decision where it ruled: WHEREFORE, the petition is GRANTED. The assailed Decision dated March 5, 2001 is hereby MODIFIED increasing the award of incentive bonus from US$594.56 to US$1189.12.SO ORDERED.7 In arriving at its decision, the appellate court made the following findings: It is uncontroverted that the company grants incentive bonus for re-employment upon signing for a subsequent period. For radio officers onboard bulk carriers, it shall be 8% of the basic wage per month of actual service. In this case, we find nothing in the record to show that the classification of the vessel to which the petitioner was deployed is a Gas/LPG Tanker, which would make him entitled to 10% instead of 8% of the basic wage as incentive bonus. Thus, the public respondent correctly applied the rate of 8% of the basic wage per month of actual

service, the basic wage in this case being the amount stipulated in the contract of employment, i.e., US$929.00, and does not include the stipulated rate for overtime pay. The question now is the application of the provision of the memorandum with respect to the length of actual service. Record shows that after the expiration of the original eight-month employment contract on December 15, 1996, the petitioner was in fact re-employed when his service was extended for another nine (9) months or up to September 1997. This unquestionably entitled him to the incentive bonus for the 8-month period covered by the contract and which was correctly awarded to him by the public respondent NLRC. However, as to the succeeding period, although it was not covered by a written contract, it is unrebutted that the petitioner was actually made to suffer work during that period. Hence, there was a monthly re-employment of the petitioner for the succeeding 9 months. Conformably, since the incentive bonus is given for re-employment upon signing for a subsequent period, for purposes of computing the same, the petitioner is deemed to have been re-employed not only for the 8 months covered by the contract but also for the succeeding 8 months preceding the last month when he was terminated. x x x. xxx xxx xxx As for the claim for backwages or separation pay, we note that these claims were neither raised in the petitioner's position paper nor in the motion for reconsideration filed before the NLRC; hence, they can no longer be raised for the first time in this petition. x x x. 8 Hence, the instant petition for certiorari based on the following grounds: I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT PLACED THE BURDEN UPON PETITIONER TO PROVE THAT M/V HEROS IS AN LPG/GAS TANKER. II. CONSIDERING THAT PETITIONER HAD WORKED FOR BERGESEN D.Y. PHILIPPINES FOR AND IN BEHALF OF ITS PRINCIPAL BERGESEN D.Y. ASA FOR TEN (10) LONG YEARS ABOARD ITS DIFFERENT VESSELS, PETITIONER SHOULD HAVE BEEN CONSIDERED AS A REGULAR EMPLOYEE BY THE COURT OF APPEALS. III. THE HONORABLE COURT OF APPEALS LIKEWISE ERRED WHEN IT SAID IN ITS DECISION THAT PETITIONER FAILED TO RAISE THE ISSUE OF BACKWAGES AND SEPARATION PAY IN THE MOTION FOR RECONSIDERATION FILED WITH THE NLRC. 9 In this petition, we are called upon to resolve two basic issues: The first concerns what percentage to use in computing the incentive bonus which petitioner is entitled to. In the memorandum entitled Employment Conditions for Filipino Seafarers Serving Onboard Vessels of Bergesen D.Y. ASA (Employment Conditions Memorandum), Radio Officers are entitled to re-employment bonus equivalent to a certain percentage of their basic wage per month of actual service. If the employee served onboard a bulk carrier, he is entitled to 8% of his basic wage per month of actual service. Alternatively, if service was done onboard a gas carrier tanker, the employee is entitled to 10% of his basic wage per month of actual service. The NLRC and the Court of Appeals both agree that petitioner failed to adduce concrete proof to show that M/V HEROS is a Gas/LPG Tanker and not a bulk carrier. Hence, the Court of Appeals upheld the use of 8% by the NLRC as multiplier to compute the incentive bonus. Respondent company argues that petitioner failed to allege the nature of M/V HEROS at the earliest opportunity, belatedly alleging this information in the Motion for Reconsideration with the NLRC. Petitioner insists that M/V HEROS is a Gas/LPG Tanker which entitles him to 10% of his basic wage as incentive bonus; and that the Court of Appeals erred in ruling that it was petitioner's burden to prove the classification of M/V HEROS. We rule in petitioner's favor. The registration papers, which contain the vessel classification of M/V HEROS, are the conclusive evidence that petitioner needs to prove his allegation. However, these are in the custody of respondent company or its mother company, Bergesen D.Y. ASA. Interestingly, respondent company never presented the registration papers in evidence. We find that respondent company's failure to controvert the allegation, when it had the opportunity and resources to do so, works in favor of petitioner. Time and again we have held

that should doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. 10 Moreover, the law creates the presumption that evidence willfully suppressed would be adverse if produced. 11 Consequently, the amount of incentive bonus termed as re-employment bonus which petitioner is entitled to should be computed as follows: Salary per month = US$929.00 No. of months of actual service = 16 months Rate = 10% of basic wage US$929.00/month x 16 months x 10% = US$1,486.40 The second and third grounds raised in this petition are related, based on petitioner's allegation that he should be considered a regular employee of respondent company, having been employed onboard the latter's different vessels for the span of 10 years. Hence, petitioner claims that he is entitled to backwages or at the very least separation pay, invoking our decision in Millares, et al. v. NLRC12 where it was held that the repeated re-hiring of a Chief Engineer of a shipping company for 20 years is sufficient evidence of the necessity and indispensability of the employee's service to the employer's business or trade. Hence, applying the express provision of Article 280 of the Labor Code, 13 such an employee should be considered as a regular employee. Petitioner's argument is not well-taken. The decision of Millares, et al. v. NLRC was reconsidered and set aside in a Resolution 14 where it was held: [I]t is clear that seafarers are considered contractual employees. They can not be considered as regularemployees under Article 280 of Labor Code. Their employment is governed by the contracts they sign every time they are rehired and their employment is terminated when the contract expires. Their employment is contractually fixed for a certain period of time. They fall under the exception of Article 280 whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the nature of the work or services to be performed is seasonal in nature and employment is for the duration of the season. xxx xxx xxx Moreover, it is an accepted maritime industry practice that employment of seafarers (is) for a fixed period only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the mutual interest of both the seafarer and the employer why employment status must be contractual only or for a certain period of time. Seafarers spend most of their time at sea and understandably, they cannot stay for a long and an indefinite period of time at sea. Limited access to shore society during the employment will have an adverse impact on the seafarer. The national, cultural and lingual diversity among the crew during the [Contract of Enlistment] is a reality that necessitates the limitation of its period. 15 Clearly, petitioner cannot be considered as a regular employee notwithstanding that the work he performs is necessary and desirable in the business of respondent company. As expounded in the above-mentioned MillaresResolution, an exception is made in the situation of seafarers. The exigencies of their work necessitates that they be employed on a contractual basis. Thus, even with the continued re-hiring by respondent company of petitioner to serve as Radio Officer onboard Bergesen's different vessels, this should be interpreted not as a basis for regularization but rather a series of contract renewals sanctioned under the doctrine set down by the second Millares case. If at all, petitioner was preferred because of practical considerationsnamely, his experience and qualifications. However, this does not alter the status of his employment from being contractual. With respect to the claim for backwages and separation pay, it is now well-settled that the award of backwages and separation pay in lieu of reinstatement are reliefs that are awarded to an employee who is unjustly dismissed.16 In the instant case, petitioner was separated from his

employment due to the termination of an impliedly renewed contract with respondent company. Hence, there is no illegal or unjust dismissal. WHEREFORE, premises considered, the petition is GRANTED IN PART. The Decision of the Court of Appeals in CA-G.R. SP No. 66131 dated May 29, 2003 is MODIFIED in that the award of incentive bonus is increased from US$1189.12 to US$1,486.40. Petitioner's claim that he be declared a regular employee and awarded backwages and separation pay is DENIED for lack of merit. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 162839 October 12, 2006 INNODATA PHILIPPINES, INC., petitioner, vs. JOCELYN L. QUEJADA-LOPEZ and ESTELLA G. NATIVIDAD-PASCUAL, respondents. DECISION PANGANIBAN, J.: A contract that misuses a purported fixed-term employment to block the acquisition of tenure by the employees deserves to be struck down for being contrary to law, morals, good customs, public order and public policy. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse the September 18, 2003 Decision2 of the Court of Appeals (CA) in CA-GR SP No. 73416, as well as its March 15, 2004 Resolution3denying petitioners Motion for Reconsideration. The decretal portion of the Decision states: "WHEREFORE, the challenged decision of November 27, 2001 and resolution of July 22, 2002 of the National Labor Relations Commission are SET ASIDE, and the decision of the Labor Arbiter of December 29, 1999 in NLRC NCR CASE NO. 00-03-02732-98 is REINSTATED and AFFIRMED in all respect."4 The Facts The factual antecedents are narrated by the CA as follows: "Innodata Philippines, Inc., is engaged in the encoding/data conversion business. It employs encoders, indexers, formatters, programmers, quality/quantity staff, and others, to maintain its business and do the job orders of its clients. "Estrella G. Natividad and Jocelyn L. Quejada were employed as formatters by Innodata Philippines, Inc. They [worked] from March 4, 1997, until their separation on March 3, 1998. "Claiming that their job was necessary and desirable to the usual business of the company which is data processing/conversion and that their employment is regular pursuant to Article 280 of the Labor Code, [respondents] filed a complaint for illegal dismissal and for damages as well as for attorneys fees against Innodata Phils., Incorporated, Innodata Processing Corporation and Todd Solomon. [Respondents] further invoke the stare decicis doctrine in the case of Juanito Villanueva vs. National Labor Relations Commission, et al., G.R. No. 127448 dated September 17, 1998 and the case of Joaquin Servidad vs. National Labor Relations Commission, et al., G.R. No. 128682 dated March 18, 1999, arguing that the Highest Court has already ruled with finality that the nature of employment at [petitioner] corporation is regular and not on a fixed term basis, as the job in the company is necessary and desirable to the usual business of the corporation. "On the other hand, [petitioner] contends that [respondents] employment contracts expired, for [these were] only for a fixed period of one (1) year. [Petitioner] company further invoked the Brent School case by saying that since the period expired, [respondents] employment was likewise terminated.

"After examination of the pleadings filed, Labor Arbiter Donato G. Quinto rendered a judgment in favor of complainants, the dispositive portion of which reads: WHEREFORE, foregoing premises considered, judgment is hereby rendered: (1) Holding complainants Estella G. Natividad and Jocelyn Quejada to have been illegally dismissed by [Petitioners] Innodata Philippines Incorporated and Innodata Processing Corporation and ordering said [petitioners] to reinstate them to their former position without los[s] of seniority rights, or to a substantially equivalent position, and to pay them jointly and severally, backwages computed from the time they were illegally dismissed on March 3, 1998 up to the date of this decision in the amount ofP112,535.28 EACH, or in the total amount of P225,070.56 for the two of them; (2) Further, [petitioners] are ordered to pay, jointly and severally, [respondents] attorneys fees in the amount equivalent to 10% of their respective awards; and (3) All other claims are hereby dismissed for lack of merit.SO ORDERED. "Not satisfied, [petitioner] corporation interposed an appeal in the National Labor Relations Commission, which reversed and set aside the Labor Arbiters decision and dismissed [respondents] complaint for lack of merit. It declared that the contract between [respondents] and [petitioner] company was for a fixed term and therefore, the dismissal of [respondents], at the end of their one year term agreed upon, was valid. "A motion for reconsideration was filed but was denied in an order dated July 22, 2002." 5 Ruling of the Court of Appeals The CA ruled that respondents were regular employees in accordance with Section 280 of the Labor Code. It said that the fixed-term contract prepared by petitioner was a crude attempt to circumvent respondents right to security of tenure. Hence, this Petition.6 Issues Petitioner raises the followings issues for the Courts consideration: I "Whether or not the Court of Appeals committed serious reversible error when it did not take into consideration that fixed-term employment contracts are valid under the law and prevailing jurisprudence. II "Whether or not the Court of Appeals committed serious reversible error when it failed to take into consideration the nature of the business of petitioner vis--vis its resort to fixed-term employment contracts. III "Whether or not the Court of Appeals seriously erred when it failed to consider the fixed-term employment contracts between petitioner and respondents as valid. IV "Whether or not the Court of Appeals seriously erred when it held that regularity of employment is always premised on the fact that it is directly related to the business of the employer. V "Whether or not the Court of Appeals committed serious reversible error in setting aside the Decision of the National Labor Relations Commission, dated 27 November 2001 and Resolution of 22 July 2002, respectively[,] and reinstated the decision of the Labor Arbiter dated 29 December 1999."7 The foregoing issues may be reduced into one question: whether the alleged fixed-term employment contracts entered into by petitioner and respondents are valid. The Courts Ruling The Petition has no merit. Sole Issue: Validity of the Fixed-Term Contract

Petitioner contends that the regularity of the employment of respondents does not depend on whether their task may be necessary or desirable in the usual business of the employer. It argues that the use of fixed-term employment contracts has long been recognized by this Court. Petitioner adds that Villanueva v. NLRC8 and Servidad v. NLRC9 do not apply to the present factual circumstances. These earlier cases struck down the employment contracts prepared by herein Petitioner Innodata for being "devious, but crude, attempts to circumvent [the employees] right to security of tenure x x x." Petitioner avers that the present employment contracts it entered into with respondents no longer contain the so-called "double-bladed" provisions previously found objectionable by the Court. Petitioners contentions have no merit. While this Court has recognized the validity of fixed-term employment contracts in a number of cases,10 it has consistently emphasized that when the circumstances of a case show that the periods were imposed to block the acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs, public order or public policy. 11 In a feeble attempt to conform to the earlier rulings of this Court in Villanueva12 and Servidad,13 petitioner has reworded its present employment contracts. A close scrutiny of the provisions, however, show that the double-bladed scheme to block the acquisition of tenurial security still exists. To stress, Servidad struck down the following objectionable contract provisions: "Section 2. This Contract shall be effective for a period of 1 [year] commencing on May 10, 1994, until May 10, 1995 unless sooner terminated pursuant to the provisions hereof. "From May 10, 1994 to November 10, 1994, or for a period of six (6) months, the EMPLOYEE shall be contractual during which the EMPLOYER can terminate the EMPLOYEES services by serving written notice to that effect. Such termination shall be immediate, or at whatever date within the six-month period, as the EMPLOYER may determine. Should the EMPLOYEE continue his employment beyond November 10, 1994, he shall become a regular employee upon demonstration of sufficient skill in the terms of his ability to meet the standards set by the EMPLOYER. If the EMPLOYEE fails to demonstrate the ability to master his task during the first six months he can be placed on probation for another six (6) months after which he will be evaluated for promotion as a regular employee." 14 In comparison, the pertinent portions of the present employment contracts in dispute read as follows: "TERM/DURATION 1. The EMPLOYER hereby employs, engages and hires the EMPLOYEE, and the EMPLOYEE hereby accepts such appointment as FORMATTER effective March 04, 1997 to March 03, 1998, a period of one (1) year. xxxxxxxxx "TERMINATION 7.1 This Contract shall automatically terminate on March 03, 1998 without need of notice or demand. xxxxxxxxx 7.4 The EMPLOYEE acknowledges that the EMPLOYER entered into this Contract upon his express representation that he/she is qualified and possesses the skills necessary and desirable for the position indicated herein. Thus, the EMPLOYER is hereby granted the right to pre-terminate this Contract within the first three (3) months of its duration upon failure of the EMPLOYEE to meet and pass the qualifications and standards set by the EMPLOYER and made known to the EMPLOYEE prior to execution hereof . Failure of the EMPLOYER to exercise its right hereunder shall be without prejudice to the automatic termination of the EMPLOYEEs employment upon the expiration of this Contract or cancellation thereof for other causes provided herein and by law." 15 (Emphasis supplied)

Like those in Villanueva and Servidad, the present contracts also provide for two periods. Aside from the fixed one-year term set in paragraph 1, paragraph 7.4 provides for a threemonth period during which petitioner has the right to pre-terminate the employment for the "failure of the employees to meet and pass the qualifications and standards set by the employer and made known to the employee prior to" their employment. Thus, although couched in ambiguous language, paragraph 7.4 refers in reality to a probationary period. Clearly, to avoid regularization, petitioner has again sought to resort alternatively to probationary employment and employment for a fixed term. Noteworthy is the following pronouncement of this Court in Servidad: "If the contract was really for a fixed term, the [employer] should not have been given the discretion to dismiss the [employee] during the one year period of employment for reasons other than the just and authorized causes under the Labor Code. Settled is the rule that an employer can terminate the services of an employee only for valid and just causes which must be shown by clear and convincing evidence. "The language of the contract in dispute is truly a double-bladed scheme to block the acquisition of the employee of tenurial security. Thereunder, [the employer] has two options. It can terminate the employee by reason of expiration of contract, or it may use failure to meet work standards as the ground for the employees dismissal. In either case, the tenor of the contract jeopardizes the right of the worker to security of tenure guaranteed by the Constitution."16 In the interpretation of contracts, obscure words and provisions shall not favor the party that caused the obscurity.17 Consequently, the terms of the present contract should be construed strictly against petitioner, which prepared it. 18 Article 1700 of the Civil Code declares: "Art. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects." Indeed, a contract of employment is impressed with public interest. For this reason, provisions of applicable statutes are deemed written into the contract. Hence, the "parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other." 19 Moreover, in case of doubt, the terms of a contract should be construed in favor of labor.20 Lastly, petitioner claims that it was constrained by the nature of its business to enter into fixedterm employment contracts with employees assigned to job orders. It argues that inasmuch as its business is that of a mere service contractor, it relies on the availability of job orders or undertakings from its clients. Hence, the continuity of work cannot be ascertained. Petitioners contentions deserve little consideration. By their very nature, businesses exist and thrive depending on the continued patronage of their clients. Thus, to some degree, they are subject to the whims of clients who may decide to discontinue patronizing their products or services for a variety of reasons. Being inherent in any enterprise, this entrepreneurial risk may not be used as an excuse to circumvent labor laws; otherwise, no worker could ever attain regular employment status. Finally, it is worth noting that after its past employment contracts had been declared void by this Court, petitioner was expected to ensure that the subsequent contracts would already comply with the standards set by law and by this Court. Regrettably, petitioner failed to do so. WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution are AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 107729 December 6, 1995 GEORGE D. JONES, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, 4th Division, Cebu City; ABBOTT LABORATORIES (PHILS.), INC., AUBREY BOUT, and ELENITO P. TUAZON, respondents. BELLOSILLO, J.: The crux of this controversy is whether under the facts of the case petitioner may be considered to have abandoned his job as to warrant his dismissal. George D. Jones started working with Abbott Laboratories (Phils.), Inc. (ABBOTT) as a medical representative sometime in February 1971. In 1973 he was promoted as District Sales Manager for Western Visayas. At the time he was dismissed on 27 October 1989 he was receiving a monthly salary of P10,000.00 plus mid-year and Christmas bonuses equivalent to one month salary. Starting his eleventh year he was given, aside from the free use of a company car, six and a half (6-1/2) days vacation leave for every year of service. During his employment he was the recipient of various awards and commendations for his loyalty and exemplary performance. On 3 August 1989 petitioner applied for and was granted a vacation leave which he availed of on 11 to 28 September 1989. Shortly before his leave expired he applied for sick leave to take effect 29 September 1989. The reason he gave was that he was hypertensive as shown in his medical certificate issued by Dr. Wilfredo Salvador on 29 August 1989 attached to his application. On 10 October 1989 ABBOTT disapproved his application for sick leave and directed him instead to report to its Director of Administration within five (5) days. When petitioner failed to appear for work ABBOTT again wrote him on 25 October 1989 directing him to report on 27 October 1989, or two (2) days after, otherwise he would be dismissed for abandonment. Receiving no reply from petitioner, ABBOTT finally terminated his services on the day he was required to report. In the meantime, on 20 October 1989 petitioner wrote from Canada informing his employer that he would be reporting in the first week of December 1989 as he had been advised by his physician to rest and to undergo further medical examination. 1 When he returned to the Philippines he was informed that he was already dismissed. Consequently, he filed a complaint for illegal dismissal with damages. Upon issues being joined, petitioner opted to rely on his position paper instead of adducing testimonial evidence. Private respondents, on the other hand, presented Dr. Mel Bacabac and private respondent Elenito P. Tuazon, Administrator of ABBOTT. After trial the Labor Arbiter decided in favor of private respondents by sustaining the dismissal of petitioner.

On appeal by petitioner, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter. The NLRC found that notwithstanding the scheme of petitioner in extending his stay in Canada through vacation and sick leaves it could not sustain the conclusion that petitioner abandoned his employment. 2 Private respondents moved for reconsideration claiming that petitioner was not sick at the time of his application for sick leave; that at the time he was dismissed he had already been absent without leave for several months showing lack of interest in his work; and, that there was no dispute regarding his refusal to work despite company directives for him to report. Upon acting on the motion NLRC flip-flopped; it reversed itself. It ruled that petitioner was guilty of abandonment for going on sick leave without justifiable reasons. 3 Petitioner moved for reconsideration. It was denied; hence, this petition. Petitioner insists that he has not abandoned his job, and protests his dismissal without due process. He claims he was abroad for medical examination because of his hypertension and cardiovascular problems. Dr. Mel Bacabac confirmed that petitioner had artery coronary heart disease which would require rest and reduced normal activities. 4 Respondents maintain otherwise. According to private respondent Tuazon, as early as 9 February 1989 petitioner informed him of petitioner's intention to migrate to Canada together with his family; that petitioner wanted to resign and get a similar separation pay package extended to retrenched employees, i.e., three (3) months salary for every year of service, but that he informed petitioner that he could not get that much as he was not being retrenched. Tuazon also said that petitioner feigned illness to justify his unauthorized and prolonged trip to Canada in the hope that he could later exact benefits from the company through an action for illegal dismissal. Private respondents also contend that petitioner was guilty of dishonesty and gross misconduct when he lied about the seriousness of his alleged ailment just so he could extend his leave. 5 With respect to due process, respondents assert that petitioner was given two opportunities to explain his side but failed. 6 We rule in favor of petitioner. The requisites to constitute a valid dismissal are: (a) the dismissal must be for any of the causes provided in Art. 282 of the Labor Code, and (b) only after the employees has been notified in writing and given the opportunity to be heard and defend himself, as required under Secs. 2 and 5, Rule XIV, Book V, of the Implementing Rules. 7 Respondents' allegation that petitioner abandoned his job is belied by the fact that after learning that his services had been terminated petitioner forthwith filed a complaint for illegal dismissal. Abandonment of work is inconsistent with the filing of the complaint within the reglementary period. 8 An employee who takes steps to protest his lay-off cannot by any logic be said to have abandoned his work. Clear, deliberate and unjustified refusal to resume employment and not mere absence is required to constitute abandonment as a valid ground for termination of employment. 9 The fact that petitioner informed his employer on 20 October 1989 that he would be reporting for work in the first week of December 1989 showed that his absence was merely temporary and reflected his intention to continue working. The reasons advanced by ABBOTT in disapproving the application for sick leave of petitioner were: (a) while petitioner was allegedly suffering from hypertension since 29 August 1989 he continued working until 11 September 1989 without any ill effect; (b) petitioner inappropriately applied on 3 August 1989 for a vacation leave instead of sick leave; (c) petitioner's application was for an indefinite duration; and, (d) petitioner's application for sick leave appeared to be a mere attempt to prolong his vacation leave. These reasons appear to be petty; they defy logic. The mere fact that petitioner was able to work from 29 August to 11 September 1989 without exhibiting any ill effect should not be taken against him. He should be commended in fact for working despite his physical condition. Again, there is nothing wrong with an application for sick leave which does not specify the date when the applicant would return for work. Certainly, private respondent could have granted the application and fixed the duration or limited the period of the leave. Besides, the choice of

whether to avail of his sick leave belongs to the employee and he cannot be faulted for going on leave to seek adequate medical treatment. Under the circumstances, we cannot help concluding that the penalty of dismissal is too harsh and severe if not unjust, unreasonable and unwarranted especially when viewed against his long years of dedicated service that merited awards and commendations. The records fail to disclose any incident in the past that would make his loyalty and dedication questionable. This seems to be the first time that he is in trouble with his employer. The records show that at the time he went on leave, which ended in his dismissal, he had eighty-five and a half (85-1/2) days of leave credit. He was employed with respondent for eighteen (18) years during which, as adverted to earlier, he was the recipient of many awards and commendations from the company. Respondents would persuade us that petitioner was guilty of dishonesty for feigning illness, gross misconduct for intentional violation of company rules on leave applications, and gross in subordination for disobeying their return to work order. Fraud, serious misconduct or willful disobedience may constitute a just cause for termination of employment. But such grounds were never discussed in the proceedings below; only abandonment was raised. Unfortunately, contrary to private respondents' thesis, the facts on record do not disclose that petitioner indeed abandoned his job. The testimony of respondent Tuazon that petitioner went to Canada to seek employment is at most self-serving and hearsay. It cannot merit any probative value. But even if we assume the testimony to be true, petitioner has every right, if not a duty to himself and his family, to seek better opportunities. On the issue of due process raised by petitioner, the law requires the employer to furnish the worker whose employment is sought to be terminated a written notice containing a statement of the cause or causes for termination and shall afford him ample opportunity to be heard and to defend himself with the assistance of a representative. 10 Specifically, the employer must furnish the worker with two (2) written notices before termination of employment can be legally effected: (a) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (b) the subsequent notice which informs the employee of the employer's decision to dismiss him. 11 The only notice which contained the statement of the cause for termination was respondent ABBOTT'S letter of 25 October 1989. Its earlier letter of 10 October 1989 cannot be considered a notice of dismissal since it did not state the cause for petitioner's termination. It merely informed petitioner that his application for sick leave was disapproved and that he should report for work five (5) days from receipt thereof. Actually, petitioner was dismissed on 27 October 1989, only two (2) days after the notice of 25 October 1989 was sent to him. Considering that the second letter was mailed from Manila to Bacolod City, and taking into account the condition of our postal service of which private respondents should be well aware, it was unreasonable for private respondents to expect petitioner to receive the letter and report to work in Manila within two (2) days. Verily, the twin requirements of notice and hearing constitute the essential elements of due process. Neither of these elements can be eliminated without running afoul of the constitutional guaranty. 12 The dismissal of petitioner without giving him ample opportunity to adequately present his side is glaringly violative of his right to due process. WHEREFORE, the resolutions of the National Labor Relations Commission promulgated 20 August and 12 October 1992 are REVERSED and SET ASIDE. Consequently, private respondents are directed to REINSTATE petitioner GEORGE D. JONES to his former position immediately with back wages and without loss of seniority rights and other benefits to which he is entitled under the law. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 109902 August 2, 1994 ALU-TUCP, Representing Members: ALAN BARINQUE, with 13 others, namely: ENGR. ALAN G. BARINQUE, ENGR. DARRELL LEE ELTAGONDE, EDUARD H. FOOKSON, JR., ROMEO R. SARONA, RUSSELL GACUS, JERRY BONTILAO, EUSEBIO MARIN, JR., LEONIDO ECHAVEZ, BONIFACIO MEJOS, EDGAR S. BONTUYAN, JOSE G. GARGUENA, JR., OSIAS B. DANDASAN, and GERRY I. FETALVERO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and NATIONAL STEEL CORPORATION (NSC), respondents. Leonard U. Sawal for petitioners. Saturnino Mejorada for private respondent. FELICIANO, J.: In this Petition for Certiorari, petitioners assail the Resolution of the National Labor Relations Commission ("NLRC") dated 8 January 1993 which declared petitioners to be project employees of private respondent National Steel Corporation ("NSC"), and the NLRC's subsequent Resolution of 15 February 1993, denying petitioners' motion for reconsideration. Petitioners plead that they had been employed by respondent NSC in connection with its Five Year Expansion Program (FAYEP I & II) 1 for varying lengths of time when they were separated from NSC's service: Employee Date Nature of Separated Employed Employment 1. Alan Barinque 5-14-82 Engineer 1 8-31-91 2. Jerry Bontilao 8-05-85 Engineer 2 6-30-92 3. Edgar Bontuyan 11-03-82 Chairman to present 4. Osias Dandasan 9-21-82 Utilityman 1991 5. Leonido Echavez 6-16-82 Eng. Assistant 6-30-92 6. Darrell Eltagonde 5-20-85 Engineer 1 8-31-91 7. Gerry Fetalvero 4-08-85 Mat. Expediter regularized 8. Eduard Fookson 9-20-84 Eng. Assistant 8-31-91 9. Russell Gacus 1-30-85 Engineer 1 6-30-92 10. Jose Garguena 3-02-81 Warehouseman to present 11. Eusebio Mejos 11-17-82 Survey Aide 8-31-91 12. Bonifacio Mejos 11-17-82 Surv. Party Head 1992 13. Romeo Sarona 2-26-83 Machine Operator 8-31-91 2 On 5 July 1990, petitioners filed separate complaints for unfair labor practice, regularization and monetary benefits with the NLRC, Sub-Regional Arbitration Branch XII, Iligan City. The complaints were consolidated and after hearing, the Labor Arbiter in a Decision dated 7 June 1991, declared petitioners "regular project employees who shall continue their employment as such for as long as such [project] activity exists," but entitled to the salary of a regular employee pursuant to the provisions in the collective bargaining agreement. It also ordered payment of salary differentials. 3 Both parties appealed to the NLRC from that decision. Petitioners argued that they were regular, not project, employees. Private respondent, on the other hand, claimed that petitioners are project employees as they were employed to undertake a specific project NSC's Five Year Expansion Program (FAYEP I & II). The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It affirmed the Labor Arbiter's holding that petitioners were project employees since they were hired to

perform work in a specific undertaking the Five Years Expansion Program, the completion of which had been determined at the time of their engagement and which operation was not directly related to the business of steel manufacturing. The NLRC, however, set aside the award to petitioners of the same benefits enjoyed by regular employees for lack of legal and factual basis. Deliberating on the present Petition for Certiorari, the Court considers that petitioners have failed to show any grave abuse of discretion or any act without or in excess of jurisdiction on the part of the NLRC in rendering its questioned resolutions of 8 January 1993 and 15 February 1993. The law on the matter is Article 280 of the Labor Code which reads in full: Art. 280. Regular and Casual Employment The provisions of the written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, and employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied) Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are "necessary, desirable and work-related to private respondent's main business, steel-making"; and (ii) they have rendered service for six (6) or more years to private respondent NSC. 4 The basic issue is thus whether or not petitioners are properly characterized as "project employees" rather than "regular employees" of NSC. This issue relates, of course, to an important consequence: the services of project employees are co-terminous with the project and may be terminated upon the end or completion of the project for which they were hired. 5 Regular employees, in contract, are legally entitled to remain in the service of their employer until that service is terminated by one or another of the recognized modes of termination of service under the Labor Code. 6 It is evidently important to become clear about the meaning and scope of the term "project" in the present context. The "project" for the carrying out of which "project employees" are hired would ordinarily have some relationship to the usual business of the employer. Exceptionally, the "project" undertaking might not have an ordinary or normal relationship to the usual business of the employer. In this latter case, the determination of the scope and parameeters of the "project" becomes fairly easy. It is unusual (but still conceivable) for a company to undertake a project which has absolutely no relationship to the usual business of the company; thus, for instance, it would be an unusual steel-making company which would undertake the breeding and production of fish or the cultivation of vegetables. From the viewpoint, however, of the legal characterization problem here presented to the Court, there should be no difficulty in designating the employees who are retained or hired for the purpose of undertaking fish culture or the production of vegetables as "project employees," as distinguished from ordinary or "regular employees," so long as the duration and scope of the project were determined or specified at the time of engagement of the "project employees." 7 For, as is evident from the provisions of Article 280 of the Labor Code, quoted earlier, the principal test for determining whether particular employees are properly characterized as "project employees" as distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific project or undertaking," the duration (and scope) of which were specified at the time the employees were engaged for that project.

In the realm of business and industry, we note that "project" could refer to one or the other of at least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. The typical example of this first type of project is a particular construction job or project of a construction company. A construction company ordinarily carries out two or more discrete identifiable construction projects: e.g., a twenty-five- storey hotel in Makati; a residential condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as "project employees," and their services may be lawfully terminated at completion of the project. The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. The case at bar presents what appears to our mind as a typical example of this kind of "project." NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end in view of expanding the volume and increasing the kinds of products that it may offer for sale to the public. The Five Year Expansion Program had a number of component projects: e.g., (a) the setting up of a "Cold Rolling Mill Expansion Project"; (b) the establishment of a "Billet SteelMaking Plant" (BSP); (c) the acquisition and installation of a "Five Stand TDM"; and (d) the "Cold Mill Peripherals Project." 8 Instead of contracting out to an outside or independent contractor the tasks of constructing the buildings with related civil and electrical works that would house the new machinery and equipment, the installation of the newly acquired mill or plant machinery and equipment and thecommissioning of such machinery and equipment, NSC opted to execute and carry out its Five Yeear Expansion Projects "in house," as it were, by administration. The carrying out of the Five Year Expansion Program (or more precisely, each of its component projects) constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC. Each component project, of course, begins and ends at specified times, which had already been determined by the time petitioners were engaged. We also note that NSC did the work here involved the construction of buildings and civil and electrical works, installation of machinery and equipment and the commissioning of such machinery only for itself. Private respondent NSC was not in the business of constructing buildings and installing plant machinery for the general business community, i.e., for unrelated, third party, corporations. NSC did not hold itself out to the public as a construction company or as an engineering corporation. Which ever type of project employment is found in a particular case, a common basic requisite is that the designation of named employees as "project employees" and their assignment to a specific project, are effected and implemented in good faith, and not merely as a means of evading otherwise applicable requirements of labor laws. Thus, the particular component projects embraced in the Five Year Expansion Program, to which petitioners were assigned, were distinguishable from the regular or ordinary business of NSC which, of course, is the production or making and marketing of steel products. During the time petitioners rendered services to NSC, their work was limited to one or another of the specific component projects which made up the FAYEP I and II. There is nothing in the record to show that petitioners were hired for, or in fact assigned to, other purposes, e.g., for operating or maintaining the old, or previously installed and commissioned, steel-making machinery and equipment, or for selling the finished steel products. We, therefore, agree with the basic finding of the NLRC (and the Labor Arbiter) that the petitioners were indeed "project employees:"

It is well established by the facts and evidence on record that herein 13 complainants were hired and engaged for specific activities or undertaking the period of which has been determined at time of hiring or engagement. It is of public knowledge and which this Commission can safely take judicial notice that the expansion program (FAYEP) of respondent NSC consist of various phases [of] project components which are being executed or implemented independently or simultaneously from each other . . . In other words, the employment of each "project worker" is dependent and co-terminous with the completion or termination of the specific activity or undertaking [for which] he was hired which has been pre-determined at the time of engagement. Since, there is no showing that they (13 complainants) were engaged to perform work-related activities to the business of respondent which is steel-making, there is no logical and legal sense of applying to them the proviso under the second paragraph of Article 280 of the Labor Code, as amended. xxx xxx xxx The present case therefore strictly falls under the definition of "project employees" on paragraph one of Article 280 of the Labor Code, as amended. Moreover, it has been held that the length of service of a project employee is not the controlling test of employment tenure but whether or not "the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee". (See Hilario Rada v. NLRC, G.R. No. 96078, January 9, 1992; and Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674 (1985). 9 Petitioners next claim that their service to NSC of more than six (6) years should qualify them as regular employees. We believe this claim is without legal basis. The simple fact that the employment of petitioners as project employees had gone beyond one (1) year, does not detract from, or legally dissolve, their status as project employees. 10 The second paragraph of Article 280 of the Labor Code, quoted above, providing that an employee who has served for at least one (1) year, shall be considered a regular employee, relates to casual employees, not to project employees. In the case of Mercado, Sr. vs. National Labor Relations Commission, 11 this Court ruled that the proviso in the second paragraph of Article 280 relates only to casual employees and is not applicable to those who fall within the definition of said Article's first paragraph, i.e., project employees. The familiar grammatical rule is that a proviso is to be construed with reference to the immediately preceding part of the provision to which it is attached, and not to other sections thereof, unless the clear legislative intent is to restrict or qualify not only the phrase immediately preceding the proviso but also earlier provisions of the statute or even the statute itself as a whole. No such intent is observable in Article 280 of the Labor Code, which has been quoted earlier. ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is hereby DISMISSED for lack of merit. The Resolutions of the NLRC dated 8 January 1993 and 15 February 1993 are hereby AFFIRMED. No pronouncement as to costs. SO ORDERED.

FIRST DIVISION [G.R. No. 118853. October 16, 1997] BRAHM INDUSTRIES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, REYNALDO C. GAGARINO, ROBERTO M. DURIAN and JONE M. COMENDADOR, respondents. DECISION BELLOSILLO, J.: Matters concerning dismissal of workers are, admittedly, within the ambit of management prerogative. However, certain mandatory requirements laid down by law must be complied with to insure that this prerogative is exercised without arbitrariness or abuse of discretion. Our legal system dictates that both the reason for and the manner of dismissing a worker must be appropriate otherwise the termination itself is gravely defective and may be declared unlawful. This is because a workers job has some of the characteristics of property rights and is therefore within the constitutional mantle of protection that "no person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of the laws." As such, a person cannot be deprived of his property right without observance of the proper legal procedure.[1] Roberto M. Durian, Jone M. Comendador and Reynaldo C. Gagarino filed a case for illegal suspension, illegal dismissal, illegal lay-off, illegal deductions, non-payment of service incentive leave, 13th month pay, and actual, moral and exemplary damages against Brahm Industries, Inc. (BRAHM) before the Labor Arbiter. In their complaints, they alleged that they were employed by BRAHM on various dates with varying salary rates and for different positions.[2] All three (3) claimed that they worked seven (7) days a week from eight o clock in the morning to five oclock in the afternoon; that they were required to work overtime three (3) times a week from five o clock in the afternoon until midnight and at least once a week for the whole night; that they were paid overtime pay based on the minimum wage only; and that without cause and due process, Gagarinos employment was terminated in October 1990, while Durian and Comendador were dismissed in December 1992. [3] For its part, BRAHM maintained that Gagarino left the company sometime in 1990 to work abroad. When he returned to the Philippines he worked with another company. With respect to Durian and Comendador, Brahm claimed that they abandoned their jobs in 1992 after having been reprimanded by their employer for not finishing some welding work assigned to them. That another reason for Durians and Comendadors alleged abandonment of their jobs was due to their inability to account for some tools worth P10,000.00 which were under their custody and accountability. Moreover, BRAHM asserted that complainants were never employed on a regular basis as the latter had their own customers who required them to render home service. That being a small-scale enterprise engaged in contracting and subcontracting projects for the construction of water purifiers and waste control devices, most of its laborers, including herein complainants, were contractual employees hired on a per project basis. Since its business depended on the availability of contracts or projects, the character of employment of its work force was not permanent but rather coterminous with the project to which they were assigned. On 8 February 1994 Labor Arbiter Fatima J. Franco ruled that complainants Roberto M. Durian and Jone M. Comendador were illegally dismissed by BRAHM and accordingly ordered the latter to: (a) reinstate complainants to their former positions or equivalent positions without loss of seniority rights, but if reinstatement was no longer possible, to pay them separation pay equivalent to one (1) month for every year of service; (b) pay Roberto M. Durian the amount of Forty-Eight Thousand Thirty-Eight Pesos and Twenty-Five Centavos (P48,038.25) representing his back wages; and, Jone M. Comendador the amount of Sixty Thousand Four

Hundred Seventy-Four Pesos and Ninety-Two Centavos (P60,474.92) representing his back wages, 13th month pay and service incentive leave pay; and, (c) pay complainants the amount equivalent to 10% of the total award as attorneys fees. [4] As regards the case of Reynaldo C. Gagarino, the same was dismissed when the Labor Arbiter found that he filed his complaint only after more than two (2) years from the date of his dismissal. According to the Labor Arbiter, this lukewarm attitude of complainant (Gagarino) bolstered the conclusion that the filing of his case was merely an afterthought, i.e., when he learned that Durian and Comendador were dismissed, he joined them in filing the instant case.[5] Gagarino did not appeal the dismissal of his case. Upon appeal by BRAHM, the NLRC affirmed the decision of the Labor Arbiter, subject to the modification that the attorneys fees awarded be reduced to five percent (5%) of the total monetary award. BRAHM now argues that the NLRC gravely abused its discretion when it held that: (a) private respondents Roberto M. Durian and Jone M. Comendador were regular employees and not merely contractual employees hired on a per project basis; (b) they were illegally dismissed; and, (c) they were entitled to attorneys fees despite the fact that the award lacks factual and legal basis. We find no merit in the petition. A project employee is one whose employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. [6] Before an employee hired on a per project basis can be dismissed, a report must be made to the nearest employment office of the termination of the services of the workers everytime it completed a project, pursuant to Policy Instruction No. 20. [7] There was no showing that BRAHM observed the above-mentioned requirement. In fact, it even admitted in the petition its failure to comply with Policy Instruction No. 20. In Ochoco v. National Labor Relations Commission,[8] the failure of the employer to report to the nearest employment office the termination of employment of workers everytime it completed a project was considered by this Court as proof that the dismissed employees were not project employees but regular employees. Petitioner cannot evade the unfavorable repercussions of its failure to comply with the law by arguing that the requirement under Policy Instruction No. 20 is not mandatory. Furthermore, Art. 280 of the Labor Code defines who a regular employee is Art. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer , except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has rendered at least one (1) year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists (underscoring supplied). The primary standard to determine regularity of employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. This connection can be determined by considering the nature and work performed and its relation to the scheme of the particular business or trade in its entirety. [9] The law deems the repeated and continuing need for the service of any employee who has been performing his job for at least one (1) year, even if the performance is not continuous or

merely intermittent, as sufficient evidence of the necessity if not the indispensability of that activity to the business. The work performed by private respondents as "welders" were undoubtedly necessary and desirable to BRAHMs business or trade of manufacturing water purifiers and waste control devices. Without the performance of such services on a regular basis, BRAHMs business is expected to grind to a halt. Likewise, BRAHMs practice of rehiring private respondents after the completion of every project, which practice continued throughout Comendadors nine (9) years and Durians five (5) years of employment in the company confirms that they were considered by BRAHM as regular employees. As employer, BRAHM has unlimited access to all pertinent documents and records on the status of employment of its workers. Yet, even as it stubbornly insists that private respondents were project employees only, no contract, payroll or any other convincing evidence which may attest to the nature of their employment was ever presented to substantiate its claim. Instead, what was offered as evidence were merely self-serving affidavits of petitioners other employees declaring that private respondents were project employees like them, which affidavits were inadequate to buttress its claim. On the validity of private respondents dismissal, there are two (2) facets of valid termination of employment: (a) the legality of the act of dismissal, i.e., the dismissal must be under any of the just causes provided under Art. 282 of the Labor Code; and, (b) the legality of the manner of dismissal, which means that there must be observance of the requirements of due process.[10] In this connection, the employer is required to furnish the worker sought to be dismissed with two (2) written notices before his dismissal can be legally effected, namely, notice which apprises the employee of the particular acts or omissions for which his dismissal is sought (in cases of abandonment of work, the notice shall be served at the workers last known address); and, subsequent notice which informs the employee of the employers decision to dismiss him. These requirements are mandatory, non-compliance with which renders any judgment reached by management void and inexistent. [11] Petitioner failed to satisfy these requisites. While it imputes "abandonment" as the cause of dismissal, no proof was offered in support thereof other than the bare allegation that private respondents did not report for work after they were reprimanded by their employer. On the contrary, the filing by private respondents of the complaint for illegal dismissal with prayers for reinstatement, upon learning that they were dismissed, clearly suggests that they were not abandoning their work. To constitute abandonment, there must be a clear and deliberate intent to discontinue ones employment without any intention of returning back. Even assuming abandonment, the dismissal of private respondents is still illegal for lack of due process. As correctly observed by the Labor Arbiter and sustained by the NLRC, petitioner failed to furnish private respondents with the first of the required two (2) notices at their last known addresses, which could have apprised them of petitioners intention to dismiss them. This requirement is not a mere formality that may be dispensed with at will. Its disregard is a matter of serious concern since it constitutes a safeguard of the highest order in response to mans innate sense of justice. [12] Petitioner contends that the charge of abandonment of work should be sustained as it was never rebutted nor refuted by private respondents. It is in effect postulating that the onus of proving the illegality of the dismissal is on private respondents themselves, not on the employer. This is not the intention of Art. 277, par. (b), of the Labor Code which in clear and unambiguous terms mandates that the burden of proving the validity of the termination of employment rests on the employer. Failure to do so would necessarily mean that the dismissal was not justified and, therefore, illegal. [13] The employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause. [14] With regard to the propriety of the award of attorneys fees in favor of private respondents, petitioner contends that it was erroneous for the NLRC to merely reduce the award of attorneys fees when it should have been completely deleted. Petitioner claims that the award

is baseless since the matter of attorneys fees was touched only once in the dispositive portion of the Labor Arbiters decision and no discussion or reason was stated therefor. This argument is unfounded. A perusal of the decision shows that the reason for the award of attorneys fees is clearly and unequivocally set forth in the body of the Labor Arbiters decision, to wit: "Having been compelled to litigate, complainants should be paid an amount equivalent to ten percent (10%) of the total award as and for attorneys fees." It used as basis Art. 2208 of the Civil Code which allows attorneys fees to be awarded by a court when its claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party from whom it is sought. [15] However, nothing precludes the appellate courts from reducing the award of attorneys fees when it is found to be unconscionable or excessive under the circumstances. Thus, we agree with the NLRCs ruling that "the award of attorneys fees is proper on account of complainants being compelled to litigate their claims against respondent. The amount is however reduced to five percent (5%) of the adjudged relief, it appearing that the substantial portion of the award refers to complainants back wages and not to withheld salaries." Finally, this Court has consistently held that findings of fact of administrative agencies and quasi-judicial bodies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality and are binding upon this Court unless there is grave abuse of discretion or where it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record. [16] Petitioner failed to convince us that we should depart from this time-honored rule. WHEREFORE, the instant petition is DISMISSED for lack of merit and the decision of the National Labor Relations Commission is AFFIRMED. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. L-51182 July 5, 1983 HELMUT DOSCH, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and NORTHWEST AIRLINES, INC., respondents. GUERRERO, J.: This is a petition for review seeking to set aside the decision of the National Labor Relations Commission in NLRC Case No. RB-4220 reversing the award made by the Labor Arbiter ordering petitioner's reinstatement by private respondent Northwest Airlines, Inc. with full backwages and other benefits decreed by law. The antecedent facts of this case are as follows: Petitioner Helmut Dosch an American citizen, married to a Filipina, was the resident Manager of Northwest Airlines, Inc. (Northwest, for short) in the Philippines. He has to his credit eleven (11) years of continuous service with the company, including nine (9) years as Northwest Manager with station at Manila. On August 18, 1975 he received an inter-office communication from R.C. Jenkins, Northwest's Vice President for Orient Region based in Tokyo, promoting him to the position of Director of International Sales and transferring him to Northwest's General Office in Minneapolis, U.S.A., effective the same day. The full text of the inter-office communication is reproduced below: NORTHWEST ORIENT Interoffice Communication To: H. Dosch Manager-Philippines From: Vice-President, Orient Region Subject: Transfer Date: August 18,1975 Location: Tokyo Dear Helmut: You have completed nine (9) years of service in the Orient, and in accordance with usual practice, it is now the Company's intention to transfer you to the General Office in Minneapolis to broaden your experience base considering that your assignment in the Philippines has continued for several years longer than is normal for our overseas managers. The Company feels that there is need for an executive with your experience to fill the position of Director of International Sales reporting directly to the Vice President for Sales. The Company has therefore decided to promote and transfer you to this position effective today, August 18, 1975. Your monthly compensation will be upgraded and the proper payroll adjustment will be made in due course effective today. To implement the foregoing decision of the Company and in order to effect a smooth turnover, Mr. L.J. Gilbert, Jr. shall, effective today, August 18, 1975, take over your functions and responsibilities as Manager. You are expected to report to your new assignment on September 15, 1975. You shall, however, be afforded sufficient time, which in this case shall not extend beyond September 15, 1975, within which to wind up your affairs in the Philippines. During this transition period, you will be on vacation leave for ten (10) days and thereafter on travel and relocation status with pay. Please see that the Company house you presently occupy will be made available to your successor by September 10, 1975.

We wish you success in your new assignment. Petitioner, acknowledging receipt of the above memo of August 18, 1975, expressed appreciation for the promotion and at the same time regretted that "for personal reasons and reasons involving my family, I am unable to accept a transfer from the Philippines" in his letter dated August 28, 1975 which reads: R. C. JENKINS V.P., O.R. August 28, 1975 H. DOSCH TRANSFER This is to acknowledge receipt of your memo of August 18, 1975, on the subject. While I sincerely appreciate the company's confidence in my abilities as a manager, which reflects itself in my promotion to the position of Director of International Sales, I regret that at this time, for personal reasons and reasons involving my family, I am unable to accept a transfer from the Philippines. I would, therefore, prefer to remain in my position of Manager-Philippines until such time that my services in that capacity are no longer required by Northwest Airlines. Petitioner tried to resume his duties as Manager, through a memorandum to the Manila Staff which reads: MANILA STAFF H. DOSCH RESUMPTION OF DUTIES Sept. 4, 1975 MNL Letter No. 454/75

It gives me great pleasure to announce that I advised Mr. Jenkins by letter dated August 28, 1975, that, for personal reasons, I have declined to accept the promotion to the position of Director of International Sales at the General Office. Accordingly, upon return to work from an authorized vacation of ten working days, I am resuming my duties and responsibilities as Manager-Philippines effective today, September 4, 1975. I know you will join me in thanking Mr. L.J. Gilbert for taking my place as Acting ManagerPhilippines during my absence from the office. Telegrams were also sent by petitioner to Mr. Nightingale, Director for Finance and to Mr. Jenkins, clearly stating petitioner's desire to remain as Manager-Philippines of Northwest. On September 9, 1975, the Vice-President for the Orient Region of Northwest advised petitioner that "in view of the foregoing, your status as an employee of the company ceased on the close of business on August 31, 1975" and "the company therefore considers your letter of August 28, 1975, to be a resignation without notice." On September 16, 1975, Northwest filed a Report on Resignation of Managerial Employee (Form No. 74-3, Revised September 1974), i.e., Helmut Dosch before Regional Office No. IV (Manila) Department of Labor, copy thereof furnished petitioner. The Report was contested by the petitioner and the parties were conciliated by Regional Office No.IV, Manila but failed to agree on a settlement. The case was thus certified to the Executive Labor Arbiter, National Labor Relations Commission, for compulsory arbitration, in the following wise and manner: Pursuant to P. D. 442, as amended, and its implementing rules and regulations (I) have the honor to transmit complaint-Case No. R04- 10-(illegible) COMPLAINANT/S HELMUT DOSCH

Address: c/o Atty. A.D. Valmonte Don Pable Bldg. 114 Amorsolo St., Makati Rizal RESPONDENT/S NORTHWEST AIRLINES, INC. Address: 1020 Roxas Blvd., Manila and hereby certifies the following issue(s) for arbitration: 1. Illegal dismissal. The following issue(s) have been settledAttached herewith is the record of the case consisting of THIRTY ONE (31) pages l Signed. February 3, 1976. After hearing, Labor Arbiter Sofronio A. Ona rendered the decision dated December 29, 1976, the dispositive portion of which reads: IN VIEW OF THE FOREGOING, respondent Northwest Airlines, Inc. of 1020 Roxas Boulevard, Manila is hereby directed to reinstate complainant Helmut Dosch of Makati, Rizal c/o Atty. A. D. Valmonte, Don Pablo Building, 114 Amorsolo Street, to his former position with full backwages without deduction whatsoever from the time his salary was withheld by the respondent until actual reinstatement, without loss of seniority rights and other benefits recognized by law, including attorney's fees equivalent to 10% of the total monetary benefits the petitioner may recover, to take effect 10 days from receipt of this Decision.SO ORDERED. Manila, Philippines, December 29, 1976. Respondent Northwest appealed from the Labor Arbiter's decision to the National Labor Relations Commission (hereinafter referred to as NLRC) assigning the following errors: (a) the Labor Arbiter erred in not holding that petitioner had "resigned" from his employment; (b) assuming arguendo that petitioner "did not resign," the Labor Arbiter erred in not holding that petitioner could be dismissed for failure/refusal to comply with the valid transfer order and for the employer's loss of trust and confidence of his employee; (c) the Labor Arbiter erred in impliedly holding that prior clearance was required to effect the termination of petitioner, a managerial employee; and (d) Labor Arbiter erred in awarding reinstatement, backwages, and attorney's fees. Petitioner filed his Reply to the appeal, supporting the findings of the Labor Arbiter and furthermore questioned the propriety of raising for the first time on appeal the issue whether or not petitioner's refusal to comply with the transfer order constitutes a just and sufficient cause to dismiss him. The decision en banc of the NLRC reversed the Labor Arbiter's decision and dismissed the case for lack of merit, holding that: The hiring, firing, transfer, demotion and promotion of employees has been traditionally Identified as a management prerogative. This is a function associated with the employer's inherent right to control and manage effectively its enterprise. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied. This exercise finds support not only in actual management practice but has become a part of our jurisprudence in labor relations law where, in a number of cases brought before the Supreme Court, the highest tribunal ruled in one of these cases (Roldan vs. Cebu Portland Cement Co., C.A. G.R. No. 24276-R, May 20, 1960, citing Gregorio Araneta Employees Union vs, Roldan, G.R. No. L6843, July 20, 1955; Philippine Steel Metal Workers Union vs. CIR, G.R. No. L-3587, Dec. 11, 1951), pertinent portion of the decision reads as follows: ... Questions affecting the direction and management of personnel are matters which the management itself must resolve. Thus the Court has steadfastly held that the determination of the qualifications and fitness of workers for hiring and firing, promotion or reassignment on rotation system, are the exclusive prerogatives of management. The management has also the right to discharge employees when there is need to reduce personnel because of the precarious condition of the enterprise or as a result of that closing of a section therein'

(Morabe, The Law on Dismissal, 1962 ed., p. 55 citing Pampanga Bus Co., Inc. v. Employees Association of the Pampanga Bus Co., Inc., Case No. 17-V, Decision, August 10, 1946). xxx xxx xxx In the light of all the foregoing, We find that petitioner's transfer and promotion is a valid exercise of management's prerogative. It is our view, therefore, that respondent's decision to consider him resigned from his job after he defined management's order to transfer and promote him to a new position at the general office at Minnesota, U.S.A. is justified and warranted. x x x." Petitioner now comes to Us for review of the decision. With respect to the procedural error allegedly committed by the respondent Commission in taking cognizance of an issue raised for the first time on appeal that of petitioner's alleged insubordination for refusing to comply with the transfer order for him to assume the position of Director of International Sales at Minneapolis, U.S.A., which said Commission sustained and ruled in favor of Northwest, reversing the Labor Arbiter's decision, the records disclose that Northwest's theory from the inception of the case to the rendition of the Labor Arbiter's decision was that petitioner was not dismissed, fired or terminated but that he resigned from Northwest. This is plain from Northwest's verified " Report on Resignation of Managerial Employee" in DOL Form No. 74-3 filed on September 16, 1975 with Regional Office No. IV, Department of Labor, wherein Northwest stated that the termination of employment of "Helmut Dosch, Manager-Philippines" was due to "resignation". Petitioner contested this report claiming that he never resigned from the company. In its " Position Paper" dated March 10, 1976 before Regional Branch No. IV, Northwest emphasized that any issue other than resignation of petitioner is irrelevant, thus: "As allegations relative to termination are immaterial in this case, petitioner has no basis to claim that 'there is no legitimate ground upon which Northwest Airlines, Inc. could have terminated the services of Mr. Dosch' or that petitioner's resignation was 'a circumvention of the law.' In truth petitioner caused his own dissociation from respondent." We agree with the Labor Arbiter that "(i)n view of the overwhelming evidence to the effect that petitioner did not resign or relinquish his position as Manager-Philippines, this Body is without any alternative, but to declare the sole reason relied upon by respondent- resignation (Exh. 'Q') as baseless and devoid of truth." Indeed, the letter dated August 28, 1975 sent by petitioner to R.C. Jenkins cannot be considered as a resignation as petitioner indicated therein clearly that he preferred to remain as Manager-Philippines of Northwest. Realizing that its "resignation" theory was weak and flimsy, Northwest abandoned it and contended for the first time that petitioner was guilty of insubordination when he refused to comply with the transfer order. This change of theory on appeal is improper; it is offensive to the basic rules of fair play and justice and violative of petitioner's constitutional right to due process of law. Appellate courts may not entertain questions of law or fact not raised in the lower courts (Sec. 18, Rule 46, Revised Rules of Court), for that would constitute a change of theory not permissible on appeal (Toribio vs. Decasa, 55 Phil. 461). It is undoubtedly the law, that, where a cause has been tried upon the theory that the pleadings are at issue, or that a particular issue is made by the pleadings, or where an issue is tacitly accepted by all parties as properly presented for trial and as the only issue, the appellate court will proceed upon the same theory. (Lizarraga Hermanos vs. Yap Tico, 24 Phil. Rep. 504; Molina vs. Somes, 24 Phil. Rep., 45.) it would be unjust and oppressive for the appellate court to adopt a theory at variance with that on which the case was presented to and tried by the lower court. It would surprise the parties, to take them unaware and off their guard, and would in effect, deprive them of their day in court. (Limpangco Sons vs. Yangco Steamship Co., 34 Phil. 597, 605-609). Since "resignation" was the particular cause alleged by Northwest in terminating petitioner's employment, Northwest is restricted to the ground specified and may not invoke any other cause for the discharge. (56 CJS p. 452, citing Georgia Coast and P.R. Co. vs. McFarland, 64

S.E. 897,132 Ga 639; 56 CJS p. 435, citing Vicknair vs. Southside Plantation Co., 10 La. App. Orleans 43; Warner vs. Fabacher, 6 La. App. Orleans, 87). As indicated earlier, Northwest on appeal to NLRC changed its stand and claimed that petitioner was guilty of insubordination" when he refused to comply with the transfer order made by Vice President Jenkins dated August 18, 1975. And for such act of insubordination, Northwest claimed it lost confidence in the petitioner. We must, however, rightly treat the Jenkins letter as directing the promotion of the petitioner from his position as Philippine manager to Director of International Sales in Minneapolis, U.S.A. It is not merely a transfer order alone but as the Solicitor General correctly observes, "it is more in the nature of a promotion that a transfer, the latter being merely incidental to such promotion." The inter-office communication of Vice President Jenkins is captioned "Transfer" but it is basically and essentially a promotion for the nature of an instrument is characterized not by the title given to it but by its body and contents. (Cf. Shell Co. vs. Firemen's Insurance Co. of Newark, 100 Phil. 757; Borromeo vs. Court of Appeals, L-22962, Sept. 28, 1972; American Rubber co. vs. Collector of Internal Revenue, L-25965, June 29, 1975). The communication informed the petitioner that effective August 18, 1975, he was to bepromoted to the position of Director of International Sales, and his compensation would be upgraded and the payroll accordingly adjusted. Petitioner was, therefore, advanced to a higher position and rank and his salary was increased and that is a promotion. (People ex. rel. Campbell vs. Partridge, 85 N.Y.S. 833, 899 App. Div. 497; State ex rel. Wolcott vs. Celebrezze, 49 N.E. 2d 948, 141 Ohio St. 627, Vol. 34 Words and Phrases, pp. 564, 565). It has been held that promotion denotes a scalar ascent of an officer or an employee to another position, higher either in rank or salary. (Millares vs. Subido, 20 SCRA 954). In the Millares case above, the Supreme Court, speaking thru Acting Chief Justice J.B.L. Reyes, distinguished between transfer and promotion as follows: A transfer is a movement from one position to another of equivalent rank, level or salary, without break in the service. Promotion, on the other hand, is the advancement from one position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary, Whereas, promotion denotes a scalar ascent of a senior officer or employee to another position, higher either in rank or salary, transfer refers to lateral movement from one position to another, of equivalent rank, level or salary. (p. 962) There is no law that compels an employee to accept a promotion, as a promotion is in the nature of a gift or a reward, which a person has a right to refuse. When petitioner refused to accept his promotion to Director of International Sales, he was exercising a right and he cannot be punished for it as qui jure suo utitur neminem laedit . He who uses his own legal right injures no one. It cannot be said that petitioner's refusal to obey the transfer order was contumacious. For one, petitioner's refusal was justified in that the position of Director of International Sales had been non-existent since 1965 and was inexistent at the time of petitioner's promotion thereto on August 18, 1975, which fact is shown by Northwest's Manual Policies and Procedures (Exhibit "X") and admitted by Northwest's witness, Richardson Sells, in his testimony. Northwest has not even attempted to deny the non- existence of the position. Assuming for the sake of argument that the communication or letter of Mr. Jenkins was basically a transfer, under the particular and peculiar facts obtaining in the case at bar, petitioner's inability or his refusal to be transferred was not a valid cause for dismissal. While it may be true that the right to transfer or reassign an employee is an employer's exclusive right and the prerogative of management, such right is not absolute. The right of an employer to freely select or discharge his employee is limited by the paramount police power (Phil. Air Lines, Inc. vs. Phil. Airlines Employees Association, L-24626, June 28, 1974, 57 SCRA 489) for the relations between capital and labor are not merely contractual but impressed with public interest (Article 1700, New Civil Code). And neither capital nor labor shall act oppressively against each other (Article 1701, New Civil Code).

There can be no dispute that the constitutional guarantee of security of tenure mandated under Section 9, Article 2, 1973 Constitution applies to all employees and laborers, whether in the government service or in the private sector. The fact that petitioner is a managerial employee does not by itself exclude him from the protection of the constitutional guarantee of security of tenure. Even a manager in a private concern has the right to be secure in his position, to decline a promotion where, although the promotion carries an increase in his salary and rank but results in his transfer to a new place of assignment or station and away from his family. Such an order constitutes removal without just cause and is illegal. Nor can the removal be justified on the ground of loss of confidence as now claimed by private respondent Northwest, insisting as it does that by petitioner's alleged contumacious refusal to obey the transfer order, said petitioner was guilty of insubordination. We cannot agree to Northwest's submission that petitioner was guilty of disobedience and insubordination which respondent Commission sustained. The only piece of evidence on which Northwest bases the charge of contumacious refusal is petitioner's letter dated August 28, 1975 to R. C. Jenkins wherein petitioner acknowledged receipt of the former's memorandum dated August 18, 1975, appreciated his promotion to Director of International Sales but at the same time regretted " that at this time for personal reasons and reasons of my family, I am unable to accept the transfer from the Philippines" and thereafter expressed his preference to remain in his position, saying. " I would, therefore, prefer to remain in my position of ManagerPhilippines until such time that my services in that capacity are no longer required by Northwest Airlines." From this evidence, We cannot discern even the slightest hint of defiance, much less imply insubordination on the part of petitioner. Neither is the other ground alleged by Northwest in dismissing petitioner which is loss of confidence, supported by evidence. On the contrary, the fact that Northwest wanted to promote petitioner to Director of International Sales as "the Company feels there is need for an executive of (his) experience to fill the position of Director of International Sales" as well as its Manifestation dated March 23, 1976 that Northwest "offered to rehire petitioner as Director of International Sales with office at Minneapolis, U.S.A." clearly indicate that Northwest had full confidence in petitioner. And so We hold and rule that respondent Commission committed grave abuse of discretion in sustaining the dismissal of petitioner on the ground of insubordination and loss of confidence. Indeed, the outright dismissal of petitioner from his position as Manager-Philippines of Northwest Airlines is much too severe, considering the length of service that petitioner has rendered for eleven (11) fruitful and loyal years, a strong and vital factor that must be taken into account in labor law determinations which this Court, speaking thru Chief Justice Fernando in Meracap vs. International Ceramics Manufacturing Co., Inc ., L-48235-36, July 30, 1979, 92 SCRA 412 emphasized should not only be secundum rationem but also secundum caritatem, to wit: It would imply at the very least that where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe. It is not only because of the law's concern for the workingman. There is, in addition, his family to consider. Unemployment brings untold hardships and sorrows on those dependent on the wage-earner. The misery and pain attendant on the loss of jobs then could be avoided if there be acceptance of the view that under all the circumstances of this case, petitioners should not be deprived of their means of livelihood. Nor is this to condone what had been done by them. For all this to condone what had been done by them. For all this while, since private respondent considered them separated from the service, they had not been paid. For the strictly juridical standpoint, it cannot be too strongly stressed, to follow Davis in his masterly work, Discretionary Justice, that where a decision may be made to rest on informed judgment rather than rigid rules, all the equities of the case must be accorded their due weight. Finally, labor law determinations, to quote from Bultmann, should be not only secundum rationem but

also secundum caritatem. (This excerpt was cited in Almira vs B.F. Goodrich Philippines, Inc., 58 SCRA 120,131.) The trend of recent decisions of this Court as pointed out by Chief Justice Fernando in the recent case of Johnny Bustillos us. Amado Inciong and Cummins Diesel Sales and Service Corporation of the Philippines, G.R. 1,45396, January 27, 1983 has been "to vitalize the constitutional mandate of security of tenure as an aspect of the protection accorded labor. For its forceful and authoritative weight, We quote lengthily the careful and clear review of Our decisions as follows: 1. Meracap v. International Ceramics Mfg- Co., Inc. explains why the appeal should be disposed in that manner. Thus: 'In a number of decisions, Philippine Air Lines, Inc. v. Philippine Airlines Employees Association, Almira v. B.F. Goodrich Philippines, Central Textile Mills v. National Labor Relations Commission, and Genconsu Free Workers Union v. Inciong, this Court has sought to vitalize the constitutional mandate of security of tenure as an aspect of the protection accorded labor.' We do so again in this case. 2. The decision reached not only by a labor arbitrator who heard the case but also by the National Labor Relations Commission was the reinstatement of petitioner with back pay. The challenged order reversed it. Thus: 'In effect, complainant has no involvement in the alleged pilferage. However, since complainant no longer enjoys the trust and confidence reposed upon him by respondent as a Service Supervisor, and hence, a managerial employee, respondent has every right to terminate him. Since the termination is not for a justifiable cause, complainant is entitled to separation pay.' No case has gone that far. Moreover, the ruling in Central Textile Mills, Inc. v. National Relations Commission is squarely in point. Thus: 'The weakness of the petition to repeat, is thus indisputable. Petitioner, (management) however, would try to impart a semblance of plausibility by alleging that even on the assumption that no theft was committed, still there was loss of confidence sufficient to cause his dismissal In the Philippine Airlines decision referred to, the accusation that theft was committed by the employee was likewise not borne out by the evidence. To justify a dismissal, management relied on the allegation that there was breach of trust, a ground analogous to loss of confidence. The Court of Industrial Relations did not agree. Neither did this Court. Reinstatement was ordered. So it must be in this case.' The above ruling is reinforced by a case decided last December 15, 1982, Justice de Castro speaking for the Court in Acda v. Minister of Labor. Thus: 'The findings of the Labor Arbiter on this point, as upheld by the National Labor Relations Commission, are quite clear, and We find no reversible error therein the same being substantiated by evidence of record, aside from the fact that said findings had already attained the character of finality by the non-perfection of a proper appeal.' The opinion goes on to state: 'With the charges against petitioner found to be unsubstantiated, We are left with no other alternative but to hold that the so-called 'loss of confidence' is without basis and may not be successfully invoked as ground for dismissal which requires some basis therefor, such ground never having been intended to afford an occasion for abuse by the employer of its prerogative, as it can easily be subject to abuse because of its subjective nature, to dismiss employees in contravention with the 'protection of labor' clause of the Constitution. It is this Constitutional guaranty that accords even to employees employed on a probationary basis the protection that their services may be terminated only for a just cause or when authorized by existing laws, or when he fails to qualify as a regular employee in accordance with reasonable standards prescribed by the employer.' 3. There is likewise this excerpt from Meracap which calls for the reversal of the assailed order of the Secretary of Labor. Thus: 'In this suit for certiorari to review the dismissal of an appeal from a decision of the then Acting Secretary of Labor Amado G. Inciong by respondent Ronaldo Zamora, Presidential Assistant on Legal Affairs, ordering the dismissal of petitioner Faustino Meracap, the relevance of such a provision becomes apparent. It was alleged by petitioner that while the termination of his services was based on his unauthorized absences, the real reason was due to his union activities. Respondent Zamora ruled otherwise. Such a

finding of fact must be accorded deference. Nonetheless, considering that petitioner Meracap has been in the employ of the International Ceramics Manufacturing Company, Inc. for eighteen years, it would appear that the punishment was much too severe. Dismissal was not warranted. Suspension would suffice. To that extent, certiorari lies.' Dismissal as pointed out in the latest case in point, decided fourteen days after Acda, in the ponencia of Justice MelencioHerrera in Visperas v. Inciong, 'is too harsh a penalty. A penalty less punitive should have been proper.' In this case, upon mere suspicion, later found to be unsubstantiated, he was immediately suspended. A two-year suspension would have sufficed, not the loss of his job. The length of service was accorded due consideration in decisions of this Tribunal ordering reinstatement, twenty years in De Leon v. National Labor Relations Commission and Reyes v. Philippine Duplicators and twenty-two years in Union of Supervisors v. Secretary of Labor . Here he was in the service for eleven years when suspended. Accordingly, We must emphasize here the long and faithful years of service that petitioner had rendered to respondent company, eleven good years, nine of which as Manager with station at Manila. It is plainly abusive of the company and oppressive to the petitioner that the latter is peremptorily dismissed on the shallow claim of " resignation without notice," and thereafter converted to alleged loss of confidence. This unjustified dismissal of the petitioner calls for Our specific ruling in the cited case of De Leon vs. National Labor Relations Commission, 100 SCRA 691, 700, wherein the Court speaking through Justice De Castro said: While a Managerial employee may be dismissed merely on the ground of loss of confidence the matter of determining whether the cause for dismissing an employee is justified on ground of loss of confidence, cannot be left entirely to the employer. Impartial tribunals do not rely only on the statement made by employer that there is 'loss of confidence' unless duly proved or sufficiently substantiated. We find no reason to disturb the findings of the Labor Arbiter that the charges against petitioner were not fully substantiated, and 'there can be no valid reason for said loss of confidence. ... So must this Court re-enforce the constitutional protection afforded labor and assure the right of workers to security of tenure. Justice and equity call for petitioner's reinstatement. It should be so not only secundum rationem but also secundum caritatem. One last point. We reject the holding of the respondent Commission that petitioner's act in accepting from the respondent airline several pay checks relative to his pension fund and the cash value representing an adjustment in the peso amount of his dollar base by reason of currency fluctuation constitutes an admission if not a conformity, of his lawful separation from office on August 31, 1975. It appears indubitably that the several pay checks mentioned by respondent NLRC were only refunds of petitioner's contribution to the pension fund of respondent airline. The money refunded was petitioner's own money, that which he personally contributed to the retirement plan. If petitioner accepted the cash value representing the adjustment in the peso amount of petitioner's dollar base, the money was legitimately and legally due to the petitioner; they are not benefits or privileges granted by the airline to the dismissed petitioner. There can be no estoppel against petitioner's acceptance of the refund of monies legitimately his own, nor a waiver of his right to question the termination of his services. (Urgelio vs. Osmea, Jr., 10 SCRA 253). Even employees who receive their separation pay are not barred from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel as held in the leading case of Mercury Drug Company vs. CIR as aptly cited in the decision of the Labor Arbiter. (De Leon vs. NLRC, 100 SCRA 691). In Cario vs. Agricultural Credit and Cooperative Financing Administration, 18 SCRA 183, the rationale of the Court's ruling rejecting the argument that acceptance of separation pay and terminal leave benefits by the employees illegally dismissed by their employer constitutes estoppel, is stated thus, which We re-echo as follows: Acceptance of those benefits would not amount to estoppel The reason is plain. Employer and employee, obviously, do not stand on the same footing. The employer drove the employee to

the wall The latter must have to get hold of money. Because, out of job, he had to face the harsh necessities of life. He thus found himself in no position to resist money proferred. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioner did not relent on their claim. They pressed it. They are deemed not to have waived any of their rights. Renuntiatio non praesumitur. WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the National Labor Relations Commission in Case No. RB-4220 is hereby REVERSED and SET ASIDE, and the decision of the Labor Arbiter dated December 29, 1976 in RB-IV-4220-76 ordering petitioner's reinstatement to his former position with full backwages for three (3) years without loss of seniority rights and other benefits recognized by law, including attorney's fees equivalent to 10% of the total monetary benefits which the petitioner may recover, is hereby REINSTATED. Costs against the respondent Northwest. Petition granted. SO ORDERED.

FIRST DIVISION ENGRACIO A. GUERZON, JR., LILIAN E. CRUZ and JOSEFINA O. BAUYON, - versus PASIG INDUSTRIES, INC. MASAHIRO FUKADA and YOSHIKITSU FUJITA, Respondents. G.R. No. 170266 Petitioners, Present:

Promulgated:

September 12, 2008 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x RESOLUTION CORONA, J.: Petitioners Engracio A. Guerzon, Jr., Lilian E. Cruz and Josefina O. Bauyon were employees of respondent Pasig Industries, Inc. (PII) stationed in its Makati office. Guerzon was PIIs export/import manager for 21 years; Cruz was the companys chief accountant for 20 years and Bauyon was a member of PIIs accounting staff since 1989. In 1995, respondent Yoshikitsu Fujita [1] informed petitioners that PIIs parent company had decided to close the Makati office. To streamline operations, functions performed by the Makati office would be transferred to its facilities in the Bataan Export Processing Zone. For this

reason, petitioners were given the option to resign, in which case they would be entitled to a special separation package (SSP) equivalent to one-month basic salary for each year of service.[2] Petitioners decided to resign but requested a recomputation of their respective separation pay based on the monthly gross pay (i.e., basic pay plus all allowances). PII, through Fujita, acceded[3] and accordingly paid Guerzon, P548,100; [4] Cruz, P414,500.22[5] and Bauyon, P10,219.66 on September 25, 1995.[6] Despite voluntarily availing of the SSP, petitioners filed a complaint for illegal dismissal and payment of separation pay, retirement benefits, leave pay and 13 th month pay against PII, its president Masahiro Fukada and Fujita in the National Labor Relations Commission (NLRC) on September 27, 1995.[7] Because petitioners filed the complaint two days after they were terminated, the labor arbiter found respondents guilty of illegal dismissal. Accordingly, he awarded backwages, separation pay and attorneys fees to petitioners. [8]Respondents appealed.The NLRC found that petitioners voluntarily accepted the terms of the SSP offered by PII. It noted that they negotiated to improve PIIs offered SSP. Thus, the NLRC reversed the decision of the labor arbiter.[9]Aggrieved, petitioners filed a petition for certiorari [10] in the Court of Appeals (CA) asserting that the NLRC committed grave abuse of discretion in reversing the decision of the labor arbiter. The CA, however, dismissed the petition. [11] Petitioners moved for reconsideration but it was denied.[12] Hence, petitioners availed of this recourse contending that the CA erred in affirming the decision of the NLRC. Respondents allegedly failed to prove that PII had been incurring losses to justify its reorganization. They claimed they were dismissed without just or authorized cause. We deny the petition.Petitioners held responsible positions in PII. Employees of their educational backgrounds and professional standing do not easily relinquish their legal rights unless they intend to.[13] In fact, petitioners even bargained to improve the terms of the SSP and, after successfully doing so, voluntarily resigned from PII. [14] Consequently, whether the streamlining of PIIs operations constituted an authorized cause for petitioners termination became immaterial in view of their voluntary resignation. [15] ACCORDINGLY, the petition is hereby DENIED.Costs against petitioners. SO ORDERED.

SECOND DIVISION [G.R. No. 108889. July 30, 1998] HIGHWAY COPRA TRADERS and/or GERSON DULANG (owner-operator)/LUZVIMINDA DULANG, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION Cagayan de Oro, and DAVID EMPEYNADO, respondents. DECISION MARTINEZ, J.:

On May 15, 1986, private respondent David Empeynado was employed as a general utility man by petitioners in their business of trading copra and charcoal with a daily wage of P35.00. Private respondents work consisted of weighing copra or charcoal, bagging copra for loading and ascertaining the moisture content thereof. He was likewise a multi-purpose handyman since he worked as a driver of petitioners trucks, a mechanic and a messenger to follow-up petitioners contracts with other companies, to register their vehicles, to pay their taxes, and to collect and receive payments in their behalf. Private respondent, however, was not paid his full salary but was merely given cash advances. When he sought full payment thereof, petitioners informed him not to report for work starting January 12, 1987, and wait until he is re-hired which never happened. Thus, on December 16, 1987, he filed before the Labor Arbiter a complaint for illegal dismissal and nonpayment of regular salaries against petitioners. After hearing, the Labor Arbiter found that private respondent was merely a casual employee and accordingly dismissed his complaint in a decision the dispositive portion of which reads: [1] WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered: (1) declaring that complainants employment status with respondent is casual; and (2) dismissing complainants charge for illegal dismissal and the money claims for overtime pay, holiday pay, 13th month pay, emergency cost of living allowance, and unpaid wages against respondent for lack of merit. SO ORDERED.[2] On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiters decision and ruled in this wise: "WHEREFORE, the decision appealed from is Annulled and Set Aside and a new one entered declaring complainant David Empeynado a regular employee and his termination from the service held as illegal. Accordingly, respondents are ordered jointly and solidarily to reinstate complainant and pay his backwages effective from his date of lay-off on January 12, 1987 up to January 11, 1990 plus his claims for unpaid wages and salary differentials and proportionate 13th month pay for three (3) years, less complainants cash advance of P2,000.00 or in the net award ofP60,306.67 as computed above. In case the reinstatement of complainant is found impractical due to any lawful supervening event not attributable to the fault of respondents, the determination of which in case of dispute over the matter is tasked to the Labor Arbiter below after due notice and hearing during the execution stage, complainant is granted the alternative relief of payment of separation pay which is hereby fixed for a total of three (3) months salary based on the prevailing statutory rate at the time of his termination on January 12, 1987. With costs against respondents. SO ORDERED.[3] When their motion for reconsideration was denied by the NLRC, [4] petitioners elevated the case via petition for certiorari. Petitioners principally ascribe grave abuse of discretion on the part of the NLRC for declaring private respondent a regular employee and thus, entitled to unpaid wages and other monetary benefits. They argue that private respondent performed tasks which were menial and not in any way connected with petitioners copra business and that he was hired only on a per need basis. The petition must fail. The factual milieu of this case undisputably shows that private respondent was a regular employee of petitioners copra business. Article 280 of the Labor Code[5] describes a regular employee as one who is either (1) engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which he is employed.[6] The Labor Code draws a fine line between regular and casual employees to protect the interests of labor. We ruled in Baguio Country Club Corporation vs. NLRC[7] that its language evidently manifests the intent to safeguard the tenurial interest of the worker who

may be denied the rights and benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as convenient. Thus, notwithstanding any agreements to the contrary, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer. [8] The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer, i.e. if the work is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety.
[9]

In this case, the nature of private respondents work as a general utility man was definitely necessary and desirable to petitioners business of trading copra and charcoal regardless of the length of time he worked therein. As such, he is a regular employee pursuant to the first paragraph of Article 280 of the Labor Code. Petitioners further argue that private respondent was only engaged for a specific task, the completion of which resulted in the cessation of his employment. This is not correct. By "specific project or undertaking," Article 280 of the Labor Code contemplates an activity which is not commonly or habitually performed or such type of work which is not done on a daily basis but only for a specific duration of time or until completion in which case, the services of an employee are necessary and desirable in the employers usual business only for the period of time it takes to complete the project. [10] Such circumstance does not obtain in this case. We now turn to the issue of backwages. In determining the proper amount of backwages, the material date to consider is March 21, 1989 which is when Republic Act No. 6715[11] took effect. This law amended, among others, Article 279 (related to backwages) of the Labor Code.[12] Said amendatory law, however, does not cover illegal dismissals effected prior to March 21, 1989, hence, we apply the "Mercury Drug Rule" as enunciated in the landmark case of Mercury Drug Co., Inc., et. al. vs. CIR, et. al.[13] In this case, the Court fixed the amount of backwages to be awarded to an illegally dismissed employee to three (3) years without further qualifications or deductions, for reasons of expediency in the execution of the decision. Any award in excess of the three years is null and void as to the excess.[14] Of note also is the "Ferrer Doctrine" laid down in the case of Ferrer vs. NLRC[15] as reiterated in Pines City Educational Center vs. NLRC[16] which adopted the rule applied prior to the"Mercury Drug Rule". The said doctrine states that the employer may, however, deduct any amount which the employee may have earned during the period of his illegal termination. [17] Computation of full backwages and presentation of proof as to income earned elsewhere by the illegally dismissed employee after his termination and before actual reinstatement should be ventilated in the execution proceedings before the Labor Arbiter concordant with Section 3, Rule 8 of the 1990 New Rules of Procedure of the NLRC. [18] To settle once and for all the rule on the correct computation of the award of backwages, this Court laid down jurisprudence in its Resolution en banc in Bustamante vs. NLRC[19] with regard to illegal dismissals effected after March 21, 1989 applying Article 279 of the Labor Code, as amended. Thus, an illegally dismissed employee is entitled to his full backwages from the time his compensation was withheld from him (which, as a rule, is from the time of his illegal dismissal) up to the time of his actual reinstatement. The legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly that, i.e. without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. Considering that private respondent was terminated from service on January 12, 1987, which is prior to March 21, 1989, the NLRC correctly applied the ruling in the Mercury Drug case.[20]

WHEREFORE, premises considered, the instant petition is DISMISSED. The assailed Resolution dated November 13, 1992 of the National Labor Relations Commission is AFFIRMED. SO ORDERED.

FIRST DIVISION NISSAN NORTH EDSA BALINTAWAK, G.R. No. 162538 QUEZON CITY, Petitioner, versus ANGELITO SERRANO, JR. and Promulgated: EDWIN TAGULAO, Respondents. June 4, 2009 x-------------------------------------------------- x RESOLUTION CARPIO, J.: The Case This is a petition for review on certiorari[1] assailing the Decision[2] dated 21 March 2003 and the Resolution[3] dated 13 February 2004 of the Court of Appeals (appellate court) in CAG.R. SP No. 67662. The appellate court reinstated the Decision [4] dated 6 June 2000 of Labor Arbiter Melquiades Sol D. Del Rosario (Arbiter Del Rosario) in NLRC NCR Case No. 00-0302755-99, holding petitioner Nissan North EDSA Balintawak (Nissan) of Quezon City liable for the illegal dismissal of respondents Angelito Serrano, Jr. (Serrano) and Edwin Tagulao (Tagulao).

The Facts Nissan hired Serrano on 2 August 1995 as driver in the Parts Department and assigned him to drive a pick-up vehicle. Serranos daily load was valued between P200,000 toP400,000. Serrano twice received merit increases in 1996 for his satisfactory work performance. Nissan hired Tagulao on 1 July 1996 also as driver in the Parts Department, but assigned him to drive a motorcycle. The value of Tagulaos daily load did not fall below P20,000. Tagulao twice received merit increases in 1997. Nissan claimed that Serrano and Tagulao were responsible for the non-delivery of two rolls of tint on 9 July 1998. Serrano and Tagulao allegedly picked up the rolls from Joan Sokua of Sarao corner T. Yap Streets, Corinthian Gardens, Edsa, Mandaluyong City. On 3 September 1998, Jeorge Geronimo (Geronimo), head of the Parts and Accessories Department, issued a memorandum to Tagulao asking for a written explanation for the non-delivery of the two rolls of tint. Tagulao submitted his written explanation on 8 September 1998 and stated that he picked up two rolls of tint on 21 July 1998 and not on 9 July. Tagulao unloaded the rolls on 22 July 1998 and notified Teresa Catudio (Catudio) and Mon Espie of the Parts and Accessories Department. The next day, Catudio issued a memorandum which stated that she never received the delivery referred to in Tagulaos written explanation. For his part, Serrano submitted his written explanation on 26 September 1998. Serrano stated that he and Tagulao picked up two rolls of tint on 9 July 1998 but had no knowledge of actual delivery as he had already left the office by then. Tagulao submitted another written explanation on 26 September 1998, insisting that the two rolls of tint were picked up on 21, not 9, July 1998. Steve G. Chu (Chu), Vice-President for Parts and Services, instructed Geronimo to finish the investigation and submit his report with recommendations. Nathaniel Ballares, Personnel and Administrative Manager, wrote a memorandum dated 21 October 1998 to ask Tagulao and Serrano for yet another written explanation. Tagulao and Serrano stated that they picked up two rolls of tint, endorsed the same to a Mr. David of the Accessories Department, yet could not recall the exact date. Nissan served Tagulao and Serrano a Notice of Termination dated 3 November 1998 and severed their employment after 30 days from receipt of notice. Tagulao and Serrano filed a joint complaint for illegal dismissal and separation pay plus backwages, non-payment of salaries, service incentive leave pay, 13th month pay, overtime pay, damages, and attorneys fees before the Labor Arbiter. Their complaint was docketed as NLRC NCR Case No. 00-0302755-99. The Ruling of the Labor Arbiter In his Decision dated 6 June 2000, Arbiter Del Rosario found that Tagulao and Serranos dismissals were indeed illegal. From the memo documents, Arbiter Del Rosario inferred that Chu wanted to make it appear that despite Tagulao and Serranos receipt of two rolls of tint, Tagulao and Serrano failed to deliver the rolls to Nissan. Chu had Catudio antedate a 28 July 1998 delivery to 9 July 1998. There was really no pick up of two rolls of tint on the questioned 9 July 1998 date. Tagulao and Serrano picked up ten rolls of tint on 28 July 1998 and delivered them to Nissan on the same day. Because of these factual findings, Nissan failed to establish by substantial evidence the charge of asportation upon which it based Tagulao and Serranos dismissals. The consequences of Arbiter Del Rosarios findings weighed heavily against Nissan, as shown below: For [Nissans] failure to establish a valid cause to dismiss [Tagulao and Serrano], their termination from work is invalid and illegal. Consequently, they should be paid their backwages reckoned from December 3, 1998 (Annex J complainants position paper) as the memorandum of termination is dated November 3, 1998 and it is to [take] effect 30 days thereafter. As of May 3, 2000 at P5,270.88 a month, Angelito Serrano, Jr.s backwages in addition to the payment of his separation pay at one (1) month pay per year of service, a fraction of six (6) months being considered one whole year, has amounted to P94,875.84.With regard to Edwin

Tagulao, as he was [last] receiving the monthly salary of P5,477.88, his accumulated backwages as of May 3, 2000 is also P98,601.84 in addition to his separation pay of one (1) month per year of service, a fraction of six (6) months being considered as one whole year. Both complainant[s] should likewise received [sic] their half[-]month pay for services rendered. For Serrano, Jr., the sum of P2,635.44; and for Tagulao the sum of P2,738.94. As regards overtime pay, there is nothing on record to support this claim[.] [N]ot only does the law require the claimant to prove by substantial evidence his entitlement thereto but this claim must be denied because by being drivers (not purchasers [as] claimed by [Nissan]) complainants are considered field workers who are not entitled to overtime pay. As to SIL and 13th month pay, [Nissan] admits that these benefits were not paid because of the complainants failure to [have] their clearances processed. They are therefore entitled to proportionate reliefs. As to the claim for moral and actual damages, complainants indicated as party respondent only Nissan North EDSA Balintawak (QC) and not the persons responsible for their problems. [Nissan] being a corporate person could not be liable for the individual acts of the employees working for the company and hence could not be sentenced to pay damages. Since [Tagulao and Serrano] were assisted by counsel de parte, attorneys fees equivalent to 10% of the awarded money claims must be paid by [Nissan]. CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding [Tagulao and Serranos] dismissals to be illegal. Consequently, they should be paid backwages reckoned from their dismissal on December 3, 1998 and which as of May 3, 2000 has accumulated in the sum of P94,875.84 for Angelito Serrano, Jr., amd P98,601.84 for Edwin Tagulao plus separation pay at one (1) month per year of service, a fraction of six (6) months being considered as one (1) whole year. [Nissan] should further pay complainants as follows: Angelito Serrano, Jr. a) P 878.50 SIL; b) P4,421.57 13th month pay (proportionate);c) P2,635.44 unpaid wages; [and] d) 10% as attorneys fees Edwin Tagulao a) P 913.00 SIL b) P4,595.33 13th month pay (proportionate);c) P2,738.94 unpaid wages; [and d) 10% as attorneys fees. All other claims are dismissed for lack of merit. SO ORDERED.[5] The Ruling of the NLRC In its Decision[6] promulgated on 25 June 2001, the NLRC affirmed the decision of the Labor Arbiter but deleted the award of backwages and separation pay for lack of legal basis. The NLRC ruled that Arbiter Del Rosarios award of backwages to Tagulao and Serrano violated Section 3, Rule V of the NLRC Rules of Procedure. The NLRC agreed with Nissans assertion that Arbiter Del Rosario gravely abused his discretion amounting to lack of jurisdiction when he awarded backwages to Tagulao and Serrano even if the award of backwages was not prayed for in the complaint. The ratio for the NLRCs decision reads as follows: The NLRC Rules of Procedure (Section 3, Rule V) clearly state, among others, that the verified position papers of the parties shall cover only those claims and causes of action raised in the complaint, and the parties shall thereafter not be allowed to allege, or present evidence to prove, facts not referred to and any cause or causes of action not included in the complaint. In the case at bar, the complaint of complainants never state illegal dismissal as one of their causes of action, as well as, reinstatement or payment of backwages as among the reliefs prayed for. Instead, they claimed for payment of separation pay However, the Labor Arbiter below proceeded in granting payment of backwages to complainants plus separation pay.

Respondent-appellants contention that the cause or causes of action not stated in the complaint must not be entertained and cannot be given due course, is well-taken. Since the complainants asked only for payment of separation pay in their complaint and never prayed for reinstatement with backwages, then the ruling of the Labor Arbiter below awarding backwages to complainants is in violation of the Revised NLRC Rules of Procedure above-cited. In general, the remedy for illegal dismissal is the reinstatement of the employee to his former position without loss of seniority rights and the payment to him of backwages [Santos v. NLRC, 154 SCRA 166 (1987)]. But, there may be instances where reinstatement is not a viable remedy or where the relations between the employer and employee have been so severely strained that it is not advisable to order reinstatement [Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 (1987)], or where the employee decides not to be reinstated [Starlite Plastic Industrial Corp. v. NLRC, 171 SCRA 315, 326 (1989)]. In such events, the employer will instead be ordered to pay separation pay. Considering the fact that the herein complainants never decide to be reinstated as evidenced by their failure or non-inclusion of the same in the reliefs they prayed for in their complaint, it is error on the part of the Labor Arbiter to award backwages in the absence of any prayer for reinstatement. For, where the employee has manifested that he is not anymore interested in reinstatement, award of backwages is improper (International Travel Corp. v. NLRC, G.R. No. 70859, Dec. 12, 1986). Hence, the award of backwages made by the Labor Arbiter to the complainants is null and void it having been issued in grave abuse of discretion amounting to lack of jurisdiction. SO ORDERED.[7] The Ruling of the Appellate Court In its Decision[8] promulgated on 21 March 2003, the appellate court set aside the decision of the NLRC and reinstated the decision of Arbiter Del Rosario. The appellate court found that a mere cursory look at the pro-forma complaint form of Tagulao and Serrano shows that they marked the following causes of action: illegal dismissal, nonpayment of 15 days salary, overtime pay, separation pay, service incentive leave, moral and exemplary damages, and attorneys fees. Tagulao and Serrano prayed for reinstatement and the payment of unpaid salaries and wages for 15 days, service incentive leave, overtime pay, proportionate 13th month pay, moral and exemplary damages, and attorneys fees. The appellate court declared that the NLRC overlooked the fact that illegal dismissal was one of the causes of action and reinstatement was one of the reliefs prayed for. The complaint itself was clearly very obvious. Res ipsa loquitur. Although the relief of backwages was not in the complaint, backwages was one of the reliefs prayed for in Tagulao and Serranos position paper. Section 3, Rule V of the NLRCs New Rules of Procedure allows claims asserted in the position paper. The appellate court also declared that Tagulao and Serranos dismissals were illegal because Nissan failed to prove by substantial evidence the charge of asportation of company property by Tagulao and Serrano. The dispositive portion of the appellate courts decision reads as follows: WHEREOF, premises considered, the decision of the NLRC dated 25 June 2001 and the Minute Resolution dated 30 July 2001 are hereby REVERSED and SET ASIDE. The decision of Labor Arbiter Melquiades Sol D. Del Rosario dated 6 June 2000 is REINSTATED. SO ORDERED.[9] The appellate court denied Nissans motion for reconsideration in a Resolution promulgated on 13 February 2004.[10] The Issues Nissan raises two issues before this Court. First, Nissan questions the appellate courts ruling that Nissan failed to establish the charge of asportation of company property against Tagulao and Serrano. Nissan alleges that the termination of Tagulao and Serrano is clearly supported

by evidence of asportation. Second, Nissan claims that, contrary to the appellate courts ruling, Tagulao and Serrano are not entitled to backwages and separation pay. The Ruling of the Court The petition has no merit. We see no reason to overturn the findings of fact of Arbiter Del Rosario, the NLRC, and the appellate court. Nissan failed to prove that Tagulao and Serrano were responsible for the loss of two rolls of tint. The records of the case show that there was a discrepancy between the dates of pick up and delivery as alleged by Nissan and as alleged by Tagulao and Serrano. Even Catudio, Nissans employee, stated that she changed the dates on the delivery receipt of the two rolls of tint on the instruction of her boss. Loss of trust and confidence, to be a valid ground for an employees dismissal, must be based on a willful breach and founded on clearly established facts. The burden of proof of dismissal rests entirely upon the employer. In the present case, Nissan illegally dismissed Tagulao and Serrano because Nissan failed to prove that Tagulao and Serrano were terminated for a valid cause. Tagulao and Serrano are thus entitled to reinstatement and to receive backwages. The NLRCs decision limited itself as to whether Tagulao and Serrano prayed for reinstatement with backwages. The appellate courts decision emphasized that Tagulao and Serrano indeed asked for these reliefs in their complaint and in their position paper. The appellate courts ruling is supported by Section 2, Rule V of The New Rules of Procedure of the NLRC which reads: Submission of Position Papers/Memorandum. Should the parties fail to agree upon an amicable settlement, either in whole or in part, during the conferences, the Labor Arbiter shall issue an order stating therein the matters taken up and agreed upon during the conferences and directing the parties to simultaneously file their respective verified position papers. These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the place of the latters direct testimony. The parties shall thereafter not be allowed to allege facts, or present evidence to prove facts, not referred to and any cause or causes of action not included in the complaint or position papers, affidavits and other documents. Unless otherwise requested in writing by both parties, the Labor Arbiter shall direct both parties to submit simultaneously their position papers/memorandum with the supporting documents and affidavits within fifteen (15) calendar days from the date of the last conference, with proof of having furnished each other with copies thereof. Article 279 of the Labor Code provides that [a]n employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. Since, in the present case, reinstatement is no longer practicable or feasible, separation pay may be awarded in lieu of reinstatement. Moreover, the awards of separation pay and backwages are not mutually exclusive and both may be given to Tagulao and Serrano. The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual reinstatement. The statutory intent on this matter is clearly discernible. Reinstatement restores the employee who was unjustly dismissed to the position from which he was removed, that is, to his status quo ante dismissal, while the grant of backwages allows the same employee to recover from the employer that which he had lost by way of wages as a result of his dismissal. These twin remedies reinstatement and

payment of backwages make the dismissed employee whole who can then look forward to continued employment. Thus do these two remedies give meaning and substance to the constitutional right of labor to security of tenure. The two forms of relief are distinct and separate, one from the other. Though the grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-availability of one does not carry with it the inappropriateness or non-availability of the other. x x x As the term suggests, separation pay is the amount that an employee receives at the time of his severance from the service and x x x is designed to provide the employee with the wherewithal during the period that he is looking for another employment. In the instant case, the grant of separation pay was a substitute for immediate and continued re-employment with the private respondent Bank. The grant of separation pay did not redress the injury that is intended to be relieved by the second remedy of backwages, that is, the loss of earnings that would have accrued to the dismissed employee during the period between dismissal and reinstatement. Put a little differently, payment of backwages is a form of relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional period the dismissed employee must undergo before locating a replacement job. x x x The grant of separation pay was a proper substitute only for reinstatement; it could not be an adequate substitute both for reinstatement and for backwages.[11] WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 March 2003 and the Resolution dated 13 February 2004 of the Court of Appeals in CA-G.R. SP No. 67662. SO ORDERED.

Republic of the Philippines SUPREME COURT G.R. No. 158693 November 17, 2004 JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE ANGELES, respondents. DECISION YNARES-SANTIAGO, J.: This petition for review seeks to reverse the decision 1 of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00. Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January 2, 1992 2 until February 23, 1999 when they were dismissed for abandonment of work. Petitioners then filed a complaint for illegal dismissal and payment of money claims 3 and on December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetary claims. The dispositive portion of the decision states: WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly, respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of: 1. Jenny M. Agabon - P56, 231.93 2. Virgilio C. Agabon - 56, 231.93and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date ofhiring up to November 29, 1999. Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.SO ORDERED.4 On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter were also denied for lack of evidence. 5 Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals. The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment but ordered the payment of money claims. The dispositive portion of the decision reads: WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of P2,150.00. SO ORDERED.6

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.7 Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did not agree on this arrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also claim that private respondent did not comply with the twin requirements of notice and hearing. 8 Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their work.9 In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to report for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not report for work because they had subcontracted to perform installation work for another company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted, petitioners stopped reporting for work and filed the illegal dismissal case.10 It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even finality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed by the Court of Appeals. 11 However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the records and examine for itself the questioned findings. 12 Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a just cause. They had abandoned their employment and were already working for another employer. To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer to give the employee the opportunity to be heard and to defend himself.13 Article 282 of the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or the latter's representative in connection with the employee's work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d) commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing. Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.14 It is a form of neglect of duty, hence, a just cause for termination of employment by the employer.15 For a valid finding of abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more determinative factor which is manifested by overt acts from which it may be deduced that the employees has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified. 16 In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company. Subcontracting for another company clearly showed the intention to sever the employer-employee relationship with private respondent. This was not the first time they did this. In January 1996, they did not report for work because they were working for another company. Private respondent at that time warned petitioners that they would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a relevant consideration in determining the penalty that should be meted out to him. 17 In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from work without leave or permission from his employer, for the purpose of looking for a job

elsewhere, is considered to have abandoned his job. We should apply that rule with more reason here where petitioners were absent because they were already working in another company. The law imposes many obligations on the employer such as providing just compensation to workers, observance of the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct19 and loyalty. The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests. 20 After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissal were observed. The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code: Standards of due process: requirements of notice. In all cases of termination of employment, the following standards of due process shall be substantially observed: I. For termination of employment based on just causes as defined in Article 282 of the Code: (a) A written notice served on the employee specifying the ground or grounds for termination, and giving tosaid employee reasonable opportunity within which to explain his side; (b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and (c) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employee's last known address. Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based on authorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A termination for an authorized cause requires payment of separation pay. When the termination of employment is declared illegal, reinstatement and full backwages are mandated under Article 279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted. Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed. In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability. In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be held liable for non-compliance with the procedural requirements of due process . The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established that the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice requirements and instead argued that sending notices to the last known addresses would have been useless because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin notice requirements to the employee's last known address.21 Thus, it should be held liable for non-compliance with the procedural requirements of due process. A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on employment termination in the light of Serrano v. National Labor Relations Commission.22 Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission,23 we reversed this long-standing rule and held that the dismissed employee, although not given any notice and hearing, was not entitled to reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just ground for termination under Article 282. The employee had a violent temper and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding backwages "may encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to observe." 24 We further held that: Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no right to return to his former employment. However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer.25 The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule. On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause. The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause. Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code which states: ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed. The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the doctrine. To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our entire history. Due process is that which comports with the deepest notions of what is fair and right and just.26 It is a constitutional restraint on the legislative as well as on the executive and judicial powers of the government provided by the Bill of Rights. Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10.27 Breaches of these due process requirements violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply with constitutional due process. Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects employees from being unjustly terminated without just cause after notice and hearing. In Sebuguero v. National Labor Relations Commission ,28 the dismissal was for a just and valid cause but the employee was not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each case and the gravity of the omission committed by the employer. In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was not given due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause,albeit without due process, did not entitle the employee to reinstatement, backwages, damages and attorney's fees. Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations Commission,30 which opinion he reiterated in Serrano, stated: C. Where there is just cause for dismissal but due process has not been properly observed by an employer, it would not be right to order either the reinstatement of the dismissed employee or the payment of backwages to him. In failing, however, to comply with the procedure prescribed by law in terminating the services of the employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally constitute the two-part due process requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the above steps would be no more than a useless formality and where, accordingly,

it would not be imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x.31 After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believe that in cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing justice not just to employees, but to employers as well. The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences. This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy. The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this case. 32 Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned. The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes neither oppression nor selfdestruction of the employer.33 It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the requirements of due process were complied with, would undoubtedly result in a valid dismissal. An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of the necessity of interdependence among diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number." 34 This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances. Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labormanagement relations and dispense justice with an even hand in every case: We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich, for justice must always be served for the poor and the rich alike, according to the mandate of the law.35

Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court. As interdependent and indispensable partners in nation-building, labor and management need each other to foster productivity and economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer. Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission.36 The indemnity to be imposed should be stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer. Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. 37 As enunciated by this Court in Viernes v. National Labor Relations Commissions ,38 an employer is liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's one month salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee's right to statutory due process which was violated by the employer. 39 The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.40 Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules. Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday pay, service incentive leave pay and 13th month pay. We are not persuaded. We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions. As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that overtime, differentials, service incentive leave and other claims of workers have been paid are not in the possession of the worker but in the custody and absolute control of the employer.41 In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it could have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the benefit in the years disputed.42 Allegations by private respondent that it does not operate during holidays and that it allows its employees 10 days leave with pay, other than being self-serving, do not constitute

proof of payment. Consequently, it failed to discharge the onus probandi thereby making it liable for such claims to the petitioners. Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in the form of the 13th month pay to employees not already receiving the same43 so as "to further protect the level of real wages from the ravages of world-wide inflation."44 Clearly, as additional income, the 13th month pay is included in the definition of wage under Article 97(f) of the Labor Code, to wit: (f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee" from which an employer is prohibited under Article 113 45 of the same Code from making any deductions without the employee's knowledge and consent. In the instant case, private respondent failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims against private respondent. The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00. WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements, Inc. is furtherORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory due process. No costs. SO ORDERED.

FIRST DIVISION INDUSTRIAL TIMBER G.R. No. 164518 CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN,Petitioners, Respondents. x ---------------------------------------------------- x VIRGILIO ABABON, IGNACIO Petitioners, - versus THE HONORABLE COURT OF APPEALS, INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and Promulgated: TOMAS TAN, Respondents. March 30, 2006 RESOLUTION YNARES-SANTIAGO, J.: On January 25, 2006, the Court rendered judgment disposing of the case as follows: G.R. No. 164965

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-G.R. SP No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution denying ITCs motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision of the Labor Arbiter finding the closure or cessation of ITCs business valid, is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher, and P50,000.00 as nominal damages to each employee.SO ORDERED.[1] On March 14, 2006, respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 filed a Motion for Reconsideration seeking to set aside the above-stated Decision and reinstate the October 21, 2002 Decision of the Court of Appeals, with the modification that they be awarded full backwages, with the additional award of P50,000.00 as nominal damages for each worker. They insist that the holding in International Timber Corporation v. National Labor Relations Commission[2] that the closure of ITCs Butuan Plant was valid should not have been applied in the instant cases which pertain to ITCs Stanply Plant. They further claim that the findings by the Labor Arbiter that there was a shortage of raw materials; that the wood processing plaint permit has expired; that the lease contract with IPGC was terminated; and that ITC and IPGC were not business conduits, were all debunked by the NLRC. The arguments raised have been amply discussed; at any rate, they are inconsequential as to affect the assailed Decision. On the other hand, petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 also filed a Motion for Partial Reconsideration seeking to delete or reduce the nominal damages awarded to each employee, considering that since August 17, 1990 it had ceased operation of its business and that the award involves a huge amount considering that there are 97 workers. [3] While we ruled in this case that the sanction should be stiffer in a dismissal based on authorized cause where the employer failed to comply with the notice requirement than a dismissal based on just cause with the same procedural infirmity, however, in instances where the execution of a decision becomes impossible, unjust, or too burdensome, modification of the decision becomes necessary in order to harmonize the disposition with the prevailing circumstances. In the determination of the amount of nominal damages which is addressed to the sound discretion of the court, several factors are taken into account: (1) the authorized cause invoked, whether it was a retrenchment or a closure or cessation of operation of the establishment due to serious business losses or financial reverses or otherwise; (2) the number of employees to be awarded; (3) the capacity of the employers to satisfy the awards, taken into account their prevailing financial status as borne by the records; (4) the employers grant of other termination benefits in favor of the employees; and (5) whether there was a bona fide attempt to comply with the notice requirements as opposed to giving no notice at all. In the case at bar, there was valid authorized cause considering the closure or cessation of ITCs business which was done in good faith and due to circumstances beyond ITCs control. Moreover, ITC had ceased to generate any income since its closure on August 17, 1990. Several months prior to the closure, ITC experienced diminished income due to high production costs, erratic supply of raw materials, depressed prices, and poor market conditions for its wood products. It appears that ITC had given its employees all benefits in accord with the CBA upon their termination. Thus, considering the circumstances obtaining in the case at bar, we deem it wise and just to reduce the amount of nominal damages to be awarded for each employee to P10,000.00 each instead of P50,000.00 each.

WHEREFORE, premises considered, the Motion for Reconsideration of respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 is DENIED. The Motion for Partial Reconsideration of petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 is GRANTED. The amount of nominal damages awarded to each employee is reduced from P50,000.00 to P10,000.00. SO ORDERED.

THIRD DIVISION [G.R. No. 120802. June 17, 1997] JOSE T. CAPILI, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, and UNIVERSITY OF MINDANAO, respondents. DECISION DAVIDE, JR., J.: The pivotal issue in this petition is whether an instructor of a private educational institution may be compelled to retire at the age of sixty years. A corollary issue is whether his subsequent acceptance of retirement benefits would estop him from pursuing his complaint questioning the validity of his forced retirement. Petitioner Jose T. Capili, Jr., was employed by private respondent University of Mindanao (hereafter, UM) as a college instructor in November 1982. On 2 July 1993, the private respondent informed the petitioner that under the law and UM's retirement program he would be eligible for retirement when he would reach the age of 60 years on 18 August 1993. In his answer of 5 August 1993, the petitioner informed UM that pursuant to Section 4, Rule II, Book VI of the Rules Implementing the Labor Code, the that he was not opting to retire but would continue to serve until he reaches the compulsory retirement age of 65. In its reply of 10 August 1993 to the petitioner, UM reiterated its position that under the universitys retirement plan, it could retire him. It argued that under Section 4 cited by the petitioner, the employee has the option only in the absence of a retirement plan. Perceiving the schools insistence as constructive dismissal, and recalling at least four other faculty members who were allowed to teach beyond their sixtieth birth anniversary, the petitioner filed a complaint[1] for illegal dismissal before the Regional Arbitration Branch No. XI of the NLRC in Davao City. He sought his reinstatement to his former position without loss of seniority rights with full back wages, wage differential, 13th month differential, moral and exemplary damages, and attorneys fees.[2] In its position paper,[3] UM invoked Article 287 of the Labor Code which provides that any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. It contended that it has a retirement plan, known as the University of Mindanao & Associated Enterprises Retirement Plan, under which it could retire the petitioner upon his reaching the age of 60. UM also cited Policy Instruction No. 25 issued by the Secretary of Labor, which provides that in the absence of a retirement plan any teacher or other employee in a private educational institution may retire or be retired from the service upon reaching the age of 60 years. In his position paper[4] the petitioner maintained that private respondents retirement plan applies only to members thereof, pursuant to Articles II and III of its Rules and Regulations, [5] and that since he is not a member of the Plan, he is not covered by it. He further contended that Policy Instruction No. 25, issued on 1 June 1977, was abrogated by Republic Act No. 7641, which took effect on 7 January 1993; and that pursuant to the new Rule II, Book VI of the Omnibus Rules Implementing the Labor Code, [6] which also took effect on 7 January 1993, he has the option whether or not to retire upon attaining the age of 60 years. On 18 April 1994,[7] Labor Arbiter Newton Sancho held for UM and dismissed the complaint. He ruled: There is no question that UM [University of Mindanao] has an existing retirement plan which fixed 60 years as an age for normal retirement. It applies to all its employees and that of its associated enterprises, including the non-members thereof as a matter of school policy. As such, the option to retire complainant lies on the administration of UM. Complainants reliance on R.A. No. 7641 is evidently misplaced. It only provides for retirement pay to qualified private sector employees in the absence of any retirement plan of the establishment. Given UMs retirement plan or school policy of retiring its teachers upon reaching the age of 60, said law does not clearly operate in his favor.

That at least four (4) teachers had been allowed to work beyond their 60th birthday does not make them an exception to UMs policy on the matter. They did so on a case-to-case and semestral basis to which UM consented in the exercise of its management prerogative. The charge that he was discriminated against through "forced" retirement because of his propensity to question certain school policies or regulations cannot be given credence. For want of corroborative evidence, it is simply self-serving! Ditto his money claims. UM has proofs that he had been fully paid thereof. The petitioner appealed[8] from the decision to the respondent Commission on 10 May 1994, or thirteen days after he received the Labor Arbiters decision. He argued that the Labor Arbiter erred in ruling that private respondents retirement plan applies to all its employees and that he had been fully paid his monetary claims. The private respondent moved to dismiss the appeal [9] for having been filed out of time, as the same should have been filed within ten days from petitioners receipt of the Arbiters decision, or, at the latest, on 7 May 1994. On 21 November 1994, the private respondent filed a Manifestation with Motion [10] alleging that on 6 October 1994, the petitioner received his retirement pay and other accrued benefits due from the private respondent, thus making the appeal moot and academic. The petitioner filed a Counter-Manifestation[11] wherein he alleged that his partial acceptance of retirement benefits did not render the case moot and academic, and that having "long and unjustly been denied of his retirement benefits since August 18, 1993 [he could not] be expected to remain idle." On 19 January 1995, the respondent NLRC dismissed the appeal for having been filed out of time, it appearing that since the petitioner received a copy of the assailed decision on 27 April 1994, he had only until 7 May 1994 to file his appeal; however, considering that 7 May 1994 was a Saturday, he had until 9 May 1994, the next working day, to file the appeal. He filed the appeal only on 10 May 1994.[12] The petitioner moved for the reconsideration [13] of the order, alleging that he could not have filed his appeal on 9 May 1994 which was a non-working holiday, as the barangay elections were held on the said date. In its resolution of 31 March 1995,[14] the NLRC reconsidered the order of 19 January 1995 and decided the case on its merits. In disposing of the appeal, it made the following observations and conclusions: After a careful review of the respective arguments of the parties, We find no serious inconsistency between the company retirement plan of the university and the provision of Article 287 of the Labor Code, as amended by R.A. 7641. Both speak of fixing the normal retirement age at 60 in the absence of a retirement plan or agreement. The retirement plan of the university allows retirement at a later or beyond 60 by mutual assent and on a case-tocase basis. Whereas, R.A. 7641, has fixed 65 as the compulsory retirement date. Except therefore for the fixing of a maximum retirement age of 65 or the compulsory retirement date, Section 14, Rule I, Book VI of the Implementing Rules of Article 287 prior to its amendment by R.A. 7641, has equally fixed the retirement benefit to at least one-half (1/2) month for every year of service. The contention of complainant that respondent's retirement plan is inapplicable for being a non-member is beside the point. Respondent has expressly assented to the extension of the retirement plan to complainant thereby serving as the "consensual basis" for the applicability of the retirement plan to complainant. (See Llora Motors, Inc. vs. Drilon, 179 SCRA 176, November 7, 1989, citing Allied Investigation Bureau, Inc. vs. Ople, 91 SCRA 265). The ultimate question, however, is that will complainant be forced by the respondent to retire at age 60 or on his 60th birthday if he refuses to accept the same. It is Our well discerned view that respondent may not force complainant to retire at age 60, unless there are other justifiable reason to compel complainant to accept the same. This is so because the law (R.A. 7641) has fixed age 65 as the compulsory age of retirement.

It, however, appears that this particular issue has become moot and academic. During the pendency of the case, complainant has accepted and received from respondent university his retirement benefits (Annex "1" to Respondent's Manifestation). Complainant's counter-manifestation that this was only "partial acceptance" of his retirement benefits is belied by the computation of his retirement benefits based on his length of service in the sum of P67,344.42, plus other fringe benefits or in the total sum of P75,338.10. Deducting therefrom the sum of P60,015.45 which was partially released to him, he received the balance of his retirement benefits in the sum of P15,322.65 as shown by his signature appearing on the Journal Voucher dated October 4, 1994 (Annex "2", ibid ). Except for the notation on the exclusion of incremental proceeds of his benefits which is still subject of conciliation, there is nothing on Annex "1" indicating that complainant only received partial payment of his retirement benefits or a reservation that receipt of the balance of his retirement was without prejudice to his claims in the instant case. Complainant therefore by his own act of accepting the proceeds of his retirement benefits as originally offered to him by respondent is now estopped from further pursuing his claims in the instant case. Besides, the main cause of action of complainant in suing respondent is the charge of illegal or constructive dismissal. There being no concrete and convincing proof that complainant was illegally dismissed, the present action must equally fail. Thus, the issue as to whether or not complainant was forced to prematurely retire by respondent is now moot and academic in view of the subsequent acceptance by complainant of his retirement benefits from respondent. It then dismissed the appeal for lack of merit and affirmed the Labor Arbiters decision, subject to the foregoing modification. Petitioners motion for reconsideration[15] of the above resolution having been denied in the resolution[16] of 31 May 1995, the petitioner filed this petition. He alleges that the respondent Commission committed grave abuse of discretion amounting to excess or lack of jurisdiction (i) ... WHEN IT RENDERED ITS RESOLUTIONS IN A MANNER VIOLATIVE OF SUBSTANTIAL DUE PROCESS. (ii) ...WHEN IT RENDERED THE QUESTIONED RESOLUTION... DISMISSING THE APPEAL IN CONTRAVENTION TO THE RULING OF THE SUPREME COURT IN THE CASE OF ZURBANO, SR. VS. NLRC (229 SCRA 563) AND OTHERS. (iii) ...IN HOLDING THAT THE PETITIONER BY ACCEPTING THE PROCEEDS OF HIS RETIREMENT BENEFITS IS ESTOPPED FROM PURSUING HIS CLAIMS. The first assigned error consists of the last two errors, which boil down to the issue of whether the petitioner, by his acceptance of retirement benefits, is estopped from pursuing his claim of illegal dismissal arising from his forced retirement before the age of 65. In its comment, the Office of the Solicitor General agrees with the petitioner that the latters acceptance of retirement benefits does not amount to estoppel or render the appeal moot and academic, and hence, the NLRC committed reversible error and grave abuse of discretion in perfunctorily dismissing petitioners appeal solely on the ground of estoppel. It nevertheless disagreed with the NLRCs conclusion that the petitioner could not be forced to retire at age 60. It is of the view that petitioners forced retirement at the age of 60 is valid and that petitioners not being a member of the retirement plan is of no moment, since all employees of UM are covered by it. These notwithstanding, the OSG concurred in the dispositive portion of the NLRCs resolution. On the other hand, the private respondent submits that the NLRC was correct in holding that petitioners voluntarily acceptance of his retirement benefits amounted to a waiver of his claims, and that his retirement was in accordance with UMs retirement policy. We resolved to give due course to the petition and required the parties to submit their respective memoranda. Only the petitioner and private respondent submitted their memoranda. The OSG manifested that it be excused from filing a memorandum and that its comment be treated as its memorandum.

The applicable law on the matter is Article 287 of the Labor Code of the Philippines, as amended by R.A. No. 7641, which took effect on 7 January 1993. [17] As amended, the Article reads as follows: ART. 287. Retirement. -Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employees retirement benefits under any collective bargaining agreement and other agreements shall not be less than those provided herein. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. The article provides for two types of retirement: (a) compulsory and (b) optional. The first takes place at age 65, while the second is primarily determined by the collective bargaining agreement or other employment contract or employers retirement plan. In the absence of any provision on optional retirement in a collective bargaining agreement, other employment contract, or employers retirement plan, an employee may optionally retire upon reaching the age of 60 years or more, but not beyond 65 years, provided he has served at least five years in the establishment concerned. That prerogative is exclusively lodged in the employee. It may be noted that before the effectivity of R.A. No. 7641, Article 287 of the Labor Code did not specifically provide for the retirable age of employees in the private sector, thus: ART. 287. Retirement. -- Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and other collective bargaining or other agreement. Section 13, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code provided: Sec. 13. In the absence of any collective bargaining agreement or other applicable agreement concerning terms and conditions of employment which provides for retirement at an older age, an employee may retire upon reaching the age of sixty (60) years. Notably, the option to retire at 60 years was the employees prerogative. However, the Department of Labor and Employment had provided a separate rule for employees of private educational institutions. Policy Instruction No. 25 promulgated on 1 June 1977 by the Secretary of Labor provided as follows: For purposes of applying the retirement provisions of the Labor Code in private educational institutions, and in consideration of the unique characteristics and peculiar problems and work situations of such institutions, the following rules are hereby issued for the information and guidance of all concerned: I - If there is a retirement plan under a collective agreement or employer policy in private educational institutions, any teacher and/or employee who retires or is retired from the service pursuant to the same shall be entitled to all the retirement benefits provided therein. II - In the absence of any such company policy or collective agreement providing for a retirement plan for teachers and other employees in private educational institutions, any teacher and/or employee may retire or be retired from the service upon reaching the age of sixty (60) years and shall be paid the equivalent of at least one month salary or one-half month salary for every year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year. It is clear therefrom that in the absence of a collective bargaining agreement or company policy providing for a retirement plan, the option to retire at age 60 could be exercised by either the

employee or the employer. This power of the employer no longer exists under R.A. No. 7641, which unequivocally provides that the option to retire upon reaching the age of 60 years or more but not beyond 65 is the exclusive prerogative of the employee if there is no provision on retirement in a collective bargaining agreement or any other agreement or if the employer has no retirement plan. The foregoing brings us to the next point of inquiry, viz., whether private respondent UM has a retirement plan or collective bargaining agreement or other agreement vesting upon UM the prerogative to retire an employee who reaches 60 years. UM insists that it has a retirement plan under the title University of Mindanao & Associated Enterprises Retirement Plan,[18] which became effective on 1 July 1968, and that the petitioner is covered by it. On the other hand, the petitioner contends that the Plan covers only those who opted to become members thereof. We agree with the petitioner. Indeed, under UMs Retirement Plan only members are covered by it. It defines Member as an employee, as herein defined, who chooses to contribute to the Fund as provided for in Article IV, Section 1 hereof. Only Members shall be entitled to any of the benefits provided for under this Plan and to any of the Companys contributions as provided for in Articles IV and V hereof.[19] As to eligibility for membership therein of employees hired after the effectivity of the Plan, it explicitly provides as follows: [A]ny employee hired after the effective date may become a Member of the Plan on the date he becomes a permanent full-time employee if he chooses to contribute to the Fund in accordance with Article IV, Section 1, hereof. [20] Nothing could be clearer from the above provisions of the Plan than that it is not applicable to all employees of UM and its associated enterprises. It applies only to those who opted to become members thereof. Contracts take effect only between the parties thereto. [21] Since the Plan was prepared and approved only by the responsible officials of UM and its associated enterprises, namely, the Presidents of UM, Mt. Apo Science Foundation, and Davao Savings and Loan Association,[22] the Plan may thus be described as a contract of adhesion. Hence, the above provisions on requirements of membership and eligibility must be strictly construed against UM and its associated enterprises. [23] UM cannot now be heard to claim that the plan applies to all its employees or to those who did not even opt to become members thereof. The validity then of UMs retirement of the petitioner upon the latters 60th birth anniversary on 18 August 1993 could only be based on proof that the petitioner became a member of its Retirement Plan at any time after his employment in 1982 but before 18 August 1993. The burden to prove such a fact was on UM, but the record fails to show that UM has discharged that burden. UMs belated attempt to prove that it is a school policy to retire employees who reach the age of 60, pursuant to UMs Retirement Policies dated 16 December 1990 [24] and Updated Retirement Policy dated 3 August 1993,[25] cannot sway this Court in UMs favor. These documents are mere scraps of paper, they being only xerox copies. They have not been certified to be true copies or offered in evidence before the Labor Arbiter and the NLRC. Neither have they even been referred to in UMs comment in this case. The foregoing notwithstanding, a supervening event worked against the petitioner. On 30 April 1994, after receiving the Labor Arbiters decision but before filing his appeal from that decision, the petitioner received partial payment of his retirement pay and other accrued benefits from respondent UM.[26] During the pendency of his appeal with the NLRC, specifically, on 6 October 1994, he received full payment of his retirement benefits. In his Counter-Manifestation[27] he declared: COMPLAINANT-APPELLANT ... most respectfully maintains that the partial acceptance of the retirement benefits does not render the instant case moot and academic. The

complainant-appellant who had long and unjustly been denied of his retirement benefits since August 18, 1993 cannot be expected to remain idle. By his acceptance of retirement benefits the petitioner is deemed to have opted to retire under the third paragraph of Article 287 of the Labor Code, as amended by R.A. No. 7641. Thereunder he could choose to retire upon reaching the age of 60 years, provided it is before reaching 65 years, which is the compulsory age of retirement. Also worth noting is his statement that he had long and unjustly been denied of his retirement benefits since August 18, 1993. Elsewise stated, he was entitled to retirement benefits as early as 18 August 1993 but was denied thereof without justifiable reason. This could only mean that he has already acceded to his retirement, effective on such date - when he reached the age of 60 years. WHEREFORE, the 31 March 1995 and 31 May 1995 Resolutions of the National Labor Relations Commission in NLRC CA No. M-002096-94 are AFFIRMED subject to the modification that the petitioner is hereby declared to be not covered by respondent University of Mindanaos Retirement Plan but is, nevertheless, deemed to have opted to retire when he reached the age of sixty years, pursuant to Article 287 of the Labor Code, as amended by R.A. No. 7641.No pronouncement as to costs. SO ORDERED.

FIRST DIVISION [G.R. No. 115019. April 14, 1997] PHILIPPINE SCOUT VETERANS SECURITY AND INVESTIGATION AGENCY AND/OR SEVERO SANTIAGO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and MARIANO FEDERICO, respondents. DECISION BELLOSILLO, J.: MARIANO FEDERICO, private respondent, had been working with petitioners Philippine Scout Veterans Security and Investigation Agency and/or Severo Santiago as a security guard for twenty-three (23) years. On 16 September 1991 Federico, then already sixty (60) years old, tendered his so-called "letter of resignation" citing as his reasons physical disability to perform his duties and desire to spend the rest of his life in the province. It seems that the letter did not strictly refer to "resignation" but "withdrawal from occupation" because thereafter he sought alternative reliefs from petitioners, namely, termination pay corresponding to his years of service, or retirement benefits. Petitioners rejected the claim for termination pay contending that respondent Federico voluntarily resigned. The claim for retirement benefits met the same fate there being no collective or individual agreement providing therefor. On 4 December 1991 respondent Federico brought his grievance to the Labor Arbiter. However, the latter sustained the stand of petitioners. Hence on 25 August 1992 he ruled against Federico. Nevertheless, the termination of the proceedings did not leave respondent empty-handed. The Labor Arbiter directed petitioners to pay respondent P10,000.00, the amount they previously offered him, as financial assistance. [1] On 28 December 1993 public respondent National Labor Relations Commission (NLRC) set aside on appeal the subject Decision, relying on Art. 287 of the Labor Code as amended by

R.A. 7641 which, in the absence of a retirement plan or agreement providing for retirement benefits, grants retirement pay equivalent to fifteen (15) days for every year of service. [2] The amendment, which took effect on 7 January 1993, was thus retroactively applied in favor of respondent Federico. On 21 March 1994, NLRC denied reconsideration of the Decision. [3] The question to be resolved is whether Art. 287 of the Labor Code as amended by R.A. 7641 may be applied retroactively to the complaint filed on 4 December 1991 by respondent Mariano Federico. Petitioners argue that the amendment introduced by R.A. 7641 applies to employees of the private sector who retired beginning 7 January 1993, the date of its effectivity, and onwards. In the present case therefore respondent Federico, who filed his complaint two (2) years prior to the effectivity of the law, cannot seek refuge in the provision. Besides, this Court in Llora Motors, Inc. v. Drilon[4] was faced with the same controversy. Its ruling thereon is now judicial precedent. The Office of the Solicitor General contends that the matter of giving retroactive effect to social legislation has long been settled in the leading case of Allied Investigation Bureau, Inc. v. Ople.[5] We grant the petition not on the basis of the arguments of petitioners but on recent jurisprudence. Article 287 then in force provided Art. 287. Retirement. - Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining or other agreement (underscoring supplied). In Allied, private respondent had been an employee of petitioner since 1953. In 1976, having reached the age of sixty (60) years, he submitted to petitioner an application for retirement benefits which was subsequently approved although there was then no collective bargaining agreement or employer policy establishing an additional retirement plan for its employees. Controversy arose with respect to the method of computing the amount of retirement benefits. Instead of basing the amount upon private respondent's actual period of employment (from 1953 up to 1976), petitioner computed such amount starting with the date of the effectivity of the Labor Code (1 November 1974) up to 1976. The Labor Arbiter, the NLRC and the then Minister of Labor were one in the view that the computation should be on the basis of the length of service. This Court sustained the computation of public respondents since it found the comment of the Solicitor General in support thereof persuasive x x x x in the computation thereof, public respondents acted judiciously in reckoning the retirement pay from the time private respondent started working with petitioner since respondent employee's application for retirement benefits and the company's approval of the same make express mention of Sections 13 and 14, Rule 1, Book VI of the Implementing Rules and Regulations of the Labor Code as the basis for retirement pay. Section 14 (a) of said rule provides that an employee who is retired pursuant to a bona fide retirement plan or in accordance with the applicable individual or collective agreement or established employer policy shall be entitled to all the retirement benefits provided therein or to termination pay equivalent to at least one-half month salary for every year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year x x x x This position taken by public respondents squares with the principle that social legislation should be interpreted in favor of workers in the light of the Constitutional mandate that the State shall afford protection to labor. Quite differently, in Llora Motors, we set aside the grant of retirement benefits because of the absence of a collective bargaining agreement or other contractual basis or any established

employer policy that contemplated said grant. Private respondent invoked Allied but we found the reliance thereon misplaced because x x x x while Allied had no collective bargaining agreement or similar employment contract establishing a plan under which employees could retire, its approval of (private respondent's) application, although unilateral and possibly ad hoc, supplied the necessary consensual basis. In the instant case, (petitioner) consistently resisted the demand for separation pay or retirement benefits by private respondent x x x x As between Llora which is invoked by petitioners and Allied which is invoked by the Solicitor General, we could have applied the former because of similarity in factual milieu except that we have to take into account the amendment of Art. 287 by R.A. 7641 on 7 January 1993 or during the pendency of the proceedings before the NLRC. As amended, Art. 287 now pertinently providesArt. 287. Retirement. - Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, that an employee's retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein. In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year x x x x (underscoring on amendment supplied). Under the amendment, respondent Federico appears to be entitled to retirement pay. But can he avail himself of this provision considering that it took effect subsequent to his filing of the complaint? This brings to mind the principle reiterated in Allied that police power legislation intended to promote public welfare applies to existing contracts and can therefore be given retroactive effect. Actually, the case at bench no longer presents a novel issue. We have ruled in Oro Enterprises, Inc. v. NLRC[6] that R.A. 7641 can indeed be applied retroactively. Private respondent in that case, after working continuously with the company for forty-one (41) years, manifested her intention to retire from work by filing with petitioner a claim for retirement pay which was however denied. The Labor Arbiter granted her claim. During the pendency of the appeal, R.A. 7641 took effect and on that basis the NLRC affirmed the subject decision with modification. We sustained the NLRC on its rationalization that R.A. 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a curative statute that - absent a retirement plan devised by, an agreement with, or a voluntary grant from, an employer - can respond, in part at least, to the financial well-being of workers during their twilight years soon following their life of labor. There should be little doubt about the fact that the law can apply to labor contracts still existing at the time the statute has taken effect, and that its benefits can be reckoned not only from the date of the law's enactment but retroactively to the time said employment contracts have started x x x x (underscoring supplied). The labor contract between private respondent and petitioner therein was still existing at the time of the effectivity of R.A. 7641 because the NLRC was still tasked with determining, among other things, the issue of whether private respondent has in fact been effectively retired.

We thus culled from Oro that the retroactive application of R.A. 7641 necessitated the concurrence of certain circumstances. In CJC Trading, Inc. v. NLRC,[7] we elaborated thereon. Thus, private respondents filed separate claims for illegal dismissal and monetary awards against petitioners on 23 August 1992 and 15 September 1992. Neither the Labor Arbiter nor the NLRC found merit in their complaint. Invoking justice, fairness and equitable consideration, private respondents sought reconsideration and asked for termination pay for the first time. The NLRC saw fit to award separation pay instead. The Court overruled the NLRC because it was clear that private respondents had voluntarily resigned. We then noted their prayer for an award of termination pay. Inasmuch as they were close to the age of sixty (60) when they stopped working for petitioner and that they have been in its employ for several years, we took the view most favorable to them by considering their prayer for termination pay as referring to retirement benefits. The issue that had to be resolved next was whether to grant retirement benefits by applying retroactively Art. 287 as amended by R.A. 7641. At this point we emphasized the circumstances, based on Oro, that must concur before the law could be given retroactive effect: (a) the claimant for retirement benefits was still the employee of the employer at the time the statute took effect; and, (b) the claimant was in compliance with the requirements for eligibility under the statute for such retirement benefits. It was quite clear in CJC, as held by the Labor Arbiter and the NLRC, that private respondents had ceased to be employees of petitioner by reason of their voluntary resignation before the statute went into effect. Moreover, at the time they stopped working for petitioner, they had not yet reached the age of sixty (60) years. The end result was that they were neither entitled to retirement benefits. Nevertheless, the Court stressed that there was nothing to prevent the employer from voluntarily giving the employees some financial assistance on an ex gratia basis. Returning to the present case, although the second circumstance exists, respondent Federico severed his employment relationship with petitioners when he tendered his "letter of resignation" on 16 September 1991 or prior to the effectivity of R.A. 7641. In fact, the issue before public respondents was not the existence of employee-employer relationship between the parties; rather, considering the cessation of his service, whether he was entitled to monetary awards. On the authority of CJC, private respondent therefore cannot seek the beneficial provision of R.A. 7641 and must settle for the financial assistance of P10,000.00 offered by petitioners and directed to be released to him by the Labor Arbiter. WHEREFORE, the petition is GRANTED. The Decision of respondent National Labor Relations Commission of 28 December 1993 and its Order of 21 March 1994 are SET ASIDE. The Decision of the Labor Arbiter of 25 August 1993 directing petitioners to extend financial assistance of P10,000.00 to private respondent Mariano Federico is REINSTATED. SO ORDERED.