[G.R. No. 127598. January 27, 1999.] MANILA ELECTRIC COMPANY, petitioner, vs.

THE HONORABLE SECRETARY OF LABOR LEONARDO

QUISUMBING AND MERALCO EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents.
SYLLABUS
1.LABOR AND SOCIAL LEGISLATION; CONDITIONS OF EMPLOYMENT; BONUS; NOT A DEMANDABLE AND ENFORCEABLE OBLIGATION.
As a rule, a bonus is not a demandable and enforceable obligation; it may nevertheless be granted on equitable considerations as when the giving of
such bonus has been the company's long and regular practice. To be considered a "regular practice," the giving of the bonus should have been done
over a long period of time, and must be shown to have been consistent and deliberate. Thus we have ruled in National Sugar Refineries Corporation vs.
NLRC: "The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the benefits
knowing fully well that said employees are not covered by the law requiring payment thereof." In the case at bar, the record shows that MERALCO,
aside from complying with the regular 13th month bonus, has further been giving its employees an additional Christmas bonus at the tail-end of the year
since 1988. While the special bonuses differed in amount and bore different titles, it can not be denied that these were given voluntarily and continuously
on or about Christmas time. The considerable length of time MERALCO has been giving the special grants to its employees indicates a unilateral and
voluntary act on its part, to continue giving said benefits knowing that such act was not required by law. Indeed, a company practice favorable to the
employees has been established and the payments made by MERALCO pursuant thereto ripened into benefits enjoyed by the employees.
Consequently, the giving of the special bonus can no longer be withdrawn by the company as this would amount to a diminution of the employee's
existing benefits.
2.ID.; ID.; THE COOPERATIVE LAW DOES NOT REQUIRE THE EMPLOYERS TO FUNDS THAT EMPLOYEES CAN USE TO FORM
COOPERATIVE. The Secretary's disputed ruling requires MERALCO to provide the employees covered by the bargaining unit with a loan of 1.5
Million as seed money for the employees formation of a cooperative under the Cooperative Law, R.A. 6938. We see nothing in this law whether
expressed or implied that requires employers to provide funds, by loan or otherwise, that employees can use to form a cooperative. The formation of
a cooperative is a purely voluntary act under this law, and no party in any context or relationship is required by law to set up a cooperative or to provide
the funds therefor. In the absence of such legal requirement, the Secretary has no basis to order the grant of a 1.5 million loan to MERALCO employees
for the formation of a cooperative. Furthermore, we do not see the formation of an employees cooperative, in the absence of an agreement by the
collective bargaining parties that this is a bargainable term or condition of employment, to be a term or condition of employment that can be imposed on
the parties on compulsory arbitration.
3.ID.; ID.; SIGNING BONUS; DEFINED; WITHOUT THE GOODWILL, THE SIGNING BONUS CANNOT BE JUSTIFIED. On the signing bonus issue,
we agree with the positions commonly taken by MERALCO and by the Office of the Solicitor General that the signing bonus is a grant motivated by the
goodwill generated when a CBA is successfully negotiated and signed between the employer and the union. In the present case, this goodwill does not
exist. In the words of the Solicitor General: "When negotiations for the last two years of the 1992-1997 CBA broke down and the parties sought the
assistance of the NCMB, but which failed to reconcile their differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of
Labor in the resolution of the labor dispute, whatever goodwill existed between petitioner MERALCO and respondent union disappeared. . . . ." In
contractual terms, a signing bonus is justified by and is the consideration paid for the goodwill that existed in the negotiations that culminated in the
signing of a CBA. Without the goodwill, the payment of a signing bonus cannot be justified and any order for such payment, to our mind, constitutes
grave abuse of discretion. This is more so where the signing bonus is in the not insignificant total amount of P16 million.
4.ID.; LABOR RELATIONS; CONFIDENTIAL EMPLOYEES; EXCLUDED FROM RANK AND FILE BARGAINING UNIT. We have established on the
exclusion of confidential employees from the rank and file bargaining unit. In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedore Union,
we ruled that: "Put another way, the confidential employee does not share in the same "community of interests" that might otherwise make him eligible to
join his rank and file co-workers, precisely because of a conflict in those interest." Thus, in Metrolab Industries vs. Roldan-Confesor, We ruled: ". . . that
the Secretary's order should exclude the confidential employees from the regular rank and file employees qualified to become members of the MEWA
bargaining unit." From the foregoing disquisition, it is clear that employees holding a confidential position are prohibited from joining the union of the rank
and file employees.
5.ID.; ID.; CONTRACTING OUT OF WORK IS A PROPRIETARY RIGHT OF THE EMPLOYER IN THE EXERCISE OF AN INHERENT MANAGEMENT
PREROGATIVE. This issue is limited to the validity of the requirement that the union be consulted before the implementation of any contracting out
that would last for 6 months or more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs. Bersamira, (where we recognized that
contracting out of work is a propriety right of the employer in the exercise of an inherent management prerogative) the issue we see is whether the
Secretary's consultation requirement is reasonable or unduly restrictive of the company's management prerogative. We note that the Secretary himself
has considered that management should not be hampered in the operations of its business when he said that: 'We feel that the limitations imposed by
the union advocates are too specific and may not be applicable to the situations that the company and the union may face in the future. To our mind, the
greater risk with this type of limitation is that it will tend to curtail rather than allow the business growth that the company and the union must aspire for.
Hence, we are for the general limitations we have stated above because they will allow a calibrated response to specific future situations the company
and the union may face."
6.ID.; ID.; THE SECRETARY OF LABOR ACTED IN EXCESS OF ITS JURISDICTION WHEN HE ORDERED THE INCLUSION OF BENEFITS, TERMS
AND CONDITIONS THAT THE LAW AND THE PARTIES DID NOT INTEND TO BE REFLECTED IN THE CBA. The Secretary acted in excess of the
discretion allowed him by law when he ordered the inclusion of benefits, terms and conditions that the law and the parties did not intend to be reflected in
their CBA. To avoid the possible problems that the disputed orders may bring, we are constrained to rule that only the terms and conditions already
existing in the current CBA and was granted by the Secretary (subject to the modifications decreed in this decision) should be incorporated in the CBA,
and that the Secretary's disputed orders should accordingly be modified. AIECSD
DECISION
MARTINEZ, J p:
In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to annul the orders of the Secretary of Labor dated August 19, 1996 and
December 28, 1996, wherein the Secretary required MERALCO and its rank and file union the Meralco Workers Association (MEWA) to execute a
collective bargaining agreement (CBA) for the remainder of the parties' 1992-1997 CBA cycle, and to incorporate in this new CBA the Secretary's
dispositions on the disputed economic and non-economic issues.
MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO. LLphil
On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate the terms and conditions of their existing 1992-1997 Collective
Bargaining Agreement (CBA) covering the remaining period of two years starting from December 1, 1995 to November 30, 1997. 1 MERALCO signified
its willingness to re-negotiate through its letter dated October 17, 1995 2 and formed a CBA negotiating panel for the purpose. On November 10, 1995,
MEWA submitted its proposal 3 to MERALCO, which, in turn, presented a counter-proposal. Thereafter, collective bargaining negotiations proceeded.

However, despite the series of meetings between the negotiating panels of MERALCO and MEWA, the parties failed to arrive at "terms and conditions
acceptable to both of them."
On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the National Conciliation and Mediation Board (NCMB) of
the Department of Labor and Employment (DOLE) which was docketed as NCMB-NCR-NS-04-152-96, on the grounds of bargaining deadlock and unfair
labor practices. The NCMB then conducted a series of conciliation meetings but the parties failed to reach an amicable settlement. Faced with the
imminence of a strike, MERALCO on May 2, 1996, filed an Urgent Petition 4 with the Department of Labor and Employment which was docketed as OSAJ No. 0503[1]96 praying that the Secretary assume jurisdiction over the labor dispute and to enjoin the striking employees to go back to work.
The Labor Secretary granted the petition through its Order 5 of May 8, 1996, the dispositive portion of which reads:
"WHEREFORE, premises considered, this Office now assumes jurisdiction over the labor dispute obtaining between the parties
pursuant to Article 263(g) of the Labor Code. Accordingly, the parties are here enjoined from committing any act that may
exacerbate the situation. To speed up the resolution of the dispute, the parties are also directed to submit their respective
Position Papers within ten (10) days from receipt.
'Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences between the parties to bridge their
differences and eventually hammer out a solution that is mutually acceptable. He shall be assisted by the Legal Service.
SO ORDERED."
Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary resolved the labor dispute through an Order, 6
containing the following awards:
"ECONOMIC DEMANDS
Wage increaseP2,300.00 for the first year covering the period from December 1, 1995 to November 30, 1996
P2,200.00 for the second year covering the period December 1, 1996 to November 30, 1997.
Red Circle Rate (RCR) Allowance all RCR allowances (promotional increases that go beyond the maximum range of a job
classification salary) shall be integrated into the basic salary of employees effective December 1, 1995.
Longevity Allowance the integration of the longevity allowance into the basic wage is denied; the present policy is maintained.
Longevity Increase the present longevity bonus is maintained but the bonus shall be incorporated into the new CBA.
Sick Leave MEWA's demand for upgrading is denied; the company's present policy is maintained. However, those who have
not used the sick leave benefit during a particular year shall be entitled to a one-day sick leave incentive.
Sick leave reserve the present reserve of 25 days shall be reduced to 15 days; the employee has the option either to convert
the excess of 10 days to cash or let it remain as long as he wants. In case he opts to let it remain, he may later on convert it into
cash at his retirement or separation.
Vacation Leave MEWA's demand for upgrading denied & the company's present policy is maintained which must be
incorporated into the new CBA but scheduled vacation leave may be rounded off to one full day at a time in case of a benefit
involving a fraction of a day.
Union Leave of MEWA's officers, directors or stewards assigned to perform union duties or legitimate union activity
is increased from 30 to 40 Mondays per month.
Maternity, Paternity and Funeral leaves the existing policy is to be maintained and must be incorporated in the new CBA
unless a new law granting paternity leave benefit is enacted which is superior to what the company has already granted.
Birthday Leave union's demand is granted. If birthday falls on the employee's rest day or on a non-working holiday, the worker
shall be entitled to go on leave with pay on the next working day.
Group Hospitalization & Surgical Insurance Plan (GHSIP) and Health Maintenance Plan (HMP) present policy is maintained
insofar as the cost sharing is concerned 70% for the Company and 30% for MEWA.
Health Maintenance Plan (HMP) for dependents subsidized dependents increased from three to five dependents.
Longevity Bonus is increased from P140.00 to P200.00 for every year of service to be received by the employee after serving
the Company for 5 years.
Christmas Bonus and Special Christmas Grant MEWA's demand of one month salary as Christmas Bonus and two month's
salary as Special Christmas Grant is granted and to be incorporated in the new CBA.
Midyear Bonus one month's pay to be included in the CBA.
Anniversary Bonus union's demand is denied.
Christmas Gift Certificate company has the discretion as to whether it will give it to its employees.
Retirement Benefits:
a.Full retirement-present policy is maintained;
b.one cavan of rice per month is granted to retirees;
c.special retirement leave and allowance-present policy is maintained;
d.HMP coverage for retirees HMP coverage is granted to retirees who have not reached the age of 70, with
MERALCO subsidizing 100% of the monthly premium; those over 70 are entitled to not more than 30 days of
hospitalization at the J.F. Cotton Hospital with the company shouldering the entire cost.
e.HMP coverage for retiree's dependents is denied

f.Monthly pension of P3,000.00 for each retiree is denied.

g.Death benefit for retiree's beneficiaries is denied.
Optional retirement union's demand is denied; present policy is maintained; employee is eligible for optional
retirement if he has rendered at least 18 years of service.
Dental, Medical and Hospitalization Benefits grant of all the allowable medical, surgical, dental and annual physical
examination benefits, including free medicine whenever the same is not available at the JFCH.
Resignation benefits union's demand is denied.
Night work union demand is denied but present policy must be incorporated in CBA.
Shortswing work in another shift within the same day shall be considered as the employee's work for the following day and the
employee shall be given additional four (4) hours straight time and the applicable excess time premium if he works beyond 8
hours in the other shift.
High Voltage allowance is increased from P45.00 to P55.00 to be given to any employee authorized by the Safety Division to
perform work on or near energized bare lines & bus including stockman drivers & crane operators and other crew members on
ground.
High Pole Allowance is increased from P30.00 to P40.00 to be given to those authorized to climb poles up to at least 60 ft.
from the ground. Members of the team including stockman drivers, crane operators and other crew members on the ground, are
entitled to this benefit.
Towing Allowance where stockmen drive tow trailers with long poles and equipment on board, they shall be entitled to a towing
allowance of P20.00 whether they perform the job on regular shift or on overtime.
Employee's Cooperative a loan of P3 M seed money is granted to the proposed establishment of a cooperative, payable in
twenty (20) years starting one year from the start of operations.
Holdup Allowance the union demand is denied; the present policy shall be maintained.
Meal and Lodging Allowance shall be increased effective December 1, 1995 as follows:
Breakfastfrom P25.00 to P35.00
Lunchfrom P35.00 to P45.00
Dinnerfrom P35.00 to P45.00
Lodgingfrom
P180.00
MERALCO franchise areas

P135.00
night

in

to
all

Payroll Treatment for Accident while on Duty an employee shall be paid his salary and allowance if any is due plus average
excess time for the past 12 months from the time of the accident up to the time of full recovery and placing of the employee back
to normal duty or an allowance of P2,000.00, whichever is higher.
Housing and Equity Assistance Loan is increased to P60,000.00; those who have already availed of the privilege shall be
allowed to get the difference.
Benefits for Collectors:
a.Company shall reduce proportionately the quota and monthly average product level (MAPL) in terms of equivalent bill
assignment when an employee is on sick leave and paid vacation leave.
b.When required to work on Saturdays, Sundays and holidays, an employee shall receive P60.00 lunch allowance and
applicable transportation allowance as determined by the Company and shall also receive an additional
compensation to one day fixed portion in addition to lunch and transportation allowance.
c.The collector shall be entitled to an incentive pay of P25.00 for every delinquent account disconnected.
d.When a collector voluntarily performs other work on regular shift or overtime, he shall be entitled to remuneration
based on his computed hourly compensation and the reimbursement of actually incurred transportation
expenses.
e.Collectors shall be provided with bobcat belt bags every year.
f.Collector's cash bond shall be deposited under his capital contribution to MESALA.
g.Collectors quota and MAPL shall be proportionately reduced during typhoons, floods, earthquakes and other similar
force majeure events when it is impossible for a collector to perform collection work.
POLITICAL DEMANDS:
a.Scope of the collective bargaining unit the collective bargaining unit shall be composed of all regular rank-and-file
employees hired by the company in all its offices and operative centers throughout its franchise area and
those it may employ by reason of expansion, reorganization or as a result of operational exigencies.

b.Union recognition and security

i.The union shall be recognized by the Company as sole and exclusive bargaining representative of the rankand-file employees included in the bargaining unit. The Company shall agree to meet only with

Union officers and its authorized representatives on all matters involving the Union and all issues
arising from the implementation and interpretation of the new CBA.
ii.The union shall meet with the newly regularized employees for a period not to exceed four (4) hours, on
company time, to acquaint the new regular employees of the rights, duties and benefits of Union
membership.
iii.The right of all rank-and-file employees to join the union shall be recognized in accordance with the
maintenance of membership principle as a form of union security.
c.Transfer of assignment and job security
i.No transfer of an employee from one position to another shall be made if motivated by considerations of
sex, race, creed, political and religious belief, seniority or union activity.
ii.If the transfer is due to the reorganization or decentralization, the distance from the employee's residence
shall be considered unless the transfer is accepted by the employee. If the transfer is extremely
necessary, the transfer shall be made within the offices in the same district.
iii.Personnel hired through agencies or contractors to perform the work done by covered employees shall not
exceed one month. If extension is necessary, the union shall be informed. But the Company shall
not permanently contract out regular or permanent positions that are necessary in the normal
operation of the Company.
d.Check off Union Dues where the union increases its dues as approved by the Board of Directors, the Company
shall check off such increase from the salaries of union members after the union submits check off
authorizations signed by majority of the members. The Company shall honor only those individual
authorizations signed by the majority of the union members and collectively submitted by the union to the
Company's Salary Administration.
e.Payroll Reinstatement shall be in accordance with Article 223, p. 3 of the Labor Code.
f.Union Representation in Committees the union is allowed to participate in policy formulation and in the decisionmaking process on matters affecting their rights and welfare, particularly in the Uniform Committee, the
Safety Committee and other committees that may be formed in the future.
Signing Bonus P4,000.00 per member of the bargaining unit for the conclusion of the CBA.
Existing benefits already granted by the Company but which are not expressly or impliedly repealed in the new agreement shall
remain subsisting and shall be included in the new agreement to be signed by the parties effective December 1, 1995.
On August 30, 1996, MERALCO filed a motion for reconsideration 7 alleging that the Secretary of Labor committed grave abuse of discretion amounting
to lack or excess of jurisdiction:
1.in awarding to MEWA a package that would cost at least P1.142 billion, a package that is grossly excessive and exorbitant,
would not be affordable to MERALCO and would imperil its viability as a public utility affected with national interest.
2.in ordering the grant of a P4,500 00 wage increase, as well as a new and improved fringe benefits, under the remaining two (2)
years of the CBA for the rank-and-file employees.
3.in ordering the 'incorporation into the CBA of all existing employee benefits, on the one hand, and those that MERALCO has
unilaterally granted to its employees by virtue of voluntary company policy or practice, on the other hand.'
4.in granting certain 'political demands' presented by the union.
5.in ordering the CBA to be 'effective December 1995' instead of August 19, 1996 when he resolved the dispute.
MERALCO filed a supplement to the motion for reconsideration on September 18, 1995, alleging that the Secretary of Labor did not properly appreciate
the effect of the awarded wages and benefits on MERALCO's financial viability. llcd
MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the wage increase, leaves, decentralized filing of paternity and
maternity leaves, bonuses, retirement benefits, optional retirement, medical, dental and hospitalization benefits, short swing and payroll treatment. On its
political demands, MEWA asked the Secretary to rule on its proposal to institute a Code of Discipline for its members and the union's representation in
the administration of the Pension Fund.
On December 28, 1996, the Secretary issued an Order 8 resolving the parties' separate motions, the modifications of the August 19, 1996 Order being
highlighted hereunder:
1)Effectivity of Agreement December 1, 1995 to November 30, 1997.
Economic Demands
2)Wage Increase:
First year P2,200.00 per month;
Second year P2,200.00 per month.
3)Integration of Red Circle Rate (RCR) and Longevity Allowance into Basic Salary the RCR allowance shall be integrated into
the basic salary of employees as of August 19, 1996 (the date of the disputed Order).
4)Longevity Bonus P170 per year of service starting from 10 years of continuous service.
5)Vacation Leave The status quo shall be maintained as to the number of vacation leave but employees' scheduled vacation
may be taken one day at a time in the manner that this has been provided in the supervisory CBA.

6)Sick Leave Reserve is reduced to 15 days, with any excess payable at the end of the year. The employee has the option to
avail of this cash conversion or to accumulate his sick leave credits up to 25 days for conversion to cash at retirement or
separation from the service.
7)Birthday Leave the grant of a day off when an employee's birthday falls on a non-working day is deleted.
8)Retirement Benefits for Retirees The benefits granted shall be effective on August 19, 1996, the date of the disputed order
up to November 30, 1997, which is the date the CBA expires and shall apply to those who are members of the bargaining unit at
the time the award is made.
One sack of rice per quarter of the year shall be given to those retiring between August 19, 1996 and November 30,
1997.
On HMP Coverage for Retirees The parties 'maintain the status quo, that is, with the Company complying with the
present arrangement and the obligations to retirees as is.'
9)Medical, Dental and Hospitalization Benefits The cost of medicine unavailable at the J.F. Cotton Hospital shall be in
accordance with MERALCO's Memorandum dated September 14, 1976.
10)GHSIP and HMP for Dependents The number of dependents to be subsidized shall be reduced from 5 to 4 provided that
their premiums are proportionately increased.
11)Employees' Cooperative The original award of P3 million pesos as seed money for the proposed Cooperative is reduced to
P1.5 million pesos.
12)Shortswing the original award is deleted.
13)Payroll Treatment for Accident on Duty Company ordered to continue its present practice on payroll treatment for accident
on duty without need to pay the excess time the Union demanded.
Political Demands:
14)Scope of the collective bargaining unit The bargaining unit shall be composed of all rank and file employees hired by the
Company in accordance with the original Order.
15)Union recognition and security The incorporation of a closed shop form of union security in the CBA; the Company is
prohibited from entertaining individuals or groups of individuals only on matters that are exclusively within the domain of the
union; the Company shall furnish the Union with a complete list of newly regularized employees within a week from regularization
so that the Union can meet these employees on the Union's and the employee's own time.
16)Transfer of assignment and job security Transfer is a prerogative of the Company but the transfer must be for a valid
business reason, made in good faith and must be reasonably exercised. The CBA shall provide that 'No transfer of an employee
from one position to another, without the employee's written consent, shall be made if motivated by considerations of sex, race,
creed, political and religious belief, age or union activity.
17)Contracting Out The Company has the prerogative to contract out services provided that this move is based on valid
business reasons in accordance with law, is made in good faith, is reasonably exercised and, provided further that if the
contracting out involves more than six months, the Union must be consulted before its implementation.
18)Check off of union dues
In any increase of union dues or contributions for mandatory activities, the union must submit to the Company a copy of
its board resolution increasing the union dues or authorizing such contributions;
If a board resolution is submitted, the Company shall deduct union dues from all union members after a majority of the
union members have submitted their individual written authorizations. Only those check-off authorizations submitted by
the union shall be honored by the Company.
With respect to special assessments, attorney's fees, negotiation fees or any other extraordinary fees, individual
authorizations shall be necessary before the company may so deduct the same.
19)Union Representation in Committees The union is granted representation in the Safety Committee, the Uniform Committee
and other committees of a similar nature and purpose involving personnel welfare, rights and benefits as well as duties.
Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely abused his discretion:
1). . . in awarding wage increases of P2,200.00 for 1996 and P2,200 for 1997;
2) . . . in awarding the following economic benefits:
a.Two months Christmas bonus;
b.Rice Subsidy and retirement benefits for retirees;
c.Loan for the employees' cooperative;
d.Social benefits such as GHSIP and HMP for dependents, employees' cooperative and housing equity assistance
loan;

e.Signing bonus;
f.Integration of the Red Circle Rate Allowance
g.Sick leave reserve of 15 days
h.The 40-day union leave;

i.High pole/high voltage and towing allowance; and

j.Benefits for collectors
3). . . in expanding the scope of the bargaining unit to all regular rank and file employees hired by the company in all its offices
and operating centers and those it may employ by reason of expansion, reorganization or as a result of operational exigencies;
4). . . in ordering for a closed shop when his original order for a maintenance of membership arrangement was not questioned by
the parties;
5). . . in ordering that Meralco should consult the union before any contracting out for more than six months;
6). . . in decreeing that the union be allowed to have representation in policy and decision making into matters affecting
"personnel welfare, rights and benefits as well as duties;"
7). . . in ruling for the inclusion of all terms and conditions of employment in the collective bargaining agreement;
8). . . in exercising discretion in determining the retroactivity of the CBA;
Both MEWA and the Solicitor General, on behalf of the Secretary of Labor, filed their comments to the petition. While the case was also set for oral
argument on Feb. 10, 1997, this hearing was cancelled due to MERALCO not having received the comment of the opposing parties. The parties were
instead required to submit written memoranda, which they did. Subsequently, both petitioner and private respondent MEWA also filed replies to the
opposing parties' Memoranda, all of which We took into account in the resolution of this case.
The union disputes the allegation of MERALCO that the Secretary abused his discretion in issuing the assailed orders arguing that he acted
within the scope of the powers granted him by law and by the Constitution. The union contends that any judicial review is limited to an
examination of the Secretary's decision-making/discretion exercising process to determine if this process was attended by some
capricious or whimsical act that constitutes "grave abuse"; in the absence of such abuse, his findings considering that he has both
jurisdiction and expertise to make them are valid.
The union's position is anchored on two premises:
First, no reviewable abuse of discretion could have attended the Secretary's arbitral award because the Secretary complied with
constitutional norms in rendering the disputed award. The union posits that the yardstick for comparison and for the determination of the
validity of the Secretary's actions should be the specific standards laid down by the Constitution itself. To the union, these standards include
the State policy on the promotion of workers' welfare, 9 the principle of distributive justice, 10 the right of the State to regulate the use of
property, 11 the obligation of the State to protect workers, both organized and unorganized, and insure their enjoyment of "humane
conditions of work" and a "living wage," and the right of labor to a just share in the fruits of production. 12
Second, no reversible abuse of discretion attended the Secretary's decision because the Secretary took all the relevant evidence into
account, judiciously weighed them, and rendered a decision based on the facts and law. Also, the arbitral award should not be reversed given
the Secretary's expertise in his field and the general rule that findings of fact based on such expertise is generally binding on this Court.
To put matters in proper perspective, we go back to basic principles. The Secretary of Labor's statutory power under Art. 263 (g) of the Labor Code
to assume jurisdiction over a labor dispute in an industry indispensable to the national interest, and, to render an award on compulsory
arbitration, does not exempt the exercise of this power from the judicial review that Sec. 1, Art. 8 of the Constitution mandates. This
constitutional provision states:
"Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the government."
Under this constitutional mandate, every legal power of the Secretary of Labor under the Labor Code, or, for that matter, any act of the
Executive, that is attended by grave abuse of discretion is subject to review by this Court in an appropriate proceeding. To be sure, the
existence of an executive power alone whether granted by statute or by the Constitution cannot exempt the executive action from
judicial oversight, interference or reversal when grave abuse of discretion is, or is alleged to be, present. This is particularly true when
constitutional norms are cited as the applicable yardsticks since this Court is the final interpreter of the meaning and intent of the
Constitution.
The extent of judicial review over the Secretary of Labor's arbitral award is not limited to a determination of grave abuse in the manner of the
secretary's exercise of his statutory powers. This Court is entitled to, and must in the exercise of its judicial power review the substance
of the Secretary's award when grave abuse of discretion is alleged to exist in the award, i.e., in the appreciation of and the conclusions the
Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretary's acts is, of course, the Constitution. And we recognize that indeed the constitutional provisions
the union cited are State policies on labor and social justice that can serve as standards in assessing the validity of a Secretary of Labor's actions.
However, we note that these provisions do not provide clear, precise and objective standards of conduct that lend themselves to easy application. We
likewise recognize that the Constitution is not a lopsided document that only recognizes the interests of the working man; it too protects the interests of
the property owner and employer as well. 14
For these reasons and more importantly because a ruling on the breadth and scope of the suggested constitutional yardsticks is not
absolutely necessary in the disposition of this case we shall not use these yardsticks in accordance with the time-honored practice of
avoiding constitutional interpretations when a decision can be reached using non-constitutional standards. We have repeatedly held that one
of the essential requisites for a successful judicial inquiry into constitutional questions is that the resolution of the constitutional question
must be necessary in deciding the case. 15
In this case we believe that the more appropriate and available standard and one does not require a constitutional interpretation is
simply the standard of reasonableness. In layman's terms, reasonableness implies the absence of arbitrariness; 16 in legal parlance, this
translates into the exercise of proper discretion and to the observance of due process. Thus, the question we have to answer in deciding this
case is whether the Secretary's actions have been reasonable in light of the parties positions and the evidence they presented.
MEWA's second premise i.e., that the Secretary duly considered the evidence presented is the main issue that we shall discuss at length below.
Additionally, MEWA implied that we should take great care before reading an abuse of discretion on the part of the Secretary because of his expertise
on labor issues and because his findings of fact deserve the highest respect from this Court.

This Court has recognized the Secretary of Labor's distinct expertise in the study and settlement of labor disputes falling under his power of compulsory
arbitration. 17 It is also well-settled that factual findings of labor administrative officials, if supported by substantial evidence, are entitled not only to great
respect but even to finality. 18 We, therefore, have no difficulty in accepting the union's caveat on how to handle a Secretary of Labor's arbitral award.
But at the same time, we also recognize the possibility that abuse of discretion may attend the exercise of the Secretary's arbitral functions; his findings
in an arbitration case are usually based on position papers and their supporting documents (as they are in the present case), and not on the thorough
examination of the parties' contending claims that may be present in a court trial and in the face-to-face adversarial process that better insures the
proper presentation and appreciation of evidence. 19 There may also be grave abuse of discretion where the board, tribunal or officer exercising judicial
function fails to consider evidence adduced by the parties. 20 Given the parties' positions on the justiciability of the issues before us, the question we
have to answer is one that goes into the substance of the Secretary's disputed orders: Did the Secretary properly consider and appreciate the evidence
presented before him?
We find, based on our consideration of the parties' positions and the evidence on record, that the Secretary of Labor disregarded and misappreciated
evidence, particularly with respect to the wage award. The Secretary of Labor apparently also acted arbitrarily and even whimsically in considering a
number of legal points; even the Solicitor General himself considered that the Secretary gravely abused his discretion on at least three major points: (a)
on the signing bonus issue; (b) on the inclusion of confidential employees in the rank and file bargaining unit, and (c) in mandating a union security
"closed-shop" regime in the bargaining unit.
We begin with a discussion on the wages issue. The focal point in the consideration of the wage award is the projected net income for 1996 which
became the basis for the 1996 wage award, which in turn by extrapolation became the basis for the (2nd Year) 1997 award. MERALCO projected
that the net operating income for 1996 was 14.7% above the 1999 level or a total net operating income of 4.171 Billion, while the union placed the 1996
net operating income at 5.795 Billion.

MERALCO based its projection on the increase of the income for the first 6 months of 1996 over the same period in 1995. The union, on the other hand,
projected that the 1996 income would increase by 29% to 35% because the "consumption of electric power is at its highest during the last two quarters
with the advent of the Yuletide season." The union likewise relied heavily on a newspaper report citing an estimate by an all Asia capital financial analyst
that the net operating income would amount to 5.795 Billion. 21
Based essentially on these considerations, the Secretary made the following computations and ordered his disputed wage award:
Projected net operating
income for 19965,795,000,000
Principals and interests1,426,571,703
Dividends at 1995 rate1,636,949,000
Net Amount left with the Company2,729,479,297
Add: Tax credit equivalent to
35% of labor cost231,804,940
Company's net operating income2,961,284,237
"For 1997, the projected income is P7,613,612 which can easily absorb the incremental increase of P2,200 per month or a total of
P4,500 during the last year of the CBA period.
xxx xxx xxx
"An overriding aim is to estimate the amount that is left with the Company after the awarded wages and benefits and the
company's customary obligations are paid. This amount can be the source of an item not found in the above computations but
which the Company must provide for, that is the amount the company can use for expansion.
"Considering the expansion plans stated in the Company's Supplement that calls for capital expenditures of 6 billion, 6.263 billion
and 5.802 billion for 1996, 1997 and 1998 respectively, We conclude that our original award of P2,300 per month for the first year
and P2,200 for the second year will still leave much by way of retained income that can be used for expansion." 22 (Underscoring
ours.)
We find after considering the records that the Secretary gravely abused his discretion in making this wage award because he disregarded evidence on
record. Where he considered MERALCO's evidence at all, he apparently misappreciated this evidence in favor of claims that do not have evidentiary
support. To our mind, the MERALCO projection had every reason to be reliable because it was based on actual and undisputed figures for the first six
months of 1996. 23 On the other hand, the union projection was based on a speculation of Yuletide consumption that the union failed to substantiate. In
fact, as against the union's unsubstantiated Yuletide consumption claim, MERALCO adduced evidence in the form of historical consumption data
showing that a lengthy consumption does not tend to rise during the Christmas period. 24 Additionally, the All-Asia Capital Report was nothing more
than a newspaper report that did not show any specific breakdown or computations. While the union claimed that its cited figure is based on
MERALCO's 10-year income stream, 25 no data or computation of this 10-year stream appear in the record.
While the Secretary is not expected to accept the company-offered figures wholesale in determining a wage award, we find it a grave abuse of discretion
to completely disregard data that is based on actual and undisputed record of financial performance in favor of the third-hand and unfounded claims the
Secretary eventually relied upon. At the very least, the Secretary should have properly justified his disregard of the company figures. The Secretary
should have also reasonably insured that the figure that served as the starting point for his computation had some substantial basis.
Both parties extensely discussed the factors that the decision maker should consider in making a wage award. While We do not seek to enumerate in
this decision the factors that should affect wage determination, we must emphasize that a collective bargaining dispute such as this one requires due
consideration and proper balancing of the interests of the parties to the dispute and of those who might be affected by the dispute. To our mind, the best
way in approaching this task holistically is to consider the available objective facts, including, where applicable, factors such as the bargaining history of
the company, the trends and amounts of arbitrated and agreed wage awards and the company's previous CBAs, and industry trends in general. As a
rule, affordability or capacity to pay should be taken into account but cannot be the sole yardstick in determining the wage award, especially in a public
utility like MERALCO. In considering a public utility, the decision maker must always take into account the "public interest" aspects of the case;
MERALCO's income and the amount of money available for operating expenses including labor costs are subject to State regulation. We must

also keep in mind that high operating costs will certainly and eventually be passed on to the consuming public as MERALCO has bluntly warned in its
pleadings.
We take note of the "middle ground" approach employed by the Secretary in this case which we do not necessarily find to be the best method of
resolving a wage dispute. Merely finding the midway point between the demands of the company and the union, and "splitting the difference" is a
simplistic solution that fails to recognize that the parties may already be at the limits of the wage levels they can afford. It may lead to the danger too that
neither of the parties will engage in principled bargaining; the company may keep its position artificially low while the union presents an artificially high
position, on the fear that a "Solomonic" solution cannot be avoided. Thus, rather than encourage agreement, a "middle ground approach" instead
promotes a "play safe" attitude that leads to more deadlocks than to successfully negotiated CBAs.
After considering the various factors the parties cited, we believe that the interests of both labor and management are best served by a wage increase of
P1,900.00 per month for the first year and another P1,900.00 per month for the second year of the two-year CBA term. Our reason for this is that these
increases sufficiently protects the interest of the worker as they are roughly 15% of the monthly average salary of P11,600.00. 26 They likewise
sufficiently consider the employer's costs and its overall wage structure, while at the same time, being within the range that will not disrupt the wage
trends in Philippine industries. LLphil
The record shows that MERALCO, throughout its long years of existence, was never remiss in its obligation towards its employees. In fact, as a
manifestation of its strong commitment to the promotion of the welfare and well-being of its employees, it has consistently improved their compensation
package. For instance, MERALCO has granted salary increases 27 through the collective bargaining agreement the amount of which since 1980 for
both rank-and-file and supervisory employees were as follows:
AMOUNT OF CBA INCREASES DIFFERENCE
CBA
COVERAGERANK-AND-FILESUPERVISORY AMOUNT PERCENT
1980230.00342.50112.5048.91%
1981210.00322.50112.5053.57
1982200.00312.50112.5056.25
TOTAL640.00977.50337.5052.73
1983320.00432.50112.5035.16
1984350.00462.50112.5032.14
1985370.00482.50112.5030.41
TOTAL1,040.001,377.50337.5032.45
1986860.00972.50112.5013.08
1987640.00752.50112.5017.58
1988600.00712.50112.5018.75
TOTAL2,100.002,437.50337.5016.07
19891,100.001,212.50112.5010.23
19901,200.001,312.50112.509.38
19911,300.001,412.50112.508.65
TOTAL3,600.003,937.50337.509.38
19921,400.001,742.50342.5024.46
19931,350.001,682.50332.5024.63
19941,150.001,442.50292.5025.43
TOTAL3,900.004,867.50967.5024.81
Based on the above-quoted table, specifically under the column "RANK-AND FILE," it is easily discernible that the total wage increase of P3,800.00 for
1996 to 1997 which we are granting in the instant case is significantly higher than the total increases given in 1992 to 1994, or a span of three (3) years,
which is only P3,900.00 a month. Thus, the Secretary's grant of P2,200.00 monthly wage increase in the assailed order is unreasonably high a burden
for MERALCO to shoulder.
We now go to the economic issues.
1.CHRISTMAS BONUS
MERALCO questions the Secretary's award of "Christmas bonuses" on the ground that what it had given its employees were special bonuses to mark or
celebrate "special occasions," such as when the Asia Money Magazine recognized MERALCO as the "best managed company in Asia." These grants
were given on or about Christmas time, and the timing of the grant apparently led the Secretary to the conclusion that what were given were Christmas
bonuses given by way of a "company practice" on top of the legally required 13th month pay.
The Secretary in granting the two-month bonus, considered the following factual finding, to wit:
"We note that each of the grant mentioned in the commonly adopted table of grants has a special description. Christmas bonuses
were given in 1988 and 1989. However, the amounts of bonuses given differed. In 1988, it was P1,500. In 1989, it was 1/2 month
salary. The use of "Christmas bonus" title stopped after 1989. In 1990, what was given was a "cash gift" of 1/2 month's salary.
The grants thereafter bore different titles and were for varying amounts. Significantly, the Company explained the reason for the
1995 bonuses and this explanation was not substantially contradicted by the Union.

"What comes out from all these is that while the Company has consistently given some amount by way of bonuses since 1988,
these awards were not given uniformly as Christmas bonuses or special Christmas grants although they may have been given at
or about Christmas time.
"xxx xxx xxx
"The Company is not therefore correct in its position that there is no established practice of giving Christmas bonuses that has
ripened to the status of being a term and condition of employment. Regardless of its nomenclature and purpose, the act of giving
this bonus in the spirit of Christmas has ripened into a Company practice." 28

It is MERALCO's position that the Secretary erred when he recognized that there was an "established practice" of giving a two-month Christmas bonus
based on the fact that bonuses were given on or about Christmas time. It points out that the "established practice" attributed to MERALCO was neither
for a considerable period of time nor identical in either amount or purpose. The purpose and title of the grants were never the same except for the
Christmas bonuses of 1988 and 1989, and were not in the same amounts.
We do not agree.
As a rule, a bonus is not a demandable and enforceable obligation; 29 it may nevertheless be granted on equitable considerations 30 as when the giving
of such bonus has been the company's long and regular practice. 31 To be considered a "regular practice," the giving of the bonus should have been
done over a long period of time, and must be shown to have been consistent and deliberate. 32 Thus we have ruled in National Sugar Refineries
Corporation vs. NLRC: 33
"The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the
benefits knowing fully well that said employees are not covered by the law requiring payment thereof."
In the case at bar, the record shows that MERALCO, aside from complying with the regular 13th month bonus, has further been giving its employees an
additional Christmas bonus at the tail-end of the year since 1988. While the special bonuses differed in amount and bore different titles, it can not be
denied that these were given voluntarily and continuously on or about Christmas time. The considerable length of time MERALCO has been giving the
special grants to its employees indicates a unilateral and voluntary act on its part, to continue giving said benefits knowing that such act was not required
by law. cdphil
Indeed, a company practice favorable to the employees has been established and the payments made by MERALCO pursuant thereto ripened into
benefits enjoyed by the employees. Consequently, the giving of the special bonus can no longer be withdrawn by the company as this would amount to
a diminution of the employee's existing benefits. 34
We can not, however, affirm the Secretary's award of a two-month special Christmas bonus to the employees since there was no recognized company
practice of giving a two-month special grant. The two-month special bonus was given only in 1995 in recognition of the employees' prompt and efficient
response during the calamities. Instead, a one-month special bonus, We believe, is sufficient, this being merely a generous act on the part of
MERALCO.
2.RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES
It appears that the Secretary of Labor originally ordered the increase of the retirement pay, rice subsidy and medical benefits of MERALCO retirees. This
ruling was reconsidered based on the position that retirees are no longer employees of the company and therefore are no longer bargaining members
who can benefit from a compulsory arbitration award. The Secretary, however, ruled that all members of the bargaining unit who retire between August
19, 1996 and November 30, 1997 (i.e., the term of the disputed CBA under the Secretary's disputed orders) are entitled to receive an additional rice
subsidy.
The question squarely brought in this petition is whether the Secretary can issue an order that binds the retirement fund. The company alleges that a
separate and independent trust fund is the source of retirement benefits for MERALCO retirees, while the union maintains that MERALCO controls these
funds and may therefore be compelled to improve this benefit in an arbitral award.
The issue requires a finding of fact on the legal personality of the retirement fund. In the absence of any evidence on record indicating the nature of the
retirement fund's legal personality, we rule that the issue should be remanded to the Secretary for reception of evidence as whether or not the
MERALCO retirement fund is a separate and independent trust fund. The existence of a separate and independent juridical entity which controls an
irrevocable retirement trust fund means that these retirement funds are beyond the scope of collective bargaining: they are administered by an entity not
a party to the collective bargaining and the funds may not be touched without the trustee's conformity.
On the other hand, MERALCO control over these funds means that MERALCO may be compelled in the compulsory arbitration of a CBA deadlock
where it is the employer, to improve retirement benefits since retirement is a term or condition of employment that is a mandatory subject of bargaining.
3.EMPLOYEES' COOPERATIVE
The Secretary's disputed ruling requires MERALCO to provide the employees covered by the bargaining unit with a loan of 1.5 Million as seed money for
the employees formation of a cooperative under the Cooperative Law, R.A. 6938. We see nothing in this law whether expressed or implied that
requires employers to provide funds, by loan or otherwise, that employees can use to form a cooperative. The formation of a cooperative is a purely
voluntary act under this law, and no party in any context or relationship is required by law to set up a cooperative or to provide the funds therefor. In the
absence of such legal requirement, the Secretary has no basis to order the grant of a 1.5 million loan to MERALCO employees for the formation of a
cooperative. Furthermore, we do not see the formation of an employees cooperative, in the absence of an agreement by the collective bargaining parties
that this is a bargainable term or condition of employment, to be a term or condition of employment that can be imposed on the parties on compulsory
arbitration.
4.GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY LOAN
MERALCO contends that it is not bound to bargain on these benefits because these do not relate to "wages, hours of work and other terms and
conditions of employment" hence, the denial of these demands cannot result in a bargaining impasse.
The GHSIP, HMP benefits for dependents and the housing equity loan have been the subject of bargaining and arbitral awards in the past. We do not
see any reason why MERALCO should not now bargain on these benefits. Thus, we agree with the Secretary's ruling:
". . . Additionally and more importantly, GHSIP and HMP, aside from being contributory plans, have been the subject of previous
rulings from this Office as bargainable matters. At this point, we cannot do any less and must recognize that GHSIP and HMP are

matters where the union can demand and negotiate for improvements within the framework of the collective bargaining system."
35
Moreover, MERALCO have long been extending these benefits to the employees and their dependents that they now become part of the terms and
conditions of employment. In fact, MERALCO even pledged to continue giving these benefits. Hence, these benefits should be incorporated in the new
CBA.
With regard to the increase of the housing equity grant, we find P60,000.00 reasonable considering the prevailing economic crisis.
5.SIGNING BONUS
On the signing bonus issue, we agree with the positions commonly taken by MERALCO and by the Office of the Solicitor General that the signing bonus
is a grant motivated by the goodwill generated when a CBA is successfully negotiated and signed between the employer and the union. In the present
case, this goodwill does not exist. In the words of the Solicitor General:
"When negotiations for the last two years of the 1992-1997 CBA broke down and the parties sought the assistance of the NCMB,
but which failed to reconcile their differences, and when petitioner MERALCO bluntly invoked the jurisdiction of the Secretary of
Labor in the resolution of the labor dispute, whatever goodwill existed between petitioner MERALCO and respondent union
disappeared. . . ." 36
In contractual terms, a signing bonus is justified by and is the consideration paid for the goodwill that existed in the negotiations that culminated in the
signing of a CBA. Without the goodwill, the payment of a signing bonus cannot be justified and any order for such payment, to our mind, constitutes
grave abuse of discretion. This is more so where the signing bonus is in the not insignificant total amount of P16 Million.
6.RED-CIRCLE-RATE ALLOWANCE
An RCR allowance is an amount, not included in the basic salary, that is granted by the company to an employee who is promoted to a higher position
grade but whose actual basic salary at the time of the promotion already exceeds the maximum salary for the position to which he or she is promoted.
As an allowance, it applies only to specific individuals whose salary levels are unique with respect to their new and higher positions. It is for these
reasons that MERALCO prays that it be allowed to maintain the RCR allowance as a separate benefit and not be integrated in the basic salary.
The integration of the RCR allowance in the basic salary of the employees had consistently been raised in the past CBAs (1989 and 1992) and in those
cases, the Secretary decreed the integration of the RCR allowance in the basic salary. We do not see any reason why it should not be included in the
present CBA. In fact, in the 1995 CBA between MERALCO and the supervisory union (FLAMES), the integration of the RCR allowance was recognized.
Thus, Sec. 4 of the CBA provides:
"All Red-Circle-Rate Allowance as of December 1, 1995 shall be integrated in the basic salary of the covered employees who as
of such date are receiving such allowance. Thereafter, the company rules on RCR allowance shall continue to be
observed/applied." 37
For purposes of uniformity, we affirm the Secretary's order on the integration of the RCR allowance in the basic salary of the employees.
7.SICK LEAVE RESERVE OF 15 DAYS
MERALCO assails the Secretary's reduction of the sick leave reserve benefit from 25 days to 15 days, contending that the sick leave reserve of 15 days
has reached the lowest safe level that should be maintained to give employees sufficient buffer in the event they fall ill.

We find no compelling reason to deviate from the Secretary's ruling that the sick leave reserve is reduced to 15 days, with any excess convertible to
cash at the end of the year. The employee has the option to avail of this cash conversion or to accumulate his sick leave credits up to 25 days for
conversion to cash at his retirement or separation from the service. This arrangement is, in fact, beneficial to MERALCO. The latter admits that "the
diminution of this reserve does not seriously affect MERALCO because whatever is in reserve are sick leave credits that are payable to the employee
upon separation from service. In fact, it may be to MERALCO's financial interest to pay these leave credits now under present salary levels than pay
them at future higher salary levels." 38
8.40-DAY UNION LEAVE
MERALCO objects to the demanded increase in union leave because the union leave granted to the union is already substantial. It argues that the union
has not demonstrated any real need for additional union leave.
The thirty (30) days union leave granted by the Secretary, to our mind, constitute sufficient time within which the union can carry out its union activities
such as but not limited to the election of union officers, selection or election of appropriate bargaining agents, conduct referendum on union matters and
other union-related matters in furtherance of union objectives. Furthermore, the union already enjoys a special union leave with pay for union authorized
representatives to attend work education seminars, meetings, conventions and conferences where union representation is required or necessary, and
Paid-Time-off for union officers, stewards and representatives for purpose of handling or processing grievances.
9.HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE
MERALCO argues that there is no justification for the increase of these allowances. The personnel concerned will not receive any additional risk during
the life of the current CBA that would justify the increase demanded by the union. In the absence of such risk, then these personnel deserve only the
same salary increase that all other members of the bargaining unit will get as a result of the disputed CBA. MERALCO likewise assails the grant of the
high voltage/high pole allowance to members of the team who are not exposed to the high voltage/high pole risks. The risks that justify the higher salary
and the added allowance are personal to those who are exposed to those risks. They are not granted to a team because some members of the team are
not exposed to the given risks.
The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole allowance (from P30.00 to P40.00), and towing allowance is justified
considering the heavy risk the employees concerned are exposed to. The high-voltage allowance is granted to an employee who is authorized by the
company to actually perform work on or near energized bare lines and bus, while the high-pole allowance is given to those authorized to climb poles on
a height of at least 60 feet from the ground to work thereat. The towing allowance, on the other hand, is granted to the stockman drivers who tow trailers
with long poles and equipment on board. Based on the nature of the job of these concerned employees, it is imperative to give them these additional
allowances for taking additional risks. These increases are not even commensurate to the danger the employees concerned are subjected to. Besides,
no increase has been given by the company since 1992. 39

We do not, however, subscribe to the Secretary's order granting these allowances to the members of the team who are not exposed to the given risks.
The reason is obvious no risk, no pay. To award them the said allowances would be manifestly unfair for the company and even to those who are
exposed to the risks, as well as to the other members of the bargaining unit who do not receive the said allowances.
10.BENEFITS FOR COLLECTORS
MERALCO opposes the Secretary's grant of benefits for collectors on the ground that this is grossly unreasonable both in scope and on the premise it is
founded.
We have considered the arguments of the opposing parties regarding these benefits and find the Secretary's ruling on the (a) lunch allowance; (b)
disconnection fee for delinquent accounts; (c) voluntary performance of other work at the instance of the Company; (d) bobcat belt bags; and (e)
reduction of quota and MAPL during typhoons and other force majeure events, reasonable considering the risks taken by the company personnel
involved, the nature of the employees' functions and responsibilities and the prevailing standard of living. We do not however subscribe to the
Secretary's award on the following:
(a)Reduction of quota and MAPL when the collector is on sick leave because the previous CBA has already provided for a
reduction of this demand. There is no need to further reduce this.
(b)Deposit of cash bond at MESALA because this is no longer necessary in view of the fact that collectors are no longer required
to post a bond.
We shall now resolve the non-economic issues.
1.SCOPE OF THE BARGAINING UNIT
The Secretary's ruling on this issue states that:
"a.Scope of the collective bargaining unit. The union is demanding that the collective bargaining unit shall be composed of all
regular rank and file employees hired by the company in all its offices and operating centers through its franchise and those it
may employ by reason of expansion, reorganization or as a result of operational exigencies. The law is that only managerial
employees are excluded from any collective bargaining unit and supervisors are now allowed to form their own union (Art. 254 of
the Labor Code as amended by R.A. 6715). We grant the union demand."
Both MERALCO and the Office of the Solicitor General dispute this ruling because it disregards the rule We have established on the exclusion of
confidential employees from the rank and file bargaining unit. dctai
In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedores Union, 40 we ruled that:
"Put another way, the confidential employee does not share in the same "community of interests" that might otherwise make him
eligible to join his rank and file co-workers, precisely because of a conflict in those interests."
Thus, in Metrolab Industries vs. Roldan-Confesor, 41 We ruled:
". . . that the Secretary's order should exclude the confidential employees from the regular rank and file employees qualified to
become members of the MEWA bargaining unit."
From the foregoing disquisition, it is clear that employees holding a confidential position are prohibited from joining the union of the rank and file
employees.
2.ISSUE OF UNION SECURITY
The Secretary in his Order of August 19, 1996, 42 ruled that:
"b.Union recognition and security. The Union is proposing that it be recognized by the Company as sole and exclusive
bargaining representative of the rank and file employees included in the bargaining unit for the purpose of collective bargaining
regarding rates of pay, wages, hours of work and other terms and conditions of employment. For this reason, the Company shall
agree to meet only with the Union officers and its authorized representatives on all matters involving the Union as an organization
and all issues arising from the implementation and interpretation of the new CBA. Towards this end, the Company shall not
entertain any individual or group of individuals on matters within the exclusive domain of the Union.
Additionally, the Union is demanding that the right of all rank and file employees to join the Union shall be recognized by the
Company. Accordingly, all rank and file employees shall join the Union.
xxx xxx xxx
These demands are fairly reasonable. We grant the same in accordance with the maintenance of membership principle as a form
of union security."
The Secretary reconsidered this portion of his original order when he said in his December 28, 1996 order that:
". . . . When we decreed that all rank and file employees shall join the Union, we were actually decreeing the incorporation of a
closed shop form of union security in the CBA between the parties. In Ferrer v. NLRC, 224 SCRA 410, the Supreme Court ruled
that a CBA provision for a closed shop is a valid form of union security and is not a restriction on the right or freedom of
association guaranteed by the Constitution, citing Lirag v. Blanco, 109 SCRA 87."
MERALCO objected to this ruling on the grounds that: (a) it was never questioned by the parties; (b) there is no evidence presented that would justify the
restriction on employee's union membership; and (c) the Secretary cannot rule on the union security demand because this is not a mandatory subject for
collective bargaining agreement.
We agree with MERALCO's contention.
An examination of the records of the case shows that the union did not ask for a closed shop security regime; the Secretary in the first instance
expressly stated that a maintenance of membership clause should govern; neither MERALCO nor MEWA raised the issue of union security in their
respective motions for reconsideration of the Secretary's first disputed order; and that despite the parties clear acceptance of the Secretary's first ruling,
the Secretary motu proprio reconsidered his maintenance of membership ruling in favor of the more stringent union shop regime.

Under these circumstances, it is indubitably clear that the Secretary gravely abused his discretion when he ordered a union shop in his order of
December 28, 1996. The distinctions between a maintenance of membership regime from a closed shop and their consequences in the relationship
between the union and the company are well established and need no further elaboration.
Consequently, We rule that the maintenance of membership regime should govern at MERALCO in accordance with the Secretary's order of August 19,
1996 which neither party disputed.

3.THE CONTRACTING OUT ISSUE

This issue is limited to the validity of the requirement that the union be consulted before the implementation of any contracting out that would last for 6
months or more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs. Bersamira, 43 (where we recognized that contracting out of
work is a proprietary right of the employer in the exercise of an inherent management prerogative) the issue we see is whether the Secretary's
consultation requirement is reasonable or unduly restrictive of the company's management prerogative. We note that the Secretary himself has
considered that management should not be hampered in the operations of its business when he said that:
"We feel that the limitations imposed by the union advocates are too specific and may not be applicable to the situations that the
company and the union may face in the future. To our mind, the greater risk with this type of limitation is that it will tend to curtail
rather than allow the business growth that the company and the union must aspire for. Hence, we are for the general limitations
we have stated above because they will allow a calibrated response to specific future situations the company and the union may
face." 44
Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-defined legal
limitations. As we have previously held, the company can determine in its best business judgment whether it should contract out the performance of
some of its work for as long as the employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law or
must not have been the result of malicious or arbitrary action. 45 The Labor Code and its implementing rules also contain specific rules governing
contracting out (Department of Labor Order No. 10, May 30, 1997, Sections 1-25).
Given these realities, we recognize that a balance already exists in the parties' relationship with respect to contracting out; MERALCO has its legally
defined and protected management prerogatives while workers are guaranteed their own protection through specific labor provisions and the recognition
of limits to the exercise of management prerogatives. From these premises, we can only conclude that the Secretary's added requirement only
introduces an imbalance in the parties' collective bargaining relationship on a matter that the law already sufficiently regulates. Hence, we rule that the
Secretary's added requirement, being unreasonable, restrictive and potentially disruptive should be struck down.
4.UNION REPRESENTATION IN COMMITTEES
As regards this issue, We quote with approval the holding of the Secretary in his Order of December 28, 1996, to wit:
"We see no convincing reason to modify our original Order on union representation in committees. It reiterates what the Article
211 (A)(g) of the Labor Code provides: "To ensure the participation of workers in decision and policy-making processes affecting
their rights, duties and welfare. 'Denying this opportunity to the Union is to lay the claim that only management has the monopoly
of ideas that may improve management strategies in enhancing the Company's growth. What every company should remember is
that there might be one among the Union members who may offer productive and viable ideas on expanding the Company's
business horizons. The Union's participation in such committees might just be the opportune time for dormant ideas to come
forward. So, the Company must welcome this development (see also PAL v. NLRC, et al., G.R. 85985, August 13, 1995). It must
be understood, however, that the committees referred to here are the Safety Committee, the Uniform Committee and other
committees of a similar nature and purpose involving personnel welfare, rights and benefits as well as duties."
We do not find merit in MERALCO's contention that the above-quoted ruling of the Secretary is an intrusion into the management prerogatives of
MERALCO. It is worthwhile to note that all the Union demands and what the Secretary's order granted is that the Union be allowed to participate in
policy formulation and decision-making process on matters affecting the Union members' rights, duties and welfare as required in Article 211 (A) (g) of
the Labor Code. And this can only be done when the Union is allowed to have representatives in the Safety Committee, Uniform Committee and other
committees of a similar nature. Certainly, such participation by the Union in the said committees is not in the nature of a co-management control of the
business of MERALCO. What is granted by the Secretary is participation and representation. Thus, there is no impairment of management prerogatives.
5.INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA
MERALCO also decries the Secretary's ruling in both the assailed Orders that
"All other benefits being enjoyed by the Company's employees but which are not expressly or impliedly repealed in this new agreement shall remain
subsisting and shall likewise be included in the new collective bargaining agreement to be signed by the parties effective December 1, 1995." 46
claiming that the above-quoted ruling intruded into the employer's freedom to contract by ordering the inclusion in the new CBA all other benefits
presently enjoyed by the employees even if they are not incorporated in the new CBA. This matter of inclusion, MERALCO argues, was never
discussed and agreed upon in the negotiations; nor presented as issues before the Secretary; nor were part of the previous CBA's between the
parties.
We agree with MERALCO.
The Secretary acted in excess of the discretion allowed him by law when he ordered the inclusion of benefits, terms and conditions that the law and the
parties did not intend to be reflected in their CBA.
To avoid the possible problems that the disputed orders may bring, we are constrained to rule that only the terms and conditions already existing in the
current CBA and was granted by the Secretary (subject to the modifications decreed in this decision) should be incorporated in the CBA, and that the
Secretary's dispute orders should accordingly be modified.
6.RETROACTIVITY OF THE CBA
Finally, MERALCO also assails the Secretary's order that the effectivity of the new CBA shall retroact to December 1, 1995, the date of the
commencement of the last two years of the effectivity of the existing CBA. This retroactive date, MERALCO argues, is contrary to the ruling of this Court
in Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan-Confessor 47 which mandates that the effective date of the new CBA should be the date the
Secretary of Labor has resolved the labor dispute.

On the other hand, MEWA supports the ruling of the Secretary on the theory that he has plenary power and discretion to fix the date of effectivity of his
arbitral award citing our ruling in St. Lukes Medical Center, Inc. vs. Torres. 48 MEWA also contends that if the arbitral award takes effect on the date of
the Secretary Labor's ruling on the parties' motion for reconsideration (i.e., on December 28, 1996), an anomaly situation will result when CBA would be
more than the 5-year term mandated by Article 253-A of the Labor Code.
However, neither party took into account the factors necessary for a proper resolution of this aspect. Pier 8, for instance, does not involve a mid-term
negotiation similar to this case, while St. Lukes does not take the "hold over" principle into account, i.e., the rule that although a CBA has expired, it
continues to have legal effects as between the parties until a new CBA has been entered into. 49
Article 253-A serves as the guide in determining when the effectivity of the CBA at bar is to take effect. It provides that the representation aspect of the
CBA is to be for a term of 5 years, while
". . . [A]ll other provisions of the Collective Bargaining Agreement shall be re-negotiated not later than 3 years after its execution.
Any agreement on such other provision of the Collective Bargaining Agreement entered into within 6 months from the date of
expiry of the term of such other provisions as fixed in such Collective Bargaining Agreement shall retroact to the day immediately
following such date. If such agreement is entered into beyond 6 months, the parties shall agree on the duration of the effectivity
thereof. . . ."
Under these terms, it is clear that the 5-year term requirement is specific to the representation aspect. What the law additionally requires is that a CBA
must be re-negotiated within 3 years "after its execution." It is in this re-negotiation that gives rise to the present CBA deadlock.
If no agreement is reached within 6 months from the expiry date of the 3 years that follow the CBA execution, the law expressly gives the parties not
anybody else the discretion to fix the effectivity of the agreement.
Significantly, the law does not specifically cover the situation where 6 months have elapsed but no agreement has been reached with respect to
effectivity. In this eventuality, we hold that any provision of law should then apply for the law abhors a vacuum. 50
One such provision is the principle of hold over, i.e., that in the absence of a new CBA, the parties must maintain the status quo and must continue in full
force and effect the terms and conditions of the existing agreement until a new agreement is reached. 51 In this manner, the law prevents the existence
of a gap in the relationship between the collective bargaining parties. Another legal principle that should apply is that in the absence of an agreement
between the parties, then, an arbitrated CBA takes on the nature of any judicial or quasi-judicial award; it operates and may be executed only
respectively unless there are legal justifications for its retroactive application.
Consequently, we find no sufficient legal ground on the other justification for the retroactive application of the disputed CBA, and therefore hold that the
CBA should be effective for a term of 2 years counted from December 28, 1996 (the date of the Secretary of Labor's disputed order on the parties'
motion for reconsideration) up to December 27, 1999.

WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19, 1996 and December 28, 1996 are set
aside to the extent set forth above. The parties are directed to execute a Collective Bargaining Agreement incorporating the terms and conditions
contained in the unaffected portions of the Secretary of Labor's orders of August 19, 1996 and December 28, 1996, and the modifications set forth
above. The retirement fund issue is remanded to the Secretary of Labor for reception of evidence and determination of the legal personality of the
MERALCO retirement fund. cdtai
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan and Pardo, JJ., concur.
Footnotes
1.Annex "A" of Petition, Rollo, p. 93.
2.Annex "B" of Petition, Rollo, p. 94.
3.Annex "5" of MEWA's Comment, Rollo, pp. 852-879:
1.Wage increase 1995 P4,000.00/month
1996 P3,000.00/month
2.Integration of RCR and longevity allowances into the basic salary.
3.Longevity increase in the amount of P30.00 a year.
4.Sick leave upgraded from 21 to 31 days depending on length of service and sick leave reserve reduced to 15 days.
5.Vacation leave 24 days minimum 32 days maximum.
6.Union leave with pay for 50 Mondays per month.
7.Maternity Leave 70 days-normal delivery
90 days caesarian
Paternity leave 10 days normal
14 days caesarian
8 days miscarriage.
8.Funeral leave 12 days 6 days.
9.Birthday leave falls on regular working day leave with pay/regular day off entitled next working day non-working
holiday next working day.
10.Group hospitalization and surgical insurance plan (GHSIP) and health and maintenance plan (HMP) for dependents.

11.Longevity bonus.
12.Christmas bonus equivalent to one month's salary & allowance and special Christmas grant (incorporated in the CBA)
equivalent to two months' pay to be given in the middle of November and second week of December.
13.Mid-year bonus incorporated in the CBA.
14.Anniversary bonus P6,000.00/1st year, P8,000.00 2nd year.
15.Christmas Gift Certificate
16.Retirement
17.Dental, medical and hospitalization benefits
18.Resignation benefit for employees who served for at least 7 years.
19.Night work 50% of employees basic salary.
20.Shortswing an employee after resting for not more than 8 hours is required to work in another shift is considered
employees' work for the following day and given additional 4 hours straight time.
21.High voltage/high pole allowance for P45.00 to P75.00.
22.Employees' Cooperative to provide the seed money of P3,000,000.00.
23.Hold-up allowance pay P5,000.00 value of personal belonging taken from accountable officer.
24.Fieldmen's rubber shoes
25.Uniforms
26.Calamity leave
27.Danger exposure allowance
28.Meal and lodging allowancebreak fast P40.00
Lunch P60.00
Dinner P60.00
Lodging P200/night
29.Payroll treatment for accident while on duty
30.Housing equity assistance loan increased to P60,000.00
31.Female employee's uniforms, and
32.Benefits for collectors.
The Union's political demands consist of:
1.The scope of the collective bargaining unit all regular rank and file hired by the company in all its offices.
1.Union recognition and security all rank & file employees to join the union
2.Allow union to meet with the newly regularized employees for a period not exceeding 4 hours excused for work.
3.Transfer of assignment and job security
4.Check-off of union dues
5.Payroll reinstatement
6.Union representation in committees
7.Signing bonus of P7,000.00.
4.Annex "G" of Petition, Rollo, pp. 120-122.
5.Annex "H" of Petition, Rollo, pp. 124-125.
6.Annex "M", Rollo, pp. 319-340.
7.Annex "N" of Petition, Rollo, pp. 341-394.
8.Annex "V" of Petition, Rollo, pp. 661-715.
9.Section 18, Article 2 of the 1987 Constitution.
10.Section 6, Article 12, Id.
11.Section 1, Article 13, Id.
12.Section 3, Article 12 and Section 3[3], Article 15 of the 1987 Constitution.
13.Phil. Scout Veteran Security vs. NLRC, 262 SCRA 112 [1996], citing Insular Bank of Asia and America Employees Union (IBAAEU) vs. Inciong,
132 SCRA 663 [1984]; Endencia vs. David, 93 Phil. 696 [1953].
14.Section 3, pars. 3 & 4, Article 13 of the 1987 Constitution.

15.Garcia vs. Exec. Secretary, 204 SCRA 516 [1991]; Dumlao vs. Comelec, 95 SCRA 390 [1980]; Assoc. of Small Landowners of the Phil. vs.
Secretary of Agrarian Reform, 175 SCRA 343 [1989].
16.Taxicab Operators of Metro Manila, Inc. vs. Board of Transportation, 117 SCRA 597 [1982].
17.Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan-Confesor, 241 SCRA 295 [1995].
18.American Home Assurance Company vs. NLRC, 259 SCRA 280 [1996]; Lopez Sugar Corp. vs. Federation of Free Workers, et al., 189 SCRA 179
[1990].
19.PAL vs. Confesor, 231 SCRA 41 [1994].
20.PAL vs. Confesor, Id.; Caltex Filipino Managers Supervisors vs. CIR, 44 SCRA 350 [1972]; Labor ng Pagkakaisa sa Peter-Paul vs. CIR, 96 Phil. 63
[1954].
21.See Annex "B" of the Union's Rejoinder to Company's Opposition to Union's Motion for Reconsideration. Rollo, p. 1521.
22.Annex "V" of Petition, Rollo, p. 694.
23.Annex "S" of Petition, Rollo, p. 596.
24.Annex "W" of Petition, Rollo, p. 716.
25.A formula used by the Court in determining the reasonableness of the wages award in PAL vs. Confesor, supra.
26.Annex "I", Rollo, p. 133:
"The MERALCO rank and file employee receives a monthly average salary of P11,601 as against the median salary of P9,620
monthly and the weighted average salary of P9,729 monthly prevailing in the community. This means that Meralco's average monthly
salary rate for its rank and file employees is 20.60 percent higher than the median salary and 19.24 percent higher than the weighted
average salary enjoyed by other rank and file employees within the community.
27.Annex "K", Rollo, p. 221.
28.Annex "V" of Petition, Rollo, pp. 700-701.
29.Azucena, The Labor Code, Vol. I, 1996 Ed., p. 314.
30.Philippine Education Co., Inc. vs Court of Industrial Relations, 92 SCRA 381 [1979].
31.Liberation Steamship Co., Inc. vs. CIR, 23 Phil. 1105 [1968]; National Development Co. vs. CIR, 23 Phil. 1106; Heacock Co. vs. NLU, 95 Phil. 553;
NWSA vs NWSA Consolidated Labor Union, 21 SCRA 203 [1967].
32.Globe Mackay Cable and Radio Corporation vs. NLRC, 163 SCRA 71 [1988].
33.220 SCRA 463 [1993].
34.Article 100 of the Labor Code; Davao Fruits Corporation vs. Associate Labor Union, 225 SCRA 567 [1993].
35.Annex "V" of Petition, Rollo, p. 704.
36.See Rollo, p. 1786.
37.Annex "E" of the Union's Rejoinder to Company's Opposition to Union's Motion for Reconsideration, Rollo, p. 1525.
38.MERALCO's Memorandum, Rollo, p. 1721.
39.MEWA's Memorandum, p. 37.
40.214 SCRA 295 [1995] citing Golden Farms, Inc. vs. Calleja, 175 SCRA 471 [1989]; Philips Industrial Development, Inc. vs. NLRC, 210 SCRA 348
[1992]; National Association of Trade Unions-Republic Planters Bank Supervisors Chapter vs. Hon. Ruben Torres, 239 SCRA 546 [1994].
41.254 SCRA 182.
42.Annex "M" of Petition, Rollo, p. 338.
43.186 SCRA 496 [1990].
44.Annex "V" of Petition, Rollo, pp. 713-714.
45.De Ocampo vs. NLRC, 213 SCRA 652 [1992].
46.Annex "M" of Petition, Rollo, p. 340.
47.241 SCRA 294, 307 [1995].
48.223 SCRA 779 [1993].
49.Lopez Sugar Corporation vs. Federation of Free Workers, 189 SCRA 179 [1990].
50.Duldulao vs. Ramos, 91 Phil. 2611; Rivera vs. Court of Appeals, 176 SCRA 169 [1989].
51.National Congress of Unions in the Sugar Industry vs. Ferrer-Calleja, 205 SCRA 478 [1995].

||| (Manila Electric Co. v. Quisumbing, G.R. No. 127598, January 27, 1999)

THIRD DIVISION
[G.R. No. 157202. March 28, 2007.]
PHILIPPINE LONG DISTANCE and TELEPHONE COMPANY, INC., petitioner, vs. AMPARO BALBASTRO and NATIONAL
LABOR RELATIONS COMMISSION, respondents.
DECISION
AUSTRIA-MARTINEZ, J p:
Before us is a Petition for Review on Certiorari filed by Philippine Long Distance and Telephone Company, Inc. (petitioner) seeking to annul the Decision
1 dated July 31, 2002 and the Resolution 2 dated February 7, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 51060.
Amparo Balbastro (private respondent) was employed by petitioner in 1978 as its telephone operator until her questioned dismissal from employment on
October 5, 1989. She was dismissed by petitioner for her absences without authorized leave due to unconfirmed sick leave on June 28 to July 14, 1989,
which constituted her third offense 3 punishable by dismissal under petitioner's rules and regulations. 4
On October 28, 1991, private respondent filed a Complaint 5 with the Labor Arbiter against petitioner and its President, Antonio Cojuangco, for illegal
dismissal, non-payment of salary wage, premium pay for rest day, 13th month pay, and damages. In her position paper, she alleged that she was
dismissed on the ground of unconfirmed sick leave despite her presentation of medical certificates from her attending physicians which were not
considered by petitioner's medical doctors; and that she has four minor children and it was not her intention to habitually absent herself without reason
considering that her loss of job which was based only on opinions of petitioner's doctors had caused her great deprivation and moral suffering. She
prayed for reinstatement, backwages, and damages.
Petitioner filed its position paper with Motion to Dismiss 6 alleging that private respondent's habitual and unjustified absences was a just and valid cause
for her termination under its rules and regulations; and that her record of unauthorized absences for 1989 showed the following:
First unauthorized absences, from March 19 to 29, 1989. Private respondent absented herself from work for nine days excluding rest days on March 23
to 24, 1989 without notice to petitioner. She gave marital problem as the reason for her absence. She was penalized with 18 days suspension for
violating petitioner's rules and regulations regarding absences.
Second unauthorized absences, from June 11 to 13, 1989. Private respondent called in sick from Tanauan, Batangas on June 5 that she was suffering
from gastroenteritis. She absented herself from June 5 to 13, 1989. On June 14, 1989, she presented herself to petitioner's doctor, Dr. Melissa Musngi
and submitted a medical certificate where it was stated that she was under treatment from June 5 to 8, 1989 of gastroenteritis. Dr. Musngi confirmed
private respondent's sick leave from June 5 to 10, 1989 but did not confirm her absences from June 11 to 13, 1989 because her medical certificate
covered only the period from June 5 to 8, 1989. Furthermore, petitioner reasons out that if she really had such illness, certain normal logical medical
procedures should have been taken, such as stool examinations and hospitalization; and she bore no post-illness manifestations of gastroenteritis.
Private respondent's unconfirmed leave of absence was considered by petitioner unauthorized due to her patent abuse of sick leave privileges and
treated it as her second offense and was penalized with 15 days suspension.
Third unauthorized absences, from June 28 to July 14, 1989. On June 25, 1989, private respondent made a sick call that she had sore eyes and
absented herself from June 25 to July 14, 1989. On July 3, 1989, she was outvisited at her given address in Makati but was not found home. On July 15,
1989, she reported for work and presented herself to the clinic for confirmation. She had her medical certificate issued by her attending physician
showing that she had been under his professional treatment from June 25 to July 12, 1989 for systemic viral infection. Petitioner's doctor, Dr. Benito
Dungo, confirmed her sick leave from June 25 to 27, 1989 but did not confirm as to the rest of the dates when she was absent from work. When asked
to explain, private respondent said that she had a viral infection during the said period; and that she was in Tanauan, Batangas during the said dates so
she was not found in Makati when outvisited. Petitioner's doctor did not confirm her leave of absence from June 28 to July 14, 1989 on the ground that
such illness did not warrant a very long time of rest; certain laboratory examinations should have been conducted by her attending physician; and there
was patent abuse of her sick leave privileges.
While private respondent's third leave of absence was being deliberated upon, she absented herself from August 6 to 12, 1989. She called in sick on
August 6, 1989 informing her supervisor that she had a fever. The medical certificate issued by her attending physician showed that she was under
treatment from August 7 to 10, 1989 for influenza. Petitioner's doctor, Dr. Eduardo Co, confirmed private respondent's leave of absence from August 6 to
8, 1989 but did not confirm the rest because her absences from August 9 to 12, 1989 were not covered by a medical certificate; her illness did not
warrant prolonged absence; and it was medically impossible for her to contract the same illness which she contracted the previous month since it is a
medical fact that there is no such thing as an immediately recurrent viral infection.
In view of her repeated absences without authorized leave for the third time, petitioner terminated private respondent's service effective October 5, 1989.
The Labor Arbiter conducted a hearing where private respondent testified on her behalf, while petitioner presented the three medical doctors who did not
confirm portions of private respondent's leave of absence, and its Employee Relations and Service Department Manager.
On May 30, 1994, the Labor Arbiter issued its Decision, 7 the dispositive portion of which reads:
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the respondent Philippine
Long Distance [and] Telephone Co. to reinstate the complainant to her former position as telephone operator with all the rights,
privileges and benefits appertaining thereto, including seniority, plus backwages equivalent to one (1) year salary in the sum of
P78,000.00 (P6,500.00/mo. x 12 mos.).
SO ORDERED. 8
The Labor Arbiter held that private respondent's first incident of absence from March 19 to 29, 1989 were unauthorized but not as to the other
succeeding absences. It found that private respondent, on her first day of absence, called in sick and when she reported for work, she went to
petitioner's clinic for check-up and submitted her medical certificates, thus she complied with the standard requirements on matters of sick leave; that
petitioner's doctors did not confirm some portions of private respondent's leave of absence based merely on their medical opinions; that such justification
was not warranted under Department Order No. ADM-79-02 wherein absences due to illness were considered unauthorized and without pay when the
attending doctor's signature is forged, there is alteration as to the date and contents of the medical certificate, the certificate is false as to the facts
alleged therein, the doctor issuing the medical certificate is not qualified to attend to the illness, there are falsities and misrepresentations, and when
there is patent abuse of sick leave privileges; and that these circumstances were not proven in this case. SADECI
The Labor Arbiter gave more credence to the doctor who actually attended to private respondent rather than to the medical opinion of petitioner's
doctors. It concluded that petitioner's doctors should have coordinated with private respondent's attending physicians to settle any doubts as to the
medical certificates.

Petitioner filed its appeal with the National Labor Relations Commission (NLRC). 9 On January 19, 1996, the NLRC issued a Resolution 10 affirming the
decision of the Labor Arbiter.
The NLRC found that company practice allows leave of absence due to sickness if supported by a medical certificate issued by the attending physician;
that a difference in opinion by the Medical Director from that of the attending physician should not prejudice private respondent since the Medical
Director can consider absences unauthorized only in cases of forgery and patent abuse of sick leave privileges which were not proven in this case; that if
the Medical Director entertained doubts as to the medical certificate, he should have asked the attending physician to submit himself for crossexamination and then present an independent physician for an expert opinion on the matter.
Petitioner's Motion for Reconsideration was denied in a Resolution 11 dated March 14, 1996.
Undaunted, petitioner filed with us a Petition for Certiorari with prayer for the issuance of a Temporary Restraining Order (TRO). A TRO was issued to
enjoin the enforcement of the NLRC Resolution until further orders. 12
In a Resolution dated December 7, 1998, 13 we referred the petition to the CA in accordance with the St. Martin Funeral Home v. National Labor
Relations Commission 14 ruling.
On July 31, 2002, the CA issued its assailed Decision which dismissed the petition and affirmed the NLRC Decision. The CA held that as long as the
medical certificate presented did not fall under any of the infirmities set forth in petitioner's rules and regulations, the unconfirmed leave should be
treated merely as absence without leave and was not subject to disciplinary action; that petitioner may not rely on the previous absences of respondents
in 1978 and 1982 to show abuse of sick leave privileges because petitioner had acknowledged that respondent had already been penalized with
suspension, and those absences were committed beyond the three-year period mentioned in their rules and regulations; that in its desire to clothe
private respondent's dismissal with a semblance of legality, petitioner points to private respondent's fourth unauthorized leave of absence committed in
August 1989 while the third unauthorized leave of absence was being deliberated upon; and that the notice of dismissal referred only to her third
unauthorized leave, thus she could not be faulted for an infraction for which she was not charged.

Petitioner's Motion for Reconsideration was denied in a Resolution dated February 7, 2003.
Hence, petitioner filed the instant Petition for Review on Certiorari alleging the following grounds:
I
WITH ALL DUE RESPECT, THE HONORABLE COURT FAILED TO CONSIDER THAT THE PETITION HEREIN DOES NOT
MERELY INQUIRE UPON THE RELATIVE WEIGHT OF THE EVIDENCE PRESENTED BY THE PARTIES, BUT IS ANCHORED
ON MANIFESTLY ERRONEOUS CONCLUSIONS ON THE PART OF THE NLRC ARISING FROM GROSS
MISAPPREHENSION OF THE FACTS OBTAINING IN THE CASE. AMONG OTHERS, IT WAS GRAVE ERROR TO
CONCLUDE THAT THERE WAS NO PATENT ABUSE OF THE SICK LEAVE PRIVILEGE ON THE PART OF THE PRIVATE
RESPONDENT BECAUSE THE MEDICAL CERTIFICATES SHE PRESENTED WERE NOT FALSE, FORGED, OR ALTERED
TOTALLY DISREGARDING THE FACT THAT "ABUSE OF SICK LEAVE PRIVILEGE" IS A CAUSE SEPARATELY
ENUMERATED UNDER THE RULES AS A GROUND FOR DISCIPLINARY ACTION.
II
WITH ALL DUE RESPECT, THE HONORABLE COURT FAILED TO CONSIDER THAT THE CONCLUSIONS OF THE NLRC
ARE BEREFT OF ANY LEGAL OR FACTUAL BASES AS THERE WERE LEGALLY NO MEDICAL CERTIFICATES TO SPEAK
OF, AND THE EXISTENCE THEREOF ARE PURE AND SIMPLE HEARSAY, HENCE COULD NOT BE VALIDLY RELIED
UPON OR INVOKED BY THE PRIVATE RESPONDENT TO SUPPORT HER DEFENSE EVEN SUPPOSING TECHNICAL
RULES ON EVIDENCE COULD BE RELAXED IN LABOR PROCEEDINGS. 15
Petitioner argues that the NLRC's conclusions that private respondent had not committed a patent abuse of sick leave privileges and that her dismissal
was illegal are utterly without any factual or legal basis; that the NLRC's conclusion that the dismissal was illegal was merely based: (1) on the evidence
of private respondent; (2) on medical certificates which are clearly hearsay and of no probative value whatsoever; and (3) on medical certificates which,
even supposing could be considered, simply failed to cover the period of the leave requested and set forth implausible diagnoses.
Petitioner claims that the CA as well as the NLRC failed to resolve the issue of whether or not the medical certificate should be given any credence at all;
that it had presented four witnesses which included their three medical doctors who were subjected to cross-examinations, and yet credence was given
to private respondent's hearsay evidence consisting merely of a medical certificate by the latter's attending physician who was not even presented to
testify; that since the content of the medical certificate had been rebutted and refuted by petitioner's witnesses, the burden of evidence is shifted to
private respondent to show that the medical certificate she submitted was competent, proper, and sound which she failed to do. aIcTCS
Petitioner further claims that the CA erred in not finding that private respondent committed a patent abuse of sick leave privileges which does not arise
solely from forgery or alteration of the medical certificate, but on the fact that an employee had frequently and incorrigibly absented herself and then
applied for sick leave with absolute impunity armed with medical certificates which not only failed to cover the entire length of the leave but also with
implausible diagnoses; that excluding private respondent's unauthorized absences in 1989, she had accumulated 93 days of sick leave from January to
July 1989 and 115 days of sick leave in 1988, thus, how can the conclusion be drawn that there was no patent abuse of sick leave privileges; and that
her unauthorized absence for which she was terminated all occurred in 1989, thus, the CA erred in saying that petitioner may not rely on the previous
absences of respondent in 1978 and 1982 to justify private respondent's dismissal.
We find the petition meritorious. Private respondent was validly dismissed by petitioner. It must be borne in mind that the basic principle in termination
cases is that the burden of proof rests upon the employer to show that the dismissal is for just and valid cause and failure to do so would necessarily
mean that the dismissal was not justified and, therefore, was illegal. 16 For dismissal to be valid, the evidence must be substantial and not arbitrary and
must be founded on clearly established facts. 17 We find that petitioner had discharged this burden.
Under petitioner's Department Order No. ADM-79-02, for the absence due to an alleged illness to be considered unauthorized, without pay, and subject
to disciplinary action, it must be shown that the medical certificate is forged, altered as to the date and contents, false as to the facts stated therein,
issued by a doctor not qualified to attend to the patient's illness, and there is patent abuse of sick leave privileges. The penalty for three offenses of
unauthorized absences committed within the three-year period is dismissal.
Private respondent's unconfirmed absences from June 28 to July 14, 1989 is the crucial period in this particular case.
The Labor Arbiter and the NLRC found that private respondent was illegally dismissed by petitioner. Such finding was affirmed by the CA. They all
concluded that the medical certificate which private respondent presented did not fall under the circumstances enumerated in Department Order No.

ADM-79-02, and there was no patent abuse of sick leave privileges, thus, there was no basis for petitioner's doctors not to confirm her sick leave and
consider the same unauthorized.
The jurisdiction of this Court in a petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless the factual findings being
assailed are not supported by evidence on record or the impugned judgment is based on a misapprehension of facts. 18 We find that those exceptions
are present in the instant case.
We find that petitioner had sufficiently established that private respondent committed a patent abuse of her sick leave privileges which is one of the
grounds listed in Department Order No. ADM-79-02 for disciplinary action.
Private respondent was absent on June 25, 1989 and the reason given was sore eyes. She was then absent from June 25 to July 14, 1989. When she
reported for work on July 15, 1989, she went to petitioner's doctor, Dr. Benito Dungo, for confirmation of her leave of absence and presented a medical
certificate 19 from her attending physician, Dr. Manuel C. Damian of Tanauan Batangas, who certified that she had been under his professional care
from June 25 to July 12, 1989 for systemic viral disease.
Dr. Dungo confirmed private respondent's leave of absence from June 25 to 27, 1989 only and did not confirm her leave from June 28 to July 14, 1989
for the following reasons: (a) systemic viral disease indicated in the medical certificate does not warrant such a very long time of rest and recuperation;
(b) if she really had an infection, the logical recourse is for the attending physician to conduct a chest x-ray and blood examination to determine the
cause of the prolonged fever, but such was not made; (c) if she was really ill for such a long time, she would have already been confined in a hospital for
treatment as petitioner has standing agreements with various hospitals to provide immediate medical assistance free of charge; (d) she displayed no
residue of symptoms of flu, thus casting doubt on the veracity of her claim; (e) she called in sick on June 25, 1989 that she was suffering from sore eyes
but her medical certificate made no mention of such condition; and (f) her medical records reveal a pattern of abuse of sick leave privileges. 20
Private respondent's reason for her absence on June 25, 1989 was sore eyes, however the medical certificate that she presented for her prolonged
absence from June 25 to July 14, 1989 was systemic viral disease and as correctly observed by Dr. Dungo, sore eyes was never mentioned therein.
Moreover, in the medical progress note 21 of Dr. Damian dated October 10, 1989 attached to private respondent's position paper submitted before the
Labor Arbiter, it was shown that private respondent was seen by Dr. Damian on June 25, 1989 at 9:00 a.m. and her temperature was 40 degrees and
she was complaining of severe headache and body pain. It would appear that there was a discrepancy between the reason given when she called in
sick on June 25, 1989 and her complaints when she consulted Dr. Damian on the same day. In fact, when private respondent was asked on crossexamination why sore eyes was never mentioned in her medical certificate, all that she could say was "the diagnosis was systemic viral disease, samasama na lahat". 22
The medical certificate issued by Dr. Damian showed that private respondent was under his professional care from June 25 to July 12, 1989. However,
the medical progress note dated October 10, 1989 of the same doctor showed that private respondent consulted him only on June 25, 27, and 29, 1989.
It was never mentioned that Dr. Damian had seen private respondent after June 29, 1989. Thus, there was even a discrepancy between the medical
certificate dated July 13, 1989 and the medical progress note as to the time frame that private respondent was seen by Dr. Damian. The medical
certificate did not cover private respondent's absences from July 13 to 14, 1989 and she only reported for work on July 15, 1989.
It bears stressing that from the time private respondent called in sick on June 25, 1989 due to sore eyes, she never called up petitioner again until she
reported for work on July 15, 1989. She never went to petitioner's doctors for them to verify her sickness.
Private respondent had committed the first two offenses of unauthorized absences in the same year. First, she did not report for work from March 19 to
29, 1989 without notice to petitioner, thus her absence was treated as unauthorized and considered her first offense for which she was penalized with
suspension. Second, she again did not report for work from June 5 to 13, 1989 and when she reported for work and presented her medical certificate, it
covered the period from June 5 to 8, 1989 only but she did not report for work until June 14, 1989. Petitioner's doctor did not confirm her absences from
June 11 to 13, 1989, thus, the same was considered unauthorized and her second offense for which she was penalized again with suspension. These
two unauthorized absences together with her third unauthorized absences committed from June 28 to July 14, 1989 are sufficient bases for petitioner's
finding that private respondent patently abused her sick leave privileges. ADScCE

Previous infractions may be used as justification for an employee's dismissal from work in connection with a subsequent similar offense. 23 Moreover, it
is in petitioner's rules and regulations that the same offense committed within the three-year period merits the penalty of dismissal. The CA's finding that
petitioner may not rely on the previous absences of private respondent in 1978 and 1982 to show abuse of sick leave privileges has no basis since
private respondent was dismissed for committing her three unauthorized absences all in 1989.
It had also been established by Dr. Dungo's testimony that private respondent's medical record showed that she did not go to the clinic for consultation
as she would only present a medical certificate and get a clearance for her sick leave; 24 that the same medical record showed her absences in 1989 as
follows: (1) From April 27 to May 4 due to urinary tract infection and she submitted a medical certificate; 25 (2) From May 5 to 14 due to back pain; 26 (3)
From May 20 to 21 due to migraine; 27 (4) June 5 to 13 due to gastroenteritis (penalized as her second offense); (5) June 15 to 24 due to conjunctivitis
and submitted a medical certificate; 28 and (6) June 25 to July 14, 1989 due to systemic viral disease with medical certificate (her third offense penalized
with dismissal). Private respondent had incurred a total absence of 85 days from January to October 1989; 29 and 115 days in 1988. 30 It had also been
established that petitioner's doctors confirmed most of her sick leave out of compassion 31 and that her medical records showed that there were several
warnings given her regarding her unconfirmed sick leave. 32
As petitioner stated in its pleadings, it is a telecommunication service company which provides the country with various telecommunication services and
facilities. Its operations are a vital part to many transactions all over the country and abroad, and private respondent was one of its telephone operators
who used to connect all these calls. Thus, her patent abuse of her sick leave privileges is detrimental to petitioner's business.
While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's
source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the
services of an employee who has been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes neither
oppression nor self-destruction of the employer. 33 It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a
recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on
relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none). 34
WHEREFORE, the instant petition is GRANTED. The Decision dated July 31, 2002 and the Resolution dated February 7, 2003 of the Court of Appeals
in CA-G.R. SP No. 51060 are hereby REVERSED and SET ASIDE. The complaint of Amparo Balbastro is DISMISSED.
No costs.

SO ORDERED.
Ynares-Santiago, Callejo, Sr., Chico-Nazario and Nachura, JJ., concur.

Footnotes

1.Penned by Justice Mario Guaria III and concurred in by Justices Conrado M. Vasquez, Jr. and Andres B. Reyes, Jr.; CA rollo, pp. 271-276.
2.Id. at 299.
3.Records, p. 84.
4."Traffic Operators Guidelines for Disciplinary Actions"
xxx xxx xxx
7. Unconfirmed Sick Leave. This may be treated as:
a) AWOL, or
b) Leave of Absence without pay.
8. AWOL
Frequency Penalty
1st offense Suspension- # of days absent x 2
2nd offense Suspension - # of days absent x 3 but not less than 15 days
3rd offense Dismissal
within a 3 year period.
5.Docketed as NLRC-NCR Case No. 00-10-06232-91.
6.Records, pp. 24-47.
7.Penned by Labor Arbiter Jose G. De Vera, records, pp. 1032-1042.
8.Id. at 1042.
9.Docketed as NLRC NCR CA No. 007802-94.
10.Penned by Commissioner Ireneo B. Bernardo, concurred in by Presiding Commissioner Lourdes C. Javier and Commissioner Joaquin A. Tanodra,
records, pp. 1342-1348.
11.Id. at 1386-1387.
12.CA rollo, pp. 98-99.
13.Id. at 160.
14.356 Phil. 811 (1998).
15.Rollo, pp. 49-50.
16.Royal Crown Internationale v. National Labor Relations Commission, G.R. No. 78085, October 16, 1989, 178 SCRA 569, 578 citing Polymedic
General Hospital v. National Labor Relations Commission, G.R. No. L-64190, January 31, 1985, 134 SCRA 420, 424.
17.Skippers Pacific, Inc. v. Mira, 440 Phil. 906, 918 (2002).
18.German Machineries Corporation v. Endaya, G.R. No. 156810, November 25, 2004, 444 SCRA 329, 340, citing Bolinao Security and Investigation
Service, Inc. v. Toston, G.R. No. 139135, January 29, 2004, 421 SCRA 406, 412.
19.Annex "D-1", records, p. 934.
20.Exhibit "1", Affidavit of Dr. Dungo, id. at 130-135.
21.Id. at 9.
22.TSN, January 27, 1993, p. 87.
23.Stellar Industrial Services, Inc. v. National Labor Relations Commission, 322 Phil. 352, 364 (1996). AHDacC
24.TSN, March 8, 1993, p. 30.
25.Id. at 31.
26.Id. at 32.
27.Id. at 33.
28.Id. at 34.
29.TSN, March 18, 1993, p. 23.
30.Id. at 25.

31.TSN, October 21, 1993, p. 42.

32.Id.
33.Philippine Geothermal, Inc. v. National Labor Relations Commission, G.R. No. 106370, September 8, 1994, 236 SCRA 371, 378-379 citing Pacific
Mills, Inc. v. Alonzo, G.R. No. 78090, July 26, 1991, 199 SCRA 617, 622.
34.Philippine Geothermal, Inc. v. National Labor Relations Commission, id. at 379.
||| (PLDT, Inc. v. Balbastro, G.R. No. 157202, March 28, 2007)

EN BANC
[G.R. No. 117040. January 27, 2000.]
RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT STORE,
respondents.
Buenaluz Urbano Law Office for petitioner.
The Solicitor General for public respondent.
Romeo Batino for private respondent.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FACTUAL FINDINGS OF ADMINISTRATIVE AGENCY THAT PHASE-OUT OF SECURITY SECTION CONSTITUTED
"A LEGITIMATE BUSINESS DECISION," ACCORDED RESPECT AND EVEN FINALITY BY THIS COURT. Indeed, that the phase-out of the security
section constituted a "legitimate business decision" is a factual finding of an administrative agency which must be accorded respect and even finality by
this Court since nothing can be found in the record which fairly detracts from such finding.
2. LABOR AND SOCIAL LEGISLATION; LABOR CODE; TERMINATION OF EMPLOYMENT; EMPLOYER MUST BE SANCTIONED WHERE
EMPLOYEE VALIDLY DISMISSED WAS NOT FURNISHED TWIN REQUIREMENTS OF NOTICE AND OPPORTUNITY TO BE HEARD. As this
Court said: "It is now settled that where the dismissal of one employee is in fact for a just and valid cause and is so proven to be but he is not accorded
his right to due process, i.e., he was not furnished the twin requirements of notice and opportunity to be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due process."
3. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; DOES NOT APPLY TO EXERCISE OF PRIVATE POWER. The Due Process
Clause of the Constitution is a limitation on governmental powers. It does not apply to the exercise of private power, such as the termination of
employment under the Labor Code. This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or
property without due process of law. . . ." The reason is simple: Only the State has authority to take the life, liberty, or property of the individual. The
purpose of the Due Process Clause is to ensure that the exercise of this power is consistent with what are considered civilized methods.
4. LABOR AND SOCIAL LEGISLATION; LABOR CODE; TERMINATION OF EMPLOYMENT; NOTICE AND HEARING, PURPOSE. The purpose for
requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity to be heard on any charge against him, for there is
none. The purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic
causes do exist justifying the termination of his employment. Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and
hearing is not to comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage. Then that is the time we speak
of notice and hearing as the essence of procedural due process. Thus, compliance by the employer with the notice requirement before he dismisses an
employee does not foreclose the right of the latter to question the legality of his dismissal. EHTIcD
5. ID.; ID.; ID.; ID.; NON-COMPLIANCE THEREWITH DOES NOT CONSTITUTE DENIAL OF DUE PROCESS. With respect to Art. 283 of the Labor
Code, the employer's failure to comply with the notice requirement does not constitute a denial of due process but a mere failure to observe a procedure
for the termination of employment which makes the termination of employment merely ineffectual.
6. ID.; ID.; ID.; ID.; ID.; DOES NOT MAKE DISMISSAL ILLEGAL. Under the Labor Code, only the absence of a just cause for the termination of
employment can make the dismissal of an employee illegal. This is clear from Art. 279.
7. ID.; ID.; ID.; ID.; APPLICABLE RULES. If in proceedings for reinstatement under Art. 283, it is shown that the termination of employment was due
to an authorized cause, then the employee concerned should not be ordered reinstated even though there is failure to comply with the 30-day notice
requirement. Instead, he must be granted separation pay in accordance with Art. 283. If the employee's separation is without cause, instead of being
given separation pay, he should be reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid full backwages
if he has been laid off without written notice at least 30 days in advance. On the other hand, with respect to dismissals for cause under Art. 282, if it is
shown that the employee was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not be
reinstated. However, he must be paid backwages from the time his employment was terminated until it is determined that the termination of employment
is for a just cause because the failure to hear him before he is dismissed renders the termination of his employment without legal effect.
BELLOSILLO, J., separate opinion:
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT; TERMINATION THEREOF; JUST CAUSES. Article 282 of the Labor Code
enumerates the just causes for the termination of employment 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.
2. ID.; ID.; ID.; AUTHORIZED CAUSES. On the other hand, Arts. 283 and 284 of the same Code enumerate the so-called authorized causes: (a)
installation of labor saving devices; (b) redundancy; (c) retrenchment to prevent losses; (d) closure or cessation of the establishment or undertaking
unless the closure or cessation is for the purpose of circumventing the provisions of the law; and, (e) disease.
3. ID.; ID.; ID.; SEPARATION PAY; BASIS OF COMPUTATION. The basis in computing the amount of separation pay varies depending on whether
the termination is due to the installation of a labor saving device, or redundancy, in which case, the employee is entitled to receive separation pay
equivalent to at least one (1) month pay or to at least one (1) month pay for every year of service. In case the termination is due to retrenchment in order
to prevent losses or in case of closure or cessation of operation of the establishment or undertaking not due to serious business losses or financial
reverses, the separation pay is lower, i.e., equivalent to one (1) month pay or at least one-half month pay for every year of service, whichever is higher.
As may be gleaned from the foregoing, where the cause of termination is for the financial advantage or benefit of the employer, the basis in computing
for separation pay is higher compared to termination dictated by necessity with no appreciable financial advantage to the employer.
4. ID.; ID.; ID.; REDUNDANCY; WHEN IS A POSITION CONSIDERED REDUNDANT. A position is redundant where it is superfluous, and the
superfluity may be the outcome of other factors such as overhiring of workers, decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise.
5. ID.; ID.; LABOR RELATIONS HIRING OF INDEPENDENT SECURITY AGENCY, AN EXERCISE OF MANAGEMENT PREROGATIVE. The hiring
of an independent security agency is a business decision properly within the exercise of management prerogative. As such, this Court is denied the
authority to delve into its wisdom although it is equipped with the power to determine whether the exercise of such prerogative is in accordance with law.

Consequently, the wisdom or soundness of the management decision is not subject to the discretionary review of the Labor Arbiter nor of the NLRC
unless there is a violation of law or arbitrariness in the exercise thereof, in which case, this Court will step in. Specifically, we held in International
Harvester Macleod, Inc. v. Intermediate Appellate Court that the determination of whether to maintain or phase out an entire department or section or to
reduce personnel lies with management. The determination of the need for the phasing out of a department as a labor and cost saving device because it
is no longer economical to retain its services is a management prerogative.

6. ID.; ID.; TERMINATION OF EMPLOYMENT; SECURITY OF TENURE; DOES NOT GUARANTEE PERPETUAL EMPLOYMENT. Security of
tenure, however, does not guarantee perpetual employment. If there exists a just or an authorized cause, the employer may terminate the services of an
employee but subject always to procedural requirements. The employer cannot be legally compelled to have in its employ a person whose continued
employment is patently inimical to its interest. The law, while affording protection to the employee, does not authorize the oppression or destruction of
his employer.
7. ID.; ID.; TERMINATION OF EMPLOYMENT; REDUNDANCY; EMPLOYMENT; 30-DAY NOTICE REQUIREMENT; PURPOSE. As specifically
provided in Art. 283 of the Labor Code, the employer may terminate the employment of any employee due to redundancy by serving a written notice on
the worker and the DOLE at least one (1) month before the intended date thereof. The notice is intended to enable the employee not only to prepare
himself for the legal battle to protect his tenure of employment, which can be long, arduous, expensive and complicated by his own standards, but also
to find other means of employment and ease the impact of the loss of his job and, necessarily, his income.
8. ID.; ID.; ID.; ID.; ID.; NON-COMPLIANCE THEREWITH DOES NOT CONSTITUTE DENIAL OF DUE PROCESS. We are of the view that failure to
send notice of termination to Serrano is not tantamount to violation of his constitutional right to due process but merely constitutes non-compliance with
the provision on notice under Art. 283 of the Labor Code.
9. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; REQUIREMENT FOR VALIDITY OF GOVERNMENTAL ACTION AMOUNTING TO
DEPRIVATION OF LIBERTY AND PROPERTY. Due process is a requirement for the validity of any governmental action amounting to deprivation of
liberty or property. It is a restraint on state action not only in terms of what it amounts to but how it is accomplished. Its range thus covers both the ends
sought to be achieved by officialdom as well as the means for their realization.
10. ID.; ID.; ID.; REQUIREMENTS IN ADMINISTRATIVE PROCEEDINGS. The cardinal primary requirements of due process in administrative
proceedings were highlighted in Ang Tibay v. Court of Industrial Relations: (a) the right to a hearing, which includes the right to present one's case and
submit evidence in support thereof; (b) the tribunal must consider the evidence presented; (c) the decision must have something to support itself; (d) the
evidence must be substantial; (e) the decision must be based on the evidence presented at the hearing, or at least contained in the record and disclosed
to the parties affected; (f) the tribunal or body or any of its judges must act on its own independent consideration of the law and facts of the controversy,
and not simply accept the views of a subordinate; (g) the board or body should, in all controversial questions, render its decision in such manner that the
parties to the proceeding may know the various issues involved, and the reason for the decision rendered. DAcaIE
11. ID.; ID.; ID.; ESSENCE THEREOF IN ADMINISTRATIVE PROCEEDINGS. In administrative proceedings, the essence of due process is simply
the opportunity to explain one's side. One may be heard, not solely by verbal presentation but also, and perhaps even more creditably as it is more
practicable than oral arguments, through pleadings. An actual hearing is not always an indispensable aspect of due process. As long as a party was
given the opportunity to defend his interests in due course, he cannot be said to have been denied due process of law, for this opportunity to be heard is
the very essence of due process. (Lumiqued v. Exevea, G.R. No. 117665, 18 November 1997, 282 SCRA 146-147)
12. LABOR AND SOCIAL LEGISLATION; LABOR CODE; TERMINATION OF EMPLOYMENT; 30-DAY NOTICE REQUIREMENT; DISMISSAL
WITHOUT NOTICE, THOUGH IRREGULAR, VALID; EMPLOYER LIABLE FOR DAMAGES. We have consistently upheld in the past as valid
although irregular the dismissal of an employee for a just or authorized cause but without notice and have imposed a sanction on the erring employers in
the form of damages for their failure to comply with the notice requirement.
13. ID.; ID.; ID.; BENEFITS DUE TO EMPLOYEE DISMISSED WITHOUT REQUIRED 30-DAY NOTICE. If the dismissal is for a just cause but
without observance of the 30-day notice requirement, the dismissal is deemed improper and irregular. If later the dismissal is ascertained to be without
just cause, the dismissed employee is entitled to reinstatement, if this be feasible, otherwise to separation pay and back wages plus disturbance
compensation of P10,000.00 and moral damages, if warranted. On the other hand, if the dismissal is ascertained to be with just cause, the dismissed
employee is entitled nevertheless to a disturbance compensation of P5,000.00 if the legal requirement of the 30-day notice to both employee and DOLE
has not been complied with.
PANGANIBAN, J., separate opinion:
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; TERMINATION OF EMPLOYMENT; ESSENTIAL REQUISITES FOR AN EMPLOYER'S VALID
TERMINATION OF AN EMPLOYEE'S SERVICES. In the past, this Court has untiringly reiterated that there are two essential requisites for an
employer's valid termination of an employee's services: (1) a just or authorized cause and (2) due process.
2. CONSTITUTIONAL LAW; CONSTITUTIONAL RIGHTS; TRADITIONALLY INVOKED AGAINST THE STATE. As pointed out by Mr. Justice
Mendoza, traditional doctrine holds that constitutional rights may be invoked only against the State. This is because in the past, only the State was in a
position to violate these rights, including the due process clause. However, with the advent of liberalization, deregulation and privatization, the State
tended to cede some of its powers to the "market forces." Hence, corporate behemoths and even individuals may now be sources of abuses and threats
to human rights and liberties.
3. ID.; BILL OF RIGHTS; DUE PROCESS; EMPLOYEE ENTITLED THERETO; RATIONALE. The employee is entitled to due process not because of
the Labor Code, but because of the Constitution. Elementary is the doctrine that constitutional provisions are deemed written into every statute, contract
or undertaking. Worth noting is that "[o]ne's employment, profession, trade or calling is a property right within the protection of the constitutional guaranty
of due process of law." An objective reading of the Bill of Rights clearly shows that the due process protection is not limited to government action alone.
The Constitution does not say that the right cannot be claimed against private individuals and entities. Truly, justice is dispensed not just by the courts
and quasi-judicial bodies like public respondent here. The administration of justice begins with each of us, in our everyday dealings, with one another
and, as in this case, in the employer's affording their employees the right to be heard.
4. LABOR AND SOCIAL LEGISLATION; DUE PROCESS; TWIN REQUIREMENTS OF NOTICE AND HEARING; A CONDITIO SINE QUA NON IN
TERMINATION OF EMPLOYEES. In a long line of cases involving judicial, quasi-judicial and administrative proceedings the Court has held that the
twin requirements of notice and hearing (or, at the very least, an opportunity to be heard) constitute the essential elements of due process. In labor
proceedings, both are the conditio sine qua non for a dismissal to be validly effected. The perceptive Justice Irene Cortes has aptly stated: "One cannot
go without the other, for otherwise the termination would, in the eyes of the law, be illegal."

5. ID.; LABOR CODE; TERMINATION OF EMPLOYMENT; NOTICE AND HEARING, REQUIRED. It is really inaccurate to say that the Labor Code
grants "notice alone" to employees being dismissed due to an authorized cause. Article 277 (b) of the said Code explicitly provides that the termination
of employment by the employer is "subject to the constitutional right of workers to security of tenure[;] . . . without prejudice to the requirement of notice
under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample opportunity to be heard . . . ." Significantly, the provision requires the employer
"to afford [the employee] ample opportunity to be heard" when the termination is due to a "just and authorized cause." I submit that this provision on
"ample opportunity to be heard" applies to dismissals under Articles 282, 283 and 284 of the Labor Code.
6. ID.; ID.; ID.; ID.; VIOLATION THEREOF ENTITLES EMPLOYEE TO DAMAGES. Where the employee proves the presence of facts showing
liability for damages (moral, exemplary, etc.) as provided under the Civil Code, the employee could be entitled to such award in addition to reinstatement
and back wages. For instance, where the illegal dismissal has caused the employee "physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury" due to the bad faith of the employer, an award for moral
damages would be proper, in addition to reinstatement and back wages.
7. ID.; ID.; ID.; TERMINATION WITHOUT DUE PROCESS, NULL AND VOID; EXCEPTION. Even if there may be a just or an authorized cause for
termination but due process is absent, the dismissal proceedings must be declared null and void. The dismissal should still be branded as illegal.
Consequently, the employee must be reinstated and given full back wages. On the other hand, there is an exception. The employer can adequately
prove that under the peculiar circumstances of the case, there was no opportunity to comply with due process requirements; or doing so would have
been impractical or gravely adverse to the employer, as when the employee is caught in flagrante delicto. Under any of these circumstances, the
dismissal will not be illegal and no award may properly be granted. Nevertheless, as a measure of compassion, the employee may be given a nominal
sum depending on the circumstances, pursuant to Article 2221 of the Civil Code. Depending on the facts of each case, damages as provided under
applicable articles of the Civil Code may additionally be awarded.

VITUG, J., concurring and dissenting opinion

1. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS OF LAW; CONCEPT. Due process of law, in its broad concept, is a principle in our
legal system that mandates due protection to the basic rights, inherent or accorded, of every person against harm or transgression without an
intrinsically just and valid law, as well as an opportunity to be heard before an impartial tribunal, that can warrant such an impairment. Due process
guarantees against arbitrariness and bears on both substance and procedure. Substantive due process concerns itself with the law, its essence, and its
concomitant efficacy; procedural due process focuses on the rules that are established in order to ensure meaningful adjudications appurtenant thereto.
DEHaAS
2. ID.; ID.; DUE PROCESS REQUIREMENT IN LABOR CASES; ASPECTS. Due process in the context of a termination of employment would be
two-fold, i.e., substantive due process which is complied with when the action of the employer is predicated on a just cause or an authorized cause, and
procedural due process which is satisfied when the employee has the opportunity to contest the existence of the ground invoked by the employer in
terminating the contract of employment and to be heard thereon.
3. LABOR AND SOCIAL LEGISLATION; LABOR CODE; TERMINATION OF EMPLOYMENT; VALID CAUSE AND WRITTEN NOTICE, REQUIRED
CONCURRENTLY BUT NOT EQUIPOLLENT IN THEIR CONSEQUENCE. A just cause or an authorized cause and a written notice of dismissal or
lay-off, as the case may be, are required concurrently but not really equipollent in their consequence, in terminating an employer-employee relationship.
4. ID.; ID.; ID.; EMPLOYEE ILLEGALLY DISMISSED ENTITLED TO REINSTATEMENT AND BACKWAGES; MORAL AND EXEMPLARY DAMAGES
ALSO AWARDED WHERE DISMISSAL WAS IN BAD FAITH. Where there is neither just cause nor authorized cause, the reinstatement of the
employee and the payment of back salaries would be proper and should be decreed. If the dismissal or lay-off is attended by bad faith or if the employer
acted in wanton or oppressive manner, moral and exemplary damages might also be awarded. Separation pay can substitute for reinstatement if such
reinstatement is not feasible, such as in case of a clearly strained employer-employee relationship (limited to managerial positions and contracts of
employment predicated on trust and confidence) or when the work or position formerly held by the dismissed employee plainly has since ceased to be
available.
5. ID.; ID.; ID.; LEGALLY DISMISSED EMPLOYEE, WITHOUT PRIOR NOTICE, ENTITLED TO SEPARATION PAY AND DAMAGES. Where there is
just cause or an authorized cause for the dismissal or lay-off but the required written notices therefor have not been properly observed by an employer, it
would neither be right and justifiable nor likely intended by law to order either the reinstatement of the dismissed or laid-off employee or the payment of
back salaries to him simply for the lack of such notices if, and so long as, the employee is not deprived of an opportunity to contest that dismissal or layoff and to accordingly be heard thereon. In the termination of employment for an authorized cause (this cause being attributable to the employer), the
laid-off employee is statutorily entitled to separation pay, unlike a dismissal for a just cause (a cause attributable to an employee) where no separation
pay is due. In either case, if an employer fails to comply with the requirements of notice in terminating the services of the employee, the employer must
be made to pay, as hereinabove expressed, corresponding damages to the employee.
PUNO, J., dissenting opinion:
1. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; PROCEDURAL DUE PROCESS; ESSENCE. The rule of audi alteram partem
hear the other side, is the essence of procedural due process. That a "party is not to suffer in person or in purse without an opportunity of being heard" is
the oldest established principle in administrative law.
2. LABOR AND SOCIAL LEGISLATION; LABOR CODE; TERMINATION OF EMPLOYMENT; TERMINATION FOR JUST CAUSE, NOTICE
REQUIRED. The long established jurisprudence is that to justify dismissal of an employee for a just cause, he must be given two kinds of notice by
his employer, viz: (1) notice to apprise the employee of the particular acts or omissions for which the dismissal is sought, and (2) subsequent notice to
inform him of the employer's decision to dismiss him. Similarly, deeply ingrained is our ruling that these pre and post notice requirements are not mere
technicalities but are requirements of due process.
3. ID.; ID.; ID.; RETRENCHMENT; NOTICE REQUIREMENT, MANDATORY. In Sebuguero v. NLRC, we held thru our esteemed Chief Justice
Davide that "the requirement of notice to both the employees concerned and the Department of Labor and Employment (DOLE) is mandatory and must
be written and given at least one month before the intended date of retrenchment." We explained that the "notice to the DOLE is essential because the
right to retrench is not an absolute prerogative of an employer but is subject to the requirement of law that retrenchment be proved to prevent losses.
The DOLE is the agency that will determine whether the planned retrenchment is justified and adequately supported by fact."
4. ID.; ID.; ID.; ID.; PURPOSE OF PRIOR NOTICE REQUIREMENT. The stubborn refusal of the majority to appreciate the importance of predismissal notice is difficult to understand. It is the linchpin of an employee's right against an illegal dismissal. The notice tells him the cause of his
dismissal. It gives him a better chance to contest his dismissal in an appropriate proceeding as laid down in the parties' collective bargaining agreement
or the rules of employment established by the employer, as the case may be. In addition, it gives to both the employee and employer more cooling time

to settle their differences amicably. In fine, the prior notice requirement and the hearing before the employer give an employee a distinct, different and
effective first level of remedy to protect his job. In the event the employee is dismissed, he can still file a complaint with the DOLE with better knowledge
of the cause of his dismissal, with longer time to prepare his case, and with greater opportunity to take care of the financial needs of his family pendente
lite. The majority has taken away from employees this effective remedy. This is not to say that the pre-dismissal notice requirement equalizes the fight
between an employee and an employer for the fight will remain unequal. This notice requirement merely gives an employee a fighting chance but that
fighting chance is now gone.
5. ID.; ID.; ID.; AUTHORIZED CAUSES FOR TERMINATION; NOTICE, REQUIRED; REASON. Article 283 of the Labor Code lays down four (4)
authorized causes for termination of employment. These authorized causes are: (1) installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the law. It also provides that prior to the dismissal of an employee for an authorized cause, the employer must send two written notices at
least one month before the intended dismissal one notice to the employee and another notice to the Department of Labor and Employment (DOLE).
We have ruled that the right to dismiss on authorized causes is not an absolute prerogative of an employer. We explained that the notice to the DOLE is
necessary to enable it to ascertain the truth of the cause of termination. The DOLE is equipped with men and machines to determine whether the
planned closure or cessation of business or retrenchment or redundancy or installation of labor saving device is justified by economic facts. For this
reason too, we have held that notice to the employee is required to enable him to contest the factual bases of the management decision or good faith of
the retrenchment or redundancy before the DOLE. In addition, this notice requirement gives an employee a little time to adjust to his joblessness.
6. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; PRIVATE DUE PROCESS; NOT MERELY A LIMITATION ON GOVERNMENTAL
POWERS BUT ALSO ON PRIVATE ACTIONS. There can be no room for disagreement on the proposition that the due process clause found in the
Bill of Rights of the Constitution is a limitation on governmental powers. Nor can there be any debate that acts of government violative of due process
are null and void. Today, private due process is a settled norm in administrative law. But we need not rely on foreign jurisprudence to repudiate the new
majority ruling that due process restricts government alone and not private employers like ISETANN. This Court has always protected employees
whenever they are dismissed for an unjust cause by private employers. We have consistently held that before dismissing an employee for a just cause,
he must be given notice and hearing by his private employer. (Kingsize Manufacturing Corporation vs. NLRC). In other words, we have long adopted in
our decisions the doctrine of private due process. This is as it ought to be. The 1987 Constitution guarantees the rights of workers, especially the right to
security of tenure in a separate article Section 3 of Article XIII entitled Social Justice and Human Rights. Thus, a 20-20 vision of the Constitution will
show that the more specific rights of labor are not in the Bill of Rights which is historically directed against government acts alone. Needless to state, the
constitutional rights of labor should be safeguarded against assaults from both government and private parties. The majority should not reverse our
settled rulings outlawing violations of due process by employers in just causes cases. AcDHCS
7. ID.; ID.; ID.; PRE-DISMISSAL NOTICE, PART THEREOF. The pre-dismissal notice requirement is part of due process. In Batangas Laguna
Tayabas Bus Co. vs. Court of Appeals, which was decided under the provisions of RA No. 1052 as amended by RA No. 1787, this Court ruled that "the
failure of the employer to give the [employee] the benefit of a hearing before he was dismissed constitute an infringement on his constitutional right to
due process of law and not to be denied the equal protection of the laws. . . . . Since the right of [an employee] to his labor is in itself a property and that
the labor agreement between him and [his employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation of his
property without due process." Since then, we have consistently held that before dismissing an employee for a just cause, he must be given notice and
hearing by his private employer as a matter of due process. I wish also to stress that the 1999 Rules and Regulations implementing the Labor Code
categorically characterize this pre-dismissal notice requirement as a requirement of due process.

8. LABOR AND SOCIAL LEGISLATION; LABOR CODE; TERMINATION OF EMPLOYMENT; EMPLOYER NOT CALLED UPON TO ACT AS
IMPARTIAL JUDGE. In an Article 283 situation, dismissal due to an authorized cause, the employer is not called upon to act as an impartial judge.
The employer is given the duty to serve a written notice on the worker and the DOLE at least one month before the intended date of lay-off. It is the
DOLE, an impartial agency that will judge whether or not the employee is being laid off for an authorized caused. It is not the employer who will adjudge
whether the alleged authorized cause for dismissing the employee is fact or fiction. On the other hand, in an Article 282 situation, dismissal for a just
cause, it is also incorrect to hold that an employer cannot be an impartial judge. Today, the procedure on discipline and dismissal of employees is
usually defined in the parties' collective bargaining agreement or in its absence, on the rules and regulations made by the employer himself. This
procedure is carefully designed to be bias free for it is to the interest of both the employee and the employer that only a guilty employee is disciplined or
dismissed. Hence, where the charge against an employee is serious, it is standard practice to include in the investigating committee an employee
representative to assure the integrity of the process. In addition, it is usual practice to give the aggrieved employee an appellate body to review an
unfavorable decision. Stated otherwise, the investigators are mandated to act impartially for to do otherwise can bring havoc less to the employee but
more to the employer. For one, if the integrity of the grievance procedure becomes suspect, the employees may shun it and instead resort to coercive
measures like picketing and strikes that can financially bleed employers. For another, a wrong, especially a biased judgment can always be challenged
in the DOLE and the courts and can result in awards of huge damages against the company. Indeed, the majority ruling that an employer cannot act as
an impartial judge has no empirical evidence to support itself. Statistics in the DOLE will prove the many cases won by employees before the grievance
committees manned by impartial judges of the company.
9. ID.; ID.; ID.; PRE-DISMISSAL NOTICE REQUIREMENT; NOT AN APPLICATION OF JUSTINIAN PRECEPT BUT A LABOR CODE PROVISION.
The majority holds that "the requirement to hear an employee before he is dismissed should be considered simply as an application of the Justinian
precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe honesty and good faith toward one's fellowmen." It then
rules that violation of this norm will render the employer liable for damages but will not render his act of dismissal void. Again, I cannot join the majority
stance. The faultline of this ruling lies in the refusal to recognize that employer-employee relationship is governed by special labor laws and not by the
Civil Code. The majority has disregarded the precept that relations between capital and labor are impressed with public interest. For this reason, we
have the Labor Code that specially regulates the relationship between employer-employee including dismissals of employees. Thus, Article 279 of the
Labor Code specifically provides that "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 provision of the Labor Code clearly gives the remedies that an
unjustly dismissed employee deserves. It is not the Civil Code that is the source of his remedies.
10. ID.; ID.; ID.; LEGAL RELATIONSHIP OF EMPLOYER TO HIS EMPLOYEE, NOT SIMILAR TO THAT OF VENDOR AND VENDEE. The legal
relationship of an employer to his employee is not similar to that of a vendor and a vendee. An employee suffers from a distinct disadvantage in his
relationship with an employer, hence, the Constitution and our laws give him extra protection. In contrast, a vendor and a vendee in a sale of immovable
property are at economic par with each other. To consider an employer-employee relationship as similar to a sale of commodity is an archaic
abomination. An employer-employee relationship involves the common good and labor cannot be treated as a mere commodity. As well-stated by former
Governor General Leonard Wood in his inaugural message before the 6th Philippine Legislature on October 27, 1922, "it is opportune that we strive to
impress upon all the people that labor is neither a chattel nor a commodity, but human and must be dealt with from the standpoint of human interests."

11. ID.; ID.; ID.; EMPLOYEES PROTECTED NOT ONLY AGAINST UNJUST CAUSES BUT ALSO FOR UNAUTHORIZED CAUSES OF
TERMINATION. The majority holds that under the Labor Code, only the absence of a just cause for the termination of employment can make the
dismissal of an employee illegal. It is then rationalized that "to hold that the employer's failure to give notice before dismissing an employee . . . results in
the nullity of the dismissal would, in effect, be to amend Article 279 by adding another ground, for considering a dismissal illegal." With due respect, the
majority has misread Article 279. To start with, the article is entitled "Security of Tenure" and therefore protects an employee against dismissal not only
for an unjust cause but also for an unauthorized cause. Thus, the phrase "unjustly dismissed" refers to employees who are dismissed without just cause
and to employees who are laid off without any authorized cause.
DECISION
MENDOZA, J p:
This is a petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the National Labor Relations Commission (NLRC)
which reversed the decision of the Labor Arbiter and dismissed petitioner Ruben Serrano's complaint for illegal dismissal and denied his motion for
reconsideration. The facts are as follows: Cdpr
Petitioner was hired by private respondent Isetann Department Store as a security checker to apprehend shoplifters and prevent pilferage of
merchandise. 1 Initially hired on October 4, 1984 on contractual basis, petitioner eventually became a regular employee on April 4, 1985. In 1988, he
became head of the Security Checkers Section of private respondent. 2
Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security section and engage the services of an
independent security agency. For this reason, it wrote petitioner the following memorandum: 3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Serrano,
In view of the retrenchment program of the company, we hereby reiterate our verbal notice to you of your termination as Security
Section Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal dismissal, illegal layoff, unfair labor practice,
underpayment of wages, and nonpayment of salary and overtime pay. 4
The parties were required to submit their position papers, on the basis of which the Labor Arbiter defined the issues as follows: 5
Whether or not there is a valid ground for the dismissal of the complainant.
Whether or not complainant is entitled to his monetary claims for underpayment of wages, nonpayment of salaries, 13th month
pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding petitioner to have been illegally dismissed. He ruled that
private respondent failed to establish that it had retrenched its security section to prevent or minimize losses to its business; that private respondent
failed to accord due process to petitioner; that private respondent failed to use reasonable standards in selecting employees whose employment would
be terminated; that private respondent had not shown that petitioner and other employees in the security section were so inefficient so as to justify their
replacement by a security agency, or that "cost-saving devices [such as] secret video cameras (to monitor and prevent shoplifting) and secret code tags
on the merchandise could not have been employed; instead, the day after petitioner's dismissal, private respondent employed a safety and security
supervisor with duties and functions similar to those of petitioner. cdlex
Accordingly, the Labor Arbiter ordered: 6
WHEREFORE, above premises considered, judgment is hereby decreed:
(a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is ordered to pay complainant full
backwages without qualification or deduction in the amount of P74,740.00 from the time of his dismissal until reinstatement
(computed till promulgation only) based on his monthly salary of P4,040.00/month at the time of his termination but limited to (3)
three years;
(b) Ordering the Respondent to immediately reinstate the complainant to his former position as security section head or to a
reasonably equivalent supervisorial position in charges of security without loss of seniority rights, privileges and benefits. This
order is immediately executory even pending appeal;
(c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and proportionate 13th month pay in
the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10% attorney's fees based on the total
judgment award of P79,959.12.

All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack of merit.
SO ORDERED. cdrep

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994, reversed the decision of the Labor Arbiter and ordered petitioner to
be given separation pay equivalent to one month pay for every year of service, unpaid salary, and proportionate 13th month pay. Petitioner filed a motion
for reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent's security section and the hiring of an independent security agency constituted an exercise by
private respondent of "[a] legitimate business decision whose wisdom we do not intend to inquire into and for which we cannot substitute our judgment";
that the distinction made by the Labor Arbiter between "retrenchment" and the employment of "cost-saving devices under Art. 283 of the Labor Code
was insignificant because the company official who wrote the dismissal letter apparently used the term "retrenchment in its "plain and ordinary sense: to
layoff or remove from one's job, regardless of the reason therefor; that the rule of "reasonable criteria in the selection of the employees to be
retrenched did not apply because all positions in the security section had been abolished; and that the appointment of a safety and security supervisor
referred to by petitioner to prove bad faith on private respondent's part was of no moment because the position had long been in existence and was
separate from petitioner's position as head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue: cdll
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO REPLACE ITS CURRENT
SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE LATTER? 7
Petitioner contends that abolition of private respondent's Security Checkers Section and the employment of an independent security agency do not fall
under any of the authorized causes for dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioner's contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due
to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operations of
the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a
written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment
or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to at least one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered as one (1) whole year. cdrep
In De Ocampo v. National Labor Relations Commission, 8 this Court upheld the termination of employment of three mechanics in a transportation
company and their replacement by a company rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the company's cost-saving program, the services rendered by the
mechanics became redundant and superfluous, and therefore properly terminable. The company merely exercised its business
judgment or management prerogative. And in the absence of any proof that the management abused its discretion or acted in a
malicious or arbitrary manner, the court will not interfere with the exercise of such prerogative. 9
In Asian Alcohol Corporation v. National Labor Relations Commission, 10 the Court likewise upheld the termination of employment of water pump
tenders and their replacement by independent contractors. It ruled that an employer's good faith in implementing a redundancy program is not
necessarily put in doubt by the availment of the services of an independent contractor to replace the services of the terminated employees to promote
economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty of promoting efficiency and attaining economy
by a study of what units are essential for its operation. To it belongs the ultimate determination of whether services should be performed by its personnel
or contracted to outside agencies . . . [While there] should be mutual consultation, eventually deference is to be paid to what management decides." 11
Consequently, absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an
employer. 12
In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section, private respondent's real purpose was to avoid
payment to the security checkers of the wage increases provided in the collective bargaining agreement approved in 1990. 13 Such an assertion is not a
sufficient basis for concluding that the termination of petitioner's employment was not a bona fide decision of management to obtain reasonable return
from its investment, which is a right guaranteed to employers under the Constitution. 14 Indeed, that the phase-out of the security section constituted a
"legitimate business decision is a factual finding of an administrative agency which must be accorded respect and even finality by this Court since
nothing can be found in the record which fairly detracts from such finding. 15
Accordingly, we hold that the termination of petitioner's services was for an authorized cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor
Code, petitioner should be given separation pay at the rate of one month pay for every year of service.
Sanctions for Violations of
the Notice Requirement cda
Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes the employer must serve "a written notice on
the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In the case at bar, petitioner was
given a notice of termination on October 11, 1991. On the same day, his services were terminated. He was thus denied his right to be given written
notice before the termination of his employment, and the question is the appropriate sanction for the violation of petitioner's right.
To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC, 16 workers in a garment factory were temporarily laid off due to the
cancellation of orders and a garment embargo. The Labor Arbiter found that the workers had been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand, found that this was a case of retrenchment due to business losses and ordered the
payment of separation pay without backwages. This Court sustained the NLRCs finding. However, as the company did not comply with the 30-day
written notice in Art. 283 of the Labor Code, the Court ordered the employer to pay the workers P2,000.00 each as indemnity.
The decision followed the ruling in several cases involving dismissals which, although based on any of the just causes under Art. 282, 17 were effected
without notice and hearing to the employee as required by the implementing rules. 18 As this Court said: "It is now settled that where the dismissal of
one employee is in fact for a just and valid cause and is so proven to be but he is not accorded his right to due process, i.e., he was not furnished the

twin requirements of notice and opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with the
requirements of, or for failure to observe, due process." 19
The rule reversed a long standing policy theretofore followed that even though the dismissal is based on a just cause or the termination of employment is
for an authorized cause, the dismissal or termination is illegal if effected without notice to the employee. The shift in doctrine took place in 1989 in
Wenphil Corp. v. NLRC. 20 In announcing the change, this Court said: 21
The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of seniority and the
payment of his wages during the period of his separation until his actual reinstatement but not exceeding three (3) years without
qualification or deduction, when it appears he was not afforded due process, although his dismissal was found to be for just and
authorized cause in an appropriate proceeding in the Ministry of Labor and Employment, should be re-examined. It will be highly
prejudicial to the interests of the employer to impose on him the services of an employee who has been shown to be guilty of the
charges that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service.
xxx xxx xxx
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. prLL

The fines imposed for violations of the notice requirement have varied from P1,000.00 22 to P2,000.00 23 to P5,000.00 24 to P10,000.00. 25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate sanctions for violations of the notice requirement in light of our experience during the last
decade or so with the Wenphil doctrine. The number of cases involving dismissals without the requisite notice to the employee, although effected for just
or authorized causes, suggests that the imposition of fine for violation of the notice requirement has not been effective in deterring violations of the notice
requirement. Justice Panganiban finds the monetary sanctions "too insignificant, too niggardly, and sometimes even too late. On the other hand, Justice
Puno says there has in effect been fostered a policy of "dismiss now, pay later which moneyed employers find more convenient to comply with than the
requirement to serve a 30-day written notice (in the case of termination of employment for an authorized cause under Arts. 283-284) or to give notice
and hearing (in the case of dismissals for just causes under Art. 282).
For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even though there are just or authorized causes for
such dismissal or layoff. Consequently, in their view, the employee concerned should be reinstated and paid backwages. aisadc
Validity of Petitioner's Layoff Not
Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the sanction of fine for an employer's disregard of the
notice requirement. We do not agree, however, that disregard of this requirement by an employer renders the dismissal or termination of employment
null and void. Such a stance is actually a reversion to the discredited pre-Wenphil rule of ordering an employee to be reinstated and paid backwages
when it is shown that he has not been given notice and hearing although his dismissal or layoff is later found to be for a just or authorized cause. Such
rule was abandoned in Wenphil because it is really unjust to require an employer to keep in his service one who is guilty, for example, of an attempt on
the life of the employer or the latter's family, or when the employer is precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's right to notice before he is dismissed or laid off, at the same time acknowledges the right
of the employer to dismiss for any of the just causes enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned in
Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an employee for cause without prior notice is deemed
ineffective in deterring employer violations of the notice requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for
such dismissal or if the termination is for an authorized cause. That would be to uphold the right of the employee but deny the right of the employer to
dismiss for cause. Rather, the remedy is to order the payment to the employee of full backwages from the time of his dismissal until the court finds that
the dismissal was for a just cause. But, otherwise, his dismissal must be upheld and he should not be reinstated. This is because his dismissal is
ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a labor-saving device, but the employer did not
give him and the DOLE a 30-day written notice of termination in advance, then the termination of his employment should be considered ineffectual and
he should be paid backwages. However, the termination of his employment should not be considered void but he should simply be paid separation pay
as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with the notice requirement constitutes a denial of the employee's right to due process.
Prescinding from this premise, he quotes the statement of Chief Justice Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco 26 that "acts of
Congress, as well as of the Executive, can deny due process only under the pain of nullity, and judicial proceedings suffering from the same flaw are
subject to the same sanction, any statutory provision to the contrary notwithstanding. Justice Puno concludes that the dismissal of an employee without
notice and hearing, even if for a just cause, as provided in Art. 282, or for an authorized cause, as provided in Arts. 283-284, is a nullity. Hence, even if
just or authorized causes exist, the employee should be reinstated with full back pay. On the other hand, Justice Panganiban quotes from the statement
in People v. Bocar 27 that "[w]here the denial of the fundamental right of due process is apparent, a decision rendered in disregard of that right is void
for lack of jurisdiction."
Violation of Notice Requirement
Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by the State, which is not the case here. There are
three reasons why, on the other hand, violation by the employer of the notice requirement cannot be considered a denial of due process resulting in the
nullity of the employee's dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply to the exercise of private power,
such as the termination of employment under the Labor Code. This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person shall be
deprived of life, liberty, or property without due process of law. . . ." The reason is simple: Only the State has authority to take the life, liberty, or property
of the individual. The purpose of the Due Process Clause is to ensure that the exercise of this power is consistent with what are considered civilized
methods.
The second reason is that notice and hearing are required under the Due Process Clause before the power of organized society are brought to bear
upon the individual. This is obviously not the case of termination of employment under Art. 283. Here the employee is not faced with an aspect of the
adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity to be heard on any
charge against him, for there is none. The purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to
determine whether economic causes do exist justifying the termination of his employment. prcd
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with Due Process Clause of the
Constitution. The time for notice and hearing is at the trial stage. Then that is the time we speak of notice and hearing as the essence of procedural due
process. Thus, compliance by the employer with the notice requirement before he dismisses an employee does not foreclose the right of the latter to
question the legality of his dismissal. As Art. 277 (b) provides, "Any decision taken by the employer shall be without prejudice to the right of the worker to
contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact that Art. 283 had its origin in Art. 302
of the Spanish Code of Commerce of 1882 which gave either party to the employer-employee relationship the right to terminate their relationship by
giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by paying him a mesada equivalent to his salary for one
month. 28 This provision was repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052,
otherwise known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing
for the giving of advance notice or the payment of compensation at the rate of one-half month for every year of service. 29
The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of which was to give the employer the opportunity
to find a replacement or substitute, and the employee the equal opportunity to look for another job or source of employment. Where the termination of
employment was for a just cause, no notice was required to be given to the employee. 30 It was only on September 4, 1981 that notice was required to
be given even where the dismissal or termination of an employee was for cause. This was made in the rules issued by the then Minister of Labor and
Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later when the notice requirement was embodied in the
law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot be that the former regime denied due process to the employee.
Otherwise, there should now likewise be a rule that, in case an employee leaves his job without cause and without prior notice to his employer, his act
should be void instead of simply making him liable for damages.
The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due Process Clause is that the employer cannot
really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of employment for a just cause under Art. 282
(i.e., serious misconduct or willful disobedience by the employee of the lawful orders of the employer, gross and habitual neglect of duties, fraud or willful
breach of trust of the employer, commission of crime against the employer or the latter's immediate family or duly authorized representatives, or other
analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won by employees before the grievance
committees manned by impartial judges of the company. The grievance machinery is, however, different because it is established by agreement of the
employer and the employees and composed of representatives from both sides. That is why, in Batangas Laguna Tayabas Bus Co. v. Court of Appeals,
31 which Justice Puno cites, it was held that "Since the right of [an employee] to his labor is in itself a property and that the labor agreement between
him and [his employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation of his property without due process
of law. But here we are dealing with dismissals and layoffs by employers alone, without the intervention of any grievance machinery. Accordingly in
Montemayor v. Araneta University Foundation, 32 although a professor was dismissed without a hearing by his university, his dismissal for having made
homosexual advances on a student was sustained, it appearing that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes
Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply part of a procedure to be followed before a right granted to a party can be
exercised. Others are simply an application of the Justinian precept, embodied in the Civil Code, 33 to act with justice, give everyone his due, and
observe honesty and good faith toward one's fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the failure either of the
employer or the employee to live up to this precept is to make him liable in damages, not to render his act (dismissal or resignation, as the case may be)
void. The measure of damages is the amount of wages the employee should have received were it not for the termination of his employment without
prior notice. If warranted, nominal and moral damages may also be awarded. ELC
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer's failure to comply with the notice requirement does not constitute a
denial of due process but a mere failure to observe a procedure for the termination of employment which makes the termination of employment merely
ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of the Civil Code 34 in rescinding a contract for the
sale of immovable property. Under these provisions, while the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in
cases involving the sale of immovable property, the vendor cannot exercise this power even though the vendee defaults in the payment of the price,
except by bringing an action in court or giving notice of rescission by means of a notarial demand. 35 Consequently, a notice of rescission given in the
letter of an attorney has no legal effect, and the vendee can make payment even after the due date since no valid notice of rescission has been given.
36
Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can make the dismissal of an employee illegal. This is
clear from Art. 279 which provides:
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. 37
Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and, therefore, the employee should be reinstated and
paid backwages. To contend, as Justices Puno and Panganiban do, that even if the termination is for a just or authorized cause the employee
concerned should be reinstated and paid backwages would be to amend Art. 279 by adding another ground for considering a dismissal illegal. What is

more, it would ignore the fact that under Art. 285, if it is the employee who fails to give a written notice to the employer that he is leaving the service of
the latter, at least one month in advance, his failure to comply with the legal requirement does not result in making his resignation void but only in making
him liable for damages. 38 This disparity in legal treatment, which would result from the adoption of the theory of the minority cannot simply be explained
by invoking President Ramon Magsaysay's motto that "he who has less in life should have more in law." That would be a misapplication of this noble
phrase originally from Professor Thomas Reed Powell of the Harvard Law School.
Justice Panganiban cites Pepsi Cola Bottling Co. v. NLRC, 39 in support of his view that an illegal dismissal results not only from want of legal cause but
also from the failure to observe "due process." The Pepsi-Cola case actually involved a dismissal for an alleged loss of trust and confidence which, as
found by the Court, was not proven. The dismissal was, therefore, illegal, not because there was a denial of due process, but because the dismissal was
without cause. The statement that the failure of management to comply with the notice requirement "taints the dismissal with illegality was merely a
dictum thrown in as additional grounds for holding the dismissal to be illegal. cdll
Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the payment of backwages for the period when the
employee is considered not to have been effectively dismissed or his employment terminated. The sanction is not the payment alone of nominal
damages as Justice Vitug contends.
Unjust Results of Considering Dismissals/
Layoffs Without Prior Notice As Illegal
The refusal to look beyond the validity of the initial action taken by the employer to terminate employment either for an authorized or just cause can
result in an injustice to the employer. For not giving notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even of
an attempt against the life of the employer, an employer will be forced to keep in his employ such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force." 40 But so does it declare that it "recognizes the indispensable role of the
private sector, encourages private enterprise, and provides incentives to needed investment." 41 The Constitution bids the State to "afford full protection
to labor." 42 But it is equally true that "the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer."
43 And it is oppression to compel the employer to continue in employment one who is guilty or to force the employer to remain in operation when it is not
economically in his interest to do so.
In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination of employment was due to an authorized cause,
then the employee concerned should not be ordered reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he
must be granted separation pay in accordance with Art. 283, to wit:
In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at least one month for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six months shall be
considered one (1) whole year.
If the employee's separation is without cause, instead of being given separation pay, he should be reinstated. In either case, whether he is
reinstated or only granted separation pay, he should be paid full backwages if he has been laid off without written notice at least 30 days in
advance.
On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed for any of the just causes
mentioned in said Art 282, then, in accordance with that article, he should not be reinstated. However, he must be paid backwages from the time his
employment was terminated until it is determined that the termination of employment is for a just cause because the failure to hear him before he is
dismissed renders the termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is MODIFIED by ordering private respondent
Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his
proportionate 13th month pay and, in addition, full backwages from the time his employment was terminated on October 11, 1991 up to the time the
decision herein becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and
other monetary awards to petitioner. cdrep
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes and De Leon, Jr., JJ., concur.
Bellosillo, Vitug,and Panganiban, JJ., see separate opinion.
Puno, J., see dissenting opinion.
Ynares-Santiago, J., joins the dissenting opinion of J. Puno.

Separate Opinions
BELLOSILLO, J.:
We point out at the outset that this Petition for Review, which was filed before the promulgation of St. Martin Funeral Home v. National Labor Relations
Commission, 1 is not the proper means by which NLRC decisions are appealed to this Court. Before St. Martin Funeral Home, it was only through a
Petition for Certiorari under Rule 65 that NLRC decisions could be reviewed and nullified by us on the ground of lack of jurisdiction or grave abuse of
discretion amounting to lack or excess of jurisdiction. After St. Martin Funeral Home, petitions like the one at bar are initially filed in the Court of Appeals
for proper adjudication. LGM
In the interest of justice, however, and in order to write finis to the instant case which has already dragged on for so long, we shall treat the petition pro
hac vice as one for certiorari under Rule 65 although it is captioned Petition for Review on Certiorari; after all, it was filed within the reglementary period
for the filing of a petition for certiorari under Rule 65.
Briefly, on 4 April 1985 private respondent Isetann Department Store, Inc. (ISETANN), employed petitioner Ruben Serrano as Security Checker until his
appointment as Security Section Head. On 11 October 1991 ISETANN through its Human Resource Division Manager Teresita A. Villanueva sent
Serrano a memorandum terminating his employment effective immediately "in view of the retrenchment program of the company," and directing him to
secure clearance from their office. 2

Petitioner Serrano filed with the NLRC Adjudication Office a complaint for illegal dismissal and underpayment of wages against ISETANN. Efforts at
amicable settlement proved futile. Ms. Cristina Ramos, Personnel Administration Manager of ISETANN, testified that the security checkers and their
section head were retrenched due to the installation of a labor saving device, i.e., the hiring of an independent security agency.
Finding the dismissal to be illegal, the Labor Arbiter ordered the immediate reinstatement of Serrano to his former or to an equivalent position plus
payment of back wages, unpaid wages, 13th month pay and attorney's fees.
On appeal the NLRC reversed the Labor Arbiter and ruled that ISETANN acted within its prerogative when it phased out its Security Section and
retained the services of an independent security agency in order to cut costs and economize. Upon denial of his motion for reconsideration 3 Serrano
filed the instant petition imputing grave abuse of discretion on the part of the NLRC.
Article 282 of the Labor Code enumerates the just causes for the termination of employment 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. CDta
On the other hand, Arts. 283 and 284 of the same Code enumerate the so-called authorized causes: (a) installation of labor saving devices; (b)
redundancy; (c) retrenchment to prevent losses; (d) closure or cessation of the establishment or undertaking unless the closure or cessation is for the
purpose of circumventing the provisions of the law; and, (e) disease.
The just causes enumerated under Art. 282 of the Labor Code are provided by the employee who causes the infraction. The authorized causes are
provided by the employer either because of outside factors such as the general decline in the economy or merely part of its long range plan for business
profitability. Corollarily, in termination for a just cause, the employee is not entitled to separation pay unlike in termination for an authorized cause. In
addition, the basis in computing the amount of separation pay varies depending on whether the termination is due to the installation of a labor saving
device, or redundancy, in which case, the employee is entitled to receive separation pay equivalent to at least one (1) month pay or to at least one (1)
month pay for every year of service. In case the termination is due to retrenchment in order to prevent losses or in case of closure or cessation of
operation of the establishment or undertaking not due to serious business losses or financial reverses, the separation pay is lower, i.e., equivalent to one
(1) month pay or at least one-half month pay for every year of service, whichever is higher. As may be gleaned from the foregoing, where the cause of
termination is for the financial advantage or benefit of the employer, the basis in computing for separation pay is higher compared to termination dictated
by necessity with no appreciable financial advantage to the employer.
In the instant case, we agree with the NLRC that the dismissal of petitioner Serrano was for an authorized cause, i.e., redundancy, which exists where
the services of an employee are in excess of what are reasonably demanded by the actual requirements of the enterprise. A position is redundant where
it is superfluous, and the superfluity may be the outcome of other factors such as overhiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the enterprise. 4
The hiring of an independent security agency is a business decision properly within the exercise of management prerogative. As such, this Court is
denied the authority to delve into its wisdom although it is equipped with the power to determine whether the exercise of such prerogative is in
accordance with law. Consequently, the wisdom or soundness of the management decision is not subject to the discretionary review of the Labor Arbiter
nor of the NLRC unless there is a violation of law or arbitrariness in the exercise thereof, in which case, this Court will step in. 5 Specifically, we held in
International Harvester Macleod, Inc. v. Intermediate Appellate Court 6 that the determination of whether to maintain or phase out an entire department
or section or to reduce personnel lies with management. The determination of the need for the phasing out of a department as a labor and cost saving
device because it is no longer economical to retain its services is a management prerogative. LLpr
After having established that the termination of petitioner Ruben Serrano was for an authorized cause, we now address the issue of whether proper
procedures were observed in his dismissal.
Since the State affords protection to labor under the Constitution, 7 workers enjoy security of tenure and may only be removed or terminated upon valid
reason and through strict observance of proper procedure. 8 Article 279 of the Labor Code specifically provides
ARTICLE 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.
Security of tenure however does not guarantee perpetual employment. If there exists a just or an authorized cause, the employer may terminate the
services of an employee but subject always to procedural requirements. The employer cannot be legally compelled to have in its employ a person whose
continued employment is patently inimical to its interest. The law, while affording protection to the employee, does not authorize the oppression or
destruction of his employer. 9
Subject then to the constitutional right of workers to security of tenure and to be protected against dismissal except for a just or authorized cause, and
without prejudice to the requirement of notice under Art. 283 of the Labor Code, the employer shall furnish the worker whose employment is sought to be
terminated a written notice containing a statement of the cause of termination and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative, if he so desires, in accordance with company rules and regulations promulgated pursuant to guidelines
set by the DOLE. 10
As specifically provided in Art. 283 of the Labor Code, the employer may terminate the employment of any employee due to redundancy by serving a
written notice on the worker and the DOLE at least one (1) month before the intended date thereof. In the instant case, ISETANN clearly violated the
provisions of Art. 283 on notice. 11 It did not send a written notice to DOLE which is essential because the right to terminate an employee is not an
absolute prerogative. The lack of written notice denied DOLE the opportunity to determine the validity of the termination.
The written notice ISETANN sent to Serrano was dated 11 October 1991 or on the same day the intended termination was to take effect. This obviously
did not comply with the 30-day mandatory requirement. Although the cause for discharge may be just or authorized, it is still necessary and obligatory to
afford the employee concerned his basic and more important right to notice. Serrano was not given the chance to make the needed adjustments brought
about by his termination. Significantly, the notice is intended to enable the employee not only to prepare himself for the legal battle to protect his tenure
of employment, which can be long, arduous, expensive and complicated by his own standards, but also to find other means of employment and ease the
impact of the loss of his job and, necessarily, his income.

We are of the view that failure to send notice of termination to Serrano is not tantamount to violation of his constitutional right to due process but merely
constitutes non-compliance with the provision on notice under Art. 283 of the Labor Code.
The legitimacy of a government is established and its functions delineated in the Constitution. From the Constitution flows all the powers of government
in the same manner that it sets the limits for their proper exercise. In particular, the Bill of Rights functions primarily as a deterrent to any display of
arbitrariness on the part of the government or any of its instrumentalities. It serves as the general safeguard, as is apparent in its first section which
states, "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." 12 Specifically, due process is a requirement for the validity of any governmental action amounting to deprivation of liberty or property. 13 It is a
restraint on state action not only in terms of what it amounts to but how it is accomplished. Its range thus covers both the ends sought to be achieved by
officialdom as well as the means for their realization. 14
Substantive due process is a weapon that may be utilized to challenge acts of the legislative body, whether national or local, and presumably executive
orders of the President and administrative orders and regulations of a rule-making character. Procedural due process, on the other hand, is available for
the purpose of assailing arbitrariness or unreasonableness in the administration of the law by the executive department or the judicial branch. Procedural
due process likewise may aid those appearing before Congressional committees if the proceedings are arbitrary or otherwise unfair. 15
Procedural due process demands that governmental acts, more specifically so in the case of the judiciary, be not infected with arbitrariness. 16 The
same disinterestedness required of men on the bench must characterize the actuations of public officials, not excluding the President, to satisfy the
requirements of procedural due process. 17
In his dissent Mr. Justice Puno states that "the new majority opinion limiting violations of due process to government action alone is a throwback to a
regime of law long discarded by more progressive countries." He opines that "today, private due process is a settled norm in administrative law," citing
Schwartz, an authority in administrative law.
We beg to disagree. A careful reading of Schwartz would reveal that requirements of procedural due process extended from governmental to private
action only in instances where there is "sufficient governmental involvement" or "the private action was so saturated with governmental incidents."
The cardinal primary requirements of due process in administrative proceedings were highlighted in Ang Tibay v. Court of Industrial Relations: 18 (a) the
right to a hearing, which includes the right to present one's case and submit evidence in support thereof; (b) the tribunal must consider the evidence
presented; (c) the decision must have something to support itself; (d) the evidence must be substantial; (e) the decision must be based on the evidence
presented at the hearing, or at least contained in the record and disclosed to the parties affected; (f) the tribunal or body or any of its judges must act on
its own independent consideration of the law and facts of the controversy, and not simply accept the views of a subordinate; (g) the board or body
should, in all controversial questions, render its decision in such manner that the parties to the proceeding may know the various issues involved, and
the reason for the decision rendered.
Also in Lumiqued v. Exevea 19 it was held
In administrative proceedings, the essence of due process is simply the opportunity to explain one's side. One may be heard, not
solely by verbal presentation but also, and perhaps even more creditably as it is more practicable than oral arguments, through
pleadings. An actual hearing is not always an indispensable aspect of due process. As long as a party was given the opportunity
to defend his interests in due course, he cannot be said to have been denied due process of law, for this opportunity to be heard
is the very essence of due process. Llibris
From the foregoing, it is clear that the observance of due process is demanded in governmental acts. Particularly in administrative proceedings, due
process starts with the tribunal or hearing officer and not with the employer. In the instant case, what is mandated of the employer to observe is the 30day notice requirement. Hence, non-observance of the notice requirement is not denial of due process but merely a failure to comply with a legal
obligation for which, we strongly recommend, we impose a disturbance compensation as discussed hereunder.
In the instant case, we categorically declare that Serrano was not denied his right to due process. Instead, his employer did not comply with the 30-day
notice requirement. However, while Serrano was not given the required 30-day notice, he was nevertheless given and, in fact, took advantage of every
opportunity to be heard, first, by the Labor Arbiter, second, by the NLRC, and third, by no less than this Court. Before the Labor Arbiter and the NLRC,
petitioner had the opportunity to present his side not only orally but likewise through proper pleadings and position papers. It is not correct therefore to
say that petitioner was deprived of his right to due process.
We have consistently upheld in the past as valid although irregular the dismissal of an employee for a just or authorized cause but without notice and
have imposed a sanction on the erring employers in the form of damages for their failure to comply with the notice requirement. We discussed the
rationale behind this ruling in Wenphil Corporation v. NLRC 20 thus
The Court holds that the policy of ordering reinstatement to the service of an employee without loss of seniority and the payment
of his wages during the period of his separation until his actual reinstatement but not exceeding three years without qualification
or deduction, when it appears he was not afforded due process, although his dismissal was found to be for just and authorized
cause in an appropriate proceeding in the Ministry of Labor and Employment should be re-examined. It will be highly prejudicial to
the interests of the employer to impose on him the services of an employee who has been shown to be guilty of the charges that
warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable,
remains in the service . . . 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 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 (italics supplied).
In Sebuguero v. National Labor Relations Commission 21 Mr. Justice Davide Jr., now Chief Justice, made this clear pronouncement
It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven to be but he is not
accorded his right to due process, i.e., he was not furnished the twin requirements of notice and the opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of or for failure to
observe due process. The sanction, in the nature of indemnification or penalty, depends on the facts of each case and the gravity
of the omission committed by the employer.
This ruling was later ably amplified by Mr. Justice Puno in Nath v. National Labor Relations Commission 22 where he wrote

The rules require the employer to furnish the worker sought to be dismissed with two written notices before termination of
employment can be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the subsequent notice which informs the employee of the employer's decision to dismiss him. In the
instant case, private respondents have failed to furnish petitioner with the first of the required two (2) notices and to state plainly
the reasons for the dismissal in the termination letter. Failure to comply with the requirements taints the dismissal with illegality.
Be that as it may, private respondent can dismiss petitioner for just cause . . . We affirm the finding of the public respondent that
there was just cause to dismiss petitioner, a probationary employee (italics supplied). dctai
Also, in Camua v. National Labor Relations Commission 23 this Court through Mr. Justice Mendoza decreed
In the case at bar, both the Labor Arbiter and the NLRC found that no written notice of the charges had been given to petitioner
by the respondent company. . . . Accordingly, in accordance with the well-settled rule, private respondents should pay petitioner
P1,000.00 as indemnity for violation of his right to due process. . . Although an employee validly dismissed for cause he may
nevertheless be given separation pay as a measure of social justice provided the cause is not serious misconduct reflecting on
his moral character (italics supplied).

Non-observance of this procedural requirement before would cause the employer to be penalized by way of paying damages to the employee the
amounts of which fluctuated through the years. Thus, for just cause the indemnity ranged from P1,000.00 to P10,000.00. 24 For authorized cause, as
distinguished from just cause, the award ranged from P2,000.00 to P5,000.00. 25
This Court has also sanctioned the ruling that a dismissal for a just or authorized cause but without observance of the mandatory 30-day notice
requirement was valid although considered irregular. The Court ratiocinated that employers should not be compelled to keep in their employ undesirable
and undeserving laborers. For the irregularity, i.e., the failure to observe the 30-day notice of termination, the employer was made to pay a measly sum
ranging from P1,000.00 to P10,000.00. RHLY
With regard to the indemnity or penalty, which we prefer seriously to be referred to as "disturbance compensation," the Court has awarded varying
amounts depending on the circumstances of each case and the gravity of the commission. We now propose that the amount of the award be uniform
and rational and not arbitrary. The reason for the proposal or modification is that in their non-compliance with the 30-day notice requirement the erring
employers, regardless of the peculiar circumstances of each case, commit the infraction only by the single act of not giving any notice to their workers. It
cannot be gainfully said that the infraction in one case is heavier than in the other as the non-observance constitutes one single act. Thus, if the
dismissal is illegal, i.e., there is no just or authorized cause, a disturbance compensation in the amount of P10,000.00 may be considered reasonable. If
the dismissal is for a just cause but without notice, a disturbance compensation in the amount P5,000.00 may be given. In termination for an authorized
cause and the notice requirement was not complied with, we distinguish further: If it is to save the employer from imminent bankruptcy or business
losses, the disturbance compensation to be given is P5,000.00. If the authorized cause was intended for the employer to earn more profits, the amount
of disturbance compensation is P10,000.00. This disturbance compensation, again we strongly recommend, should be given to the dismissed employee
at the first instance, the moment it is shown that his employer has committed the infraction of not complying with the 30-day written notice
requirement to tide him over during his economic dislocation.
The right of the laborers to be informed of their impending termination cannot be taken lightly, and the award of any amount below P5,000.00 may be too
anemic to satisfy the fundamental protection especially accorded to labor and the workingman. In fact, it is hardly enough to sustain a family of three;
more so if the employee has five or more children, which seems to be the average size of a Filipino family.
Henceforth, if the dismissal is for a just cause but without observance of the 30-day notice requirement, the dismissal is deemed improper and irregular.
If later the dismissal is ascertained to be without just cause, the dismissed employee is entitled to reinstatement, if this be feasible, otherwise to
separation pay and back wages plus disturbance compensation of P10,000.00 and moral damages, if warranted. On the other hand, if the dismissal is
ascertained to be with just cause, the dismissed employee is entitled nevertheless to a disturbance compensation of P5,000.00 if the legal requirement
of the 30-day notice to both employee and DOLE has not been complied with.
In instances where there is obviously a ground for dismissal, as when the employee has become violent and his presence would cause more harm to his
co-workers and the security and serenity of the workplace, the employee may be suspended in the meantime until he is heard with proper observance of
the 30-day notice requirement. Likewise, if the dismissal is for an authorized cause but without the required notice, the dismissal is improper and
irregular and the employee should be paid separation pay, back wages and disturbance compensation of P5,000.00 or P10,000.00 depending on the
cause. As already intimated, if the authorized cause is for the purpose of saving the employer from imminent bankruptcy or business losses, the
disturbance compensation should be P5,000.00; otherwise, if the authorized cause is for the employer, in the exercise of management prerogative, to
save and earn more profits, the disturbance compensation should be P10,000.00.
In the instant case, Serrano was given his walking papers only on the very same day his termination was to take effect. DOLE was not served any
written notice. In other words, there was non-observance of the 30-day notice requirement to both Serrano and the DOLE. Serrano was thus terminated
for an authorized cause but was not accorded his right to 30-day notice. Thus, his dismissal being improper and irregular, he is entitled to separation pay
and back wages the amounts of which to be determined by the Labor Arbiter, plus P10,000.00 as disturbance compensation which, from its very nature,
must be paid immediately to cushion the impact of his economic dislocation.
One last note. This Separate Opinion is definitely not advocating a new concept in imposing the so-called "disturbance compensation." Since Wenphil
Corporation v. NLRC 26 this Court has already recognized the necessity of imposing a sanction in the form of indemnity or even damages, when proper,
not specifically provided by any law, upon employers who failed to comply with the twin-notice requirement. At the very least, what is being proposed to
be adopted here is merely a change in the terminology used, i.e., from "sanction," "indemnity," "damages" or "penalty," to "disturbance compensation" as
it is believed to be the more appropriate term to accurately describe the lamentable situation of our displaced employees.
Indeed, from the time the employee is dismissed from the service without notice in this case since 11 October 1991 to the termination of his case,
assuming it results in his reinstatement, or his being paid his back wages and separation pay, as the case may be, how long must he be made to suffer
emotionally and bear his financial burden? Will reinstating him and/or paying his back wages adequately make up for the entire period that he was in
distress for want of any means of livelihood? Petitioner Serrano has been deprived of his only source of income his employment for the past eight
(8) years or so. Will his reinstatement and/or the payment of his back wages and separation pay enable him to pay off his debts incurred in abject usury
to which he must have succumbed during his long period of financial distress? Will it be adequate? Will it be just? Will it be fair? Thus, do we really
and truly render justice to the workingman by simply awarding him full back wages and separation pay without regard for the long period during which he
was wallowing in financial difficulty?

FOR ALL THE FOREGOING, the Decision of respondent National Labor Relations Commission should be MODIFIED. The termination of petitioner
RUBEN SERRANO being based on an authorized cause should be SUSTAINED AS VALID although DECLARED IRREGULAR for having been effected
without the mandatory 30-day notice.
ISETANN DEPARTMENT STORE INC. should PAY petitioner petitioner SERRANO back wages and separation pay the amounts of which to be
determined by the Labor Arbiter, plus P10,000.00 as disturbance compensation which must be paid immediately. Consequently, except as regards the
disturbance compensation, the case should be REMANDED to the Labor Arbiter for the immediate computation and payment of the back wages and
separation pay due petitioner.
EXCEPT as herein stated, I concur with the majority. CDta
PANGANIBAN, J.:
In the case before us, the Court is unanimous in at least two findings: (1) petitioner's dismissal was due to an authorized cause, redundancy; and (2)
petitioner was notified of his dismissal only on the very day his employment was terminated. The contentious issue arising out of these two findings is as
follows: What is the legal effect and the corresponding sanction for the failure of the employer to give the employee and the Department of Labor and
Employment (DOLE) the 30-day notice of termination required under Article 283 of the Labor Code?
During the last ten (10) years, the Court has answered the foregoing question by ruling that the dismissal should be upheld although the employee
should be given "indemnity or damages" ranging from P1,000 to P10,000 depending on the circumstances. CDTInc
The present ponenciaof Mr. Justice Mendoza holds that "the termination of his employment should be considered ineffectual and the [employee] should
be paid back wages" from the time of his dismissal until the Court finds that the dismissal was for a just cause.
Reexamination of the
"Indemnity Only" Rule
I am grateful that the Court has decided to reexamine our ten-year doctrine on this question and has at least, in the process, increased the monetary
award that should go to the dismissed employee from a nominal sum in the concept "indemnity or damages" to "full back wages." Shortly after my
assumption of office on October 10, 1995, I already questioned this practice of granting "indemnity only" to employees who were dismissed for cause but
without due process. 1 I formally registered reservations on this rule in my ponencia in MGG Marine Services v. NLRC 2 and gave it full discussion in my
Dissents in Better Buildings v. NLRC 3 and in Del Val v. NLRC. 4
Without in any way diminishing my appreciation of this reexamination and of the more financially-generous treatment the Court has accorded labor, I
write to take issue with the legal basis of my esteemed colleague, Mr. Justice Mendoza, in arriving at his legal conclusion that "the employer's failure to
comply with the notice requirement does not constitute a denial of due process but a mere failure to observe a procedure for the termination of
employment which makes the termination of employment merely ineffectual." In short, he believes that (1) the 30-day notice requirement finds basis only
in the Labor Code, and (2) the sanction for its violation is only "full back wages."

With due respect, I submit the following counter-arguments:

(1) The notice requirement finds basis not only in the Labor Code but, more important, in the due process clause of the
Constitution.
(2) Consequently, when the employee is dismissed without due process, the legal effect is an illegal dismissal and the appropriate
sanction is full back wages plus reinstatement, not merely full back wages. It is jurisprudentially settled, as I will show
presently, that when procedural due process is violated, the proceedings in this case, the dismissal will be voided,
and the parties will have to be returned to their status quo ante; that is, the employee will have to be given back his old
job and paid all benefits as if he were never dismissed.
(3) In any event, contrary to Mr. Justice Mendoza's premise, even the Labor Code expressly grants the dismissed employee not
only the right to be notified but also the right to be heard.
In short, when an employee is dismissed without notice and hearing, the effect is an illegal dismissal and the appropriate reliefs are reinstatement and
full back wages. In ruling that the dismissal should be upheld, the Court majority has virtually rendered nugatory the employee's right to due process as
mandated by law and the Constitution. It implicitly allows the employer to simply ignore such right and to just pay the employee. While it increases the
payment to "full back wages," it doctrinally denigrates his right to due process to a mere statutory right to notice.
Let me explain the foregoing by starting with a short background of our jurisprudence on the right to due process. SDML
Without Due Process, the
Proceedings Are Illegal
In the past, this Court has untiringly reiterated that there are two essential requisites for an employer's valid termination of an employee's services: (1) a
just 5 or authorized 6 cause and (2) due process. 7 During the last ten years, the Court has been quite firm in this doctrinal concept, but it has been less
than consistent in declaring the illegality of a dismissal when due process has not been observed. This is particularly noticeable in the relief granted.
Where there has been no just or authorized cause, the employee is awarded reinstatement or separation pay, and back wages. 8 If only the second
requisite (due process) has not been fulfilled, the employee, as earlier stated, is granted indemnity or damages amounting to a measly P1,000 up to
P10,000. 9
I respectfully submit that illegal dismissal results not only from the absence of a legal cause (enumerated in Arts. 282 to 284 of the Labor Code), but
likewise from the failure to observe due process. Indeed, many are the cases, labor or otherwise, in which acts violative of due process are
unequivocally voided or declared illegal by the Supreme Court. In Pepsi-Cola Bottling Co. v. NLRC, 10 the Court categorically ruled that the failure of
management to comply with the requirements of due process made its judgment of dismissal "void and non-existent."
This Court in People v. Bocar 11 emphatically made the following pronouncement, which has been reiterated in several cases: 12
"The cardinal precept is that where there is a violation of basic constitutional rights, courts are ousted of their jurisdiction. Thus
the violation of the State's right to due process raises a serious jurisdictional issue (Gumabon vs. Director of the Bureau of
Prisons, L-30026, 37 SCRA 420 [Jan. 30, 1971]) which cannot be glossed over or disregarded at will. Where the denial of the
fundamental right of due process is apparent, a decision rendered in disregard of that right is void for lack of jurisdiction
(Aducayen vs. Flores, L-30370, [May 25, 1973] 51 SCRA 78; Shell Co. vs. Enage, L-30111-12, 49 SCRA 416 [Feb. 27, 1973]).

Any judgment or decision rendered notwithstanding such violation may be regarded as a 'lawless thing, which can be treated as
an outlaw and slain at sight, or ignored wherever it exhibits its head' (Aducayen vs. Flores, supra)." cda
In the earlier case Bacus v. Ople, 13 this Court also nullified the then labor minister's clearance to terminate the employment of company workers who
had supposedly staged an illegal strike. The reason for this ruling was the denial of sufficient opportunity for them to present their evidence and prove
their case. The Court explained: 14
"A mere finding of the illegality of a strike should not be automatically followed by a wholesale dismissal of the strikers from their
employment. What is more, the finding of the illegality of the strike by respondent Minister of Labor and Employment is predicated
on the evidence ascertained through an irregular procedure conducted under the semblance of summary methods and speedy
disposition of labor disputes involving striking employees. SDML
While it is true that administrative agencies exercising quasi-judicial functions are free from the rigidities of procedure, it is equally
well-settled in this jurisdiction that avoidance of such technicalities of law or procedure in ascertaining objectively the facts in each
case should not, however, cause a denial of due process. The relative freedom of the labor arbiter from the rigidities of procedure
cannot be invoked to evade what was clearly emphasized in the landmark case of Ang Tibay v. Court of Industrial Relations that
all administrative bodies cannot ignore or disregard the fundamental and essential requirements of due process."
In the said case, the respondent company was ordered to reinstate the dismissed workers, pending a hearing "giving them the opportunity to be heard
and present their evidence."
In Philippine National Bank v. Apalisok, 15 Primitivo Virtudazo, an employee of PNB, was served a Memorandum stating the finding against him of a
prima facie case for dishonesty and violation of bank rules and regulations. He submitted his Answer denying the charges and explaining his defenses.
Later, two personnel examiners of the bank conducted a fact-finding investigation. They stressed to him that a formal investigation would follow, in which
he could confront and examine the witnesses for the bank, as well as present his own. What followed, however, was a Memorandum notifying him that
he had been found guilty of the charges and that he was being dismissed. After several futile attempts to secure a copy of the Decision rendered against
him, he instituted against PNB a Complaint for illegal dismissal and prayed for reinstatement and damages. LLphil
The trial court held that Virtudazo had been deprived of his rights to be formally investigated and to cross-examine the witnesses. This Court sustained
the trial court, stating resolutely: "The proceedings having been conducted without according to Virtudazo the 'cardinal primary rights of due process'
guaranteed to every party in an administrative or quasi-judicial proceeding, said proceedings must be pronounced null and void." 16
Also in Fabella v. Court of Appeals, 17 this Court declared the dismissal of the schoolteachers illegal, because the administrative body that heard the
charges against them had not afforded them their right to procedural due process. The proceedings were declared void, and the orders for their
dismissal set aside. We unqualifiedly reinstated the schoolteachers, to whom we awarded all monetary benefits that had accrued to them during the
period of their unjustified suspension or dismissal.
In People v. San Diego, 18 People v. Sola, 19 People v. Dacudao, 20 People v. Calo Jr. 21 and People v. Burgos, 22 this Court similarly voided the trial
court's grant of bail to the accused upon a finding that the prosecution had been deprived of procedural due process.
In People v. Sevilleno, 23 the Court noted that the trial judge "hardly satisfied the requisite searching inquiry" due the accused when he pleaded guilty to
the capital offense he had been charged with. We thus concluded that "the accused was not properly accorded his fundamental right to be informed of
the precise nature of the accusation leveled against him." Because of the nonobservance of "the fundamental requirements of fairness and due
process," the appealed Decision was annulled and set aside, and the case was remanded for the proper arraignment and trial of the accused.
Recently, the Court vacated its earlier Decision 24 in People v. Parazo 25 upon realizing that the accused "a deaf-mute, a mental retardate, whose
mental age [was] only seven (7) years and nine (9) months, and with low IQ of 60 only" had not been ably assisted by a sign language expert during
his arraignment and trial. Citing People v. Crisologo, 26 we ruled that the accused had been deprived of "a full and fair trial and a reasonable opportunity
to defend himself." He had in effect been denied his fundamental right to due process of law. Hence, we set aside the trial proceedings and granted the
accused a rearraignment and a retrial.
Of late, we also set aside a Comelec Resolution disallowing the use by a candidate of a certain nickname for the purpose of her election candidacy. The
Resolution was issued pursuant to a letter-petition which was passed upon by the Comelec without affording the candidate the opportunity to explain her
side and to counter the allegations in said letter-petition. In invalidating the said Resolution, we again underscored the necessity of the observance of the
twin requirements of notice and hearing before any decision can be validly rendered in a case. 27
Clearly deducible from our extant jurisprudence is that the denial of a person's fundamental right to due process amounts to the illegality of the
proceedings against him. Consequently, he is brought back to his status quo ante, not merely awarded nominal damages or indemnity. cdrep
Our labor force deserves no less. Indeed, the State recognizes it as its primary social economic force, 28 to which it is constitutionally mandated to
afford full protection. 29 Yet, refusing to declare the illegality of dismissals without due process, we have continued to impose upon the erring employer
the simplistic penalty of paying indemnity only. Hence, I submit that it is time for us to denounce these dismissals as null and void and to grant our
workers these proper reliefs: (1) the declaration that the termination or dismissal is illegal and unconstitutional and (2) the reinstatement of the employee
plus full back wages. The present ruling of the Court is manifestly inconsistent with existing jurisprudence which holds that proceedings held without
notice and hearing are null and void, since they amount to a violation of due process, and therefore bring back the parties to the status quo ante.

Exception: When Due Process

Is Impractical and Futile
I am fully aware that in a long line of cases starting with Wenphil v. NLRC, 30 the Court has held: where there is just cause for the dismissal of an
employee but the employer fails to follow the requirements of procedural due process, the former is not entitled to back wages, reinstatement (or
separation pay in case reinstatement is no longer feasible) or other benefits. Instead, the employee is granted an indemnity (or penalty or damages)
ranging from P1,000 31 to as much as P10,000, 32 depending on the circumstances of the case and the gravity of the employer's omission. Since then,
Wenphil has perfunctorily been applied in most subsequent cases 33 involving a violation of due process (although just cause has been duly proven),
without regard for the peculiar factual milieu of each case. Indemnity or damages has become an easy substitute for due process. cdrep
Be it remembered, however, that the facts in Wenphil clearly showed the impracticality and the futility of observing the procedure laid down by law and
by the Constitution for terminating employment. The employee involved therein appeared to have exhibited a violent temper and caused trouble during
office hours. In an altercation with a co-employee, he "slapped [the latter's] cap, stepped on his foot and picked up the ice scooper and brandished it
against [him]." When summoned by the assistant manager, the employee "shouted and uttered profane words" instead of giving an explanation. He was

caught virtually in flagrante delicto in the presence of many people. Under the circumstances obtaining, swift action was necessary to preserve order and
discipline, as well as to safeguard the customers' confidence in the employer's business a fast food chain catering to the general public where
courtesy is a prized virtue. Llibris
However, in most of the succeeding cases, including the present one before us in which the petitioner was dismissed on the very day he was served
notice, there were ample opportunities for the employers to observe the requisites of due process. There were no exigencies that called for immediate
response. And yet, Wenphil was instantly invoked and due process brushed aside.
I believe that the price that the Court has set for the infringement of the fundamental right to due process is too insignificant, too niggardly, and
sometimes even too late. I believe that imposing a stiffer sanction is the only way to emphasize to employers the extreme importance of the right to due
process in our democratic system. Such right is too sacred to be taken for granted or glossed over in a cavalier fashion. To hold otherwise, as by simply
imposing an indemnity or even "full back wages," is to allow the rich and powerful to virtually purchase and to thereby stifle a constitutional right granted
to the poor and marginalized.
It may be asked: If the employee is guilty anyway, what difference would it make if he is fired without due process? By the same token, it may be asked:
If in the end, after due hearing, a criminal offender is found guilty anyway, what difference would it make if he is simply penalized immediately without the
trouble and the expense of trial? The absurdity of this argument is too apparent to deserve further discourse. 34
Worker's Right to Notice Is
Constitutional, Not Merely Statutory
According to the ponencia of Mr. Justice Mendoza, the "violation of the notice requirement cannot be considered a denial of due process resulting in the
nullity of the employee's dismissal or lay- off." He argues that the due process clause of the Constitution may be used against the government only.
Since the Labor Code does not accord employees the right to a hearing, ergo, he concludes, they do not have the right to due process. cdphil
I disagree. True, as pointed out by Mr. Justice Mendoza, traditional doctrine holds that constitutional rights may be invoked only against the State. This is
because in the past, only the State was in a position to violate these rights, including the due process clause. However, with the advent of liberalization,
deregulation and privatization, the State tended to cede some of its powers to the "market forces." Hence, corporate behemoths and even individuals
may now be sources of abuses and threats to human rights and liberties. I believe, therefore, that such traditional doctrine should be modified to enable
the judiciary to cope with these new paradigms and to continue protecting the people from new forms of abuses. 34-a
Indeed the employee is entitled to due process not because of the Labor Code, but because of the Constitution. Elementary is the doctrine that
constitutional provisions are deemed written into every statute, contract or undertaking. Worth noting is that "[o]ne's employment, profession, trade or
calling is a property right within the protection of the constitutional guaranty of due process of law." 35
In a long line of cases involving judicial, quasi-judicial and administrative proceedings, some of which I summarized earlier, the Court has held that the
twin requirements of notice and hearing (or, at the very least, an opportunity to be heard) constitute the essential elements of due process. In labor
proceedings, both are the conditio sine qua non for a dismissal to be validly effected. 36 The perceptive Justice Irene Cortes has aptly stated: "One
cannot go without the other, for otherwise the termination would, in the eyes of the law, be illegal." 37
Even the Labor Code Grants
the Right to a Hearing
Besides, it is really inaccurate to say that the Labor Code grants "notice alone" to employees being dismissed due to an authorized cause. Article 277 (b)
38 of the said Code explicitly provides that the termination of employment by the employer is "subject to the constitutional right of workers to security of
tenure[;] . . . without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard . .
.." Significantly, the provision requires the employer "to afford [the employee] ample opportunity to be heard" when the termination is due to a "just and
authorized cause." I submit that this provision on "ample opportunity to be heard " applies to dismissals under Articles 282, 283 and 284 of the Labor
Code. llcd
In addition, to say that the termination is "simply ineffectual" for failure to comply with the 30-day written notice and, at the same time, to conclude that it
has "legal effect" appears to be contradictory. Ineffectual means "having no legal force." 39 If a dismissal has no legal force or effect, the consequence
should be the reinstatement of the dismissed employee and the grant of full back wages thereto, as provided by law not the latter only. Limiting the
consequence merely to the payment of full back wages has no legal or statutory basis. No provision in the Labor Code or any other law authorizes such
limitation of sanction, which Mr. Justice Mendoza advocates.
The majority contends that it is not fair to reinstate the employee, because the employer should not be forced to accommodate an unwanted worker. I
believe however that it is not the Court that forces the employer to rehire the worker. By violating the latter's constitutional right to due process, the
former brings this sanction upon itself. Is it unfair to imprison a criminal? No! By violating the law, one brings the penal sanction upon oneself. There is
nothing unfair or unusual about this inevitable chain of cause and effect, of crime and punishment, of violation and sanction.
Due Process Begins
With Each of Us
To repeat, due process begins with the employer, not with the labor tribunals. An objective reading of the Bill of Rights clearly shows that the due
process protection is not limited to government action alone. The Constitution does not say that the right cannot be claimed against private individuals
and entities. Thus, in PNB v. Apalisok, which I cited earlier, this Court voided the proceedings conducted by petitioner bank because of its failure to
observe Apalisok's right to due process.
Truly, justice is dispensed not just by the courts and quasi-judicial bodies like public respondent here. The administration of justice begins with each of
us, in our everyday dealings with one another and, as in this case, in the employers' affording their employees the right to be heard. If we, as a people
and as individuals, cannot or will not deign to act with justice and render unto everyone his or her due in little, everyday things, can we honestly hope
and seriously expect to do so when monumental, life-or-death issues are at stake? Unless each one is committed to a faithful observance of day-to-day
fundamental rights, our ideal of a just society can never be approximated, not to say attained. LexLib
In the final analysis, what is involved here is not simply the amount of monetary award, whether insignificant or substantial; whether termed indemnity,
penalty or "full back wages." Neither is it merely a matter of respect for workers' rights or adequate protection of labor. The bottom line is really the
constitutionally granted right to due process. And due process is the very essence of justice itself. Where the rule of law is the bedrock of our free
society, justice is its very lifeblood. Denial of due process is thus no less than a denial of justice itself .
In Addition to Reinstatement and
Back Wages, Damages May Be Awarded

One last point. Justice Vitug argues in his Separate Opinion that the nonobservance of the prescribed notices "can verily entitle the employee to an
award of damages but . . . not to the extent of rendering outrightly illegal that dismissal or lay-off . . ." I, of course, disagree with him insofar as he denies
the illegality of the dismissal, because as I already explained, a termination without due process is unconstitutional and illegal. But I do agree that, where
the employee proves the presence of facts showing liability for damages (moral, exemplary, etc.) as provided under the Civil Code, the employee could
be entitled to such award in addition to reinstatement and back wages. For instance, where the illegal dismissal has caused the employee "physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury" due to the
bad faith of the employer, an award for moral damages would be proper, in addition to reinstatement and back wages.

Summary
To conclude, I believe that even if there may be a just or an authorized cause for termination but due process is absent, the dismissal proceedings must
be declared null and void. The dismissal should still be branded as illegal. Consequently, the employee must be reinstated and given full back wages.
On the other hand, there is an exception. The employer can adequately prove that under the peculiar circumstances of the case, there was no
opportunity to comply with due process requirements; or doing so would have been impractical or gravely adverse to the employer, as when the
employee is caught in flagrante delicto. Under any of these circumstances, the dismissal will not be illegal and no award may properly be granted.
Nevertheless, as a measure of compassion, the employee may be given a nominal sum depending on the circumstances, pursuant to Article 2221 of the
Civil Code. llcd
Depending on the facts of each case, damages as provided under applicable articles of the Civil Code may additionally be awarded.
WHEREFORE, I vote to GRANT the petition. Ruben Serrano should be REINSTATED and PAID FULL BACK WAGES, from date of termination until
actual reinstatement, plus all benefits he would have received as if he were never dismissed.
VITUG, J.,separate concurring and dissenting opinion:
The lawful severance by an employer of an employer-employee relationship would require a valid cause. There are, under the Labor Code, two groups
of valid causes, and these are the just causes under Article 282 1 and the authorized causes under Article 283 2 and Article 284. 3
An employee whose employment is terminated for a just cause is not entitled to the payment of separation benefits. 4 Separation pay would be due,
however, when the lay-off is on account of an authorized cause. The amount of separation pay would depend on the ground for the termination of
employment. A lay-off due to the installation of a labor saving device, redundancy (Article 283) or disease (Article 284), entitles the worker to a
separation pay equivalent to "one (1) month pay or at least one (1) month pay for every year of service, whichever is higher." When the termination of
employment is due to retrenchment to prevent losses, or to closure or cessation of operations of an establishment or undertaking not due to serious
business losses or financial reverses, the separation pay is only an equivalent of "one (1) month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher." In the above instances, a fraction of at least six (6) months is considered as one (1) whole year. LLpr
Due process of law, in its broad concept, is a principle in our legal system that mandates due protection to the basic rights, inherent or accorded, of
every person against harm or transgression without an intrinsically just and valid law, as well as an opportunity to be heard before an impartial tribunal,
that can warrant such an impairment. Due process guarantees against arbitrariness and bears on both substance and procedure. Substantive due
process concerns itself with the law, its essence, and its concomitant efficacy; procedural due process focuses on the rules that are established in order
to ensure meaningful adjudications appurtenant thereto.
In this jurisdiction, the right to due process is constitutional and statutory.
Due process in the context of a termination of employment, particularly, would be two-fold, i.e., substantive due process which is complied with when the
action of the employer is predicated on a just cause or an authorized cause, and procedural due process which is satisfied when the employee has the
opportunity to contest the existence of the ground invoked by the employer in terminating the contract of employment and to be heard thereon. I find it
difficult to ascribe either a want of wisdom or a lack of legal basis to the early pronouncements of this Court that sanction the termination of employment
when a just or an authorized cause to warrant the termination is clearly extant. Regrettably, the Court in some of those pronouncements has used, less
than guarded in my view, the term "due process" when referring to the notices prescribed in the Labor Code 5 and its implementing rules 6 that could,
thereby, albeit unintendedly and without meaning to, confuse the latter with the notice requirement in adjudicatory proceedings. It is not seldom when the
law puts up various conditions in the juridical relations of parties; it would not be accurate to consider, I believe, an infraction thereof to ipso-facto raise a
problem of due process. The mere failure of notice of the dismissal or lay-off does not foreclose the right of an employee from disputing the validity, in
general, of the termination of his employment, or the veracity, in particular, of the cause that has been invoked in order to justify that termination. In
assailing the dismissal or lay-off, an employee is entitled to be heard and to be given the corresponding due notice of the proceedings. It would be when
this right is withheld without cogent reasons that, indeed, it can rightly be claimed that the fundamental demands of procedural due process have been
unduly discarded. CDTInc
I do appreciate the fact that the prescribed notices can have consequential benefits to an employee who is dismissed or laid off, as the case may be; its
non-observance by an employer, therefore, can verily entitle the employee to an award of damages but, to repeat, not to the extent of rendering
outrightly illegal that dismissal or lay-off predicated on valid grounds. I would consider the indemnification to the employee not a penalty or a fine against
the employer, the levy of either of which would require an appropriate legislative enactment; rather, I take the grant of indemnity as justifiable as an
award of nominal damages in accordance with the provisions of Articles 2221-2223 of the Civil Code, viz.:
"ARTICLE 2221. Nominal damages are 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.
"ARTICLE 2222. The court may award nominal damages in every obligation arising from any source enumerated in Article 1157,
or in every case where any property right has been invaded.
"ARTICLE 2223. The adjudication of nominal damages shall preclude further contest upon the right involved and all accessory
questions, as between the parties to the suit, or their respective heirs and assigns."
There is no fixed formula for determining the precise amount of nominal damages. In fixing the amount of nominal damages to be awarded, the
circumstances of each case should thus be taken into account, such as, to exemplify, the
(a) length of service or employment of the dismissed employee;
(b) his salary or compensation at the time of the termination of employment vis-a-vis the capability of the employer to pay; CDta

(c) question of whether the employer has deliberately violated the requirements for termination of employment or has attempted
to comply, at least substantially, therewith; and/or
(d) reasons for the termination of employment.
I might stress the rule that the award of nominal damages is not for the purpose of indemnification for a loss but for the recognition and vindication
of a right. The degree of recovery therefor can depend, on the one hand, on the constitution of the right, and, upon the other hand, on the extent
and manner by which that right is ignored to the prejudice of the holder of that right.
In fine 7
A. A just cause or an authorized cause and a written notice of dismissal or lay-off, as the case may be, are required concurrently but not really
equipollent in their consequence, in terminating an employer-employee relationship.
B. Where there is neither just cause nor authorized cause, the reinstatement of the employee and the payment of back salaries would be proper and
should be decreed. If the dismissal or lay-off is attended by bad faith or if the employer acted in wanton or oppressive manner, moral and exemplary
damages might also be awarded. In this respect, the Civil Code provides: CDta
"ARTICLE 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted
fraudulently or in bad faith."
"ARTICLE 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner." (Civil Code).
Separation pay can substitute for reinstatement if such reinstatement is not feasible, such as in case of a clearly strained employer-employee
relationship (limited to managerial positions and contracts of employment predicated on trust and confidence) or when the work or position formerly
held by the dismissed employee plainly has since ceased to be available.
C. Where there is just cause or an authorized cause for the dismissal or lay-off but the required written notices therefor have not been properly observed
by an employer, it would neither be right and justifiable nor likely intended by law to order either the reinstatement of the dismissed or laid-off employee
or the payment of back salaries to him simply for the lack of such notices if, and so long as, the employee is not deprived of an opportunity to contest
that dismissal or lay-off and to accordingly be heard thereon. In the termination of employment for an authorized cause (this cause being attributable to
the employer), the laid-off employee is statutorily entitled to separation pay, unlike a dismissal for a just cause (a cause attributable to an employee)
where no separation pay is due. In either case, if an employer fails to comply with the requirements of notice in terminating the services of the employee,
the employer must be made to pay, as so hereinabove expressed, corresponding damages to the employee.

WHEREFORE, I vote to hold (a) that the lay-off in the case at bar is due to redundancy and that, accordingly, the separation pay to petitioner should be
increased to one month, instead of one-half month, pay for every year of service, and (b) that petitioner is entitled to his unpaid wages, proportionate
13th-month pay, and an indemnity of P10,000.00 in keeping with the nature and purpose of, as well as the rationale behind, the grant of nominal
damages.
PUNO, J., dissenting opinion:
The rule of audi alteram partem hear the other side, is the essence of procedural due process. That a "party is not to suffer in person or in purse
without an opportunity of being heard" is the oldest established principle in administrative law. 1 Today, the majority is ruling that the all important right of
an employee to be notified before he is dismissed for a just or authorized cause is not a requirement of due process. This is a blow on the breadbasket
of our lowly employees, a considerable erosion of their constitutional right to security of tenure, hence this humble dissenting opinion. LLcd
A review of our law on dismissal is in order.
I. DISMISSAL DUE TO JUST CAUSE
The law allowing dismissal of an employee due to a just cause is provided in Article 282 of the Labor Code:
"ARTICLE 282. Termination by employer. An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his 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 duly authorized representative;
(d) Commission of the 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 cdtai
(e) Other causes analogous to the foregoing."
The long established jurisprudence 2 is that to justify dismissal of an employee for a just cause, he must be given two kinds of notice by his employer,
viz.: (1) notice to apprise the employee of the particular acts or omissions for which the dismissal is sought, and (2) subsequent notice to inform him of
the employer's decision to dismiss him. Similarly, deeply ingrained is our ruling that these pre and post notice requirements are not mere technicalities
but are requirements of due process. 3
Then came the case of Wenphil Corporation vs. NLRC and Mallare in 1989. 4 It is the majority view that Wenphil reversed the long standing policy of
this Court on dismissal. This is too broad a reading of Wenphil. A careful statement of the facts of Wenphil and the ruling of this Court is thus proper.
LLjur
First, the facts. The private respondent Roberto Mallare is the assistant head of the backroom department of petitioner Wenphil Corporation. At about
2:30 pm on May 20, 1985, Mallare had an altercation with his co-employee, Job Barrameda, about tending the Salad Bar. He slapped Barrameda's cap,
stepped on his foot, picked up an ice scooper and brandished it against the latter. He refused to be pacified by another employee who reported the
incident to Delilah Hermosura, assistant manager. Hermosura summoned Mallare but the latter refused to see the former. It took a security guard to
bring Mallare to Hermosura. Instead of making an explanation, Mallare shouted profane words against Hermosura. He declared that their altercation
should only be settled by him and Barrameda.

The following morning, Mallare was suspended. In the afternoon, he was dismissed from the service. He received an official notice of his dismissal four
(4) days later.
Mallare filed with the Labor Arbiter a complaint for illegal suspension, illegal dismissal and unfair labor practice. No hearing was conducted in view of the
repeated absence of the counsel of Mallare. The parties submitted their respective position papers. On December 3, 1986, the Arbiter denied the
complaint as he found Mallare guilty of grave misconduct and insubordination, which are just causes for dismissal. The Arbiter also ruled that Mallare
was not denied due process. On appeal, the NLRC reversed. It held that Mallare was denied due process before he was dismissed. It ordered Mallare's
reinstatement and the payment of his one (1) year backwages.
On certiorari to this Court, we reversed the NLRC and reinstated the decision of the Arbiter with the modification that petitioner should pay to Mallare an
indemnity of P1,000.00 for dismissing Mallare without any notice and hearing. We held:
"Petitioner insists that private respondent was afforded due process but he refused to avail of his right to the same; that when the
matter was brought to the labor arbiter he was able to submit his position paper although the hearing cannot proceed due to the
non-appearance of his counsel; and that the private respondent is guilty of serious misconduct in threatening or coercing a coemployee which is a ground for dismissal under Article 283 of the Labor Code. cdasia
The failure of petitioner to give private respondent the benefit of a hearing before he was dismissed constitutes an infringement of
his constitutional right to due process of law and equal protection of the laws. The standards of due process in judicial as well as
administrative proceedings have long been established. In its bare minimum due process of law simply means giving notice and
opportunity to be heard before judgment is rendered.
The claim of petitioner that a formal investigation was not necessary because the incident, which gave rise to the termination of
private respondent, was witnessed by his co-employees and supervisors, is without merit. The basic requirement of due process
is that which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial.
However, it is a matter of fact that when the private respondent filed a complaint against petitioner, he was afforded the right to an
investigation by the labor arbiter. He presented his position paper as did the petitioner. If no hearing was had, it was the fault of
private respondent as his counsel failed to appear at the scheduled hearings. The labor arbiter concluded that the dismissal of
private respondent was for just cause. He was found guilty of grave misconduct and insubordination. This is borne by the sworn
statements of witnesses. The Court is bound by this finding of the labor arbiter. prLL
By the same token, the conclusion of the public respondent NLRC on appeal that private respondent was not afforded due
process before he was dismissed is binding on this Court. Indeed, it is well taken and supported by the records. However, it can
not justify a ruling that private respondent should be reinstated with back wages as the public respondent NLRC so decreed.
Although belatedly, private respondent was afforded due process before the labor arbiter wherein the just cause of his dismissal
had been established. With such finding, it would be arbitrary and unfair to order his reinstatement with back wages."
Three members of the Court filed concurring and dissenting opinions. Madam Justice Herrera opined that: (a) Mallare was dismissed for cause, hence,
he is not entitled to reinstatement and backwages; (b) he was not denied due process; and (c) he has no right to any indemnity but to separation pay to
cushion the impact of his loss of employment Mr. Justice Padilla took the view that: (1) Mallare was not entitled to reinstatement and backwages as he
was guilty of grave misconduct and insubordination; (2) he was denied administrative due process; and (3) for making such denial, Wenphil should pay
"separation pay (instead of indemnity) in the sum of P1,000.00." Madam Justice Cortes held that: (1) Mallare was not illegally dismissed; (2) he was not
denied due process; (3) he was not entitled to indemnity; and (4) if P1,000.00 was to be imposed on Wenphil as an administrative sanction, it should
form part of the public fund of the government.
I shall discuss later that Wenphil did not change our ruling that violation of the pre-dismissal notice requirement is an infringement of due process.
II. DISMISSAL DUE TO AUTHORIZED CAUSE
The applicable law on dismissal due to authorized cause is Article 283 of the Labor Code which provides:
"ARTICLE 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any
employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the [Department] of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations
of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year."
In Sebuguero v. NLRC, 5 we held thru our esteemed Chief Justice Davide that "the requirement of notice to both the employees concerned and the
Department of Labor and Employment (DOLE) is mandatory and must be written and given at least one month before the intended date of
retrenchment." We explained that the "notice to the DOLE is essential because the right to retrench is not an absolute prerogative of an employer but is
subject to the requirement of law that retrenchment be proved to prevent losses. The DOLE is the agency that will determine whether the planned
retrenchment is justified and adequately supported by fact." 6 Nonetheless, we ruled:

"The lack of written notice to the petitioners and to the DOLE does not, however, make the petitioners' retrenchment illegal such
that they are entitled to the payment of back wages and separation pay in lieu of reinstatement as they contend. Their
retrenchment, for not having been effected with the required notices, is merely defective. In those cases where we found the
retrenchment to be illegal and ordered the employees' reinstatement and the payment of backwages, the validity of the cause for
retrenchment, that is the existence of imminent or actual serious or substantial losses, was not proven. But here, such a cause is
present as found by both the Labor Arbiter and the NLRC. There is only a violation by GTI of the procedure prescribed in Article
283 of the Labor Code in effecting the retrenchment of the petitioners. cdlex
It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven to be but he is not
accorded his right to due process, i.e., he was not furnished the twin requirements of notice and the opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of or for failure to
observe due process. The sanction, in the nature of indemnification or penalty, depends on the facts of each case and the gravity

of the omission committed by the employer and has ranged from P1,000.00 as in the cases of Wenphil vs. National Labor
Relations Commission, Seahorse Maritime Corp. v. National Labor Relations Commission, Shoemart, Inc. vs. National Labor
Relations Commission, Rubberworld (Phils.) Inc. vs. National Labor Relations Commission, Pacific Mills, Inc. vs. Alonzo, and
Aurelio vs. National Labor Relations Commission to P10,000.00 in Reta vs. National Labor Relations Commission and Alhambra
Industries, Inc. vs. National Labor Relations Commission. More recently, in Worldwide Papermills, Inc. vs. National Labor
Relations Commission, the sum of P5,000.00 was awarded to the employee as indemnification for the employer's failure to
comply with the requirements of procedural due process.
Accordingly, we affirm the deletion by the NLRC of the award of back wages. But because the required notices of the petitioners'
retrenchment were not served upon the petitioners and the DOLE, GTI must be sanctioned for such failure and thereby required
to indemnify each of the petitioners the sum of P20,000.00 which we find to be just and reasonable under the circumstances of
this case."
III. RE-EXAMINATION OF THE WENPHIL DOCTRINE: FROM BAD TO WORSE
The minority of the Court has asked for a re-examination of Wenphil because as the majority correctly observed, "the number of cases involving
dismissals without the requisite notice to the employee although effected for just or authorized causes suggests that the imposition of fine for violation of
the notice requirement has not been effective in deterring violations of the notice requirement."
We must immediately set Wenphil in its proper perspective as it is a very exceptional case. Its doctrine must be limited to its distinct facts. Its facts
therefore ought to be carefully examined again. In Wenphil, it was clearly established that the employee had a violent temper, caused trouble during
office hours and even defied his superiors as they tried to pacify him. The employee was working for a fast food chain that served the public and where
violence has no place. These facts were established only in the proceedings before the Labor Arbiter after the employee filed a complaint for illegal
dismissal. There were no formal investigation proceedings before the employer as the employee was dismissed without any notice by the employer.
Given these facts, we ruled that the pre-dismissal notice requirement was part of due process; nonetheless, we held that the employee was given due
process as he was heard by the Labor Arbiter; we found that the proceedings before the Labor Arbiter proved that the employee was guilty of grave
misconduct and insubordination; we concluded with the rule that it would be highly prejudicial to the interest of the employer to reinstate the employee,
but the employer must indemnify the employee the amount of P1,000.00 for dismissing him without notice. We further held that "the measure of this
award depends on the facts of each case and the gravity of the omission committed by the employer." 7
At the outset, I wish to emphasize that Wenphil itself held, and repeatedly held that "the failure of petitioner to give private respondent the benefit of a
hearing before he was dismissed, constitutes an infringement of his constitutional right to due process of law and equal protection of the laws. The
standards of due processof law in judicial as well as administrative proceedings have long been established. In its bare minimum due process of law
simply means giving notice and opportunity to be heard before judgment is rendered." 8 The Court then satisfied itself with this bare minimum when it
held that the post dismissal hearing before the Labor Arbiter was enough compliance with the demands of due process and refused to reinstate an
eminently undesirable employee. Heretofore, the Court was far from satisfied with this bare minimum as it strictly imposed on an employer compliance
with the requirement of pre-dismissal notice, violation of which resulted in orders of reinstatement of the dismissed employee. This is the only wrinkle
wrought by Wenphil in our jurisprudence on dismissal. Nonetheless, it should be stressed that the Court still punished Wenphil's violation of the predismissal notice requirement as it was ordered to pay an indemnity of P1,000.00 to the employee. The indemnity was based on the iterated and
reiterated rule that "the dismissal of an employee must be for just or authorized cause and after due process." 9
Our ten (10) years experience with Wenphil is not a happy one. Unscrupulous employers have abused the Wenphil ruling. They have dismissed without
notice employees including those who are not as eminently undesirable as the Wenphil employee. They dismissed employees without notice as a
general rule when it should be the exception. The purpose of the pre-dismissal notice requirement was entirely defeated by employers who were just too
willing to pay an indemnity for its violation. The result, as the majority concedes, is that the indemnity we imposed has not been effective to prevent
unjust dismissals of employees. To be sure, this is even a supreme understatement. The ugly truth is that Wenphil is the mother of many unjust and
unauthorized dismissals of employees who are too weak to challenge their powerful employees. LexLib
As the Wenphil indemnity doctrine has proved to be highly inimical to the interest of our employees, I humbly submit a return to the pre-Wenphil rule
where a reasonless violation of the pre-dismissal notice requirement makes the dismissal of an employee illegal and results in his reinstatement. In fine,
we should strike down as illegal the dismissal of an employee even if it is for a justified end if it is done thru unjustified means for we cannot be disciples
of the Machiavellian doctrine of the end justifies the means. With due respect, the majority decision comes too near this mischievous doctrine by giving
emphasis on the end and not the means of dismissal of employees. What grates is that the majority today espouses a doctrine more pernicious than
Wenphil for now it announces that a violation of the pre-dismissal notice requirement does not even concern due process. The reasons relied upon by
the majority for this new ruling against the job security of employees cannot inspire assent. LLjur
FIRST. I would like to emphasize that one undesirable effect of Wenphil is to compel employees to seek relief against illegal dismissals with the DOLE
whereas before, a remedy can be sought before the employer. In shifting this burden, an employee's uneven fight against his employer has become
more uneven. Now, an illegally dismissed employee often goes to the DOLE without an exact knowledge of the cause of his dismissal. As a matter of
strategy, some employers today dismiss employees without notice. They know that it is more advantageous for them to litigate with an employee who
has no knowledge of the cause of dismissal. The probability is that said employee will fail to prove the illegality of his dismissal. All that he can prove is
that he was dismissed without notice and the penalty for the omission is a mere fine, a pittance.
The case at bar demonstrates how disastrous Wenphil has been to our helpless employees. In holding that the petitioner failed to prove his cause of
action, the majority held ". . . we have only the bare assertion of petitioner that, in abolishing the security section, private respondent's real purpose was
to avoid payment to the security checkers of the wage increases provided in the collective bargaining agreement approved in 1990." The bare assertion
of the petitioner is understandable. The notice given to him spoke of a general ground retrenchment. No details were given about the employer's
sudden retrenchment program. Indeed, the employee was dismissed on the day he received the notice in violation of the 30-day requirement. He was
given no time, no opportunity to ascertain and verify the real cause of his dismissal. Thus, he filed with the DOLE a complaint for illegal dismissal with a
hazy knowledge of its real cause. Heretofore, it is the employer whom we blame and penalize if he does not notify his employee of the cause of his
dismissal. Today, the majority puts the blame on the employee for not knowing why he was dismissed when he was not given any notice of dismissal. In
truth, the suspicion of the petitioner in the case at bar that he was dismissed to avoid payment of their wage increases is not without basis. The DOLE
itself found that petitioner has unpaid wages which were ordered to be paid by the employer. The majority itself affirmed this finding.

What hurts is that while the majority was strict with the petitioner-employee, it was not so with the employer ISETANN. Immediately, it validated the
finding of the NLRC that petitioner was dismissed due to the redundancy of his position. This is inconsistent with the finding of the Labor Arbiter that the
employer failed to prove retrenchment, the ground it used to dismiss the petitioner. A perusal of the records will show that Ms. Cristina Ramos,
Personnel Administration Manager of the employer ISETANN testified on the cause of dismissal of the petitioner. She declared that petitioner was
retrenched due to the installation of a labor saving device. Allegedly, the labor saving device was the hiring of an independent security agency, thus: 10

"xxx xxx xxx

Atty. Perdigon:
You said that your company decided to phase out the position of security checkers . . .
Ms. Ramos:
Yes Sir.
Q: And instead hired the services of a security agency?
A: Yes, sir.
xxx xxx xxx
Q: Did you not retrench the position of security checkers?
A: We installed a labor saving device. cdll
Q: So you did not retrench?
A: No, sir.
Q: How about the position of Section Head of Security Department?
A: It was abolished in 1991.
xxx xxx xxx
Q: Are you aware of the retrenchment program of the company as stated in this letter?
A: Actually it's not a retrenchment program. It's an installation of a labor saving device.
Q: So you are telling this Court now that there was no retrenchment program?
A: It was actually an installation of a labor saving device (italics supplied).
xxx xxx xxx
Q: . . . What (is) this labor saving device that you are referring to?
A: The labor saving device is that the services of a security agency were contracted to handle the services of the security
checkers of our company. cdlex
Q: Are you sure of what labor saving means, Madam witness?
A: Yes, sir.
Q: You said you installed a labor saving device, and you installed a security agency as a labor saving device?
A: We hired the services of a security agency.
Q: So according to you . . . a security agency is a labor saving device?
Atty. Salonga:
Already answered, your Honor."
Obviously, Ms. Ramos could not even distinguish between retrenchment and redundancy. The Labor Arbiter thus ruled that petitioner's dismissal
was illegal. The NLRC, however, reversed. The majority affirmed the NLRC ruling that ISETANN's phase out of its security employees is a
legitimate business decision, one that is necessary to obtain reasonable return from its investment. To use the phrase of the majority, this is a "bare
assertion." Nothing in the majority decision shows how the return of ISETANN's investment has been threatened to justify its so-called business
decision as legitimate.
SECOND. The majority holds that "the need is for a rule which, while recognizing the employee's right to notice before he is dismissed or laid off, at the
same time acknowledges the right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to terminate employment for any of the
authorized causes mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an employee for
cause without prior notice is deemed ineffective in deterring employer violations of the notice requirement, the remedy is not to declare the dismissal
void if there are just or valid grounds for such dismissal or if the termination is for an authorized cause. That would be to uphold the right of the employee
but deny the right of the employer to dismiss for cause. Rather, the remedy is to consider the dismissal or termination to be simply ineffectual for failure
of the employer to comply with the procedure for dismissal or termination."
With due respect, I find it most difficult to follow the logic of the majority. Before Wenphil, we protected employees with the ruling that dismissals without
prior notice are illegal and the illegally dismissed employee must be reinstated with backwages. Wenphil diluted that rule when it held that due process is
satisfied if the employee is given the opportunity to be heard by the Labor Arbiter. It further held that an employee cannot be reinstated if it is established
in the hearing that his dismissal is for a just cause. The failure of the employer to give a pre-dismissal notice is only to be penalized by payment of an
indemnity. The dilution of the rule has been abused by unscrupulous employers who then followed the "dismiss now, pay later" strategy. This evil
practice of employers was what I expected the majority to address in re-examining the Wenphil doctrine. At the very least, I thought that the majority
would restore the balance of rights between an employee and an employer by giving back the employee's mandatory right to notice before dismissal. It
is disquieting, however, that the majority re-arranged this balance of right by tilting it more in favor of the employer's right to dismiss. Thus, instead of
weakening a bit the right to dismiss of employers, the majority further strengthens it by insisting that a dismissal without prior notice is merely
"ineffectual" and not illegal. cda
The stubborn refusal of the majority to appreciate the importance of pre-dismissal notice is difficult to understand. It is the linchpin of an employee's right
against an illegal dismissal. The notice tells him the cause of his dismissal. It gives him a better chance to contest his dismissal in an appropriate
proceeding as laid down in the parties' collective bargaining agreement or the rules of employment established by the employer, as the case may be. In
addition, it gives to both the employee and employer more cooling time to settle their differences amicably. In fine, the prior notice requirement and the

hearing before the employer give an employee a distinct, different and effective first level of remedy to protect his job. In the event the employee is
dismissed, he can still file a complaint with the DOLE with better knowledge of the cause of his dismissal, with longer time to prepare his case, and with
greater opportunity to take care of the financial needs of his family pendente lite. The majority has taken away from employees this effective remedy.
This is not to say that the pre-dismissal notice requirement equalizes the fight between an employee and an employer for the fight will remain unequal.
This notice requirement merely gives an employee a fighting chance but that fighting chance is now gone.
It is equally puzzling why the majority believes that restoring the employee's right to pre-dismissal notice will negate the right of an employer to dismiss
for cause. The pre-Wenphil rule simply requires that before the right of the employer to dismiss can be exercised, he must give prior notice to the
employee of its cause. There is nothing strange nor difficult about this requirement. It is no burden to an employer. He is bereft of reason not to give the
simple notice. If he fails to give notice, he can only curse himself, He forfeits his right to dismiss by failing to follow the procedure for the exercise of his
right. Employees in the public sector cannot be dismissed without prior notice. Equal protection of law demands similar treatment of employees in the
private sector. aisadc
THIRD. The case at bar specifically involves Article 283 of the Labor Code which lays down four (4) authorized causes for termination of employment. 11
These authorized causes are: (1) installation of labor-saving devices; (2) redundancy; (3) retrenchment to prevent losses; and (4) closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of circumventing the law. It also provides that prior to the dismissal of
an employee for an authorized cause, the employer must send two written notices at least one month before the intended dismissal one notice to the
employee and another notice to the Department of Labor and Employment (DOLE). We have ruled that the right to dismiss on authorized causes is not
an absolute prerogative of an employer. 12 We explained that the notice to the DOLE is necessary to enable it to ascertain the truth of the cause of
termination. 13 The DOLE is equipped with men and machines to determine whether the planned closure or cessation of business or retrenchment or
redundancy or installation of labor saving device is justified by economic facts. 14 For this reason too, we have held that notice to the employee is
required to enable him to contest the factual bases of the management decision or good faith of the retrenchment or redundancy before the DOLE. 15 In
addition, this notice requirement gives an employee a little time to adjust to his joblessness. 16
The majority insists that if an employee is laid off for an authorized cause under Article 283 in violation of the prior notice requirement, his dismissal
should not be considered void but only ineffectual. He shall not be reinstated but paid separation pay and some backwages. I respectfully submit that an
employee under Article 283 has a stronger claim to the right to a pre-dismissal notice and hearing. To begin with, he is an innocent party for he has not
violated any term or condition of his employment. Moreover, an employee in an Article 283 situation may lose his job simply because of his employer's
desire for more profit. Thus, the installation of a labor saving device is an authorized cause to terminate employment even if its non-installation need not
necessarily result in an over-all loss to an employer possessed by his possessions. In an Article 283 situation, it is easy to see that there is a greater
need to scrutinize the allegations of the employer that he is dismissing an employee for an authorized cause. The acts involved here are unilateral acts
of the employer. Their nature requires that they should be proved by the employer himself. The need for a labor saving device, the reason for
redundancy, the cause for retrenchment, the necessity for closing or cessation of business are all within the knowledge of the employer and the
employer alone. They involve a constellation of economic facts and factors usually beyond the ken of knowledge of an ordinary employee. Thus, the
burden should be on the employer to establish and justify these authorized causes. Due to their complexity, the law correctly directs that notice should
be given to the DOLE for it is the DOLE more than the lowly employee that has the expertise to validate the alleged cause in an appropriate hearing. In
fine, the DOLE provides the equalizer to the powers of the employer in an Article 283 situation. Without the equalizing influence of DOLE, the employee
can be abused by his employer. LexLibris

Further, I venture the view that the employee's right to security of tenure guaranteed in our Constitution calls for a pre-dismissal notice and hearing
rather than a post facto dismissal hearing. The need for an employee to be heard before he can be dismissed cannot be overemphasized. As
aforestated, in the case at bar, petitioner was a regular employee of ISETANN. He had the right to continue with his employment. The burden to
establish that this right has ceased is with ISETANN, as petitioner's employer. In fine, ISETANN must be the one to first show that the alleged authorized
cause for dismissing petitioner is real. And on this factual issue, petitioner must be heard. Before the validity of the alleged authorized cause is
established by ISETANN, the petitioner cannot be separated from employment. This is the simple meaning of security of tenure. With due respect, the
majority opinion will reduce this right of our employees to a mere illusion. It will allow the employer to dismiss an employee for a cause that is yet to be
established. It tells the employee that if he wants to be heard, he can file a case with the labor arbiter, then the NLRC, and then this Court. Thus, it
unreasonably shifts the burden to the employee to prove that his dismissal is for an unauthorized cause.
The pernicious effects of the majority stance are self-evident in the case at bar. For one, petitioner found himself immediately jobless and without means
to support his family. For another, petitioner was denied the right to rely on the power of DOLE to inquire whether his dismissal was for a genuine
authorized cause. This is a valuable right for all too often, a lowly employee can only rely on DOLE's vast powers to check employer abuses on illegal
dismissals. Without DOLE, poor employees are preys to the claws of powerful employers. Last but not the least, it was the petitioner who was forced to
file a complaint for illegal dismissal. To a jobless employee, filing a complaint is an unbearable burden due to its economic cost. He has to hire a lawyer
and defray the other expenses of litigation while already in a state of penury. At this point, the hapless employee is in a no win position to fight for his
right. To use a local adage, "aanhin pa ang damo kung patay na ang kabayo."
In the case at bar, the job of the petitioner could have been saved if DOLE was given notice of his dismissal. The records show that petitioner worked in
ISETANN as security checker for six (6) years. He served ISETANN faithfully and well. Nonetheless, in a desire for more profits, and not because of
losses, ISETANN contracted out the security work of the company. There was no effort whatsoever on the part of ISETANN to accommodate petitioner
in an equivalent position. Yet, there was the position of Safety and Security Supervisor where petitioner fitted like a perfect T. Despite petitioner's long
and loyal service, he was treated like an outsider, made to apply for the job, and given a stringent examination which he failed. Petitioner was booted out
and given no chance to contest his dismissal. Neither was the DOLE given the chance to check whether the dismissal of petitioner was really for an
authorized cause. All these because ISETANN did not follow the notice and hearing requirement of due process. ELC
FOURTH. The majority has inflicted a most serious cut on the job security of employees. The majority did nothing to restore the pre-Wenphil right of
employees but even expanded the right to dismiss of employer by holding that the pre-dismissal notice requirement is not even a function of due
process. This seismic shift in our jurisprudence ought not to pass.
The key to the new majority ruling is that the "due process clause of the Constitution is a limitation on governmental powers. It does not apply to the
exercise of private power such as the termination of employment under the Labor Code." The main reason alleged is that "only the State has authority to
take the life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that the exercise of this power is consistent with
settled usage of civilized society."
There can be no room for disagreement on the proposition that the due process clause found in the Bill of Rights of the Constitution is a limitation on
governmental powers. Nor can there be any debate that acts of government violative of due process are null and void. Thus, former Chief Justice
Roberto Concepcion emphasized in Cuaycong v. Senbengco 17 that ". . . acts of Congress as well as those of the Executive, can deny due process only
under pain of nullity, and judicial proceedings suffering from the same flaw are subject to the same sanction, any statutory provision to the contrary
notwithstanding." With due respect to the majority, however, I part ways with the majority in its new ruling that the due process requirement does not

apply to the exercise of private power. This overly restrictive majority opinion will sap the due process right of employees of its remaining utility, Indeed,
the new majority opinion limiting violations of due process to government action alone is a throwback to a regime of law long discarded by more
progressive countries. Today, private due process is a settled norm in administrative law. Per Schwartz, a known authority in the field, viz: 18
"Private Due Process
As already stressed, procedural due process has proved of an increasingly encroaching nature. Since Goldberg v. Kelly, the right
to be heard has been extended to an ever-widening area, covering virtually all aspects of agency action, including those
previously excluded under the privilege concept. The expansion of due process has not been limited to the traditional areas of
administrative law. We saw how procedural rights have expanded into the newer field of social welfare, as well as that of
education. But due process expansion has not been limited to these fields. The courts have extended procedural protections to
cases involving prisoners and parolees, as well as the use of established adjudicatory procedures. Important Supreme Court
decisions go further and invalidate prejudgment wage garnishments and seizures of property under replevin statutes where no
provision is made for notice and hearing. But the Court has not gone so far as to lay down an inflexible rule that due process
requires an adversary hearing when an individual may be deprived of any possessory interest, however brief the dispossession
and however slight the monetary interest in the property. Due process is not violated where state law requires, as a precondition
to invoking the state's aid to sequester property of a defaulting debtor, that the creditor furnish adequate security and make a
specific showing of probable cause before a judge.
In addition, there has been an extension of procedural due process requirements from governmental to private action. In Section
5.16 we saw that Goldberg v. Kelly has been extended to the eviction of a tenant from a public housing project. The courts have
not limited the right to be heard to tenants who have governmental agencies as landlords. Due process requirements also govern
acts by "private" landlords where there is sufficient governmental involvement in the rented premises. Such an involvement exists
in the case of housing aided by Federal Housing Administration financing and tax advantages. A tenant may not be summarily
evicted from a building operated by a "private" corporation where the corporation enjoyed substantial tax exemption and had
obtained an FHA-insured mortgage, with governmental subsidies to reduce interest payments. The "private" corporation was so
saturated with governmental incidents as to be limited in its practices by constitutional due process. Hence, it could not terminate
tenancies without notice and an opportunity to be heard."
But we need not rely on foreign jurisprudence to repudiate the new majority ruling that due process restricts government alone and not private employers
like ISETANN. This Court has always protected employees whenever they are dismissed for an unjust cause by private employers. We have
consistently held that before dismissing an employee for a just cause, he must be given notice and hearing by his private employer. In Kingsize
Manufacturing Corporation vs. NLRC, 19 this Court, thru Mr. Justice Mendoza, categorically ruled:
". . . (P)etitioners failure to give notice with warning to the private respondents before their services were terminated puts in grave
doubt petitioners' claim that dismissal was for a just cause. Section 2 Rule XIV of the Rules implementing the Labor Code
provides:
"An employer who seeks to dismiss a worker shall furnish him a written notice stating the particular acts or omission
constituting the ground for dismissal. In case of abandonment of work, the notice shall be served on the worker's last
known address.
"The notice required, . . ., actually consists of two parts to be separately served on the employee, to wit: (1) notice to apprise the
employee of the particular acts or omissions for which the dismissal is sought; and (2) subsequent notice to inform him of the
employer's decision to dismiss him. LGM
"This requirement is not a mere technicality but a requirement of due process to which every employee is entitled to insure that
the employer's prerogative to dismiss or lay off is not abused or exercised in an arbitrary manner. This rule is clear and
unequivocal. . . ." 20
In other words, we have long adopted in our decisions the doctrine of private due process. This is as it ought to be. The 1987 Constitution guarantees
the rights of workers, especially the right to security of tenure in a separate article Section 3 of Article XIII entitled Social Justice and Human Rights.
Thus, a 20-20 vision of the Constitution will show that the more specific rights of labor are not in the Bill of Rights which is historically directed against
government acts alone. Needless to state, the constitutional rights of labor should be safeguarded against assaults from both government and private
parties. The majority should not reverse our settled rulings outlawing violations of due process by employers in just causes cases.

To prop up its new ruling against our employees, the majority relates the evolution of our law on dismissal starting from Article 302 of the Spanish Code
of Commerce, to the New Civil Code of 1950, to R.A. No, 1052 (Termination Pay Law), then to RA No. 1787. To complete the picture, let me add that on
May 1, 1974, the Labor Code (PD 442) was signed into law by former President Marcos. It took effect on May 1, 1974 or six months after its
promulgation. The right of the employer to terminate the employment was embodied in Articles 283, 21 284, 22 and 285. 23 Batas Pambansa Blg. 130
which was enacted on August 21, 1981 amended Articles 283 and 284, which today are cited as Arts. 282 and 283 of the Labor Code. 24
On March 2, 1989, Republic Act No. 6715 was approved which amended, among others, Article 277 of the Labor Code. Presently, Article 277 (b) reads:
RBR
"ARTICLE 277. Miscellaneous provisions. (a) . . ..
"(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a
just or authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall
furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for
termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated pursuant to the guidelines set by
the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the
worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer.
. . .."
Previous to the amendment, Article 277 (b) read:
"ARTICLE 277. Miscellaneous provisions. (a) . . ..

"(b) With or without a collective agreement, no employer may shut down his establishment or dismiss or terminate the
employment of employees with at least one year of service during the last two years, whether such service is continuous or
broken, without prior written authority issued in accordance with the rules and regulations as the Secretary may promulgate."
Rule XIV, Book V of the 1997 Omnibus Rules Implementing the Labor Code provides:
"Termination of Employment
"SECTION 1. Security of tenure and due process. No worker shall be dismissed except for a just or authorized cause provided
by law and after due process.
"SECTION 2. Notice of dismissal. Any employer who seeks to dismiss a worker shall furnish him a written notice stating the
particular acts or omissions constituting the grounds for his dismissal. . . .
xxx xxx xxx
"SECTION 5. Answer and hearing. The worker may answer the allegations stated against him in the notice of dismissal within
a reasonable period from receipt of such notice. The employer shall afford the worker ample opportunity to be heard and to
defend himself with the assistance of his representative, if he so desires."
These laws, rules and regulations should be related to our decisions interpreting them. Let me therefore emphasize our rulings holding that the predismissal notice requirement is part of due process. In Batangas Laguna Tayabas Bus Co. vs. Court of Appeals, 25 which was decided under the
provisions of RA No. 1052 as amended by RA No. 1787, this Court ruled that "the failure of the employer to give the [employee] the benefit of a hearing
before he was dismissed constitute an infringement on his constitutional right to due process of law and not to be denied the equal protection of the
laws. . . .. Since the right of [an employee] to his labor is in itself a property and that the labor agreement between him and [his employer] is the law
between the parties, his summary and arbitrary dismissal amounted to deprivation of his property without due process." Since then, we have consistently
held that before dismissing an employee for a just cause, he must be given notice and hearing by his private employer as a matter of due process.
I respectfully submit that these rulings are more in accord with the need to protect the right of employees against illegal dismissals. Indeed, our laws and
our present Constitution are more protective of the rights and interests of employees than their American counterpart. For one, to justify private due
process, we need not look for the factors of "sufficient governmental involvement" as American courts do. Article 1700 of our Civil Code explicitly
provides: SDML
"ARTICLE 1700. The relation between capital and labor are not merely contractual. They are so impressed with public interest
that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions,
collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects."
Nor do we have to strain on the distinction made by American courts between property and privilege and follow their ruling that due process will not
apply if what is affected is a mere privilege. It is our hoary ruling that labor is property within the contemplation of the due process clause of the
Constitution. Thus, in Philippine Movie Pictures Workers Association vs. Premiere Productions, Inc., 26 private respondent-employer filed with the
Court of Industrial Relations (CIR) a petition seeking authority to lay off forty-four of its employees. On the date of the hearing of the petition, at the
request of the counsel of the private respondent, the judge of the CIR conducted an ocular inspection in the premises of the employer. He
interrogated fifteen laborers. On the basis of the ocular inspection, the judge concluded that the petition for lay off was justified. We did not agree
and we ruled that "the right of a person to his labor is deemed to be property within the meaning of constitutional guarantees. That is his means of
livelihood. He can not be deprived of his labor or work without due process of law. . . . (T)here are certain cardinal primary rights which the Court of
Industrial Relations must respect in the trial of every labor case. One of them is the right to a hearing which includes the right of the party interested
to present his own case and to submit evidence in support thereof."
I wish also to stress that the 1999 Rules and Regulations implementing the Labor Code categorically characterize this pre-dismissal notice requirement
as a requirement of due process. Rule XXIII provides:
"SECTION 2. 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 to said 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 circumstance, 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.
II. For termination of employment as based on authorized causes defined in Article 283 of the Code, the requirements
of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate
Regional Office of the Department at least thirty (30) days before the effectivity of the termination, specifying the ground
or grounds for termination."
The new ruling af the majority is not in consonance with this Rule XXIII. Llibris
If we are really zealous of protecting the rights of labor as called for by the Constitution, we should guard against every violation of their rights
regardless of whether the government or a private party is the culprit. Section 3 of Article XIII of the Constitution requires the State to give full
protection to labor. We cannot be faithful to this duty if we give no protection to labor when the violator of its rights happens to be private parties like
private employers. A private person does not have a better right than the government to violate an employee's right to due process. To be sure,
violation of the particular right of employees to security of tenure comes almost always from their private employers. To suggest that we take mere
geriatric steps when it comes to protecting the rights of labor from infringement by private parties is farthest from the intent of the Constitution. We
trivialize the right of the employee if we adopt the rule allowing the employer to dismiss an employee without any prior hearing and say let him be
heard later on. To a dismissed employee that remedy is too little and too late. The new majority ruling is doubly to be regretted because it comes at
a time when deregulation and privatization are buzzwords in the world being globalized. In such a setting, the new gods will not be governments but

non-governmental corporations. The greater need of the day therefore is protection from illegal dismissals sans due process by these nongovernmental corporations. LLpr
The majority also holds that the "third reason why the notice requirement under Art. 283 is not a requirement of due process is that the employer cannot
really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of employment for a just cause under Art. 282."
Again, with due respect, I beg to disagree. In an Article 283 situation, dismissal due to an authorized cause, the employer is not called upon to act as an
impartial judge. The employer is given the duty to serve a written notice on the worker and the DOLE at least one month before the intended date of layoff. It is the DOLE, an impartial agency that will judge whether or not the employee is being laid off for an authorized caused. 27 It is not the employer
who will adjudge whether the alleged authorized cause for dismissing the employee is fact or fiction. On the other hand, in an Article 282 situation,
dismissal for a just cause, it is also incorrect to hold that an employer cannot be an impartial judge. Today, the procedure on discipline and dismissal of
employees is usually defined in the parties' collective bargaining agreement or in its absence, on the rules and regulations made by the employer
himself. This procedure is carefully designed to be bias free for it is to the interest of both the employee and the employer that only a guilty employee is
disciplined or dismissed. Hence, where the charge against an employee is serious, it is standard practice to include in the investigating committee an
employee representative to assure the integrity of the process. In addition, it is usual practice to give the aggrieved employee an appellate body to
review an unfavorable decision. Stated otherwise, the investigators are mandated to act impartially for to do otherwise can bring havoc less to the
employee but more to the employer. For one, if the integrity of the grievance procedure becomes suspect, the employees may shun it and instead resort
to coercive measures like picketing and strikes that can financially bleed employers, For another, a wrong, especially a biased judgment can always be
challenged in the DOLE and the courts and can result in awards of huge damages against the company. Indeed, the majority ruling that an employer
cannot act as an impartial judge has no empirical evidence to support itself. Statistics in the DOLE will prove the many cases won by employees before
the grievance committees manned by impartial judges of the company. LLjur

Next, the majority holds that "the requirement to hear an employee before he is dismissed should be considered simply as an application of the Justinian
precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe honesty and good faith toward one's fellowmen." It then
rules that violation of this norm will render the employer liable for damages but will not render his act of dismissal void. Again, I cannot join the majority
stance. The faultline of this ruling lies in the refusal to recognize that employer-employee relationship is governed by special labor laws and not by the
Civil Code. The majority has disregarded the precept that relations between capital and labor are impressed with public interest. For this reason, we
have the Labor Code that specially regulates the relationship between employer-employee including dismissals of employees. Thus, Article 279 of the
Labor Code specifically provides that "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 provision of the Labor Code clearly gives the remedies that an
unjustly dismissed employee deserves. It is not the Civil Code that is the source of his remedies. prcd
The majority also holds that lack of notice in an Article 283 situation merely makes an employee dismissal "ineffectual" but not illegal. Again, the ruling is
sought to be justified by analogy and our attention is called to Article 1592, in relation to Article 1191 of the Civil Code. It is contended that "under these
provisions, while the power to rescind is implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable property, the vendor
cannot rescind the contract even though the vendee defaults in the payment of the price, except by bringing an action in court or giving notice of
rescission by means of a notarial demand." The analogy of the majority cannot be allowed both in law and in logic. The legal relationship of an employer
to his employee is not similar to that of a vendor and a vendee. An employee suffers from a distinct disadvantage in his relationship with an employer,
hence, the Constitution and our laws give him extra protection. In contrast, a vendor and a vendee in a sale of immovable property are at economic par
with each other. To consider an employer-employee relationship as similar to a sale of commodity is an archaic abomination. An employer-employee
relationship involves the common good and labor cannot be treated as a mere commodity. As well-stated by former Governor General Leonard Wood in
his inaugural message before the 6th Philippine Legislature on October 27, 1922, "it is opportune that we strive to impress upon all the people that labor
is neither a chattel nor a commodity, but human and must be dealt with from the standpoint of human interests."
Next, the majority holds that under the Labor Code, only the absence of a just cause for the termination of employment can make the dismissal of an
employee illegal. Quoting Article 279 which provides:
"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."
it is then rationalized that "to hold that the employer's failure to give notice before dismissing an employee . . . results in the nullity of the dismissal
would, in effect, be to amend Article 279 by adding another ground, for considering a dismissal illegal." With due respect, the majority has misread
Article 279. To start with, the article is entitled "Security of Tenure" and therefore protects an employee against dismissal not only for an unjust
cause but also for an unauthorized cause. Thus, the phrase "unjustly dismissed" refers to employees who are dismissed without just cause and to
employees who are laid off without any authorized cause. As heretofore shown, we have interpreted dismissals without prior notice as illegal for
violating the right to due process of the employee, These rulings form part of the law of the land and Congress was aware of them when it enacted
the Labor Code and when its implementing rules and regulations were promulgated especially the rule ordering employers to follow due process
when dismissing employees. Needless to state, it is incorrect for the majority to urge that we are in effect amending Article 279. Cdpr
In further explication of its ruling, the majority contends "what is more, it would ignore the fact that under Art. 285, if it is the employee who fails to give a
written notice to the employer that he is leaving the service of the latter, at least one month in advance, his failure to comply with the legal requirement
does not result in making his resignation void but only in making him liable for damages." Article 285(a) states: "An employee may terminate without just
cause the employee-employer relationship by serving a written notice on the employer at least one (1) month in advance. The employer upon whom no
such notice was served may hold the employee liable for damages."
In effect, the majority view is that its new ruling puts at par both the employer and the employee under Article 285, the failure of an employee to prenotify in writing his employer that he is terminating their relationship does not make his walk-out void; under its new ruling, the failure of an employer to
pre-notify an employee before his dismissal does not also render the dismissal void. By this new ruling, the majority in a short stroke has rewritten the
law on dismissal and tampered its pro-employee philosophy. Undoubtedly, Article 285 favors the employee as it does not consider void his act of
terminating his employment relationship before giving the required notice. But this favor given to an employee just like the other favors in the Labor Code
and the Constitution are precisely designed to level the playing field between the employer and the employee. It cannot be gainsaid that employees are
the special subject of solicitous laws because they have been and they continue to be exploited by unscrupulous employers. Their exploitation has
resulted in labor warfare that has broken industrial peace and slowed down economic progress. In the exercise of their wisdom, the founding fathers of
our 1935, 1973 and 1987 Constitutions as well as the members of our past and present Congresses, have decided to give more legal protection and

better legal treatment to our employees in their relationship with their employer. Expressive of this policy is President Magsaysay's call that "he who has
less in life should have more in law." I respectfully submit that the majority cannot revise our laws nor shun the social justice thrust of our Constitution in
the guise of interpretation especially when its result is to favor employers and disfavor employees. The majority talks of high nobility but the highest
nobility it to stoop down to reach the poor.
IV. NO UNJUST RESULTS OF CONSIDERING DISMISSALS WITHOUT PRIOR NOTICE AS ILLEGAL
The majority further justifies its new ruling by holding:
"The refusal to look beyond the validity of the initial action taken by the employer to terminate employment either for an
authorized or just cause can result in an injustice to the employer. For not having been given notice and hearing before
dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt against the life of the employer, an employer
will be forced to keep in his employ such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force." But so does it declare that it "recognizes the
indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investment " The
Constitution bids the State to "afford full protection to labor." But it is equally true that "the law, in protecting the rights of the
laborer, authorizes neither oppression nor self-destruction of the employer." And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in operation when it is not economically in his interest
to do so."
With due respect, I cannot understand this total turnaround of the majority on the issue of the unjustness of lack of pre-dismissal notice to an employee.
Heretofore, we have always considered this lack of notice as unjust to the employee. Even under Article 302 of the Spanish Code of Commerce of 1882
as related by the majority, an employer who opts to dismiss an employee without any notice has to pay a mesada equivalent to his salary for one month
because of its unjustness. This policy was modified by our legislators in favor of a more liberal treatment of labor as our country came under the
influence of the United States whose major labor laws became the matrix of our own laws like R.A. 875, otherwise known as the Industrial Peace Act. In
accord with these laws, and as aforediscussed, we laid down the case law that dismissals without prior notice offend due process. This is the case law
when the Labor Code was enacted on May 1, 1974 and until now despite its amendments. The 1935 and the 1973 Constitutions did not change this
case law. So with the 1987 Constitution which even strengthened the rights of employees, especially their right to security of tenure. Mr. Justice Laurel in
his usual inimitable prose expressed this shift in social policy in favor of employees as follows:

"It should be observed at the outset that our Constitution was adopted in the midst of surging unrest and dissatisfaction resulting
from economic and social distress which was threatening the stability of governments the world over. Alive to the social and
economic forces at work, the framers of our Constitution boldly met the problems and difficulties which faced them and
endeavored to crystallize, with more or less fidelity, the political, social and economic propositions of their age, and this they did,
with the consciousness that the political and philosophical aphorism of their generation will, in the language of a great jurist, 'be
doubted by the next and perhaps entirely discarded by the third.' (Chief Justice Winslow in Gorgnis v. Falk Co., 147 Wis., 327;
133 N. W., 209). Embodying the spirit of the present epoch, general provisions were inserted in the Constitution which are
intended to bring about the needed social and economic equilibrium between component elements of society through the
application of what may be termed as the justitia communis advocated by Grotius and Leibnitz many years ago to be secured
through the counter-balancing of economic and social forces and employers or landlords, and employees or tenants, respectively;
and by prescribing penalties for the violation of the orders' and later, Commonwealth Act No. 213, entitled 'An Act to define and
regulate legitimate labor organizations."' 28
This ingrained social philosophy favoring employees has now been weakened by the new ruling of the majority. For while this Court has always
considered lack of pre-dismissal notice as unjust to employees, the new ruling of the majority now declares it is unjust to employers as if employers
are the ones exploited by employees. In truth, there is nothing unjust to employers by requiring them to give notice to their employees before
denying them their jobs. There is nothing unjust to the duty to give notice for the duty is a reasonable duty. If the duty is reasonable, then it is also
reasonable to demand its compliance before the right to dismiss on the part of an employer can be exercised. If it is reasonable for an employer to
comply with the duty, then it can never be unjust if non-compliance therewith is penalized by denying said employer his right to dismiss. In fine, if
the employer's right to dismiss an employee is forfeited for his failure to comply with this simple, reasonable duty to pre-notify his employee, he has
nothing to blame but himself. If the employer is estopped from litigating the issue of whether or not he is dismissing his employee for a just or an
authorized cause, he brought the consequence on to himself. The new ruling of the majority, however, inexplicably considers this consequence as
unjust to the employer and it merely winks at his failure to give notice. LexLib
V. A LAST WORD
The new ruling of the majority erodes the sanctity of the most important right of an employee, his constitutional right to security of tenure. This right will
never be respected by the employer if we merely honor the right with a price tag. The policy of "dismiss now and pay later" favors monied employers and
is a mockery of the right of employees to social justice. There is no way to justify this pro-employer stance when the 1987 Constitution is undeniably
more pro-employee than our previous fundamental laws. Section 18 of Article II (State Policies) provides that "the State affirms labor as a primary social
economic force. It shall protect the rights of workers and promote their welfare." Section 1, Article XIII (Social Justice and Human Rights) calls for the
reduction of economic inequalities. Section 3, Article XIII (Labor) directs the State to accord full protection to labor and to guaranty security of tenure.
These are constitutional polestars and not mere works of cosmetology. Our odes to the poor will be meaningless mouthfuls if we cannot protect the
employee's right to due process against the power of the peso of employers. cdasia
To an employee, a job is everything. Its loss involves terrible repercussions stoppage of the schooling of children, ejectment from leased premises,
hunger to the family, a life without any safety net. Indeed, to many employees, dismissal is their lethal injection. Mere payment of money by way of
separation pay and backwages will not secure food on the mouths of employees who do not even have the right to choose what they will chew.
I vote to grant the petition. cdrep
Footnotes
1.TSN of testimony of petitioner, pp. 24, 76-78, April 24, 1992.
2.Petitioner's Position Paper, Annex C; Records, p. 19.
3.Id., Annex B; id., p. 21.
4.Records, p. 2.

5.Decision, dated April 30, 1993, of Labor Arbiter Pablo C. Espiritu. Petition, Annex A; Rollo, p. 30.
6.Id., pp. 35-36.
7.Petition, p. 10; id., p. 16.
8.213 SCRA 652 (1992).
9.Id., at 662.
10.G.R. No. 131108, March 25, 1999.
11.Shell Oil Workers Union v. Shell Company of the Philippines, Ltd., 39 SCRA 276, 284-285 (1971).
12.Asian Alcohol Corporation v. National Labor Relations Commission, G.R. No. 131108, March 25, 1999.
13.TSN, p. 61, April 24, 1992.
14.Const., ART. XIII, 3.
15.E.g., Aurora Land Projects Corporation v. NLRC, 266 SCRA 48 (1997).
16.248 SCRA 532 (1995).
17.This provision reads:
Termination by employer. An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his 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 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.
18.Bk. VI, Rule 1, of the Omnibus Rules and Regulations to Implement the Labor Code provides in pertinent parts:
Section 2. Security of tenure . . . .
(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:
For termination of employment based on just causes as defined in Article 282 of the Labor Code:
(i) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within
which to explain his side.
(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires, is given opportunity to respond to
the charge, present his evidence, or rebut the evidence presented against him.
(iii) 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.
For termination of employment as defined in Article 283 of the Labor Code, the requirement of due process shall be deemed complied with upon
service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment at least thirty
days before effectivity of the termination, specifying the ground or grounds for termination. . . .
19.Sebuguero v. NLRC, 248 SCRA at 547.
20.170 SCRA 69 (1989).
21.Id., at 75-76.
22.E.g., Aurelio v. NLRC, 221 SCRA 432 (1993) (dismissal of a managerial employee for breach of trust); Rubberworld (Phils.), Inc. v. NLRC, 183
SCRA 421 (1990) (dismissal for absenteeism, leaving the work place without notice, tampering with machines); Shoemart, Inc. v. NLRC,
176 SCRA 385 (1989) (dismissal for abandonment of work).
23.Sebuguero v. NLRC, 248 SCRA 536 (1995) (termination of employment due to retrenchment).
24.E.g., Worldwide Papermills, Inc. v. NLRC, 244 SCRA 125 (1995) (dismissal for gross and habitual neglect of duties).
25.E.g., Reta v. NLRC, 232 SCRA 613 (1994) (dismissal for negligence and insubordination).
26.110 Phil. 113, 118 (1960).
27.138 SCRA 166, 170 (1985).
28.Art. 302 of the Code of Commerce provided:
In cases in which no special time is fixed in the contracts of service, any one of the parties thereto may dissolve it, advising the other party thereof
one month in advance.
The factory or shop clerk shall be entitled, in such case, to the salary due for said month.
29.R.A. No. 1052, as amended by R.A. No. 1787, provided:
SECTION 1. 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.
30.Abe v. Foster Wheeler Corp., 110 Phil. 198 (1960); Malate Taxicab and Garage, Inc. v. CIR, 99 Phil. 41 (1956).
31.71 SCRA 470, 480 (1976).
32.77 SCRA 321 (1977).
33.CIVIL CODE, Art. 19.
34.ART. 1191: "The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent
upon him . . . ."
ART. 1592: "In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon
the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new
term."

35.De la Cruz v. Legaspi, 98 Phil. 43(1955); Taguba v. Vda. de Leon, 132 SCRA 722 (1984).
36.See Maximo v. Fabian, G.R. No. L-8015, December 23, 1955, (unpub.), 98 Phil. 989.
37.Italics added.
38.Art. 285 reads:
Termination by employee. (a) An employee may terminate without just cause the employee-employer relationship by serving a written notice on
the employer at least one (1) month in advance. The employer upon whom no such notice was served may hold the employee liable for
damages.
(b) An employee may put an end to the relationship without serving any notice on the employer for any of the following just causes:
1. Serious insult by the employer or his representative on the honor and person of the employee;
2. Inhuman and unbearable treatment accorded the employee by the employer or his representative;
3. Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of
his family; and
4. Other causes analogous to any of the foregoing.
39.210 SCRA 277 (1992).
40.Art. II, 18.
41.Id., 20.
42.Art. XIII, 3.
43.Manila Trading and Supply Co. v. Zulueta, 69 Phil. 485, 487 (1940) (per Laurel, J.) Accord, Villanueva v. NLRC, 293 SCRA 259 (1998); DI Security
and General Services, Inc. v. NLRC, 264 SCRA 458 (1996); Flores v. NLRC, 256 SCRA 735 (1996); San Miguel Corporation v. NLRC, 218
SCRA 293 (1993); Colgate Palmolive Philippines, Inc. v. Ople, 163 SCRA 323 (1988).
BELLOSILLO, J.:
1.G.R. No. 130866, 16 September 1998, 295 SCRA 494.
2.Exh. "B", Records, p. 21.
3.Rollo, p. 63.
4.Sebuguero v. National Labor Relations Commission, G.R. No. 115395, 27 September 1995, 248 SCRA 536; Almodiel v. National Labor Relations
Commission, G.R. No. 100641, 14 June 1993, 223 SCRA 341.
5.De Ocampo v. National Labor Relations Commission, G.R. No. 101539, 4 September 1992, 213 SCRA 652, 662.
6.G.R. No. 73287, 18 May 1987, 149 SCRA 641.
7.Art. XIII, Sec. 3, 1987 Constitution, reiterated in Art. 3, Labor Code.
8.Art. 3, Labor Code.
9.Alcantara, Samson S., Reviewer in Labor and Social Legislation, 1993 Ed., p. 347.
10.Art. 277, Labor Code.
11.Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the

establishment or undertaking . . . by serving a written notice on the worker and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof . . .
12.Sec. 1, Art. III, 1987 Constitution.
13.Fernando, Enrique M., The Bill of Rights, 1972 ed., p. 71.
14.Id., p. 78.
15.Id., pp. 80-81.
16.Id., p. 94.
17.Id., p. 96.
18.69 Phil. 635 (1940).
19.G.R. No. 117565, 18 November 1997, 282 SCRA 146-147.
20.G.R. No. 80587, 8 February 1989, 170 SCRA 69.
21.G.R. No. 115394, 27 September 1995, 248 SCRA 535.
22.G.R. No. 122666, 19 June 1997, 274 SCRA 379.
23.G.R. No. 116473, 12 September 1997, 279 SCRA 45.
24.Shoemart, Inc. v. NLRC, G.R. No. 74229, 11 August 1989, 176 SCRA 385 The employee was found to have abandoned his job but for failure to
observe the notice requirement, the employer was fined P1,000.00; Pacific Mills, Inc. v. Alonzo, G.R. No. 78090, 26 July 1991, 199 SCRA
617 The employee violated company rules and regulations but because of procedural lapse the company was fined P1,000.00; Aurelio v.
NLRC, G.R. No. 99034, 12 April 1993, 221 SCRA 432 The managerial employee breached the trust and confidence of his employer but
for failure to observe the notice requirement the company was fined P1,000.00; Worldwide Papermills Inc. v. NLRC, G.R. No. 113081, 12
May 1995, 244 SCRA 125 The employee was found guilty of gross and habitual neglect of his duties and of excessive absences. For
failure to comply with the notice requirement the company was fined P5,000.00; Reta v. NLRC, G.R. No. 112100, 27 May 1994, 232 SCRA
613 The employee was guilty of inefficiency, negligence and insubordination but the company was fined P10,000.00 for failure to
observe the notice requirement.
25.Sebuguero v. NLRC, G.R. No. 115394, 27 September 1995, 248 SCRA 532 The employees were retrenched in order to prevent further losses
but the company failed to observe the notice requirement, hence was fined P2,000.00 for each employee; Balbalec et al. v. NLRC, G.R. No.
107756, 19 December 1995, 251 SCRA 398 The employees were retrenched to prevent business losses but the company was fined
P5,000.00 for each employee for failure to observe the notice requirement.
26.See Note 21.
PANGANIBAN, J.:
1.See Panganiban, Battles in the Supreme Court, 1998 ed., p. 155 et seq.
2.259 SCRA 665, July 29, 1996.
3.283 SCRA 242, December 15, 1997. In that case, I proposed to grant separation pay in lieu of reinstatement because, by the employee's acts, he
had made reinstatement improper, a fact not present in the instant case.
4.296 SCRA 283, September 28, 1998.
5.Art. 282 of the Labor Code provides:
"ART. 282. Termination by employer. An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his 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 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."
6.Arts. 283 & 284 provide:
"ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation or operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the workers and the [Department] of Labor and Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishments or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
ART. 284. Disease as a ground for termination. An employer may terminate the services of an employee who has been found to be suffering from
any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his coemployees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year."

7.Mapalo v. NLRC, 233 SCRA 266, June 17, 1994; Ala Mode Garments, Inc. v. NLRC, 268 SCRA 497, February 17, 1997; Pizza Hut/Progressive
Development Corp. v. NLRC, 252 SCRA 531, January 29, 1996; MGG Marine Services, Inc. v. NLRC, 259 SCRA 664, July 29, 1996;
Ranises v. NLRC, 262 SCRA 671, September 24, 1996.
8.Conti v. NLRC, 271 SCRA 114, April 10, 1997; Alhambra Industries, Inc. v. NLRC, 238 SCRA 232, November 18, 1994; JGB and Associates, Inc. v.
NLRC, 254 SCRA 457, March 7, 1996; Samillano v. NLRC, 265 SCRA 788, December 23, 1996.
9.Alhambra Industries, Inc. v. NLRC, ibid.; Segismundo v. NLRC, 239 SCRA 167, December 13, 1994; Sebuguero v. NLRC, 248 SCRA 532,
September 27, 1995; Wenphil Corp. v. NLRC, 170 SCRA 69, February 8, 1989.
10.210 SCRA 277, 286, June 23, 1992, per Gutierrez Jr., J.
11.138 SCRA 166, 170-171, August 16, 1985, per Makasiar, C.J.
12.Among those are Galman v. Sandiganbayan, 144 SCRA 43, 87, September 12, 1986; People v. Albano, 163 SCRA 511, July 26, 1988, Saldana v.
Court of Appeals, 190 SCRA 396, 403, October 11, 1990; Paulin v. Gimenez, 217 SCRA 386, 392, January 21, 1993.
13.132 SCRA 690, October 23, 1984, per Cuevas, J.
14.Ibid., p. 703.
15.199 SCRA 92, July 12, 1991, per Narvasa, J. (later CJ).
16.Ibid., p. 101.
17.282 SCRA 256, November 28, 1997.
18.26 SCRA 252, December 24, 1968.
19.103 SCRA 393, March 17, 1981.
20.170 SCRA 489, February 21, 1989.
21.186 SCRA 620, June 18, 1990.
22.200 SCRA 67, August 2, 1991.
23.G.R. No. 129058, March 29, 1999, per Bellosillo, J.
24.G.R. No. 121179, May 14, 1997.
25.July 8, 1999 Resolution on the Motion for Reconsideration, per Purisima, J.
26.150 SCRA 653, 656, June 17, 1987, per Padilla, J.
27.Villarosa v. Comelec, G.R. No. 133927, November 29, 1999.
28. 18, Art. II, 1987 Constitution.
29. 3, Art. XIII, ibid.
30.170 SCRA 69, February 8, 1989, per Gancayco, J.
31.In Wenphil Corp. v. NLRC, ibid.; Sampaguita Garments Corp. v. NLRC, 233 SCRA 260, June 17, 1994; Villarama v. NLRC, 236 SCRA 280,
September 2, 1994; Rubberworld (Phils.), Inc. v. NLRC, 183 SCRA 421, March 21, 1990; Kwikway Engineering Works v. NLRC, 195 SCRA
526, March 22, 1991, and several other cases.
32.In Reta v. NLRC, 232 SCRA 613, May 27, 1994; and Alhambra Industries, Inc. v. NLRC, 238 SCRA 232, November 18, 1994.
33.Seahorse Maritime Corp. v. NLRC, 173 SCRA 390, May 15, 1989; Rubberworld (Phils.), Inc. v. NLRC, supra; Cario v. NLRC, 185 SCRA 177,
May 8, 1990; Great Pacific Life Assurance Corp. v. NLRC, 187 SCRA 694, July 23, 1990; Cathedral School of Technology v. NLRC, 214
SCRA 551, October 13, 1992; Aurelio v. NLRC, 221 SCRA 432, April 12, 1993; Sampaguita Garments Corp. v. NLRC, 233 SCRA 260,
June 17, 1994; Villarama v. NLRC, supra.

34.See Concurring and Dissenting Opinion in Better Buildings, Inc. v. NLRC, 283 SCRA 242, 256, December 15, 1997.
34-a.See Panganiban, Leadership by Example, 1999 ed., pp. 60-61.
35.Wallem Maritime Services, Inc. v. NLRC, 263 SCRA 174, October 15, 1996; per Romero, J. Bernas, The 1987 Constitution of the Republic of the
Philippines: A Commentary, 1996 ed., p. 101.
36.RCPI v. NLRC, 223 SCRA 656, June 25, 1993; Samillano v. NLRC, 265 SCRA 788, December 23, 1996.
37.San Miguel Corporation v. NLRC, 173 SCRA 314, May 12, 1989.
38."Art. 277.. . .. . .. . .
"(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized
cause and without prejudice to the requirement of notice under Article 283 of this Code the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules
and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer
shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall
rest on the employer. The Secretary of the Department of Labor and Employment may suspend the effects of the termination pending
resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor and Employment before
whom such dispute is pending that the termination may cause a serious labor dispute or is in implementation of a mass lay-off."

39.The New World Dictionary, Second College Ed. (1974), defines effectual as "having legal force; valid." Thus, ineffectual, being its opposite, means
having no legal force or not valid.
VITUG, J., separate concurring and dissenting opinion:
1.ART. 282.Termination by employer. An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his 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 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.
2.ART. 283.Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due
to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
3.ART. 284.Disease as ground for termination. An employer may terminate the services of an employee who has been found to be suffering from
any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his coemployees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.
4.See San Miguel Corporation vs. NLRC, 255 SCRA 580. Section 7, Rule I, Book VI, of the Omnibus Rules Implementing the Labor Code provides:
"Sec. 7. Termination of employment by employer. The just causes for terminating the services of an employee shall be those provided in Article
282 of the Code. The separation from work of an employee for a just cause does not entitle him to the termination pay provided in Code,
without prejudice, however, to whatever rights, benefits and privileges he may have under the applicable individual or collective bargaining
agreement with the employer or voluntary employer policy or practice."
5.See Footnote 2.
6.Section 1, Rule XXIII, of the Rules Implementing the Labor Code clearly states that "(i)n cases of regular employment, the employer shall not
terminate the services of an employee except for just or authorized causes as provided by law, and subject to the requirements of due
process."
Section 2, I, of the same Rule provides that in case of termination of employment based on just causes under Article 282 of the Labor Code, is it
required that there be
"(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said 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 cases of termination based on authorized causes under Article 283 of the Labor Code, Section 2, II, of the same Rule mandates that there be "a
written notice to the employee and the appropriate Regional Office of the Department (of Labor and Employment) at least thirty days before
the effectivity of the termination," specifying the ground/s therefor.
7.See MGG Marine Services, Inc. vs. NLRC, 259 SCRA 664.
PUNO, J., dissenting opinion:
1.Schwartz, Administrative Law, 1991 ed., p. 224 citing Painter v. Liverpool Gas Co., 3 Ad. & E I. 433, 449, 11 Eng. Rep. 478 (K. B. 1836).
2.Kingsize Manufacturing Corp. vs. NLRC, 238 SCRA 349 (1994).
3.Ibid.
4.170 SCRA 69.
5.248 SCRA 532, 545 (1995).
6.Ibid., p. 546.
7.Op. cit., p. 76.
8.Op. cit., pp. 74-75.
9.Op. cit., p. 76.
10.TSN, August 4, 1992, pp. 30, 37-38, 42-49.
11.A fifth authorized cause is "disease of the employee" provided in Article 284 of the Code.

12.Sebuguero, supra.
13.International Hardware, Inc. v. National Labor Relations Commission, 176 SCRA 256, 259 (1989).
14.Sebuguero v. NLRC, supra.
15.Wiltshire File Co. v. NLRC, 193 SCRA 665, 676 (1991).
16.Balbalec v. NLRC, 251 SCRA 398, 406 (1995).
17.110 Phil. 113 (1960).
18.Schwartz, op. cit., pp. 273-274.
19.Supra.
20.See also JGB and Associates, Inc. vs. NLRC, 254 SCRA 457 (1996); Philippine Savings Bank v. NLRC, 261 SCRA 409 (1996); Pasudeco Inc. vs.
NLRC, 272 SCRA 737 (1997); P.I. Manpower, Inc. vs. NLRC, 267 SCRA 451 (1997); Canura v. NLRC, 279 SCRA 45 (1997); International
Pharmaceuticals, Inc. vs. NLRC, 287 SCRA 213 (1998); Mabuhay Development Industries vs. NLRC, 288 SCRA 1 (1998), all ponencias of
Mr. Justice Mendoza.
21.Art. 283.Termination by employer. An employer may terminate an employment without a definite period for any of the following just causes:
(a) The closing or cessation of operation of the establishment or enterprise, or where the employer has to reduce his work force by more than onehalf (1/2) due to serious business reverses, unless the closing is for the purpose of circumventing the provisions of this chapter;
(b) Serious misconduct or willful disobedience by the employee of the orders of his employer or representative in connection with his work;
(c) Gross and habitual neglect by the employee of his duties;
(d) Fraud or willful breach by the employee of the trust reposed in him by his employer or representative;
(e) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or representative;
and
(f) Other causes analogous to the foregoing.
22.Art. 284.Reduction of personnel. The termination of employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses, and other similar causes, shall entitle the employee affected thereby to separation pay. . . .
23.Art. 285.Disease as a ground for termination. An employer may terminate the services of an employee who have been found to be suffering
from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his coemployees . . . .
24.The adjustment of the numbering of the Articles is due to the fact that there are two (2) Article 238.
25.71 SCRA 470 (1976).
26.92 Phil. 843 (1953).
27.International Hardware, Inc. vs. NLRC, 176 SCRA 256 (1989); Sebuguero v. NLRC, supra.
28.Concurring opinion in Ang Tibay et al. vs. Court of Industrial Relations, et al., 69 Phil. 635 (1940).
||| (Serrano v. NLRC, G.R. No. 117040, January 27, 2000)

EN BANC
[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 p:
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 56,231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date of hiring 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. aIcCTA
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 conduct 19 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 to said employee
reasonable opportunity within which to explain his side; CaEATI
(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 noncompliance 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.
AcIaST
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. . . . 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. DTAHEC
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have farreaching 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 self-destruction 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 labor-management 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 same 43 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. STCDaI

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 further ORDERED 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.
Quisumbing, Carpio, Carpio-Morales, Callejo, Sr. and Azcuna, JJ ., concur.
Davide, Jr., C .J ., I join Mr. Justice Puno in his dissenting opinion.
Puno and Panganiban, JJ ., See dissenting opinion.
Sandoval-Gutierrez, J ., I join Justice Puno in his dissent.
Austria-Martinez, J ., I join in the separate opinion of Justice Tinga.
Corona, J ., is on leave.
Tinga, J ., In the result, per separate opinion.
Chico-Nazario, J ., I concur in J. Puno's dissenting opinion.
Garcia, J ., I join J. Puno's dissenting opinion.
PUNO, J., dissenting:
"Strike if you will, but hear me first!" was adjuration of Themistocles, c. 528462 B.C., Athenian General and Statesman, to Eurybiades, Admiral of the
Spartan fleet, who, in an argument, raised his staff as though to strike him. 1 It was the same plea, centuries later, of petitioner-employees Jenny M.
Agabon and Virgilio C. Agabon to their employer who fired them from their jobs without hearing them first.
In the last two decades, this Court has wrestled with due process issues in dismissal cases. In February 1989, Wenphil Corporation v. National Labor
Relations Commission 2 put an abrupt end to the long-standing doctrine nullifying the dismissal of an employee even if based on a just or authorized
cause, if done without prior notice to the employee. Wenphil upheld the dismissal of a crew of a fast food chain for just cause even if it was effected
without the requisite notice. And in compensation for the deprivation of his prior right to notice and investigation before dismissal, he was given a measly
sum of P1,000.00. Since then, lowly employees have been cut-off from their bloodline their jobs without due process of law.
A decade later, we re-examined Wenphil in Serrano v. National Labor Relations Commission 3 but the struggle of our employees for job security turned
from bad to worse. In Serrano, the majority held that "the employer's failure to comply with the notice requirement does not constitute a denial of due
process but a mere failure to observe a procedure for the termination of employment which makes the termination of employment merely ineffectual." 4
Thus, the dismissal without prior notice was further legalized and the dismissed employee was simply awarded some crumbs backwages from the
time his employment was terminated until it was determined that the termination was for an authorized cause. I dissented and voted for the return of the
pre-Wenphil rule to stop the pernicious practice of dismissals without prior notice.
After four years of the Serrano rule, I see no reason to relent from my Dissenting Opinion as the situation has even turned from worse to worst. Agabon
is doing away with the crumbs and is leaving the employee with no more than a tiny bit of grain. As such, I feel the strong urgency to right away revert to
the pre-Wenphil era to rectify a grave error and atone for the wanton, albeit now licensed, violation of the pre-dismissal notice requirement committed by
employers with twisted ethos.
There are enduring reasons for resisting Wenphil, its clone Serrano, and now their offspring Agabon. As I said in Serrano
Our ten (10) years experience with Wenphil is not a happy one. Unscrupulous employers have abused the Wenphil ruling. They
have dismissed without notice employees including those who are not as eminently undesirable as the Wenphil employee. They
dismissed employees without notice as a general rule when it should be the exception. The purpose of the pre-dismissal notice
requirement was entirely defeated by employers who were just too willing to pay an indemnity for its violation. The result, as the
majority concedes, is that the indemnity we imposed has not been effective to prevent unjust dismissals of employees. To be
sure, this is even a supreme understatement. The ugly truth is that Wenphil is the mother of many unjust and unauthorized
dismissals of employees who are too weak to challenge their powerful employers. acCETD
As the Wenphil indemnity doctrine has proved to be highly inimical to the interest of our employees, I humbly submit a return to
the pre-Wenphil rule where a reasonless violation of the pre-dismissal notice requirement makes the dismissal of an employee
illegal and results in his reinstatement. In fine, we should strike down as illegal the dismissal of an employee even if it is for a
justified end if it is done thru unjustified means for we cannot be disciples of the Machiavellian doctrine of the end justifies the
means. With due respect, the majority decision comes too near this mischievous doctrine by giving emphasis on the end and not

on the means of dismissal of employees. What grates is that the majority today espouses a doctrine more pernicious than
Wenphil for now it announces that a violation of the pre-dismissal notice requirement does not even concern due process. The
reasons relied upon by the majority for this new ruling against the job security of employees cannot inspire assent.
xxx xxx xxx
The new ruling of the majority erodes the sanctity of the most important right of an employee, his constitutional right to security of
tenure. This right will never be respected by the employer if we merely honor the right with a price tag. The policy of "dismiss now
and pay later" favors [moneyed] employers and is a mockery of the right of employees to social justice. There is no way to justify
this pro-employer stance when the 1987 Constitution is undeniably more pro-employee than our previous fundamental laws.
Section 18 of Article II (State Policies) provides that "the State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare." Section 1 Article XIII (Social Justice and Human Rights), calls for the reduction of
economic inequalities. Section 3, Article XIII (Labor) directs the State to accord full protection to labor and to guaranty security of
tenure. These are constitutional polestars and not mere works of cosmetology. Our odes to the poor will be meaningless
mouthfuls if we cannot protect the employee's right to due process against the power of the peso of the employers.
To an employee, a job is everything. Its loss involves terrible repercussions stoppage of the schooling of children, ejectment
from leased premises, hunger to the family, a life without any safety net. Indeed, to many employees, dismissal is their lethal
injection. Mere payment of money by way of separation pay and backwages will not secure food on the mouths of employees who
do not even have the right to choose what they will chew. 5
The instant case is a perfect portrait of this reversal of fortune. On January 2, 1992, petitioners Jenny Agabon and Virgilio Agabon were hired as gypsum
board and cornice installers by respondent Riviera Home Improvements, Inc., a corporation engaged in the business of selling and installing ornamental
and construction materials. Seven (7) years later, on February 23, 1999, their services were terminated on the ground of abandonment of work.
Apparently, petitioners were subcontracting installation jobs for another company and were frequently absent from work. Thus, when petitioners reported
for work on February 23, 1999, respondent company simply refused to reemploy them unless they agree to work on a "pakyaw" basis. Petitioners
demurred since this would mean losing their benefits. They were given their walking papers without according them the twin requirements of notice and
hearing. Respondent company stated that they abandoned their jobs. Hence, petitioners filed a complaint for illegal dismissal and payment of money
claims against respondent company.
On December 28, 1999, the Labor Arbiter held that the dismissal of petitioners was illegal and ordered respondent company to pay them backwages,
holiday and service incentive leave pay, and separation pay in lieu of reinstatement. On appeal, the NLRC reversed the decision of the Labor Arbiter and
ruled that the latter erred in awarding backwages and separation pay to petitioners who deliberately abandoned their work. On certiorari, the Court of
Appeals affirmed the findings of the NLRC but ordered respondent company to pay petitioners their money claims. Hence, this petition for review on the
lone issue of whether petitioners were illegally dismissed from the service.
While I appreciate the view of Mme. Justice Ynares-Santiago that "[t]he indemnity to be imposed should be stiffer in order to discourage the abhorrent
practice of 'dismiss now, pay later,'" 6 the majority, however, simply retained, if not diminished, the indemnity granted to the dismissed employees.
Consequently, I respectfully dissent and maintain my view that the workingman's right to job security and due process of law cannot be measured with a
reduced price tag. The majority opinion treats an employee's right to due process as no more than an abstract declaration. I am unwilling to diminish
petitioners' constitutional right to procedural due process which is necessary to protect their security of tenure. I proffer the following precepts:

One. Our Constitution is an ode to social justice. The Court should give due obeisance to this ode for social justice is not a mere euphony of words. In
other countries, political debates over the last two centuries continue to rage on whether social rights should be given constitutional protection. 7 In our
jurisdiction, however, constitutional social rights have long been embedded in all our Constitutions, and thus at the very least should be respected and
protected by our courts.
Social justice is that virtue by which individuals and groups fulfill their obligations to human society by contributing positively to the complete well-being of
their fellowmen considered as members of that society, and hence regulate all their actions accordingly. 8 Social justice as a creed in the 1935
Constitution was crafted by Delegate Jose C. Locsin. He persistently pounced on the necessity of including social justice in the Constitution to protect
those who have little in life. In the course of the debates, the core concept of social justice was developed to mean
. . . justice to the common tao, the "little man" so-called. It means justice to him, his wife, and children in relation to their
employers in the factories, in the farms, in the mines, and in other employments. It means justice to him in the education of his
children in the schools, in his dealings with the different offices of the government, including the courts of justice. 9
1935 Constitution
Thus, Article II (Declaration of Principles), Section 5 of the 1935 Constitution, provides that "[t]he promotion of social justice to insure the well-being and
economic security of all the people should be the concern of the State." Mr. Justice Jose Laurel, in his concurring opinion in the main case of Ang Tibay
v. Court of Industrial Relations, 10 explained the constitutional milestone
Our Constitution was adopted in the midst of surging unrest and dissatisfaction resulting from economic and social distress which
was threatening the stability of governments the world over. Alive to the social and economic forces at work, the framers of our
Constitution boldly met the problems and difficulties which faced them and endeavored to crystallize, with more or less fidelity, the
political, social and economic propositions of their age . . . (by inserting) general provisions in the Constitution which are intended
to bring about the needed social and economic equilibrium between component elements of society through the application of
what may be termed as the justitia communis advocated by Grotius and Leibinitz many years ago to be secured through the
counterbalancing of economic and social forces and opportunities which should be regulated, if not controlled by the State or
placed, as it were, in custodia societatis. "The promotion of social justice to insure the well-being and economic security of all the
people" was thus inserted as a vital principle in our Constitution. 11
And, as quoted in the 1940 case of Antamok Goldlfields Mining Company v. Court of Industrial Relations, 12 this Court held that in order that the
declaration of the principle of social justice "may not just be an empty medley of words, the Constitution in various sections thereof has provided the
means towards its realization." 13 Thus, the promotion of the welfare of the working classes was concretized in Article XIII (General Provisions), Section
6, which mandates that "[t]he State shall afford protection to labor, especially to working women and minors, and shall regulate the relations . . . between
labor and capital in industry and in agriculture. The State may provide for compulsory arbitration." EcDSHT
Delegate Locsin even exerted a last-ditch effort to amend the draft of the constitutional provision on labor to read in part, "[t]he State recognizes the right
of all workers to work and shall enact laws protecting labor." In defense of his substitute amendment, Delegate Locsin in a stirring speech dwelt on the

necessity of paying more attention to the needs of the working class and of including in the Constitution a provision guaranteeing to all workers the right
to work. His substitute amendment was however defeated, but only because his ideas were already said to be within the scope of the constitutional
provisions on social justice and on labor which was then being considered. 14
As early as Calalang v. Williams, 15 the Court already threw in some wind of caution
The promotion of social justice, however, is to be achieved not through a mistaken sympathy towards any given group. Social
justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the humanization of laws and the equalization of
social and economic forces by the State so that justice in its rational and objectively secular conception may at least be
approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of measures
calculated to [e]nsure economic stability of all the competent elements of society, through the maintenance of a proper economic
and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures
legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the
time-honored principle of salus populi est suprema lex. 16
Social justice, therefore, must be founded on the recognition of the necessity of interdependence among divers and diverse units
of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and
economic 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." 17
Indeed, in light of the accelerated pace of Philippine industrialization then, the Filipinos who used to be more or less anchored to the soil and living
comparatively simple lives were fast becoming full-fledged members of the complex and impersonal industrial society. They and their families were
entirely at the mercy of the severities of the labor system. They were wholly dependent for their subsistence, sustenance and sheer survival on a job and
regular wage.
In time, Mr. Chief Justice Enrique M. Fernando drew the arches of social justice as follows:
What is thus stressed is that a fundamental principle as social justice, identified as it is with the broad scope of police power, has
an even more basic role to play in aiding those whose lives are spent in toil, with destitution an ever-present threat, to attain a
certain degree of economic well-being. Precisely, through the social justice coupled with the protection to labor provisions, the
government is enabled to pursue an active and militant policy to give reality and substance to the proclaimed aspiration of a better
life and more decent living conditions for all. It is in that spirit that in 1969, in Del Rosario vs. Delos Santos (L-20586, March 21,
1969, 22 SCRA 1196), reference was made to what the social justice concept signifies in the realistic language of the late
President Magsaysay: "He who has less in life should have more in law." After tracing the course of decisions which spoke
uniformly to the effect that the tenancy legislation, now on the statute books, is not vitiated by constitutional infirmity, the Del
Rosario opinion made clear why it is easily understandable "from the enactment of the Constitution with its avowed concern for
those who have less in life, [that] the constitutionality of such legislation has been repeatedly upheld." What is sought to be
accomplished by the above fundamental principle is to assure the effectiveness of the community's effort to assist the
economically underprivileged. For under existing conditions, without succor and support, they might not, unaided, be able to
secure justice for themselves. 18
1973 Constitution
The 1973 Constitution carried over the concept of social justice under the 1935 Constitution. 19 Article II (Declaration of Principles and State Policies),
Section 6 of the 1973 Constitution, provides that "[t]he State shall promote social justice to ensure the dignity, welfare, and security of all the people.
Towards this end, the State shall regulate the acquisition, ownership, use, enjoyment, and disposition of private property, and equitably diffuse property
ownership and profits." Its counterpart provision on labor was specific and categorical. Article II (Declaration of Principles and State Policies), Section 9
of the 1973 Constitution, commands that "[t]he State shall afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to selforganization, collective bargaining, security of tenure, and just and humane conditions of work. The State may provide for compulsory arbitration." The
elevation of this provision in the Declaration of Principles and State Policies of the 1973 Constitution underscored its sublime significance. Hence, in
Philippine Apparel Workers Union v. National Labor Relations Commission, 20 this Court explained that this obligation of the State to the workingman
has repercussions on the stability, if not survival, of the nation itself
More than elusive justice, survival is the daily problem of the worker and his family. The employer is not faced with such a
problem. More often than not, the employer dissipates part of his income or profit in pleasures of the flesh and gambling aside
from luxuries, fabulous parties and conspicuous consumption.
The stability of the economy does not depend on the employer alone, but on government economic policies concerning
productivity in all areas and not only in the clothing or textile industries. There is not even an intimation that the company is losing.
It is the living wage of the workers which is the basis of a stable economy. If the company cannot pay a living wage, it has no
business operating at the expense of the lives of its workers from the very start.

The preservation of the lives of the citizens is a basic duty of the State, more vital than the preservation of the profits of the
corporation. When the State is engaged in a life-and-death struggle, like war or rebellion, it is the citizen worker who fights in
defense of the State and for the preservation of the existence of corporations and businesses within its territorial confines. When
the life of the State is threatened from within and without, it is the citizen, not the corporation or business enterprise, that mans the
weapons of war and march into battle.
To invoke the nebulous term "stable economy" to justify rejection of the claims of the workers as against the assets of the
employer, is to regard human life as more expendable than corporate capital. There is nothing in the Constitution that expressly
guarantees the viability of business enterprises much less assuring them of profits. 21
Thus, in affirming the reinstatement of an employee, this Court in Philippine Air Lines v. Philippine Air Lines Employees Association 22 held that
[t]he futility of this appeal becomes even more apparent considering the express provision in the Constitution already noted,
requiring the State to assure workers "security of tenure." It was not that specific in the 1935 Charter. The mandate was limited to
the State affording "protection to labor, especially to working women and minors . . ." If by virtue of the above, it would not be
legally justifiable to reverse the order of reinstatement, it becomes even more readily apparent that such a conclusion is even
more unwarranted now. To reach it would be to show lack of fealty to a constitutional command. 23

1987 Constitution
The 1987 Constitution has deepened the roots of social justice and expanded its branches to include "all phases of national development." 24 An entire
article was devoted to Social Justice and Human Rights 25 which properly includes a full section on labor
LABOR
Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of
work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as
may be provided by law. TICaEc
The State shall promote the principle of shared responsibility between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits
of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.
Then, Article II (Declaration of Principles and State Policies), Section 18 of the 1987 Constitution, provides that "[t]he State affirms labor as a primary
social economic force. It shall protect the rights of workers and promote their welfare." Under Article II (Declaration of Principles and State Policies),
Section 9 of the 1987 Constitution, "[t]he State shall promote a just and dynamic social order that will ensure the prosperity and independence of the
nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and
an improved quality of life for all." These provisions protecting labor are not mere beliefs but should be reinforced by everyone's behavior.
The Labor Code of the Philippines and its Implementing Rules
In 1974, P.D. No. 442, as amended, otherwise known as the Labor Code of the Philippines, was enacted. There was power in its purpose which was
trumpeted in its title to afford protection to labor, promote employment and human resources development and insure industrial peace based on
social justice. Article 3 of its Preliminary Title under General Provisions provides
ART. 3. Declaration of basic policy. The State shall afford protection to labor, promote full employment, ensure equal work
opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure
the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work.
Under Labor Relations (Book Five), Article 211 states
ART. 211. Declaration of Policy. A. It is the policy of the State:
(a) To promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary
arbitration, mediation and conciliation, as modes of settling labor or industrial disputes;
(b) To promote free trade unionism as an instrument for the enhancement of democracy and the promotion of social
justice and development;
(c) To foster the free and voluntary organization of a strong and united labor movement;
(d) To promote the enlightenment of workers concerning their rights and obligations as union members and as
employees;
(e) To provide an adequate administrative machinery for the expeditious settlement of labor or industrial peace;
(f) To ensure a stable but dynamic and just industrial peace; and
(g) To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and
welfare.
In May 1980 and then again in March 1989, B.P. Blg. 70 and R.A. No. 6715 were approved, respectively, "to strengthen the constitutional right of
workers", and "to extend protection to labor." Accordingly, Volkschel Labor Union v. Bureau of Labor Relations, 26 decreed that "[i]n the implementation
and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and
paramount consideration." 27
Two. Courts at all times should give meaning and substance to constitutional postulates in favor of the workingman. The 1987 Constitution is fraught
with provisions protecting the workingman, e.g., Secs. 9, 10 and 18, Art. II, and Sec. 3, Art XIII, a legacy of the evolution off rights. These constitutional
creeds should not be dwarfed by deeds. A contrary posture would convert these creeds as "meaningless constitutional patter." 28 The principle of social
justice was not embedded in the fundamental law for demagoguery. It was meant to be a vital, articulate, compelling principle of public policy. 29 Social
justice should be a living reality and not a mere high level abstraction. 30 Thus, while the Constitution must be read as a whole, even if we do not invoke
its Due Process Clause, the coherent application of the separate constitutional creeds on social justice and labor is enough to uphold the workers'
constitutional right to work and their consequent right to job security. These substantive rights are not to be weakened by a diminished procedural right.
For in weakening the procedure, we weaken the substantive right. The importance of the procedure to protect the exercise of the right to work cannot be
overemphasized.
I have always, as I do now, adhered to the constitutional precepts of social justice and protection to labor. Some years back, in Pepito v. Secretary of
Labor, 31 I, as an Assistant Solicitor General, invoked the argument of constitutional guarantee of security of tenure as the rationale for the
reinstatement of an employee. The argument was sustained by this Court speaking through Mr. Chief Justice Fernando no less
. . . As set forth in the Comment, considered as the answer, Solicitor General Estelito P. Mendoza, Assistant Solicitor General
Reynato S. Puno and Solicitor Jesus V. Diaz "are of the opinion that petitioner's reinstatement is in order." Their view follows from
pronouncements of this Tribunal "handed down in consonance with the social justice and protection to labor provisions of the
Constitution."
. . . That point is well-taken. In the latest case in point, Meracap v. International Ceramics Mfg. Co., Inc., this Court left no doubt
that it is committed to the principle of vitalizing "the constitutional mandate of security of tenure as an aspect of the protection

accorded labor." There should be no reason why there should be a deviation in this litigation especially so when again, as noted
in the Comment, respect for such a mandate has been accorded in previous opinions. 32
With due respect, we should not now deviate from this doctrine. TaDSHC
Three. The constitution puts the employee on equal footing with his employer. 33 As between an employee, usually poor and unlettered, and the
employer, who has resources to secure able legal advice, the law has reason to demand from the latter stricter compliance. For, social justice in these
cases is not equality but protection. 34 As Mr. Chief Justice Fernando stressed in Victorias Milling Co., Inc. v. Workmen's Compensation Commission 35

To repeat, courts should ever be on the alert lest through inadvertence or faulty analysis the expected opposition from
management be appraised much more favorably than warranted. The unfortunate result would be that both the social justice
concept and the complementary constitutional command of protection to labor would be disregarded and set at naught. There is
no higher duty cast on the judiciary than to guard against such an undesirable possibility, fraught as it is with consequences truly
to be deplored. 36
In a similar vein, Mr. Chief Justice Ramon C. Aquino, in his Concurring Opinion in Allied Investigation Bureau v. Hon. Inciong, 37 opined that "social
justice in the case of the laborers means compassionate justice or an implementation of the policy that those who have less in life should have more in
law." 38 The Constitution helps labor for a simple reason. Employees are overmatched in their struggle against their employers. Their playing field is not
level.

Four. This Court has long extended constitutional due process in labor cases involving private action. Prior to Wenphil, the rule etched in stone is that an
employer can validly dismiss an erring employee only after giving him notice and hearing. Thus, decades ago, this Court in Batangas Laguna Tayabas
Bus Co. v. Court of Appeals 39 ruled that "the failure of petitioner to give the private respondent the benefit of a hearing before he was dismissed
constitutes an infringement on his constitutional right to due process of law." 40 In De Leon v. National Labor Relations Commission 41 where an
employee was dismissed without notice, it was held that "[t]here is in this case a clear denial of due process, a constitutional right which must be
safeguarded at all times especially when what is at stake is petitioner's position as his only means of livelihood." 42 In Reyes v. Philippine Duplicators,
Inc., 43 where petitioner Reyes was dismissed from the service in 1977 without any investigation or hearing, this Court found that the dismissal was
arbitrary as Reyes was denied due process. Hence, even the non-compliance with Sections 2 and 3, Rule XIV, Book V of the Implementing Rules and
Regulations of the Labor Code pursuant to the amendments of P.D. No. 850 which was issued in 1975, requiring a prior clearance from the Department
of Labor to terminate the services of an employee, rendered the termination illegal and nullified the dismissal of the employee. 44
In August 1981, B.P. Blg. 130 did away with the clearance to terminate employment. Prior notice and formal investigation were however instead imposed
as conditions sine qua non before termination may be effected. 45 Thus, the inviolability of prior notice and hearing before an employee could be
dismissed was iterated and reiterated. In Miguel v. National Labor Relations Commission, 46 where the employee was simply handed his walking papers
without any explanation, this Court held that the dismissal was unwarranted and ruled that "[t]he due process 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 man's
innate sense of justice." 47 Kwikway Engineering Works v. National Labor Relations Commission, 48 explained that "[t]he twin requirements of notice
and hearing constitute essential elements of due process in cases of employee dismissal: the requirement of notice is intended to inform the employee
concerned of the employer's intent to dismiss and the reason for the proposed dismissal; upon the other hand, the requirement of hearing affords the
employee an opportunity to answer his employer's charges against him accordingly to defend himself therefrom before dismissal is effected. Neither of
these two requirements can be dispensed with without running afoul of the due process requirement of the 1987 Constitution." 49 In a stream of
ceaseless cases, we adhered to the doctrine that failure to comply with the two-notice rule makes the dismissal illegal and reinstatement or payment of
separation pay in order. 50 In fine, "fire the employee, and let him explain later" violates this hallowed rules. 51 It has always been this way until
Wenphil.
This is not to hold that a trial-type proceeding is required to be conducted by employers. 52 Hearings before the employers prior to the dismissal are in
the nature of and akin to administrative due process which is free from the rigidity of certain procedural requirements. Mr. Justice Laurel way back in
1940 enumerated the cardinal rights of parties in administrative proceedings in the landmark case of Ang Tibay v. Court of Industrial Relations 53
1. the right to a hearing which includes the right to present one's case and submit evidence in support thereof;
2. the tribunal must consider the evidence presented;
3. the decision must have something to support itself;
4. the evidence must be substantial which means such evidence as a reasonable mind might accept as adequate to support a
conclusion;
5. the decision must be based on the evidence presented at the hearing, or at least contained in the record and disclosed to the
parties affected;
6. the tribunal or body or any of its judges must act on its own independent consideration of the law and facts of the controversy,
and not simply accept the views of a subordinate;
7. the board or body should, in all controversial questions, render its decision in such manner that the parties to the proceeding
can know the issues involved and the reasons for the decision rendered. 54
The posture that the constitutional due process requirement limits government action alone and does not apply to private action is already pass. Thus,
even in the United States, the application of due process to private conduct has gained approval and has become a settled norm. For, as expressed by
Professor Laurence H. Tribe, a noted constitutionalist
But particularly where ostensibly "private" power is the primary source of the coercion and violence that oppressed individuals
and groups experience, it is hard to accept with equanimity a rigid legal distinction between state and society. The pervasive
system of racial apartheid which existed in the South for a century after the Civil War, for example, thrived only because of the
resonance of society and politics . . . the close fit between private terror, public discrimination, and political exclusion. So too,
where it is the state's persistent inaction in the face of patterns of deprivation for which the state and society seem to many to
bear collective responsibility, the premise that only identifiable state "action" may be called constitutional account is deeply
troubling. 55

Accordingly, modern notions of violations of due process which may fairly be attributed to the State have expanded considerably in recent decades.
Seemingly private conducts have arguably been treated as adequate state actions. 56 Individual invasions of individual rights in certain instances have
become proper subjects of constitutional restraints. 57 In fine, as Mr. Justice Felix Frankfurter put it in Joint Anti-Fascist Refugee Committee v. McGrath,
58 "'[d]ue process,' unlike some legal rules, is not a technical conception with a fixed content unrelated to time, place, and circumstances . . . Due
process is not a mechanical instrument. It is not a yardstick. It is a delicate process of adjustment inescapably involving the exercise of judgment by
those whom the Constitution entrusted with the unfolding of the process." 59 Beyond argument, the Constitution was designed to embody and celebrate
values and to inculcate proper acceptance of them, as much as to compel governments to abide by them. 60
This is as it ought to be for as well observed by Dr. David C. Korten, Founder and President of the People Centered Development Forum, ". . .
[c]orporations have emerged as the dominant governance institutions on the planet, with the largest among them reaching into virtually every country of
the world and exceeding most governments in size and power. Increasingly, it is the corporate interest more than the human interest that defines the
policy agendas of states and international bodies . . ." 61 Assailing the threat to liberty coming from these new economic rulers, President Franklin
Delano Roosevelt said: "The royalists of the economic order have conceded that political freedom was the business of government but they have
maintained that economic slavery was nobody's business. They granted that the government could protect the citizen in his right to vote, but they denied
that the government could do anything to protect the citizen in his right to work and his right to live." 62 To be sure, some of the unlamented decisions of
the Supreme Court of the United States were those which allowed private corporations to rim roughshod over the rights of workers. Observed Korten
again: 63
A conservative court system that was consistently responsive to the appeals and arguments of corporate lawyers steadily chipped
away at the restraints a wary citizenry had carefully placed on corporate powers. Step-by-step, the court system put in place new
precedents that made the protection of corporations and corporate property a centerpiece of constitutional law. These precedents
eliminated the use of juries to decide fault and assess damages in cases involving corporate-caused harm and took away the
right of states to oversee corporate rates of return and prices. Judges sympathetic to corporate interests ruled that workers were
responsible for causing their own injuries on the job, limited the liability of corporations for damages they might cause, and
declared wage and hours laws unconstitutional. They interpreted the common good to mean maximum production no matter
what was produced or who it harmed. TDcHCa
The choice that confronts us is which right to uphold: the right to work of an underprivileged natural person or the right to property of an
overprivileged artificial person. In truth, there is but one choice to make for it is highly anomalous to bestow better rights to an artificial person than
a natural person. 64
Certainly, these are neither "novel legal ideas" nor "nouvelle vague theories" but careful directions brought about by the evolution of laws and the due
process clause which saw the need to rightfully protect the underprivileged as a result of ominous occurrences over the years.. These, on the contrary,
are persuasive axioms which prevail in other countries and should find application in our jurisdiction.
Indeed, it strains my imagination to see how the application of the constitutional due process clause to cases of illegal dismissal can "open the
floodgates to, and the docket . . . swamped with, litigations of the scurrilous sort" and "give rise to all absurd constitutional claims." Suffice it to say that
equating an excommunicated Catholic demanding reinstatement, or a celebrity endorser suing to be able to sing for another brand, or even an employee
preventing his employer to read his out going e-mail with a dismissed employee exerting his constitutional right to security of tenure and due process of
clause is too off-line. Withal, as adverted to, we have long extended constitutional due process and security of tenure in labor cases involving private
action and I have yet to see "litigations of the scurrilous sort" being entertained by the courts.

Five. An employee who is denied procedural doe process is entitled to reinstatement. Nothing less. This Court, in carrying out the constitutional directive
of the 1973 Constitution requiring the State to "assure the rights of workers to . . . security of tenure . . ." 65 has quite consistently nullified, simply on
constitutional grounds, dismissals in violation of procedural due process, notwithstanding the absence of an express provision of any statute. The Court
has done the same under the 1987 Constitution which admittedly has given more protection to labor than any of our previous charters through a fourparagraph section in the Article on Social Justice and Human Rights which details the protective mantle accorded to labor alone. 66 Thus, Art. XIII, Sec.
3 of the 1987 Constitution decrees that "[t]he State shall afford full protection to labor . . . and promote full employment . . . (All workers) shall be entitled
to security of tenure . . ." Art. XII, Sec. 18 of the 1987 Constitution mandates that "[t]he State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare." All told, this Court for almost three decades has set aside, on constitutional grounds, dismissals
in violation of procedural due process until Wenphil came along, with the interests of the employer tailing and suddenly enjoying preference. To
uphold Wenphil, Serrano, and now Agabon, is to dilute the protection to those who need it most despite the constitutional mandate which in the
language of Mr. Justice Cardozo speaks with "a reverberating clang that drowns all weaker sounds." With due respect, the grant of indemnity to the
dismissed employee "as both penalty and disincentive" as the majority provides in the instant case does not square with the protection accorded by the
Constitution to labor. There is only one main relief in cases of dismissal without notice and hearing reinstatement.
Six. Compliance with procedural due process is not a burden on employers. There is no valid reason why employers should have any difficulty according
procedural due process to their employees. The rules are fairly simple. Section 2, Rule XXIII (Termination of Employment), Book V (Labor Relations),
Omnibus Rules Implementing the Labor Code, provides
Section 2. 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 to said 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.
II. For termination of employment as based on authorized causes defined in Article 283 of the Code, the requirements of due
process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of
the Department at least thirty (30) days before the effectivity of the termination, specifying the ground or grounds for termination.

III. If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required. If the
termination is brought about by the failure of an employee to meet the standards of the employer in the case of probationary
employment, it shall be sufficient that a written notice is served the employee within a reasonable time from the effective date of
termination.
Similarly, Section 2, Rule I (Termination of Employment and Retirement), Book VI (Post-Employment) of the same Omnibus Rules, which covers all
establishments and undertakings, whether for profit or not, except the Government, requires the same notice and hearing.
In sum, in cases of dismissal based on just causes (Article 282, Labor Code), the employer must give two (2) simple notices: (1) notice before dismissal
to apprise the employee being dismissed of the particular acts or omissions for which the dismissal is sought, and (2) subsequent notice to inform him of
the employer's decision to dismiss him. In cases of dismissal for authorized causes (Article 283, Labor Code), the employer must serve an
uncomplicated written notice on the worker and on the Department of Labor and Employment at least one (1) month before the intended closure of the
establishment or reduction of personnel. The law requires nothing more. cEAaIS
It is distressing to say the least why employers should be exempted from observing this simple duty. In fine, to give to labor what is due them is far from
authorizing oppression nor destruction of the employer as some views would have. The employer cannot simply abuse the conduct of his business to the
prejudice of an employee. The persistence in violating the rights of the workers is the employer's own doing and self-destruction which may be let alone.
The right of an employer to dismiss an employee differs from and should not be confused with the manner in which such right is exercised. While the
management has certain privileges, the exercise of such privileges must be made without abuse of discretion, Thus, Dole Philippines v. National Labor
Relations Commission, 67 recognized as a management prerogative the determination of the need for the phasing out of a department as a labor and
cost saving device. In the same manner, Remereco Garments Manufacturing v. Minister of Labor and Employment 68 conceded that it is the sole
prerogative of management to dismiss or lay-off an employee. But in these two cases, and in so many other cases, this Court cautioned that the
exercise of such prerogatives must be made without abuse of discretion for what is at stake is not only the employee's position but also their means of
livelihood. 69 It must not be oppressive and abusive since it affects one's person and property. It is the right of every workingman to assure himself and
his family a life worthy of human dignity. Consequently, in dismissing an employee based on authorized cause or for just cause, as the case may be, the
employer must, at the very minimum, comply with procedural due process. Failure to observe due process, particularly the prior notice requirement,
rightly deserves stiff sanctions, if not condemnation, and not a mere slap on the wrist, as the majority now propounds. As I said in Serrano
It is equally puzzling why the majority believes that restoring the employee's right to pre-dismissal notice will negate the right of an
employer to dismiss for cause. The pre-Wenphil rule simply requires that before the right of the employer to dismiss can be
exercised, he must give prior notice to the employee of its cause. There is nothing strange nor difficult about this requirement. It is
no burden to an employer. He is bereft of reason not to give the simple notice. If he fails to give notice, he can only curse himself.
He forfeits his right to dismiss by failing to follow the procedure for the exercise of his right.
xxx xxx xxx
In fine, if the employer's right to dismiss an employee is forfeited for his was failure to comply with this simple, reasonable duty to
pre-notify his employee, he has nothing to blame but himself. 70
Verily, dismissal without due process debases human dignity. It is, therefore, incumbent upon the employer to conduct a formal investigation and inform
the employee of the specific charges against him. Most certainly, the resolution of extreme cases, e.g., where the employee threatens the life of the
employer, are the exceptions rather than the ordinary and usual cases. As such, rules governing them should not be used as the general rule. Rather,
employers should be reminded that under our system of government, even the most hardened criminals are given their day in court. 71 Employees are
not entitled to anything less.
Seven. In the hierarchy of rights of an employees, the right to security of tenure is high, if not the highest. Its paramount value is recognized and
guaranteed under our new Constitution. 72 Consequently, the first paragraph of Article XIII, Section 3 of the 1987 Constitution, extends the protective
mantle of the Constitution to all of labor including the promotion of full employment. The second paragraph specifies the guaranteed right to security of
tenure. All other rights, e.g., the right to collective bargaining and negotiations, the right to peaceful concerted activities, the right to strike and form
unions, and the right to due process, merely complement the right to job security. All these complementary rights are meaningless to an unemployed
Juan De la Cruz. Thus, we held in Rance v. National Labor Relations Commission, 73 "[i]t is the policy of the State to assure the right of workers to
'security of tenure.' The guarantee is an act of social justice. 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." 74 Almira v. B.F. Goodrich Philippines, Inc. 75 is worth quoting

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 while, since private respondent considered them separated from the service, they had not been paid.
From 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] an 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. 76

Eight. Workers need work more than anything else. For a wageworker, a job is important. While there is work, there is food on the table. Take away
work, replace it with a meager lump sum, and the food will disappear. Through work, the breadwinner satisfies his basic needs and those of his family.
He also provides himself with a means to express himself, transform, develop and perfect his skills and talents. Through work, he interacts and
establishes relations with others. Work is a defining feature of human existence. It is the means of sustaining life and meeting essential needs. It is also
an activity through which individuals affirm their own identity, both to themselves and to those around them. It is crucial to individual choice, to the
welfare of families and to the stability of societies. 77 Every man has the right to work, to a chance to develop his qualities and his personality in the
exercise of his profession, to equitable remuneration which will enable him and his family to lead a worthy life on material, social, cultural and spiritual
level. 78 Shylock said it well: "You take my life when you do take the means whereby I live." 79
Nine. To simply allow payment of nominal damages for violation of employee's right to due process is to give undue advantage to employers. One does
not need to have a stratospheric mind to know that the Constitution gave greater rights to employees over their employers. The intent is to equalize the
fight of the underprivileged against the overprivileged. We cannot allow the employers to marginalize the right of the workingman to due process for a
few pesos without mocking the protection accorded by the Constitution to the powerless. The deprivation of the right to security of tenure and due

process is beyond monetary valuation. In fine, to lengthen the longevity of Serrano is to sharpen the dangerous divide between the haves and have-nots
in our society. But Agabon is not merely extending Serrano. Agabon is far worse than Serrano. TDaAHS
In Serrano, the dismissed employee was awarded backwages from the time his employment was terminated until it was determined that the termination
was for an authorized cause. Using the facts of the instant case as an illustration, petitioner-employees who were dismissed in February 1999 stand to
get roughly 63 months of backwages under Serrano, i.e., the number of months from the time they were dismissed in February 1999 until November
2004 when it was determined that the termination was for just cause. In Agabon, however, the dismissed employee is merely being granted an indemnity
equivalent to Thirty Thousand Pesos. This is exactly Wenphil more than a decade later, with the cost of money and inflation factored in. Indeed, the
sorry plight of the workers has just been worsened, if not preserved, by the new majority ruling.
Just a word more. In Serrano, I pointed out:
. . . The dilution of the rule has been abased by unscrupulous employers who then followed the "dismiss now, pay later" strategy.
This evil practice of employers was what I expected the majority to address in re-examining the Wenphil doctrine. At the very
least, I thought that the majority would restore the balance of rights between an employee and an employer by giving back the
employee's mandatory right to notice before dismissal. It is disquieting, however, that the majority re-arranged this balance of
right by tilting it more in favor of the employer's right to dismiss. Thus, instead of weakening a bit the right to dismiss of
employers, the majority further strengthens it by insisting that a dismissal without prior notice is merely "ineffectual" and not
illegal.
The stubborn refusal of the majority to appreciate the importance of pre-dismissal notice is difficult to understand. It is the linchpin
of an employees right against an illegal dismissal. The notice tells him the cause of [the] dismissal. It gives him a better chance to
contest his dismissal in an appropriate proceeding as laid down in the parties' collective bargaining agreement or the rules of
employment established by the employer, as the case may be. In addition, it gives to both the employee and employer more
cooling time to settle their differences amicably. In fine, the prior notice requirement and the hearing before the employer gives an
employee a distinct, different and effective first level of remedy to protect his job.
xxx xxx xxx
I respectfully submit that the majority cannot revise our laws nor shun the social justice thrust of our Constitution in the guise of
interpretation especially when its result is to favor employers and disfavor employees. The majority talks of high nobility but the
highest nobility is to stoop down to reach the poor. 80
In these times when our lowly workers can hardly maintain body and soul together due to their meager means, I find it hard to believe that the majority in
Wenphil, in Serrano, and now in the instant case Agabon, persists in weakening our employee's right to job security. The stance simply offends a basic
principle of justice so entrenched in our tradition and etched in our conscience. An employee may not have a torrens title to his job but it is not too much
to require that before he is dismissed by his employer, he should be given a simple notice of the cause of his dismissal and a summary hearing to
present his side. All our constitutional and statutory precepts on social justice and the protection of labor will go to naught if we perpetuate our ruling that
a dismissal without the required prior notice is valid and if we just penalize with the payment of pennies violations of the employee's right to due process.
Without doubt, Wenphil and Serranohave lengthened the queue of the unemployed. Agabon will stretch it out even more.
In the case at bar, where petitioners Jenny Agabon and Virgilio Agabon were dismissed from the service for abandonment of work without the due
process requirements of two (2) notices and hearing, I submit that the dismissals should be nullified and set aside, and petitioners immediately
reinstated without loss of seniority rights and other privileges. This Court should protect labor and it should walk the talk.
Accordingly, I vote for the immediate REINSTATEMENT of petitioners Jenny M. Agabon and Virgilio C. Agabon, without loss of their seniority rights and
other privileges and with full backwages, and the REVERSION to the pre-Wenphil Doctrine in resolving future labor cases.
PANGANIBAN, J ., dissenting:
The core issue of the present case concerns the legal effect of and the corresponding sanction for the failure of an employer to give an employee the
pre-dismissal written notice of termination and opportunity to be heard required under the Labor Code and its implementing Rules.
In Serrano v. NLRC, 1 the Court held that such termination of employment should be considered "ineffectual" and, as such, sanctioned with payment of
full back wages plus in case the dismissal was for an authorized cause separation pay in accordance with Article 283 2 of the Labor Code. In
addition, nominal and moral damages may also be awarded, if warranted by the evidence.
In the case before us now, the employment of petitioners was terminated on the ground of abandonment of their work. However, the employer failed to
accord them their right to prior notice and hearing, required under Article 277 3 of the Labor Code and Section 2 4 of Rule XXIII of the 1999
Implementing Rules and Regulations. The majority holds that for violation of the employee's right to statutory due process, an indemnity in the amount of
P30,000 should be awarded to the petitioners as nominal damages under the Civil Code. According to the majority, this award should serve to
discourage employers from violating the statutory due process rights of their employees.
With due respect, I disagree with this ruling, because it aggravates the rights of our work force, and diminishes respect for due process.
Jurisprudence
Notice and Hearing

on

Right

to

Prior to the promulgation in 1989 of Wenphil v. NLRC, 5 the Court held that whether for a valid cause or not dismissing employees without giving
them prior notice and the opportunity to be heard was illegal; and that, as a consequence, they were entitled to reinstatement plus full back wages.
Wenphil abandoned this policy and ruled that if the dismissal was for a just or an authorized cause, but without due process, the termination was valid;
but that the employer should be sanctioned, for violating the employee's right to notice and hearing, through the payment of indemnity to each dismissed
employee in an amount ranging from P1,000 to P10,000. DHSEcI
In 2000, Serrano 6 held that such dismissals for just or authorized causes but without due process were merely ineffectual (not illegal). Nevertheless, the
employee was entitled to full back wages plus nominal and moral damages, if warranted by the evidence; and, in case the dismissal was for an
authorized cause, separation pay in accordance with Article 283 of the Labor Code.
This time, in the present case, the majority is incredibly reverting to Wenphil in upholding the validity of employment terminations without due process.
A
Labor's Rights

Setback

on

With due respect, I strongly oppose the Court's inexplicable turnaround. This ruling is a setback on labor's rights. Thus, I reiterate my Dissent 7 in
Serrano. In that case, I was grateful enough that the Court had decided to reexamine and modify the ten-year Wenphil doctrine. In the process, it had at
least increased the monetary award that should go to the dismissed employee from a nominal sum in the concept of "indemnity or damages" to "full
back wages."
I respectfully submit that nothing has transpired in the past four and a half years since Serrano was issued, that justifies further diminution of whatever
constitutional rights to due process and security of tenure our workers still enjoy. On the contrary, nothing is more evident than the inescapable fact that
their empowerment makes them better partners in the country's development and global competence. Any further trampling of their rights is undeserved.

As explained in my Dissenting Opinion in Serrano, the notice requirement finds basis not only in the Labor Code but, more important, in the due process
clause of the Constitution.
Consequently, when an employee is dismissed without due process, the legal effect is an illegal dismissal; and the appropriate sanction is full back
wages plus reinstatement, not merely full back wages (or separation pay), much less merely "indemnity of one month salary for every year of service." It
is jurisprudentially settled that when procedural due process is violated, the proceedings in this case, the dismissal shall be voided, and the parties
returned to their status quo ante; that is, the employees should be given back their old jobs and paid all benefits as if they have never been dismissed.
In ruling that the dismissal should be deemed legal, the majority has virtually rendered nugatory the employees' right to due process as mandated by law
and the Constitution. It has implicitly allowed the employer simply to ignore such right and just pay the employee.
I respectfully submit that illegal dismissal results not only from the absence of a legal cause, in accordance with Articles 282 8 to 284 9 of the Labor
Code, but likewise from the failure to observe due process. There are many labor and other cases in which acts violative of due process have
unequivocally been declared illegal by the Court. They range from similar cases of employment termination 10 to criminal prosecutions 11 to
administrative cases 12 and election cases 13 as well. I made a summary of these Decisions in my aforesaid Serrano Opinion, which I shall no longer
repeat here.
Violation
Amounts to Illegality of Proceedings

of

Due

Process

In all these cases, the Court has uniformly ruled that the denial of the fundamental right to due process resulted in the illegality of the proceedings. Thus,
the deprived individuals should be brought back to their status quo ante, not merely awarded nominal damages or indemnity.
Our labor force deserves no less. Indeed, the State recognizes it as its primary social economic force, 14 to which it is constitutionally mandated to
afford full protection. 15 Yet, the Court refuses to declare the illegality of dismissals made without due process. I insist that we should denounce such
dismissals as null and void and grant our workers these proper reliefs: (1) a declaration that the termination or dismissal is illegal and unconstitutional;
and (2) the reinstatement of the employee, without loss of seniority rights and accruing benefits plus full back wages.
Exception
Process Sanctions

to

Due

The only exception to the above sanctions would be a case analogous to Wenphil, one clearly showing the impracticality and the futility of observing the
procedure laid down by law in terminating employment. To recall, the employee involved in Wenphil had exhibited a violent temper and caused trouble
even in the presence of the restaurant's customers. In an altercation with a co-employee, he "slapped [the latter's] cap, stepped on his foot and picked
up the ice scooper and brandished it against [him]." When summoned by the assistant manager, the employee "shouted and uttered profane words"
instead of giving an explanation. Under the circumstances, instant action was necessary to preserve order and discipline, as well as to safeguard the
customers' confidence in the employer's business a fastfood chain catering to the general public, towards whom courtesy was a prized virtue.
In most of the succeeding cases, though including the present one before us in which petitioners had been dismissed without prior notice and hearing
there were ample opportunities for the employers to observe the requisites of due process. There were no exigencies that called for immediate
response.
For the infringement of the fundamental right to due process, I believe that the price the Court once again sets is too insignificant and too niggardly at
such a late hour. I iterate that imposing a stiffer sanction is the only way to emphasize to employers the extreme importance of the right to due process.
Such right is too sacred to be taken for granted or glossed over in a cavalier fashion. To hold otherwise, as by simply imposing an indemnity (or even
"full back wages" as was done in Serrano), is to allow the rich and powerful to virtually purchase and thereby stifle a constitutional right granted to the
poor and marginalized. TAIEcS
Respect
Should be Maintained

for

Due

Process

The ponencia concedes that the worker's right to due process is both statutory and constitutional in nature. Yet, it still gives it little regard and value.
May I just recall that in Wallem Maritime Services v. NLRC, 16 the Court said that "[o]ne's employment, profession, trade or calling is a property right
within the protection of the constitutional guaranty of due process of law." An objective reading of the Bill of Rights clearly shows that the due process
protection is not limited to government action alone. The Constitution does not say that the right cannot be claimed against private individuals and
entities. Indeed, the employee is entitled to due process, not because of the Labor Code, but because of the Constitution. Elementary is the doctrine that
constitutional provisions are deemed written into every statute, contract or undertaking.
True, traditional doctrine holds that constitutional rights may be invoked only against the State, which in the past was the only entity in a position to
violate these rights, including the due process clause. However, with the advent of liberalization, deregulation and privatization, the State tended to cede
some of its powers to the "market forces." Hence, corporate behemoths and even individuals may now be sources of abuses and threats to human rights
and liberties. I believe, therefore, that this traditional doctrine should be modified to enable the judiciary to cope with new paradigms and to continue
protecting the people from new forms of abuses.
In the final analysis, what is involved here is not simply the amount of monetary award whether insignificant or substantial; whether termed as
indemnity, penalty, separation pay or full back wages. Neither is the subject here merely a matter of respect for workers' rights or adequate protection of
labor. The bottom line is the constitutionally granted right to due process, which is the very essence of justice itself. Where the rule of law is the bedrock
of our free society, justice is its very lifeblood. A denial of due process is thus no less than a denial of justice itself.
Summary

In conclusion, I believe that even if there was just or authorized cause for termination of employment, but due process was not afforded the employee,
the dismissal proceedings must be declared null and void. Consequently, the employee must be reinstated and given full back wages and accruing
benefits. Depending on the facts of each case, damages as provided under applicable articles of the Civil Code may additionally be awarded.
An exception may be entertained if the employer could adequately prove that under the peculiar circumstances of the case, there was no opportunity to
comply with due process requirements; or doing so would have been impractical or gravely adverse to the employer, as when the employee was caught
in flagrante delicto. Under such circumstances, dismissal would not be illegal, and no award may properly be granted. Nevertheless, as a measure of
compassion in this specific instance, the employee may be given a nominal sum depending on the circumstances, pursuant to Article 2221 of the Civil
Code.
WHEREFORE, I vote to GRANT the Petition and ORDER the petitioners' REINSTATEMENT without loss of seniority rights and other privileges, plus
FULL BACK WAGES from the date of termination until actual reinstatement.
TINGA, J.:
I concur in the result, the final disposition of the petition being correct. There is no denying the importance of the Court's ruling today, which should be
considered as definitive as to the effect of the failure to render the notice and hearing required under the Labor Code when an employee is being
dismissed for just causes, as defined under the same law. The Court emphatically reaffirms the rule that dismissals for just cause are not invalidated due
to the failure of the employer to observe the proper notice and hearing requirements under the Labor Code. At the same time, The Decision likewise
establishes that the Civil Code provisions on damages serve as the proper framework for the appropriate relief to the employee dismissed for just cause
if the notice-hearing requirement is not met. Serrano v. NLRC, 1 insofar as it is controlling in dismissals for unauthorized causes, is no longer the
controlling precedent. Any and all previous rulings and statements of the Court inconsistent with these determinations are now deemed inoperative.
My views on the questions raised in this petition are comprehensive, if I may so in all modesty. I offer this opinion to discuss the reasoning behind my
conclusions, pertaining as they do to questions of fundamental importance.
Prologue
The factual backdrop of the present Petition for Review is not novel. Petitioners claim that they were illegally dismissed by the respondents, who allege
in turn that petitioners had actually abandoned their employment. There is little difficulty in upholding the findings of the NRLC and the Court of Appeals
that petitioners are guilty of abandonment, one of the just causes for termination under the Labor Code. Yet, the records also show that the employer
was remiss in not giving the notice required by the Labor Code; hence, the resultant controversy as to the legal effect of such failure vis--vis the
warranted dismissal.
Ostensibly, the matter has been settled by our decision in Serrano, 2 wherein the Court ruled that the failure to properly observe the notice requirement
did not render the dismissal, whether for just or authorized causes, null and void, for such violation was not a denial of the constitutional right to due
process, and that the measure of appropriate damages in such cases ought to be the amount of wages the employee should have received were it not
for the termination of his employment without prior notice. 3 Still, the Court has, for good reason, opted to reexamine the so-called Serrano doctrine
through the present petition THSaEC

Antecedent Facts
Respondent Riviera Home Improvements, Inc (Riviera Home) is engaged in the manufacture and installation of gypsum board and cornice. In January of
1992, the Agabons were hired in January of 1992 as cornice installers by Riviera Home. According to their personnel file with Riviera Home, the Agabon
given address was 3RDS Tailoring, E. Rodriguez Ave., Moonwalk Subdivision, P-II Paraaque City, Metro Manila. 4
It is not disputed that sometime around February 1999, the Agabons stopped rendering services for Riviera Home. The Agabons allege that beginning
on 23 February 1999, they stopped receiving assignments from Riviera Home. 5 When they demanded an explanation, the manager of Riviera Homes,
Marivic Ventura, informed them that they would be hired again, but on a "pakyaw" (piece-work) basis. When the Agabons spurned this proposal, Riviera
Homes refused to continue their employment under the original terms and agreement. 6 Taking affront, the Agabons filed a complaint for illegal
dismissal with the National Labor Relations Commission ("NLRC").
Riviera Homes adverts to a different version of events leading to the filing of the complaint for illegal dismissal. It alleged that in the early quarter of 1999,
the Agabons stopped reporting for work with Riviera. Two separate letters dated 10 March 1999, were sent to the Agabons at the address indicated in
their personnel file. In these notices, the Agabons were directed to report for work immediately. 7 However, these notices were returned unserved with
the notation "RTS Moved." Then, in June of 1999, Virgilio Agabon informed Riviera Homes by telephone that he and Jenny Agabon were ready to return
to work for Riviera Homes, on the condition that their wages be first adjusted. On 18 June 1999, the Agabons went to Riviera Homes, and in a meeting
with management, requested a wage increase of up to Two Hundred Eighty Pesos (P280.00) a day. When no affirmative response was offered by
Riviera Homes, the Agabons initiated the complaint before the NLRC. 8
In their Position Paper, the Agabons likewise alleged that they were required to work even on holidays and rest days, but were never paid the legal
holiday pay or the premium pay for holiday or rest day. They also asserted that they were denied Service Incentive Leave pay, and that Virgilio Agabon
was not given his thirteenth (13th) month pay for the year 1998. 9
After due deliberation, Labor Arbiter Daisy G. Cauton-Barcelona rendered a Decision dated 28 December 1999, finding the termination of the Agabons
illegal, and ordering Riviera Homes to pay backwages in the sum of Fifty Six Thousand Two Hundred Thirty One Pesos and Ninety Three Centavos
(P56,231.93) each. The Labor Arbiter likewise ordered, in lieu of reinstatement, the payment of separation pay of one (1) month pay for every year of
service from date of hiring up to 29 November 1999, as well as the payment of holiday pay, service incentive leave pay, and premium pay for holiday
and restday, plus thirteenth (13th) month differential to Virgilio Agabon. 10
In so ruling, the Labor Arbiter declared that Riviera Homes was unable to satisfactorily refute the Agabons' claim that they were no longer given work to
do after 23 February 1999 and that their rehiring was only on "pakyaw" basis. The Labor Arbiter also held that Riviera Homes failed to comply with the
notice requirement, noting that Riviera Homes well knew of the change of address of the Agabons, considering that the identification cards it issued
stated a different address from that on the personnel file. 11 The Labor Arbiter asserted the principle that in all termination cases, strict compliance by
the employer with the demands of procedural and substantive due process is a condition sine qua non for the same to be declared valid. 12
On appeal, the NLRC Second Division set aside the Labor Arbiter's Decision and ordered the dismissal of the complaint for lack of merit. 13 The NLRC
held that the Agabons were not able to refute the assertion that for the payroll period ending on 15 February 1999, Virgilio and Jenny Agabon worked for
only two and one-half (2 1/2) and three (3) days, respectively. It disputed the earlier finding that Riviera Homes had known of the change in address,
noting that the address indicated in the identification cards was not the Agabons, but that of the persons who should be notified in case of emergency

concerning the employee. 14 Thus, proper service of the notice was deemed to have been accomplished. Further, the notices evinced good reason to
believe that the Agabons had not been dismissed, but had instead abandoned their jobs by refusing to report for work.
In support of its conclusion that the Agabons had abandoned their work, the NLRC also observed that the Agabons did not seek reinstatement, but only
separation pay. While the choice of relief was premised by the Agabons on their purported strained relations with Riviera Homes, the NLRC pointed out
that such claim was amply belied by the fact that the Agabons had actually sought a conference with Riviera Homes in June of 1999. The NLRC likewise
found that the failure of the Labor Arbiter to justify the award of extraneous money claims, such as holiday and service incentive leave pay, confirmed
that there was no proof to justify such claims.
A Petition for Certiorari was promptly filed with the Court of Appeals by the Agabons, imputing grave abuse of discretion on the part of the NLRC in
dismissing their complaint for illegal dismissal. In a Decision 15 dated 23 January 2003, the Court of Appeals affirmed the finding that the Agabons had
abandoned their employment. It noted that the two elements constituting abandonment had been established, to wit: the failure to report for work or
absence without valid justifiable reason, and; a clear intention to sever the employer-employee relationship. The intent to sever the employer-employee
relationship was buttressed by the Agabon's choice to seek not reinstatement, but separation pay. The Court of Appeals likewise found that the service
of the notices were valid, as the Agabons did not notify Riviera Homes of their change of address, and thus the failure to return to work despite notice
amounted to abandonment of work.
However, the Court of Appeals reversed the NLRC as regards the denial of the claims for holiday pay, service incentive leave pay, and the balance of
Virgilio Agabon's thirteenth (13th) month pay. It ruled that the failure to adduce proof in support thereof was not fatal and that the burden of proving that
such benefits had already been paid rested on Riviera Homes. 16 Given that Riviera Homes failed to present proof of payment to the Agabons of their
holiday pay and service incentive leave pay for the years 1996, 1997 and 1998, the Court of Appeals chose to believe that such benefits had not actually
been received by the employees. It also ruled that the apparent deductions made by Riviera Homes on the thirteenth (13th) month pay of Virgilio Agabon
violated Section 10 of the Rules and Regulations Implementing Presidential Decree No. 851. 17 Accordingly, Riviera Homes was ordered to pay the
Agabons holiday pay for four (4) regular holidays in 1996, 1997 and 1998, as well as their service incentive leave pay for said years, and the balance of
Virgilio Agabon's thirteenth (13th) month pay for 1998 in the amount of Two Thousand One Hundred Fifty Pesos (P2,150.00). 18
In their Petition for Review, the Agabons claim that they had been illegally dismissed, reasserting their version of events, thus: (1) that they had not been
given new assignments since 23 February 1999; (2) that they were told that they would only be re-hired on a "pakyaw" basis, and; (3) that Riviera
Homes had knowingly sent the notices to their old address despite its knowledge of their change of address as indicated in the identification cards. 19
Further, the Agabons note that only one notice was sent to each of them, in violation of the rule that the employer must furnish two written notices before
termination the first to apprise the employee of the cause for which dismissal is sought, and the second to notify the employee of the decision of
dismissal. 20 The Agabons likewise maintain that they did not seek reinstatement owing to the strained relations between them and Riviera Homes.
TCDcSE
The Agabons present to this Court only one issue, i.e.: whether or not they were illegally dismissed from their employment. 21 There are several
dimensions though to this issue which warrant full consideration.
The Abandonment Dimension
Review of Factual Finding of Abandonment
As the Decision points out, abandonment is characterized by the failure to report for work or absence without valid or justifiable reason, and a clear
intention to sever the employer-employee relationship. The question of whether or not an employee has abandoned employment is essentially a factual
issue. 22 The NLRC and the Court of Appeals, both appropriate triers of fact, concluded that the Agabons had actually abandoned their employment,
thus there is little need for deep inquiry into the correctness of this factual finding. There is no doubt that the Agabons stopped reporting for work
sometime in February of 1999. And there is no evidence to support their assertion that such absence was due to the deliberate failure of Riviera Homes
to give them work. There is also the fact, as noted by the NLRC and the Court of Appeals, that the Agabons did not pray for reinstatement, but only for
separation pay and money claims. 23 This failure indicates their disinterest in maintaining the employer-employee relationship and their unabated
avowed intent to sever it. Their excuse that strained relations between them and Riviera Homes rendered reinstatement no longer feasible was hardly
given credence by the NLRC and the Court of Appeals. 24

The contrary conclusion arrived at by the Labor Arbiter as regards abandonment is of little bearing to the case. All that the Labor Arbiter said on that
point was that Riviera Homes was not able to refute the Agabons' claim that they were terminated on 23 February 1999. 25 The Labor Arbiter did not
explain why or how such finding was reached. Being bereft of reasoning, the conclusion deserves scant consideration.
Compliance with Notice Requirement
At the same time, both the NLRC and the Court of Appeals failed to consider the apparent fact that the rules governing notice of termination were not
complied with by Riviera Homes. Section 2, Book V, Rule XXIII of the Omnibus Rules Implementing the Labor Code (Implementing Rules) specifically
provides that for termination of employment based on just causes as defined in Article 282, there must be: (1) written notice served on the employee
specifying the grounds for termination and giving employee reasonable opportunity to explain his/her side; (2) a hearing or conference wherein the
employee, with the assistance of counsel if so desired, is given opportunity to respond to the charge, present his evidence or rebut evidence presented
against him/her; and (3) written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds
have been established to justify termination.
At the same time, Section 2, Book V, Rule XXIII of the Implementing Rules does not require strict compliance with the above procedure, but only that the
same be "substantially observed."
Riviera Homes maintains that the letters it sent on 10 March 1999 to the Agabons sufficiently complied with the notice rule. These identically worded
letters noted that the Agabons had stopped working without permission that they failed to return for work despite having been repeatedly told to report to
the office and resume their employment. 26 The letters ended with an invitation to the Agabons to report back to the office and return to work. 27
The apparent purpose of these letters was to advise the Agabons that they were welcome to return back to work, and not to notify them of the grounds
of termination. Still, considering that only substantial compliance with the notice requirement is required, I am prepared to say that the letters sufficiently
conform to the first notice required under the Implementing Rules. The purpose of the first notice is to duly inform the employee that a particular
transgression is being considered against him or her, and that an opportunity is being offered for him or her to respond to the charges. The letters served
the purpose of informing the Agabons of the pending matters beclouding their employment, and extending them the opportunity to clear the air.
Contrary to the Agabons' claim, the letter-notice was correctly sent to the employee's last known address, in compliance with the Implementing Rules.
There is no dispute that these letters were not actually received by the Agabons, as they had apparently moved out of the address indicated therein.
Still, the letters were sent to what Riviera Homes knew to be the Agabons' last known address, as indicated in their personnel file. The Agabons insist

that Riviera Homes had known of the change of address, offering as proof their company IDs which purportedly print out their correct new address. Yet,
as pointed out by the NLRC and the Court of Appeals, the addresses indicated in the IDs are not the Agabons, but that of the person who is to be
notified in case of emergency involving either or both of the Agabons.
The actual violation of the notice requirement by Riviera Homes lies in its failure to serve on the Agabons the second notice which should inform them of
termination. As the Decision notes, Riviera Homes' argument that sending the second notice was useless due to the change of address is inutile, since
the Implementing Rules plainly require that the notice of termination should be served at the employee's last known address.
The importance of sending the notice of termination should not be trivialized. The termination letter serves as indubitable proof of loss of employment,
and its receipt compels the employee to evaluate his or her next options. Without such notice, the employee may be left uncertain of his fate; thus, its
service is mandated by the Implementing Rules. Non-compliance with the notice rule, as evident in this case, contravenes the Implementing Rules. But
does the violation serve to invalidate the Agabons' dismissal for just cause?
The So-Called Constitutional Law Dimension
Justices Puno and Panganiban opine that the Agabons should be reinstated as a consequence of the violation of the notice requirement. I respectfully
disagree, for the reasons expounded below. IHCDAS
Constitutional
Of
Due
Requirement in Labor Termination Cases

Process

and

the

Considerations
Notice-Hearing

Justice Puno proposes that the failure to render due notice and hearing prior to dismissal for just cause constitutes a violation of the constitutional right
to due process. This view, as acknowledged by Justice Puno himself, runs contrary to the Court's pronouncement in Serrano v. NLRC 28 that the
absence of due notice and hearing prior to dismissal, if for just cause, violates statutory due process.
The ponencia of Justice Vicente V. Mendoza in Serrano provides this cogent overview of the history of the doctrine:
Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact that Art. 283
had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either party to the employer-employee
relationship the right to terminate their relationship by giving notice to the other one month in advance. In lieu of notice, an
employee could be laid off by paying him a mesada equivalent to his salary for one month. This provision was repealed by Art.
2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the
Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing for
the giving of advance notice for every year of service. 29
Under Section 1 of the Termination Pay Law, an employer could dismiss an employee without just cause by serving written notice on the employee at
least one month in advance or one-half month for every year of service of the employee, whichever was longer. 30 Failure to serve such written notice
entitled the employee to compensation equivalent to his salaries or wages corresponding to the required period of notice from the date of termination of
his employment.
However, there was no similar written notice requirement under the Termination Pay Law if the dismissal of the employee was for just cause. The Court,
speaking through Justice JBL Reyes, ruled in Phil. Refining Co. v. Garcia: 31
[Republic] Act 1052, as amended by Republic Act 1787, impliedly recognizes the right of the employer to dismiss his employees
(hired without definite period) whether for just case, as therein defined or enumerated, or without it. If there be just cause, the
employer is not required to serve any notice of discharge nor to disburse termination pay to the employee. . . . 32
Clearly, the Court, prior to the enactment of the Labor Code, was ill-receptive to the notion that termination for just cause without notice or hearing
violated the constitutional right to due process. Nonetheless, the Court recognized an award of damages as the appropriate remedy. In Galsim v. PNB,
33 the Court held:
Of course, the employer's prerogative to dismiss employees hired without a definite period may be with or without cause. But if
the manner in which such right is exercised is abusive, the employer stands to answer to the dismissed employee for damages.
34
The Termination Pay Law was among the repealed laws with the enactment of the Labor Code in 1974. Significantly, the Labor Code, in its inception,
did not require notice or hearing before an employer could terminate an employee for just cause. As Justice Mendoza explained:
Where the termination of employment was for a just cause, no notice was required to be given to the employee. It was only on
September 4, 1981 that notice was required to be given even where the dismissal or termination of an employee was for cause.
This was made in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130 which amended the
Labor Code. And it was still much later when the notice requirement was embodied in the law with the amendment of Art. 277(b)
by R.A. No. 6715 on March 2, 1989. 35
It cannot be denied though that the thinking that absence of notice or hearing prior to termination constituted a constitutional violation has gained a
jurisprudential foothold with the Court. Justice Puno, in his Dissenting Opinion, cites several cases in support of this theory, beginning with Batangas
Laguna Tayabas Bus Co. v. Court of Appeals 36 wherein we held that "the failure of petitioner to give the private respondent the benefit of a hearing
before he was dismissed constitutes an infringement on his constitutional right to due process of law. 37
Still, this theory has been refuted, pellucidly and effectively to my mind, by Justice Mendoza's disquisition in Serrano, thus:
. . . There are three reasons why, on the other hand, violation by the employer of the notice requirement cannot be considered a
denial of due process resulting in the nullity of the employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of employment under the Labor Code. This is plain from the text of Art. III, 1 of
the Constitution, viz.: "No person shall be deprived of life, liberty, or property without due process of law. . . ." The reason is
simple: Only the State has authority to take the life, liberty, or property of the individual. The purpose of the Due Process Clause
is to ensure that the exercise of this power is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the power of organized society
are brought to bear upon the individual. This is obviously not the case of termination of employment under Art. 283. Here the

employee is not faced with an aspect of the adversary system. The purpose for requiring a 30-day written notice before an
employee is laid off is not to afford him an opportunity to be heard on any charge against him, for there is none. The purpose
rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic
causes do exist justifying the termination of his employment.
xxx xxx xxx
The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due Process Clause is
that the employer cannot really be expected to be entirely an impartial judge of his own cause. This is also the case in termination
of employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the lawful
orders of the employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime
against the employer or the latter's immediate family or duly authorized representatives, or other analogous cases). 38
The Court in the landmark case of People v. Marti 39 clarified the proper dimensions of the Bill of Rights.
That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of private individuals finds support in
the deliberations of the Constitutional Commission. True, the liberties guaranteed by the fundamental law of the land must always
be subject to protection. But protection against whom? Commissioner Bernas in his sponsorship speech in the Bill of Rights
answers the query which he himself posed, as follows:
"First, the general reflections. The protection of fundamental liberties in the essence of constitutional democracy.
Protection against whom? Protection against the state. The Bill of Rights governs the relationship between the
individual and the state. Its concern is not the relation between individuals, between a private individual and other
individuals. What the Bill of Rights does is to declare some forbidden zones in the private sphere inaccessible to any
power holder." (Sponsorship Speech of Commissioner Bernas; Record of the Constitutional Commission, Vol. 1, p.
674; July 17,1986; Italics supplied) 40
I do not doubt that requiring notice and hearing prior to termination for just cause is an admirable sentiment borne out of basic equity and fairness. Still, it
is not a constitutional requirement that can impose itself on the relations of private persons and entities. Simply put, the Bill of Rights affords protection
against possible State oppression against its citizens, but not against an unjust or repressive conduct by a private party towards another. CDcHSa
Justice Puno characterizes the notion that constitutional due process limits government action alone as "pass," and adverts to nouvelle vague theories
which assert that private conduct may be restrained by constitutional due process. His dissent alludes to the American experience making references to
the post-Civil War/pre-World War II era when the US Supreme Court seemed overly solicitous to the rights of big business over those of the workers.
Theories, no matter how entrancing, remain theoretical unless adopted by legislation, or more controversially, by judicial opinion. There were a few
decisions of the US Supreme Court that, ostensibly, imposed on private persons the values of the constitutional guarantees. However, in deciding the
cases, the American High Court found it necessary to link the actors to adequate elements of the "State" since the Fourteenth Amendment plainly begins
with the words "No State shall. . . ." 41
More crucially to the American experience, it had become necessary to pass legislation in order to compel private persons to observe constitutional
values. While the equal protection clause was deemed sufficient by the Warren Court to bar racial segregation in public facilities, it necessitated
enactment of the Civil Rights Acts of 1964 to prohibit segregation as enforced by private persons within their property. In this jurisdiction, I have trust in
the statutory regime that governs the correction of private wrongs. There are thousands of statutes, some penal or regulatory in nature, that are the
source of actionable claims against private persons. There is even no stopping the State, through the legislative cauldron, from compelling private
individuals, under pain of legal sanction, into observing the norms ordained in the Bill of Rights.
Justice Panganiban's Separate Opinion asserts that corporate behemoths and even individuals may now be sources of abuses and threats to human
rights and liberties. 42 The concern is not unfounded, but appropriate remedies exist within our statutes, and so resort to the constitutional trump card is
not necessary. Even if we were to engage the premise, the proper juristic exercise should be to examine whether an employer has taken the attributes of
the State so that it could be compelled by the Constitution to observe the proscriptions of the Bill of Rights. But the strained analogy simply does not
square since the attributes of an employer are starkly incongruous with those of the State. Employers plainly do not possess the awesome powers and
the tremendous resources which the State has at its command.
The differences between the State and employers are not merely literal, but extend to their very essences. Unlike the State, the raison d'etre of
employers in business is to accumulate profits. Perhaps the State and the employer are similarly capacitated to inflict injury or discomfort on persons
under their control, but the same power is also possessed by a school principal, hospital administrator, or a religious leader, among many others.
Indeed, the scope and reach of authority of an employer pales in comparison with that of the State. There is no basis to conclude that an employer, or
even the employer class, may be deemed a de facto state and on that premise, compelled to observe the Bill of Rights. There is simply no nexus in their
functions, distaff as they are, that renders it necessary to accord the same jurisprudential treatment.
It may be so, as alluded in the dissent of Justice Puno, that a conservative court system overly solicitous to the concerns of business may consciously
gut away at rights or privileges owing to the labor sector. This certainly happened before in the United States in the early part of the twentieth century,
when the progressive labor legislation such as that enacted during President Roosevelt's New Deal regime most of them addressing problems of
labor were struck down by an arch-conservative Court. 43 The preferred rationale then was to enshrine within the constitutional order business
prerogatives, rendering them superior to the express legislative intent. Curiously, following its judicial philosophy at the time the U.S. Supreme Court
made due process guarantee towards employers prevail over the police power to defeat the cause of labor. 44
Of course, this Court should not be insensate to the means and methods by which the entrenched powerful class may maneuver the socio-political
system to ensure self-preservation. However, the remedy to rightward judicial bias is not leftward judicial bias. The more proper judicial attitude is to give
due respect to legislative prerogatives, regardless of the ideological sauce they are dipped in.
While the Bill of Rights maintains a position of primacy in the constitutional hierarchy, 45 it has scope and limitations that must be respected and
asserted by the Court, even though they may at times serve somewhat bitter ends. The dissenting opinions are palpably distressed at the effect of the
Decision, which will undoubtedly provoke those reflexively sympathetic to the labor class. But haphazard legal theory cannot be used to justify the
obverse result. The adoption of the dissenting views would give rise to all sorts of absurd constitutional claims. An excommunicated Catholic might
demand his/her reinstatement into the good graces of the Church and into communion on the ground that excommunication was violative of the
constitutional right to due process. A celebrity contracted to endorse Pepsi Cola might sue in court to void a stipulation that prevents him/her from
singing the praises of Coca Cola once in a while, on the ground that such stipulation violates the constitutional right to free speech. An employee might
sue to prevent the employer from reading outgoing e-mail sent through the company server using the company e-mail address, on the ground that the
constitutional right to privacy of communication would be breached.

The above concerns do not in anyway serve to trivialize the interests of labor. But we must avoid overarching declarations in order to justify an end result
beneficial to labor. I dread the doctrinal acceptance of the notion that the Bill of Rights, on its own, affords protection and sanctuary not just from the acts
of State but also from the conduct of private persons. Natural and juridical persons would hesitate to interact for fear that a misstep could lead to their
being charged in court as a constitutional violator. Private institutions that thrive on their exclusivity, such as churches or cliquish groups, could be forced
to renege on their traditional tenets, including vows of secrecy and the like, if deemed by the Court as inconsistent with the Bill of Rights. Indeed, that
fundamental right of all private persons to be let alone would be forever diminished because of a questionable notion that contravenes with centuries of
political thought. aDcETC

It is not difficult to be enraptured by novel legal ideas. Their characterization is susceptible to the same marketing traps that hook consumers to new
products. With the help of unique wrapping, a catchy label, and testimonials from professed experts from exotic lands, a malodorous idea may gain wide
acceptance, even among those self-possessed with their own heightened senses of perception. Yet before we join the mad rush in order to proclaim a
theory as "brilliant," a rigorous test must first be employed to determine whether it complements or contradicts our own system of laws and juristic
thought. Without such analysis, we run the risk of abnegating the doctrines we have fostered for decades and the protections they may have implanted
into our way of life.
Should the Court adopt the view that the Bill of Rights may be invoked to invalidate actions by private entities against private individuals, the Court would
open the floodgates to, and the docket would be swamped with, litigations of the scurrilous sort. Just as patriotism is the last refuge of scoundrels, the
broad constitutional claim is the final resort of the desperate litigant.
Constitutional Protection of Labor
The provisions of the 1987 Constitution affirm the primacy of labor and advocate a multi-faceted state policy that affords, among others, full protection to
labor. Section 18, Article II thereof provides:
The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.
Further, Section 3, Article XIII states:
The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and
equal employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law. They shall be entitled to security to tenure, humane conditions of
work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as
may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits
of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.
The constitutional enshrinement of the guarantee of full protection of labor is not novel to the 1987 Constitution. Section 6, Article XIV of the 1935
Constitution reads:
The State shall afford protection to labor, especially to working women, and minors, and shall regulate the relations between the
landowner and tenant, and between labor and capital in industry and in agriculture. The State may provide for compulsory
arbitration.
Similarly, among the principles and state policies declared in the 1973 Constitution, is that provided in Section 9, Article II thereof:
The State shall afford full protection to labor, promote full employment and equality in employment, ensure equal work
opportunities regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure
the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work. The
State may provide for compulsory arbitration.
On the other hand, prior to the 1973 Constitution, the right to security of tenure could only be found in legislative enactments and their respective
implementing rules and regulations. It was only in the 1973 Constitution that security of tenure was elevated as a constitutional right. The development of
the concept of security of tenure as a constitutionally recognized right was discussed by this Court in BPI Credit Corporation v. NLRC, 46 to wit:
The enthronement of the worker's right to security or tenure in our fundamental law was not achieved overnight. For all its
liberality towards labor, our 1935 Constitution did not elevate the right as a constitutional right. For a long time, the worker's
security of tenure had only the protective mantle of statutes and their interpretative rules and regulations. It was an uncertain
protection that sometimes yielded to the political permutations of the times. It took labor nearly four decades of sweat and tears to
persuade our people thru their leaders, to exalt the worker's right to security of tenure as a sacrosanct constitutional right. It was
Article II, section 2 [9] of our 1973 Constitution that declared as a policy that the State shall assure the right of workers to security
tenure. The 1987 Constitution is even more solicitous of the welfare of labor. Section 3 of its Article XIII mandates that the State
shall afford full protection to labor and declares that all workers shall be entitled to security of tenure. Among the enunciated State
policies are the promotion of social justice and a just and dynamic social order. In contrast, the prerogative of management to
dismiss a worker, as an aspect of property right, has never been endowed with a constitutional status.
The unequivocal constitutional declaration that all workers shall be entitled to security of tenure spurred our lawmakers to
strengthen the protective walls around this hard earned right. The right was protected from undue infringement both by our
substantive and procedural laws. Thus, the causes for dismissing employees were more defined and restricted; on the other
hand, the procedure of termination was also more clearly delineated. These substantive and procedural laws must be strictly
complied with before a worker can be dismissed from his employment. 47
It is quite apparent that the constitutional protection of labor was entrenched more than eight decades ago, yet such did not prevent this Court in the past
from affirming dismissals for just cause without valid notice. Nor was there any pretense made that this constitutional maxim afforded a laborer a positive
right against dismissal for just cause on the ground of lack of valid prior notice. As demonstrated earlier, it was only after the enactment of the Labor

Code that the doctrine relied upon by the dissenting opinions became en vogue. This point highlights my position that the violation of the notice
requirement has statutory moorings, not constitutional. DSTCIa
It should be also noted that the 1987 Constitution also recognizes the principle of shared responsibility between workers and employers, and the right of
enterprise to reasonable returns, expansion, and growth. Whatever perceived imbalance there might have been under previous incarnations of the
provision have been obviated by Section 3, Article XIII.
In the case of Manila Prince Hotel v. GSIS, 48 we affirmed the presumption that all constitutional provisions are self-executing. We reasoned that to
declare otherwise would result in the pernicious situation wherein by mere inaction and disregard by the legislature, constitutional mandates would be
rendered ineffectual. Thus, we held:
As against constitutions of the past, modern constitutions have been generally based upon a different principle and have often
become in effect extensive codes of laws intended to operate directly upon the people in a manner similar to that of statutory
enactments, and the function of constitutional conventions has evolved into one more like that of a legislative body. Hence, unless
it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the presumption now is that all
provisions of the constitution are self-executing. If the constitutional provisions are treated as requiring legislation instead of selfexecuting, the legislature would have the power to ignore and practically nullify the mandate of the fundamental law. This can be
cataclysmic. That is why the prevailing view is, as it has always been, that
. . . in case of doubt, the Constitution should be considered self-executing rather than non-self-executing. . . . Unless
the contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary
rule would give the legislature discretion to determine when, or whether, they shall be effective. These provisions would
be subordinated to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to
pass the needed implementing statute. 49
In further discussing self-executing provisions, this Court stated that:
In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise of powers directly
granted by the constitution, further the operation of such a provision, prescribe a practice to be used for its enforcement, provide a
convenient remedy for the protection of the rights secured or the determination thereof, or place reasonable safeguards around
the exercise of the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the violation of a
self-executing constitutional provision does not render such a provision ineffective in the absence of such legislation. The
omission from a constitution of any express provision for a remedy for enforcing a right or liability is not necessarily an indication
that it was not intended to be self-executing. The rule is that a self-executing provision of the constitution does not necessarily
exhaust legislative power on the subject, but any legislation must be in harmony with the constitution, further the exercise of
constitutional right and make it more available. Subsequent legislation however does not necessarily mean that the subject
constitutional provision is not, by itself, fully enforceable. 50

Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as self-executing in the sense that these are
automatically acknowledged and observed without need for any enabling legislation. However, to declare that the constitutional provisions are enough to
guarantee the full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be impractical, if not unrealistic. The
espousal of such view presents the dangerous tendency of being overbroad and exaggerated. The guarantees of "full protection to labor" and "security
of tenure", when examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket shield in favor of labor
against any form of removal regardless of circumstance. This interpretation implies an unimpeachable right to continued employment a utopian
notion, doubtless but still hardly within the contemplation of the framers. Subsequent legislation is still needed to define the parameters of these
guaranteed rights to ensure the protection and promotion, not only the rights of the labor sector, but of the employers' as well. Without specific and
pertinent legislation, judicial bodies will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable right to stave off the dismissal of an employee for
just cause owing to the failure to serve proper notice or hearing. As manifested by several framers of the 1987 Constitution, the provisions on social
justice require legislative enactments for their enforceability. This is reflected in the record of debates on the social justice provisions of the Constitution:
MS. [FELICITAS S.] AQUINO: We appreciate the concern of the Commissioner. But this Committee [on Social Justice] has
actually become the forum already of a lot of specific grievances and specific demands, such that understandably, we may have
been, at one time or another, dangerously treading into the functions of legislation. Our only plea to the Commission is to focus
our perspective on the matter of social justice and its rightful place in the Constitution. What we envision here is a mandate
specific enough that would give impetus for statutory implementation. We would caution ourselves in terms of the judicious
exercise of self-censorship against treading into the functions of legislation. (emphasis supplied) 51
xxx xxx xxx
[FLORENZ D.] REGALADO: I notice that the 1935 Constitution had only one section on social justice; the same is true with the
1973 Constitution. But they seem to have stood us in good stead; and I am a little surprised why, despite that attempt at selfcensorship, there are certain provisions here which are properly for legislation. 52
xxx xxx xxx
BISHOP [TEODORO S.] BACANI: [I] think the distinction that was given during the presentation of the provisions on the Bill of
Rights by Commissioner Bernas is very apropos here. He spoke of self-executing rights which belong properly to the Bill of
Rights, and then he spoke of a new body of rights which are more of claims and that these have come about largely through the
works of social philosophers and then the teaching of the Popes. They focus on the common good and hence, it is not as easy to
pinpoint precisely these rights nor the situs of the rights. And yet, they exist in relation to the common good. 53
xxx xxx xxx
MS. [MINDA LUZ M.] QUESADA: I think the nitty-gritty of this kind of collaboration will be left to legislation but the important thing
now is the conservation, utilization or maximization of the very limited resources. . . .
[RICARDO J.] ROMULO: The other problem is that, by and large, government services are inefficient. So, this is a problem all by
itself. On Section 19, where the report says that people's organizations as a principal means of empowering the people to pursue
and protect through peaceful means. . . ., I do not suppose that the Committee would like to either preempt or exclude the

legislature, because the concept of a representative and democratic system really is that the legislature is normally the principal
means. HICSTa
[EDMUNDO G.] GARCIA: That is correct. In fact, people cannot even dream of influencing the composition or the membership of
the legislature, if they do not get organized. It is, in fact, a recognition of the principle that unless a citizenry is organized and
mobilized to pursue its ends peacefully, then it cannot really participate effectively. 54
There is no pretense on the part of the framers that the provisions on Social Justice, particularly Section 3 of Article XIII, are self-executory. Still,
considering the rule that provisions should be deemed self-executing if enforceable without further legislative action, an examination of Section 3 of
Article XIII is warranted to determine whether it is complete in itself as a definitive law, or if it needs future legislation for completion and enforcement. 55
Particularly, we should inquire whether or not the provision voids the dismissal of a laborer for just cause if no valid notice or hearing is attendant.
Constitutional Commissioner Fr. Joaquin G. Bernas makes a significant comment on Section 3, Article XIII of the 1987 Constitution:
The [cluster] of rights guaranteed in the second paragraph are the right "to security of tenure, humane conditions of work, and a
living wage." Again, although these have been set apart by a period (.) from the next sentence and are therefore not modified by
the final phrase "as may be provided by law," it is not the intention to place these beyond the reach of valid laws. . . . (emphasis
supplied) 56
At present, the Labor Code is the primary mechanism to carry out the Constitution's directives. This is clear from Article 3 57 under Chapter 1 thereof
which essentially restates the policy on the protection of labor as worded in the 1973 Constitution, which was in force at the time of enactment of the
Labor Code. It crystallizes the fundamental law's policies on labor, defines the parameters of the rights granted to labor such as the right to security of
tenure, and prescribes the standards for the enforcement of such rights in concrete terms. While not infallible, the measures provided therein tend to
ensure the achievement of the constitutional aims.
The necessity for laws concretizing the constitutional principles on the protection of labor is evident in the reliance placed upon such laws by the Court in
resolving the issue of the validity of a worker's dismissal. In cases where that was the issue confronting the Court, it consistently recognized the
constitutional right to security of tenure and employed the standards laid down by prevailing laws in determining whether such right was violated. 58 The
Court's reference to laws other than the Constitution in resolving the issue of dismissal is an implicit acknowledgment that the right to security of tenure,
while recognized in the Constitution, cannot be implemented uniformly absent a law prescribing concrete standards for its enforcement.
As discussed earlier, the validity of an employee's dismissal in previous cases was examined by the Court in accordance with the standards laid down
by Congress in the Termination Pay Law, and subsequently, the Labor Code and the amendments thereto. At present, the validity of an employee's
dismissal is weighed against the standards laid down in Article 279, as well as Article 282 in relation to Article 277(b) of the Labor Code, for a dismissal
for just cause, and Article 283 for a dismissal for an authorized cause.
The
Of Notice and Hearing

Effect

of

Statutory

Violation

There is no doubt that the dismissal of an employee even for just cause, without prior notice or hearing, violates the Labor Code. However, does such
violation necessarily void the dismissal?
Before I proceed with my discussion on dismissals for just causes, a brief comment regarding dismissals for authorized cause under Article 283 of the
Labor Code. While the justiciable question in Serrano pertained to a dismissal for unauthorized cause, the ruling therein was crafted as definitive to
dismissals for just cause. Happily, the Decision today does not adopt the same unwise tack. It should be recognized that dismissals for just cause and
dismissals for authorized cause are governed by different provisions, entail divergent requisites, and animated by distinct rationales. The language of
Article 283 expressly effects the termination for authorized cause to the service of written notice on the workers and the Ministry of Labor at least one (1)
month before the intended date of termination. This constitutes an eminent difference than dismissals for just cause, wherein the causal relation between
the notice and the dismissal is not expressly stipulated. The circumstances distinguishing just and authorized causes are too markedly different to be
subjected to the same rules and reasoning in interpretation.
Since the present petition is limited to a question arising from a dismissal for just cause, there is no reason for making any pronouncement regarding
authorized causes. Such declaration would be merely obiter, since they are neither the law of the case nor dispositive of the present petition. When the
question becomes justiciable before this Court, we will be confronted with an appropriate factual milieu on which we can render a more judicious
disposition of this admittedly important question.
B. Dismissal for Just Cause
There is no express provision in the Labor Code that voids a dismissal for just cause on the ground that there was no notice or hearing. Under Section
279, the employer is precluded from dismissing an employee except for a just cause as provided in Section 282, or an authorized cause under Sections
283 and 284. Based on reading Section 279 alone, the existence of just cause by itself is sufficient to validate the termination.

Just cause is defined by Article 282, which unlike Article 283, does not condition the termination on the service of written notices. Still, the dissenting
opinions propound that even if there is just cause, a termination may be invalidated due to the absence of notice or hearing. This view is anchored
mainly on constitutional moorings, the basis of which I had argued against earlier. For determination now is whether there is statutory basis under the
Labor Code to void a dismissal for just cause due to the absence of notice or hearing. DaHISE
As pointed out by Justice Mendoza in Serrano, it was only in 1989 that the Labor Code was amended to enshrine into statute the twin requirements of
notice and hearing. 59 Such requirements are found in Article 277 of the Labor Code, under the heading "Miscellaneous Provisions." Prior to the
amendment, the notice-hearing requirement was found under the implementing rules issued by the then Minister of Labor in 1981. The present-day
implementing rules likewise mandate that the standards of due process, including the requirement of written notice and hearing, "be substantially
observed." 60
Indubitably, the failure to substantially comply with the standards of due process, including the notice and hearing requirement, may give rise to an
actionable claim against the employer. Under Article 288, penalties may arise from violations of any provision of the Labor Code. The Secretary of Labor
likewise enjoys broad powers to inquire into existing relations between employers and employees. Systematic violations by management of the statutory
right to due process would fall under the broad grant of power to the Secretary of Labor to investigate under Article 273.
However, the remedy of reinstatement despite termination for just cause is simply not authorized by the Labor Code. Neither the Labor Code nor its
implementing rules states that a termination for just cause is voided because the requirement of notice and hearing was not observed. This is not simply
an inadvertent semantic failure, but a conscious effort to protect the prerogatives of the employer to dismiss an employee for just cause. Notably, despite

the several pronouncements by this Court in the past equating the notice-hearing requirement in labor cases to a constitutional maxim, neither the
legislature nor the executive has adopted the same tack, even gutting the protection to provide that substantial compliance with due process suffices.
The Labor Code significantly eroded management prerogatives in the hiring and firing of employees. Whereas employees could be dismissed even
without just cause under the Termination Pay Law 61 , the Labor Code affords workers broad security of tenure. Still, the law recognizes the right of the
employer to terminate for just cause. The just causes enumerated under the Labor Code serious misconduct or willful disobedience, gross and
habitual neglect, fraud or willful breach of trust, commission of a crime by the employee against the employer, and other analogous causes are
characterized by the harmful behavior of an employee against the business or the person of the employer.
These just causes for termination are not negated by the absence of notice or hearing. An employee who tries to kill the employer cannot be magically
absolved of trespasses just because the employer forgot to serve due notice. Or a less extreme example, the gross and habitual neglect of an employee
will not be improved upon just because the employer failed to conduct a hearing prior to termination.
In fact, the practical purpose of requiring notice and hearing is to afford the employee the opportunity to dispute the contention that there was just cause
in the dismissal. Yet it must be understood if a dismissed employee is deprived of the right to notice and hearing, and thus denied the opportunity to
present countervailing evidence that disputes the finding of just cause, reinstatement will be valid not because the notice and hearing requirement was
not observed, but because there was no just cause in the dismissal. The opportunity to dispute the finding of the just cause is readily available before the
Labor Arbiter, and the subsequent levels of appellate review. Again, as held in Serrano:
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with the Due
Process Clause of the Constitution. The time for notice and hearing is at the trial stage. Then that is the time we speak of notice
and hearing as the essence of procedural due process. Thus, compliance by the employer with the notice requirement before he
dismisses an employee does not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides,
"Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. 62
The Labor Code presents no textually demonstrable commitment to invalidate a dismissal for just cause due to the absence of notice or hearing. This is
not surprising, as such remedy will not restore the employer or employee into equity. Absent a showing of integral causation, the mutual infliction of
wrongs does not negate either injury, but instead enforces two independent rights of relief.
The Damages' Dimensions
Award for Damages Must Have Statutory Basis
The Court has grappled with the problem of what should be the proper remedial relief of an employee dismissed with just cause, but not afforded either
notice or hearing. In a long line of cases, beginning with Wenphil Corp. v. NLRC 63 and up until Serrano in 2000, the Court had deemed an
indemnification award as sufficient to answer for the violation by the employer against the employee. However, the doctrine was modified in Serrano.
I disagree with Serrano insofar as it held that employees terminated for just cause are to be paid backwages from the time employment was terminated
"until it is determined that the termination is for just cause because the failure to hear him before he is dismissed renders the termination of his
employment without legal effect." 64 Article 279 of the Labor Code clearly authorizes the payment of backwages only if an employee is unjustly
dismissed. A dismissal for just cause is obviously antithetical to an unjust dismissal. An award for backwages is not clearly warranted by the law.
The Impropriety of Award for Separation Pay
The formula of one month's pay for every year served does have statutory basis. It is found though in the Labor Code, not the Civil Code. Even then,
such computation is made for separation pay under the Labor Code. But separation pay is not an appropriate as a remedy in this case, or in any case
wherein an employee is terminated for just cause. As Justice Vitug noted in his separate opinion in Serrano, an employee whose employment is
terminated for a just cause is not entitled to the payment of separation benefits. 65 Separation pay is traditionally a monetary award paid as an
alternative to reinstatement which can no longer be effected in view of the long passage of time or because of the realities of the situation. 66 However,
under Section 7, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, "[t]he separation from work of an employee for a just cause does
not entitle him to the termination pay provided in the Code." 67 Neither does the Labor Code itself provide instances wherein separation pay is
warranted for dismissals with just cause. Separation pay is warranted only for dismissals for authorized causes, as enumerated in Article 283 and 284 of
the Labor Code.
The Impropriety of Equity Awards
Admittedly, the Court has in the past authorized the award of separation pay for duly terminated employees as a measure of social justice, provided that
the employee is not guilty of serious misconduct reflecting on moral character. 68 This doctrine is inapplicable in this case, as the Agabons are guilty of
abandonment, which is the deliberate and unjustified refusal of an employee to resume his employment. Abandonment is tantamount to serious
misconduct, as it constitutes a willful breach of the employer-employee relationship without cause. IcSEAH
The award of separation pay as a measure of social justice has no statutory basis, but clearly emanates from the Court's so-called "equity jurisdiction."
The Court's equity jurisdiction as a basis for award, no matter what form it may take, is likewise unwarranted in this case. Easy resort to equity should be
avoided, as it should yield to positive rules which pre-empt and prevail over such persuasions. 69 Abstract as the concept is, it does not admit to definite
and objective standards.
I consider the pronouncement regarding the proper monetary awards in such cases as Wenphil Corp. v. NLRC, 70 Reta, 71 and to a degree, even
Serrano as premised in part on equity. This decision is premised in part due to the absence of cited statutory basis for these awards. In these cases, the
Court deemed an indemnity award proper without exactly saying where in statute could such award be derived at. Perhaps, equity or social justice can
be invoked as basis for the award. However, this sort of arbitrariness, indeterminacy and judicial usurpation of legislative prerogatives is precisely the
source of my discontent. Social justice should be the aspiration of all that we do, yet I think it the more mature attitude to consider that it ebbs and flows
within our statutes, rather than view it as an independent source of funding.
Article 288 of the Labor Code as a Source of Liability
Another putative source of liability for failure to render the notice requirement is Article 288 of the Labor Code, which states:
Article 288 states:
Penalties. Except as otherwise provided in this Code, or unless the acts complained of hinges on a question of interpretation or
implementation of ambiguous provisions of an existing collective bargaining agreement, any violation of the provisions of this
Code declared to be unlawful or penal in nature shall be punished with a fine of not less than One Thousand Pesos (P1,000.00)

nor more than Ten Thousand Pesos (P10,000.00), or imprisonment of not less than three months nor more than three years, or
both such fine and imprisonment at the discretion of the court.

It is apparent from the provision that the penalty arises due to contraventions of the provisions of the Labor Code. It is also clear that the provision
comes into play regardless of who the violator may be. Either the employer or the employee may be penalized, or perhaps even officials tasked with
implementing the Labor Code.
However, it is apparent that Article 288 is a penal provision; hence, the prescription for penalties such as fine and imprisonment. The Article is also
explicit that the imposition of fine or imprisonment is at the "discretion of the court." Thus, the proceedings under the provision is penal in character. The
criminal case has to be instituted before the proper courts, and the Labor Code violation subject thereof duly proven in an adversarial proceeding.
Hence, Article 288 cannot apply in this case and serve as basis to impose a penalty on Riviera Homes.
I also maintain that under Article 288 the penalty should be paid to the State, and not to the person or persons who may have suffered injury as a result
of the violation. A penalty is a sum of money which the law requires to be paid by way of punishment for doing some act which is prohibited or for not
doing some act which is required to be done. 72 A penalty should be distinguished from damages which is the pecuniary compensation or indemnity to a
person who has suffered loss, detriment, or injury, whether to his person, property, or rights, on account of the unlawful act or omission or negligence of
another. Article 288 clearly serves as a punitive fine, rather than a compensatory measure, since the provision penalizes an act that violates the Labor
Code even if such act does not cause actual injury to any private person.
Independent of the employee's interests protected by the Labor Code is the interest of the State in seeing to it that its regulatory laws are complied with.
Article 288 is intended to satiate the latter interest. Nothing in the language of Article 288 indicates an intention to compensate or remunerate a private
person for injury he may have sustained.
It should be noted though that in Serrano, the Court observed that since the promulgation of Wenphil Corp. v. NLRC 73 in 1989, "fines imposed for
violations of the notice requirement have varied from P1,000.00 to P2,000.00 to P5,000.00 to P10,000.00." 74 Interestingly, this range is the same range
of the penalties imposed by Article 288. These "fines" adverted to in Serrano were paid to the dismissed employee. The use of the term "fines," as well
as the terminology employed a few other cases, 75 may have left an erroneous impression that the award implemented beginning with Wenphil was
based on Article 288 of the Labor Code. Yet, an examination of Wenphil reveals that what the Court actually awarded to the employee was an
"indemnity", dependent on the facts of each case and the gravity of the omission committed by the employer. There is no mention in Wenphil of Article
288 of the Labor Code, or indeed, of any statutory basis for the award.
The Proper Basis: Employer's Liability under the Civil Code
As earlier stated, Wenphil allowed the payment of indemnity to the employee dismissed for just cause is dependent on the facts of each case and the
gravity of the omission committed by the employer. However, I considered Wenphil flawed insofar as it is silent as to the statutory basis for the indemnity
award. This failure, to my mind, renders it unwise for to reinstate the Wenphil rule, and foster the impression that it is the judicial business to invent
awards for damages without clear statutory basis.
The proper legal basis for holding the employer liable for monetary damages to the employee dismissed for just cause is the Civil Code. The award of
damages should be measured against the loss or injury suffered by the employee by reason of the employer's violation or, in case of nominal damages,
the right vindicated by the award. This is the proper paradigm authorized by our law, and designed to obtain the fairest possible relief .
Under Section 217(4) of the Labor Code, the Labor Arbiter has jurisdiction over claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations. It is thus the duty of Labor Arbiters to adjudicate claims for damages, and they should disabuse themselves of
any inhibitions if it does appear that an award for damages is warranted. As triers of facts in a specialized field, they should attune themselves to the
particular conditions or problems attendant to employer-employee relationships, and thus be in the best possible position as to the nature and amount of
damages that may be warranted in this case.
The damages referred under Section 217(4) of the Labor Code are those available under the Civil Code. It is but proper that the Civil Code serve as the
basis for the indemnity, it being the law that regulates the private relations of the members of civil society, determining their respective rights and
obligations with reference to persons, things, and civil acts. 76 No matter how impressed with the public interest the relationship between a private
employer and employee is, it still is ultimately a relationship between private individuals. Notably, even though the Labor Code could very well have
provided set rules for damages arising from the employer-employee relationship, referral was instead made to the concept of damages as enumerated
and defined under the Civil Code. HSDIaC
Given the long controversy that has dogged this present issue regarding dismissals for just cause, it is wise to lay down standards that would guide the
proper award of damages under the Civil Code in cases wherein the employer failed to comply with statutory due process in dismissals for just cause.
First. I believe that it can be maintained as a general rule, that failure to comply with the statutory requirement of notice automatically gives rise to
nominal damages, at the very least, even if the dismissal was sustained for just cause.
Nominal damages are adjudicated in order that a right of a plaintiff which has been violated or invaded by another may be vindicated or recognized
without having to indemnify the plaintiff for any loss suffered by him. 77 Nominal damages may likewise be awarded in every obligation arising from law,
contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or where any property right has been invaded.
Clearly, the bare act of failing to observe the notice requirement gives rise to nominal damages assessable against the employer and due the employee.
The Labor Code indubitably entitles the employee to notice even if dismissal is for just cause, even if there is no apparent intent to void such dismissals
deficiently implemented. It has also been held that one's employment, profession, trade, or calling is a "property right" and the wrongful interference
therewith gives rise to an actionable wrong. 78
In Better Buildings, Inc. v. NLRC, 79 the Court ruled that while the termination therein was for just and valid cause, the manner of termination was done
in complete disregard of the necessary procedural safeguards. 80 The Court found nominal damages as the proper form of award, as it was purposed to
vindicate the right to procedural due process violated by the employer. 81 A similar holding was maintained in Iran v. NLRC 82 and Malaya Shipping v.
NLRC. 83 The doctrine has express statutory basis, duly recognizes the existence of the right to notice, and vindicates the violation of such right. It is
sound, logical, and should be adopted as a general rule.
The assessment of nominal damages is left to the discretion of the court, 84 or in labor cases, of the Labor Arbiter and the successive appellate levels.
The authority to nominate standards governing the award of nominal damages has clearly been delegated to the judicial branch, and it will serve good
purpose for this Court to provide such guidelines. Considering that the affected right is a property right, there is justification in basing the amount of
nominal damages on the particular characteristics attaching to the claimant's employment. Factors such as length of service, positions held, and

received salary may be considered to obtain the proper measure of nominal damages. After all, the degree by which a property right should be
vindicated is affected by the estimable value of such right.
At the same time, it should be recognized that nominal damages are not meant to be compensatory, and should not be computed through a formula
based on actual losses. Consequently, nominal damages are usually limited in pecuniary value. 85 This fact should be impressed upon the prospective
claimant, especially one who is contemplating seeking actual/compensatory damages.
Second. Actual or compensatory damages are not available as a matter of right to an employee dismissed for just cause but denied statutory due
process. They must be based on clear factual and legal bases, 86 and correspond to such pecuniary loss suffered by the employee as duly proven. 87
Evidently, there is less degree of discretion to award actual or compensatory damages.
I recognize some inherent difficulties in establishing actual damages in cases for terminations validated for just cause. The dismissed employee retains
no right to continued employment from the moment just cause for termination exists, and such time most likely would have arrived even before the
employer is liable to send the first notice. As a result, an award of backwages disguised as actual damages would almost never be justified if the
employee was dismissed for just cause. The possible exception would be if it can be proven the ground for just cause came into being only after the
dismissed employee had stopped receiving wages from the employer.
Yet it is not impossible to establish a case for actual damages if dismissal was for just cause. Particularly actionable, for example, is if the notices are not
served on the employee, thus hampering his/her opportunities to obtain new employment. For as long as it can be demonstrated that the failure of the
employer to observe procedural due process mandated by the Labor Code is the proximate cause of pecuniary loss or injury to the dismissed employee,
then actual or compensatory damages may be awarded.

Third. If there is a finding of pecuniary loss arising from the employer violation, but the amount cannot be proved with certainty, then temperate or
moderate damages are available under Article 2224 of the Civil Code. Again, sufficient discretion is afforded to the adjudicator as regards the proper
award, and the award must be reasonable under the circumstances. 88 Temperate or nominal damages may yet prove to be a plausible remedy,
especially when common sense dictates that pecuniary loss was suffered, but incapable of precise definition.
Fourth. Moral and exemplary damages may also be awarded in the appropriate circumstances. As pointed out by the Decision, moral damages are
recoverable where the dismissal of the employee was attended by bad faith, fraud, or was done in a manner contrary to morals, good customs or public
policy, or the employer committed an act oppressive to labor. 89 Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or
malevolent manner.
Appropriate Award of Damages to the Agabons
The records indicate no proof exists to justify the award of actual or compensatory damages, as it has not been established that the failure to serve the
second notice on the Agabons was the proximate cause to any loss or injury. In fact, there is not even any showing that such violation caused any sort of
injury or discomfort to the Agabons. Nor do they assert such causal relation. Thus, the only appropriate award of damages is nominal damages.
Considering the circumstances, I agree that an award of Fifteen Thousand Pesos (P15,000.00) each for the Agabons is sufficient.
All premises considered, I VOTE to:
(1) DENY the PETITION for lack of merit, and AFFIRM the Decision of the Court of Appeals dated 23 January 2003, with the
MODIFICATION that in addition, Riviera Homes be ORDERED to pay the petitioners the sum of Fifteen Thousand
Pesos (P15,000.00) each, as nominal damages. IHAcCS
(2) HOLD that henceforth, dismissals for just cause may not be invalidated due to the failure to observe the due process
requirements under the Labor Code, and that the only indemnity award available to the employee dismissed for just
cause are damages under the Civil Code as duly proven. Any and all previous rulings and statements of the Court
inconsistent with this holding are now deemed INOPERATIVE.
Footnotes
1.Penned by Associate Justice Marina L. Buzon and concurred in by Associate Justices Josefina Guevara-Salonga and Danilo B. Pine.
2.Rollo, p. 41.
3.Id., pp. 1314.
4.Id., p. 92.
5.Id., p. 131.
6.Id., p. 173.
7.Id., p. 20.
8.Id., pp. 2123.
9.Id., p. 45.
10.Id., pp. 4243.
11.Rosario v. Victory Ricemill, G.R. No. 147572, 19 February 2003, 397 SCRA 760, 767.
12.Reyes v. Maxim's Tea House, G.R. No. 140853, 27 February 2003, 398 SCRA 288, 298.
13.Santos v. San Miguel Corporation, G.R. No. 149416, 14 March 2003, 399 SCRA 172, 182.
14.Columbus Philippine Bus Corporation v. NLRC, 417 Phil. 81, 100 (2001).
15.De Paul/King Philip Customs Tailor v. NLRC, 364 Phil. 91, 102 (1999).
16.Sta. Catalina College v. NLRC, G.R. No. 144483, 19 November 2003.
17.Cosmos Bottling Corporation v. NLRC, G.R. No. 111155, 23 October 1997, 281 SCRA 146, 153154.

18.G.R. No. L-49875, 21 November 1979, 94 SCRA 472, 478.

19.Judy Philippines, Inc. v. NLRC, 352 Phil. 593, 606 (1998).
20.Philippine-Singapore Transport Services, Inc. v. NLRC, 343 Phil. 284, 291 (1997).
21.See Stolt-Nielsen Marine Services, Inc. v. NLRC, G.R. No. 128395, 29 December 1998, 300 SCRA 713, 720.
22.G.R. No. 117040, 27 January 2000, 323 SCRA 445.
23.G.R. No. 80587, 8 February 1989, 170 SCRA 69.
24.Id. at 76.
25.Id.
26.Solesbee v. Balkcom, 339 U.S. 9, 16 (1950) (Frankfurter, J., dissenting). Due process is violated if a practice or rule "offends some principle of
justice so rooted in the traditions and conscience of our people as to be ranked as fundamental;" Snyder v. Massachusetts, 291 U.S. 97,
105 (1934).
27.Department Order No. 9 took effect on 21 June 1997. Department Order No. 10 took effect on 22 June 1997.
28.G.R. No. 115394, 27 September 1995, 248 SCRA 535.
29.G.R. No. 122666, 19 June 1997, 274 SCRA 386.
30.G.R. No. 114313, 29 July 1996, 259 SCRA 699, 700.
31.Serrano, supra, Vitug, J., Separate (Concurring and Dissenting) Opinion, 323 SCRA 524, 529530 (2000).
32.Capili v. NLRC, G.R. No. 117378, 26 March 1997, 270 SCRA 488, 495.
33.Filipro, Inc. v. NLRC, G.R. No. L-70546, 16 October 1986, 145 SCRA 123.
34.Calalang v. Williams, 70 Phil. 726, 735 (1940).
35.Gelos v. Court of Appeals, G.R. No. 86186, 8 May 1992, 208 SCRA 608, 616.
36.G.R. No. 112100, 27 May 1994, 232 SCRA 613, 618.
37.Art. 2221, Civil Code.
38.G.R. No. 108405. April 4, 2003 citing Kwikway Engineering Works v. NLRC, G.R. No. 85014, 22 March 1991, 195 SCRA 526, 532; Aurelio v.
NLRC, G.R. No. 99034, 12 April 1993, 221 SCRA 432, 443; and Sampaguita Garments Corporation v. NLRC, G.R. No. 102406, 17 June
1994, 233 SCRA 260, 265.
39.Id. citing Better Buildings, Inc. v. NLRC, G.R. No. 109714, 15 December 1997, 283 SCRA 242, 251; Iran v. NLRC, G.R. No. 121927, 22 April 1998,
289 SCRA 433, 442.
40.Savellano v. Northwest Airlines, G.R. No. 151783, 8 July 2003.
41.Villar v. NLRC, G.R. No. 130935, 11 May 2000.
42.Rollo, pp. 6071.
43.UST Faculty Union v. NLRC, G.R. No. 90445, 2 October 1990.
44."Whereas" clauses, P.D. No. 851.
45."Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his
employees except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by
him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check off has been recognized by the employer or authorized in writing by
the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment.
PUNO, J., dissenting.
1.Plutarch, Lives: Themistocles, Ch. 3, Sec. 11.
2.G.R. No. 80587, February 8, 1989, 170 SCRA 69.
3.G.R. No. 117040, January 27, 2000, 323 SCRA 445.
4.Id., 472.
5.Id., 499500; 523524.
6.Ponencia, 15.
7.See Fabre, C., Social Rights Under the Constitution. Government and the Decent Life. Oxford University Press, 2000.
8.Rerum Novarum (On the Condition of the Working Classes). Encyclical of His Holiness Pope Leo XIII on Capital and Labor issued on May 15, 1891.
9.I J. Aruego, The Framing of the Philippine Constitution 147 (1936).
10.L-46496, May 29, 1939, 7 Lawyer's Journal 487.

11.Id., 494.
12.70 Phil. 340 (1940).
13.Id., 357.
14.II J. Aruego, The Framing of the Philippine Constitution 656657 (1937).
15.70 Phil. 726 (1940).
16.The welfare of the people is the supreme law.
17.70 Phil. 726, 734735 (1940).
18.Fernando, Enrique M., Constitution of the Philippines, 8081 (1974).
19.Bernas, Joaquin G., The 1987 Constitution of the Republic of the Philippines. A Commentary, 81 (2003).
20.G.R. No. 50320, July 31, 1981, 106 SCRA 444.
21.Id., 462.
22.L-24626, June 28, 1974, 57 SCRA 489.
23.Id., 495496.
24.Section 10, Article II (Declaration of State Policies and Principles, State Policies), 1987 Constitution provides: "The State shall promote social
justice in all phases of development."
25.Article XIII (Social Justice and Human Rights), 1987 Constitution.
26.L-45824, June 19, 1985, 137 SCRA 42.
27.Id., 48.
28.Philippine Blooming Mills Employees Organization v. Philippine Blooming Mills Co., L-31195, June 5, 1973, 51 SCRA 189, 210.
29.Bocobo, Jorge., Cult of Legalism, cited by Mr. Justice Gregorio Perfecto in his Concurring Opinion in Ocampo Vda. De Gomez v. The Government
Insurance Board, 78 Phil. 216, 225 (1947); and by Mr. Justice Teodoro Padilla some 40 years later in National Service Corporation v.
National Labor Relations Commission, G.R. No. 69870, November 29, 1988, 168 SCRA 122, 138.
30.Magnolia Corporation v. National Labor Relations Commission, G.R. No. 116813, November 24, 1995, 250 SCRA 332, 340.
31.L-49418, February 29, 1980, 96 SCRA 454.
32.Id., 457; 459460.
33.Philippine Airlines v. Santos, G.R. No. 77875, February 4, 1993, 218 SCRA 415.
34.Agustin v. Workmen's Compensation Commission, L-19957, September 29, 1964, 12 SCRA 55, 59.
35.L-25665, May 22, 1969, 28 SCRA 285.
36.Id., 298.
37.L-49678, June 29, 1979, 91 SCRA 265.
38.Id., 274.
39.L-38482, June 18, 1976, 71 SCRA 470.
40.Id., 480.
41.G.R. No. 52056, October 30, 1980, 100 SCRA 691.
42.Id., 698.
43.G.R. No. 54996, November 27, 1981, 109 SCRA 489.
44.Egyptair v. National Labor Relations Commission, G.R. No. 63185, February 27, 1987, 148 SCRA 125; Oliva v. National Labor Relations
Commission, G.R. No. 57865, April 28, 1983, 121 SCRA 827; Visperas v. Inciong, G.R. No. 51299, December 29, 1982, 119 SCRA 476;
Bachiller v. National Labor Relations Commission, G.R. No. 51484, June 25, 1980, 98 SCRA 393.
45.Metro Port Service Inc. v. National Labor Relations Commission, G.R. Nos. 7163233, March 9, 1989, 171 SCRA 190.
46.G.R. No. 78993, June 22, 1988, 162 SCRA 441.
47.Id., 445, citing Natividad v. Workmen's Compensation Commission, L-42340, August 31, 1978, 85 SCRA 115, 119120; and Luzon Surety Co. v.
Beson, L-26865-66, January 30, 1970, 31 SCRA 313, 318. See also De Leon v. National Labor Relations Commission, G.R. No. 52056,
October 30, 1980, 100 SCRA 691.
48.G.R. No. 85014, March 22, 1991, 195 SCRA 526.
49.Id., 531; citing Century Textile Mills, Inc. v. National Labor Relations Commission, G.R. No. 77859, May 25, 1988, 161 SCRA 528, 535.
50.Nitto Enterprises v. National Labor Relations Commission, G.R. No. 114337, September 29, 1995, 248 SCRA 654; Pepsi-Cola Bottling Co. v.
National Labor Relations Commission, G.R. No. 101900, June 23, 1992, 210 SCRA 277; De Vera v. National Labor Relations Commission,
G.R. No. 93070, August 9, 1991, 200 SCRA 439; Tingson v. National Labor Relations Commission, G.R. No. 84702, May 18, 1990, 185
SCRA 498; Ruffy v. National Labor Relations Commission, G.R. No. 84193, February 15, 1990, 182 SCRA 365; and National Service Corp.
v. National Labor Relations Commission, G.R. No. 69870, November 29, 1988, 168 SCRA 122.

51.Batangas Laguna Tayabas Bus Company v. National Labor Relations Commission, G.R. No. 94429, May 29, 1992, 209 SCRA 430,439.
52.Sajonas v. National Labor Relations Commission, L-49286, March 15, 1990, 183 SCRA 182.
53.69 Phil. 635 (1940).
54.Id., 642644; cited by Alliance of Democratic Free Labor Organization v. Laguesma, G.R. No. 108625, March 11, 1996, 254 SCRA 565, 573574;
and Doruelo v. Commission on Elections, G.R. No. 67746, November 21, 1984, 133 SCRA 376, 381382.
55.Tribe, L., Constitutional Choices (Chapter 16. Refocusing the "State Action" Inquiry: Separating State Acts from State Actors). Harvard University
Press, 1985.
56.See Gunther, G. and Sullivan, K. Constitutional Law, 13th Ed. (Chapter 10. The Post Civil War Amendments and Civil Rights Legislation:
Constitutional Restraints on Private Conduct; Congressional Power to Implement Amendments). The Foundation Press, Westbury, New
York, 1997.
57.See Cohen, W. and Varat, J., Constitutional Law. Cases and Materials. 9th Ed. (Chapter 12. Application of the Post Civil War Amendments to
Private Conduct: Congressional Power to Enforce the Amendments). The Foundation Press, Westbury, New York, 1993.
58.341 U.S. 123 (1951).
59.Cited by Altschuler, B. and Sgroi, C., Understanding Law in a Changing Society. (Chapter 3. Due Process of Law, 94). Prentice Hall, Inc., 1996.
60.Chemerinsky. E., Rethinking Sate Action., 80 Nw.U.L.Rev. 503, 535546, 550553 (1985), citing Franz v. United States, 707 F.2d 582, 594 n. 45
(D.C.Cir. 1983).
61.Korten, When Corporations Rule the World, 54 (2002 ed).
62.Acceptance Speech for the Democratic Nomination for President, Philadelphia, June 27, 1936.
63.Korten, op. cit., 59.
64.See Hartmann, Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights.
65.Article II (Declaration of Principles and State Policies), Section 9 of the 1973 Constitution.
66.Article XIII (Social Justice and Human Rights), Section 3 of the 1987 Constitution.
67.G.R. No. 120009, September 13, 2001, 365 SCRA 124.
68.G.R. Nos. 56176-77, February 28, 1985, 135 SCRA 167, 175.
69.International Harvester Macleod v. Intermediate Appellate Court, G.R. No. 73287, May 18, 1987; citing D.M. Consunji, Inc. v. National Labor
Relations Commission, G.R. No. 71459, July 30, 1986, 143 SCRA 204; Kapisanan ng Manggagawa sa Camara Shoes v. Camara Shoes,
G.R. No. 50985, January 30, 1982, 111 SCRA 477.
70.323 SCRA 445, 504505, 523.
71.De Leon v. National Labor Relations Commission, G.R. No. 52056, October 30, 1980, 100 SCRA 691, 698.
72.Tolentino v. National Labor Relations Commission, G.R. No. 75380, July 31, 1987, 152 SCRA 724.
73.G.R. No. 68147, June 30, 1988, 163 SCRA 279.
74.Id., 284285. See also Bondoc v. People's Bank and Trust Company, L-43835, March 31, 1981, 103 SCRA 599, 605.
75.L-34974, July 25, 1974, 58 SCRA 120.
76.Id., 131.
77.Juan Somavia, ILO Director-General, June 2001.
78.Octagesima Adveniens. An Apostolic Letter of His Holiness Pope Paul VI., citing Gaudium et Spes, 25: AAS 67 (1966), p. 1089.
79.The Merchant of Venice.
80.Id., 503504; 521.
PANGANIBAN, J., dissenting:
1.380 Phil. 416, January 27, 2000.
2."Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation or operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the workers and the [Department] of Labor and Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for every year of service whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishments or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year."
3."Art. 277. . . .
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized
cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose
employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample

opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules
and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer
shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall
rest on the employer. The Secretary of the Department of Labor and Employment may suspend the effects of the termination pending
resolution of the dispute in the event of a prima facie finding by the appropriate official of the Department of Labor and Employment before
whom such dispute is pending that the termination may cause a serious labor dispute or is in implementation of a mass lay-off."
4."Sec. 2. 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 to said 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."
5.170 SCRA 69, February 8, 1989.
6.Supra.
Separate Opinions
Separate Opinions
7.Pp. 531547. See also my Separate Opinions in Better Buildings, Inc. v. NLRC, 347 Phil. 521, 535, December 15, 1997; and Del Val v. NLRC, 357
Phil. 286, 294, September 25, 1998.
8."Art. 282. Termination by employer. An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his 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 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."
9."Art. 284. Disease as a ground for termination. An employer may terminate the services of an employee who has been found to be suffering from
any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his coemployees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year."
10.Pepsi-Cola Bottling Co. v. NLRC, 210 SCRA 277, June 23, 1992; Bacus v. Ople, 217 Phil. 670, October 23, 1984; Philippine National Bank v.
Apalisok, 199 SCRA 92, July 12, 1991.
11.People v. Bocar, 138 SCRA 166, 170171, August 16, 1985; People v. San Diego, 135 Phil. 514, December 24, 1968; People v. Sola, 191 Phil.
21, March 17, 1981; People v. Dacudao, 170 SCRA 489, February 21, 1989; People v. Calo Jr., 186 SCRA 620, June 18, 1990; People v.
Burgos, 200 SCRA 67, August 2, 1991; People v. Parazo, 369 Phil. 398, July 8, 1999 (Resolution on the Motion for Reconsideration).
12.Fabella v. Court of Appeals, 346 Phil. 940, November 28, 1997.
13.Villarosa v. Comelec, 377 Phil. 497, November 29, 1999.
14.18, Art II, 1987 Constitution.
15.3, Art. XIII, ibid.
16.331 Phil. 476, 485, October 15, 1996, per Romero, J.
TINGA, J:
1.380 Phil. 416 (2000).
2.Id.
3.Id. at 443, 445, 448.
4.Rollo, p. 42.
5.Id. at 32.
6.Ibid.
7.Id. at 5960.
8.Id. at 15.
9.Id. at 34.

10.Id. at 92.
11.Id. at 91. The address indicated in the identification cards was "V 6 Cruz Iron Works, E. Rodriguez Paraaque City."
12.Ibid citing PAL v. NLRC, 279 SCRA 533.
13.In a Decision dated 21 August 2000, penned by Commissioner V.R. Calaycay, and concurred in by Presiding Commissioner R. Aquino and
Commissioner A. Gacutan.
14.Rollo, p. 127.
15.Penned by Associate Justice M. Buzon, concurred in by Associate Justices J. Guevara-Salonga and D. Pine.
16.In their Petition for Certiorari before the Court of Appeals, the Agabons particularly claimed that they were required to work on four holidays,
namely, Araw Ng Kagitingan, National Heroes Day, Bonifacio Day, and Rizal Day. See Rollo, p. 154.
17.Deducted from Virgilio Agabon's thirteenth (13th) month pay were his SSS loan and expenses for shoes. Rollo, pp. 171172.

18.Rollo, p. 173.
19.Id. at 22.
20.Id. at 23 citing Kingsize Manufacturing Corporation v. NLRC, 238 SCRA 349.
21.Rollo, p. 20.
22.Palencia v. NLRC, G.R. No. L-75763, 21 August 1987; Pure Blue Industries v. NLRC, G.R. No. 115879, 16 April 1997.
23.Rollo, pp. 129, 170.
24.Both the NLRC and the Court of Appeals noted that the 10 June 1999 conference between the Agabons and Riviera Homes was at the behest of
the Agabons, thus countering the claim of strained relations. Rollo, pp. 130, 170171.
25.Rollo, p. 91.
26.Supra note 6.
27.Id.
28.Supra note 1.
29.Supra note 1 at 446.
30.See Section 1, Republic Act No. 1052, which states:
Sec. 1. 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 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.
31.124 Phil. 698 (1966).
32.Id. at 703.
33.139 Phil. 747 (1969).
34.Id. at 754.
35.Serrano v. NLRC, supra note 1 at 447.
36.G.R. No. L-38482, 18 June 1976, 71 SCRA 470.
37.Serrano v. NLRC, supra note 1 at 480.
38.Serrano, supra note 1 at 445446.
39.G.R. No. 81651, 18 January 1991, 193 SCRA 57.
40.Id. at 67.
41.See G. Gunther and K. Sullivan, Constitutional Law (14th ed.) at 867.
42.Separate Opinion of Justice Panganiban, p. 12.
43.See e.g., Morehead v. State of New York, 298 U.S. 587 (1936), which affirmed the invalidity of minimum wage laws as previously declared in
Adkins v. Children's Hospital, 261 U.S. 525 (1923).
44.Famously justified by the Supreme Court as an assertion of the "liberty of contract", or "the right to contract about one's affairs", as contained in the
Fourteenth Amendment. Adkins v. Children's Hospital, 261 U.S. 525, 545. (1923). But as Justice Holmes famously critiqued: "Contract is
not specially mentioned in the text (of the Fourteenth Amendment) that we have to construe. It is merely an example of doing what you want
to do, embodied in the word liberty. But pretty much all law consists in forbidding men to do some things that they want to do, and contract
is no more exempt from law than other acts." Adkins v. Children's Hospital. Id. at 568.

45.See People v. Tudtud, G.R. No. 144037, 26 September 2003.

46.G.R. No. 106027, 234 SCRA 441, 25 July 1994.
47.Id. at 451452.
48.335 Phil. 82 (1997). The Court therein was divided, with twelve voting for, and three against the decision. Interestingly, both Justices Puno and
Panganiban adopted the dissenting position that the provisions of Article XII of the Constitution alone were insufficient to accord the Filipino
bidder a preferential right to obtain the winning bid for Manila Hotel. Their concession as to the enforceability of paragraph 2, Section 10,
Article XII of the Constitution without enabling legislation was in a situation wherein if the bids of the Filipino and the foreign entity were tied.
Id. at 154 (J. Puno, dissenting) and 154 (J. Panganiban, dissenting).
49.Id. at 102 citing 16 AM JUR. 2d 281.
50.Id. at 103104 citing 16 AM JUR 2d 283284.
51.II RECORD OF THE CONSTITUTIONAL COMMISSION: PROCEEDINGS AND DEBATES 613.
52.Id. at 617.
53.Id. at 626.
54.Id. at 644.
55.The test suggested by Justice Puno in the Manila Hotel case, supra note 47, is as definitive as any proposed method of analysis could ever be. "A
searching inquiry should be made to find out if the provision is intended as a present enactment, complete in itself as a definitive law, or if it
needs future legislation for completion and enforcement. The inquiry demands a micro-analysis and the context of the provision in
question." J. Puno, dissenting, id. at 141142. See also Rev. Pamatong v. COMELEC, G.R. No. 161872, 13 April 2004.
56.J. BERNAS, THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES: A COMMENTARY (1996), at 1064.
57.Article 3, Chapter I of the Labor Code declares:
Declaration of basic policy. The State shall afford full protection to labor, promote full employment, ensure equal work opportunities regardless of
sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to selforganization, collective bargaining, security of tenure and just and humane conditions of work.
58.See Phil. Aeolus Automotive United Corp. v. NLRC, 387 Phil 250 (2000); Gonzales v. National Labor Relations Commission, 372 Phil 39 (1999);
Jardine Davies v. National Labor Relations Commission, 370 Phil 310 (1999); Pearl S. Buck Foundation v. National Labor Relations
Commission, G.R. No. 80728, February 21, 1990, 182 SCRA 446; Bagong Bayan Corporation, Realty Investors & Developers v. National
Labor Relations Commission, G.R. No. 61272, September 29, 1989, 178 SCRA 107; Labajo v. Alejandro, et al., G.R. No. L-80383,
September 26, 1988, 165 SCRA 747; D.M. Consunji, Inc. v. Pucan, et al., G.R. No. L-71413, March 21, 1988; 159 SCRA 107; Santos v.
National Labor Relations Commission, G.R. No. L-76271, September 21, 1987, 154 SCRA 166; People's Bank & Trust Co. v. People's
Bank & Trust Co. Employees Union, 161 Phil 15 (1976); Philippine Movie Pictures Association v. Premiere Productions, 92 Phil. 843 (1953);
Phil. Refining Co. v. Garcia, supra.
59.Serrano v. NLRC, supra note 1.
60.Section 2, Rule XXIII, Book V, OMNIBUS RULES IMPLEMENTING THE LABOR CODE.
61.Supra note 2.
62.Serrano v. NLRC, supra note 1 at 445.
63.G.R. No. 80587, 8 February 1989, 170 SCRA 69.
64.Serrano, supra note 1 at 453.
65.Serrano, supra note 1 at 485; J. Vitug, separate concurring and dissenting.
66.Balaquezon EWTU v. Zamora, G.R. No. L-46766-7, 1 April 1980, 97 SCRA 5, 8.
67.". . . without prejudice, however, to whatever rights, benefits, and privileges he may have under the applicable individual or collective bargaining
agreement with the employer or voluntary employer policy or practice". Section 7, Rule 1, Book VI, Omnibus Rules Implementing the Labor
Code.
68.See Philippine Rabbit Bus Lines, Inc. v. NLRC, G.R. No. 98137, 15 September 1997, 279 SCRA 106, 115, citing cases.
69.Aguila v. CFI, G.R. No. L-48335, 15 April 1988, 160 SCRA 352, 360. "For all its conceded merits, equity is available only in the absence of law and
not as its replacement. Equity is described as justice outside legality, which simply means that it cannot supplant although it may, as often
happens, supplement the law." Id.
70.170 SCRA 69 (1989).
71.G.R. No. 112100, May 27, 1994, 232 SCRA 613.
72.BLACK'S LAW DICTIONARY, 1990 ed., p. 1133; citing Hidden Hollow Ranch v. Collins, 146 Mont. 321, 406 P.2d 365, 368.
73.170 SCRA 69 (1989).
74.Serrano v. NLRC, supra note 1 at 442.
75.See e.g., Reta v. NLRC, G.R. No. 112100, 27 May 1994, 232 SCRA 613, wherein the Court held that "private respondents should pay petitioner
P10,000.00 as penalty for failure to comply with the due process requirement." Id. at 618.
76.A. TOLENTINO, CIVIL CODE OF THE PHILIPPINES (1990 ed.), at 11; citing 9 Fabres 10.
77.Article 2221, Civil Code.

78.Ferrer v. NLRC, G.R. No. 100898, 5 July 1993; citing Callanta vs. Carnation Philippines, Inc., 145 SCRA 268.
79.347 Phil. 521, 531 (1997).
80.Id. at 531.
81.Id.
82.G.R. No. 121927, 22 April 1998.
83.G.R. No. 121698, 26 March 1998. The ponente in all three cases was Justice Flerida Ruth Romero.
84.See Article 2216, Civil Code. See also Saludo v. Court of Appeals, G.R. No. 95536, 23 March 1992.
85.In relation to Article 2224 of the Civil Code, nominal damages are less than temperate/moderate damages or compensatory damages.
86.See De la Paz, Jr. v. IAC, 154 SCRA 65; Chavez v. Gonzales, 32 SCRA 547.
87.See Art. 2199, Civil Code.
88.Art. 2225, Civil Code.
89.Page 16, Decision, citing jurisprudence.

||| (Agabon v. NLRC, G.R. No. 158693, November 17, 2004)

SECOND DIVISION
[G.R. No. 162994. September 17, 2004.]
DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs. GLAXO WELLCOME
PHILIPPINES, INC., respondent.
RESOLUTION
TINGA, J p:
Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company
prohibiting its employees from marrying employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision 1 dated May 19, 2003 and the Resolution dated March 26, 2004 of the Court of Appeals
in CA-G.R. SP No. 62434. 2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995,
after Tecson had undergone training and orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to
disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies
and should management find that such relationship poses a possible conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by
consanguinity or affinity with co-employees or employees of competing drug companies. If management perceives a conflict of interest or a potential
conflict between such relationship and the employees employment with the company, the management and the employee will explore the possibility of a
transfer to another department in a non-counterchecking position or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales area. SHADcT
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals 3 (Astra), a competitor of Glaxo. Bettsy
was Astras Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing
strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with
Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons superiors reminded him that he
and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible
because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He
explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy
package to be offered by Astra. With Bettsys separation from her company, the potential conflict of interest would be eliminated. At the same time, they
would be able to avail of the attractive redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxos milk division,
thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of Glaxos
least-movement-possible policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision,
but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Glaxo, however, remained firm in
its decision and gave Tecson until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical
representative in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with
similar products manufactured by Astra. He was also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson
a separation pay of one-half () month pay for every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the
National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships between its employees and
persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision. EHSTcC
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering
its Decision. The appellate court held that Glaxos policy prohibiting its employees from having personal relationships with employees of competitor
companies is a valid exercise of its management prerogatives. 4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied by the appellate court in its Resolution dated
March 26, 2004. 5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMBs finding that the Glaxos policy prohibiting
its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was
constructively dismissed when he was transferred to a new sales territory, and deprived of the opportunity to attend products seminars and training
sessions. 6
Petitioners contend that Glaxos policy against employees marrying employees of competitor companies violates the equal protection clause of the
Constitution because it creates invalid distinctions among employees on account only of marriage. They claim that the policy restricts the employees
right to marry. 7
They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines SurCamarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars

and training sessions for medical representatives, and (4) he was prohibited from promoting respondents products which were competing with Astras
products. 8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an
employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that
Tecsons reassignment from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City and Agusan del Sur sales area does not
amount to constructive dismissal. 9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees
avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having
personal or family interests in any competitor company which may influence their actions and decisions and consequently deprive Glaxo of legitimate
profits. The policy is also aimed at preventing a competitor company from gaining access to its secrets, procedures and policies. 10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor
companies, and is therefore not violative of the equal protection clause. It maintains that considering the nature of its business, the prohibition is based
on valid grounds. 11
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astras products were in direct
competition with 67% of the products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case was a valid exercise of its
management prerogatives. 12 In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask
his wife to resign from Astra instead. 13
Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was
aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds that his relationship
with an employee of a competitor company would be detrimental to the interests of Glaxo. 14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars regarding respondents new products did not
amount to constructive dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur-Camarines Norte sales area to the Butuan City-Surigao
City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since Tecsons
hometown was in Agusan del Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City
sales area would be favorable to him and his family as he would be relocating to a familiar territory and minimizing his travel expenses. 15

In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma drug was due to the fact that said product was in
direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in
Tecsons receipt of his sales paraphernalia was due to the mix-up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was
delivered to his new sales area instead of Naga City because the supplier thought he already transferred to Butuan). 16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxos policy against its employees marrying
employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether
Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners provides: ScaEIT
xxx xxx xxx
10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with
co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management
discretion, you agree to resign voluntarily from the Company as a matter of Company policy.
xxx xxx xxx 17
The same contract also stipulates that Tecson agrees to abide by the existing company rules of Glaxo, and to study and become acquainted with such
policies. 18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they
owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses
which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo
Wellcome of legitimate profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside
personal interests, that of their relatives, friends and other businesses.
c. To avoid outside employment or other interests for income which would impair their effective job performance.
d. To consult with Management on such activities or relationships that may lead to conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity with co-employees of competing drug companies
are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest,
every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by
transfer to another department in a non-counter checking position, or by career preparation toward outside employment after
Glaxo Wellcome. Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible. 19

No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy prohibiting an employee from having a relationship with an
employee of a competitor company is a valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from
competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is reasonable under the
circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo
only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to
adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth. 20 Indeed, while our laws
endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in
favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.
21
As held in a Georgia, U.S.A case, 22 it is a legitimate business practice to guard business confidentiality and protect a competitive position by evenhandedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an
employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964.
23 The Court pointed out that the policy was applied to men and women equally, and noted that the employers business was highly competitive and that
gaining inside information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled
principle that the commands of the equal protection clause are addressed only to the state or those acting under color of its authority. 24 Corollarily, it
has been held in a long array of U.S. Supreme Court decisions that the equal protection clause erects no shield against merely private conduct,
however, discriminatory or wrongful. 25 The only exception occurs when the state 26 in any of its manifestations or actions has been found to have
become entwined or involved in the wrongful private conduct. 27 Obviously, however, the exception is not present in this case. Significantly, the
company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made
in an impartial and even-handed manner, with due regard for the lot of the employee. ITDHSE
In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute
prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and
marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may
arise out of such relationships. As succinctly explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or
her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an
employees personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit
and business success . . . 28
The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code of Conduct and of its
contracts with its employees, such as that signed by Tecson, was made known to him prior to his employment. Tecson, therefore, was aware of that
restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered
into a contract of employment with Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith.
29 He is therefore estopped from questioning said policy.
The Court finds no merit in petitioners contention that Tecson was constructively dismissed when he was transferred from the Camarines NorteCamarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar
on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an
involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or
diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. 30 None of these
conditions are present in the instant case. The record does not show that Tecson was demoted or unduly discriminated upon by reason of such transfer.
As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in keeping with the policy of the company in
avoidance of conflict of interest, and thus valid . . . Note that [Tecsons] wife holds a sensitive supervisory position as Branch
Coordinator in her employer-company which requires her to work in close coordination with District Managers and Medical
Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering
relationship with customers, collection, monitoring and managing Astras inventory . . . she therefore takes an active participation
in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant,
petitioners sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in
Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible,
but actual, as learning by one spouse of the others market strategies in the region would be inevitable. [Managements]
appreciation of a conflict of interest is therefore not merely illusory and wanting in factual basis . . . 31

In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, 32 which involved a complaint filed by a medical representative against his
employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the
Court upheld the right of the drug company to transfer or reassign its employee in accordance with its operational demands and requirements. The ruling
of the Court therein, quoted hereunder, also finds application in the instant case: STaCcA
By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate
reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products
is great. More so if such reassignments are part of the employment contract. 33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the
record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their
relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly reminded him about its effects on his employment with the company
and on the companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking
his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that

he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest.
When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that
handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home
province, Agusan del Sur, was included. In effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the foregoing
dispels any suspicion of unfairness and bad faith on the part of Glaxo. 34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
Austria-Martinez and Callejo, Sr., JJ ., concur.
Puno, J ., concurs in the result.
Chico-Nazario, J ., is on leave.
Footnotes
1.Penned by Associate Justice Rosmari D. Carandang and concurred in by Justices Conrado M. Vasquez, Jr. and Mercedes Gozo-Dadole. Rollo, pp.
22-32.
2.Duncan Association of Detailman-PTGWO and Pedro A. Tecson, petitioners, v. Glaxo Wellcome Philippines, Inc., respondent.
3.Now Astra Zeneca Pharmaceuticals, Inc.
4.Rollo, pp. 28-32.
5.Id. at 55.
6.Id. at 9.
7.Id. at 9-11.
8.Id. at 14-17.
9.Id. at 96-112.
10.Id. at 99-100.
11.Id. at 101-102.
12.Id. at 102-103.
13.Id. at 102-104.
14.Id. at 104-105.
15.Id. at 64.
16.Id. at 106-110.
17.See Decision of the Court of Appeals; Rollo, pp. 23-24.
18.Item No. 6 of Tecsons employment contract cited by the Court of Appeals in its Decision, Id.
19.Excerpt of Glaxos Employee Handbook, Annex A of respondents Comment, Id. at 114.
20.Section 3, Article XIII of the Constitution provides:
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and
the right of enterprises to reasonable returns on investments, and to expansion and growth.
21.Sta. Catalina College v. National Labor Relations Commission, G.R. No. 144483, November 19, 2003.
22.Emory v. Georgia Hospital Service Association (1971), DC Ga., 4 CCH EPD 7785, 4 BNA FEP Cas 891, affd (CA5) 446 F2d 897, 4 CCH EPD
7786; Cited 45 Am Jr 2d Sec. 469.
23.42 USCS 2000e2002e17. Title VII prohibits certain employers, employment agencies, labor organizations, and joint labor-management
training committees from discriminating against applicants and employees on the basis of race or color, religion, sex, national origin, or
opposition to discriminatory practices.
There is no similar legislation in the Philippines.
24.Avery v. Midland County, 390 US 474, 20 L. Ed 2d 45, 88 S Ct 1114, on remand (Tex) 430 SW2d 487; Cooper v. Aaron, 358 US 1, 3 L Ed 2d 5, 78
S Ct 1401.
25.District of Columbia v. Carter, 409 US 418, 34 L.Ed.2d 613, 93 S. Ct. 602, 35 L.Ed.2d 694, 93 S. Ct. 1411; Moose Lodge No. 107 v. Irvis, 407 US
163, 32 L.Ed.2d 627, 92 S. Ct. 1965; United States v. Price, 383 US 787, 16 L.Ed. 2d 267, 86 S. Ct. 1152; Burton v. Wilmington Parking
Authority, 365 US 715, 6 L.Ed.2d 45, 81 S. Ct. 856; Shelley v. Kraemer, 334 US 1, 92 L.Ed.1161, 68 S. Ct. 836, 3 ALR2d 441; United
States v. Classic, 313 US 299, 85 L.Ed 1368, 61 S. Ct. 1031, 86 L.Ed 565, 62 S. Ct. 51; Nixon v. Condon, 286 US 73, 76 L.Ed. 984, 52 S.
Ct. 484, 88 ALR 458; Iowa-Des Moines Nat. Bank v. Bennet, 284 US 239, 76 L.Ed 265, 52 S. Ct. 133; Corrigan v. Buckley, 271 US 323, 70
L.Ed. 969, 46 S. Ct. 521; U.S. Adickes v. S. H. Kress & Co., N.Y., 90 S. Ct. 1598, 398 U.S. 144, 26 L. Ed. 2d 142.
26.The equal protection clause contained in the Fourteenth Amendment of the U.S. Constitution is a restriction on the state governments and
operates exclusively upon them. It does not extend to authority exercised by the Government of the United States. 16 A Am Jur 2d 742.
27.Gilmore v. Montgomery, 417 US 556, 41 L Ed 2d 304, 94 S Ct 2416; Evans v. Newton, 382 US 296, 15 L Ed 2d 373, 86 S Ct 486; Anderson v.
Martin, 375 US 399, 11 L Ed 2d 430, 84 S Ct 454; Peterson v. Greenville, 373 US 244, 10 L Ed 2d 323, 83 S Ct 1119; Burton v. Wilmington
Parking Authority, supra note 25.

28.Decision of the Court of Appeals, Rollo, p. 28.

29.Article 1159, Civil Code. See National Sugar Trading and/or the Sugar Regulatory Administration v. Philippine National Bank, G.R. No. 151218,
January 18, 2003, 396 SCRA 528; Pilipinas Hino, Inc. v. Court of Appeals, G.R. No. 126570, August 18, 2000, 338 SCRA 355.
30.Leonardo v. National Labor Relations Commission, et al., G.R. Nos. 125303, and 126937, June 16, 2000, 333 SCRA 589.
31.Rollo, pp. 30-31.
32.G.R. No. L-76959, October 12, 1987, 154 SCRA 713.
33.Id. at 719.
34.Decision of the Court of Appeals, Rollo, pp. 24-27.

||| (Duncan Ass'n of Detailman-PTGWO v. Glaxo Wellcome Phil., G.R. No. 162994, September 17, 2004)

THIRD DIVISION
[G.R. No. 168081. October 17, 2008.]
ARMANDO G. YRASUEGUI, petitioner, vs. PHILIPPINE AIRLINES, INC., respondent.
DECISION
REYES, R.T., J p:
THIS case portrays the peculiar story of an international flight steward who was dismissed because of his failure to adhere to the weight standards of the
airline company. CacTSI
He is now before this Court via a petition for review on certiorari claiming that he was illegally dismissed. To buttress his stance, he argues that (1) his
dismissal does not fall under 282 (e) of the Labor Code; (2) continuing adherence to the weight standards of the company is not a bona fide occupational
qualification; and (3) he was discriminated against because other overweight employees were promoted instead of being disciplined.
After a meticulous consideration of all arguments pro and con, We uphold the legality of dismissal. Separation pay, however, should be awarded in favor
of the employee as an act of social justice or based on equity. This is so because his dismissal is not for serious misconduct. Neither is it reflective of his
moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight inches (5'8")
with a large body frame. The proper weight for a man of his height and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds, as
mandated by the Cabin and Crew Administration Manual 1 of PAL. cIADTC
The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an extended vacation leave from December 29, 1984 to
March 4, 1985 to address his weight concerns. Apparently, petitioner failed to meet the company's weight standards, prompting another leave without
pay from March 5, 1985 to November 1985.
After meeting the required weight, petitioner was allowed to return to work. But petitioner's weight problem recurred. He again went on leave without pay
from October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with company policy, he was removed from flight duty
effective May 6, 1989 to July 3, 1989. He was formally requested to trim down to his ideal weight and report for weight checks on several dates. He was
also told that he may avail of the services of the company physician should he wish to do so. He was advised that his case will be evaluated on July 3,
1989. 2
On February 25, 1989, petitioner underwent weight check. It was discovered that he gained, instead of losing, weight. He was overweight at 215 pounds,
which is 49 pounds beyond the limit. Consequently, his off-duty status was retained. DcCHTa
On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his residence to check on the progress of his effort to lose
weight. Petitioner weighed 217 pounds, gaining 2 pounds from his previous weight. After the visit, petitioner made a commitment 3 to reduce weight in a
letter addressed to Cabin Crew Group Manager Augusto Barrios. The letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a weight loss from 217 pounds to 200 pounds from today until 31 Dec. 1989.
AaSHED
From thereon, I promise to continue reducing at a reasonable percentage until such time that my ideal weight is achieved.
Likewise, I promise to personally report to your office at the designated time schedule you will set for my weight check.
Respectfully Yours,
F/S Armando Yrasuegui 4
Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained overweight. On January 3, 1990, he was informed of the
PAL decision for him to remain grounded until such time that he satisfactorily complies with the weight standards. Again, he was directed to report every
two weeks for weight checks. SEcAIC
Petitioner failed to report for weight checks. Despite that, he was given one more month to comply with the weight requirement. As usual, he was asked
to report for weight check on different dates. He was reminded that his grounding would continue pending satisfactory compliance with the weight
standards. 5
Again, petitioner failed to report for weight checks, although he was seen submitting his passport for processing at the PAL Staff Service Division.
On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check would be dealt with accordingly. He was given
another set of weight check dates. 6 Again, petitioner ignored the directive and did not report for weight checks. On June 26, 1990, petitioner was
required to explain his refusal to undergo weight checks. 7
When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still way over his ideal weight of 166 pounds. EaScHT
From then on, nothing was heard from petitioner until he followed up his case requesting for leniency on the latter part of 1992. He weighed at 219
pounds on August 20, 1992 and 205 pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of Administrative Charge for violation of company standards on weight requirements. He
was given ten (10) days from receipt of the charge within which to file his answer and submit controverting evidence. 8
On December 7, 1992, petitioner submitted his Answer. 9 Notably, he did not deny being overweight. What he claimed, instead, is that his violation, if
any, had already been condoned by PAL since "no action has been taken by the company" regarding his case "since 1988". He also claimed that PAL
discriminated against him because "the company has not been fair in treating the cabin crew members who are similarly situated". TcCDIS
On December 8, 1992, a clarificatory hearing was held where petitioner manifested that he was undergoing a weight reduction program to lose at least
two (2) pounds per week so as to attain his ideal weight. 10

On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal weight, "and considering the utmost leniency"
extended to him "which spanned a period covering a total of almost five (5) years", his services were considered terminated "effective immediately". 11
His motion for reconsideration having been denied, 12 petitioner filed a complaint for illegal dismissal against PAL. HcSCED
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled 13 that petitioner was illegally dismissed. The dispositive part of the Arbiter ruling runs as
follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, declaring the complainant's dismissal illegal, and ordering
the respondent to reinstate him to his former position or substantially equivalent one, and to pay him:
a. Backwages of Php10,500.00 per month from his dismissal on June 15, 1993 until reinstated, which for purposes of appeal is
hereby set from June 15, 1993 up to August 15, 1998 at P651,000.00; ITDHcA
b. Attorney's fees of five percent (5%) of the total award.
SO ORDERED. 14
The Labor Arbiter held that the weight standards of PAL are reasonable in view of the nature of the job of petitioner. 15 However, the weight standards
need not be complied with under pain of dismissal since his weight did not hamper the performance of his duties. 16 Assuming that it did, petitioner
could be transferred to other positions where his weight would not be a negative factor. 17 Notably, other overweight employees, i.e., Mr. Palacios, Mr.
Cui, and Mr. Barrios, were promoted instead of being disciplined. 18
Both parties appealed to the National Labor Relations Commission (NLRC). 19
On October 8, 1999, the Labor Arbiter issued a writ of execution directing the reinstatement of petitioner without loss of seniority rights and other
benefits. 20
On February 1, 2000, the Labor Arbiter denied 21 the Motion to Quash Writ of Execution 22 of PAL. HCEaDI
On March 6, 2000, PAL appealed the denial of its motion to quash to the NLRC. 23
On June 23, 2000, the NLRC rendered judgment 24 in the following tenor:
WHEREFORE, premises considered[,] the Decision of the Arbiter dated 18 November 1998 as modified by our findings herein, is
hereby AFFIRMED and that part of the dispositive portion of said decision concerning complainant's entitlement to backwages
shall be deemed to refer to complainant's entitlement to his full backwages, inclusive of allowances and to his other benefits or
their monetary equivalent instead of simply backwages, from date of dismissal until his actual reinstatement or finality hereof.
Respondent is enjoined to manifests (sic) its choice of the form of the reinstatement of complainant, whether physical or through
payroll within ten (10) days from notice failing which, the same shall be deemed as complainant's reinstatement through payroll
and execution in case of non-payment shall accordingly be issued by the Arbiter. Both appeals of respondent thus, are
DISMISSED for utter lack of merit. 25
According to the NLRC, "obesity, or the tendency to gain weight uncontrollably regardless of the amount of food intake, is a disease in itself". 26 As a
consequence, there can be no intentional defiance or serious misconduct by petitioner to the lawful order of PAL for him to lose weight. 27
Like the Labor Arbiter, the NLRC found the weight standards of PAL to be reasonable. However, it found as unnecessary the Labor Arbiter holding that
petitioner was not remiss in the performance of his duties as flight steward despite being overweight. According to the NLRC, the Labor Arbiter should
have limited himself to the issue of whether the failure of petitioner to attain his ideal weight constituted willful defiance of the weight standards of PAL.
28

PAL moved for reconsideration to no avail. 29 Thus, PAL elevated the matter to the Court of Appeals (CA) via a petition for certiorari under Rule 65 of
the 1997 Rules of Civil Procedure. 30
By Decision dated August 31, 2004, the CA reversed 31 the NLRC:
WHEREFORE, premises considered, we hereby GRANT the petition. The assailed NLRC decision is declared NULL and VOID
and is hereby SET ASIDE. The private respondent's complaint is hereby DISMISSED. No costs. caITAC
SO ORDERED. 32
The CA opined that there was grave abuse of discretion on the part of the NLRC because it "looked at wrong and irrelevant considerations" 33 in
evaluating the evidence of the parties. Contrary to the NLRC ruling, the weight standards of PAL are meant to be a continuing qualification for an
employee's position. 34 The failure to adhere to the weight standards is an analogous cause for the dismissal of an employee under Article 282 (e) of
the Labor Code in relation to Article 282 (a). It is not willful disobedience as the NLRC seemed to suggest. 35 Said the CA, "the element of willfulness
that the NLRC decision cites is an irrelevant consideration in arriving at a conclusion on whether the dismissal is legally proper". 36 In other words, "the
relevant question to ask is not one of willfulness but one of reasonableness of the standard and whether or not the employee qualifies or continues to
qualify under this standard". 37
Just like the Labor Arbiter and the NLRC, the CA held that the weight standards of PAL are reasonable. 38 Thus, petitioner was legally dismissed
because he repeatedly failed to meet the prescribed weight standards. 39 It is obvious that the issue of discrimination was only invoked by petitioner for
purposes of escaping the result of his dismissal for being overweight. 40
On May 10, 2005, the CA denied petitioner's motion for reconsideration. 41 Elaborating on its earlier ruling, the CA held that the weight standards of PAL
are a bona fide occupational qualification which, in case of violation, "justifies an employee's separation from the service". 42
Issues
In this Rule 45 petition for review, the following issues are posed for resolution:
I.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER'S OBESITY CAN BE A
GROUND FOR DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER'S DISMISSAL FOR
OBESITY CAN BE PREDICATED ON THE "BONA FIDE OCCUPATIONAL QUALIFICATION (BFOQ) DEFENSE";
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER WAS NOT UNDULY
DISCRIMINATED AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT CABIN ATTENDANTS WERE
EITHER GIVEN FLYING DUTIES OR PROMOTED;
IV.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT BRUSHED ASIDE PETITIONER'S CLAIMS FOR
REINSTATEMENT [AND] WAGES ALLEGEDLY FOR BEING MOOT AND ACADEMIC. 43 (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article 282 (e) 44 of the Labor Code.
A reading of the weight standards of PAL would lead to no other conclusion than that they constitute a continuing qualification of an employee in order to
keep the job. Tersely put, an employee may be dismissed the moment he is unable to comply with his ideal weight as prescribed by the weight
standards. The dismissal of the employee would thus fall under Article 282 (e) of the Labor Code. As explained by the CA:
. . . [T]he standards violated in this case were not mere "orders" of the employer; they were the "prescribed weights" that a cabin
crew must maintain in order to qualify for and keep his or her position in the company. In other words, they were standards
that establish continuing qualifications for an employee's position. In this sense, the failure to maintain these standards does
not fall under Article 282 (a) whose express terms require the element of willfulness in order to be a ground for dismissal. The
failure to meet the employer's qualifying standards is in fact a ground that does not squarely fall under grounds (a) to (d) and is
therefore one that falls under Article 282(e) the "other causes analogous to the foregoing". TAIDHa
By its nature, these "qualifying standards" are norms that apply prior to and after an employee is hired. They apply prior to
employment because these are the standards a job applicant must initially meet in order to be hired. They apply after hiring
because an employee must continue to meet these standards while on the job in order to keep his job. Under this perspective, a
violation is not one of the faults for which an employee can be dismissed pursuant to pars. (a) to (d) of Article 282; the employee
can be dismissed simply because he no longer "qualifies" for his job irrespective of whether or not the failure to qualify was willful
or intentional. . . . 45
Petitioner, though, advances a very interesting argument. He claims that obesity is a "physical abnormality and/or illness". 46 Relying on Nadura v.
Benguet Consolidated, Inc., 47 he says his dismissal is illegal:
Conscious of the fact that Nadura's case cannot be made to fall squarely within the specific causes enumerated in subparagraphs
1(a) to (e), Benguet invokes the provisions of subparagraph 1(f) and says that Nadura's illness occasional attacks of asthma
is a cause analogous to them. IASCTD
Even a cursory reading of the legal provision under consideration is sufficient to convince anyone that, as the trial court said,
"illness cannot be included as an analogous cause by any stretch of imagination".
It is clear that, except the just cause mentioned in sub-paragraph 1(a), all the others expressly enumerated in the law are due to
the voluntary and/or willful act of the employee. How Nadura's illness could be considered as "analogous" to any of them is
beyond our understanding, there being no claim or pretense that the same was contracted through his own voluntary act. 48
The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the case at bar. First, Nadura was not decided under
the Labor Code. The law applied in that case was Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the rationale
there cannot apply here. Third, in Nadura, the employee who was a miner, was laid off from work because of illness, i.e., asthma. Here, petitioner was
dismissed for his failure to meet the weight standards of PAL. He was not dismissed due to illness. Fourth, the issue in Nadura is whether or not the
dismissed employee is entitled to separation pay and damages. Here, the issue centers on the propriety of the dismissal of petitioner for his failure to
meet the weight standards of PAL. Fifth, in Nadura, the employee was not accorded due process. Here, petitioner was accorded utmost leniency. He
was given more than four (4) years to comply with the weight standards of PAL. STcaDI
In the case at bar, the evidence on record militates against petitioner's claims that obesity is a disease. That he was able to reduce his weight from 1984
to 1992 clearly shows that it is possible for him to lose weight given the proper attitude, determination, and self-discipline. Indeed, during the clarificatory
hearing on December 8, 1992, petitioner himself claimed that "[t]he issue is could I bring my weight down to ideal weight which is 172, then the answer
is yes. I can do it now". 49
True, petitioner claims that reducing weight is costing him "a lot of expenses". 50 However, petitioner has only himself to blame. He could have easily
availed the assistance of the company physician, per the advice of PAL. 51 He chose to ignore the suggestion. In fact, he repeatedly failed to report
when required to undergo weight checks, without offering a valid explanation. Thus, his fluctuating weight indicates absence of willpower rather than an
illness. EScHDA
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation and Hospitals, 52 decided by the United States Court of
Appeals (First Circuit). In that case, Cook worked from 1978 to 1980 and from 1981 to 1986 as an institutional attendant for the mentally retarded at the
Ladd Center that was being operated by respondent. She twice resigned voluntarily with an unblemished record. Even respondent admitted that her
performance met the Center's legitimate expectations. In 1988, Cook re-applied for a similar position. At that time, "she stood 5'2" tall and weighed over
320 pounds". Respondent claimed that the morbid obesity of plaintiff compromised her ability to evacuate patients in case of emergency and it also put
her at greater risk of serious diseases.
Cook contended that the action of respondent amounted to discrimination on the basis of a handicap. This was in direct violation of Section 504 (a) of
the Rehabilitation Act of 1973, 53 which incorporates the remedies contained in Title VI of the Civil Rights Act of 1964. Respondent claimed, however,
that morbid obesity could never constitute a handicap within the purview of the Rehabilitation Act. Among others, obesity is a mutable condition, thus
plaintiff could simply lose weight and rid herself of concomitant disability. cIHDaE

The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation Act and that respondent discriminated against Cook
based on "perceived" disability. The evidence included expert testimony that morbid obesity is a physiological disorder. It involves a dysfunction of both
the metabolic system and the neurological appetite suppressing signal system, which is capable of causing adverse effects within the
musculoskeletal, respiratory, and cardiovascular systems. Notably, the Court stated that "mutability is relevant only in determining the substantiality of
the limitation flowing from a given impairment", thus "mutability only precludes those conditions that an individual can easily and quickly reverse by
behavioral alteration".

Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the District of Rhode Island, Cook was sometime before
1978 "at least one hundred pounds more than what is considered appropriate of her height". According to the Circuit Judge, Cook weighed "over 320
pounds" in 1988. Clearly, that is not the case here. At his heaviest, petitioner was only less than 50 pounds over his ideal weight. CEDScA
In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight attendant, becomes an analogous cause under Article 282
(e) of the Labor Code that justifies his dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary. As the CA correctly
puts it, "[v]oluntariness basically means that the just cause is solely attributable to the employee without any external force influencing or controlling his
actions. This element runs through all just causes under Article 282, whether they be in the nature of a wrongful action or omission. Gross and habitual
neglect, a recognized just cause, is considered voluntary although it lacks the element of intent found in Article 282 (a), (c), and (d)." 54
II. The dismissal of petitioner can be predicated on the bona fide occupational qualification defense.
Employment in particular jobs may not be limited to persons of a particular sex, religion, or national origin unless the employer can show that sex,
religion, or national origin is an actual qualification for performing the job. The qualification is called a bona fide occupational qualification (BFOQ). 55 In
the United States, there are a few federal and many state job discrimination laws that contain an exception allowing an employer to engage in an
otherwise unlawful form of prohibited discrimination when the action is based on a BFOQ necessary to the normal operation of a business or enterprise.
56
Petitioner contends that BFOQ is a statutory defense. It does not exist if there is no statute providing for it. 57 Further, there is no existing BFOQ statute
that could justify his dismissal. 58
Both arguments must fail.
First, the Constitution, 59 the Labor Code, 60 and RA No. 7277 61 or the Magna Carta for Disabled Persons 62 contain provisions similar to BFOQ.
DcAaSI
Second, in British Columbia Public Service Employee Commission (BSPSERC) v. The British Columbia Government and Service Employee's Union
(BCGSEU), 63 the Supreme Court of Canada adopted the so-called "Meiorin Test" in determining whether an employment policy is justified. Under this
test, (1) the employer must show that it adopted the standard for a purpose rationally connected to the performance of the job; 64 (2) the employer must
establish that the standard is reasonably necessary 65 to the accomplishment of that work-related purpose; and (3) the employer must establish that the
standard is reasonably necessary in order to accomplish the legitimate work-related purpose. Similarly, in Star Paper Corporation v. Simbol, 66 this
Court held that in order to justify a BFOQ, the employer must prove that (1) the employment qualification is reasonably related to the essential operation
of the job involved; and (2) that there is factual basis for believing that all or substantially all persons meeting the qualification would be unable to
properly perform the duties of the job. 67
In short, the test of reasonableness of the company policy is used because it is parallel to BFOQ. 68 BFOQ is valid "provided it reflects an inherent
quality reasonably necessary for satisfactory job performance". 69
In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome Philippines, Inc., 70 the Court did not hesitate to pass upon the validity of a company
policy which prohibits its employees from marrying employees of a rival company. It was held that the company policy is reasonable considering that its
purpose is the protection of the interests of the company against possible competitor infiltration on its trade secrets and procedures. TASCDI
Verily, there is no merit to the argument that BFOQ cannot be applied if it has no supporting statute. Too, the Labor Arbiter, 71 NLRC, 72 and CA 73 are
one in holding that the weight standards of PAL are reasonable. A common carrier, from the nature of its business and for reasons of public policy, is
bound to observe extraordinary diligence for the safety of the passengers it transports. 74 It is bound to carry its passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. 75
The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold that the weight standards of PAL show its
effort to comply with the exacting obligations imposed upon it by law by virtue of being a common carrier. cSDHEC
The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In order to achieve this, it must necessarily
rely on its employees, most particularly the cabin flight deck crew who are on board the aircraft. The weight standards of PAL should be viewed as
imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew is flight safety. It cannot be gainsaid that cabin
attendants must maintain agility at all times in order to inspire passenger confidence on their ability to care for the passengers when something goes
wrong. It is not farfetched to say that airline companies, just like all common carriers, thrive due to public confidence on their safety records. People,
especially the riding public, expect no less than that airline companies transport their passengers to their respective destinations safely and soundly. A
lesser performance is unacceptable. aAEIHC
The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims and caprices of the passengers. The most important
activity of the cabin crew is to care for the safety of passengers and the evacuation of the aircraft when an emergency occurs. Passenger safety goes to
the core of the job of a cabin attendant. Truly, airlines need cabin attendants who have the necessary strength to open emergency doors, the agility to
attend to passengers in cramped working conditions, and the stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important factors to consider in case of emergency. Aircrafts have constricted
cabin space, and narrow aisles and exit doors. Thus, the arguments of respondent that "[w]hether the airline's flight attendants are overweight or not has
no direct relation to its mission of transporting passengers to their destination"; and that the weight standards "has nothing to do with airworthiness of
respondent's airlines", must fail. DHaEAS
The rationale in Western Air Lines v. Criswell 76 relied upon by petitioner cannot apply to his case. What was involved there were two (2) airline pilots
who were denied reassignment as flight engineers upon reaching the age of 60, and a flight engineer who was forced to retire at age 60. They sued the
airline company, alleging that the age-60 retirement for flight engineers violated the Age Discrimination in Employment Act of 1967. Age-based BFOQ

and being overweight are not the same. The case of overweight cabin attendants is another matter. Given the cramped cabin space and narrow aisles
and emergency exit doors of the airplane, any overweight cabin attendant would certainly have difficulty navigating the cramped cabin area. ADSTCI
In short, there is no need to individually evaluate their ability to perform their task. That an obese cabin attendant occupies more space than a slim one is
an unquestionable fact which courts can judicially recognize without introduction of evidence. 77 It would also be absurd to require airline companies to
reconfigure the aircraft in order to widen the aisles and exit doors just to accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the possibility of impeding passengers from evacuating the aircraft, should the occasion call
for it. The job of a cabin attendant during emergencies is to speedily get the passengers out of the aircraft safely. Being overweight necessarily impedes
mobility. Indeed, in an emergency situation, seconds are what cabin attendants are dealing with, not minutes. Three lost seconds can translate into three
lost lives. Evacuation might slow down just because a wide-bodied cabin attendant is blocking the narrow aisles. These possibilities are not remote.
IcTCHD
Petitioner is also in estoppel. He does not dispute that the weight standards of PAL were made known to him prior to his employment. He is presumed to
know the weight limit that he must maintain at all times. 78 In fact, never did he question the authority of PAL when he was repeatedly asked to trim
down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that what is agreed upon shall be done. Kung ang tao ay tapat kanyang
tutuparin ang napagkasunduan.
Too, the weight standards of PAL provide for separate weight limitations based on height and body frame for both male and female cabin attendants. A
progressive discipline is imposed to allow non-compliant cabin attendants sufficient opportunity to meet the weight standards. Thus, the clear-cut rules
obviate any possibility for the commission of abuse or arbitrary action on the part of PAL. HcSaTI
III. Petitioner failed to substantiate his claim that he was discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a convenient excuse to discriminate against him. 79 We are constrained, however, to hold
otherwise. We agree with the CA that "[t]he element of discrimination came into play in this case as a secondary position for the private respondent in
order to escape the consequence of dismissal that being overweight entailed. It is a confession-and-avoidance position that impliedly admitted the cause
of dismissal, including the reasonableness of the applicable standard and the private respondent's failure to comply". 80 It is a basic rule in evidence that
each party must prove his affirmative allegation. 81

Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner has to prove his allegation with particularity. There is
nothing on the records which could support the finding of discriminatory treatment. Petitioner cannot establish discrimination by simply naming the
supposed cabin attendants who are allegedly similarly situated with him. Substantial proof must be shown as to how and why they are similarly situated
and the differential treatment petitioner got from PAL despite the similarity of his situation with other employees. ICHcaD
Indeed, except for pointing out the names of the supposed overweight cabin attendants, petitioner miserably failed to indicate their respective ideal
weights; weights over their ideal weights; the periods they were allowed to fly despite their being overweight; the particular flights assigned to them; the
discriminating treatment they got from PAL; and other relevant data that could have adequately established a case of discriminatory treatment by PAL. In
the words of the CA, "PAL really had no substantial case of discrimination to meet". 82
We are not unmindful that findings of facts of administrative agencies, like the Labor Arbiter and the NLRC, are accorded respect, even finality. 83 The
reason is simple: administrative agencies are experts in matters within their specific and specialized jurisdiction. 84 But the principle is not a hard and
fast rule. It only applies if the findings of facts are duly supported by substantial evidence. If it can be shown that administrative bodies grossly
misappreciated evidence of such nature so as to compel a conclusion to the contrary, their findings of facts must necessarily be reversed. Factual
findings of administrative agencies do not have infallibility and must be set aside when they fail the test of arbitrariness. 85
Here, the Labor Arbiter and the NLRC inexplicably misappreciated evidence. We thus annul their findings. HSIaAT
To make his claim more believable, petitioner invokes the equal protection clause guaranty 86 of the Constitution. However, in the absence of
governmental interference, the liberties guaranteed by the Constitution cannot be invoked. 87 Put differently, the Bill of Rights is not meant to be invoked
against acts of private individuals. 88 Indeed, the United States Supreme Court, in interpreting the Fourteenth Amendment, 89 which is the source of our
equal protection guarantee, is consistent in saying that the equal protection erects no shield against private conduct, however discriminatory or wrongful.
90 Private actions, no matter how egregious, cannot violate the equal protection guarantee. 91
IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for reinstatement and wages have not been mooted. He is entitled to reinstatement and his full
backwages, "from the time he was illegally dismissed" up to the time that the NLRC was reversed by the CA. 92
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect
is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under
the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in
the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein. ATaDHC
The law is very clear. Although an award or order of reinstatement is self-executory and does not require a writ of execution, 93 the option to exercise
actual reinstatement or payroll reinstatement belongs to the employer. It does not belong to the employee, to the labor tribunals, or even to the courts.
Contrary to the allegation of petitioner that PAL "did everything under the sun" to frustrate his "immediate return to his previous position", 94 there is
evidence that PAL opted to physically reinstate him to a substantially equivalent position in accordance with the order of the Labor Arbiter. 95 In fact,
petitioner duly received the return to work notice on February 23, 2001, as shown by his signature. 96
Petitioner cannot take refuge in the pronouncements of the Court in a case 97 that "[t]he unjustified refusal of the employer to reinstate the dismissed
employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite the issuance of a writ of execution"
98 and "even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the
wages of the employee during the period of appeal until reversal by the higher court". 99 He failed to prove that he complied with the return to work order
of PAL. Neither does it appear on record that he actually rendered services for PAL from the moment he was dismissed, in order to insist on the
payment of his full backwages. cTCEIS
In insisting that he be reinstated to his actual position despite being overweight, petitioner in effect wants to render the issues in the present case moot.
He asks PAL to comply with the impossible. Time and again, the Court ruled that the law does not exact compliance with the impossible. 100

V. Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.
Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced from the language of Article 279 of the Labor Code 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". Luckily for petitioner, this is not an ironclad rule. caTESD
Exceptionally, separation pay is granted to a legally dismissed employee as an act "social justice", 101 or based on "equity". 102 In both instances, it is
required that the dismissal (1) was not for serious misconduct; and (2) does not reflect on the moral character of the employee. 103
Here, We grant petitioner separation pay equivalent to one-half (1/2) month's pay for every year of service. 104 It should include regular allowances
which he might have been receiving. 105 We are not blind to the fact that he was not dismissed for any serious misconduct or to any act which would
reflect on his moral character. We also recognize that his employment with PAL lasted for more or less a decade. HIaTDS
WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui is entitled to
separation pay in an amount equivalent to one-half (1/2) month's pay for every year of service, which should include his regular allowances.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Chico-Nazario and Nachura, JJ., concur.

Footnotes

1.Rollo, p. 136; Annex "A" of Annex "G". HcSaTI

The Cabin Crew Administration Manual of PAL provides:
"C. A cabin crew one (1) to four (4) pounds over his/her weight maximum shall be given a verbal warning and a two (2)-week period in which to meet
weight standards.
1. A record of the verbal warning shall be maintained in the cabin crew's permanent file.
2. A cabin crew who fails to progress shall be given a written letter and an additional two (2)-week period to meet weight standards.
3. A cabin crew who fails to reach the prescribed weights standard as required shall be removed from schedule.
a. A cabin crew who has been removed from schedule shall report to his/her assigned Check Cabin Crew for a weight check every two (2) weeks and
will be required to lose two (2) pounds per week.
b. A cabin crew who fails to reach his/her required weight standard within a maximum period of ninety (90) days shall be terminated.
c. A cabin crew will return to active flight duty when he/she has reduced to his/her maximum weight requirement.
1. A cabin crew who returns to active flight duty after being removed from schedule and within the following three (3) months exceeds the maximum
weight standard will be removed from schedule until he/she reached his/her maximum allowable standard.
D. A cabin crew who is five (5) pounds or more over his/her weight maximum will be given a written letter and a two (2) week period to show
substantial weight reduction to meet standards. At the end of the initial two (2) weeks period, a cabin crew who has shown progress will
continue on weight check until he/she reached his/her maximum allowable standard.
1. Cabin crew who fails to show substantial weight reduction shall be removed from schedules.
a. Refer to letter C above for discipline guideline.
2. A cabin crew who is ten (10) pounds or more over his/her weight maximum shall be removed from schedule immediately."
MEN
HEIGHT SMALL FRAME MEDIUM FRAME LARGE FRAME
FEET inches w/o shoes
Five 7 128-137 134-147 142-161
8 132-141 138-152 147-166
9 136-145 142-156 151-170
10 140-150 146-160 155-174
11 144-154 150-165 159-179
Six 0 148-158 154-170 164-184
1 152-162 158-175 168-189
2 156-167 162-180 173-194
3 160-171 167-185 178-199
4 164-175 172-190 180-204
WOMEN
HEIGHT SMALL FRAME MEDIUM FRAME LARGE FRAME

FEET inches w/o shoes

Five 2 102-110 107-119 115-131
3 105-113 110-122 118-134
4 108-116 113-126 121-138
5 111-119 116-130 125-142
6 114-123 120-135 129-146
7 118-127 124-139 133-150
8 122-131 128-143 137-154
9 126-135 132-147 141-158
10 130-140 136-151 145-163
11 134-144 144-159 153-173
2.Annex "C" of Annex "G".

3.Annex "D" of Annex "G".

4.Rollo, p. 139.
5.Annex "E" of Annex "G".
6.Annex "F" of Annex "G".
7.Annex "G" of Annex "G".
8.Annex "H" of Annex "G".
9.Annex "J" of Annex "G".
10.Annex "K" of Annex "G". HIcTDE
11.Annex "M" of Annex "G".
12.Annex "N" of Annex "G".
13.Rollo, pp. 94-99; Annex "E". NLRC NCR Case No. 00-05-03078-96-A, promulgated on November 18, 1998.
14.Id. at 99.
15.Id. at 96.
16.Id. at 96-98.
17.Id. at 98.
18.Id.
19.Annexes "N" and "O".
20.Annex "Q". aAEHCI
21.Annex "U".
22.Annex "R".
23.Annex "V".
24.Rollo, pp. 76-88; Annex "C". NLRC NCR Case No. 019725-99, promulgated on June 23, 2000. Penned by Commissioner Alberto R. Quimpo and
concurred in by Commissioner Vicente S.E. Veloso.
25.Id. at 87-88.
26.Id. at 83.
27.Id.
28.Id. at 83-86.
29.Annex "E".
30.Annex "BB". DSCIEa
31.Rollo, 46-64; Annex "A". CA-G.R. SP No. 63027, promulgated on August 31, 2004. Penned by Associate Justice Arturo D. Brion (now a member of
this Court), with Associate Justices Delilah Vidallon-Magtolis and Eliezer R. De los Santos, concurring.
32.Id. at 64.
33.Id. at 60.
34.Id. at 61.
35.Id.

36.Id.
37.Id.
38.Id. at 62.
39.Id.
40.Id. aDcHIS
41.Annex "B".
42.Rollo, p. 70.
43.Id. at 659-660.
44.Termination by employer. An employer may terminate an employment for any of the following causes.
a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his 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 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 representatives; and
e) Other causes analogous to the foregoing.
45.Id. at 60-61.
46.Id. at 663.
47.G.R. No. L-17780, August 24, 1962, 5 SCRA 879.
48.Nadura v. Benguet Consolidated, Inc., id. at 881-882.
49.Rollo, p. 153.
50.Id. aSTcCE
51.Id. at 137.
52.10 F. 3d 17, 20 (Ist Cir. 1993).
53.(a) Promulgation of rules and regulations
No otherwise qualified individual with handicaps in the United States, as defined in section 706 (8) of this title, shall, solely by reason of her or his
handicap, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity
receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal
Service. The head of each such agency shall promulgate such regulations as may be necessary to carry out the amendments to this section
made by the Rehabilitation, Comprehensive Services, and Developmental Disabilities Act of 1978. Copies of any proposed regulation shall
be submitted to appropriate authorizing committees of the Congress, and such regulation may take effect no earlier than the thirtieth day
after the date on which such regulation is so submitted to such committees.
54.Id. at 71.
55.Black's Law Dictionary, 6th ed.
56.45A Am. Jur. 2d, Job Discrimination, 269.
57.Rollo, p. 669.
58.Id. at 670.
59.CONSTITUTION (1987), Art. XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall
also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. EHASaD
The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns to investments, and to expansion and growth.
60.ART. 3. Declaration of Basic Policy. The State shall afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers. The State shall assure the rights of workers to
self-organization, collective bargaining, security of tenure, and just and humane conditions of work.
61.Approved on March 24, 1992.
62.SEC. 32. Discrimination of Employment. No entity, whether public or private shall discriminate against a qualified disabled person by reason of
disability in regard to job application procedures, the hiring, promotion, or discharge of employees compensation, job training and other
terms, conditions and privileges of employment. The following constitute acts of discrimination:
a) Limiting, segregating or classifying a disabled job applicant in such a manner that adversely affects his work opportunities;

b) Using qualification standards, employment tests or other selection criteria that screen out or tend to screen out a disabled person unless such
standards, tests or other selection criteria are shown to be related for the position in question and are consistent with business necessity;
c) Utilizing standards, criteria, or methods of administration that:
1) have the effect of discrimination on the basis of disability; or
2) perpetuate the discrimination of others who are the subject to common administrative control.
d) Providing less compensation, such as salary, wage or other forms of remuneration and fringe benefits, to qualified disabled employee, by reason
of his disability, than the amount to which a non-disabled person performing the same work is entitled; aSTECA
e) Favoring a non-disabled employee over a qualified disabled employee with respect to promotion, training opportunities, study and scholarship
grants, solely on account of the latter's disability;
f) Re-assigning or transferring a disabled employee to a job or position he cannot perform by reason of his disability;
g) Dismissing or terminating the services of a disabled employee by reason of his disability unless the employer can prove that he impairs the
satisfactory performance of the work involved to the prejudice of the business entity; Provided, however, That the employer first sought to
provide reasonable accommodations for the disabled persons;
h) Failing to select or administer in the most effective manner employment tests which accurately reflect the skills, aptitude or other factor of the
disabled applicant or employee that such test purports to measure, rather than the impaired sensory, manual or speaking skills of such
applicant or employee, if any; and
i) Excluding disabled persons from membership in labor unions or similar organizations.
63.3 SCR 3 (1999).
64.The focus is not on the validity of the particular standard but rather on the validity of its more general purpose.
65.To show that the standard is reasonably necessary, it must be demonstrated that it is impossible to accommodate individual employees sharing
the characteristics of the claimant without imposing undue hardship on the employer.
66.G.R. No. 164774, April 12, 2006, 487 SCRA 228.
67.Star Paper Corporation v. Simbol, id. at 242-243, citing Flood, R.G. and Cahill, K.A., The River Bend Decision and How It Affects Municipalities'
Personnel Rule and Regulations (June 1993), Illinois Municipal Review, p. 7.
68.Id. at 243.
69.Philippine Telegraph and Telephone Company v. National Labor Relations Commission, G.R. No. 118978, May 23, 1997, 272 SCRA 596, 613.
70.G.R. No. 162994, September 17, 2004, 438 SCRA 343. ADcHES
71.Rollo, p. 96. "In light of the nature of complainant's function as a cabin flight crew member, the setting of weight standard by company policy finds
relevance, and in fact, reasonableness. But in judging what is reasonably set for a cabin crew member to comply should not be viewed in
isolation from its obvious ultimate objective, which is to maintain agility at all time while on flight, especially in time of emergencies, effect to
grooming merely secondary. . . ."
72.Id. at 84. "Observe that the reasonableness of the rule [i.e., the weight standards of PAL] was already established with his [i.e., the Labor Arbiter]
finding to which we agree that the aim thereof is to maintain their agility to as to assure the air safety of passengers, as well by his
finding of the parties unanimity in the correctness of the weight range that should be observed by complainant as prescribed in the rule. . . ."
73.Id. at 61-62. "While the private respondent disputes in his position paper the reasonableness of PAL's weight standards, the NLRC's assailed
decision finds the weight standard to be valid and reasonable. In our view, this is a fair and correct assessment as the weight limits are not
whimsical standards. They are standards put in place by an air carrier for reasons of safety in order to comply with the extraordinary
diligence in the care of passengers that the law exacts. . . ."
74.Civil Code, Art. 1733.
75.Id., Art. 1755. Thus, in case of death or injuries to passengers, a common carrier is presumed to have been at fault or to have acted negligently,
unless it proves that it observed extraordinary diligence. (Id., Art. 1756)
Not only that. The responsibility of a common carrier for the safety of passengers cannot be dispensed with or lessened by stipulation, by the posting
of notices, by statements on tickets, or otherwise. (Id., Art. 1757) So much so that when a passenger is carried gratuitously, a stipulation
limiting the liability for negligence of a common carrier is valid, but not for willful acts or gross negligence. (Id., Art. 1758) Even a reduction of
fare does not justify any limitation of the liability of the common carrier. (Id.)

The burden that the law imposes on a common does not stop there. A common carrier is liable for the death or injuries to passengers through the
negligence or willful acts of its employees. (Id., Art. 1759) This liability attaches although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common carrier. (Id.) Truly, the requirement of the law is very strict in that the
liability of a common carrier for the death of or injuries to passengers does not cease upon proof that it exercised all the diligence of a good
father of a family in the selection and supervision of its employees. (Id.) The liability of a common carrier cannot be eliminated or limited by
stipulation, by the posting of notices, by statements on the tickets or otherwise. (Id., Art. 1760) Although the passenger must observe the
diligence of a good father of a family to avoid injury to himself (id., Art. 1761), the contributory negligence of the passenger does not bar
recovery of damages for his death or injuries, if the proximate cause is the negligence of the common carrier. (Id., Art. 1762) In such case,
the amount of damages shall only be equitably reduced. (Id.) It does not totally excuse the common carrier. IDSaAH
Lastly, a common carrier is responsible for injuries suffered by a passenger on the account of the willful acts or negligence of the other passengers or
of strangers, if the employees of the common carrier through the exercise of the diligence of a good father of a family could have prevented
or stopped the act or omission. (Id., Art. 1763)
76.472 US 400 (1985).

77.RULES OF COURT, Rule 129, Sec. 2.

78.See Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc., G.R. No. 162994, September 17, 2004, 438 SCRA 343, 356.
79.Rollo, p. 673.
80.Id. at 63. aEHTSc
81.Jimenez v. National Labor Relations Commission, G.R. No. 116960, April 2, 1996, 256 SCRA 84, 89.
82.Rollo, p. 63.
83.Zarate, Jr. v. Olegario, G.R. No. 90655, October 7, 1996, 263 SCRA 1.
84.Id.
85.Philippine Airlines, Inc. v. National Labor Relations Commission, G.R. No. 117038, September 25, 1997, 279 SCRA 445.
86.CONSTITUTION (1987), Art. III, Sec. 1. "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."
87.People v. Marti, G.R. No. 81561, January 18, 1991, 193 SCRA 57, 65.
88.Id. at 67. The Court, in buttressing its ruling also cited the Sponsorship Speech of Commissioner Bernas in the Bill of Rights; Record of the
Constitutional Commission, Vol. 1, p. 674; July 17, 1986, viz.:
"First, the general reflections. The protection of the fundamental liberties in the essence of constitutional democracy. Protection against whom?
Protection against the state. The Bill of Rights governs the relationship between the individual and the state. Its concern is not the relation
between individuals, between a private individual and other individuals. What the Bill of Rights does is to declare some forbidden zones in
the private sphere inaccessible to any power holder."
89.United States Constitution, Fourteenth Amendment (ratified July 9, 1868), Sec. 1. "All persons born or naturalized in the United States, and subject
to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law
which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or
property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws."
90.16B Am. Jur. 2d, Constitutional Law, 799 citing District of Columbia v. Carter, 409 US 418, 93 S. Ct. 602, 34 L. Ed. 2d 613 (1973), reh'g denied,
410 US 959, 93 S. Ct. 1411, 35 L. Ed. 2d 694 (1973) and on remand to, 489 F. 2d 1272 (D.C. Cir. 1974); Moose Lodge No. 107 v. Irvis, 407
US 163, 92 S. Ct. 1965, 32 L. Ed. 2d 627 (1972); Equality Foundation of Greater Cincinnati, Inc. v. City of Cincinnati, 54 F. 3d 261, 67 Fair
Empl. Prac. Cas. (BNA) 1290, 66 Empl. Prac. Dec. (CCH) 43542, 1995 FED App. 147P (6th Cir. 1995), cert. granted, judgment vacated
on other grounds, 116 S. Ct. 2519, 135 L. Ed. 2d 1044, 71 Fair Empl. Prac. Cas. (BNA) 64 (US 1996), ON REMAND TO, 128 F. 3d 289, 75
Fair Empl. Prac. Cas. (BNA) 115, 1997 FED App. 318P (6th Cir. 1997); Gallagher v. Neil Young Freedom Concert, 49 F. 3d 1442, 98 Ed.
Law Rep. 639 (10th Cir. 1995); Mahoney v. Babbitt, 105 F. 3d 1452 (DC Cir. 1997), reh'g denied, 113 F. 3d 219 (DC Cir. 1997). TEcAHI
91.Id., citing Medical Institute of Minnesota v. National Ass'n of Trade and Technical Schools, 817 F. 2d 1310, 39 Ed. Law Rep. 62 (8th Cir. 1987);
First Nat. Bank of Kansas City v. Danforth, 523 S.W. 2d 808 (Mo. 1975), cert. denied, 421 US 992, 95 S. Ct. 1999, 44 L. Ed. 2d 483 (1975)
and cert. denied, 421 US 1016, 95 S. Ct. 2424, 44 L. Ed. 2d 685 (1975).
92.Rollo, p. 687.
93.Pioneer Texturizing Corporation v. National Labor Relations Commission, G.R. No. 118651, October 16, 1997, 280 SCRA 806.
94.Rollo, p. 684.
95.Id. at 648. Petitioner was informed that:
"In connection with our manifestation dated 25 January 2001 you are hereby directed to physically return to work effective 01 March 2001. You are to
report to the Office of the Vice-President-Airport Services.
Pending appeal you are going to be assigned to a 'substantially equivalent' position in accordance with the 18 November 1998 Decision of Labor
Arbiter Ramon Valentin Reyes as modified by the 23 June Resolution of the National Labor Relations Commission.
Failure on your part to heed this order may be a ground to administratively charge you in accordance with the Company Code of Discipline, policy,
rules and regulations.
CESAR B. LAMBERTE"
96.Id.
97.Roquero v. Philippine Airlines, Inc., G.R. No. 152329, April 22, 2003, 401 SCRA 424.
98.Id. at 430.
99.Id.
100.Pizza Inn/Consolidated Foods Corporation v. National Labor Relations Commission, G.R. No. L-74531, June 28, 1988, 162 SCRA 773; Philippine
Engineering Corporation v. Court of Industrial Relations, G.R. No. L-27880, September 30, 1971, 41 SCRA 89. cEHSIC
101.San Miguel Corporation v. Lao, 433 Phil. 890, 898 (2002); Philippine Long Distance Telephone Company v. National Labor Relations
Commission, G.R. No. L-80609, August 23, 1988, 164 SCRA 671, 682.
102.Aparente, Sr. v. National Labor Relations Commission, 387 Phil. 96, 107 (2000).
103.San Miguel Corporation v. Lao, supra at 898; Aparente, Sr. v. National Labor Relations Commission, id.; Philippine Long Distance Telephone
Company v. National Labor Relations Commission, supra at 682.
104.Aparente, Sr. v. National Labor Relations Commission, supra at 108.

105.Planters Products, Inc. v. National Labor Relations Commission, G.R. No. 78524, January 20, 1989, 169 SCRA 328; Insular Life Assurance Co.,
Ltd. v. National Labor Relations Commission, G.R. No. L-74191, December 21, 1987, 156 SCRA 740; Soriano v. National Labor Relations
Commission, G.R. No. L-75510, October 27, 1987, 155 SCRA 124. CDAcIT

||| (Yrasuegui v. PAL, Inc., G.R. No. 168081, October 17, 2008)

SECOND DIVISION
[G.R. No. 127553. November 28, 1997.]
EDDIE MANUEL, ROMEO BANA, ROGELIO PAGTAMA, JR. and JOEL REA, petitioners, vs. N.C. CONSTRUCTION SUPPLY,
JOHNNY LIM, ANITA SY and NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), respondents.
J.S. Torregoza & Associates Law Office for petitioners.
Ramon P. Reyes for private respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; REQUISITES OF A VALID DISMISSAL. An employer has a right to
terminate the services of an employee subject to both substantive and procedural limitations. This means that (1) the dismissal must be for a just or
authorized cause provided in the Labor Code, and (2) the employee must be accorded due process before his employment is terminated. The validity of
the dismissal hinges on the employer's compliance with these two requirements.
2. ID.; ID.; LOSS OF TRUST AND CONFIDENCE. In the case at bar, petitioners who were employed as drivers at respondent company were found
guilty of stealing company property consisting of electrical wire, welding rod, G.I. sheet, steel bar and plywood. Article 282 of the Labor Code authorizes
an employer to terminate the services of an employee for loss of trust and confidence, provided that the loss of confidence arises from particular proven
facts.
3. ID.; ID.; ID.; SUBSTANTIAL EVIDENCE IS SUFFICIENT IN TERMINATION CASES; PETITIONERS' CULPABILITY IN THE INSTANT CASE WAS
SUFFICIENTLY PROVED. The law does not require proof beyond reasonable doubt of the employee's misconduct. Substantial evidence is sufficient.
Substantial evidence has been defined as such relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Petitioners'
culpability in the instant case was sufficiently proved by private respondents. Jay Calso, an employee of respondent company who has personal
knowledge about the series of thefts that has been going on at respondent company, positively identified petitioners as among the perpetrators of the
theft. Petitioners have not shown any ill motive on the part of Calso to implicate them in the offense, unless it was true. In addition, petitioners admitted
their participation in the theft during an investigation conducted by private respondents' lawyer.
4. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHTS OF A PERSON UNDER CUSTODIAL INVESTIGATION; EXCLUSIONARY RULE; APPLIES
ONLY TO ADMISSIONS MADE IN A CRIMINAL INVESTIGATION BUT NOT TO THOSE MADE IN AN ADMINISTRATIVE INVESTIGATION. We
reject petitioners' argument that said admission is inadmissible as evidence against them under Section 12, Article III of the 1987 Constitution. The right
to counsel under Section 12 of the Bill of Rights is meant to protect a suspect in a criminal case under custodial investigation. Custodial investigation is
the stage where the police investigation is no longer a general inquiry into an unsolved crime but has begun to focus on a particular suspect who had
been taken into custody by the police to carry out a process of interrogation that lends itself to elicit incriminating statements. It is when questions are
initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way.
The right to counsel attaches only upon the start of such investigation. Therefore, the exclusionary rule under paragraph (3), Section 12 of the Bill of
Rights applies only to admissions made in a criminal investigation but not to those made in an administrative investigation.
5. ID.; ID.; ID.; ID.; ID.; PETITIONERS WERE NOT UNDER CUSTODIAL INVESTIGATION AS THEY WERE NOT YET ACCUSED BY THE POLICE
OF COMMITTING A CRIME; THE FACT THAT THE INVESTIGATION WAS CONDUCTED AT THE POLICE STATION DID NOT NECESSARILY PUT
PETITIONERS UNDER CUSTODIAL INVESTIGATION AS THE VENUE OF THE INVESTIGATION WAS MERELY INCIDENTAL. In the case at bar,
the admission was made by petitioners during the course of the investigation conducted by private respondents' counsel to determine whether there is
sufficient ground to terminate their employment. Petitioners were not under custodial investigation as they were not yet accused by the police of
committing a crime. The investigation was merely an administrative investigation conducted by the employer, not a criminal investigation. The questions
were propounded by the employer's lawyer, not by police officers. The fact that the investigation was conducted at the police station did not necessarily
put petitioners under custodial investigation as the venue of the investigation was merely incidental. Hence, the admissions made by petitioners during
such investigation may be used as evidence to justify their dismissal. IcHEaA
6. ID.; ID.; RIGHT TO DUE PROCESS; REQUIRED WRITTEN NOTICES BEFORE TERMINATION OF EMPLOYMENT BE VALIDLY EFFECTED; NOT
OBSERVED BY EMPLOYER IN CASE AT BAR; AS A CONSEQUENCE THEREOF, THE EMPLOYER MUST INDEMNIFY THE DISMISSED
EMPLOYEES. Private respondents failed to observe due process in terminating the employment of petitioners. Due process demands that the
employer should furnish the worker whose employment is sought to be terminated a written notice containing a statement of the cause(s) for termination
and afford him ample opportunity to be heard and to defend himself with the assistance of a representative if he so desires. Specifically, the employer
must furnish the worker with two written notices before termination of employment can be legally effected: (1) notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought, and (2) the subsequent notice which informs the employee of the employer's decision to
dismiss him. There is no showing in this case that private respondents furnished petitioners with such notices. Private respondents, through their
counsel, Atty. Reyes, immediately terminated petitioners' services upon conclusion of the investigation. Private respondents must therefore indemnify
petitioners for failure to observe due process before dismissing them from work. AaEcDS
DECISION
PUNO, J p:
This special civil action for certiorari seeks to review the decision of the National Labor Relations Commission (NLRC) dated June 27, 1996 in NLRCNCR-00-07-04925-95 entitled Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea v. N.C. Construction Supply, Johnny Lim and Anita Sy. 1
Petitioners Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea were employed as drivers at N.C. Construction Supply owned by private
respondents Johnny Lim (a.k.a. Lao Ching Eng) and Anita Sy. prLL
On June 3, 1995, the security guards of respondent company caught Aurelio Guevara, a company driver, and Jay Calso, his helper ("pahinante"), taking
out from the company premises two rolls of electrical wire worth P500.00 without authority. Calso was brought to the Pasig Police station for questioning.
During the investigation, Calso named seven other employees who were allegedly involved in a series of thefts at respondent company, among them
petitioners Manuel, Bana, Pagtama, Jr. and Rea. 2

On June 5, 1995, petitioners received separate notices from respondent company informing them that they were positively identified by their co-worker,
Jay Calso, as perpetrators of the series of thefts committed at respondent company. They were thus invited to the Pasig police station for investigation
regarding their alleged involvement in the offense.

Atty. Ramon Reyes, private respondents' counsel conducted in their behalf an investigation regarding petitioners' involvement in the theft. Atty. Reyes
interrogated the petitioners on their alleged participation in the series of thefts committed at respondent company. Petitioners initially denied the charge.
However, after being positively identified by Jay Calso, petitioners admitted their guilt and offered to resign in exchange for the withdrawal of any criminal
charge against them. 3 Petitioners Bana and Rea filed separate resignation letters while petitioners Manuel and Pagtama, Jr. tendered their resignations
orally. Petitioner Bana's resignation letter 4 reads:
Hunyo 6, 1995
Dear Bong,
Sa ganitong sitwasyon nagpapasalamat rin ako na humantong sa ganito para hindi na tumagal ang masama naming gawain. Piro
lubos rin ako nagpapasalamat sa iyong pagpapatawad sa akin, at ang masasabi ko lang na I'm very, very sorry na lang. Kasi
alam mo naman na kapos na kapos talaga ako. Kaya alam mo halos hindi na nga ako nag-a-absent dahil sa sahod ko lang kapos
pa sa pamilya ko. Kaya sana sa pag-resign ko sana mabigyan mo man lang ako nang kaunti para makapamasahi man lang pauwi sa Mindanao kasama ang mga anak ko. Yon lang. . .
Gumagalang,
Boy
Petitioner Rea's resignation letter, 5 on the other hand, states:
Hunyo 6, 1995
Boss,
Dahil sa hindi maganda ang aking naging performance sa inyo sa loob ng NC Construction Supply sa nakakahiya na aking
nasangkutan magreresign na ho ako, magsisimula Hunyo 6, 1995. Siguro naman Boss alam naman ninyo ang totoo nakikisama
lang ako sa mga dati ninyong tauhan dahil kailangan ko talaga ng trabaho kahit labag man sa aking kalooban ang gumawa ng
hindi maganda.
Boss, kahit paano sana maintindihan mo ako, tatanggalin nyo na ho ako sana bigyan nyo na lang ako ng kahit pamasahe namin
pauwing probinsya para makapagbagong buhay na ako.
Salamat po.
Sumasainyo,
Joel Rea
Atty. Reyes accepted petitioners' resignation effective June 5, 1995.
On July 17, 1995, petitioners filed a complaint against private respondents for illegal dismissal. Petitioners alleged that they were not informed of the
charge against them nor were they given an opportunity to dispute the same. They also alleged that their admission made at the Pasig police station
regarding their involvement in the theft as well as their resignation were not voluntary but were obtained by private respondents' lawyer by means of
threat and intimidation. dctai
Labor Arbiter Manuel R. Caday ruled in favor of petitioners and found their dismissal to be illegal. He held that private respondents failed to show a just
cause for the termination of petitioners' services. He declared that petitioners' admission regarding their involvement in the theft was inadmissible in
evidence as it was taken without the assistance of counsel, in violation of Section 12 Article III of the 1987 Constitution. 6 He also held that petitioners
were not afforded due process before their services were terminated. Hence, Labor Arbiter Caday ordered private respondents to reinstate petitioners to
their former position without loss of seniority rights and to pay them full backwages. He also ordered private respondents to pay petitioners their service
incentive leave benefits plus attorney's fees. 7
On appeal, the NLRC reversed the decision of the Labor Arbiter. It ruled that petitioners were dismissed for a just cause. It held that petitioners failed to
adduce competent evidence to show a vitiation of their admission regarding their participation in the theft. It further stated that such admission may be
admitted in evidence because Section 12 Article III of the 1987 Constitution applies only to criminal proceedings but not to administrative proceedings.
The NLRC, however, agreed with the Labor Arbiter that petitioners were denied due process. Hence, it ordered private respondents to pay petitioners
the amount of P1,000.00 as indemnity. The dispositive portion of the decision reads:
WHEREFORE, premises duly considered, the decision appealed from is hereby reversed and set aside. A new one is hereby
entered ordering respondents to pay to the complainants the amount of P1,000.00 each as and for indemnity for failure of the
respondents to observe due process.
SO ORDERED. 8
Petitioners filed the instant petition on the following grounds:
1. The National Labor Relations Commission committed grave abuse of discretion in declaring the dismissal legal;
2. The National Labor Relations Commission committed grave abuse of discretion in declaring that the admission of petitioners is
admissible in evidence despite the fact that it was obtained in a hostile environment and without the presence or
assistance of counsel;
3. The National Labor Relations Commission committed grave abuse of discretion in finding that respondents N.C. Construction
Supply et. al. are right in withdrawing their trust and confidence with petitioners without any valid and legal basis. 9
We affirm the decision of the NLRC.
An employer has a right to terminate the services of an employee subject to both substantive and procedural limitations. This means that (1) the
dismissal must be for a just or authorized cause provided in the Labor Code, 10 and (2) the employee must be accorded due process before his
employment is terminated. The validity of the dismissal hinges on the employer's compliance with these two requirements. 11
In the case at bar, petitioners who were employed as drivers at respondent company were found guilty of stealing company property consisting of
electrical wire, welding rod, G.I. sheet, steel bar and plywood. Article 282 of the Labor Code authorizes an employer to terminate the services of an
employee for loss of trust and confidence, provided that the loss of confidence arises from particular proven facts. The law does not require proof

beyond reasonable doubt of the employee's misconduct. Substantial evidence is sufficient. 12 Substantial evidence has been defined as such relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. 13
Petitioners' culpability in the instant case was sufficiently proved by private respondents. Jay Calso, an employee of respondent company who has
personal knowledge about the series of thefts that has been going on at respondent company, positively identified petitioners as among the perpetrators
of the theft. Petitioners have not shown any ill motive on the part of Calso to implicate them in the offense, unless it was true. In addition, petitioners
admitted their participation in the theft during an investigation conducted by private respondents' lawyer. LLpr
We are not convinced by petitioners' allegation that such admission was obtained by means of threat or intimidation as such allegation is couched in
general terms and is unsupported by evidence.
We also reject petitioners' argument that said admission is inadmissible as evidence against them under Section 12 Article III of the 1987 Constitution.
The right to counsel under Section 12 of the Bill of Rights is meant to protect a suspect in a criminal case under custodial investigation. Custodial
investigation is the stage where the police investigation is no longer a general inquiry into an unsolved crime but has begun to focus on a particular
suspect who had been taken into custody by the police to carry out a process of interrogation that lends itself to elicit incriminating statements. It is when
questions are initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any
significant way. The right to counsel attaches only upon the start of such investigation. 14 Therefore, the exclusionary rule under paragraph (3) Section
12 of the Bill of Rights applies only to admissions made in a criminal investigation but not to those made in an administrative investigation.
In the case at bar, the admission was made by petitioners during the course of the investigation conducted by private respondents' counsel to determine
whether there is sufficient ground to terminate their employment. Petitioners were not under custodial investigation as they were not yet accused by the
police of committing a crime. The investigation was merely an administrative investigation conducted by the employer, not a criminal investigation. The
questions were propounded by the employer's lawyer, not by police officers. The fact that the investigation was conducted at the police station did not
necessarily put petitioners under custodial investigation as the venue of the investigation was merely incidental. Hence, the admissions made by
petitioners during such investigation may be used as evidence to justify their dismissal.
Private respondents, however, failed to observe due process in terminating the employment of petitioners. Due process demands that the employer
should furnish the worker whose employment is sought to be terminated a written notice containing a statement of the cause(s) for termination and
afford him ample opportunity to be heard and to defend himself with the assistance of a representative if he so desires. Specifically, the employer must
furnish the worker with two written notices before termination of employment can be legally effected: (1) notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought, and (2) the subsequent notice which informs the employee of the employer's decision to
dismiss him. 15 There is no showing in this case that private respondents furnished petitioners with such notices. Private respondents, through their
counsel, Atty. Reyes, immediately terminated petitioners' services upon conclusion of the investigation. Private respondents must therefore indemnify
petitioners for failure to observe due process before dismissing them from work.

IN VIEW WHEREOF, the petition is DISMISSED. The assailed decision is hereby AFFIRMED. No costs. aisadc
SO ORDERED.
Regalado and Martinez, JJ ., concur.
Mendoza, J ., is on official leave.
Footnotes
1.Penned by Commissioner Rogelio I. Rayala with the concurrence of Presiding Commissioner Raul I. Aquino and Commissioner Victoriano R.
Calaycay.
2.Sworn Statement executed by Jay S. Calso before the PO1 Enrique R. Jimenez on June 4, 1995 at the Pasig Police Station; Annex "A" of private
respondents' Comment; Rollo, p. 78.
3.Police Blotter of the Pasig Police Station dated June 5, 1995; Annex "B" of private respondent's Comment; Rollo, p. 80.
4.Annex "C" of private respondents' Comment; Rollo, p. 82.
5.Annex "D" of private respondents' Comment; Rollo, p. 83.
6.Sec. 12. (1) Any person under investigation for the commission of an offense shall have the right to be informed of his right to remain silent and to
have competent and independent counsel preferably of his own choice. If the person cannot afford the services of counsel, he must be
provided with one. These rights cannot be waived except in writing and in the presence of counsel.
xxx xxx xxx
(3) Any confession or admission obtained in violation of this or Section 17 hereof shall be inadmissible in evidence against him.
7.Rollo, pp. 13-25.
8.NLRC Decision, p. 8; Rollo, p. 33.
9.Petition, p. 5; Rollo, p. 7.
10.Articles 282 and 283 of the Labor Code provide:
Art. 282. Termination by employer. An employer may terminate an employment for any of the following reasons:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his 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 duly authorized representative;
(d) Commission of any 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.

Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title. . . .
11.Ranises v. NLRC, 262 SCRA 371 (1996); Shoppers Gain Supermart v. NLRC, 259 SCRA 411 (1996); Midas Touch Food Corp. v. NLRC, 259
SCRA 652 (1996).
12.ComSavings Bank v. NLRC, 257 SCRA 307 (1996); MGG Marine Services, Inc. v. NLRC, 259 SCRA 664 (1996).
13.Section 5 Rule 133 of the Revised Rules of Court; Domasig v. NLRC, 261 SCRA 779 (1996).
14.People v. Bandula, 232 SCRA 566 (1994), citing Gamboa v. Judge Cruz, 162 SCRA 642 (1988); see also People v. Evangelista, 256 SCRA 611
(1996).
15.Stolt-Nielsen Marine Services (Phils.), Inc. v. NLRC, 264 SCRA 307 (1996).

||| (Manuel v. N.C. Construction Supply, G.R. No. 127553, November 28, 1997)

SECOND DIVISION
[G.R. Nos. 170384-85. March 9, 2007.]
LORNA DISING PUNZAL, petitioner, vs. ETSI TECHNOLOGIES, INC., WERNER GEISERT, and CARMELO D. REMUDARO,
respondents.
DECISION
CARPIO-MORALES, J p:
Petitioner, Lorna Dising Punzal, had been working for respondent, ETSI Technologies, Inc. (ETSI), for 12 years prior to the termination of her services
on November 26, 2001 on which date she was holding the position of Department Secretary.
On October 30, 2001, petitioner sent an electronic mail (e-mail) message to her officemates announcing the holding of a Halloween party that was to be
held in the office the following day. The e-mail message read verbatim:
Dear ETSI-JMT Colleagues,
Good day!
As you all know, tomorrow is the day before HALLOWEEN. And many of our kids will go around "TRICK OR TREATING". We will
be dressing them up in costumes of all sorts, from cute to outrageous, from wild to "scary." aAHSEC
What we want to have is a similar activity here in the office. So we invite you to participate in this effort. You can also dress your
kids up in funny costumes. Also the kids will then go around the office Trick or Treating. So, we ask you to prepare your Treats,
like candies, biscuits, cookies, etc., (Cash is also welcome for parents like me . . . he he he)
Why are we doing this? Well, we just want the kids to have a good time. Kung gusto ninyo, mag-costume din kayo.
Alright! See you tomorrow morning, [October 31, 2001]. 1 (Underscoring supplied)
Petitioner's immediate superior, respondent Carmelo Remudaro (Remudaro), who was one of those to whom the e-mail message was sent, advised
petitioner to first secure the approval of the Senior Vice President, respondent Werner Geisert (Geisert), for the holding of the party in the office.
TDESCa
Petitioner soon learned that Geisert did not approve of the plan to hold a party in the office. She thereupon sent also on October 30, 2001 another e-mail
message to her officemates, reading verbatim:
Sorry for the mail that I sent you, unfortunately the SVP of ETSI Technologies, Inc. did not agree to our idea to bring our children
in the office for the TRICK or TREATING. He was so unfair. . . para bang palagi siyang iniisahan sa trabaho. . . bakit most of the
parents na mag-joined ang anak ay naka-VL naman. Anyway, solohin na lang niya bukas ang office.
Anyway, to those parents who would like to bring their Kids in Megamall there will be Trick or Treating at Mc Donalds Megamall
Bldg. A at 10:00 AM tomorrow and let's not spoil the fun for our kids. 2 (Underscoring supplied)
Remudaro and Arnold Z. David (David), the Assistant Vice President of Human Resources/TQM of ETSI, later informed petitioner, by letter of November
13, 2001, that Geisert got a copy of her e-mail message and that he required her to explain in writing within 48 hours why she
. . . should not be given disciplinary action for committing Article IV, No. 5 & 8 Improper conduct or acts of discourtesy or
disrespect and Making malicious statements concerning Company Officer, whereby such offenses may be subject to
suspension to termination depending upon the gravity of the offense/s as specified in our ETSI's Code of Conduct and Discipline.
3 (Emphasis in the original)
Petitioner replied by letter of November 14, 2001 that she had no malicious intention in sending the second e-mail message and that she "never
expected such kind of words can be called as 'acts of discourtesy or disrespect.'" 4 aECSHI
On November 19, 2001, Geisert and Remudaro conferred with petitioner to give her a chance to explain her side. 5
David and Remudaro subsequently sent petitioner a letter on November 26, 2001, finding her explanation "not acceptable" and terminating her services,
effective immediately, "for committing Article IV, No[s]. 5 & 8, Improper conduct or act of discourtesy or disrespect and making malicious statements
concerning company officer." 6
On February 11, 2002, petitioner filed before the National Labor Relations Commission (NLRC) a complaint 7 for illegal dismissal against ETSI, Geisert,
and Remudaro.
By Order of November 26, 2002, the Labor Arbiter dismissed petitioner's complaint, finding that she was legally dismissed for serious misconduct, and
that she was afforded due process. 8 IHaSED
On petitioner's appeal, the NLRC, by Resolution 9 dated October 27, 2003, found that while she was indeed guilty of misconduct, the penalty of
dismissal was disproportionate to her infraction. 10 The NLRC thus ordered that petitioner was entitled to reinstatement which, however, was no longer
feasible due to strained relations. The NLRC thus ordered that petitioner be awarded separation pay equivalent to one month pay for every year of
service, a period of at least six months to be considered one whole year. 11
Noting that petitioner was not entirely faultless, the NLRC denied her prayer for backwages 12 as well as her prayer for exemplary and moral damages
and attorney's fees in the absence of the legal conditions justifying their award. 13
Both parties filed their respective motions for reconsideration 14 which the NLRC denied. 15 Both parties thereupon filed their respective petitions for
certiorari 16 with the Court of Appeals. ATcEDS
In the petition of petitioner, docketed as CA-G.R. SP No. 83296, she questioned the denial of her prayer for backwages. 17 Upon the other hand, in the
petition of respondent ETSI, et al., docketed as CA-G.R. SP No. 83205, they questioned the finding of illegal dismissal, the grant of separation pay, and
the imputation of liability to Geisert and Remudaro. 18
In her comment to the petition of ETSI, et al. in CA-G.R. SP No. 83205, petitioner raised the issue of due process, alleging that her employer did not
inform her of her right to be assisted by counsel during the conference with respondents Geisert and Remudaro. 19

By Decision 20 of May 13, 2005, the Court of Appeals, which priorly consolidated the petitions of both parties, held that petitioner's dismissal was in
order: 21
The gravity of Punzal's infraction is borne by the fact that her e-mail message to the workers of ETSI tended to cast scorn and
disrespect toward a senior vice president of the company. The message itself resounds of subversion and undermines the
authority and credibility of management.
xxx xxx xxx
Also, this message was not a mere expression of dissatisfaction privately made by one person to another, but was circulated to
everyone in the work area. The message was sent close at the heels of SVP Geisert's disapproval of Punzal's plan to hold a
Halloween affair in the office, because the said event would disrupt the operations and peace and order in the office. Punzal
therefore displayed a tendency to act without management's approval, and even against management's will, as she invited her
co-workers to join a trick or treating activity at another venue during office hours. aEAIDH
The message also comes across as an encouragement to ignore SVP Geisert's authority, and portrayed him as unworthy of
respect because of his unpopular personality. THEDCA
This is in clear violation of Article IV, Section 5 of the company's Code of Conduct and Discipline, which clearly imposes the
penalty of "suspension to dismissal, depending upon the gravity of the offense" in cases where an employee displays "improper
conduct or acts of discourtesy or disrespect to fellow employees, visitors, guests, clients, at any time."
The imposition of the penalty of dismissal is proper, because of the gravity of Punzal's misconduct, as earlier pointed out, and
considering that:
(1) Punzal's statements were discourteous and disrespectful not only to a mere co-employee, but to a high ranking
executive official of the company;
(2) Punzal's statements tended to ridicule and undermine the credibility and authority of SVP Geisert, and even
encouraged disobedience to the said officer;
(3) Punzal's message was sent to a great number of employees of ETSI, which tended to sow dissent and disrespect to
management among a great number of employees of ETSI;
(4) Punzal's message could not have been made in good faith, because the message itself used language that placed
SVP Geisert in ridicule and portrayed him as an object of scorn, betraying the sender's bad faith. CSaHDT
Given these circumstances, the fact that Punzal's infraction occurred only once should be largely insignificant. The gravity and
publicity of the offense as well as its adverse impact in the workplace is more than sufficient to place the same in the level of a
serious misconduct. 22 (Underscoring supplied)
Contrary to petitioner's contention, the Court of Appeals also found that due process was observed in her dismissal. 23
The Court of Appeals thus reinstated the Labor Arbiter's Order. Thus it disposed:
WHEREFORE, premises considered, the petition filed by Lorna Dising Punzal in CA-G.R. SP No. 83296 is hereby DISMISSED,
while the petition filed by ETSI, Werner Geisert and Carmelo D. Remudaro is hereby GRANTED. The assailed Resolutions, dated
October 27, 2003 and January 28, 2004, of the respondent National Labor Relations Commission are hereby SET ASIDE. In lieu
thereof, the Decision of Labor Arbiter Joel S. Lustria, dated November 26, 2002, dismissing the complaint filed by Lorna Dising
Punzal is hereby REINSTATED. DAETcC
SO ORDERED. 24 (Underscoring supplied)
Hence, petitioner's present Petition for Review on Certiorari, 25 faulting the appellate court to have erred
. . . WHEN IT RULED THAT PETITIONER'S STATEMENT WAS DISCOURTEOUS AND DISRESPECTFUL CONSTITUTING
GROSS DISRESPECT AND SERIOUS MISCONDUCT;
. . . WHEN IT FOUND THAT DUE PROCESS WAS ACCORDED THE PETITIONER;
. . . WHEN IT FAILED TO AWARD THE PETITIONER HER RIGHT TO REINSTATEMENT AND BACKWAGES. 26
Petitioner posits that her second e-mail message was merely an exercise of her right to freedom of expression without any malice on her part. 27
EaCDAT

On the other hand, ETSI, et al. maintain that petitioner's second e-mail message was tainted with bad faith and constituted a grave violation of the
company's code of discipline. 28
In Philippines Today, Inc. v. NLRC, 29 this Court, passing on the attitude or respect that an employee is expected to observe towards an employer, held:
Alegre's choice of words and way of expression betray his allegation that the memorandum was simply an "opportunity to open
the eyes of (Petitioner) Belmonte to the work environment in petitioner's newspaper with the end in view of persuading (her) to
take a hand at improving said environment." Apprising his employer (or top-level management) of his frustrations in his job and
differences with his immediate superior is certainly not done in an abrasive, offensive, and disrespectful manner. A cordial or, at
the very least, civil attitude, according due deference to one's superiors, is still observed, especially among high-ranking
management officers. The Court takes judicial notice of the Filipino values of pakikisama and paggalang which are not only
prevalent among members of a family and community but within organizations as well, including work sites. An employee is
expected to extend due respect to management, the employer being the "proverbial hen that lays the golden egg," so to speak.
An aggrieved employee who wants to unburden himself of his disappointments and frustrations in his job or relations with his
immediate superior would normally approach said superior directly or otherwise ask some other officer possibly to mediate and
discuss the problem with the end in view of settling their differences without causing ferocious conflicts. No matter how [much] the
employee dislikes the employer professionally, and even if he is in a confrontational disposition, he cannot afford to be
disrespectful and dare to talk with an unguarded tongue and/or with a bileful pen. 30 (Underscoring supplied)

A scrutiny of petitioner's second e-mail message shows that her remarks were not merely an expression of her opinion about Geisert's decision; they
were directed against Geisert himself, viz: "He was so unfair . . . para bang palagi siyang iniisahan sa trabaho. . . Anyway, solohin na lang niya
bukas ang office." (Emphasis supplied) 31
As the Court of Appeals noted, petitioner, in her closing statement "Anyway, to those parents who would like to bring their Kids in Megamall there will
be Trick or Treating at Mc Donalds . . . tomorrow and let's not spoil the fun for our kids" 32 even invited her co-workers to join a trick or treating
activity at another venue during office hours 33 (10:00 AM), October 31, 2001 being a Wednesday and there is no showing that it was declared a
holiday, encouraging them to ignore Geisert's authority. SIcCTD
Additionally, petitioner sent the e-mail message in reaction to Geisert's decision which he had all the right to make. That it has been a tradition in ETSI to
celebrate occasions such as Christmas, birthdays, Halloween, and others 34 does not remove Geisert's prerogative to approve or disapprove plans to
hold such celebrations in office premises and during company time. It is settled 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 substitution of the judgment of the employer in the conduct of
its business. 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. 35 (Underscoring supplied) DEcTCa
In the case at bar, the disapproval of the plan to hold the Halloween party on October 31, 2001 may not be considered to have been actuated by
bad faith. As the Labor Arbiter noted:
It may not be ignored that holding a trick or treat party in the office premises of respondent ETSI would certainly affect the
operations of the office, since children will be freely roaming around the office premises, things may get misplaced and the noise
in the office will simply be too hard to ignore. Contrary to complainant's position, it is immaterial if the parents of the children who
will participate in the trick or treat will be on vacation leave, since it is the work of the employees who will not be on leave and who
will be working on that day which will be disrupted, possibly resulting in the disruption of the operations of the company. 36
(Underscoring supplied)
Given the reasonableness of Geisert's decision that provoked petitioner to send the second e-mail message, the observations of the Court of Appeals
that "the message . . . resounds of subversion and undermines the authority and credibility of management" 37 and that petitioner "displayed a tendency
to act without management's approval, and even against management's will" are well taken. 38
Moreover, in circulating the second e-mail message, petitioner violated Articles III (8) and IV (5) of ETSI's Code of Conduct on "making false or malicious
statements concerning the Company, its officers and employees or its products and services " 39 and "improper conduct or acts of discourtesy or
disrespect to fellow employees, visitors, guests, clients, at any time." 40
Petitioner invokes Samson v. National Labor Relations Commission 41 where this Court held that the dismissal of the therein petitioner was too harsh a
penalty for uttering "Si EDT [Epitacio D. Titong, the General Manager and President of the employer], bullshit yan," "sabihin mo kay EDT yan" and
"sabihin mo kay EDT, bullshit yan," while making the "dirty finger" gesture, and warning that the forthcoming national sales conference of the company
would be a "very bloody one."
Petitioner's reliance on Samson is misplaced. First, in that case, this Court found that the misconduct committed was not related with the employee's
work as the offensive remarks were verbally made during an informal Christmas gathering of the employees, an occasion "where tongues are more often
than not loosened by liquor or other alcoholic beverages" 42 and "it is to be expected . . . that employees freely express their grievances and gripes
against their employers." 43
In petitioner's case, her assailed conduct was related to her work. It reflects an unwillingness to comply with reasonable management directives. IDAaCc
While in Samson, Samson was held to be merely expressing his dissatisfaction over a management decision, 44 in this case, as earlier shown,
petitioner's offensive remarks were directed against Geisert.
Additionally, in Samson, this Court found that unlike in Autobus Workers' Union (AWU) v. NLRC 45 where dismissal was held to be an appropriate
penalty for uttering insulting remarks to the supervisor, 46 Samson uttered the insulting words against EDT in the latter's absence. 47 In the case at bar,
while petitioner did not address her e-mail message to Geisert, she circulated it knowing or at least, with reason to know that it would reach him.
As ETSI notes, "[t]hat [petitioner] circulated this e-mail message with the knowledge that it would reach the eyes of management may be reasonably
concluded given that the first e-mail message reached her immediate supervisor's attention." 48
Finally, in Samson, this Court found that the "lack of urgency on the part of the respondent company in taking any disciplinary action against [the
employee] negates its charge that the latter's misbehavior constituted serious misconduct." 49 In the case at bar, the management acted 14 days after
petitioner circulated the quoted e-mail message. 50 TSIDaH
Petitioner asks that her 12 years of service to ETSI during which, so she claims, she committed no other offense be taken as a mitigating circumstance.
51 This Court has held, however, that "the longer an employee stays in the service of the company, the greater is his responsibility for knowledge and
compliance with the norms of conduct and the code of discipline in the company." 52
In fine, petitioner, having been dismissed for just cause, is neither entitled to reinstatement nor to backwages.
Petitioner's contention that she was denied due process is well-taken however, as the records do not show that she was informed of her right to be
represented by counsel during the conference with Geisert and Remudaro. ASTcaE
The protestations of ETSI, et al. that the right to be informed of the right to counsel does not apply to investigations before administrative bodies and that
law and jurisprudence merely give the employee the option to secure the services of counsel in a hearing or conference 53 fall in light of the clear
provision of Article 277 (b) of the Labor Code that
the employer . . . shall afford [the worker whose employment is sought to be terminated] ample opportunity to be heard and to
defend himself with the assistance of his representatives if he so desires in accordance with company rules and regulations
pursuant to guidelines set by the Department of Labor and Employment,
and this Court's explicit pronouncement that "[a]mple opportunity connotes every kind of assistance that management must accord the employee to
enable him to prepare adequately for his defense including legal representation." 54

Following Agabon, et al. v. National Labor Relations Commission, 55 the violation of petitioner's statutory due process right entitles her to an award of
nominal damage, which this Court fixes at P30,000. 56
WHEREFORE, the petition is in part GRANTED. The questioned decision is AFFIRMED with the MODIFICATION that respondent ETSI Technologies,
Inc. is ordered to pay petitioner, Lorna Punzal, nominal damages in the amount of P30,000. aSTECI

SO ORDERED.
Quisumbing, Carpio, Tinga and Velasco, Jr., JJ., concur.
Footnotes
1.NLRC records, p. 21.
2.Id. at 22.
3.Id. at 23.
4.Id. at 24.
5.Id. at 49, 109, 243; CA rollo (CA-G.R. SP No. 83205), p. 293.
6.Id. at 49.
7.Id. at 2.
8.Id. at 99-120.
9.Id. at 241-250. Penned by Commissioner Tito F. Genilo, with the concurrence of Commissioner Ernesto C. Verceles, Presiding Commissioner
Lourdes C. Javier, on leave.
10.Id. at 247-248.
11.Id. at 248-249.
12.Ibid.
13.Id. at 249.
14.Id. at 256-275.
15.Id. at 290.
16.CA rollo (CA-G.R. SP No. 83296), pp. 2-14; CA rollo (CA-G.R. SP No. 83205), pp. 2-31.
17.Id. at 9-11.
18.CA rollo (CA-G.R. SP No. 83205), pp. 11-26.
19.Id. at 136-137.
20.Id. at 285-294. Penned by Associate Justice Rodrigo V. Cosico, with the concurrences of Associate Justices Danilo B. Pine and Arcangelita
Romilla Lontok.
21.Id. at 292-293.
22.Ibid.
23.Id. at 293.
24.Id. at 293-294.
25.Rollo, pp. 5-27.
26.Id. at 10-11.
27.Id. at 11-16.
28.Id. at 71-78.
29.334 Phil. 854 (1997).
30.Id. at 869.
31.NLRC records, p. 46.
32.Ibid.
33.CA rollo (CA-G.R. SP No. 83205), p. 292.
34.NLRC records, p. 14.
35.Wise and Co., Inc. v. Wise & Co., Inc. Employees Union, G.R. No. 87672, October 13, 1989, 178 SCRA 536, 540.
36.NLRC records, pp. 107-108.
37.CA rollo (CA-G.R. SP No. 83205), p. 292.
38.Ibid.

39.NLRC records, p. 56.

40.Ibid.
41.386 Phil. 669 (2000); Rollo, pp. 89-92.
42.Id. at 683.
43.Ibid.
44.Ibid.
45.353 Phil. 419 (1998).
46.Id. at 423-428; Samson v. NLRC, supra note 41 at 683.
47.Samson v. NLRC, supra note 41 at 683-684.
48.Rollo, p. 73.
49.Samson v. NLRC, supra note 41 at 685.
50.NLRC records, p. 23.
51.Rollo, pp. 22-23.
52.Cruz v. Coca Cola, Inc., G.R. No. 165586, June 15, 2005, 460 SCRA 340; Central Pangasinan Electric Cooperative, Inc. v. Macaraeg, 443 Phil.
866, 877 (2003); Citibank, N.A. v. Gatchalian, 310 Phil. 211, 220 (1995).
53.Rollo, pp. 81-82.
54.Maebo v. NLRC, G.R. No. 107721, January 10, 1994, 229 SCRA 240, 251.
55.G.R. No. 158693, November 17, 2004, 442 SCRA 573.
56.Id. at 617. Vide Aberdeen Court, Inc. v. Agustin, Jr., G.R. No. 149371, April 13, 2005, 456 SCRA 32, 43-44; Aladdin Transit Corporation v. Court of
Appeals, G.R. No. 152123, June 21, 2005, 460 SCRA 468, 472.

||| (Punzal v. ETSI Technologies, Inc., G.R. Nos. 170384-85, March 09, 2007)

EN BANC
[G.R. No. L-25018. May 26, 1969.]
ARSENIO PASCUAL, JR., petitioner-appellee, vs. BOARD OF MEDICAL EXAMINERS, respondent-appellant, SALVADOR
GATBONTON and ENRIQUETA GATBONTON, intervenors-appellants.
Conrado B. Enriquez for petitioner-appellee.
Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio A. Torres and Solicitor Pedro A. Ramirez for respondent-appellant.
Bausa, Ampil & Suarez for intervenors-appellants.
SYLLABUS
1.CONSTITUTIONAL LAW; RIGHTS OF AN ACCUSED; RIGHT AGAINST SELF- INCRIMINATION; APPLICABILITY THEREOF IN ADMINISTRATIVE
PROCEEDINGS. Where petitioner was the respondent in the malpractice charge filed against him with the Board of Medical Examiners, the said
Board cannot compel him to take the witness stand as a witness for the complainants. The principle against self-incrimination is equally applicable to a
proceeding that could possibly result in the loss of the privilege to practice the medical profession.
2.ID.; ID.; ID.; RIGHT INCLUDES RIGHT TO SILENCE. The constitutional guarantee against self-incrimination is not limited to that of allowing a
witness to object to questions the answers to which could lead to a penal liability being subsequently incurred. The constitutional guarantee protects as
well the right to silence.
3.ID.; ID.; ID.; ID.; REASON. Why the constitutional guarantee against self-incrimination protects as well the right to silence should be thus is not
difficult to discern. The constitutional guarantee, along with other rights granted an accused, stands for a belief that while crime should not go
unpunished and that the truth must be revealed, such desirable objectives should not be accomplished according to means or methods offensive to the
high sense of respect accorded the human personality. More and more in line with the democratic creed, the deference accorded an individual even
those suspected of the most heinous crimes is given due weight.
4.ID.; ID.; ID.; SAID RIGHT IS IDENTIFIED WITH RIGHT TO PRIVACY. It is of interest to note that while earlier decisions stressed the principle of
humanity on which the right against self-incrimination is predicated, precluding as it does all resort to force or compulsion, whether physical or mental,
current judicial opinion places equal emphasis on its identification with the right to privacy.
DECISION
FERNANDO, J p:
The broad, all-embracing sweep of the self-incrimination clause, 1 whenever appropriately invoked, has been accorded due recognition by this Court
ever since the adoption of the Constitution. 2 Bermudez v. Castillo, 3 decided in 1937, was quite categorical. As we there stated: "This Court is of the
opinion that in order that the constitutional provision under consideration may prove to be a real protection and not a dead letter, it must be given a
liberal and broad interpretation favorable to the person invoking it." As phrased by Justice Laurel in his concurring opinion: "The provision, as doubtless it
was designed, would be construed with the utmost liberality in favor of the right of the individual intended to be served." 4
Even more relevant, considering the precise point at issue, is the recent case of Cabal v. Kapunan, 5 where it was held that a respondent in an
administrative proceeding under the Anti-Graft Law 6 cannot be required to take the witness stand at the instance of the complainant. So it must be in
this case, where petitioner was sustained by the lower court in his plea that he could not be compelled to be the first witness of the complainants, he
being the party proceeded against in an administrative charge for malpractice. That was a correct decision; we affirm it on appeal.
Arsenio Pascual, Jr., petitioner-appellee, filed on February 1, 1965 with the Court of First Instance of Manila an action for prohibition with prayer for
preliminary injunction against the Board of Medical Examiners, now respondent-appellant. It was alleged therein that at the initial hearing of an
administrative case 7 for alleged immorality, counsel for complainants announced that he would present as his first witness herein petitioner-appellee,
who was the respondent in such malpractice charge. Thereupon, petitioner-appellee, through counsel, made of record his objection, relying on the
constitutional right to be exempt from being a witness against himself. Respondent-appellant, the Board of Examiners, took note of such a plea, at the
same time stating that at the next scheduled hearing, on February 12, 1965, petitioner-appellee would be called upon to testify as such witness, unless
in the meantime he could secure a restraining order from a competent authority.
Petitioner-appellee then alleged that in thus ruling to compel him to take the witness stand, the Board of Examiners was guilty, at the very least, of grave
abuse of discretion for failure to respect the constitutional right against self-incrimination, the administrative proceeding against him, which could result in
forfeiture or loss of a privilege, being quasi-criminal in character. With his assertion that he was entitled to the relief demanded consisting of perpetually
restraining the respondent Board from compelling him to testify as witness for his adversary and his readiness or his willingness to put a bond, he prayed
for a writ of preliminary injunction and after a hearing or trial, for a writ of prohibition.
On February 9, 1965, the lower court ordered that a writ of preliminary injunction issue against the respondent Board commanding it to refrain from
hearing or further proceeding with such an administrative case, to await the judicial disposition of the matter upon petitioner-appellee posting a bond in
the amount of P500.00.
The answer of respondent Board, while admitting the facts stressed that it could call petitioner-appellee to the witness stand and interrogate him, the
right against self-incrimination being available only when a question calling for an incriminating answer is asked of a witness. It further elaborated the
matter in the affirmative defenses interposed, stating that petitioner-appellee's remedy is to object once he is in the witness stand, for respondent "a
plain, speedy and adequate remedy in the ordinary course of law," precluding the issuance of the relief sought. Respondent Board, therefore, denied
that it acted with grave abuse of discretion.
There was a motion for intervention by Salvador Gatbonton and Enriqueta Gatbonton, the complainants in the administrative case for malpractice
against petitioner-appellee, asking that they be allowed to file an answer as intervenors. Such a motion was granted and an answer in intervention was
duly filed by them on March 23, 1965 sustaining the power of respondent Board, which for them is limited to compelling the witness to take the stand, to
be distinguished, in their opinion, from the power to compel a witness to incriminate himself. They likewise alleged that the right against selfincrimination cannot be availed of in an administrative hearing.
A decision was rendered by the lower court on August 2, 1965, finding the claim of petitioner-appellee to be well-founded and prohibiting respondent
Board "from compelling the petitioner to act and testify as a witness for the complainant in said investigation without his consent and against himself."
Hence this appeal both by respondent Board and intervenors, the Gatbontons. As noted at the outset, we find for the petitioner-appellee.
1.We affirm the lower court decision on appeal as it does manifest fealty to the principle announced by us in Cabal v. Kapunan. 8 In that proceeding for
certiorari and prohibition to annul an order of Judge Kapunan, it appeared that an administrative charge for unexplained wealth having been filed against

petitioner under the Anti-Graft Act, 9 the complainant requested the investigating committee that petitioner be ordered to take the witness stand, which
request was granted. Upon petitioner's refusal to be sworn as such witness, a charge for contempt was filed against him in the sala of respondent
Judge. He filed a motion to quash and upon its denial, he initiated this proceeding. We found for the petitioner in accordance with the well-settled
principle that "the accused in a criminal case may refuse, not only to answer incriminatory questions, but, also, to take the witness stand."
It was noted in the opinion penned by the present Chief Justice that while the matter referred to an administrative charge of unexplained wealth, with the
Anti-Graft Act authorizing the forfeiture of whatever property a public officer or employee may acquire, manifestly out of proportion to his salary and his
other lawful income, there is clearly the imposition of a penalty. The proceeding for forfeiture while administrative in character thus possesses a criminal
or penal aspect. The case before us is not dissimilar; petitioner would be similarly disadvantaged. He could suffer not the forfeiture of property but the
revocation of his license as medical practitioner, for some an even greater deprivation.
To the argument that Cabal v. Kapunan could thus be distinguished, it suffices to refer to an American Supreme Court opinion highly persuasive in
character. 10 In the language of Justice Douglas: "We conclude .. that the Self-Incrimination Clause of the Fifth Amendment has been absorbed in the
Fourteenth, that it extends its protection to lawyers as well as to other individuals, and that it should not be watered down by imposing the dishonor of
disbarment and the deprivation of a livelihood as a price for asserting it." We reiterate that such a principle is equally applicable to a proceeding that
could possibly result in the loss of the privilege to practice the medical profession.
2.The appeal apparently proceeds on the mistaken assumption by respondent Board and intervenors-appellants that the constitutional guarantee
against self-incrimination should be limited to allowing a witness to object to questions the answers to which could lead to a penal liability being
subsequently incurred. It is true that one aspect of such a right, to follow the language of another American decision, 11 is the protection against "any
disclosures which the witness may reasonably apprehend could be used in a criminal prosecution or which could lead to other evidence that might be so
used." If that were all there is then it becomes diluted.

The constitutional guarantee protects as well the right to silence. As far back as 1905, we had occasion to declare: "The accused has a perfect right to
remain silent and his silence cannot be used as a presumption of his guilt." 12 Only last year, in Chavez v. Court of Appeals, 13 speaking through
Justice Sanchez, we reaffirmed the doctrine anew that is the right of a defendant "to forego testimony, to remain silent, unless he chooses to take the
witness standwith undiluted, unfettered exercise of his own free genuine will."
Why it should be thus is not difficult to discern. The constitutional guarantee, along with other rights granted an accused, stands for a belief that while
crime should not go unpunished and that the truth must be revealed, such desirable objectives should not be accomplished according to means or
methods offensive to the high sense of respect accorded the human personality. More and more in line with the democratic creed, the deference
accorded an individual even those suspected of the most heinous crimes is given due weight. To quote from Chief Justice Warren, "the constitutional
foundation underlying the privilege is the respect a government . . . must accord to the dignity and integrity of its citizens." 14
It is likewise of interest to note that while earlier decisions stressed the principle of humanity on which this right is predicated, precluding as it does all
resort to force or compulsion, whether physical or mental, current judicial opinion places equal emphasis on its identification with the right to privacy.
Thus according to Justice Douglas: "The Fifth Amendment in its Self-Incrimination clause enables the citizen to create a zone of privacy which
government may not force to surrender to his detriment." 15 So also with the observation of the late Judge Frank who spoke of "a right to a private
enclave where he may lead a private life. That right is the hallmark of our democracy." 16
In the light of the above, it could thus clearly appear that no possible objection could be legitimately raised against the correctness of the decision now
on appeal. We hold that in an administrative hearing against a medical practitioner for alleged malpractice, respondent Board of Medical Examiners
cannot, consistently with the self-incrimination clause, compel the person proceeded against to take the witness stand without his consent.
WHEREFORE, the decision of the lower court of August 2, 1965 is affirmed. Without pronouncement as to costs.
Reyes, J.B.L. (Acting C.J.), Dizon, Makalintal, Zaldivar, Sanchez and Capistrano, JJ., concur.
Teehankee and Barredo, JJ., took no part.
Concepcion, C.J. and Castro, J., are on official leave.
Footnotes
1.Section 1, Clause 18, Art. III, Constitution.
2.It was so even under previous organic acts. Cf. United States v. Navarro, 3 Phil. 143 (1904); Beltran v. Samson, 53 Phil. 570 (1929).
3.64 Phil. 483.
4.Ibid, p. 492. This constitutional command, according to Justice Fortas, "has [been] broadly applied and generously implemented in accordance with
the teaching of the history of the privilege and its great office to mankind's battle for freedom." Re Gault, 387 US 1 (1967).
5.6 SCRA 1059 (1962).
6.Republic Act No. 1379 (1955).
7.No. 639 of Respondent Board entitled Salvador Gatbonton v. Arsenio Pascual.
8.6 SCRA 1059 (1962).
9.Republic Act No. 1379.
10.Spevack v. Klein, 385 US 511 (1967).
11.Murphy v. Waterfront Commission of New York, 378 US 52 (1964).
12.United States v. Luzon, 4 Phil. 343 (1905). Cf. United States v. Junio, 1 Phil. 50, decided three years earlier: "It appears from the record that a
copy of the complaint was served upon the accused and he was required to plead 'guilty' or 'not guilty' in accordance with Section 18 of
General Orders, No. 58. He pleaded 'not guilty.' In response to this request the defendant made a statement. We are of the opinion that this
procedure is illegal. The judge had no right to compel the accused to make any statement whatever."
13.24 SCRA 663.

14.Miranda v. Arizona, 384 US 436 (1966).

15.Griswold v. Connecticut, 381 US 479 (1965).
16.United States v. Grunewald, 233 F2d 556 quoted in Miranda v. Arizona, 384 US 436 (1966).
||| (Pascual, Jr. v. Board of Medical Examiners, G.R. No. L-25018, May 26, 1969)

EN BANC
[G.R. No. 157870. November 3, 2008.]
SOCIAL JUSTICE SOCIETY (SJS), petitioner, vs. DANGEROUS DRUGS BOARD and PHILIPPINE DRUG ENFORCEMENT
AGENCY (PDEA), respondents.
[G.R. No. 158633. November 3, 2008.]
ATTY. MANUEL J. LASERNA, JR., petitioner, vs. DANGEROUS DRUGS BOARD and PHILIPPINE DRUG ENFORCEMENT
AGENCY, respondents.
[G.R. No. 161658. November 3, 2008.]
AQUILINO Q. PIMENTEL, JR., petitioner, vs. COMMISSION ON ELECTIONS, respondent.
DECISION
VELASCO, JR., J p:
In these kindred petitions, the constitutionality of Section 36 of Republic Act No. (RA) 9165, otherwise known as the Comprehensive Dangerous Drugs
Act of 2002, insofar as it requires mandatory drug testing of candidates for public office, students of secondary and tertiary schools, officers and
employees of public and private offices, and persons charged before the prosecutor's office with certain offenses, among other personalities, is put in
issue. THEDcS
As far as pertinent, the challenged section reads as follows:
SEC. 36. Authorized Drug Testing.Authorized drug testing shall be done by any government forensic laboratories or by any of
the drug testing laboratories accredited and monitored by the DOH to safeguard the quality of the test results. . . . The drug
testing shall employ, among others, two (2) testing methods, the screening test which will determine the positive result as well as
the type of drug used and the confirmatory test which will confirm a positive screening test. . . . The following shall be subjected to
undergo drug testing:
xxx xxx xxx
(c) Students of secondary and tertiary schools. Students of secondary and tertiary schools shall, pursuant to the related rules
and regulations as contained in the school's student handbook and with notice to the parents, undergo a random drug testing . . .;
STIHaE
(d) Officers and employees of public and private offices. Officers and employees of public and private offices, whether
domestic or overseas, shall be subjected to undergo a random drug test as contained in the company's work rules and
regulations, . . . for purposes of reducing the risk in the workplace. Any officer or employee found positive for use of dangerous
drugs shall be dealt with administratively which shall be a ground for suspension or termination, subject to the provisions of Article
282 of the Labor Code and pertinent provisions of the Civil Service Law;
xxx xxx xxx
(f) All persons charged before the prosecutor's office with a criminal offense having an imposable penalty of imprisonment of not
less than six (6) years and one (1) day shall undergo a mandatory drug test;
(g) All candidates for public office whether appointed or elected both in the national or local government shall undergo a
mandatory drug test.
In addition to the above stated penalties in this Section, those found to be positive for dangerous drugs use shall be subject to the
provisions of Section 15 of this Act. TADIHE
G.R. No. 161658 (Aquilino Q. Pimentel, Jr. v. Commission on Elections)
On December 23, 2003, the Commission on Elections (COMELEC) issued Resolution No. 6486, prescribing the rules and regulations on the mandatory
drug testing of candidates for public office in connection with the May 10, 2004 synchronized national and local elections. The pertinent portions of the
said resolution read as follows: aIHSEc
WHEREAS, Section 36 (g) of Republic Act No. 9165 provides:
SEC. 36. Authorized Drug Testing. . . .
xxx xxx xxx
(g) All candidates for public office . . . both in the national or local government shall undergo a mandatory drug test.
WHEREAS, Section 1, Article XI of the 1987 Constitution provides that public officers and employees must at all times be
accountable to the people, serve them with utmost responsibility, integrity, loyalty and efficiency;
WHEREAS, by requiring candidates to undergo mandatory drug test, the public will know the quality of candidates they are
electing and they will be assured that only those who can serve with utmost responsibility, integrity, loyalty, and efficiency would
be elected . . . .
NOW THEREFORE, The [COMELEC], pursuant to the authority vested in it under the Constitution, Batas Pambansa Blg. 881
(Omnibus Election Code), [RA] 9165 and other election laws, RESOLVED to promulgate, as it hereby promulgates, the following
rules and regulations on the conduct of mandatory drug testing to candidates for public office[:]
SEC. 1. Coverage. All candidates for public office, both national and local, in the May 10, 2004 Synchronized National
and Local Elections shall undergo mandatory drug test in government forensic laboratories or any drug testing laboratories
monitored and accredited by the Department of Health.
SEC. 3. . . .

On March 25, 2004, in addition to the drug certificates filed with their respective offices, the Comelec Offices and employees
concerned shall submit to the Law Department two (2) separate lists of candidates. The first list shall consist of those candidates
who complied with the mandatory drug test while the second list shall consist of those candidates who failed to comply . . . .
SEC. 4. Preparation and publication of names of candidates. Before the start of the campaign period, the [COMELEC] shall
prepare two separate lists of candidates. The first list shall consist of those candidates who complied with the mandatory drug test
while the second list shall consist of those candidates who failed to comply with said drug test. . . . SCADIT
SEC. 5. Effect of failure to undergo mandatory drug test and file drug test certificate. No person elected to any public office
shall enter upon the duties of his office until he has undergone mandatory drug test and filed with the offices enumerated under
Section 2 hereof the drug test certificate herein required. (Emphasis supplied.)
Petitioner Aquilino Q. Pimentel, Jr., a senator of the Republic and a candidate for re-election in the May 10, 2004 elections, 1 filed a Petition for Certiorari
and Prohibition under Rule 65. In it, he seeks (1) to nullify Sec. 36 (g) of RA 9165 and COMELEC Resolution No. 6486 dated December 23, 2003 for
being unconstitutional in that they impose a qualification for candidates for senators in addition to those already provided for in the 1987 Constitution;
and (2) to enjoin the COMELEC from implementing Resolution No. 6486.
Pimentel invokes as legal basis for his petition Sec. 3, Article VI of the Constitution, which states:
SEC. 3. No person shall be a Senator unless he is a natural-born citizen of the Philippines, and, on the day of the election, is at
least thirty-five years of age, able to read and write, a registered voter, and a resident of the Philippines for not less than two
years immediately preceding the day of the election.
According to Pimentel, the Constitution only prescribes a maximum of five (5) qualifications for one to be a candidate for, elected to, and be a member of
the Senate. He says that both the Congress and COMELEC, by requiring, via RA 9165 and Resolution No. 6486, a senatorial aspirant, among other
candidates, to undergo a mandatory drug test, create an additional qualification that all candidates for senator must first be certified as drug free. He
adds that there is no provision in the Constitution authorizing the Congress or COMELEC to expand the qualification requirements of candidates for
senator.
G.R. No. 157870 (Social Justice Society v. Dangerous Drugs Board and Philippine Drug Enforcement Agency)
In its Petition for Prohibition under Rule 65, petitioner Social Justice Society (SJS), a registered political party, seeks to prohibit the Dangerous Drugs
Board (DDB) and the Philippine Drug Enforcement Agency (PDEA) from enforcing paragraphs (c), (d), (f), and (g) of Sec. 36 of RA 9165 on the ground
that they are constitutionally infirm. For one, the provisions constitute undue delegation of legislative power when they give unbridled discretion to
schools and employers to determine the manner of drug testing. For another, the provisions trench in the equal protection clause inasmuch as they can
be used to harass a student or an employee deemed undesirable. And for a third, a person's constitutional right against unreasonable searches is also
breached by said provisions. ADSTCI
G.R. No. 158633 (Atty. Manuel J. Laserna, Jr. v. Dangerous Drugs Board and Philippine Drug Enforcement Agency)
Petitioner Atty. Manuel J. Laserna, Jr., as citizen and taxpayer, also seeks in his Petition for Certiorari and Prohibition under Rule 65 that Sec. 36 (c), (d),
(f), and (g) of RA 9165 be struck down as unconstitutional for infringing on the constitutional right to privacy, the right against unreasonable search and
seizure, and the right against self-incrimination, and for being contrary to the due process and equal protection guarantees.
The Issue on Locus Standi
First off, we shall address the justiciability of the cases at bench and the matter of the standing of petitioners SJS and Laserna to sue. As respondents
DDB and PDEA assert, SJS and Laserna failed to allege any incident amounting to a violation of the constitutional rights mentioned in their separate
petitions. 2
It is basic that the power of judicial review can only be exercised in connection with a bona fide controversy which involves the statute sought to be
reviewed. 3 But even with the presence of an actual case or controversy, the Court may refuse to exercise judicial review unless the constitutional
question is brought before it by a party having the requisite standing to challenge it. 4 To have standing, one must establish that he or she has suffered
some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and
the injury is likely to be redressed by a favorable action. 5

The rule on standing, however, is a matter of procedure; hence, it can be relaxed for non-traditional plaintiffs, like ordinary citizens, taxpayers, and
legislators when the public interest so requires, such as when the matter is of transcendental importance, of overarching significance to society, or of
paramount public interest. 6 There is no doubt that Pimentel, as senator of the Philippines and candidate for the May 10, 2004 elections, possesses the
requisite standing since he has substantial interests in the subject matter of the petition, among other preliminary considerations. Regarding SJS and
Laserna, this Court is wont to relax the rule on locus standi owing primarily to the transcendental importance and the paramount public interest involved
in the enforcement of Sec. 36 of RA 9165.
The Consolidated Issues
The principal issues before us are as follows:
(1) Do Sec. 36 (g) of RA 9165 and COMELEC Resolution No. 6486 impose an additional qualification for candidates for senator? Corollarily, can
Congress enact a law prescribing qualifications for candidates for senator in addition to those laid down by the Constitution? and IECcaA
(2) Are paragraphs (c), (d), (f), and (g) of Sec. 36, RA 9165 unconstitutional? Specifically, do these paragraphs violate the right to privacy, the right
against unreasonable searches and seizure, and the equal protection clause? Or do they constitute undue delegation of legislative power?
Pimentel Petition (Constitutionality of Sec. 36 [g] of RA 9165 and COMELEC Resolution No. 6486)
In essence, Pimentel claims that Sec. 36 (g) of RA 9165 and COMELEC Resolution No. 6486 illegally impose an additional qualification on candidates
for senator. He points out that, subject to the provisions on nuisance candidates, a candidate for senator needs only to meet the qualifications laid down
in Sec. 3, Art. VI of the Constitution, to wit: (1) citizenship, (2) voter registration, (3) literacy, (4) age, and (5) residency. Beyond these stated qualification
requirements, candidates for senator need not possess any other qualification to run for senator and be voted upon and elected as member of the
Senate. The Congress cannot validly amend or otherwise modify these qualification standards, as it cannot disregard, evade, or weaken the force of a
constitutional mandate, 7 or alter or enlarge the Constitution.

Pimentel's contention is well-taken. Accordingly, Sec. 36 (g) of RA 9165 should be, as it is hereby declared as, unconstitutional. It is basic that if a law or
an administrative rule violates any norm of the Constitution, that issuance is null and void and has no effect. The Constitution is the basic law to which all
laws must conform; no act shall be valid if it conflicts with the Constitution. 8 In the discharge of their defined functions, the three departments of
government have no choice but to yield obedience to the commands of the Constitution. Whatever limits it imposes must be observed. 9
Congress' inherent legislative powers, broad as they may be, are subject to certain limitations. As early as 1927, in Government v. Springer, the Court
has defined, in the abstract, the limits on legislative power in the following wise:
Someone has said that the powers of the legislative department of the Government, like the boundaries of the ocean, are
unlimited. In constitutional governments, however, as well as governments acting under delegated authority, the powers of each
of the departments . . . are limited and confined within the four walls of the constitution or the charter, and each department can
only exercise such powers as are necessarily implied from the given powers. The Constitution is the shore of legislative authority
against which the waves of legislative enactment may dash, but over which it cannot leap. 10 EHSIcT
Thus, legislative power remains limited in the sense that it is subject to substantive and constitutional limitations which circumscribe both the exercise of
the power itself and the allowable subjects of legislation. 11 The substantive constitutional limitations are chiefly found in the Bill of Rights 12 and other
provisions, such as Sec. 3, Art. VI of the Constitution prescribing the qualifications of candidates for senators.
In the same vein, the COMELEC cannot, in the guise of enforcing and administering election laws or promulgating rules and regulations to implement
Sec. 36 (g), validly impose qualifications on candidates for senator in addition to what the Constitution prescribes. If Congress cannot require a
candidate for senator to meet such additional qualification, the COMELEC, to be sure, is also without such power. The right of a citizen in the democratic
process of election should not be defeated by unwarranted impositions of requirement not otherwise specified in the Constitution. 13
Sec. 36 (g) of RA 9165, as sought to be implemented by the assailed COMELEC resolution, effectively enlarges the qualification requirements
enumerated in the Sec. 3, Art. VI of the Constitution. As couched, said Sec. 36 (g) unmistakably requires a candidate for senator to be certified illegaldrug clean, obviously as a pre-condition to the validity of a certificate of candidacy for senator or, with like effect, a condition sine qua non to be voted
upon and, if proper, be proclaimed as senator-elect. The COMELEC resolution completes the chain with the proviso that "[n]o person elected to any
public office shall enter upon the duties of his office until he has undergone mandatory drug test". Viewed, therefore, in its proper context, Sec. 36 (g) of
RA 9165 and the implementing COMELEC Resolution add another qualification layer to what the 1987 Constitution, at the minimum, requires for
membership in the Senate. Whether or not the drug-free bar set up under the challenged provision is to be hurdled before or after election is really of no
moment, as getting elected would be of little value if one cannot assume office for non-compliance with the drug-testing requirement.
It may of course be argued, in defense of the validity of Sec. 36 (g) of RA 9165, that the provision does not expressly state that non-compliance with the
drug test imposition is a disqualifying factor or would work to nullify a certificate of candidacy. This argument may be accorded plausibility if the drug test
requirement is optional. But the particular section of the law, without exception, made drug-testing on those covered mandatory, necessarily suggesting
that the obstinate ones shall have to suffer the adverse consequences for not adhering to the statutory command. And since the provision deals with
candidates for public office, it stands to reason that the adverse consequence adverted to can only refer to and revolve around the election and the
assumption of public office of the candidates. Any other construal would reduce the mandatory nature of Sec. 36 (g) of RA 9165 into a pure jargon
without meaning and effect whatsoever.
While it is anti-climactic to state it at this juncture, COMELEC Resolution No. 6486 is no longer enforceable, for by its terms, it was intended to cover
only the May 10, 2004 synchronized elections and the candidates running in that electoral event. Nonetheless, to obviate repetition, the Court deems it
appropriate to review and rule, as it hereby rules, on its validity as an implementing issuance.
It ought to be made abundantly clear, however, that the unconstitutionality of Sec. 36 (g) of RA 9165 is rooted on its having infringed the constitutional
provision defining the qualification or eligibility requirements for one aspiring to run for and serve as senator.
SJS Petition (Constitutionality of Sec. 36 [c], [d], [f], and [g] of RA 9165)
The drug test prescribed under Sec. 36 (c), (d), and (f) of RA 9165 for secondary and tertiary level students and public and private employees, while
mandatory, is a random and suspicionless arrangement. The objective is to stamp out illegal drug and safeguard in the process "the well being of [the]
citizenry, particularly the youth, from the harmful effects of dangerous drugs". This statutory purpose, per the policy-declaration portion of the law, can be
achieved via the pursuit by the state of "an intensive and unrelenting campaign against the trafficking and use of dangerous drugs . . . through an
integrated system of planning, implementation and enforcement of anti-drug abuse policies, programs and projects". 14 The primary legislative intent is
not criminal prosecution, as those found positive for illegal drug use as a result of this random testing are not necessarily treated as criminals. They may
even be exempt from criminal liability should the illegal drug user consent to undergo rehabilitation. Secs. 54 and 55 of RA 9165 are clear on this point:
aIAHcE
Sec. 54. Voluntary Submission of a Drug Dependent to Confinement, Treatment and Rehabilitation. A drug dependent or any
person who violates Section 15 of this Act may, by himself/herself or through his/her parent, [close relatives] . . . apply to the
Board . . . for treatment and rehabilitation of the drug dependency. Upon such application, the Board shall bring forth the matter to
the Court which shall order that the applicant be examined for drug dependency. If the examination . . . results in the certification
that the applicant is a drug dependent, he/she shall be ordered by the Court to undergo treatment and rehabilitation in a Center
designated by the Board . . . .
xxx xxx xxx
Sec. 55. Exemption from the Criminal Liability Under the Voluntary Submission Program. A drug dependent under the
voluntary submission program, who is finally discharged from confinement, shall be exempt from the criminal liability under
Section 15 of this Act subject to the following conditions:
xxx xxx xxx
School children, the US Supreme Court noted, are most vulnerable to the physical, psychological, and addictive effects of drugs. Maturing nervous
systems of the young are more critically impaired by intoxicants and are more inclined to drug dependency. Their recovery is also at a depressingly low
rate. 15

The right to privacy has been accorded recognition in this jurisdiction as a facet of the right protected by the guarantee against unreasonable search and
seizure 16 under Sec. 2, Art. III 17 of the Constitution. But while the right to privacy has long come into its own, this case appears to be the first time that
the validity of a state-decreed search or intrusion through the medium of mandatory random drug testing among students and employees is, in this
jurisdiction, made the focal point. Thus, the issue tendered in these proceedings is veritably one of first impression.

US jurisprudence is, however, a rich source of persuasive jurisprudence. With respect to random drug testing among school children, we turn to the
teachings of Vernonia School District 47J v. Acton (Vernonia) and Board of Education of Independent School District No. 92 of Pottawatomie County, et
al. v. Earls, et al. (Board of Education), 18 both fairly pertinent US Supreme Court-decided cases involving the constitutionality of governmental search.
cDSAEI
In Vernonia, school administrators in Vernonia, Oregon wanted to address the drug menace in their respective institutions following the discovery of
frequent drug use by school athletes. After consultation with the parents, they required random urinalysis drug testing for the school's athletes. James
Acton, a high school student, was denied participation in the football program after he refused to undertake the urinalysis drug testing. Acton forthwith
sued, claiming that the school's drug testing policy violated, inter alia, the Fourth Amendment 19 of the US Constitution.
The US Supreme Court, in fashioning a solution to the issues raised in Vernonia, considered the following: (1) schools stand in loco parentis over their
students; (2) school children, while not shedding their constitutional rights at the school gate, have less privacy rights; (3) athletes have less privacy
rights than non-athletes since the former observe communal undress before and after sports events; (4) by joining the sports activity, the athletes
voluntarily subjected themselves to a higher degree of school supervision and regulation; (5) requiring urine samples does not invade a student's privacy
since a student need not undress for this kind of drug testing; and (6) there is need for the drug testing because of the dangerous effects of illegal drugs
on the young. The US Supreme Court held that the policy constituted reasonable search under the Fourth 20 and 14th Amendments and declared the
random drug-testing policy constitutional.
In Board of Education, the Board of Education of a school in Tecumseh, Oklahoma required a drug test for high school students desiring to join extracurricular activities. Lindsay Earls, a member of the show choir, marching band, and academic team declined to undergo a drug test and averred that the
drug-testing policy made to apply to non-athletes violated the Fourth and 14th Amendments. As Earls argued, unlike athletes who routinely undergo
physical examinations and undress before their peers in locker rooms, non-athletes are entitled to more privacy.
The US Supreme Court, citing Vernonia, upheld the constitutionality of drug testing even among non-athletes on the basis of the school's custodial
responsibility and authority. In so ruling, said court made no distinction between a non-athlete and an athlete. It ratiocinated that schools and teachers
act in place of the parents with a similar interest and duty of safeguarding the health of the students. And in holding that the school could implement its
random drug-testing policy, the Court hinted that such a test was a kind of search in which even a reasonable parent might need to engage.
In sum, what can reasonably be deduced from the above two cases and applied to this jurisdiction are: (1) schools and their administrators stand in loco
parentis with respect to their students; (2) minor students have contextually fewer rights than an adult, and are subject to the custody and supervision of
their parents, guardians, and schools; (3) schools, acting in loco parentis, have a duty to safeguard the health and well-being of their students and may
adopt such measures as may reasonably be necessary to discharge such duty; and (4) schools have the right to impose conditions on applicants for
admission that are fair, just, and non-discriminatory.
Guided by Vernonia and Board of Education, the Court is of the view and so holds that the provisions of RA 9165 requiring mandatory, random, and
suspicionless drug testing of students are constitutional. Indeed, it is within the prerogative of educational institutions to require, as a condition for
admission, compliance with reasonable school rules and regulations and policies. To be sure, the right to enroll is not absolute; it is subject to fair,
reasonable, and equitable requirements.
The Court can take judicial notice of the proliferation of prohibited drugs in the country that threatens the well-being of the people, 21 particularly the
youth and school children who usually end up as victims. Accordingly, and until a more effective method is conceptualized and put in motion, a random
drug testing of students in secondary and tertiary schools is not only acceptable but may even be necessary if the safety and interest of the student
population, doubtless a legitimate concern of the government, are to be promoted and protected. To borrow from Vernonia, "[d]eterring drug use by our
Nation's schoolchildren is as important as enhancing efficient enforcement of the Nation's laws against the importation of drugs"; the necessity for the
State to act is magnified by the fact that the effects of a drug-infested school are visited not just upon the users, but upon the entire student body and
faculty. 22 Needless to stress, the random testing scheme provided under the law argues against the idea that the testing aims to incriminate
unsuspecting individual students. TAHCEc
Just as in the case of secondary and tertiary level students, the mandatory but random drug test prescribed by Sec. 36 of RA 9165 for officers and
employees of public and private offices is justifiable, albeit not exactly for the same reason. The Court notes in this regard that petitioner SJS, other than
saying that "subjecting almost everybody to drug testing, without probable cause, is unreasonable, an unwarranted intrusion of the individual right to
privacy", 23 has failed to show how the mandatory, random, and suspicionless drug testing under Sec. 36 (c) and (d) of RA 9165 violates the right to
privacy and constitutes unlawful and/or unconsented search under Art. III, Secs. 1 and 2 of the Constitution. 24 Petitioner Laserna's lament is just as
simplistic, sweeping, and gratuitous and does not merit serious consideration. Consider what he wrote without elaboration:
The US Supreme Court and US Circuit Courts of Appeals have made various rulings on the constitutionality of mandatory drug
tests in the school and the workplaces. The US courts have been consistent in their rulings that the mandatory drug tests violate a
citizen's constitutional right to privacy and right against unreasonable search and seizure. They are quoted extensively
hereinbelow. 25
The essence of privacy is the right to be left alone. 26 In context, the right to privacy means the right to be free from unwarranted exploitation of one's
person or from intrusion into one's private activities in such a way as to cause humiliation to a person's ordinary sensibilities. 27 And while there has
been general agreement as to the basic function of the guarantee against unwarranted search, "translation of the abstract prohibition against
'unreasonable searches and seizures' into workable broad guidelines for the decision of particular cases is a difficult task", to borrow from C. Camara v.
Municipal Court. 28 Authorities are agreed though that the right to privacy yields to certain paramount rights of the public and defers to the state's
exercise of police power. 29
As the warrantless clause of Sec. 2, Art III of the Constitution is couched and as has been held, "reasonableness" is the touchstone of the validity of a
government search or intrusion. 30 And whether a search at issue hews to the reasonableness standard is judged by the balancing of the governmentmandated intrusion on the individual's privacy interest against the promotion of some compelling state interest. 31 In the criminal context,
reasonableness requires showing of probable cause to be personally determined by a judge. Given that the drug-testing policy for employees and
students for that matter under RA 9165 is in the nature of administrative search needing what was referred to in Vernonia as "swift and informal
disciplinary procedures", the probable-cause standard is not required or even practicable. Be that as it may, the review should focus on the
reasonableness of the challenged administrative search in question. EcICDT
The first factor to consider in the matter of reasonableness is the nature of the privacy interest upon which the drug testing, which effects a search within
the meaning of Sec. 2, Art. III of the Constitution, intrudes. In this case, the office or workplace serves as the backdrop for the analysis of the privacy
expectation of the employees and the reasonableness of drug testing requirement. The employees' privacy interest in an office is to a large extent
circumscribed by the company's work policies, the collective bargaining agreement, if any, entered into by management and the bargaining unit, and the
inherent right of the employer to maintain discipline and efficiency in the workplace. Their privacy expectation in a regulated office environment is, in fine,
reduced; and a degree of impingement upon such privacy has been upheld.

Just as defining as the first factor is the character of the intrusion authorized by the challenged law. Reduced to a question form, is the scope of the
search or intrusion clearly set forth, or, as formulated in Ople v. Torres, is the enabling law authorizing a search "narrowly drawn" or "narrowly focused"?
32

The poser should be answered in the affirmative. For one, Sec. 36 of RA 9165 and its implementing rules and regulations (IRR), as couched, contain
provisions specifically directed towards preventing a situation that would unduly embarrass the employees or place them under a humiliating experience.
While every officer and employee in a private establishment is under the law deemed forewarned that he or she may be a possible subject of a drug test,
nobody is really singled out in advance for drug testing. The goal is to discourage drug use by not telling in advance anyone when and who is to be
tested. And as may be observed, Sec. 36 (d) of RA 9165 itself prescribes what, in Ople, is a narrowing ingredient by providing that the employees
concerned shall be subjected to "random drug test as contained in the company's work rules and regulations . . . for purposes of reducing the risk in the
work place."
For another, the random drug testing shall be undertaken under conditions calculated to protect as much as possible the employee's privacy and dignity.
As to the mechanics of the test, the law specifies that the procedure shall employ two testing methods, i.e., the screening test and the confirmatory test,
doubtless to ensure as much as possible the trustworthiness of the results. But the more important consideration lies in the fact that the test shall be
conducted by trained professionals in access-controlled laboratories monitored by the Department of Health (DOH) to safeguard against results
tampering and to ensure an accurate chain of custody. 33 In addition, the IRR issued by the DOH provides that access to the drug results shall be on the
"need to know" basis; 34 that the "drug test result and the records shall be [kept] confidential subject to the usual accepted practices to protect the
confidentiality of the test results". 35 Notably, RA 9165 does not oblige the employer concerned to report to the prosecuting agencies any information or
evidence relating to the violation of the Comprehensive Dangerous Drugs Act received as a result of the operation of the drug testing. All told, therefore,
the intrusion into the employees' privacy, under RA 9165, is accompanied by proper safeguards, particularly against embarrassing leakages of test
results, and is relatively minimal. STHAaD
To reiterate, RA 9165 was enacted as a measure to stamp out illegal drug in the country and thus protect the well-being of the citizens, especially the
youth, from the deleterious effects of dangerous drugs. The law intends to achieve this through the medium, among others, of promoting and resolutely
pursuing a national drug abuse policy in the workplace via a mandatory random drug test. 36 To the Court, the need for drug testing to at least minimize
illegal drug use is substantial enough to override the individual's privacy interest under the premises. The Court can consider that the illegal drug
menace cuts across gender, age group, and social-economic lines. And it may not be amiss to state that the sale, manufacture, or trafficking of illegal
drugs, with their ready market, would be an investor's dream were it not for the illegal and immoral components of any of such activities. The drug
problem has hardly abated since the martial law public execution of a notorious drug trafficker. The state can no longer assume a laid back stance with
respect to this modern-day scourge. Drug enforcement agencies perceive a mandatory random drug test to be an effective way of preventing and
deterring drug use among employees in private offices, the threat of detection by random testing being higher than other modes. The Court holds that
the chosen method is a reasonable and enough means to lick the problem.
Taking into account the foregoing factors, i.e., the reduced expectation of privacy on the part of the employees, the compelling state concern likely to be
met by the search, and the well-defined limits set forth in the law to properly guide authorities in the conduct of the random testing, we hold that the
challenged drug test requirement is, under the limited context of the case, reasonable and, ergo, constitutional.
Like their counterparts in the private sector, government officials and employees also labor under reasonable supervision and restrictions imposed by
the Civil Service law and other laws on public officers, all enacted to promote a high standard of ethics in the public service. 37 And if RA 9165 passes
the norm of reasonableness for private employees, the more reason that it should pass the test for civil servants, who, by constitutional command, are
required to be accountable at all times to the people and to serve them with utmost responsibility and efficiency. 38
Petitioner SJS' next posture that Sec. 36 of RA 9165 is objectionable on the ground of undue delegation of power hardly commends itself for
concurrence. Contrary to its position, the provision in question is not so extensively drawn as to give unbridled options to schools and employers to
determine the manner of drug testing. Sec. 36 expressly provides how drug testing for students of secondary and tertiary schools and
officers/employees of public/private offices should be conducted. It enumerates the persons who shall undergo drug testing. In the case of students, the
testing shall be in accordance with the school rules as contained in the student handbook and with notice to parents. On the part of officers/employees,
the testing shall take into account the company's work rules. In either case, the random procedure shall be observed, meaning that the persons to be
subjected to drug test shall be picked by chance or in an unplanned way. And in all cases, safeguards against misusing and compromising the
confidentiality of the test results are established.
Lest it be overlooked, Sec. 94 of RA 9165 charges the DDB to issue, in consultation with the DOH, Department of the Interior and Local Government,
Department of Education, and Department of Labor and Employment, among other agencies, the IRR necessary to enforce the law. In net effect then,
the participation of schools and offices in the drug testing scheme shall always be subject to the IRR of RA 9165. It is, therefore, incorrect to say that
schools and employers have unchecked discretion to determine how often, under what conditions, and where the drug tests shall be conducted.
The validity of delegating legislative power is now a quiet area in the constitutional landscape. 39 In the face of the increasing complexity of the task of
the government and the increasing inability of the legislature to cope directly with the many problems demanding its attention, resort to delegation of
power, or entrusting to administrative agencies the power of subordinate legislation, has become imperative, as here.
Laserna Petition (Constitutionality of Sec. 36 [c], [d], [f], and [g] of RA 9165)
Unlike the situation covered by Sec. 36 (c) and (d) of RA 9165, the Court finds no valid justification for mandatory drug testing for persons accused of
crimes. In the case of students, the constitutional viability of the mandatory, random, and suspicionless drug testing for students emanates primarily from
the waiver by the students of their right to privacy when they seek entry to the school, and from their voluntarily submitting their persons to the parental
authority of school authorities. In the case of private and public employees, the constitutional soundness of the mandatory, random, and suspicionless
drug testing proceeds from the reasonableness of the drug test policy and requirement. EHaCTA
We find the situation entirely different in the case of persons charged before the public prosecutor's office with criminal offenses punishable with six (6)
years and one (1) day imprisonment. The operative concepts in the mandatory drug testing are "randomness" and "suspicionless". In the case of
persons charged with a crime before the prosecutor's office, a mandatory drug testing can never be random or suspicionless. The ideas of randomness
and being suspicionless are antithetical to their being made defendants in a criminal complaint. They are not randomly picked; neither are they beyond
suspicion. When persons suspected of committing a crime are charged, they are singled out and are impleaded against their will. The persons thus
charged, by the bare fact of being haled before the prosecutor's office and peaceably submitting themselves to drug testing, if that be the case, do not
necessarily consent to the procedure, let alone waive their right to privacy. 40 To impose mandatory drug testing on the accused is a blatant attempt to
harness a medical test as a tool for criminal prosecution, contrary to the stated objectives of RA 9165. Drug testing in this case would violate a persons'
right to privacy guaranteed under Sec. 2, Art. III of the Constitution. Worse still, the accused persons are veritably forced to incriminate themselves.

WHEREFORE, the Court resolves to GRANT the petition in G.R. No. 161658 and declares Sec. 36 (g) of RA 9165 and COMELEC Resolution No. 6486
as UNCONSTITUTIONAL; and to PARTIALLY GRANT the petition in G.R. Nos. 157870 and 158633 by declaring Sec. 36 (c) and (d) of RA 9165
CONSTITUTIONAL, but declaring its Sec. 36 (f) UNCONSTITUTIONAL. All concerned agencies are, accordingly, permanently enjoined from
implementing Sec. 36 (f) and (g) of RA 9165. No costs.
SO ORDERED.
Puno, C.J., Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio-Morales, Azcuna, Tinga, Chico-Nazario, Nachura, Reyes,
Leonardo-de Castro and Brion, JJ., concur.
Footnotes
1.Re-elected as senator in the 2004 elections. TIaDHE
2.Rollo (G.R. No. 158633), pp. 184-185.
3.Dumlao v. COMELEC, No. L-52245, January 22, 1980, 95 SCRA 392, 401.
4.Bernas, THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES: A COMMENTARY 939 (2003).
5.Gonzales v. Narvasa, G.R. No. 140835, August 14, 2000, 337 SCRA 733, 740.

6.Tatad v. Secretary of the Department of Energy, G.R. Nos. 124360 & 127867, November 5, 1997, 281 SCRA 330, 349; De Guia v. COMELEC, G.R.
No. 104712, May 6, 1992, 208 SCRA 420, 422.
7.Palmer v. Board of Education, 276 NY 222 11 NE 2d 887.
8.CRUZ, CONSTITUTIONAL LAW 4 (2000).
9.Mutuc v. Commission on Elections, No. L-32717, November 26, 1970, 36 SCRA 228, 234.
10.50 Phil. 259, 309 (1927).
11.J. Bernas, S.J., THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES: A COMMENTARY 604 (1996).
12.Id. DAEaTS
13.See concurring opinion in Go v. Commission on Elections, G.R. No. 147741, May 10, 2001, 357 SCRA 739, 753.
14.RA 9165, Sec. 2.
15.Vernonia School District 47J v. Acton, 515 U.S. 646 (1995), 661.
16.Ople v. Torres, G.R. No. 127685, July 23, 1998, 293 SCRA 141, 169; citing Morfe v. Mutuc, No. L-20387, January 31, 1968, 22 SCRA 424, 444445.
17.Sec. 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever
nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be
determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the person or things to be seized.
18.536 U.S. 822 (2002); cited in 2 Bernas, CONSTITUTIONAL RIGHTS AND SOCIAL DEMANDS 224-227 (2004).
19.The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be
violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be
searched, and the persons or things to be seized.
20.The Fourth Amendment is almost similar to Sec. 2, Art. III of the Constitution, except that the latter limited the determination of probable cause to a
judge after an examination under oath of the complainant and his witnesses. Hence, pronouncements of the US Federal Supreme Court
and State Appellate Court may be considered doctrinal in this jurisdiction, unless they are manifestly contrary to our Constitution. See
Herrera, HANDBOOK ON ARREST, SEARCH AND SEIZURE 8 (2003). CAcEaS
21.Tolentino v. Alconcel, No. L-63400, March 18, 1983, 121 SCRA 92, 95-96.
22.Rollo (G.R. No. 158633), p. 204, respondents' Consolidated Memorandum.
23.Rollo (G.R. No. 157870), p. 10.
24.Section 1. 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.
Sec. 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever
nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be
determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the person or things to be seized.
25.Rollo (G.R. No. 158633), p. 9.
26.Ople, supra note 16, at 153; citing Cooley on Torts, Sec. 135, Vol. 1, 4th ed., [1932].
27.62 Am. Jur. 2d, Privacy, Sec. 1.
28.387 U.S. 523; cited in 2 Bernas, supra note 18, at 232.
29.62 Am. Jur. 2d, Privacy, Sec. 17.
30.Vernonia & Board of Education, supra notes 15 & 18.

31.Skinner v. Railway Labor Executives Assn., 489 U.S. 602, 619 (1989); cited in Vernonia, supra.
32.Supra note 16, at 166 & 169. cTAaDC
33.Under Sec. 7 [3] of the DOH IRR Governing Licensing and Accreditation of Drug Laboratories, a laboratory is required to use documented chain of
custody procedures to maintain control and custody of specimens.
34.DOH IRR Governing Licensing and Accreditation of Drug Laboratories, Sec. 7 [10.3] provides that the original copy of the test results form shall be
given to the client/donor, copy furnished the DOH and the requesting agency.
35.Id., Sec. 7 [10.4].
36.Secs. 47 and 48 of RA 9165 charge the Department of Labor and Employment with the duty to develop and promote a national drug prevention
program and the necessary guidelines in the work place, which shall include a mandatory drafting and adoption of policies to achieve a
drug-free workplace.
37.CODE OF CONDUCT AND ETHICAL STANDARDS FOR PUBLIC OFFICERS AND EMPLOYEES, Sec. 2.
38.CONSTITUTION, Art. XI, Sec. 1.
39.Tatad, supra note 6, at 351.
40.Leona Pasion Viuda de Garcia v. Locsin, 65 Phil. 689, 695 (1938); citing Cooley, CONST. LIM. 630 (8th ed.).

||| (Social Justice Society v. Dangerous Drugs Board, G.R. No. 157870, 158633, 161658, November 03, 2008)

EN BANC
[G.R. Nos. L-12582 and L-12598. January 28, 1961.]
LVN PICTURES, INC., petitioner-appellant, vs. PHILIPPINE MUSICIANS GUILD (FFW) and COURT OF INDUSTRIAL
RELATIONS, respondents-appellees. SAMPAGUITA PICTURES, INC., petitioner-appellant, vs. PHILIPPINE MUSICIANS
GUILD (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees.
Nicanor Sison for petitioner-appellant.
Jaime J. Ilagan for respondent-appellee Court of Agrarian Relations.
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild.
SYLLABUS
1. LABOR; CERTIFICATION ELECTION; PROPRIETY OF PASSING UPON MERITS OF PETITION WHERE EXISTENCE OF EMPLOYEREMPLOYEE RELATIONSHIP IS CONTESTED. It is proper for the Court of Industrial Relations to pass upon the merits of a petition for certification
although the existence of employer-employee relationship between the parties is contested, provided that after due hearing, the parties are found to bear
said relationship.
2. ID.; ID.; NATURE OF CERTIFICATION PROCEEDING; DISCRETION OF COURT IN DETERMINING PROCEDURE. A certification proceeding is
not a "litigation" in the sense in which this term is commonly understood, but a mere investigation of a non-adversary, fact-finding character, in which the
investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of employees as to the matter of their
representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining
representatives by employees.
3. ID.; ID.; COURT'S ACTION IN DECIDING UPON A UNIT FOR COLLECTIVE BARGAINING PURPOSES DISCRETIONARY. The action of the
Court of Industrial Relations in deciding upon an appropriate unit for collective bargaining purposes is discretionary (N.L.R.B. vs. May Dept. Store Co.,
66 Sup. Ct. 468, 90 L. ed. 145) and that its judgment in this respect is entitled to almost complete finality, unless its action is arbitrary or capricious
(Marshall Field & Co. vs. N.L.R.B. [C.C.A. 1943], 135 F. 2d. 391).
4. ID.; ID.; FAILURE OF GUILD TO ALLEGE THAT ITS MEMBERS CONSTITUTE A MAJORITY OF ALL THE EMPLOYEES IN THE COMPANIES.
Where a guild was certified as the sole bargaining agency for the musicians working in certain film companies, and it does not intend to represent other
employees therein, it is not necessary for it to allege that his members constitute a majority of all the employees of the companies, including those who
are not musicians.
5. EMPLOYER AND EMPLOYEE; HOW RELATIONSHIP IS ESTABLISHED; ELEMENT OF CONTROL OVER MEANS TO ACHIEVE AN END. The
musical directors in the instant case have no control over the musicians involved in the present case. Said directors control neither the music to be
played, nor the musicians playing it. The film companies summon the musicians to work, through the musical directors. The film companies, through the
musical directors, provide the transportation to and from the studio. The film companies furnish meal at dinner time. The motion picture director who is
an employee of the company not the musical director supervises the recording of the musicians and tells them what to do in every detail, and
solely directs the performance of the musicians before the camera. Held : An employer-employee relationship exists between the musicians and the film
companies. The relationship exists where the person for whom the services are performed reserves a right to control not only the end to be achieved but
also the means to be used in reaching such end. (Alabama Highway Express Co. vs. Local, 612, 108 S. 2d 350.)
DECISION
CONCEPCION, J p:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc., seek a review by certiorari of an order of the Court of Industrial Relations in Case
No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining
agency of all musicians working with said companies, as well as with the Premiere Productions, Inc., which has not appealed. The appeal of LVN
Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the
same order, the two cases have been jointly heard in this Court, and will similarly be disposed of.
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a duly registered legitimate
labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the
Philippine laws, engaged in the making of motion pictures and in the processing and distribution thereof; that said companies employ musicians for the
purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental music, without which a motion
picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical recording of said companies are members of the Guild;
and that the same has no knowledge of the existence of any other legitimate labor organization representing musicians in said companies. Premised
upon these allegations, the Guild prayed that it be certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned
companies.
In their respective answers, the latter denied that they have any musicians as employees, and alleged that the musical numbers in the films of the
companies are furnished by independent contractors. The lower court, however, rejected this pretense and sustained the theory of the Guild, with the
result already adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN Pictures, Inc. and Sampaguita
Pictures, Inc. filed these petitions for review by certiorari.
Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film companies, the LVN
Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence of employer- employee relationship between the parties
is contested. However, this claim is neither borne out by any legal provision nor supported by any authority. So long as, after due hearing, the parties are
found to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the petition for certification.
It is next urged that a certification is improper in the present case, because "(a) the petition does not allege and no evidence was presented that the
alleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said alleged musicians- employees represent a majority of
the other numerous employees of the film companies constituting a proper bargaining unit under section 12 (a) of Republic Act No. 875."
The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is not fatal in a certification proceeding, for the
same is not a "litigation" in the sense in which this term is commonly understood, but a mere investigation of a non-adversary, fact finding character, in
which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of employees as to the matter of
their representation. In connection therewith, the court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice
of bargaining representatives by employees. 1 Moreover, it is alleged in the petition that the Guild is a duly registered legitimate labor organization and

that ninety-five (95%) per cent of the musicians playing for all the musical recordings of the film companies involving in these cases are members of the
Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it appears that, at the hearing in the lower court, it was merely the status of
the musicians as its employees that the film companies really contested. Besides, the substantial difference between the work performed by said
musicians and that of other persons who participate in the production of a film, and the peculiar circumstances under which the services of the former
are engaged and rendered, suffice to show that they constitute a proper bargaining unit.
At this juncture, it should be noted that the action of the lower court in deciding upon an appropriate unit for collective bargaining purposes is
discretionary (N.L.R.B. vs. May Dept. Store Co., 66 Sup. Ct. 468, 90 L. ed. 145) and that its judgment in this respect is entitled to almost complete
finality, unless its action is arbitrary or capricious (Marshall Field & Co. vs. N.L.R.B. [C.C.A. 1943], 135 F. 2d. 391), which is far from being so in the
cases at bar.
Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in the aforesaid film companies. It
does not intend to represent the other employees therein. Hence, it was not necessary for the Guild to allege that its members constitute a majority of all
the employees of said film companies, including those who are not musicians.
The real issue in these cases, is whether or not the musicians in question are employees of the film companies. In this connection the lower court had
the following to say:
"As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer invariably
chooses, from the musical directors, one who will furnish the musical background for a film. A price is agreed upon verbally
between the producer and musical director for the cost of furnishing such musical background. Thus, the musical director may
compose his own music specially written for or adapted to the picture. He engages his own men and pays the corresponding
compensation of the musicians under him.
"When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film company (Exh.
'D'), which show the name of the musician, his musical instrument, and the date, time and place where he will be picked up by the
truck of the film company. The film company provides the studio for the use of the musicians for that particular recording. The
musicians are also provided transportation to and from the studio by the company. Similarly, the company furnishes them meals
at dinner time.

"During the recording sessions, the motion picture director, who is an employee of the company, supervises the recording of the
musicians and tells what to do in every detail. He solely directs the performance of the musicians before the camera. As director,
he supervises the performance of all the actors including the musicians who appear in the scenes so that in the actual
performance to be shown on the screen, the musical director's intervention has stopped.
"And even in the recording sessions and during the actual shooting of a scene the technicians, soundmen and other employees
of the company assist in the operation. Hence, the work of the musicians, is an integral part of the entire motion picture since they
not only furnish the music but are also called upon to appear in the finished picture.
"The question to be determined next is what legal relationship exist between the musicians and the company in the light of the
foregoing facts.
"We are thus called upon to apply R. A. Act No. 875, which is substantially the same as and patterned after the Wagner Act and
the Taft-Hartley Law of the United States. Hence, reference to decisions of American Courts on these laws on the point-at-issue
is called for.
"Statutes are to be construed in the light of purposes to be achieved and the evils sought to be remedied. (U.S. vs. American
Tracking Association, 310 U.S. 534, 84 L. ed. 1345.)
"In the case of National Labor Relations Board vs. Hearst Publications, 322, U.S. 111, the United States Supreme Court said the
Wagner Act was designed to avert the 'substantial obstruction to the free flow of commerce which results from strikes and other
forms of industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of employers'
to bargain collectively and the inability of workers to bargain successfully for improvement in their working conditions. Hence, the
purposes of the Act are to encourage collective bargaining and to remedy the workers' inability to bargaining power, by protecting
the exercise of full freedom, of association and designation of representatives of their own choosing, for the purpose of
negotiating the terms and conditions of their employment.'
"The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within the traditional
legal distinctions, separating them from 'independent contractor.' Myriad forms of service relationship, with infinite and subtle
variations in the term of employment, blanket the nation's economy. Some are within this Act, others beyond its coverage. Large
numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality of bargaining power in
controversies of their wages, hours and working conditions may characterize the status of one group as of the other. The former,
when acting alone may be as helpless in dealing with the employer 'as dependent on his daily wage and as unable to resist
arbitrary and unfair treatment as the latter.'
"To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of forces in
certain types of economic relationship. Congress recognized those economic relationships cannot be fitted neatly into the
containers designated as 'employee' and 'employer'. Employers and employees not in proximate relationship may be drawn into
common controversies by economic forces and that the very dispute sought to be avoided might involve employees' who are at
times brought into an economic relationship with 'employers', who are not their 'employers'. In this light, the language of the Act's
definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by underlying economic facts rather
than technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.).
"In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and the facts
involved in the economic relationship. Where all the conditions of relation require protection, protection ought to be given.
"By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we
eliminate the cause of industrial unrest and consequently we promote industrial peace, because we enable him to negotiate an
agreement which will settle disputes regarding conditions of employment, through the process of collective bargaining.

"The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all
employees in the conventional as well as in the legal sense except those excluded by express provision. (Connor Lumber Co. 11
NLRB, 776.)
"It is the purpose and policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the exercise by
employees of their right to self-organization for the purpose of collective bargaining. (b) To promote sound stable industrial peace
and the advancement of the general welfare, and the best interests of employers and employees by the settlement of issues
respecting terms and conditions of employment through the process of collective bargaining between employers and
representatives of their employees.
"The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for the individual
worker the rights and protection guaranteed by the Act. The matter is not conclusively determined by a contract which purports to
establish the status of the worker, not as an employee.
"The work of the musical director and musicians is a functional and integral part of the enterprise performed at the same studio
substantially under the direction and control of the company.
"In other words, to determine whether a person who performs work for another is the latter's employee or an independent
contractor, the National Labor Relations Board relies on "the right of control' test. Under this test an employer-employee
relationship exists where the person for whom the services are performed reserves the right to control not only the end to be
achieved, but also the manner and means to be used in reaching the end. (United Insurance Company, 108, NLRB No. 115.)
"Thus, in said similar case of Connor Lumber Company, the Supreme Court said:
'We find that the independent contractors and persons working under them are 'employees' within the
meaning of Section 2 (3) of its Act. However, we are of the opinion that the independent contractors have sufficient
authority over the persons working under their immediate supervision to warrant their exclusion from the unit. We shall
include in the unit the employees working under the supervision of the independent contractors, but exclude the
contractors.'
"Notwithstanding that the employees are called independent contractors, the Board will hold them to be employees under the Act
where the extent of the employer's control over them indicates that the relationship is in reality one of employment. (John
Hancock Life Insurance Co., 2375D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.). "The right of control of the film
company over the musicians is shown (1) by calling the musicians through 'call slips' in the name of the company; (2) by
arranging schedules in its studio for recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by
supervising and directing in detail, through the motion picture director, the performance of the musicians before the camera, in
order to suit the music they are playing to the picture which is being flashed on the screen.
"Thus, in application of Philippine statutes and pertinent decision of the United States courts on the matter to the facts established
in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of control' test, the
members of the Philippine Musicians Guild are employees of the three film companies and, therefore, entitled to right of collective
bargaining under Republic Act No. 875.
"In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians Guild is hereby
declared as the sole collective bargaining representative for all the musicians employed by the film companies."
We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in line with the spirit of our
decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the
employers in the Maligaya cases, to the effect that they had dealt with independent contractors, was stronger than that of the film companies in these
cases. The third parties with whom the management and workers contracted in the Maligaya cases were agencies registered with the Bureau of
Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship companies, with permits to engage in
said business issued by the City Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film companies claim to
have dealt with had nothing comparable to the business standing of said watchmen agencies. In this respect, the status of said musical directors is
analogous to that of the alleged independent contractor in Caro vs. Rilloraza, 102 Phil., 61, with the particularity that the Caro case involved the
enforcement of the liability of an employer under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of
the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and technical in these cases, than in the
Caro case.
Herein petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc. vs. CIR, (46 Off. Gaz., 5506, 5509;)
Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al Lagadan, L-8967 (May 31, 1956), and Josefa
Vda. de Cruz vs. The Manila Hotel Co., (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants, the case of the Sunripe
Coconut Product Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as piece-workers, under the "pakiao"
system, the "parers" and "shellers" involved in that case were, not independent contractors, but employees of said company, because "the requirement
imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted', in effect limits or controls the means or details
by which said workers are to accomplish their services" as in the cases before us.

The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the Workmen's Compensation
Commission for further evidence.
The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to paint a tank of the former.
Garcia, in turn, engaged the services of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus
sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable, lard, cooking oil and margarine, it was held that the
connection between its business and the painting aforementioned was purely casual; that Eliano Garcia was an independent contractor; that Geronimo
was not an employee of the company; and that the latter was not bound, therefore, to pay the compensation provided in the Workmen's Compensation
Act. Unlike the Philippine Manufacturing case, the relation between the business of herein petitioners-appellants and the work of the musicians in
question is not casual. As held in the order appealed from which, in this respect, is not contested by herein petitioners- appellants "the work of the
musicians is an integral part of the entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in the Caro case
(supra) the owner and operator of buildings for rent was held bound to pay the indemnity prescribed in the Workmen's Compensation Act for the injury
suffered by a carpenter while working as such in one of said buildings even though his services had been allegedly engaged by a third party who had

directly contracted with said owner. In other words, the repair work had not merely a casual connection with the business of said owner. It was a
necessary incident thereof, just as music is in the production of motion pictures.
The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It involved the interpretation
of Republic Act No. 660, which amends the law creating and establishing the Government Service Insurance System. No labor law was sought to be
construed in that case. In fact, the same was originally heard in the Court of First Instance of Manila, the decision of which was, on appeal, affirmed by
the Supreme Court. The meaning or scope of the term "employee", as used in the Industrial Peace Act (Republic Act No. 875) was not touched therein.
Moreover, the subject-matter of said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on the other,
whereby the latter agreed to furnish the former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing
time daily". In the language of this Court in that case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the
intervals and other details - such are left to the leader's discretion."
This is not the situation obtaining in the cases at bar. The musical directors above referred to have no such control over the musicians involved in the
present case. Said musical directors control neither the music to be played, nor the musicians playing it. The film companies summon the musicians to
work, through the musical directors. The film companies, through the musical directors, fix the date, the time and the place of work. The film companies,
not the musical directors, provide the transportation to and from the studio. The film companies furnish meal at dinner time.
What is more in the language of the order appealed from "during the recording sessions, the motion picture director who is an employee of the
company" not the musical director "supervises the recording of the musicians and tells them what to do in every detail." The motion picture director
not the musical director "solely directs the performance of the musicians before the camera". The motion picture director "supervises the
performance of all the actors, including the musicians who appear in the scenes, so that in the actual performance to be shown on the screen, the
musical director's intervention has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells the music
to be cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want more drums or more violin or piano, as
the case may be". The movie director "directly controls the activities of the musicians". He "says he wants more drums and the drummer plays more" or
"if he wants more violin or he does not like that".
It is well settled that "an employer-employee relationship exists . . . where the person for whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in reaching such end . . .." (Alabama Highway Express Co. vs. Local, 612, 108 S. 2d 350.)
The decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No.
210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee relationship was held to exist between the management and the
workers, notwithstanding the intervention of an alleged independent contractor, who had, and exercised, the power to hire and fire said workers. The
aforementioned control over "the means to be used" in reaching the desired end is possessed and exercised by the film companies over the musicians
in the cases before us.
WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ. concur.
Gutierrez David, J.,

took no part.

Footnotes

1.N.L.R.B. vs. Botany Worsted Mills, 319 U.S. 751. 87 L. ed. 1705; Southern S.S. Co. vs. N.L.R.B., 316 U.S. 31, 86 L. ed 1246; N.L.R.B. vs. A. J.
Tower Co., 66 Sup. Ct. 1011;

". . .'certification' and 'de-certification' proceedings under this section of the Act are a non-adversary nature. Such proceedings are not predicated
upon an allegation of misconduct requiring relief, but, rather, are merely of an inquisitorial nature. The Board's functions are not judicial in
nature, but are merely of an investigative character. The object of the proceedings is not the decision of an alleged commission of wrongs
nor asserted deprivation of rights but merely the determination of proper bargaining units and the ascertainment of the will and choice of the
employees in respect of the selection of a bargaining representative. The determination of the proceedings does not entail the entry of
remedial orders to redress rights, but culminates solely in an official designation of bargaining units and an affirmation of the employees'
expressed choice of bargaining agent." (Rothenberg on Labor Relations, p. 514.)

||| (LVN Pictures v. Philippine Musicians Guild, G.R. Nos. L-12582 and L-12598, January 28, 1961)

FIRST DIVISION
[G.R. No. L-32245. May 25, 1979]
DY KEH BENG, petitioner, vs. INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET. AL., respondents.
A. M. Sikat for petitioner.
D. A. Hernandez for respondents.
SYLLABUS
1. LABOR; EMPLOYER-EMPLOYEE RELATIONSHIP; TEST. Under the control test, an employer-employee relationship exist "where the person for
whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used un reaching such end." The
control test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right where the proprietor of
an establishment is "engaged in the manufacture of baskets known as "kaing," it is natural to except that those working therein would have to observe,
among others, the proprietor's requirements of size and quality of the kaing. Some control would necessarily be exercised by the proprietor as the
making of the kaing would be subject to his specifications. And where the work on the baskets in done at his establishment, it can be inferred that the
proprietor could easily exercise control on the men he employed.
2. ID.; ID.; "PAKYAW" Judicial notice may be taken of the fact that the so-called "pakyaw" system as generally practiced in the Philippines is, in fact, a
labor contract between the employers and employees, between capitalists and laborers.
3. COURT OF INDUSTRIAL RELATION; FINDINGS OF FACT. Section 6, Republic Act 875 provides that in unfair labor practice cases, the factual
findings of the Court of Industrial Relations are conclusive on the Supreme Court, if supported by substantial evidence.
4. LABOR; BACKWAGES; FORMULA FOR FIXING AWARD OF BACKWAGES. The formula for backwages in cases not terminated sooner calls for
fixing the award of backwages without qualification and deduction to three years, subject to deduction where there are mitigating circumstance in favor of
the employer but subject to increase by way of exemplary damages where there are aggravating circumstance. In the absence of such circumstance,
the dismissed employees may be awarded backwages for three years without qualification and deduction at the respective rates of compensation the
employees concerned were receiving at the time of dismissal.
DECISION
DE CASTRO, J p:
Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and
the Court's Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the
unfair labor practice acts alleged and order him to.
"reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of dismissal until fully
reinstated without loss to their right of seniority and of such other rights already acquired by them and/or allowed by law." 1
Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial Relations:
I
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF
PETITIONERS.
II
RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM THEIR
EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING
AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED
AND DESCRIBED IN THE COMPLAINT.
V
RESPONDENT COURT ERRED IN ORDERING PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS
WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS
TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY
LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the meaning of Section 4(a),
sub-paragraph (1) and (4), Republic Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for
their union activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial Relations for in behalf of the International
Labor and Marine Union of the Philippines and two of its members, Solano and Tudla. In his answer, Dy Keh Beng contended that he did not know Tudla
and that Solano was not his employee because the latter came to the establishment only when there was work which he did on pakiaw basis, each piece
of work being done under a separate contract. Moreover, Dy Keh Beng countered with a special defense of simple extortion committed by the head of
the labor union, Bienvenido Onayan. cdphil
After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial Relations. An employee-employer
relationship was found to have existed between Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on
piece basis. 4 The issue therefore centered on whether there existed an employee employer relation between petitioner Dy Keh Beng and the
respondents Solano and Tudla.

According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became employees of Dy Keh Beng
from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the event of illness, their work with the establishment was continuous although
their services were compensated on piece basis. Evidence likewise showed that at times the establishment had eight (8) workers and never less than
five(5); including the complainants, and that complainants used to receive P5.00 a day, sometimes less. 6
According to Dy Keh Beng, however, Solano was not his employee for the following reasons:
"(1) Solano never stayed long enough at Dy's establishment;
(2) Solano had to leave as soon as he was through with the order given him by Dy;
(3) When there were no orders needing his services there was nothing for him to do;
(4) When orders came to the shop that his regular workers could not fill, it was then that Dy went to his address in Caloocan and
fetched him for these orders; and
(5) Solano's work with Dy's establishment was not continuous." 7
According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875, where an
employee 8 is referred to as
"shall include any employee and shall not be limited to the employee of a particular employer unless the Act explicitly states
otherwise and shall include any individual whose work has ceased as a consequence of, or in connection with any current labor
dispute or because of any unfair labor practice and who has not obtained any other substantially equivalent and regular
employment."
while an employer 9
"includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor organization
(otherwise than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization."
Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points to the case of Madrigal
Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that: llcd
"The test . . . of the existence of employee and employer relationship is whether there is an understanding between the parties
that one is to render personal services to or for the benefit of the other and recognition by them of the right of one to order and
control the other in the performance of the work and to direct the manner and method of its performance."
Petitioner contends that the private respondents "did not meet the control test in the light of the . . . definition of the terms employer and employee,
because there was no evidence to show that petitioner had the right to direct the manner and method of respondent's work." 10 Moreover, it is argued
that petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the establishment only when there was work.
While this Court upholds the control test 11 under which an employer-employee relationship exists "where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end," it finds no merit with
petitioner's arguments as stated above. It should be borne in mind that the control test calls merely for the existence of the right to control the manner of
doing the work, not the actual exercise of the right. 12 Considering the finding by the Hearing Examiner that the establishment of Dy Keh Beng is
"engaged in the manufacture of baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe, among others,
Dy's requirements of size and quality of the kaing. Some control would necessarily be exercised by Dy as the making of the kaing would be subject to
Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily
exercise control on the men he employed.

As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing Examiner that
"circumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not
define the essence of the relation. Units of time . . . and units of work are in establishments like respondent (sic) just yardsticks
whereby to determine rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece
where work is done in such an establishment so as to put the worker completely at liberty to turn him out and take in another at
pleasure."
At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision in "Sunripe Coconut
Products Co. v. Court of Industrial Relations" (83 Phil. 518, 523), opined that
"judicial notice of the fact that the so-called 'pakyaw' system mentioned in this case as generally practiced in our country, is, in
fact, a labor contract between employers and employees, between capitalists and laborers."
Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its discretion when it
concluded that the findings of fact made by the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides that
in unfair labor practice cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme Court, if supported by substantial
evidence. This provision has been put into effect in a long line of decisions where the Supreme Court did not reverse the findings of fact of the Court of
Industrial Relations when they were supported by substantial evidence. 14
Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were dismissed, 15 and that the decision
being appealed ordered the payment of backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in
this connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not terminated sooner." 16 The formula calls for fixing the
award of backwages without qualification and deduction to three years, "subject to deduction where there are mitigating circumstances in favor of the
employer but subject to increase by way of exemplary damages where there are aggravating circumstances." 17 Considering there are no such
circumstances in this case, there is no reason why the Court should not apply the abovementioned formula in this instance. prLL
WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of backwages for three years without
qualification and deduction at the respective rates of compensation the employees concerned were receiving at the time of dismissal. The execution of
this award is entrusted to the National Labor Relations Commission. Costs against petitioner.
SO ORDERED.

Teehankee, Makasiar, Guerrero and Melencio Herrera, JJ., concur.

Fernandez, J., Did not take part.
Footnotes
1.Rollo, p. 48.
2.Petitioner's Brief, pp. 1-2.
3.Republic Act 875, as amended, Section 4. Unfair Labor Practices.
a) It shall be unfair labor practice for an employer:
1) To interfere with, restrain or coerce employees in the exercise of their rights guaranteed in section three;
xxx xxx xxx
(4) 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: . . .
4.Rollo, p. 32.
5.Id., p. 23.
6.Id.
7.Rollo, Annex A, p. 22.
8.Section 2(d), Republic Act 875, As Amended, otherwise known as the Industrial Peace Act.
9.Id., Section 2(c).
10.Petitioner's Brief, pp. 5-7.
11.LVN Pictures v. Philippine Musicians Guild, et. al., 110 Phil. 725.
12.Feati University v. Bautista, et al., L-21500, December 27, 1966, 18 SCRA 1191.
13.Rollo, p. 46.
14.Among them are: Philippine Newspapers' Guild v. Evening News, Inc., 86 Phil. 303; G.P.T.C. Employees Union v. Court of Industrial Relations, et.
al., 102 Phil. 538; Community Sawmill Company v. Court of Industrial Relations and Community Effort Labor Union, L-24347, March 27,
1979; Gonzalo, Puyat & Sons, Inc. v. Labayo, 62 SCRA 488; De Leon, et al. v. Pampanga Development Co., Inc., L-26844, September 30,
1969, 29 SCRA 628; Castillo, et al. v. Court of Industrial Relations, L-26124, May 29, 1971, 39 SCRA 75.
15.Rollo, p. 36.
16.Mercury Drug Co., et al. v. Court of Industrial Relations, L-23357, April 30, 1974, 56 SCRA 694, 712.
17.Id.

||| (Dy Keh Beng v. International Labor, G.R. No. L-32245, May 25, 1979)

IRST DIVISION
[G.R. No. 84484. November 15, 1989.]
INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO
BASIAO, respondents.
Tirol & Tirol for petitioner.
Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.
DECISION
NARVASA, J p:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract 1 by which:
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the
existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions . . . as provided in the Schedule of Commissions" of the contract
to "constitute a part of the consideration of . . . (said) agreement;" and
3. the "rules in . . . (the Company's) Rate Book and its Agent's Manual, as well as all its circulars . . . and those which may from
time to time be promulgated by it, . . ." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the
modes of termination of the agreement, viz.: prLL
"RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of
soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer
between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the
Company may from time to time prescribe.
"ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from
making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and
in circulars of the Office of the Insurance Commissioner.
"TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of .
. . (explicitly specified causes) . . .
Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance
Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its
expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for
any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the
first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is
paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.
"ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without
the prior consent in writing of the Company . . ."
Some four years later, in April 1972, the parties entered into another contract - an Agency Manager's Contract and to implement his end of it Basiao
organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract
with the Company. 2
In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil
action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his
commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the first
contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no
obligation to him for unpaid commissions under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee
relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision
directed payment of his unpaid commissions ". . . equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of
all the insurance policies solicited by . . . (him) in favor of the respondent company . . ." plus 10% attorney's fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and
prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by
him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section
217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor
whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action. cdrep
The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the
terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling
methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of
results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects
anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed or implicit conditions of Basiao's contract with the Company, the respondents contend that
they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing
the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the

power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's
contract obliging him to ". . . observe and conform to all rules and regulations which the Company may from time to time prescribe . . .," as well as to the
fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance
cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan: 10
". . . In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control
the employees' conduct - although the latter is the most important element (35 Am. Jur. 445). . . ,"
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or
agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct
of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them
in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual
contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the
result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the
business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but
also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide
its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules
which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also
reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's
contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to
establish an employer-employee relationship between him and the company.

There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties
for whom they worked. In Mafinco Trading Corporation vs. Ople, 13 the Court ruled that a person engaged to sell soft drinks for another, using a truck
supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no
working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's
discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor. cdrep
In Investment Planning Corporation of the Philippines vs. Social Security System, 14 a case almost on all fours with the present one, this Court held that
there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent
contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales,
any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance
bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of
their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to
submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses.
More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation
except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal
and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee.
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much
less that any rules existed or were issued which effectively controlled or restricted his choice of methods - or the methods themselves of selling
insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract
leaving Basiao ". . . free to exercise his own judgment as to the time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is
meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his
relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking
cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This
conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits. LLpr
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T.
Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
Footnotes
1.Rollo, pp. 14-15.
2.Rollo, p. 16.
3.Rollo, p. 17.
4.Docketed as RAB Case No. VI-0010-83.
5.Rollo, p. 17.

6.Id., pp. 18-22.

7.Rollo, pp. 23-27.
8.which at that time conferred upon the Labor Arbiters such jurisdiction over, among others, ". . . all money claims of workers, including those based
on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate
agreement, except claims for employees compensation, social security, medicare and maternity benefits."
9.Respondents Comments; Rollo, pp. 47-52, 60-69.
10.99 Phil. 408, 411-412.
11.Feati University vs. Bautista, 18 SCRA 119; Dy Keh Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 163; Rosario Bros. vs.
Ople, 131 SCRA 72; National Mines and Allied Workers Union (NAMAWU) vs. Valero, 132 SCRA 578.
12.Am. Jur. 2d, pp. 73-91.
13.70 SCRA 139.
14.21 SCRA 924 (1967).
15.G.R. No. 73199, October 26, 1968.
||| (Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989)

EN BANC
[G.R. No. 167622. June 29, 2010.]
GREGORIO V. TONGKO, petitioner, vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A.
VERGEL DE DIOS, respondents.
RESOLUTION
BRION, J p:
This resolves the Motion for Reconsideration 1 dated December 3, 2008 filed by respondent The Manufacturers Life Insurance Co. (Phils.), Inc.
(Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we found that an employer-employee relationship existed between
Manulife and petitioner Gregorio Tongko and ordered Manulife to pay Tongko backwages and separation pay for illegal dismissal. TAcCDI
The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase began on July 1, 1977, under a
Career Agent's Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed or
interpreted as creating an employer-employee relationship between the Company and the Agent.
xxx xxx xxx
a)The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due to the Company in
respect of applications or policies obtained by or through the Agent or from policyholders allotted by the Company to the Agent for
servicing, subject to subsequent confirmation of receipt of payment by the Company as evidenced by an Official Receipt issued
by the Company directly to the policyholder.
xxx xxx xxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by giving
written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall be construed for any
previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party fifteen
(15) days notice in writing. 2
Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a standard of knowledge and
competency in the sale of Manulife's products, satisfactory to Manulife and sufficient to meet the volume of the new business, required by his
Production Club membership. 3
The second phase started in 1983 when Tongko was named Unit Manager in Manulife's Sales Agency Organization. In 1990, he became a Branch
Manager. Six years later (or in 1996), Tongko became a Regional Sales Manager. 4 CAHTIS
Tongko's gross earnings consisted of commissions, persistency income, and management overrides. Since the beginning, Tongko consistently
declared himself self-employed in his income tax returns. Thus, under oath, he declared his gross business income and deducted his
business expenses to arrive at his taxable business income. Manulife withheld the corresponding 10% tax on Tongko's earnings. 5
In 2001, Manulife instituted manpower development programs at the regional sales management level. Respondent Renato Vergel de Dios wrote
Tongko a letter dated November 6, 2001 on concerns that were brought up during the October 18, 2001 Metro North Sales Managers Meeting. De Dios
wrote:
The first step to transforming Manulife into a big league player has been very clear to increase the number of agents to at least
1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the organization.
Since then, however, substantial changes have taken place in the organization, as these have been influenced by developments
both from within and without the company.
xxx xxx xxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers' meeting earlier
last month when Kevin O'Connor, SVP-Agency, took to the floor to determine from our senior agency leaders what more could be
done to bolster manpower development. At earlier meetings, Kevin had presented information where evidently, your Region was
the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to remain one of the
laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were perceived to be uncalled
for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management, were on the same
plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-one), it was not clear that
we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings you
reiterated certain views, the validity of which we challenged and subsequently found as having no basis. STIHaE
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused as to
the directions the company was taking. For this reason, I sought a meeting with everyone in your management team, including
you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region's Sales Managers meeting held at
the 7/F Conference room last 18 October.
xxx xxx xxx

Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table before the
rest of your Region's Sales Managers to verify its validity. As you must have noted, no Sales Manager came forward on their own
to confirm your statement and it took you to name Malou Samson as a source of the same, an allegation that Malou herself
denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along, that
these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxx xxx xxx
All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the Year 2000
versus 1999. In addition, you also volunteered the information to Kevin when you said that you probably will make more money in
the Year 2001 compared to Year 2000. Obviously, your above statement about making "less money" did not refer to you but the
way you argued this point had us almost believing that you were spouting the gospel of truth when you were not. . . .
xxx xxx xxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that we
have been discussing these past few weeks, i.e., Manulife's goal to become a major agency-led distribution company in the
Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for greater
agency recruiting. You have not been proactive all these years when it comes to agency growth. DSATCI
xxx xxx xxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following
changes in the interim:
1.You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be
easily delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you
feel "may not be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The
above could solve this problem.
xxx xxx xxx
2.Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion. . . .
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro
North. I will hold you solely responsible for meeting the objectives of these remaining groups.
xxx xxx xxx
The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you. But
you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We are meeting
tough challenges next year, and I would want everybody on board. Any resistance or holding back by anyone will be dealt with
accordingly. 6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongko's services:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between yourself
and SVP Kevin O'Connor, some of them with me, as well as group meetings with your Sales Managers, all these efforts have
failed in helping you align your directions with Management's avowed agency growth policy. CaHcET
xxx xxx xxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now issuing
this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter. 7
Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC) Arbitration Branch. He essentially
alleged despite the clear terms of the letter terminating his Agency Agreement that he was Manulife's employee before he was illegally dismissed.
8
Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders the question of illegal dismissal moot; a
finding that an employment relationship exists, on the other hand, necessarily leads to the need to determine the validity of the termination of the
relationship.
A.Tongko's Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00, regardless of production levels attained and
exclusive of commissions and bonuses. He also claimed that as Regional Sales Manager, he was given a travel and entertainment allowance of
P36,000.00 per year in addition to his overriding commissions; he was tasked with numerous administrative functions and supervisory authority over
Manulife's employees, aside from merely selling policies and recruiting agents for Manulife; and he recommended and recruited insurance agents
subject to vetting and approval by Manulife. He further alleges that he was assigned a definite place in the Manulife offices when he was not in the field
at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City for which he never paid any rental. Manulife
provided the office equipment he used, including tables, chairs, computers and printers (and even office stationery), and paid for the electricity, water
and telephone bills. As Regional Sales Manager, Tongko additionally asserts that he was required to follow at least three codes of conduct. 9 DETACa
B.Manulife's Case Agency Relationship with Tongko

Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions of varying amounts, computed based
on the premium paid in full and actually received by Manulife on policies obtained through an agent. As sales manager, Tongko was paid overriding
sales commission derived from sales made by agents under his unit/structure/branch/region. Manulife also points out that it deducted and withheld a
10% tax from all commissions Tongko received; Tongko even declared himself to be self-employed and consistently paid taxes as such i.e., he
availed of tax deductions such as ordinary and necessary trade, business and professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko's claim as he was not its employee as characterized in the four-fold test and
our ruling in Carungcong v. National Labor Relations Commission. 10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the NLRC reversed the labor arbiter's decision
on appeal; it found the existence of an employer-employee relationship and concluded that Tongko had been illegally dismissed. In the petition for
certiorari with the Court of Appeals (CA), the appellate court found that the NLRC gravely abused its discretion in its ruling and reverted to the labor
arbiter's decision that no employer-employee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship existed between Tongko and Manulife. We
concluded that Tongko is Manulife's employee for the following reasons:
1.Our ruling in the first Insular 11 case did not foreclose the possibility of an insurance agent becoming an employee of an insurance company; if
evidence exists showing that the company promulgated rules or regulations that effectively controlled or restricted an insurance agent's choice of
methods or the methods themselves in selling insurance, an employer-employee relationship would be present. The determination of the existence of an
employer-employee relationship is thus on a case-to-case basis depending on the evidence on record. IHCSTE
2.Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by the following indicators:
2.1Tongko undertook to comply with Manulife's rules, regulations and other requirements, i.e., the different codes of conduct such
as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Financial Code of Conduct Agreement;
2.2The various affidavits of Manulife's insurance agents and managers, who occupied similar positions as Tongko, showed that
they performed administrative duties that established employment with Manulife; 12 and
2.3Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios' letter harped on the
direction Manulife intended to take, viz., greater agency recruitment as the primary means to sell more policies; Tongko's alleged
failure to follow this directive led to the termination of his employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS:
1.The November 7[, 2008] Decision violates Manulife's right to due process by: (a) confining the review only to the issue of
"control" and utterly disregarding all the other issues that had been joined in this case; (b) mischaracterizing the divergence of
conclusions between the CA and the NLRC decisions as confined only to that on "control"; (c) grossly failing to consider the
findings and conclusions of the CA on the majority of the material evidence, especially [Tongko's] declaration in his income tax
returns that he was a "business person" or "self-employed"; and (d) allowing [Tongko] to repudiate his sworn statement in a public
document.
2.The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the legal relationships
of agencies to sell but also distributorship and franchising, and ignores the constitutional and policy context of contract law vis- vis labor law.
3.The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test other than the
"control" test, reverses well-settled doctrines of law on employer-employee relationships, and grossly misapplies the "control test,"
by selecting, without basis, a few items of evidence to the exclusion of more material evidence to support its conclusion that there
is "control." TSHIDa
4.The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the Civil Code,
beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and contravenes through judicial
legislation, the constitutional prohibition against impairment of contracts under Article III, Section 10 of the Constitution.
5.For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which should be
corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee relationship, that Respondent
Manulife illegally dismissed Petitioner, and for consequently ordering Respondent Manulife to pay Petitioner backwages,
separation pay, nominal damages and attorney's fees. 13
THE COURT'S RULING
A.The Insurance and the Civil Codes;
the Parties' Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents were set in the insurance industry so
that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted to "Insurance Agents and Brokers" and specifically defines
the agents and brokers relationship with the insurance company and how they are governed by the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law matter governed by the Civil Code. Thus,
at the very least, three sets of laws namely, the Insurance Code, the Labor Code and the Civil Code have to be considered in looking at the
present case. Not to be forgotten, too, is the Agreement (partly reproduced on page 2 of this Dissent and which no one disputes) that the parties
adopted to govern their relationship for purposes of selling the insurance the company offers. To forget these other laws is to take a myopic view of the
present case and to add to the uncertainties that now exist in considering the legal relationship between the insurance company and its "agents."
The main issue of whether an agency or an employment relationship exists depends on the incidents of the relationship. The Labor Code concept of
"control" has to be compared and distinguished with the "control" that must necessarily exist in a principal-agent relationship. The principal cannot but

also have his or her say in directing the course of the principal-agent relationship, especially in cases where the company-representative relationship in
the insurance industry is an agency. ASTIED
a.The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who can be in the insurance business, who can
act for and in behalf of an insurer, and how these parties shall conduct themselves in the insurance business. Section 186 of the Insurance Code
provides that "No person, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a person or
corporation authorized to do the business of insurance in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and
Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or
other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company
doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner . . . The
Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant and shall have the right to refuse to
issue or renew and to suspend or revoke any such license in his discretion.
Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits for
a person other than himself an application for a policy or contract of insurance to or from such company or offers or assumes to
act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall thereby become
liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent's license requires a written examination, and the applicant must be of good moral character and must not
have been convicted of a crime involving moral turpitude. 14 The insurance agent who collects premiums from an insured person for remittance to
the insurance company does so in a fiduciary capacity, and an insurance company which delivers an insurance policy or contract to an authorized
agent is deemed to have authorized the agent to receive payment on the company's behalf. 15 Section 361 further prohibits the offer, negotiation,
or collection of any amount other than that specified in the policy and this covers any rebate from the premium or any special favor or advantage in
the dividends or benefit accruing from the policy. cAaETS
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act within the parameters of the authority
granted under the license and under the contract with the principal. Other than the need for a license, the agent is limited in the way he offers and
negotiates for the sale of the company's insurance products, in his collection activities, and in the delivery of the insurance contract or policy. Rules
regarding the desired results (e.g., the required volume to continue to qualify as a company agent, rules to check on the parameters on the authority
given to the agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control specific to an insurance agency
and should not and cannot be read as elements of control that attend an employment relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter." 16 While this is a very broad definition that on its face may even encompass an
employment relationship, the distinctions between agency and employment are sufficiently established by law and jurisprudence.
Generally, the determinative element is the control exercised over the one rendering service. The employer controls the employee both in the results and
in the means and manner of achieving this result. The principal in an agency relationship, on the other hand, also has the prerogative to exercise control
over the agent in undertaking the assigned task based on the parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in light of the need for a license and for the designation by the
insurance company. In the present case, the Agreement fully serves as grant of authority to Tongko as Manulife's insurance agent. 17 This agreement is
supplemented by the company's agency practices and usages, duly accepted by the agent in carrying out the agency. 18 By authority of the Insurance
Code, an insurance agency is for compensation, 19 a matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary. 20 Other
than the compensation, the principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for the execution of the agency. 21
By implication at least under Article 1994 of the Civil Code, the principal can appoint two or more agents to carry out the same assigned tasks, 22 based
necessarily on the specific instructions and directives given to them. HCEISc
With particular relevance to the present case is the provision that "In the execution of the agency, the agent shall act in accordance with the instructions
of the principal." 23 This provision is pertinent for purposes of the necessary control that the principal exercises over the agent in undertaking the
assigned task, and is an area where the instructions can intrude into the labor law concept of control so that minute consideration of the facts is
necessary. A related article is Article 1891 of the Civil Code which binds the agent to render an account of his transactions to the principal.
B.The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company rules and regulations that an agent has to
comply with are indicative of an employer-employee relationship. 24 The Dissenting Opinions of Justice Presbitero Velasco, Jr. and Justice Conchita
Carpio Morales also cite Insular Life Assurance Co. v. National Labor Relations Commission (second Insular case) 25 to support the view that Tongko is
Manulife's employee. On the other hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor Relations
Commission (AFPMBAI case) 26 to support its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited cases because none of them is on all fours with the present case; the
uniqueness of the factual situation of the present case prevents it from being directly and readily cast in the mold of the cited cases. These cited cases
are themselves different from one another; this difference underscores the need to read and quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second Insular Life cases. A critical difference,
however, exists as these cited cases dealt with the proper legal characterization of a subsequentmanagement contract that superseded the
original agency contract between the insurance company and its agent. Carungcong dealt with a subsequent Agreement making Carungcong a
New Business Manager that clearly superseded the Agreement designating Carungcong as an agent empowered to solicit applications for insurance.
The Grepalife case, on the other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers to positions higher than their
original position as insurance agents. Thus, after analyzing the duties and functions of the Ruiz brothers, as these were enumerated in their
contracts, we concluded that the company practically dictated the manner by which the Ruiz brothers were to carry out their jobs. Finally, the second
Insular Life case dealt with the implications of de los Reyes' appointment as acting unit manager which, like the subsequent contracts in the Carungcong

and the Grepalife cases, was clearly defined under a subsequent contract. In all these cited cases, a determination of the presence of the Labor
Code element of control was made on the basis of the stipulations of the subsequent contracts. TaDAHE
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or document extant and submitted as
evidence in the present case is the Agreement a pure agency agreement in the Civil Code context similar to the original contract in the first Insular
Life case and the contract in the AFPMBAI case. And while Tongko was later on designated unit manager in 1983, Branch Manager in 1990, and
Regional Sales Manager in 1996, no formal contract regarding these undertakings appears in the records of the case. Any such contract or agreement,
had there been any, could have at the very least provided the bases for properly ascertaining the juridical relationship established between the parties.
These critical differences, particularly between the present case and the Grepalife and the second Insular Life cases, should therefore immediately drive
us to be more prudent and cautious in applying the rulings in these cases.
C.Analysis of the Evidence
c.1.The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties' relations until the Agreement's
termination in 2001. This Agreement stood for more than two decades and, based on the records of the case, was never modified or novated. It
assumes primacy because it directly dealt with the nature of the parties' relationship up to the very end; moreover, both parties never disputed its
authenticity or the accuracy of its terms.
By the Agreement's express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure, the Agreement's legal
characterization of the nature of the relationship cannot be conclusive and binding on the courts; as the dissent clearly stated, the characterization of the
juridical relationship the Agreement embodied is a matter of law that is for the courts to determine. At the same time, though, the characterization the
parties gave to their relationship in the Agreement cannot simply be brushed aside because it embodies their intent at the time they entered the
Agreement, and they were governed by this understanding throughout their relationship. At the very least, the provision on the absence of employeremployee relationship between the parties can be an aid in considering the Agreement and its implementation, and in appreciating the other evidence on
record. STIcEA
The parties' legal characterization of their intent, although not conclusive, is critical in this case because this intent is not illegal or outside the
contemplation of law, particularly of the Insurance and the Civil Codes. From this perspective, the provisions of the Insurance Code cannot be
disregarded as this Code (as heretofore already noted) expressly envisions a principal-agent relationship between the insurance company and the
insurance agent in the sale of insurance to the public. For this reason, we can take judicial notice that as a matter of Insurance Code-based
business practice, an agency relationship prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its express
terms, is in accordance with the Insurance Code model when it provided for a principal-agent relationship, and thus cannot lightly be set aside nor simply
be considered as an agreement that does not reflect the parties' true intent. This intent, incidentally, is reinforced by the system of compensation the
Agreement provides, which likewise is in accordance with the production-based sales commissions the Insurance Code provides.
Significantly, evidence shows that Tongko's role as an insurance agent never changed during his relationship with Manulife. If changes occurred at all,
the changes did not appear to be in the nature of their core relationship. Tongko essentially remained an agent, but moved up in this role through
Manulife's recognition that he could use other agents approved by Manulife, but operating under his guidance and in whose commissions he had a
share. For want of a better term, Tongko perhaps could be labeled as a "lead agent" who guided under his wing other Manulife agents similarly tasked
with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency agreements. Thus, if Tongko's compensation scheme
changed at all during his relationship with Manulife, the change was solely for purposes of crediting him with his share in the commissions the agents
under his wing generated. As an agent who was recruiting and guiding other insurance agents, Tongko likewise moved up in terms of the reimbursement
of expenses he incurred in the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received
greater reimbursements for his expenses and was even allowed to use Manulife facilities in his interactions with the agents, all of whom were, in the
strict sense, Manulife agents approved and certified as such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion that results from the reading of the
Agreement (the only agreement on record in this case) and his continuing role thereunder as sales agent, from the perspective of the Insurance and the
Civil Codes and in light of what Tongko himself attested to as his role as Regional Sales Manager. To be sure, this interpretation could have been
contradicted if other agreements had been submitted as evidence of the relationship between Manulife and Tongko on the latter's expanded
undertakings. In the absence of any such evidence, however, this reading based on the available evidence and the applicable insurance and civil law
provisions must stand, subject only to objective and evidentiary Labor Code tests on the existence of an employer-employee relationship. CAETcH
In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties' relationship should be noted. From
1977 until the termination of the Agreement, Tongko's occupation was to sell Manulife's insurance policies and products. Both parties acquiesced with
the terms and conditions of the Agreement. Tongko, for his part, accepted all the benefits flowing from the Agreement, particularly the generous
commissions.
Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife insurance products since he invariably
declared himself a business or self-employed person in his income tax returns. This consistency with, and action made pursuant to the Agreement
were pieces of evidence that were never mentioned nor considered in our Decision of November 7, 2008. Had they been considered, they could,
at the very least, serve as Tongko's admissions against his interest. Strictly speaking, Tongko's tax returns cannot but be legally significant because he
certified under oath the amount he earned as gross business income, claimed business deductions, leading to his net taxable income. This should be
evidence of the first order that cannot be brushed aside by a mere denial. Even on a layman's view that is devoid of legal considerations, the extent of
his annual income alone renders his claimed employment status doubtful. 27
Hand in hand with the concept of admission against interest in considering the tax returns, the concept of estoppel a legal and equitable concept 28
necessarily must come into play. Tongko's previous admissions in several years of tax returns as an independent agent, as against his belated claim
that he was all along an employee, are too diametrically opposed to be simply dismissed or ignored. Interestingly, Justice Velasco's dissenting opinion
states that Tongko was forced to declare himself a business or self-employed person by Manulife's persistent refusal to recognize him as its employee.
29 Regrettably, the dissent has shown no basis for this conclusion, an understandable omission since no evidence in fact exists on this point
in the records of the case. In fact, what the evidence shows is Tongko's full conformity with, and action as, an independent agent until his relationship
with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement negated any employment relationship
between Tongko and Manulife so that the commissions he earned as a sales agent should not be considered in the determination of the backwages and
separation pay that should be given to him. This part of the dissent is correct although it went on to twist this conclusion by asserting that Tongko had

dual roles in his relationship with Manulife; he was an agent, not an employee, in so far as he sold insurance for Manulife, but was an employee in his
capacity as a manager. Thus, the dissent concluded that Tongko's backwages should only be with respect to his role as Manulife's manager. ITESAc
The conclusion with respect to Tongko's employment as a manager is, of course, unacceptable for the legal, factual and practical reasons discussed in
this Resolution. In brief, the factual reason is grounded on the lack of evidentiary support of the conclusion that Manulife exercised control over Tongko
in the sense understood in the Labor Code. The legal reason, partly based on the lack of factual basis, is the erroneous legal conclusion that Manulife
controlled Tongko and was thus its employee. The practical reason, on the other hand, is the havoc that the dissent's unwarranted conclusion would
cause the insurance industry that, by the law's own design, operated along the lines of principal-agent relationship in the sale of insurance.
c.2.Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever exercised means-and-manner control,
even to a limited extent, over Tongko during his ascent in Manulife's sales ladder. In 1983, Tongko was appointed unit manager. Inexplicably, Tongko
never bothered to present any evidence at all on what this designation meant. This also holds true for Tongko's appointment as branch manager in
1990, and as Regional Sales Manager in 1996. The best evidence of control the agreement or directive relating to Tongko's duties and
responsibilities was never introduced as part of the records of the case. The reality is, prior to de Dios' letter, Manulife had practically left Tongko
alone not only in doing the business of selling insurance, but also in guiding the agents under his wing. As discussed below, the alleged directives
covered by de Dios' letter, heretofore quoted in full, were policy directions and targeted results that the company wanted Tongko and the other sales
groups to realign with in their own selling activities. This is the reality that the parties' presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its agents in the sale of insurance. The mere
presentation of codes or of rules and regulations, however, is not per se indicative of labor law control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the insurance company and its agents in the performance of their respective
obligations under the Code, particularly on licenses and their renewals, on the representations to be made to potential customers, the collection of
premiums, on the delivery of insurance policies, on the matter of compensation, and on measures to ensure ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an element of control over the agent in a manner consistent with an agency
relationship. In this sense, these control measures cannot be read as indicative of labor law control. Foremost among these are the directives that the
principal may impose on the agent to achieve the assigned tasks, to the extent that they do not involve the means and manner of undertaking these
tasks. The law likewise obligates the agent to render an account; in this sense, the principal may impose on the agent specific instructions on how an
account shall be made, particularly on the matter of expenses and reimbursements. To these extents, control can be imposed through rules and
regulations without intruding into the labor law concept of control for purposes of employment. ScaATD
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the rules and regulations of an
insurance company does not ipso facto make the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance agent's
conduct necessarily indicate "control" as this term is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life
case tells us, should not merely relate to the mutually desirable result intended by the contractual relationship; they must have the nature of
dictating the means or methods to be employed in attaining the result, or of fixing the methodology and of binding or restricting the party
hired to the use of these means. In fact, results-wise, the principal can impose production quotas and can determine how many agents, with specific
territories, ought to be employed to achieve the company's objectives. These are management policy decisions that the labor law element of control
cannot reach. Our ruling in these respects in the first Insular Life case was practically reiterated in Carungcong. Thus, as will be shown more fully below,
Manulife's codes of conduct, 30 all of which do not intrude into the insurance agents' means and manner of conducting their sales and only control them
as to the desired results and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed between Manulife
and Tongko.
The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of labor law control; thus, Tongko as manager,
but not as insurance agent, became Manulife's employee. It drew this conclusion from what the other Manulife managers disclosed in their affidavits
(i.e., their enumerated administrative and managerial functions) and after comparing these statements with the managers in Grepalife. The dissent
compared the control exercised by Manulife over its managers in the present case with the control the managers in the Grepalife case exercised over
their employees by presenting the following matrix: 31
Duties of Manulife's Manager

Duties of Grepalife's

Managers/Supervisors
- to render or recommend prospective

- train understudies for the position

agents to be licensed, trained and

of district manager

contracted to sell Manulife products

and who will be part of my Unit
- to coordinate activities of the agents

- properly account, record and document

under [the managers'] Unit in [the

the company's funds, spot-check and audit

agents'] daily, weekly and monthly

the work of the zone supervisors, . . .

selling activities, making sure that

follow up the submission of weekly

their respective sales targets are met;

remittance reports of the debit agents and

zone supervisors
- to conduct periodic training sessions

- direct and supervise the sales activities

for [the] agents to further enhance

of the debit agents under him, . . .

their sales skill; and

undertake and discharge the functions of

absentee debit agents, spot-check the

- to assist [the] agents with their sales

record of debit agents, and insure proper

activities by way of joint fieldwork,

documentation of sales and collections of

consultations and one-on-one evaluation

debit agents.

and analysis of particular accounts cDTCIA

Aside from these affidavits however, no other evidence exists regarding the effects of Tongko's additional roles in Manulife's sales operations on
the contractual relationship between them.
To the dissent, Tongko's administrative functions as recruiter, trainer, or supervisor of other sales agents constituted a substantive alteration of
Manulife's authority over Tongko and the performance of his end of the relationship with Manulife. We could not deny though that Tongko remained, first
and foremost, an insurance agent, and that his additional role as Branch Manager did not lessen his main and dominant role as insurance agent; this
role continued to dominate the relations between Tongko and Manulife even after Tongko assumed his leadership role among agents. This conclusion
cannot be denied because it proceeds from the undisputed fact that Tongko and Manulife never altered their July 1, 1977 Agreement, a distinction the
present case has with the contractual changes made in the second Insular Life case. Tongko's results-based commissions, too, attest to the primacy he
gave to his role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists between:
the Manulife managers' role is to coordinate activities of the agents under the managers' Unit in the agents' daily, weekly, and monthly selling
activities, making sure that their respective sales targets are met.
the District Manager's duty in Grepalife is to properly account, record, and document the company's funds, spot-check and audit the work of the
zone supervisors, conserve the company's business in the district through "reinstatements," follow up the submission of weekly remittance reports of the
debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of district managers, and maintain
his quota of sales (the failure of which is a ground for termination).
the Zone Supervisor's (also in Grepalife) has the duty to direct and supervise the sales activities of the debit agents under him, conserve company
property through "reinstatements," undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure
proper documentation of sales and collections by the debit agents. AHECcT
These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and pre-determined; in the
present case, the operative words are the "sales target," the methodology being left undefined except to the extent of being "coordinative." To be
sure, a "coordinative" standard for a manager cannot be indicative of control; the standard only essentially describes what a Branch Manager is
the person in the lead who orchestrates activities within the group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter
of control by Manulife; it is simply a statement of a branch manager's role in relation with his agents from the point of view of Manulife whose
business Tongko's sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko's alleged administrative functions, is the selective citation of the portions
supportive of an employment relationship and the consequent omission of portions leading to the contrary conclusion. For example, the following
portions of the affidavit of Regional Sales Manager John Chua, with counterparts in the other affidavits, were not brought out in the Decision of
November 7, 2008, while the other portions suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were not
brought out: 32
1.a.I have no fixed wages or salary since my services are compensated by way of commissions based on the computed
premiums paid in full on the policies obtained thereat;
1.b.I have no fixed working hours and employ my own method in soliciting insurance at a time and place I see fit;
1.c.I have my own assistant and messenger who handle my daily work load;
1.d.I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;
xxx xxx xxx
6.I have my own staff that handles the day to day operations of my office;
7.My staff are my own employees and received salaries from me;
xxx xxx xxx
9.My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-employed individual
or professional with a ten (10) percent creditable withholding tax. I also remit monthly for professionals. ISHaCD
These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have readily yielded the conclusion
that no employer-employee relationship existed between Manulife and Tongko.

Even de Dios' letter is not determinative of control as it indicates the least amount of intrusion into Tongko's exercise of his role as manager in guiding
the sales agents. Strictly viewed, de Dios' directives are merely operational guidelines on how Tongko could align his operations with Manulife's redirected goal of being a "big league player." The method is to expand coverage through the use of more agents. This requirement for the recruitment of
more agents is not a means-and-method control as it relates, more than anything else, and is directly relevant, to Manulife's objective of expanded
business operations through the use of a bigger sales force whose members are all on a principal-agent relationship. An important point to note here
is that Tongko was not supervising regular full-time employees of Manulife engaged in the running of the insurance business; Tongko was
effectively guiding his corps of sales agents, who are bound to Manulife through the same Agreement that he had with Manulife, all the while
sharing in these agents' commissions through his overrides. This is the lead agent concept mentioned above for want of a more appropriate term,
since the title of Branch Manager used by the parties is really a misnomer given that what is involved is not a specific regular branch of the company but
a corps of non-employed agents, defined in terms of covered territory, through which the company sells insurance. Still another point to consider is that
Tongko was not even setting policies in the way a regular company manager does; company aims and objectives were simply relayed to him with
suggestions on how these objectives can be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios' letter focused on income, which Manulife demonstrated, in Tongko's case, to be unaffected by the new goal and
direction the company had set. Income in insurance agency, of course, is dependent on results, not on the means and manner of selling a matter for
Tongko and his agents to determine and an area into which Manulife had not waded. Undeniably, de Dios' letter contained a directive to secure a
competent assistant at Tongko's own expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion into Tongko's
method of operating and supervising the group of agents within his delineated territory. More than anything else, the "directive" was a signal to Tongko
that his results were unsatisfactory, and was a suggestion on how Tongko's perceived weakness in delivering results could be remedied. It was a
solution, with an eye on results, for a consistently underperforming group; its obvious intent was to save Tongko from the result that he then failed to
grasp that he could lose even his own status as an agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life case that showed the hallmarks of an employer-employee relationship in the
management system established. These were: exclusivity of service, control of assignments and removal of agents under the private respondent's unit,
and furnishing of company facilities and materials as well as capital described as Unit Development Fund. All these are obviously absent in the present
case. If there is a commonality in these cases, it is in the collection of premiums which is a basic authority that can be delegated to agents under the
Insurance Code. STaHIC
As previously discussed, what simply happened in Tongko's case was the grant of an expanded sales agency role that recognized him as leader
amongst agents in an area that Manulife defined. Whether this consequently resulted in the establishment of an employment relationship can be
answered by concrete evidence that corresponds to the following questions:
as lead agent, what were Tongko's specific functions and the terms of his additional engagement;
was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he received from the
insurance sales he generated;
what can be Manulife's basis to terminate his status as lead agent;
can Manulife terminate his role as lead agent separately from his agency contract; and
to what extent does Manulife control the means and methods of Tongko's role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed above. But strictly speaking, the
questions cannot definitively and concretely be answered through the evidence on record. The concrete evidence required to settle these
questions is simply not there, since only the Agreement and the anecdotal affidavits have been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of the existence of employer-employee
relationship, the Court cannot conclusively find that the relationship exists in the present case, even if such relationship only refers to Tongko's additional
functions. While a rough deduction can be made, the answer will not be fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of evidence showing Manulife's control over Tongko's contractual
duties points to the absence of any employer-employee relationship between Tongko and Manulife. In the context of the established evidence, Tongko
remained an agent all along; although his subsequent duties made him a lead agent with leadership role, he was nevertheless only an agent whose
basic contract yields no evidence of means-and-manner control. DEacIT
This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously assume conflicting dual
personalities. But to set the record straight, the concept of a single person having the dual role of agent and employee while doing the same task is a
novel one in our jurisprudence, which must be viewed with caution especially when it is devoid of any jurisprudential support or precedent. The
quoted portions in Justice Carpio-Morales' dissent, 33 borrowed from both the Grepalife and the second Insular Life cases, to support the duality
approach of the Decision of November 7, 2008, are regrettably far removed from their context i.e., the cases' factual situations, the issues they
decided and the totality of the rulings in these cases and cannot yield the conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers' appointment as zone supervisor and district manager made them employees
of Grepalife. Indeed, because of the presence of the element of control in their contract of engagements, they were considered Grepalife's employees.
This did not mean, however, that they were simultaneously considered agents as well as employees of Grepalife; the Court's ruling never implied that
this situation existed insofar as the Ruiz brothers were concerned. The Court's statement the Insurance Code may govern the licensing requirements
and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations
simply means that when an insurance company has exercised control over its agents so as to make them their employees, the relationship between the
parties, which was otherwise one for agency governed by the Civil Code and the Insurance Code, will now be governed by the Labor Code. The reason
for this is simple the contract of agency has been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction over an illegal termination dispute
involving parties who had two contracts first, an original contract (agency contract), which was undoubtedly one for agency, and another subsequent
contract that in turn designated the agent acting unit manager (a management contract). Both the Insular Life and the labor arbiter were one in the
position that both were agency contracts. The Court disagreed with this conclusion and held that insofar as the management contract is concerned, the
labor arbiter has jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We never said in this case though
that the insurance agent had effectively assumed dual personalities for the simple reason that the agency contract has been effectively superseded by
the management contract. The management contract provided that if the appointment was terminated for any reason other than for cause, the acting
unit manager would be reverted to agent status and assigned to any unit.

The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the existence of an employer-employee
relationship should be resolved in favor of the existence of the relationship. 34 This observation, apparently drawn from Article 4 of the Labor Code, is
misplaced, as Article 4 applies only when a doubt exists in the "implementation and application" of the Labor Code and its implementing rules; it does
not apply where no doubt exists as in a situation where the claimant clearly failed to substantiate his claim of employment relationship by the quantum of
evidence the Labor Code requires. STcDIE
On the dissent's last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to state that, as discussed above, the
Decision was not supported by the evidence adduced and was not in accordance with controlling jurisprudence. It should, therefore, be reconsidered
and abandoned, but not in the manner the dissent suggests as the dissenting opinions are as factually and as legally erroneous as the Decision under
reconsideration.
In light of these conclusions, the sufficiency of Tongko's failure to comply with the guidelines of de Dios' letter, as a ground for termination of Tongko's
agency, is a matter that the labor tribunals cannot rule upon in the absence of an employer-employee relationship. Jurisdiction over the matter belongs
to the courts applying the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008, GRANT Manulife's motion for reconsideration
and, accordingly, DISMISS Tongko's petition. No costs.
SO ORDERED.
Corona, C.J., Carpio, Peralta, Del Castillo, Abad, Perez and Mendoza, JJ., concur.
Carpio Morales, J., please see my Separate Dissenting Opinion.
Velasco, Jr., J., please see dissenting opinion.
Nachura, Leonardo-de Castro and Bersamin, JJ., join the dissent of J. Velasco.
Villarama, Jr., J., took no part.
Separate Opinions
CARPIO MORALES, J., dissenting:
Writing for the Court, Justice Arturo Brion grants the Motion for Reconsideration (Motion) filed by respondent Manufacturer's Life Insurance Co. (Phils.).
The ponente, who concurred in the Court's November 7, 2008 Decision, 1 this time reverses the finding of employer-employee relationship. The
ponencia states that petitioner cannot simultaneously assume the dual or hybrid role of employee and agent. cdrep
I dissent.
I submit this Separate Dissenting Opinion, after taking a closer look at the juxtaposition of five pertinent labor cases bearing on the insurance industry,
three of which ruled in favor of the existence of an employer-employee relationship.
An
agent
may,
employee of a life insurance company

at

the

same

time,

be

an

In Great Pacific Life Assurance Corp. v. NLRC 2 (second Grepalife case), the Court found that an employer-employee relationship existed between
Grepalife and the Ruiz brothers in their capacities as zone supervisor and district manager. On the relevant point, it elucidated:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions
performed by private respondents were those of insurance agents. Nevertheless, it does not follow that they are not
employees of Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of
insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor
relations. 3 (Citations omitted; emphasis and underscoring supplied)
This type of hybrid role is not novel. In Insular Life Assurance Co., Ltd. v. NLRC (4th Division) 4 (second Insular Life case), the Court ruled that the
therein respondent Pantaleon de los Reyes, acting unit manager, was an employee of Insular Life only insofar as the management contract is
concerned.
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into
between petitioner and De los Reyes as contracts of agency. We[,] however[,] hold otherwise. Unquestionably there exist major
distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far removed
from the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship.
The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only
insofar as the management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the case. 5
(Emphasis and underscoring supplied)
In the present case, the employer-employee relationship is extant from petitioner's management functions as Unit Manager in 1983, later as Branch
Manager in 1990, and finally as Regional Sales Manager in 1996, notwithstanding the absence of written management contracts. Even assuming that
management contracts were executed, the law is deemed written into them and its application cannot be disavowed by the parties.
Admittedly, petitioner was allowed to continue selling as an agent simultaneously with his management functions. Insofar as the termination of his
agency agreement 6 is concerned, the trial court has jurisdiction over such controversy. SECIcT
The ponencia finds it "conflicting" for petitioner to assume the dual roles of agent and employer. It agrees, however, that petitioner's "additional role as
Branch Manager did not lessen his main and dominant role as insurance agent," without explaining how to weigh the dominance of one function over
another.
In the present Motion, there is no reiteration of the invocation of Insurance Commission (IC) Memorandum Circular 3-93 (June 28, 1993) which provides
that "[n]o official or employee of an insurance brokerage or an adjustment company and no individual adjuster, shall be licensed to act as an insurance
agent or general agent" and that "[n]o employee with the rank of manager and above of an insurance company shall be licensed to act as its insurance
agent or general agent." 7
There is no conflict between the 1993 IC Circular and the Court's 1998 Decision in the second Insular Life case. That the regulation says that things
should run in a certain manner does not mean that any determination of facts should not be contrary to that manner. "He should not" is different from "he

did not." Respondent may assert that the parties herein could not have violated the Circular, but it does not bar the Court to determine otherwise when
facts glaringly point to the existence of an employer-employee relationship.
Whatever infraction or tolerance committed or exhibited by the parties in defiance of the Circular or any other regulation or Code, it is for the IC or the
appropriate body to determine. The same holds true with the corollary tax implications which respondent invites the Court to explore. Reconcilability of
tax returns has never been decisive of the issue of employer-employee relationship. It never became the business of this Court to thresh out for the
parties the tax consequences arising from every labor dispute where an alleged "independent contractor" was declared by the Court to be an employee.
Suffice it to state that a party would have to face the consequences, if any, of his or her actions before the proper forum.
On one hand, respondent proffers petitioner's income tax returns and documents 8 as an admission that it did not employ petitioner, to which petitioner
replies that the withholding and remittance of taxes were done by respondent as payor and withholding agent, as indicated in the Certificates of
Creditable Income Tax Withheld at Source.
On the other, petitioner relies as respondent's implied admission that he is an employee respondent's having offered him a Stock Option that could only
be exercised by "active employees" and would be terminated upon "termination of employment," 9 respondent's disclaimer to this exceptional grant
solely decided by its Head Office in Canada notwithstanding. DISEaC
As the conflicting claims effectively cancel each other, a review of the other array of evidence is in order.
Control
over
in the attainment of the result

the

means

and

methods

It bears noting that the NLRC Decision of September 27, 2004 judiciously explained why the resolution of the employment status of petitioner hinges on
the "control test" after discussing the three other components of the four-fold test. 10
Delving into jurisprudence, no employer-employee relationship was found in Insular Life Assurance Co., Ltd. v. NLRC 11 (first Insular Life case) because
the Court, applying the control test, found that Insular Life neither controlled nor restricted the choice of methods or the methods themselves of
selling insurance by agency manager Melecio Basiao, leaving him free to exercise his own judgment as to the time, place and means of soliciting
insurance.
In declaring the type of "control" that is necessary for one to be deemed an employee, the Court explained in the first Insular Life case, viz.:
. . . It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the
party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship
between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between
an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives
untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address both the result and the means used to achieve
it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of
insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and
insured but also to the internal affairs of the insurance company. Rules and regulations governing the conduct of the business are
provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an
insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of
the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may
be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the
determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be
said to establish an employer-employee relationship between him and the company. 12 (Emphasis and underscoring supplied)
TIAEac
I thus concur with the conclusion that the imposition of the codes of conduct is not indicative of control on the part of an insurance company.
In Great Pacific Life Assurance Corporation v. Judico 13 (first Grepalife case), however, the therein respondent Honorato Judico was found to be an
employee because:
. . . the element of control by the petitioner on Judico was very much present. The record shows that petitioner Judico received a
definite minimum amount per week as his wage known as "sales reserve" wherein the failure to maintain the same would bring
him back to a beginner's employment with a fixed weekly wage of P200.00 for thirteen weeks regardless of production. He was
assigned a definite place in the office to work on when he is not in the field; and in addition to his canvassing work he was
burdened with the job of collection. In both cases he was required to make regular report to the company regarding these duties,
and for which an anemic performance would mean a dismissal. Conversely[,] faithful and productive service earned him a
promotion to Zone Supervisor with additional supervisor's allowance, a definite amount of P110.00 aside from the regular
P200.00 weekly "allowance". Furthermore, his contract of services with petitioner is not for a piece of work nor for a definite
period. 14 (Underscoring supplied)
The question on the presence of "control over the means and methods" must always be taken in relation to the attainment of the result or goal. The
proper query is thus not whether respondent exercised means-and-method control but whether such control was directed in attaining which result.
Although the bottomline of any commercial enterprise has always been sales, the identification of the specific "result or goal" in a particular case can
only be gathered from the nature of one's functions. It is thus imperative to identify the functions appurtenant to the goal before administering the
control test.
In the first Insular Life case, it was clear that selling or soliciting insurance was the goal, the attainment of which Insular Life did not exercise control over
the methodology of the agency manager. Insular Life set no accomplishment quotas and compensated him on the basis of results obtained. He was not
bound to observe any schedule of working hours or report to any regular station. He could seek and work on his prospects anywhere and at anytime he
chooses.

In the first Grepalife case, however, although the debit agent's goal of selling was basically identical, Grepalife retained control over the means in
achieving sales. Grepalife assigned him a definite place in the office to work on when he is not in the field, gave him collection and canvassing jobs,
required him to make regular report regarding these duties, and, in fact, exercised the power of dismissal for his dismal performance. cTSDAH
There is no element of control with respect to petitioner's function of selling insurance as an agent. His managerial function, however, takes another
form.
In the second Insular Life and Grepalife cases, the goal expected from the managers was different from the first set of cases. The "result or goal" (in how
to accomplish it the company was found to have exercised control) were specifically aligned to the coordination and supervision of the whole marketing
effort or strategy.
In the second Insular Life case, the acting unit manager was assigned the task of supervising and coordinating the sales efforts of the underwriters who
were to be recruited and trained within his designated territory.
In the second Grepalife case, the zone supervisor and the district manager were entrusted with supervisory, sales and administrative functions to guard
Grepalife's business interests, to bring in more clients to the company, and to ensure that all collections and reports are faithfully brought to the
company.
In both cases, the manner by which those goals were carried out was dictated by their respective employers. Similarly, in the present case, the nature of
petitioner's job as such called for the exercise of supervisory and administrative functions, including recruitment and training of agents, which, when
examined in the light of the two cases, were discharged within the close range of control wielded by respondent. Tersely stated, petitioner's duty of
supervision was under the "control" of respondent.
A comparison of functions with that obtaining in the second Grepalife case illustrates an intimate similarity:
Furthermore, it cannot be gainsaid that Grepalife had control over private respondents' performance as well as the result of their
efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically
dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly account, record
and document the company's funds spot-check and audit the work of the zone supervisors, conserve the company's business in
the district through 'reinstatements', follow up the submission of weekly remittance reports of the debit agents and zone
supervisors, preserve company property in good condition, train understudies for the position of district manager, and maintain his
quota of sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must direct and supervise
the sales activities of the debit agents under him, conserve company property through "reinstatements", undertake and discharge
the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and
collections by the debit agents. 15 (Underscoring supplied) TECIaH
In contradistinction with Carungcong v. NLRC, 16 which also involves an insurance manager, the Court found the therein petitioner Susan Carungcong,
a new business manager of Sun Life Assurance Company, to be an independent contractor. In the absence of restrictive or interfering company
regulations that effectively and actually controlled her choice of methods in performing her management duties, the Court gave weight to the contractual
disavowals in the management contracts and her admission that she alone judges the element of time and place and means in the performance of
duties. She patently admitted that she performed "monitoring, training, recruitment and sales, at her own time and convenience, at however she deemed
convenient, and with whomever she chose." 17
More significantly, in the succeeding Insular Life case, the Court found the following indicators material in finding the presence of control in cases
involving insurance managers:
Exclusivity of service, control of assignments and removal of agents under private respondent's unit, collection of premiums,
furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the
management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private
respondent Pantaleon de los Reyes was an employee of herein petitioner. 18 (Underscoring supplied)
The ponencia concludes that "[a]ll these are obviously absent" in petitioner's case. The facts show otherwise, however. On top of the exclusive service
rendered to respondent, which AFP Mutual Benefit Association, Inc. v. NLRC 19 instructs to be not controlling, other factors were present. Petitioner
established no agency of his own as the Metro North Region to which he was assigned remained intact even after his ties with respondent were
severed. 20 Respondent provided and furnished company facilities, equipments and materials for petitioner at respondent's Makati office. 21
Respondent's control of assignments was evident from its act of removing the North Star Branch from petitioner's scope of the Metro North Region, on
which a "memo to spell this matter out in greater detail" was advised to be issued shortly thereafter. 22 Respondent reserved to impose other
improvements in the region after manifesting its intention to closely follow the region. 23 Respondent's managers, like petitioner, could only refer and
recommend to respondent prospective agents who would be part of their respective units. 24 In other words, respondent had the last say on the
composition and structure of the sales unit or region of petitioner. Respondent, in fact, even devised the deployment of an Agency Development Officer
in the region to "contribute towards the manpower development work . . . as part of our agency growth campaign." HAICET
Such an arrangement leads to no other conclusion than that respondent exercised the type of control of an employer, thereby wiping away the
perception that petitioner was only a "lead agent" as viewed by the ponencia. Even respondent sees otherwise when it rebuked petitioner that "[y]ou
(petitioner) may have excelled in the past as an agent but, to this date, you still carry the mindset of a senior agent." 25 Insofar as his management
functions were concerned, petitioner was no longer considered a senior agent.
I vote to DENY respondent's Motion but MODIFY the dispositive portion of the Court's November 7, 2008 Decision to (a) clarify that petitioner, Gregorio
Tongko, became respondent's employee not when he started as an agent in 1977 but when he was appointed as unit manager in 1983, thus moving the
reckoning of the computation of separation pay; and (b) remand the case to the NLRC for the purpose of computing petitioner's proper backwages as
manager.
VELASCO, JR., J., dissenting:
By Decision dated November 7, 2008, the Court, on the finding that petitioner Gregorio V. Tongko was illegally dismissed as employee of respondent
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife), awarded him full backwages and separation benefits, in lieu of reinstatement.
Manulife, via this Motion for Reconsideration, urges the Court to reconsider and set aside its aforementioned Decision by declaring, in effect, that
Tongko had never been its employee. 1 As Manulife avers, the subject Decision effectively "converted agency contracts of life insurance agents to
contracts of regular employment." 2 It thus warns that the ruling, if not reconsidered, would apply to all 41,853 life insurance agents spread across the
country, thrusting in the process the insurance industry in the Philippines into a crisis. 3
The majority seems to agree with the grim possibilities thus painted by Manulife.

As was before the National Labor Relations Commission (NLRC), then the Court of Appeals and as it is before the Court, the critical issue in the present
case is the same: whether or not Tongko during all the time he was directly or indirectly connected with the company, first as an agent, pursuant to a
Career Agent's Agreement (Agreement), and then as unit, branch and eventually regional sales manager of Manulife's Sales Agency Organization
was an employee of Manulife. In resolving the issue of whether an employer-employee tie obtains, attention was focused, as jurisprudential trend
dictates, on the four-fold test on employment developed and invariably invoked by labor officials and this Court as a guiding, if not governing norm, to
determine, based on the facts and circumstances involved in a given situation, whether such relationship exists. These four elements are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the control test. 4 And as stressed in the
Decision subject of this recourse, of the four, the control test meaning whether or not the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also the means and methods employed in reaching that end constitutes the most
important index of the existence of an employer-employee relationship. And as also there emphasized, the security of tenure of a regular employee
flowing from employment cannot be defeated by any contract, for the law defines the employment status of a person. 5 Article 280 of the Labor Code
provides that "[t]he provisions of written agreement to the contrary notwithstanding and regardless of 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."
From the evidence on record, it appears that Manulife had control over the work of Tongko after his appointment as manager of the company's
insurance sales force, indubitably implying the existence of an employer-employee relationship between them. TIEHSA
It cannot be over-emphasized enough that in Great Pacific Life Assurance Corporation v. NLRC, Ernesto Ruiz and Rodrigo Ruiz 6 (Grepalife), the Court
considered respondents Ruizes, then district managers, as employees of Grepalife, taking into account their duties and undertakings. Some excerpts
from Grepalife:
. . . A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates
the manner by which their jobs are to be carried out. For instance, the District Manager must properly account, record and
document the company's funds, spot-check and audit the work of the zone supervisors, conserve the company's business
in the district through 'reinstatements', follow up the submission of weekly remittance reports of the debit agents and zone
supervisors, preserve company property in good condition, train understudies for the position of district manager, and
maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must direct
and supervise the sales activities of the debit agents under him, conserve company property through "reinstatements",
undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure
proper documentation of sales and collections by the debit agents. 7 (Emphasis supplied.)
A comparative look at the duties of the Ruizes, as set forth in the decision in Grepalife, and those of Tongko, as may be deduced from affidavits 8 of
insurance managers of Manulife, would reveal a striking similarity in their respective duties as would adequately support a similar finding on the question
of whether the petitioner, like the Ruizes, is an employee of Manulife just as the Ruizes were Grepalife's. Consider:
Duties
Managers/Supervisors
to
agents
contracted
and
Unit

of

render

Manulife's
or

to
who

recommend
be
to
will

ManagersDuties
prospectivelicensed,
sell
be

train

part

of

understudies
for
the
trained
anddistrict
Manulife
of
the

Grepalife's
position

of
manager
products,
managers'

to
coordinate
activities
of
the
agentsproperly
account,
record
and
document
under
[the
managers']
Unit
in
[thethe
company's
funds,
spot-check
and
agents']
daily,
weekly
and
monthlyaudit
the
work
of
the
zone
supervisors,
selling
activities,
making
sure
that.
.
.
follow
up
the
submission
of
weekly
their
respective
sales
targets
are
met;remittance
reports
of
the
debit
agents and zone supervisors
to
conduct
periodic
training
sessionsdirect
and
supervise
the
sales
activities
for
[the]
agents
to
further
enhance
theirof
the
debit
agents
under
him,
.
.
.
sales
skills;
andundertake
and
discharge
the
functions
of
absentee
debit
agents,
spot-check
the
to
assist
[the]
agents
with
their
salesrecords
of
debit
agents,
and
insure
proper
activities
by
way
of
joint
fieldwork,documentation
of
sales
and
collections
by
consultations
and
one-on-onethe
debit
agents.
evaluation
and
analysis
of
particular
accounts CSTHca
The ponencia would altogether deny Tongko either while serving as insurance agent or underwriter pursuant to the Agreement, or as appointed
manager the status of Manulife's employee. It added the observation that the factual antecedents in this case were set in the insurance industry and,
hence, the Insurance Code and the industry practices instead of the Labor Code shall primary govern in determining the element of control and
necessarily whether an employer-employee existed between Tongko and Manulife. The ponencia also went on to state that the Agreement, which
provided that "the Agent is an independent contractor . . . and nothing herein shall be construed as creating an employer-employee relationship between
the Company and Agent," embodies the intent of Manulife and Tongko at the time they executed the Agreement and they were governed by this
understanding throughout their relationship.
I beg to disagree.
First, the suggestion in the ponencia that the characterization the parties gave their relationship cannot simply be brushed aside runs counter against
established jurisprudence. As it were, the question of the existence of an employer-employee relationship is a matter of public concern, never left, if
ever, for the parties to peremptorily determine. To borrow from Insular Life Assurance Co., Ltd. v. NLRC (4th Division) 9 (Insular Life II), neither can such
existence be negated by expressly repudiating it in the management contract and providing therein, as here, that the employee is an independent
contractor. For, as earlier indicated, the law defines and prescribes the employment status of a person, not what the clashing parties chose to call it or
say it should be. 10 We said as much in Servidad v. National Labor Relations Commission: 11
The private agreement of the parties cannot prevail over Article 1700 of the Civil Code, which provides:

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 special laws on labor
unions, collective bargaining, strikes and lockouts, closed shops, wages, working conditions, hours of labor and similar
subjects.
Similarly telling is the case of Pakistan Airlines Corporation vs. Pole, et al. There, it was said:
. . . provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written
into the contract. Put a little differently, the governing principle is that the parties may not contract away applicable
provisions of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law
relating to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting with each other. . .
Of the same tenor is the Court's fairly recent holding in Paguio v. National Labor Relations Commission: 12 TCASIH
Respondent company cannot seek refuge under the terms of the agreement it has entered into with petitioner. The law, in
defining their contractual relationship, does so, not necessarily or exclusively upon the terms of their written or oral contract, but
also on the basis of the nature of the work petitioner has been called upon to perform. The law affords protection to an employee,
and it will not countenance any attempt to subvert its spirit and intent. A stipulation in an agreement can be ignored as and
when it is utilized to deprive the employee of his security of tenure. The sheer inequality that characterizes employeremployee relations, where the scales generally tip against the employee, often scarcely provides him real and better options.
(Emphasis supplied.)
Second, and in relation to the first reason, the fact that the Agreement was subsisting even after Tongko's appointment as manager does not militate
against a conclusion that Tongko was Manulife's employee, at least during his stint as such manager. To be sure, an insurance agent may at the same
time be an employee of an insurance company. Or to put it a bit differently, an employee-manager may be given the privilege of soliciting insurance, as
agent, and earn in the process commission for every contract concluded as a result of such solicitation. The reality of two personalities one as
employee and the other as non-employee of an insurance company, coinciding in one person was acknowledged in Insular Life II, in which the Court
wrote:
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into
between [Insular Life] and [respondent] De Los Reyes as contracts of agency. We however hold otherwise. Unquestionably there
exist major distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far
removed from the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship.
The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only insofar
the management contract is concerned. 13 . . .
Grepalife may also be cited where we declared:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions
performed by private respondent were those of insurance agents. Nevertheless, it does not follow that they are not employees of
Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does
not bar the application of the Labor Code with regard to labor standards and labor relations. 14 CSIHDA
The ponencia points out that Grepalife and Insular Life II factually differ with the instant case in that: "these cited cases dealt with the proper legal
characterization of a subsequent management contract that superseded the original agency contract between the insurance company and its agent." In
other words, the majority opinion distinguishes the instant case from Grepalife and Insular Life II in the lack of a written management contract between
Tongko and Manulife.
The cited difference does not, for that reason alone, pose a plausible bar to the application of Grepalife and Insular Life II to the instant case. In fact, the
absence of a written agreement to memorialize the naming and assumption of Tongko as unit and later branch manager is irrelevant to the issue of the
presence of an employer-employee relationship. A management contract, for purposes of determining the relationship between the worker and the
employer, is simply an evidence to support a conclusion either way. Such document, or the absence thereof, would not influence the conclusion on the
issue of employment. The presence of a management contract would merely simplify the issue as to the duties and responsibilities of the employee
concerned as they would then be defined more clearly.
Manulife's decision not to execute a management contract with Tongko was well within its discretion. However, the fact of Manulife and Tongko not
having inked a management contract, if this were the case, did not reduce the petitioner to a mere "lead agent," as the ponencia would have it. While
there was perhaps no written management contract whence Tongko's rights, duties and functions as unit/branch manager may easily be fleshed out as
a prelude to determining if an employer-employee relationship with Manulife did exist, other evidence was adduced to show such duties and
responsibilities. For one, in his letter 15 of November 6, 2001, respondent de Dios distinctly referred to Tongko as sales manager. For another, it is well
nigh inconceivable that Manulife issued no promotional appointments to petitioner as unit manager, branch manager and eventually regional sales
manager. Basic and sound management practice simply requires an appointment for any upward personnel movement, particularly when additional
duties and compensation are involved. Then, too, the aforementioned affidavits of the managers of Manulife as to the duties and responsibilities of a unit
manager, such as Tongko, point to the conclusion that these managers were employees of Manulife, applying the four-fold test.
To my mind, Grepalife and Insular Life II bear obvious parallelism to the instant case vis- -vis the facts against which they are cast. Too, the parties are
similarly situated in point of positions occupied, the agreed exclusivity of service and functional profiles to warrant the application of the stare decisis
doctrine. The Latin maxim stare decisis et non quieta movere, translates "stand by the thing and do not disturb the calm." It requires that high courts
must follow, as a matter of sound policy, its own precedents, or respect settled jurisprudence absent compelling reason to do otherwise. 16 Put a bit
differently, the doctrine holds that when a court has laid down a principle of law as applicable to a certain set of facts, it will abide with that principle in
future cases in which the facts are substantially the same. 17 In the view I take of this case, there is absolutely nothing in Grepalife and Insular Life II
which may be viewed as plainly unreasonable as to justify withholding from them the stare decisis effect. THCSEA
And lest it be overlooked, both Grepalife and Insular Life II appreciated and applied the element of control the most crucial and determinative indicator
of an employer-employee relationship as a labor law concept. The Labor Code and other labor relations laws, some of which have been incorporated
in the Civil Code, regulate the relationship between labor and capital or between worker and employer in the private sector. The Insurance Code, on the
other hand, governs the licensing requirements and other particular duties of insurance agents; 18 it also regulates not only the relationship between the
insurer and the insured but also the internal affairs of the insurance company. 19 These are the particular areas of operation of the aforementioned laws.
To argue then that the Insurance Code and insurance industry practice shall determine the existence of an employer-employee relationship in the case
at bench is, it is submitted, simplistic if not downright erroneous. Both law and jurisprudence do not support the contention on the primacy of the
Insurance Code and insurance usages in determining said relationship. As a matter of fact, the Court, in a string of cases involving corporations

engaged in non-insurance activities as well as those into the insurance business, notably in Grepalife, Insular Life I 20 and II, Great Pacific Life
Assurance Corporation v. Judico, 21 and AFP Mutual Benefit Association v. NLRC, 22 held that the determination of the existence of an employeremployee relationship lies in the four-fold test. An examination of these cases yields no indication that a separate law, other than the Labor Code and
labor law concepts, was ever considered by the Court in determining the existence of an employer-employee relationship.
There can be no quibbling that Tongko, as unit, branch and regional sales manager, was without a fixed salary, but earned his income strictly on
commission basis. However, how and when he was paid his compensation is, without more, not an argument against a finding that he was an employee
of Manulife. For, the phrase "wage paid," as a component of employment and as an element of the four-fold test, is defined under Art. 97 (f) of the Labor
Code as "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." 23 Lazaro v. Social Security Commission 24 is
emphatic on this point:
Lazaro's arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by way
of commission does not preclude the establishment of an employer-employee relationship. In Grepalife v. Judico, the
Court upheld the existence of an employer-employee relationship between the insurance company and its agents, despite the fact
that the compensation that the agents on commission received was not paid by the company but by the investor or the person
insured. The relevant factor remains, as stated earlier, whether the "employer" controls or has reserved the right to control the
"employee" not only as to the result of the work to be done but also as to the means and methods by which the same is to be
accomplished. (Emphasis supplied.) SAHaTc
Much has been made in the ponencia, following Manulife's line, of Tongko's income tax returns (ITRs), in which he described himself to be "selfemployed." It must be stressed in this regard, however, that he had no other choice but to do so, for the following reasons: (1) Manulife had refused to
consider him as its employee; and (2) Manulife withheld 10% of his income as an agent as taxes. Tongko had no other viable alternative but to make
use of the withholding tax certificates issued by Manulife in paying his taxes. Thus, petitioner could not have really been faulted for including in his ITRs
an entry declaring himself as self-employed. While perhaps not on all fours here, because its issue revolved around estoppel instead of declaration
against interest made in an ITR, Philippine National Construction Corporation v. NLRC 25 is nonetheless most instructive:
Time honored is the precept that quitclaims are ineffective in barring recovery for the full measure of the worker's rights and that
acceptance of benefits therefrom does not amount to estoppel. In Lopez Sugar Corporation vs. Federation of Free Workers, the
Court explained:
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 the job, he has to face harsh necessities of life. He thus found himself in no position to resist
money proffered. His, then, is a case of adherence, not of choice. One thing sure, however, is that petitioners did not
relent their claim. They pressed it. They are deemed not to have waived any of their rights. . . .
It may be noted at this juncture that Manulife has changed its stance on the issue of illegal dismissal. In its Position Paper with Motion to Dismiss filed
before the Labor Arbiter, in its Motion for Reconsideration (Re: Decision dated 27 September 2004) dated October 11, 2004 filed before the NLRC, and
in its Comment dated August 5, 2006 filed before the Court, Manulife had consistently assumed the posture that the dismissal of petitioner was a proper
exercise of termination proviso under the Agreement. 26 In this motion, however, Manulife, in a virtual acknowledgment of Tongko being its employee,
contends that he was "dismissed for a just and lawful cause for gross and habitual neglect of duties, inefficiency and willful disobedience of the lawful
orders." 27 Manulife adds that:
Respondents presented an abundance of evidence demonstrating how termination happened only after failure to meet company
goals, after all remedial efforts to correct the inefficiency of Petitioner failed and after Petitioner, as found by the CA, created
dissension in Respondent Manulife when he refused to accept the need for improvement in his area and continued to spread the
bile of discontent and rebellion that he had generated among the other agents. 28
If Manulife claimed at every possible turn that Tongko was never an employee of the insurance company, why take a formal action of dismissal with a
statement of the grounds therefor?
No less than the Constitution itself guarantees protection to labor:
ARTICLE XIII
LABOR
Section 3.The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all. ITScHa
xxx xxx xxx
The State shall promote the principle of shared responsibility between workers and employers and the preferential use of
voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits
of production and the right of enterprises to reasonable returns to investments, and to expansion and growth.
Complementing the foregoing guarantee provisions is Article 1702 of the Civil Code mandating that, in case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living for the laborer. Along side with the Civil Code command is Art. 4 of the Labor Code
providing:
ART. 4.Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor.
The fairly recent Dealco Farms, Inc. v. National Labor Relations Commission (5th Division) 29 is reflective of the statutory bias in favor of the working
class and the need to give labor the benefit of the doubt, thus:
Having failed to substantiate its allegation on the relationship between the parties, we stick to the settled rule in controversies
between a laborer and his master that doubts reasonably arising from the evidence should be resolved in the former's
favor. (Emphasis supplied.)

In the instant case, doubts as to the true relationship between Tongko and Manulife should be resolved in favor of the former and for employment.
Lest it be misunderstood, this dissent proposes only to affirm the underlying Decision of the Court dated November 7, 2008, but only insofar as it
considered Tongko Manulife's employee following his hiring as manager, first as unit manager, then branch manager and ultimately as regional sales
manager. For, it was only after such engagement that Manulife exercised effective control not only over the results of his works, but also over the means
and methods by which it is to be accomplished; it was then that Tongko was tasked to perform administrative duties. As to Tongko's stint as insurance
agent, an employer-employee relationship cannot be posited in light of the paucity of evidence to support the proposition. IaTSED
In view of the foregoing, I vote to partially grant the motion for reconsideration but only in the sense that petitioner Tongko shall only be considered as
employee of respondent Manulife only after his engagement as manager of the company. Accordingly, his entitlement to backwages and separation
benefits shall be reckoned from that point in time and the amount shall correspond to his commission earned as such manager only, subject to the usual
accounting requirements.
Footnotes
1.Rollo, pp. 772-819.
2.Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc., G.R. No. 167622, November 7, 2008, 570 SCRA 503, 506-507.
3.Rollo, p. 52.
4.Id. at 53.
5.Ibid.
6.Supra note 2, at 508-510.
7.Id. at 511.
8.Rollo, pp. 57-58.
9.Tongko's Petition for Review, id. at 3-46; and Summary of Tongko's Position in the September 27, 2004 decision of the NLRC (id. at 349-351) and
the CA decision (id. at 57-58).
10.347 Phil. 587 (1997); see Summary of Manulife's Position in the September 27, 2004 decision of the NLRC (rollo, pp. 351-353) and the CA
decision (rollo, pp. 58-59).
11.Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989, 179 SCRA 459.
12.In an Affidavit dated April 28, 2003, John D. Chua, a Regional Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager ("RSM") for Metro South Region pursuant
to an Agency Contract. As such RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amanda Toledo, a Branch Manager of Manulife, stated in her Affidavit, dated April 29, 2003, that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activities of other commission agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit, dated April 28, 2003, that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife products and who will be part of my Unit.
b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling activities, making sure that their respective sales
targets are met.
c. To conduct periodic training sessions for my agents to further enhance their sales skills.
d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on-one evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales activities and encouraging them to be involved
in company and industry activities.
f. To provide opportunities for professional growth to my agents by encouraging them to be a member of the LUCAP (Life Underwriters Association of
the Philippines).
13.Rollo, pp. 776-777.
14.Sections 303 and 304, Insurance Code.

15.Section 306, Insurance Code.

16.Article 1868, Civil Code.
17.Article 1869, Civil Code.
18.Article 1870, Civil Code.
19.Section 299, Insurance Code.
20.Article 1875, Civil Code.
21.Articles 1886 and 1918, Civil Code.
22.Article 1894, Civil Code.
23.Article 1887, Civil Code.
24.Supra note 2, at 519-520.
25.G.R. No. 119930, March 12, 1998, 287 SCRA 476.
26.G.R. No. 102199, January 28, 1997, 267 SCRA 47.
27.In 1997, his income was P2,822,620.00; in 1998 P4,805,166.34; in 1999, P6,797,814.05; in 2001, P6,214,737.11; and in 2002, P8,003,180.38.
28.Articles 1431 to 1439 of the Civil Code.
29.Justice Velasco's Dissenting Opinion, p. 10. Justice Velasco maintains that Tongko's declaration in his tax returns that he was self-employed was
forced upon him by Manulife, which refused and still refuses to consider him as its employee, and withheld 10% of Tongko's income as an
agent for taxes. Tongko therefore had no choice but to use the withholding tax certificates issued to Manulife in connection with the taxes it
paid on his income as an agent and he could not have been faulted for declaring himself as self-employed.
30.These include the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the Manulife Code of Conduct Agreement.
31.Justice Velasco's Dissenting Opinion, pp. 3-4.
32.Motion for Reconsideration dated December 3, 2008; quoting the Affidavit of John Chua (Regional Sales Manager) dated April 28, 2003, Affidavit
of Amanda Tolentino (Branch Manager) dated April 29, 2003, and Affidavit of Lourdes Samson (Unit Manager) dated April 28, 2003. Rollo,
p. 803.
33.Separate Dissenting Opinion of Justice Conchita Carpio Morales, pp. 1-2. Justice Carpio Morales asserts that an agent may, at the same time, be
an employee of a life insurance company and quotes the Grepalife case:
True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code some of the functions performed by private
respondents were those of insurance agents. Nevertheless, it does not follow that they are not employees of Grepalife. The Insurance Code
may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code
with regard to labor standards and labor relations.
She additionally posits that the hybrid model is not novel the second Insular Life case purportedly held that Pantaleon delos Reyes, acting unit
manager, was an employee of Insular Life only insofar as the management contract is concerned, quoting in support of this assertion
the following discussion in the second Insular Life case:
Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into between petitioner and
De los Reyes as contracts of agency. We, however, hold otherwise. Unquestionably there exist major distinctions between the two
agreements. While the first has the earmarks of an agency contract, the second is far removed from the concept of agency in that
provided therein are conditionalities that indicate an employer-employee relationship. The NLRC therefore was correct in finding that
private respondent was an employee of petitioner, but this holds true only insofar as the management contract is concerned. In
view thereof, the Labor Arbiter has jurisdiction over the case.
34.Justice Presbitero Velasco, Jr.'s Dissenting Opinion, p. 12.
CARPIO MORALES, J., dissenting:
1.570 SCRA 503, decided by the Court's Second Division, per Velasco, J.
2.G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694, decided by the Court's Third Division, per Cortes, J.
3.Id. at 699.
4.G.R. No. 119930, March 12, 1998, 287 SCRA 476, decided by the Court's First Division, per Bellosillo, J.
5.Id. at 483.
6.Rollo, pp. 451-453.
7.Vide Manulife's Comment, rollo, p. 418.
8.Rollo, pp. 456-462.
9.Id. at 291-294.
10.Vide rollo, pp. 358-360.
11.G.R. No. 84484, November 15, 1989, 179 SCRA 459, decided by the Court's First Division, per Narvasa, J.
12.Id. at 464-465.
13.G.R. No. 73887, December 21, 1989, 180 SCRA 445, decided by the Court's Second Division, per Paras, J.

14.Id. at 450.
15.Supra at 698-699.
16.G.R. No. 118086, December 15, 1997, 283 SCRA 308, decided by the Court's Third Division, per Narvasa, C.J.
17.Id. at 322.
18.Supra at 489.
19.G.R. No. 102199, January 28, 1997, 267 SCRA 47.
20.Rollo, pp. 364-365.
21.Id. at 9, 727; vide rollo, pp. 241-242.
22.Id. at 299.
23.Ibid.
24.Id. at 592-595.
25.Rollo, p. 298.
VELASCO, JR., J., dissenting:
1.Rollo, pp. 2092-2114.
2.Id. at 773.
3.Id. at 772.
4.G.R. No. 166920, February 19, 2007, 516 SCRA 209.
5.Industrial Timber Corp. v. NLRC, G.R. No. 83616, January 20, 1989, 169 SCRA 341.
6.G.R. Nos. 80750-51, July 23, 1990, 187 SCRA 694.
7.Id. at 698-699.
8.Rollo, pp. 590-594.
9.G.R. No. 119930, March 12, 1998, 287 SCRA 476, 489.
10.Industrial Timber Corp. v. NLRC, supra note 5.
11.G.R. No. 128682, March 18, 1999, 305 SCRA 49, 57-58.
12.G.R. No. 147816, May 9, 2003, 403 SCRA 190, 198.
13.Supra note 9, at 483.
14.Supra note 6, at 699.
15.Rollo, p. 53.
16.Republic v. Nillas, G.R. No. 159595, January 23, 2007, 512 SCRA 286, 297.
17.Uy v. Villanueva, G.R. No. 157851, June 29, 2007, 526 SCRA 73, 90.
18.Grepalife, supra note 6.
19.Insular Life Insurance Co., Ltd. v. NLRC, G.R. No. 84484, November 15, 1989, 179 SCRA 459, 465; citing 43 Am. Jur. 2d. pp. 73-91.
20.Insular Life Insurance Co., Ltd. v. NLRC, supra note 19.
21.G.R. No. 73887, December 21, 1989, 180 SCRA 445.
22.G.R. No. 102199, January 28, 1997, 267 SCRA 47.
23.Iran v. NLRC (Fourth Division), G.R. No. 121927, April 22, 1998, 289 SCRA 433.
24.G.R. No. 138254, July 30, 2004, 435 SCRA 472, 476.
25.G.R. No. 100353, October 22, 1999, 317 SCRA 186, 193.
26.Rollo, pp. 451-453.
27.Id. at 813.
28.Id.
29.G.R. No. 153192, January 30, 2009, 577 SCRA 280, 295.
||| (Tongko v. Manufacturers Lfe Insurance Co. (Phils.), Inc., G.R. No. 167622, June 29, 2010)

THIRD DIVISION
[G.R. No. 102199. January 28, 1997.]
AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO
BUSTAMANTE, respondents.
Gudelia L. Dinapo for petitioner.
Patricio Bongayao for private respondent.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FINDINGS OF THE LABOR ARBITER AND THE NLRC, GENERALLY RESPECTED; EXCEPTION. Well-settled is
the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and
the National Labor Relations Commission shall be accorded not only respect but even finality when supported by substantial evidence. The
determinative factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot bind this
Court.
2. LABOR LAW AND SOCIAL LEGISLATION; EMPLOYER-EMPLOYEE RELATIONSHIP; ELEMENTS. The Court has applied the "four-fold" test in
determining the existence of employer-employee relationship. This test considers the following elements: (1) the power to hire; (2) the payment of
wages, (3) the power to dismiss; and (4) the power to control, the last being the most important element.
3. ID.; ID.; ID.; CONTROL; NOT PRESENT BETWEEN INSURANCE COMPANIES AND INSURANCE AGENTS. The fact that private respondent
was required to solicit business exclusively for petitioner could hardly be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81
and 2-85 issued by the Insurance Commissioner, insurance agents are barred from serving more than one insurance company, in order to protect the
public and to enable insurance companies to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction
clearly springs from a regulation issued by the Insurance Commission, and not from an intention by petitioner to establish control over the method and
manner by which private respondent shall accomplish his work. This feature is not meant to change the nature of the relationship between the parties,
nor does it necessarily imbue such relationship with the quality of control envisioned by the law. So too, the fact that private respondent was bound by
company policies, memo/circulars, rules and regulations issued from time to time is also not indicative of control. In regard to the territorial assignments
given to sales agents, this too cannot be held as indicative of the exercise of control over an employee. Further, not every form of control that a party
reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employeremployee relationship. And private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell insurance at
any time as he was not subject to definite hours or conditions of work and in turn was compensated according to the result of his efforts. By the nature of
the business of soliciting insurance, agents are normally left free to devise ways and means of persuading people to take out insurance. There is no
prohibition for private respondent to work for as long as he does not violate the Insurance Code. Although petitioner could have, theoretically,
disapproved any of private respondent's transactions, what could be disapproved was only the result of the work, and not the means by which it was
accomplished. The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and mode of
soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had been absent in this situation. Thus, no employment
relationship had ever existed between the parties.
4. ID.; ID.; ID.; ID.; ABSENCE THEREOF INDICATES INDEPENDENT CONTRACTORSHIP. The significant factor in determining the relationship of
the parties is the presence or absence of supervisory authority to control the method and the details of performance of the service being rendered, and
the degree to which the principal may intervene to exercise such control. The presence of such power of control is indicative of an employment
relationship, while absence thereof is indicative of independent contractorship. In other words, the test to determine the existence of independent
contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being
subject to the control of the employer except only as to the result of the work. Such is exactly the nature of the relationship between petitioner and
private respondent.
5. ID.; LABOR ARBITERS AND THE NLRC; NO JURISDICTION ABSENT EMPLOYER-EMPLOYEE RELATIONSHIP. Under the contract invoked,
private respondent had never been petitioner's employee, but only its commission agent. As an independent contractor, his claim for unpaid commission
should have been litigated in an ordinary civil action. The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor
Code. The unifying element running through paragraphs (1)-(6) of said provision is the consistent reference to cases or disputes arising out of or in
connection with an employer-employee relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the
article included "all other cases arising from employer-employee relation unless expressly excluded by this Code." Without this critical element of
employment relationship, the labor arbiter and respondent Commission can never acquire jurisdiction over a dispute. As in the case at bar.
6. REMEDIAL LAW; CIVIL ACTIONS; LACK OF JURISDICTION MAY BE RAISED EVEN ON APPEAL; EFFECT THEREOF. The lack of jurisdiction
of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of estoppel cannot be properly invoked by respondent
Commission to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction over a cause of action.
Moreover, in the proceedings below, petitioner consistently challenged the jurisdiction of the labor arbiter and respondent Commission. It remains a
basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal without jurisdiction is a total nullity. A void judgment for
want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all
claims emanating from it have no legal effect. Hence, it can never become final.
DECISION
PANGANIBAN, J p:
The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or tribunal is fatal, even for a patently
meritorious claim. More specifically, labor arbiters and the National Labor Relations Commission have no jurisdiction to entertain and rule on money
claims where no employer-employee relations is involved. Thus, any such award rendered without jurisdiction is a nullity.
This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the National Labor Relations Commission, promulgated
September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming the
decision of the labor arbiter which ordered payment of the amount of P319,796.00 as insurance commissions to private respondent.
The Antecedent Facts
The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner AFP Mutual Benefit Association, Inc.
since 1975. The Sales Agent's Agreement between them provided: 2

"B. Duties and Obligations:

1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively for AFPMBAI (petitioner),
and shall be bound by the latter's policies, memo circulars, rules and regulations which it may from time to time, revise, modify or
cancel to serve its business interests.
2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp, installation or residence
of military personnel. He is free to solicit in the area for which he/she is licensed and as authorized, provided however, that
AFPMBAI may from time to time, assign him a specific area of responsibility and a production quota on a case to case basis.
xxx xxx xxx
C. Commission
1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and received by AFPMBAI out of life
insurance policies solicited and obtained by the SALES AGENT at the rates set forth in the applicant's commission schedules
hereto attached.
xxx xxx xxx
D. General Provisions
1. There shall be no employer-employee relationship between the parties, the SALES AGENT being hereby deemed an
independent contractor."
As compensation, he received commissions based on the following percentages of the premiums paid: 3
"30% of premium paid within the first year,
10% of premium paid with the second year;
5% of the premium paid during the third year;
3% of the premium paid during the fourth year; and
1% of the premium paid during the fifth year up-to the tenth year.
On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance for another life insurance
company in violation of said agreement.
At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four (24) months per the Sales Agent
Agreement and as stated in the account summary dated July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-company.
Said summary showed that private respondent had a total commission receivable of P438,835.00, of which only P78,039.89 had been paid to him.

Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner, through Marketing Manager Juan
Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence, believing Concepcion's computations, private respondent signed a
quitclaim in favor of petitioner.
Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting his check, he discovered from a
document (account summary) attached to said check that his total commissions for the 24 months actually amounted to P354,796.09. Said document
stated: 4
"6. The total receivable for Mr. Bustamante out of the renewals and old business generated since 1983 grosses P438,835.00 less
his outstanding obligation in the amount of P78,039.89 as of June 30, 1989, total expected commission would amount to
P354,796.09. From that figure at a 15% compromise settlement this would mean P53,219.41 due him to settle his claim."
Private respondent, however, was paid only the amount of P35,000.00.
On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner praying for the payment of the correct
amount of his commission. Atty. German C. Alejandria, Chief of the Public Assistance and Information Division, Office of the Insurance Commissioner,
advised private respondent that it was the Department of Labor and Employment that had jurisdiction over his complaint.
On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1) commission for 2 years from termination of
employment equivalent to 30% of premiums remitted during employment; (2) P354,796.00 as commission earned from renewals and old business
generated since 1983; (3) P100,000.00 as moral damages; and (4) P100,000.00 as exemplary damages.
After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24, 1990, the dispositive portion of which reads:
5
"WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the dismissal of the
complainant as just and valid, and consequently, his claim for separation pay is denied. On his money claim, the respondent
company is hereby ordered to pay complainant the sum of P319,796.00 plus attorney's fees in the amount of P31,976.60.
All other claims of the complainant are dismissed for want of merit."
The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific area of responsibility and a
production quota, and read it as signalling the existence of employer-employee relationship between petitioner and private respondent.
On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the Labor Arbiter. In the assailed Resolution, respondent
Commission found no reason to disturb said ruling of the labor arbiter and ruled: 7
"WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is hereby, denied and the decision
appealed from affirmed.
SO ORDERED."

Hence, this petition.

The Issue
Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor arbiter had jurisdiction over this case. At the
heart of the controversy is the issue of whether there existed an employer-employee relationship between petitioner and private respondent.
Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employer-employee relationship between private
respondent and itself. Hence, respondent commission gravely abused its discretion when it held that the labor arbiter had jurisdiction over the case.
The Court's Ruling
The petition is meritorious.
First Issue: Not All That Glitters Is Control
Well-settled is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the
labor arbiter and the National Labor Relations Commission shall be accorded not only respect but even finality when supported by substantial evidence.
8 The determinative factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot bind this
Court.
Respondent Commission concurred with the labor arbiter's findings that: 9
". . . The complainant's job as sales insurance agent is usually necessary and desirable in the usual business of the respondent
company. Under the Sales Agents Agreement, the complainant was required to solicit exclusively for the respondent company,
and he was bound by the company policies, memo circulars, rules and regulations which were issued from time to time. By such
requirement to follow strictly management policies, orders, circulars, rules and regulations, it only shows that the respondent had
control or reserved the right to control the complainant's work as solicitor. Complainant was not an independent contractor as he
did not carry on an independent business other than that of the company's . . ."
To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner may assign private respondent a specific
area of responsibility and a production quota. From there, it concluded that apparently there is that exercise of control by the employer which is the most
important element in determining employer-employee relationship. 10 cda
We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court has applied the "four-fold" test in
determining the existence of employer-employee relationship. This test considers the following elements: (1) the power to hire; (2) the payment of
wages; (3) the power to dismiss; and (4) the power to control, the last being the most important element. 11
The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control. Anent the issue of exclusivity in the case
at bar, the fact that private respondent was required to solicit business exclusively for petitioner could hardly be considered as control in labor
jurisprudence. Under Memo Circulars No. 2-81 12 and 2-85, dated December 17, 1981 and August 7, 1985, respectively, issued by the Insurance
Commissioner, insurance agents are barred from serving more than one insurance company, in order to protect the public and to enable insurance
companies to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly springs from a regulation
issued by the Insurance Commission, and not from an intention by petitioner to establish control over the method and manner by which private
respondent shall accomplish his work. This feature is not meant to change the nature of the relationship between the parties, nor does it necessarily
imbue such relationship with the quality of control envisioned by the law.
So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations issued from time to time is also not
indicative of control. In its Reply to Complainant's Position Paper, 13 petitioner alleges that the policies, memo/circulars, and rules and regulations
referred to in provision B(1) of the Sales Agent's Agreement are only those pertaining to payment of agents' accountabilities, availment by sales agents
of cash advances for sorties, circulars on incentives and awards to be given based on production, and other matters concerning the selling of insurance,
in accordance with the rules promulgated by the Insurance Commission. According to the petitioner, insurance solicitors are never affected or covered
by the rules and regulations concerning employee conduct and penalties for violations thereof, work standards, performance appraisals, merit increases,
promotions, absenteeism/attendance, leaves of absence, management-union matters, employee benefits and the like. Since private respondent failed to
rebut these allegations, the same are deemed admitted, or at least proven, thereby leaving nothing to support the respondent Commission's conclusion
that the foregoing elements signified an employment relationship between the parties.
In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the exercise of control over an employee. First of all,
the place of work in the business of soliciting insurance does not figure prominently in the equation. And more significantly, private respondent failed to
rebut petitioner's allegation that it had never issued him any territorial assignment at all. Obviously, this Court cannot draw the same inference from this
feature as did the respondent Commission.
To restate, the significant factor in determining the relationship of the parties is the presence or absence of supervisory authority to control the method
and the details of performance of the service being rendered, and the degree to which the principal may intervene to exercise such control. The
presence of such power of control is indicative of an employment relationship, while absence thereof is indicative of independent contractorship. In other
words, the test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do
the work according to his own methods and without being subject to the control of the employer except only as to the result of the work. 14 Such is
exactly the nature of the relationship between petitioner and private respondent.
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be
accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co.,
Ltd. vs. NLRC. In said case, we held that:

"Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employeremployee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires
particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that
account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the
internal affairs of the insurance company. Rules and regulations governing the conduct of the business are provided for in the
Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to

promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it
requires or prohibits. . . . None of these really invades the agent's contractual prerogative to adopt his own selling methods or to
sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship
between him and the company." 15
Private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell insurance at any time as he was not
subject to definite hours or conditions of work and in turn was compensated according to the result of his efforts. By the nature of the business of
soliciting insurance, agents are normally left free to devise ways and means of persuading people to take out insurance. There is no prohibition, as
contended by petitioner, for private respondent to work for as long as he does not violate the Insurance Code. As petitioner explains:
"(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and unfettered time to pursue his
business. He did not have to punch in and punch out the bundy clock as he was not required to report to the (petitioner's) office
regularly. He was not covered by any employee policies or regulations and not subject to the disciplinary action of management
on the basis of the Employee Code of Conduct. He could go out and sell insurance at his own chosen time. He was entirely left to
his own choices of areas or territories, with no definite, much less supervised, time schedule.
(Private respondent) had complete control over his occupation and (petitioner) did not exercise any right of Control and
Supervision over his performance except as to the payment of commission the amount of which entirely depends on the sole
efforts of (private respondent). He was free to engage in other occupation or practice other profession for as long as he did not
commit any violation of the ethical standards prescribed in the Sales Agent's Agreement." 16
Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could be disapproved was only the result of the
work, and not the means by which it was accomplished.
The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and mode of soliciting insurance.
On the contrary, they clearly indicate that the juridical element of control had been absent in this situation. Thus, the Court is constrained to rule that no
employment relationship had ever existed between the parties.
Second Issue: Jurisdiction of Respondent
Commission & Labor Arbiter
Under the contract invoked, private respondent had never been petitioner's employee, but only its commission agent. As an independent contractor, his
claim for unpaid commission should have been litigated in an ordinary civil action. 17
The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor Code. 18 The unifying element running through
paragraphs (1) (6) of said provision is the consistent reference to cases or disputes arising out of or in connection with an employer-employee
relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the article included "all other cases arising
from employer-employee relation unless expressly excluded by this Code." 19 Without this critical element of employment relationship, the labor arbiter
and respondent Commission can never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on the part of the labor arbiter to
have assumed jurisdiction and adjudicated the claim. Likewise, the respondent Commission's affirmance thereof.
Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of estoppel cannot be
properly invoked by respondent Commission to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was bereft of
jurisdiction over a cause of action. 20 Moreover, in the proceedings below, petitioner consistently challenged the jurisdiction of the labor arbiter 21 and
respondent Commission. 22
It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal without jurisdiction is a total nullity. 23 A
void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed
pursuant to it and all claims emanating from it have no legal effect. Hence, it can never become final. ". . . (I)t may be said to be a lawless thing which
can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head." 24
The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid commission. Be that as it may, this ruling
is without prejudice to private respondent's right to file a suit for collection of unpaid commissions against petitioner with the proper forum and within the
proper period. cda
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE.
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Melo and Francisco, JJ., concur.
Footnotes
1.Rollo, pp. 48-54.
2.Rollo, p. 176.
3.Rollo, p. 98.
4.Rollo, p. 111.
5.Rollo, pp. 48-49.
6.Commissioners Rustico L. Diokno, ponente, with Presiding Commissioners Edna Bonto-Perez and Commissioner Domingo H. Zapanta.
7.Rollo, p. 53.
8.North Davao Mining Corporation vs. National Labor Relations Commission, 254 SCRA 721, 731, March 13, 1996; Great Pacific Life Assurance
Corporation vs. National Labor Relations Commission, 187 SCRA 694, 699, July 23, 1990; Loadstar Shipping Co., Inc. vs. Gallo, 229 SCRA
654, 660, February 4, 1994; Inter-Orient Maritime Enterprises, Inc. vs. National Labor Relations Commission, 235 SCRA 268, 277, August
11, 1994.
9.Rollo, pp. 49-50.
10.Rollo, p. 51.

11.Insular Life Assurance Co., Ltd. vs. NLRC, 179 SCRA 459, 464, November 15, 1989; Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC,
217 SCRA 249, 255, January 19, 1993; and Villuga vs. NLRC, 225 SCRA 537, 546, August 23, 1993.
12.Memorandum Circular No. 2-81 on Licensing Of Insurance Agents, Variable Contract Agents, Insurance Brokers and Reinsurance Brokers
provides:
"xxx xxx xxx
2. LICENSING REQUIREMENTS, LIMITATIONS
xxx xxx xxx
2.5. No person shall be licensed to act as an insurance agent or general agent of more than one life insurance company, and/ or as a general agent
of more than one non-life insurance company, and/or as insurance agent of more than three other non-life insurance companies. . . ."
13.Rollo, p. 36.
14.Investment Planning Corp. of the Phil. vs. Social Security System, 21 SCRA 924, 931, November 18, 1967.
15.Supra., p. 465.
16.Petitioner's Position Paper, Rollo, p. 32.
17.Insular Life Assurance Co., Ltd. vs. NLRC, supra., p. 467; Manliguez vs. Court of Appeals, 232 SCRA 427, 431, May 20, 1994; and HawaiianPhilippine Company vs. Gulmatico, 238 SCRA 181, 187, November 16, 1994.
18.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, . . ., the following cases involving all workers, whether agricultural or non-agricultural:
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 employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and
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
19.San Miguel Corporation vs. National Labor Relations Commission, 161 SCRA 719, 724-725, May 31, 1988.
20.Southeast Asian Fisheries Development Center-Agriculture Department vs. National Labor Relations Commission, 206 SCRA 283, 288, February
14, 1992; and Calimlim vs. Ramirez, 118 SCRA 399, 406, November 19, 1982.
21.Petitioner's Position Paper, Rollo, pp. 29-33.
22.Petitioner's Appeal Memorandum, Rollo, pp. 40-46.

23.Philippine Singapore Ports Corporation vs. National Labor Relations Commission, 218 SCRA 77, 83, January 29, 1993.
24.Leonor vs. Court of Appeals, et al., G.R. No. 112597, April 2, 1996, pp. 17-18.

||| (AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, January 28, 1997)

SECOND DIVISION
[G.R. No. 129315. October 2, 2000.]
OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS, PATRICIA
NAS, and TERESITA FLORES, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY,
INC. and/or TRINIDAD LAO ONG, respondents.
Francisco D. Estrada for petitioners.
Romero A. Yu for private respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; WAGES; INDEPENDENT CONTRACTOR, DEFINED. An independent contractor is one
who undertakes "job contracting," i.e., a person who (a) carries on an independent business and undertakes the contract work on his own account under
his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected
with the performance of the work except as to the results thereof, and (b) has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of the business.
2. ID.; ID.; EMPLOYER-EMPLOYEE RELATIONSHIP, PRESENT IN CASE AT BAR. The following elements must be present for an employeremployee relationship to exist: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means;
and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration. Records of the case show that the late
Vicente Lao engaged the services of the petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship
owned by him; that in January 1982, his children organized a corporation which they registered with the Securities and Exchange Commission as Lao
Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties of the New Look Barber Shop and continued the
business; that the respondent company retained the services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in
petitioners' and private respondent's working arrangements. . . . As to the "control test," the following facts indubitably reveal that respondent company
wielded control over the work performance of petitioners, in that: (1) they worked in the barber shop owned and operated by the respondents; (2) they
were required to report daily and observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted their full time
working in the New Look Barber Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have worked with respondents as
early as in the 1960's; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task. Certainly,
respondent company was clothed with the power to dismiss any or all of them for just and valid cause. Petitioners were unarguably performing work
necessary and desirable in the business of the respondent company.
3. ID.; ID.; ID.; POWER TO CONTROL WORKERS' CONDUCT; ACTUAL EXERCISE THEREOF IS NOT NECESSARY. The power to control refers
to the existence of the power and not necessarily to the actual exercise thereof, nor is it essential for the employer to actually supervise the performance
of duties of the employee. It is enough that the employer has the right to wield that power.
4. ID.; ID.; TERMINATION OF EMPLOYMENT; CLOSURE DUE TO SERIOUS BUSINESS LOSSES; VALIDITY THEREOF. We agree with the labor
arbiter that there was sufficient evidence that the barber shop was closed due to serious business losses and respondent company closed its barber
shop because the building where the barber shop was located was sold. An employer may adopt policies or changes or adjustments in its operations to
insure profit to itself or protect investment of its stockholders. In the exercise of such management prerogative, the employer may merge or consolidate
its business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal or termination of its
employees in the process. CAaSED
5. ID.; ID.; ID.; ID.; AWARD OF SEPARATION PAY AND 13th MONTH PAY, PROPER; CASE AT BAR. Prescinding from the above, we hold that the
seven petitioners are employees of the private respondent company; as such, they are to be accorded the benefits provided under the Labor Code,
specifically Article 283 which mandates the grant of separation pay in case of closure or cessation of employer's business which is equivalent to one (1)
month pay for every year of service. Likewise, they are entitled to the protection of minimum wage statutes. Hence, the separation pay due them may be
computed on the basis of the minimum wage prevailing at the time their services were terminated by the respondent company. The same is true with
respect to the 13th month pay. The Revised Guidelines on the Implementation of the 13th Month Pay Law states that "all rank and file employees are
now entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month. Such employees are entitled to the benefit
regardless of their designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for
at least one (1) month during a calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be paid accordingly.
DECISION
QUISUMBING, J p:
This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent National Labor Relations
Commission (First Division), 1 in NLRC NCR Case No. 00-04-03163-95, and the Resolution dated March 5, 1997 denying the motion for
reconsideration. The aforecited October 17th Resolution affirmed the Decision dated September 28, 1996 of Labor Arbiter Potenciano S. Caizares
dismissing the petitioners' complaint for illegal dismissal and declaring that petitioners are not regular employees of private respondent Lao Enteng
Company, Inc. DTcACa
The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas, Elpidio Lacap, and
Simplicio Pedelos worked as barbers, while the two female petitioners, Teresita Flores and Patricia Nas worked as manicurists in New Look Barber
Shop located at 651 P. Paterno Street, Quiapo, Manila owned by private respondent Lao Enteng Co. Inc. Petitioner Nas alleged that she also worked as
watcher and marketer of private respondent.
Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship owned and managed by Mr. Vicente
Lao. In or about January 1982, the children of Vicente Lao organized a corporation which was registered with the Securities and Exchange Commission
as Lao Enteng Co. Inc. with Trinidad Ong as President of the said corporation. Upon its incorporation, the respondent company took over the assets,
equipment, and properties of the New Look Barber Shop and continued the business. All the petitioners were allowed to continue working with the new
company until April 15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look Barber Shop was located had been
sold and that their services were no longer needed. 2
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal deduction, separation pay, nonpayment of 13th month pay, and salary differentials. Only petitioner Nas asked for payment of salary differentials as she alleged that she was paid a
daily wage of P25.00 throughout her period of employment. The petitioners also sought the refund of the P1.00 that the respondent company collected
from each of them daily as salary of the sweeper of the barber shop.

Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty percent commission of the
amount charged to customers. Thus, there was no employer-employee relationship between them and petitioners. And assuming arguendo, that there
was an employer-employee relationship, still petitioners are not entitled to separation pay because the cessation of operations of the barber shop was
due to serious business losses.

Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated September 06, 1995 that Lao
Enteng Company, Inc. did not take over the management of the New Look Barber Shop, that after the death Lao Enteng petitioner were verbally
informed time and again that the partnership may fold up anytime because nobody in the family had the time to be at the barber shop to look after their
interest; that New Look Barber Shop had always been a joint venture partnership and the operation and management of the barber shop was left entirely
to petitioners; that her father's contribution to the joint venture included the place of business, payment for utilities including electricity, water, etc. while
petitioners as industrial partners, supplied the labor; and that the barber shop was allowed to remain open up to April 1995 by the children because they
wanted to give the partners a chance at making it work. Eventually, they were forced to close the barber shop because they continued to lose money
while petitioners earned from it. Trinidad also added that private respondents had no control over petitioners who were free to come and go as they
wished. Admittedly too by petitioners they received fifty percent to sixty percent of the gross paid by customers. Trinidad explained that some of the
petitioners were allowed to register with the Social Security System as employees of Lao Enteng Company, Inc. only as an act of accommodation. All
the SSS contributions were made by petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita Flores were not among those registered with the
Social Security System. Lastly, Trinidad avers that without any employee-employer relationship petitioners claim for 13th month pay and separation pay
have no basis in fact and in law. 3
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr. ordered the dismissal of the complaint on the basis of his findings
that the complainants and the respondents were engaged in a joint venture and that there existed no employer-employee relation between them. The
Labor Arbiter also found that the barber shop was closed due to serious business losses or financial reverses and consequently declared that the law
does not compel the establishment to pay separation pay to whoever were its employees. 4
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating thus:
Indeed, complainants failed to show the existence of employer-employee relationship under the four-way test established by the
Supreme Court. It is a common practice in the Barber Shop industry that barbers supply their own scissors and razors and they
split their earnings with the owner of the barber shop. The only capital of the owner is the place of work whereas the barbers
provide the skill and expertise in servicing customers. The only control exercised by the owner of the barber shop is to ascertain
the number of customers serviced by the barber in order to determine the sharing of profits. The barbers may be characterized as
independent contractors because they are under the control of the barber shop owner only with respect to the result of the work,
but not with respect to the details or manner of performance. The barbers are engaged in an independent calling requiring special
skills available to the public at large. 5
Its motion for reconsideration denied in the Resolution 6 dated March 5, 1997, petitioners filed the instant petition assigning that the NLRC committed
grave abuse of discretion in:
I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE EMPLOYEES OF
RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT CONTRACTORS. DacASC
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY CLAIMS. 7
Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were independent contractors. They contend that
they were employees of the respondent company and cannot be considered as independent contractors because they did not carry on an independent
business. They did not cut hair, manicure, and do their work in their own manner and method. They insist they were not free from the control and
direction of private respondents in all matters, and their services were engaged by the respondent company to attend to its customers in its barber shop.
Petitioners also stated that, individually or collectively, they do not have substantial capital nor investments in tools, equipments, work premises and
other materials necessary in the conduct of the barber shop. What the barbers owned were merely combs, scissors, and razors, while the manicurists
owned only nail cutters, nail polishes, nippers and cuticle removers. By no standard can these be considered "substantial capital" necessary to operate a
barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners Pedro Tolentino, Manuel Caparas,
Simplicio Pedelos, and Patricia Nas were registered with the Social Security System as regular employees of the respondent company. The SSS
employment records in common show that the employer's ID No. of Vicente Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent
company was 03-8740074-7. All the foregoing entries in the SSS employment records were painstakingly detailed by the petitioners in their position
paper and in their memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did not even
mention said employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and finality on appeal. We have
long settled that this Court will not uphold erroneous conclusions unsupported by substantial evidence. 8 We must also stress that where the findings of
the NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine
the questioned findings. 9
The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between petitioners and private respondent Lao
Enteng Company, Inc. The Labor Arbiter has concluded that the petitioners and respondent company were engaged in a joint venture. The NLRC
concluded that the petitioners were independent contractors. cHaDIA
The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary evidence. It should be noted that aside
from the self-serving affidavit of Trinidad Lao Ong, there were no other evidentiary documents, nor written partnership agreements presented. We have
ruled that even the sharing of proceeds for every job of petitioners in the barber shop does not mean they were not employees of the respondent
company. 10
Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because they supplied their own working
implements, shared in the earnings of the barber shop with the owner and chose the manner of performing their work. They stressed that as far as the
result of their work was concerned the barber shop owner controlled them.
An independent contractor is one who undertakes "job contracting," i.e., a person who (a) carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his

employer or principal in all matters connected with the performance of the work except as to the results thereof, and (b) has substantial capital or
investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of the business. 11
Juxtaposing this provision vis-a-vis the facts of this case, we are convinced that petitioners are not "independent contractors." They did not carry on an
independent business. Neither did they undertake cutting hair and manicuring nails, on their own as their responsibility, and in their own manner and
method. The services of the petitioners were engaged by the respondent company to attend to the needs of its customers in its barber shop. More
importantly, the petitioners, individually or collectively, did not have a substantial capital or investment in the form of tools, equipment, work premises and
other materials which are necessary in the conduct of the business of the respondent company. What the petitioners owned were only combs, scissors,
razors, nail cutters, nail polishes, the nippers nothing else. By no standard can these be considered substantial capital necessary to operate a barber
shop. From the records, it can be gleaned that petitioners were not given work assignments in any place other than at the work premises of the New
Look Barber Shop owned by the respondent company. Also, petitioners were required to observe rules and regulations of the respondent company
pertaining, among other things, observance of daily attendance, job performance, and regularity of job output. The nature of work performed by were
clearly directly related to private respondent's business of operating barber shops. Respondent company did not dispute that it owned and operated
three (3) barber shops. Hence, petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and private respondent? The following elements must be present for an employeremployee relationship to exist: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means;
and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration. Records of the case show that the late
Vicente Lao engaged the services of the petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship
owned by him; that in January 1982, his children organized a corporation which they registered with the Securities and Exchange Commission as Lao
Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties of the New Look Barber Shop and continued the
business; that the respondent company retained the services of all the petitioners and continuously paid their wages. Clearly, all three elements exist in
petitioners' and private respondent's working arrangements. THaDAE

Private respondent claims it had no control over petitioners. The power to control refers to the existence of the power and not necessarily to the actual
exercise thereof, nor is it essential for the employer to actually supervise the performance of duties of the employee. It is enough that the employer has
the right to wield that power. 12 As to the "control test," the following facts indubitably reveal that respondent company wielded control over the work
performance of petitioners, in that: (1) they worked in the barber shop owned and operated by the respondents; (2) they were required to report daily and
observe definite hours of work; (3) they were not free to accept other employment elsewhere but devoted their full time working in the New Look Barber
Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have worked with respondents as early as in the 1960's; (5) that
petitioner Patricia Nas was instructed by the respondents to watch the other six (6) petitioners in their daily task. Certainly, respondent company was
clothed with the power to dismiss any or all of them for just and valid cause. Petitioners were unarguably performing work necessary and desirable in the
business of the respondent company.
While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship since the policy is now to
encourage even the self-employed dressmakers, manicurists and jeepney drivers to become SSS members, we could not agree with private
respondents that petitioners were registered with the Social Security System as their employees only as an accommodation. As we have earlier
mentioned private respondent showed no proof to their claim that petitioners were the ones who solely paid all SSS contributions. It is unlikely that
respondents would report certain persons as their workers, pay their SSS premium as well as their wages if it were not true that they were indeed their
employees. 13
Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious business losses and
respondent company closed its barber shop because the building where the barber shop was located was sold. An employer may adopt policies or
changes or adjustments in its operations to insure profit to itself or protect investment of its stockholders. In the exercise of such management
prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which
may bring about the dismissal or termination of its employees in the process. 14
Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as such, they are to be accorded the
benefits provided under the Labor Code, specifically Article 283 which mandates the grant of separation pay in case of closure or cessation of
employer's business which is equivalent to one (1) month pay for every year of service. 15 Likewise, they are entitled to the protection of minimum wage
statutes. Hence, the separation pay due them may be computed on the basis of the minimum wage prevailing at the time their services were terminated
by the respondent company. The same is true with respect to the 13th month pay. The Revised Guidelines on the Implementation of the 13th Month Pay
Law states that "all rank and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month.
Such employees are entitled to the benefit regardless of their designation or employment status, and irrespective of the method by which their wages are
paid, provided that they have worked for at least one (1) month during a calendar year" and so all the seven (7) petitioners who were not paid their 13th
month pay must be paid accordingly. 16
Anent the other claims of the petitioners, (such as the P10,000.00 as penalty for non-compliance with procedural process; P10,000.00 as moral
damages; refund of P1.00 per day paid to the sweeper; salary differentials for petitioner Nas; attorney's fees), we find them without basis. HaDEIc
IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and Resolution dated March 05, 1997 are
SET ASIDE. Private respondents are hereby ordered to pay, severally and jointly, the seven (7) petitioners their (1) 13th month pay and (2) separation
pay equivalent to one month pay for every year of service, to be computed at the then prevailing minimum wage at the time of their actual termination
which was April 15, 1995.
Costs against private respondents.
SO ORDERED.
Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.
Footnotes
1.Per Commissioner Alberto R. Quimpo and concurred in by Presiding Commissioner Bartolome S. Carale and Commissioner Vicente S E. Veloso.
2.Rollo, pp. 5-7.
3.Rollo, pp. 115-119.
4.Id. at 84-85.

5.Id. at 122.
6.Id. at 128-130.
7.Id. at 11.
8.Anino vs. NLRC, 290 SCRA 489, 499-500 (1998).
9.Paz Martin Jo vs. NLRC, G.R. No. 121605, February 02, 2000, p.7.
10.Labor Congress of the Philippines vs. NLRC, 290 SCRA 509, 528 (1998); San Miguel Jeepney Service vs. NLRC, 265 SCRA 35 (1998).
11.Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code; Ponce vs. NLRC, 293 SCRA 366, 374-375 (1998).
12.Paz Martin Jo and Cesar Jo vs. NLRC, G.R. No. 121605, February 02, 2000, p. 5.
13.Nagusara vs. NLRC, 290 SCRA 245, 251 (1998).
14.Associated Labor Unions-VIMCONTU vs. NLRC, 204 SCRA 913, 923 (1991).
15.Phil. Tobacco Flue-Curing & Redrying Corp. vs. NLRC, 300 SCRA 37, 55 (1998)
16.See Sec. 1, P.D. 851; Osias Academy vs. DOLE, 192 SCRA 612, 619 (1990); Dentech Mfg. Corp. vs. NLRC, 172 SCRA 588 (1989).

||| (Corporal, Sr. v. NLRC, G.R. No. 129315, October 02, 2000)

FIRST DIVISION
[G.R. No. 120969. January 22, 1998.]
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION) composed of Presiding Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and
Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA FILMS, respondents.
Jose C. Evangelista for petitioners.
Bengzon, Narciso, Cudala, Pecson, Bengzon & Jimenez for private respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; WHEN AVAILABLE. A special civil action for certiorari under Rule 65 of the Rules of
Court is the proper remedy for one who complains that the NLRC acted in total disregard of evidence material to or decisive of the controversy. In the
instant case, petitioners allege that the NLRC's conclusions have no basis in fact and in law, hence the petition may not be dismissed on procedural or
jurisdictional grounds.
2. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT; CONTRACTING OUT OF LABOR, ALLOWED ONLY IN CASE OF JOB
CONTRACTING. It is settled that the contracting out of labor is allowed only in case of job contracting.
3. ID.; ID.; ID.; JOB CONTRACTING; CONDITIONS. Job contracting is permissible if the following conditions are met: (1) The contractor carries on
an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof;
and (2) The contractor has substantial capital or investment in the form of tools, equipments machineries work premises, and other materials which are
necessary in the conduct of his business. (Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code).
4. ID.; ID.; ID.; ID.; CASE AT BAR. Assuming that the associate producers are job contractors, they must then be engaged in the business of making
motion pictures. As such, and to be a job contractor under the preceding description, associate producers must have tools, equipment, machinery, work
premises, and other materials necessary to make motion pictures. However, the associate producers here have none of these. Private respondents'
evidence reveals that the movie-making equipment are supplied to the producers and owned by VIVA. These include generators, cables and wooden
platforms, cameras and "shooting equipment," in fact, VIVA likewise owns the trucks used to transport the equipment. It is thus clear that the associate
producer merely leases the equipment from VIVA. Private respondents further narrated that VIVA's generators broke down during petitioners' last movie
project, which forced the associate producer concerned to rent generators, equipment and crew from another company. This only shows that the
associate producer did not have substantial capital nor investment in the form of tools, equipment and other materials necessary for making a movie.
Private respondents in effect admit that their producers, especially petitioners' last producer, are not engaged in permissible job contracting. ITDHcA
5. ID.; ID.; ID.; LABOR-ONLY CONTRACTOR, DEFINED. If private respondents insist that their associate producers are labor contractors, then these
producers can only be "labor-only" contractors, defined by the Labor Code as follows: Art. 106. Contractor or subcontractor. . . . There is "labor-only"
contracting where the person supplying workers to an employer does not have substantial capital of investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by him.
6. ID.; ID.; ID.; PERSON ENGAGED IN LABOR-ONLY CONTRACTING IS CONSIDERED A MERE AGENT OR INTERMEDIARY OF THE DIRECT
EMPLOYER. As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the
direct employer.
7. ID.; ID.; ID.; ID.; CASE AT BAR But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors
as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who
recruited crew members from an "available group of free-lance workers which includes the complainants Maraguinot and Enero." And in their
Memorandum, private respondents declared that the associate producer "hires the services of . . . 6) camera crew which includes (a) cameraman; (b)
the utility crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc. . ." This clearly showed that the associate producers did not
supply the workers required by the movie project. The relationship between VIVA and its producers or associate producers seems to be that of agency,
as the latter make movies on behalf of VIVA, whose business is to "make" movies. As such, the employment relationship between petitioners and
producers is actually one between petitioners and VIVA, with the latter being the direct employer.
8. ID.; ID.; ID.; ELEMENTS IN DETERMINING EXISTENCE THEREOF. While four elements are usually considered in determining the existence of
an employment relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee's conduct, the most important element is the employer's control of the employee's conduct, not only as to
the result of the work to be done but also as to the means and methods to accomplish the same. These four elements are present here.
9. ID.; ID.; ID.; ID.; CONTROL TEST MANIFEST IN CASE AT BAR. VIVA's control is evident in its mandate that the end result must be "quality film
acceptable to the company." The means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished
within schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject to change to suit the taste of the
company; and the Supervising Producer, "eyes and ears" of VIVA and del Rosario, intervenes in the movie-making process by assisting the associate
producer in solving problems encountered in making the film. All the circumstances indicate an employment relationship between petitioners and VIVA
alone, thus the inevitable conclusion is that petitioners are employees only of VIVA.
10. ID.; ID.; ID.; REQUISITES FOR A PROJECT EMPLOYEE OR A MEMBER OF THE WORK POOL TO ACQUIRE STATUS OF REGULAR
EMPLOYEE. A project employee or a member of a work pool may acquire the status of a regular employee when the following concur: 1) There is a
continuous rehiring of project employees even after cessation of a project; and 2) The tasks performed by the alleged "project employee" are vital,
necessary and indispensable to the usual business or trade of the employer. However, the length of time during which the employee was continuously
re-hired is not controlling, but merely serves as a badge of regular employment.
11. ID.; ID.; ID.; ID.; CASE AT BAR. In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years
and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-three
(23) projects. Moreover, as petitioners' tasks involved, among other chores, the loading, unloading and arranging of movie equipment in the shooting
area as instructed by the cameramen, returning the equipment to the Vivs Films' warehouse, and assisting in the "fixing" of the lighting system, it may
not be gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the underscored
phrase, it has been held that this is ascertained by considering the nature of the work performed and its relation to the scheme of the particular business

or trade in its entirety. A recent pronouncement of this Court (Tomas Lao Construction, et al. v. NLRC, et al., G.R. No. 116781, September 5, 1997)
anent project or work pool employees who had attained the status of regular employees proves most instructive.
12. ID.; ID.; ID.; ID. A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall be available when called to report for a project. Although primarily applicable to regular
season workers, this set-up can likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it prevents the unjust situation of "coddling labor at the expense of capital" and at the same time
enables the workers to attain the status of regular employees.

13. ID.; ID.; ID.; ID.; CESSATION OF ACTIVITIES, A MERE SUSPENSION OF WORK. Truly, the cessation of construction activities at the end of
every project is a foreseeable suspension of work. Of course, no compensation can be demanded from the employer because the stoppage of
operations at the end of a project and before the start of a new one is regular and expected by both parties to the labor relations. Similar to the case of
regular seasonal employees, the employment relation is not severed by merely being suspended [citing Manila Hotel Co. v. CIR 9 SCRA 186 (1963)]
The employees are, strictly speaking, not separated from services but merely on leave of absence without pay until they are reemployed.
14. ID.; ID.; ID.; ID.; ID.; LAO CASE (G.R. NO. 116781, SEPTEMBER 5, 1997) APPLIED TO ALL INDUSTRIES. While Lao admitted involved the
construction industry, to which Policy Instruction No. 20/Department Order No. 19 regarding work pools specifically applies, there seems to be no
impediment to applying the underlying principles to industries other than the construction industry. Neither may it be argued that a substantial distinction
exists between the projects undertaken in the construction industry and the motion picture industry. On the contrary, the raison d' etre of both industries
concern projects with a foreseeable suspension of work.
15. ID.; ID.; ID.; ID.; ID.; PROJECT OR WORK POOL EMPLOYEES WHO HAVE GAINED STATUS OF REGULAR EMPLOYEES ARE SUBJECT TO
"NO WORK-NO PAY" PRINCIPLE. Let it not be said that this decision "coddles labor, for as Lao has ruled, project or work pool employees who have
gained the status of regular employees are subject to the "no work-no pay" principle, to repeat: A work pool may exist although the workers in the pool
do not receive salaries and are free to seek other employment during temporary breaks in the business, provided that the worker shall be available when
called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as
the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of
"coddling labor at the expense of capital" and at the same time enables the workers to attain the status of regular employees.
16. ID.; ID.; ID.; PROJECT OR WORK POOL EMPLOYEES WHO HAVE GAINED STATUS OF REGULAR EMPLOYEE ARE ENTITLED TO BACK
WAGES AND REINSTATEMENT. As petitioners had already gained the status of regular employees, their dismissal was unwarranted, for the cause
invoked by private respondents for petitioners' dismissals viz., completion of project, was not, as to them, a valid cause for dismissal under Article 282 of
the Labor Code. As such, petitioners are now entitled to backwages and reinstatement, without loss of seniority rights and other benefits that may have
accrued. Nevertheless, following the principles of "suspension of work" and "no pay" between the end of one project and the start of a new one, in
computing petitioners' backwages, the amounts corresponding to what could have been earned during the periods from the date petitioners were
dismissed until their reinstatement when petitioners' respective Shooting Units were not undertaking any movie projects, should be deducted. Petitioners
were dismissed on 20 July 1992 at a time when Republic Act No. 6715 was already in effect. Pursuant to Section 34 thereof, which amended Section
279 of the Labor Code of the Philippines, and Bustamante vs. NLRC, petitioners are entitled to receive full back wages from the date of their dismissal
up to the time of their reinstatement, without deducting whatever earnings derived elsewhere during the period of illegal dismissal, subject, however, to
the above observations. SEcITC
DECISION
DAVIDE, JR., J p:
By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners seek to annul the 10 February 1995 Decision 1 of the
National Labor Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution 2 denying the motion to reconsider the former in NLRC-NCRCA No. 006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.
The parties present conflicting sets of facts. cda
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as part of the filming crew with a salary of
P375.00 per week. About four months later, he was designated Assistant Electrician with a weekly salary of P400.00, which was increased to P450.00 in
May 1990. In June 1991, he was promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to P593.00 in September
1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of the shooting crew with a weekly salary
of P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21 December 1991. 3
Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed by the cameraman, returning the
equipment to Viva Films' warehouse, assisting in the "fixing" of the lighting system, and performing other tasks that the cameraman and/or director may
assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario, to facilitate their request that private respondents
adjust their salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to
increase their salary only if they signed a blank employment contract. As petitioners refused to sign, private respondents forced Enero to go on leave in
June 1992, then refused to take him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the company payroll
from 8 to 21 June 1992, but was returned on 22 June 1992. He was again asked to sign a blank employment contract, and when he still refused, private
respondents terminated his services on 20 July 1992. 5 Petitioners thus sued for illegal dismissal 6 before the Labor Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva Productions, Inc., and that it is primarily
engaged in the distribution and exhibition of movies but not in the business of making movies; in the same vein, private respondent Vic del Rosario is
merely an executive producer, i.e., the financier who invests a certain sum of money for the production of movies distributed and exhibited by VIVA. 7
Private respondents assert that they contract persons called "producers" also referred to as "associate producers" 8 to "produce" or make movies for
private respondents; and contend that petitioners are project employees of the associate producers who, in turn, act as independent contractors. As
such, there is no employer-employee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film "Mahirap Maging Pogi," who hired petitioner Maraguinot. The movie
shot from 2 July up to 22 July 1992, and it was only then that Maraguinot was released upon payment of his last salary, as his services were no longer

needed. Anent petitioner Enero, he was hired for the movie entitled "Sigaw ng Puso," later re-titled "Narito ang Puso." He went on vacation on 8 June
1992, and by the time he reported for work on 20 July 1992, shooting for the movie had already been completed. 9
After considering both versions of the facts, the Labor Arbiter found as follows:
"On the first issue, this Office rules that complainants are the employees of the respondents. The producer cannot be considered
as an independent contractor but should be considered only as a labor-only contractor and as such, acts as a mere agent of the
real employer, the herein respondents. Respondents even failed to name and specify who are the producers. Also, it is an
admitted fact that the complainants received their salaries from the respondents. The case cited by the respondents Rosario
Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this case.
It is very clear also that complainants are doing activities which are necessary and essential to the business of the respondents,
that of movie-making. Complainant Maraguinot worked as an electrician while complainant Enero worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were illegally dismissed.
Respondents are hereby ordered to reinstate complainants to their former positions without loss [of] seniority rights and pay their
backwages starting July 21, 1999 to December 31, 1993 temporarily computed in the amount of P38,000.00 for complainant
Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot, Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorney's fees equivalent to ten (10%) and/or P8,400.00 on top of the award. 11
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In its decision 12 of 10 February 1995, the NLRC found the
following circumstances of petitioners' work "clearly established:"
1. Complainants [petitioners herein] were hired for specific movie projects and their employment was co-terminus with each movie
project the completion/termination of which are pre-determined, such fact being made known to complainants at the time of their
engagement.
xxx xxx xxx
2. Each shooting unit works on one movie project at a time. And the work of the shooting units, which work independently from
each other, are not continuous in nature but depends on the availability of movie projects.

3. As a consequence of the non-continuous work of the shooting units, the total working hours logged by complainants in a month
show extreme variations. . . For instance, complainant Maraguinot worked for only 1.45 hours in June 1991 but logged a total of
183.25 hours in January 1992. Complainant Enero logged a total of only 31.57 hours in September 1991 but worked for 183.35
hours the next month, October 1991.
4. Further shown by respondents is the irregular work schedule of complainant on a daily basis. Complainant Maraguinot was
supposed to report on 05 August 1991 but reported only on 30 August 1991, or a gap of 25 days. Complainant Enero worked on
10 September 1991 and his next scheduled working day was 28 September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants' work explain the lump sum payment for complainants'
services for each movie project. Hence, complainants were paid a standard weekly salary regardless of the number of working
days and hours they logged in. Otherwise, if the principle of "no work no pay" was strictly applied, complainants' earnings for
certain weeks would be very negligible.
6. Respondents also alleged that complainants were not prohibited from working with such movie companies like Regal, Seiko
and FPJ Productions whenever they are not working for the independent movie producers engaged by respondents. . . This
allegation was never rebutted by complainants and should be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together, indicated that complainants (herein petitioners)
were "project employees."
After their motion for reconsideration was denied by the NLRC in its Resolution 13 of 6 April 1995, petitioners filed the instant petition, claiming that the
NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in: (1) finding that petitioners were project employees; (2) ruling
that petitioners were not illegally dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of private respondents, petitioners cited their performance of activities that
were necessary or desirable in the usual trade or business of private respondents and added that their work was continuous, i.e., after one project was
completed they were assigned to another project. Petitioners thus considered themselves part of a work pool from which private respondents drew
workers for assignment to different projects. Petitioners lamented that there was no basis for the NLRC's conclusion that they were project employees,
while the associate producers were independent contractors; and thus reasoned that as regular employees, their dismissal was illegal since the same
was premised on a "false cause," namely, the completion of a project, which was not among the causes for dismissal allowed by the Labor Code.
Private respondents reiterate their version of the facts and stress that their evidence supports the view that petitioners are project employees; point to
petitioners' irregular work load and work schedule; emphasize the NLRC's finding that petitioners never controverted the allegation that they were not
prohibited from working with other movie companies; and ask that the facts be viewed in the context of the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise questions of fact, particularly, the NLRC's
finding that petitioners were project employees, a finding supported by substantial evidence; and submits that petitioners' reliance on Article 280 of the
Labor Code to support their contention that they should be deemed regular employees is misplaced, as said section "merely distinguishes between two
types of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits."
The OSG likewise rejects petitioners' contention that since they were hired not for one project, but for a series of projects, they should be deemed
regular employees. Citing Mamansag v. NLRC, 14 the OSG asserts that what matters is that there was a time-frame for each movie project made known
to petitioners at the time of their hiring. In closing, the OSG disagrees with petitioners' claim that the NLRC's classification of the movie producers as
independent contractors had no basis in fact and in law, since, on the contrary, the NLRC "took pains in explaining its basis" for its decision.

As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule that a special civil action for certiorari under
Rule 65 of the Rules of Court is the proper remedy for one who complains that the NLRC acted in total disregard of evidence material to or decisive of
the controversy. 15 In the instant case, petitioners allege that the NLRC's conclusions have no basis in fact and in law, hence the petition may not be
dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an employer-employee relationship existed between petitioners and
private respondents or any one of private respondents. If there was none, then this petition has no merit; conversely, if the relationship existed, then
petitioners could have been unjustly dismissed.
A related question is whether private respondents are engaged in the business of making motion pictures. Del Rosario is necessarily engaged in such
business as he finances the production of movies. VIVA, on the other hand, alleges that it does not "make" movies, but merely distributes and exhibits
motion pictures. There being no further proof to this effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed below, private
respondents' evidence even supports the view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are project employees of associate producers who, in turn, act as
independent contractors. It is settled that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code describes permissible job contracting in this wise:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account under his
own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results
thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion pictures. As such, and to be a
job contractor under the preceding description, associate producers must have tools, equipment, machinery, work premises, and other materials
necessary to make motion pictures. However, the associate producers here have none of these. Private respondents' evidence reveals that the moviemaking equipment are supplied to the producers and owned by VIVA. These include generators, 16 cables and wooden platforms, 17 cameras and
"shooting equipment;" 18 in fact, VIVA likewise owns the trucks used to transport the equipment. 19 It is thus clear that the associate producer merely
leases the equipment from VIVA. 20 Indeed, private respondents' Formal Offer of Documentary Evidence stated one of the purposes of Exhibit "148" as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to finish their films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:
[T]o prove that the movies of Viva Films were contracted out to the different independent Producers who rented Shooting Unit No.
3 with a fixed budget and time-frame of at least 30 shooting days or 45 days whichever comes first. 22
Private respondents further narrated that VIVA's generators broke down during petitioners' last movie project, which forced the associate producer
concerned to rent generators, equipment and crew from another company. 23 This only shows that the associate producer did not have substantial
capital nor investment in the form of tools, equipment and other materials necessary for making a movie. Private respondents in effect admit that their
producers, especially petitioners' last producer, are not engaged in permissible job contracting.
If private respondents insist that their associate producers are labor contractors, then these producers can only be "labor-only" contractors, defined by
the Labor Code as follows:
Art. 106. Contractor or subcontractor. . . .
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by
such persons are performing activities which are directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him. cdphil
A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to be
engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other
materials; and
(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business
or operations of the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or
not the contracting out of labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct employer.
But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor
hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA., who recruited crew members from an
"available group of free-lance workers which includes the complainants Maraguinot and Enero." 24 And in their Memorandum, private respondents
declared that the associate producer "hires the services of . . . 6) camera crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff;

(d) generator man and electrician; (e) clapper; etc. . ." 25 This clearly showed that the associate producers did not supply the workers required by the
movie project.
The relationship between VIVA and its producers or associate producers seems to be that of agency, 26 as the latter make movies on behalf of VIVA,
whose business is to "make" movies. As such, the employment relationship between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be established by the "control test." While four elements are usually
considered in determining the existence of an employment relationship, namely: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct, the most important element is the employer's control
of the employee's conduct, not only as to the result of the work to be done but also as to the means and methods to accomplish the same. 27 These four
elements are present here. In their position paper submitted to the Labor Arbiter, private respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the company, for as long as the ultimate finish[ed]
product is acceptable to the company. . .
To ensure that quality films are produced by the PRODUCER who is an independent contractor, the company likewise employs a
Supervising PRODUCER, a Project accountant and a Shooting unit supervisor. The Company's Supervising PRODUCER is Mr.
Eric Cuatico, the Project accountant varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria Cesario.
The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive Producer to monitor the progress of
the PRODUCER's work accomplishment. He is there usually in the field doing the rounds of inspection to see if there is any
problem that the PRODUCER is encountering and to assist in threshing out the same so that the film project will be finished on
schedule. He supervises about 3 to 7 movie projects simultaneously [at] any given time by coordinating with each film
"PRODUCER". The Project Accountant on the other hand assists the PRODUCER in monitoring the actual expenses incurred
because the company wants to insure that any additional budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plans to suit the tast[e] of the company on how a certain scene must be presented to
make the film more interesting and more commercially viable. (emphasis ours)
VIVA's control is evident in its mandate that the end result must be a "quality film acceptable to the company." The means and methods to accomplish
the result are likewise controlled by VIVA, viz., the movie project must be finished within schedule without exceeding the budget, and additional
expenses must be justified; certain scenes are subject to change to suit the taste of the company; and the Supervising Producer, the "eyes and ears" of
VIVA and del Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the movie director's control, and not VIVA's direction. The director merely
instructs petitioners on how to better comply with VIVA's requirements to ensure that a quality film is completed within schedule and without exceeding
the budget. At bottom, the director is akin to a supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on
the employer.
Moreover, appointment slips 28 issued to all crew members state:
During the term of this appointment you shall comply with the duties and responsibilities of your position as well as observe the
rules and regulations promulgated by your superiors and by Top Management.
The words "superiors" and "Top Management" can only refer to the "superiors" and "Top Management" of VIVA. By commanding crew members to
observe the rules and regulations promulgated by VIVA, the appointment slips only emphasize VIVA's control over petitioners.
Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by VIVA. A sample appointment Slip
offered by private respondents "to prove that members of the shooting crew except the driver are project employees of the Independent Producers" 29
reads as follows:
VIVA PRODUCTIONS, INC.
16 Sct. Albano St.
Diliman, Quezon City
PEDRO NICOLAS Date: June 15, 1992

APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled "MANAMBIT". This appointment shall be effective upon the
commencement of the said project and shall continue to be effective until the completion of the same.
For your services you shall receive the daily/weekly/monthly compensation of P812.50.
During the term of this appointment you shall comply with the duties and responsibilities of your position as well as observe the
rules and regulations promulgated by your superiors and by Top Management.
Very truly yours,
(an illegible signature)
CONFORME:
____________________
Name of appointee
Signed in the presence of:

Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew members; moreover, it is
VIVA's corporate name which appears on the heading of the appointment slip. What likewise tells against VIVA is that it paid petitioners' salaries as
evidenced by vouchers, containing VIVA's letterhead, for that purpose. 30
All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the inevitable conclusion is that petitioners are
employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents contend that petitioners were project employees whose employment
was automatically terminated with the completion of their respective projects. Petitioners assert that they were regular employees who were illegally
dismissed.
It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a work pool; 31 and, while petitioners were
initially hired possibly as project employees, they had attained the status of regular employees in view of VIVA's conduct.
A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after cessation of a project; 32 and
2) The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the usual business or trade of
the employer. 33
However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular
employment. 34
In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and engaged in at least eighteen
(18) projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-three (23) projects. 35 35a
Moreover, as petitioners' tasks involved, among other chores, the loading, unloading and arranging of movie equipment in the shooting area as
instructed by the cameramen, returning the equipment to the Viva Films' warehouse, and assisting in the "fixing" of the lighting system, it may not
be gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the underscored
phrase, it has been held that this is ascertained by considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. 36
A recent pronouncement of this Court anent project or work pool employees who had attained the status of regular employees proves most instructive:

The denial by petitioners of the existence of a work pool in the company because their projects were not continuous is amply
belied by petitioners themselves who admit that: . . .
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall be available when called to report for a project. Although
primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as the effect of
temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents the unjust situation
of "coddling labor at the expense of capital" and at the same time enables the workers to attain the status of regular employees.
Clearly, the continuous rehiring of the same set of employees within the framework of the Lao Group of Companies is strongly
indicative that private respondents were an integral part of a work pool from which petitioners drew its workers for its various
projects.
In a final attempt to convince the Court that private respondents were indeed project employees, petitioners point out that the
workers were not regularly maintained in the payroll and were free to offer their services to other companies when there were no
on-going projects. This argument however cannot defeat the workers' status of regularity. We apply by analogy the case of
Industrial-Commercial-Agricultural Workers Organization v. CIR [16 SCRA 562, 567-68 (1966)] which deals with regular seasonal
employees. There we held: . . .
Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of work. Of course, no
compensation can be demanded from the employer because the stoppage of operations at the end of a project and before the
start of a new one is regular and expected by both parties to the labor relations. Similar to the case of regular seasonal
employees, the employment relation is not severed by merely being suspended. [citing Manila Hotel Co. v CIR, 9 SCRA 186
(1963)] The employees are, strictly speaking, not separated from services but merely on leave of absence without pay until they
are reemployed. Thus we cannot affirm the argument that non-payment of salary or non-inclusion in the payroll and the
opportunity to seek other employment denote project employment. 37 (emphasis supplied)
While Lao admittedly involved the construction industry, to which Policy Instruction No. 20/Department Order No. 19 38 regarding work pools specifically
applies, there seems to be no impediment to applying the underlying principles to industries other than the construction industry. 39 Neither may it be
argued that a substantial distinction exists between the projects undertaken in the construction industry and the motion picture industry. On the contrary,
the raison d' etre of both industries concern projects with a foreseeable suspension of work. cdll
At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to re-hire a project employee even after
completion of the project for which he was hired. The import of this decision is not to impose a positive and sweeping obligation upon the employer to rehire project employees. What this decision merely accomplishes is a judicial recognition of the employment status of a project or work pool employee in
accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of project or work pool employees who perform tasks necessary or
desirable to the employer's usual business or trade. Let it not be said that this decision "coddles" labor, for as Lao has ruled, project or work pool
employees who have gained the status of regular employees are subject to the "no work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during
temporary breaks in the business, provided that the worker shall be available when called to report for a project. Although
primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as the effect of
temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents the unjust situation
of "coddling labor at the expense of capital" and at the same time enables the workers to attain the status of regular employees.
The Court's ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector, 40 but, we stress not at the expense of
management. Lest it be misunderstood, this ruling does not mean that simply because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1)

continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary
and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee, pursuant to Article 280 of the
Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction
No. 20/Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees who have already
gained the status of regular employees by the employer's conduct.
In closing then, as petitioners had already gained the status of regular employees, their dismissal was unwarranted, for the cause invoked by private
respondents for petitioners' dismissal, viz., completion of project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code.
As such, petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other benefits that may have accrued. 41
Nevertheless, following the principles of "suspension of work" and "no pay" between the end of one project and the start of a new one, in computing
petitioners' back wages, the amounts corresponding to what could have been earned during the periods from the date petitioners were dismissed until
their reinstatement when petitioners' respective Shooting Units were not undertaking any movie projects, should be deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect. Pursuant to Section 34 thereof which amended
Section 279 of the Labor Code of the Philippines and Bustamante v. NLRC, 42 petitioners are entitled to receive full back wages from the date of their
dismissal up to the time of their reinstatement, without deducting whatever earnings derived elsewhere during the period of illegal dismissal, subject,
however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations Commission in NLRC NCR CA No. 006195-94
dated 10 February 1995, as well as its Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE for having been rendered with grave
abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however, to the
modification above mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, Vitug and Kapunan, JJ ., concur.
Footnotes
1.Per Commissioner Victoriano R. Calaycay, with Commissioners Raul T. Aquino and Rogelio I. Rayala, concurring. Annex "A" of Petition, Rollo, 2029.
2.Rollo, 30.
3.Complaint, 1; Original Record (OR), 2; Rollo, 3-4.
4.Position Paper for Complainant, 1; OR, 37; Rollo, 4.
5.Position Paper for complainant, 2; OR, 38; Petition, 3-4; Rollo, 4-5.
6.OR, 2-4.
7.Respondents' Position Paper, 1; OR, 8; Comment, 1; Rollo, 47.
8.Annexes 4 and 4-A, Private Respondents' Position Paper before the Labor Arbiter; OR 28-29.
9.Respondents' Position Paper, 5-6; OR, 12-13; Comment, 4-6; Rollo, 50-52.
10.Quoted from Petition, 7; Rollo, 8.
11.Quoted from NLRC decision, Annex "A" of Petition; Rollo, 20.
12.Supra, note 1.
13.Supra note 2.
14.218 SCRA 722 [1993].
15.See Sajonas v. NLRC, 183 SCRA 182, 1861 [1990].
16.TSN, 12 October 1992, 9-10; OR, 106-107; TSN, 25 January 1993, 12; OR, 246.
17.TSN, 25 January 1993, 54-55; OR, 288-289.
18.Id., 12, 14-15; Id, 246, 248-249.
19.Id., 12-13; Id., 246-247.
20.Respondent's Position Paper, 12; OR, 19.
21.OR, 340.
22.Id., 341.
23.Respondent's Position Paper, 12; OR, 19.
24.Respondent's Position Paper, 4; OR, 11.
25.Memorandum, 3; Rollo, 118.
26.The Civil Code defines a contract of agency in this wise:
Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter.
27.Encyclopedia Britannica (Phils.) v. NLRC, 264 SCRA 1, 7 [1996]; Aurora Land Projects Corporation v. NLRC, G.R. No. 114733, January 1997, 5-6.
28.Annexes "5," "5-A" to 5-D of Respondents' Position Paper; OR, 30-34.

29.OR, 389.
30.Exhibits "155," "155-A," "155-B," "156," to "164," inclusive, OR, 351-356.
31.Respondents' Position Paper, 4; OR, 11; Supplemental Position Paper, 1; OR, 301.
32.Philippine National construction Corp. v. NLRC, 174 SCRA 191, 193 [1989].
33.Capitol Industrial Construction Groups v. NLRC, 221 SCRA 469, 473-474 [1993].
34.Tomas Lao Construction, et al. v. NLRC, et al., G.R. No. 116781, 5 September 1997, at 7.
35.According to private respondents (Annex "4" of Respondents' Position Paper; OR, 28), Enero was part of Shooting Unit II, which worked on the
following films:
FILM DATE DATE ASSOCIATE
STARTED COMPLETED PRODUCER
LOVE AT FIRST SIGHT 1/3/90 2/16/90 MARIVIC ONG

PAIKOT-IKOT 1/26/90 3/11/90 EDITH MANUEL

ROCKY & ROLLY 2/13/90 3/29/90 M. ONG
PAIKOT-IKOT (addl. ) 3/12/90 4/3/90 E. MANUEL
ROCKY & ROLLY 4/6/90 5/20/90 M. ONG
(2nd contract)
NARDONG TOOTHPICK 4/4/90 5/18/90 JUN CHING
BAKIT KAY TAGAL NG 6/26/90 8/9/90 E. MANUEL
SANDALI
BAKIT KAY TAGAL 8/10/90 9/23/90 E. MANUEL
(2nd contract)
HINUKAY KO NA ANG 9/6/90 10/20/90 JUN CHING
LIBINGAN MO
MAGING SINO KA MAN 10/25/90 12/8/90 SANDY STA. MARIA
M. SINO KA MAN 12/9/90 1/22/91 SANDY S.
(2nd contract)
NOEL JUICO 1/29/91 3/14/91 JUN CHING
NOEL JUICO 3/15/91 4/6/91 JUN CHING
(2nd contract)
ROBIN GOOD 5/7/91 6/20/91 M. ONG
UTOL KONG HOODLUM # 1 6/23/91 8/6/91 JUN CHING
KAPUTOL NG ISANG AWIT 8/18/91 10/2/91 SANDY S.
DARNA 10/4/91 11/18/91 E. MANUEL
DARNA (addl. ) 11/20/91 12/12/91 E. MANUEL
MAGNONG REHAS 12/13/91 1/27/92 BOBBY GRIMALT
M. REHAS (2nd contract) 1/28/92 3/12/92 B. GRIMALT
HIRAM NA MUKHA 3/15/92 4/29/92 M. ONG
HIRAM (2nd contract) 5/1/92 6/14/92 M. ONG
KAHIT AKO'Y BUSABOS 5/28/92 7/7/92 JERRY OHARA
SIGAW NG PUSO 7/1/92 8/4/92 M. ONG
SIGAW (addl. ) 8/15/92 9/5/92 M. ONG
NGAYON AT KAILANMAN 9/6/92 10/20/92 SANDY STA. MARIA
While Maraguinot was a member of Shooting Unit III, which made the following movies (Annex "4-A" of Respondents' Position
Paper; OR, 29):
FILM DATE DATE ASSOCIATE
STARTED COMPLETED PRODUCER
GUMAPANG KA SA LUSAK 1/27/90 3/12/90 JUN CHING

PETRANG KABAYO 2/19/90 4/4/90 RUTH GRUTA

LUSAK (2nd contract) 3/14/90 4/27/90 JUN CHING
P. KABAYO (addl. contract) 4/21/90 5/13/90 RUTH GRUTA
BADBOY 6/15/90 7/29/90 EDITH MANUEL
BADBOY (2nd contract) 7/30/90 8/21/90 E. MANUEL
ANAK NI BABY AMA 9/2/90 10/16/90 RUTH GRUTA
A. B. AMA (addl. ) 10/17/90 11/8/90 RUTH GRUTA
A. B. AMA (addl. 2nd ) 11/9/90 12/1/90 R. GRUTA
BOYONG MAALAC 11/30/90 1/14/91 MARIVIC ONG
HUMANAP KA NG PANGET 1/20/91 3/5/91 EDITH MANUEL
H. PANGET (2nd contract) 3/10/91 4/23/91 E. MANUEL
B. MAALAC (2nd contract) 5/22/91 7/5/91 M. ONG
ROBIN GOOD (2nd contract) 7/7/91 8/20/91 M. ONG
PITONG GAMOL 8/30/91 10/13/91 M. ONG
P. GAMOL (2nd contract) 10/14/91 11/27/91 M. ONG
GREASE GUN GANG 12/28/91 2/10/92 E. MANUEL
ALABANG GIRLS ( contract) 3/4/92 3/26/92 M. ONG
BATANG RILES 3/9/92 3/30/92 BOBBY GRIMALT
UTOL KONG HOODLUM (part 2) 3/22/92 5/6/92 B. GRIMALT
UTOL (addl. contract) 5/7/92 5/29/92 B. GRIMALT
MANDURUGAS (2nd contract) 5/25/92 7/8/92 JERRY OHARA
MAHIRAP MAGING POGI 7/2/92 8/15/92 M. ONG
36.De Leon v. NLRC, 176 SCRA 615, 621 [1989].
37.Tomas Lao, supra note 34, at 7-9.
38.The former was issued by then Secretary of Labor Blas F. Ople, while the latter, superseding the former, is dated 1 April 1993.
39.See for instance Chua v. Civil Service Commission, 206 SCRA 65, 76 [1992], where the Court was ready to appreciate the badges of regular
employment even against Government as an employer.
40.Section 3, Article XIII, 1987 constitution.
41.Section 3, Rule I, Book VI, Omnibus Rules Implementing the Labor Code.
42.265 SCRA 61 [1996].

||| (Maraguinot, Jr. v. NLRC, G.R. No. 120969, January 22, 1998)

FIRST DIVISION
[G.R. No. 138051. June 10, 2004.]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J p:
The Case
Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999 Decision 2 of the Court of Appeals in CA-G.R. SP No. 49190
dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the National Labor Relations Commission
("NLRC"), which affirmed the Labor Arbiter's dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the Mel and Jay Management and
Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers while MJMDC was represented by SONZA, as President and
General Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide
SONZA's services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as
follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3
ABS-CBN agreed to pay for SONZA's services a monthly talent fee of P310,000 for the first year and P317,000 for the second and third year of the
Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN's President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-CBN with
our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We consider
these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we hereby serve
notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.) JOSE Y. SONZA
President and Gen. Manager 4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National Capital Region in Quezon City.
SONZA complained that ABS-CBN did not pay his salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, travel allowance
and amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed between the parties. SONZA filed
an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA's monthly talent fees through his account at PCIBank, Quezon Avenue Branch, Quezon City. In July
1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZA's talent fees and other payments due him under the
Agreement.
In his Order dated 2 December 1996, the Labor Arbiter 5 denied the motion to dismiss and directed the parties to file their respective position papers.
The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996
and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in this Office. And as
to whether or not such claim would entitle complainant to recover upon the causes of action asserted is a matter to be resolved
only after and as a result of a hearing. Thus, the respondent's plea of lack of employer-employee relationship may be pleaded
only as a matter of defense. It behooves upon it the duty to prove that there really is no employer-employee relationship between
it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent's Position Paper with Motion to Expunge Respondent's Annex 4 and Annex 5 from the Records.
Annexes 4 and 5 are affidavits of ABS-CBN's witnesses Soccoro Vidanes and Rolando V. Cruz. These witnesses stated in their affidavits that the
prevailing practice in the television and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The pertinent parts of the decision read as
follows:
xxx xxx xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it stands to
reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar circumstances
surrounding the engagement of his services.

It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host and a radio
broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in accordance with his own
style. The benefits conferred to complainant under the May 1994 Agreement are certainly very much higher than those generally
given to employees. For one, complainant Sonza's monthly talent fees amount to a staggering P317,000. Moreover, his
engagement as a talent was covered by a specific contract. Likewise, he was not bound to render eight (8) hours of work per day
as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by reason of
employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent fees and other
contractual benefits and should not be deemed as 'salaries, wages and/or other remuneration' accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given to a
stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such benefit."
The fact that complainant was made subject to respondent's Rules and Regulations, likewise, does not detract from the absence
of employer-employee relationship. As held by the Supreme Court, "The line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result
and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
xxx xxx xxx (Emphasis supplied) 7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter's decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and resolution of the NLRC. On 26
March 1999, the Court of Appeals rendered a Decision dismissing the case. 8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC's finding that no employer-employee relationship existed between SONZA and ABS-CBN. Adopting the NLRC's
decision, the appellate court quoted the following findings of the NLRC:
. . . the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of complainant Sonza,
the principal. By all indication and as the law puts it, the act of the agent is the act of the principal itself. This fact is made
particularly true in this case, as admittedly MJMDC 'is a management company devoted exclusively to managing the careers of
Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.' (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between ABS-CBN
and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to MJMDC as the 'AGENT'.
As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement, it was MJMDC which issued the
notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said
agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed
between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere 'labor-only' contractor of ABS-CBN such that there exist[s] employeremployee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of
ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same being in
the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As squarely apparent from
complainant-appellant's Position Paper, his claims for compensation for services, '13th month pay', signing bonus and travel
allowance against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994
Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position
Paper of complainant-appellant bears perusal:

'Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a
signing bonus consisting of shares of stocks . . . with FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was
receiving prior to effectivity of (the) Agreement'.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to
at least One Hundred Fifty Thousand Pesos (P150,000.00) per year.'
Thus, it is precisely because of complainant-appellant's own recognition of the fact that his contractual relations with ABS-CBN
are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-CBN, complainantappellant served upon the latter a 'notice of rescission' of Agreement with the station, per his letter dated April 1, 1996, which
asserted that instead of referring to unpaid employee benefits, 'he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said Agreement.'
(Annex 3 of the respondent ABS-CBN's Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase Agreement by
respondent-appellee that complainant-appellant filed his complaint. Complainant-appellant's claims being anchored on the
alleged breach of contract on the part of respondent-appellee, the same can be resolved by reference to civil law and not to labor
law. Consequently, they are within the realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi

Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual obligation is
intrinsically a civil dispute. 9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual question that is within
the jurisdiction of the NLRC to resolve. 10 A special civil action for certiorari extends only to issues of want or excess of jurisdiction of the NLRC. 11
Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which served as basis of the NLRC's conclusion. 12 The Court
of Appeals added that it could not re-examine the parties' evidence and substitute the factual findings of the NLRC with its own. 13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC'S DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF
CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING. 14
The Court's Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which upheld the Labor Arbiter's
dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the elements of an employeremployee relationship, this is the first time that the Court will resolve the nature of the relationship between a television and radio station and one of its
"talents." There is no case law stating that a radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio personality, and ABS-CBN, one
of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the other hand, ABS-CBN insists
that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of the Labor Arbiter and the NLRC
not only respect but also finality when supported by substantial evidence. 15 Substantial evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion. 16 A party cannot prove the absence of substantial evidence by simply pointing out that there is
contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has consistently held that the
elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee on the means and methods by which the work is accomplished. 18 The last element,
the so-called "control test", is the most important element. 19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA's services to co-host its television and radio programs because of SONZA's peculiar skills, talent and celebrity status.
SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant over other broadcasters of possibly similar
experience and qualification as complainant belies respondent's claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance
indicative, but not conclusive, of an independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABSCBN would not have entered into the Agreement with SONZA but would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the circumstances of the
relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of fee payment shows
that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges "which he would not have enjoyed if
he were truly the subject of a valid job contract." CHcTIA
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBN's employee, there
would be no need for the parties to stipulate on benefits such as "SSS, Medicare, . . . and 13th month pay" 20 which the law automatically incorporates
into every employer-employee contract. 21 Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship. 22
SONZA's talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they indicate more an
independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely
because of SONZA's unique skills, talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent contractor. The parties
expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to whom MJMDC would have to turn over any
talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show that ABS-CBN could terminate his
services on grounds other than breach of contract, such as retrenchment to prevent losses as provided under labor laws. 23

During the life of the Agreement, ABS-CBN agreed to pay SONZA's talent fees as long as "AGENT and Jay Sonza shall faithfully and completely
perform each condition of this Agreement." 24 Even if it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN
remained obligated to pay SONZA's talent fees during the life of the Agreement. This circumstance indicates an independent contractual relationship
between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its
undertaking in the Agreement to continue paying SONZA's talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZA's
programs through no fault of SONZA. 25
SONZA assails the Labor Arbiter's interpretation of his rescission of the Agreement as an admission that he is not an employee of ABS-CBN. The Labor
Arbiter stated that "if it were true that complainant was really an employee, he would merely resign, instead." SONZA did actually resign from ABS-CBN
but he also, as president of MJMDC, rescinded the Agreement. SONZA's letter clearly bears this out. 26 However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his status
as employee or independent contractor.

D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we refer to foreign case
law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez v. Corporacin De Puerto Rico Para
La Difusin Pblica ("WIPR") 27 that a television program host is an independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring
talent and training not available on-the-job. . . . In this regard, Alberty possesses a master's degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and
acted in several theater and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the
"tools and instrumentalities" necessary for her to perform. Specifically, she provided, or obtained sponsors to provide, the
costumes, jewelry, and other image-related supplies and services necessary for her appearance. Alberty disputes that this factor
favors independent contractor status because WIPR provided the "equipment necessary to tape the show." Alberty's argument is
misplaced. The equipment necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on
the show. Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used
to perform her particular function. If we accepted this argument, independent contractors could never work on collaborative
projects because other individuals often provide the equipment required for different aspects of the collaboration. . . .
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty's contracts with WIPR specifically
provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is no evidence that
WIPR assigned Alberty tasks in addition to work related to these tapings. . . . 28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an independent contractor. 29 This test is based on the extent of control the hirer
exercises over a worker. The greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well the less control the hirer exercises, the more likely the worker is considered an independent contractor. 30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZA's argument is misplaced. ABS-CBN engaged SONZA's services specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign any
other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, and
sounded on radio were outside ABS-CBN's control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to
attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings. 31 ABS-CBN could not dictate the contents of
SONZA's script. However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests. 32 The clear implication is that
SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA's work. 33 ABS-CBN did not instruct
SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule "for more effective
programming." 34 ABS-CBN's sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control
over the means and methods of performance of SONZA's work.
SONZA claims that ABS-CBN's power not to broadcast his shows proves ABS-CBN's power over the means and methods of the performance of his
work. Although ABS-CBN did have the option not to broadcast SONZA's show, ABS-CBN was still obligated to pay SONZA's talent fees. Thus, even if
ABS-CBN was completely dissatisfied with the means and methods of SONZA's performance of his work, or even with the quality or product of his work,
ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA's show but ABS-CBN must still pay his
talent fees in full. 35
Clearly, ABS-CBN's right not to broadcast SONZA's show, burdened as it was by the obligation to continue paying in full SONZA's talent fees, did not
amount to control over the means and methods of the performance of SONZA's work. ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work how he delivered his lines and appeared on television did not meet ABS-CBN's approval. This
proves that ABS-CBN's control was limited only to the result of SONZA's work, whether to broadcast the final product or not. In either case, ABS-CBN
must still pay SONZA's talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., 36 the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors although
the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the manner of
performance of the skills of the artists, it could only control the result of the work by deleting objectionable features. 37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not the "tools and
instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his
appearance. 38 Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBN's sole concern was for SONZA to display his talent during the airing of the
programs. 39

A radio broadcast specialist who works under minimal supervision is an independent contractor. 40 SONZA's work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control
over how SONZA utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN's employee because ABS-CBN subjected him to its rules and standards of performance.
SONZA claims that this indicates ABS-CBN's control "not only [over] his manner of work but also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents" 41 of ABS-CBN. The Agreement does
not require SONZA to comply with the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct imposed on
SONZA under the Agreement refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
adopted by the COMPANY (ABS-CBN) as its Code of Ethics." 42 The KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of performance referred to in the
Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. 43 In this case, SONZA
failed to show that these rules controlled his performance. We find that these general rules are merely guidelines towards the achievement of the
mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services
being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely
with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or
fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote
the result, create no employer-employee relationship unlike the second, which address both the result and the means
used to achieve it. 44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain supervision to insure the attainment of
the desired result. The hirer, however, must not deprive the one hired from performing his services according to his own initiative. 45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent contractor can
validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. 46 This practice is not designed to control the means
and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast station normally spends substantial
amounts of money, time and effort "in building up its talents as well as the programs they appear in and thus expects that said talents remain exclusive
with the station for a commensurate period of time." 47 Normally, a much higher fee is paid to talents who agree to work exclusively for a particular radio
or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter's finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN. The Labor Arbiter ruled that as
a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly under the employ of the
"labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the "labor-only" contractor is the agent of the
principal. The law makes the principal responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the
employees. 48 These circumstances are not present in this case.
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as SONZA's agent. The
Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBN's agent. MJMDC,
which stands for Mel and Jay Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The
President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by
SONZA, acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That would make MJMDC the
agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his broadcast partner, TIANGCO.
MJMDC is not engaged in any other business, not even job contracting. MJMDC does not have any other function apart from acting as agent of SONZA
or TIANGCO to promote their careers in the broadcast and television industry. 49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled the status of workers in the
broadcast industry. Under this policy, the types of employees in the broadcast industry are the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal presumption that Policy
Instruction No. 40 determines SONZA's status. A mere executive issuance cannot exclude independent contractors from the class of service providers
to the broadcast industry. The classification of workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on
this Court, especially when the classification has no basis either in law or in fact.
Affidavits of ABS-CBN's Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his counsel the opportunity to crossexamine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing practice in the radio and television industry.
SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBN's witnesses, he was never prevented from denying or refuting the allegations in the affidavits. The
Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum

xxx xxx xxx

These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those that
may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latter's direct testimony. . . .
Section 4. Determination of Necessity of Hearing. Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing. At this
stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness. 50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial. 51 The holding of a formal
hearing or trial is something that the parties cannot demand as a matter of right. 52 If the Labor Arbiter is confident that he can rely on the documents
before him, he cannot be faulted for not conducting a formal trial, unless under the particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the technicalities of law and
the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as independent
contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution 53 arises only if there is an employer-employee relationship under labor laws.
Not every performance of services for a fee creates an employer-employee relationship. To hold that every person who renders services to another for a
fee is an employee to give meaning to the security of tenure clause will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to life and livelihood
guarantees this freedom to contract as independent contractors. The right of labor to security of tenure cannot operate to deprive an individual,
possessed with special skills, expertise and talent, of his right to contract as an independent contractor. An individual like an artist or talent has a right to
render his services without any one controlling the means and methods by which he performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render their services only as employees. If radio and television program hosts can render their
services only as employees, the station owners and managers can dictate to the radio and television hosts what they say in their shows. This is not
conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC") 54 in relation to Republic Act No. 7716, 55 as amended by Republic Act No. 8241, 56 treats talents,
television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10% value-added tax ("VAT") on services they
render. Exempted from the VAT are those under an employer-employee relationship. 57 This different tax treatment accorded to talents and
broadcasters bolters our conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are present as in
this case.
Nature of SONZA's Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus, travel allowance, and
amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court of Appeals that SONZA's claims are
all based on the May 1994 Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the
Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZA's cause of action is for breach of contract
which is intrinsically a civil dispute cognizable by the regular courts. 58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED.
Costs against petitioner.
SO ORDERED.
Davide, Jr., C .J ., Panganiban, Ynares-Santiago and Azcuna, JJ ., concur.
Footnotes
1.Under Rule 45 of the Rules of Court.
2.Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias and Marina L. Buzon concurring.
3.Rollo, p. 150.
4.Ibid., p. 204.
5.Donato G. Quinto, Jr.
6.Rollo, pp. 114130.
7.Ibid., pp. 123125.
8.Ibid., p. 39.
9.Rollo, pp. 3739.
10.Ibid., p. 39.
11.Ibid.
12.Ibid.
13.Ibid.
14.Ibid., p. 269.

15.Fleischer Company, Inc. v. National Labor Relations Commission, G.R. No. 121608, 26 March 2001, 355 SCRA 105; AFP Mutual Benefit
Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47; Cathedral School of Technology v. NLRC, G.R. No. 101438,
13 October 1992, 214 SCRA 551. See also Ignacio v. Coca-Cola Bottlers Phils., Inc., 417 Phil. 747 (2001); Gonzales v. National Labor
Relations Commission, G.R. No. 131653, 26 March 2001, 355 SCRA 195; Sandigan Savings and Loan Bank, Inc. v. NLRC, 324 Phil. 348
(1996); Magnolia Dairy Products Corporation v. NLRC, 322 Phil. 508 (1996).

16.Madlos v. NLRC, 324 Phil. 498 (1996).

17.Domasig v. National Labor Relations Commission, G.R. No. 118101, 16 September 1996, 261 SCRA 779.
18.De Los Santos v. NLRC, 423 Phil. 1020 (2001); Traders Royal Bank v. NLRC, 378 Phil. 1081 (1999); Aboitiz Shipping Employees Association v.
National Labor Relations Commission, G.R. No. 78711, 27 June 1990, 186 SCRA 825; Ruga v. National Labor Relations Commission, G.R.
Nos. 72654-61, 22 January 1990, 181 SCRA 266.
19.Ibid.
20.Paragraph 10 of the Agreement provides: "The COMPANY shall provide him with the following benefits: SSS, Medicare, Healthcare, executive life
and accident insurance, and a 13th-month pay based on an amount not lower than the amount he was receiving prior to the effectivity of
this Agreement."
21.Presidential Decree No. 851 (Requiring All Employers to Pay their Employees a 13th-month Pay) for the 13th month pay; Republic Act No. 1161
(Social Security Law) for the SSS benefits; and Republic Act No. 7875 (National Health Insurance Act of 1995) for the Philhealth insurance.
22.Article 1157 of the Civil Code explicitly provides:
Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (Emphasis supplied)
23.See Article 283, Labor Code.
24.Paragraph 7 of the Agreement states: "Provided that the AGENT and Jay Sonza shall faithfully and completely perform each condition of this
Agreement for and in consideration of the aforesaid services by the AGENT and its talent, the COMPANY agrees to pay the AGENT for the
first year of this Agreement the amount of THREE HUNDRED TEN THOUSAND PESOS ONLY (P310,000.00) per month, payable on the
10th and 25th of each month. For the second and third year of this Agreement, the COMPANY shall pay the amount of THREE HUNDRED
SEVENTEEN THOUSAND PESOS ONLY (P317,000.00) per month, payable likewise on the 10th and 25th of each month."
25.Paragraph 11 of the Agreement states: "In the event of cancellation of this Agreement through no fault of the AGENT and its talent, COMPANY
agrees to pay the full amount specified in this Agreement for the remaining period covered by this Agreement, provided that the talent shall
not render any service for or in any other radio or television production of any person, firm, corporation or any entity competing with the
COMPANY until the expiry hereof."
26.The opening sentence of the second paragraph of SONZA's letter reads:
"As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. . . ."
27.361 F.3d 1, 2 March 2004.
28.See also Spirides v. Reinhardt, 486 F. Supp. 685 (1980).
29.In the United States, aside from the right of control test, there are the "economic reality" test and the "multi-factor test." The tests are drawn from
statutes, regulations, rules, policies, rulings, case law and the like. The "right of control" test applies under the federal Internal Revenue
Code ("IRC"). The "economic reality" test applies to the federal Fair Labor Standards Act ("FLSA"). 29 The California Division of Labor
Standards Enforcement ("DLSE") uses a hybrid of these two tests often referred to as the "multi-factor test" in determining who an
employee is.
Most courts in the United States have utilized the control test to determine whether one is an employee. Under this test, a court must consider the
hiring party's right to control the manner and means by which the product is accomplished. Among other factors relevant to this inquiry are
the skills required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties;
whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party's discretion over when and
how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the work is part of the regular
business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired
party. (www.piercegorman.com, quoted from the article entitled "Management-side employment law advice for the entertainment industry"
with subtitle "Classification of Workers: Independent Contractors versus Employee" by David Albert Pierce, Esq.)
30.www.piercegorman.com, quoted from the article entitled "Management-side employment law advice for the entertainment industry" with subtitle
"Classification of Workers: Independent Contractors versus Employee" by David Albert Pierce, Esq.
31.Paragraph 4 of the Agreement provides: "AGENT will make available Jay Sonza for rehearsals and tapings of the Programs on the day and time
set by the producer and director of the Programs and to attend pre and post production staff meetings."
32.Paragraph 15 of the Agreement provides: "AGENT, talent shall not use the Programs as a venue to broadcast or announce any criticism on any
operational, administrative, or legal problems, situations or other matter which may occur, exist or alleged to have occurred or existed within
the COMPANY. Likewise, AGENT, talent shall, in accordance with good broadcast management and ethics, take up with the proper officers
of the COMPANY suggestions or criticisms on any matter or condition affecting the COMPANY or its relation to the public or third parties."

33.In Zhengxing v. Nathanson, 215 F.Supp.2d 114, citing Redd v. Summers, 232 F.3d 933 (D.C. Cir.), plaintiff's superior was not involved in the
actual performance that produced the final product.
34.Paragraph 3 of the Agreement provides: "The COMPANY reserves the right to modify the program format and likewise change airtime schedule for
more effective programming."
35.The right not to broadcast an independent contractor's show also gives the radio and television station protection in case it deems the contents of
the show libelous.
36.157 F.2d 26, 8 August 1946.
37.Ibid.
38.In Zhengxing v. Nathanson, 215 F.Supp.2d 114, 5 August 2002, plaintiff was also provided with the place of work and equipment to be used.
39.In the Alberty case, the US Court of Appeals rejected Alberty's contention that WIPR provided the "equipment necessary to tape the show." The
court held there that "the equipment necessary for Alberty to conduct her job as program host related to her appearance on the show.
Others provided equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her
particular function." Since Alberty provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and
services necessary for her appearance, she provided the "tools and instrumentalities" necessary for her to perform. The US Court of
Appeals added that if it accepted Alberty's argument, independent contractors could never work on collaborative projects because other
individuals often provide the equipment required for different aspects of the collaboration.
The Alberty case further ruled that "while 'control' over the manner, location, and hours of work is often critical to the independent
contractor/employee analysis, it must be considered in light of the work performed and the industry at issue. Considering the tasks that an
actor performs, the court does not believe that the sort of control identified by Alberty necessarily indicates employee status."
40.In Zhengxing, a Chinese language broadcaster and translator was deemed an independent contractor because she worked under minimal
supervision. The U.S. court also found that plaintiff was required to possess specialized knowledge before commencing her position as a
broadcaster.
41.Paragraph 13 of the Agreement provides: "AGENT agrees that talent shall abide by the rules, regulations and standards of performance of the
COMPANY covering talents, and that talent is bound to comply with the Television and Radio Code of the Kapisanan ng mga Broadcaster
sa Pilipinas (KBP), which has been adopted by the COMPANY as its Code of Ethics. AGENT shall perform and keep all of the duties and
obligations assumed or entered by the AGENT hereunder using its best talents and abilities. Any violation of or non-conformity with this
provision by talent shall be a valid and sufficient ground for the immediate termination of the Agreement." (Emphasis supplied)
42.Ibid.
43.AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47.
44.Ibid.
45.Supra note 36.
46.Rollo, p. 302.
47.Ibid.
48.The second paragraph of Article 106 of the Labor Code reads:
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.
49.Rollo, p. 90.
50.New Rules of Procedure of the National Labor Relations Commission, as amended by Resolution 3-99, series of 1999.
51.University of the Immaculate Concepcion v. U.I.C. Teaching and Non-Teaching Personnel and Employees Union, 414 Phil. 522 (2001).
52.Columbus Philippine Bus Corp. v. NLRC, 417 Phil. 81 (2001).
53.Section 3, Article XIII of the Constitution.
54.Republic Act No. 8424. BIR Revenue Regulations No. 19-99 also provides the following:
SECTION 1. Scope. Pursuant to the provisions of Sections 244 and 108 of the National Internal Revenue Code of 1997, in relation to Section 17
of Republic Act No. 7716, as amended by Section 11 of Republic Act 8241, these Regulations are hereby promulgated to govern the
imposition of value-added tax on sale of services by persons engaged in the practice of profession or calling and professional services
rendered by general professional partnerships; services rendered by actors, actresses, talents, singers and emcees, radio and television
broadcasters and choreographers; musical, radio, movie, television and stage directors; and professional athletes.

SECTION 2. Coverage. Beginning January 1, 2000, general professional partnerships, professionals and persons described above shall be
governed by the provisions of Revenue Regulation No. 7-95, as amended, otherwise known as the "Consolidated Value-Added Tax
Regulations". . . .
55.Otherwise known as the Expanded Value-Added Tax Law.
56.Act amending Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law and other pertinent provisions of the National
Internal Revenue Code, as amended (December 20, 1996).
57.Section 109 of the NIRC provides:

Exempt transactions. The following shall be exempt from the value-added tax:
xxx xxx xxx
(o) Services rendered by individuals pursuant to an employer-employee relationship; . . .
58.Singapore Airlines Ltd. v. Hon. Cruz, etc., et al., 207 Phil. 585 (1983).

||| (Sonza v. ABS-CBN Broadcasting Corp., G.R. No. 138051, June 10, 2004)

FIRST DIVISION
[G.R. No. 164156. September 26, 2006.]
ABS-CBN BROADCASTING CORPORATION, petitioner, vs. MARLYN NAZARENO, MERLOU GERZON, JENNIFER
DEIPARINE, and JOSEPHINE LERASAN, respondents.
DECISION
CALLEJO, SR., J p:
Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the
motion for reconsideration thereof. The CA affirmed the Decision 2 and Resolution 3 of the National Labor Relations Commission (NLRC) in NLRC Case
No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the
respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees.
The Antecedents
Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of television and radio stations,
whose operations revolve around the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the
airtime it generates from its radio and television operations. It has a franchise as a broadcasting company, and was likewise issued a license and
authority to operate by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different dates. They were assigned at
the news and public affairs, for various radio programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued
ABS-CBN employees' identification cards and were required to work for a minimum of eight hours a day, including Sundays and holidays. They were
made to perform the following tasks and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABS-CBN;
b) Coordinate, arrange personalities for air interviews;
c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports;
d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints;
e) Assist, anchor program interview, etc; and
f) Record, log clerical reports, man based control radio. 4
Their respective working hours were as follows:
Name Time No. of Hours
1. Marlene
8:00 A.M.-12:00 noon

Nazareno 4:30

A.M.-8:00

A.M. 7

1/2

2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 1/2

3. Joy
Sanchez 1:00
9:00 A.M.-6:00 P.M. (WF) 9 hrs.

P.M.-10:00

P.M.(Sunday) 9

hrs.

4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs. 5

The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining Agreement (CBA) to be effective
during the period from December 11, 1996 to December 11, 1999. However, since petitioner refused to recognize PAs as part of the bargaining unit,
respondents were not included to the CBA. 6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1, 2000, they would be assigned to
non-drama programs, and that the DYAB studio operations would be handled by the studio technician. Thus, their revised schedule and other
assignments would be as follows:
Monday-Saturday
4:30 A.M.-8:00 A.M.-Marlene Nazareno.
Miss Nazareno will then be assigned at the Research Dept.
From 8:00 A.M. to 12:00
4:30 P.M.-12:00 MN-Jennifer Deiparine
Sunday
5:00 A.M.-1:00 P.M.-Jennifer Deiparine
1:00 P.M.-10:00 P.M.-Joy Sanchez
Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa.
On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay,
Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter
directed the parties to submit their respective position papers. Upon respondents' failure to file their position papers within the reglementary period,
Labor Arbiter Jose G. Gutierrez issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case.
Respondents received a copy of the Order on May 16, 2001. 7 Instead of re-filing their complaint with the NLRC within 10 days from May 16, 2001, they
filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For Resolution. 8 The

Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith admitted the position paper of the complainants. Respondents made
the following allegations:
1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of more than
five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint
on November 20, 2000. DaAIHC
Machine copies of complainants' ABS-CBN Employee's Identification Card and salary vouchers are hereto attached as follows,
thus:
I. Jennifer Deiparine:
Exhibit "A" - ABS-CBN Employee's Identification Card
Exhibit
"B", - ABS-CBN
Exhibit "B-1" & 1999 to July 2000 at P4,000.00

Salary

Voucher

from

Nov.

Exhibit "B-2"
Date employed: September 15, 1995
Length of service: 5 years & nine (9) months
II. Merlou Gerzon - ABS-CBN Employee's Identification Card
Exhibit "C"
Exhibit "D"
Exhibit "D-1" &
Exhibit
"D-2" - ABS-CBN
1999 to January 2001 at P4,000.00

Salary

Voucher

Salary

Voucher

from

March

Date employed: September 1, 1995

Length of service: 5 years & 10 months
III. Marlene Nazareno
Exhibit "E" - ABS-CBN Employee's Identification Card
Exhibit
"E" - ABS-CBN
Exhibit "E-1" & 1999 to December 2000

from

Nov.

from

Aug.

Exhibit :E-2"
Date employed: April 17, 1996
Length of service: 5 years and one (1) month
IV. Joy Sanchez Lerasan
Exhibit "F" - ABS-CBN Employee's Identification Card
Exhibit
"F-1" - ABS-CBN
Exhibit "F-2" & 2000 to Jan. 2001

Salary

Voucher

Exhibit "F-3"
Exhibit
"F-4" - Certification
Acknowledging
Complainant
Signed
by
Officer May Kima Hife

dated
regular
Joy

July
status
Sanchez
ABS-CBN

6,

2000
of
Lerasan
Administrative

Date employed: April 15, 1998

Length of service: 3 yrs. and one (1) month 9
Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific assignments at its discretion, and
were thus under its direct supervision and control regardless of nomenclature. They prayed that judgment be rendered in their favor, thus:
WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling defendants
to pay complainants the following:
1. One Hundred Thousand Pesos (P100,000.00) each and by way of moral damages;
2. Minimum wage differential;
3. Thirteenth month pay differential;
4. Unpaid service incentive leave benefits;
5. Sick leave;
6. Holiday pay;
7. Premium pay;

8. Overtime pay;
9. Night shift differential.
Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a
condition precedent for their admission into the existing union and collective bargaining unit of respondent company where they
may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom.
Complainants pray for such other reliefs as are just and equitable under the premises. 10
For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a particular program ran by an
anchor or talent. Among their duties include monitoring and receiving incoming calls from listeners and field reporters and calls of news sources;
generally, they perform leg work for the anchors during a program or a particular production. They are considered in the industry as "program
employees" in that, as distinguished from regular or station employees, they are basically engaged by the station for a particular or specific program
broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were issued talent information sheets which are updated from time to
time, and are thus made the basis to determine the programs to which they shall later be called on to assist. The program assignments of complainants
were as follows:
a. Complainant Nazareno assists in the programs:
1) Nagbagang Balita (early morning edition)
2) Infor Hayupan
3) Arangkada (morning edition)
4) Nagbagang Balita (mid-day edition)
b. Complainant Deiparine assists in the programs:
1) Unzanith
2) Serbisyo de Arevalo
3) Arangkada (evening edition)
4) Balitang K (local version)
5) Abante Subu
6) Pangutana Lang
c. Complainant Gerzon assists in the program:
1) On Mondays and Tuesdays:
(a) Unzanith
(b) Serbisyo de Arevalo
(c) Arangkada (evening edition)
(d) Balitang K (local version)
(e) Abante Sugbu
(f) Pangutana Lang
2) On Thursdays
Nagbagang Balita
3) On Saturdays
(a) Nagbagang Balita
(b) Info Hayupan
(c) Arangkada (morning edition)
(d) Nagbagang Balita (mid-day edition)
4) On Sundays:
(a) Siesta Serenata
(b) Sunday Chismisan
(c) Timbangan sa Hustisya
(d) Sayri ang Lungsod
(e) Haranahan 11
Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce, such as drama talents in other
productions. As program employees, a PA's engagement is coterminous with the completion of the program, and may be extended/renewed provided
that the program is on-going; a PA may also be assigned to new programs upon the cancellation of one program and the commencement of another. As
such program employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of the time
consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and benefits due them under the law. 12

Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially since respondents were not
covered by the bargaining unit. ADaSEH
On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular employees of petitioner; as
such, they were awarded monetary benefits. The fallo of the decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular employees
of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay complainants as follows:
I - Merlou A. Gerzon P12,025.00
II - Marlyn Nazareno 12,025.00
III - Jennifer Deiparine 12,025.00
IV - Josephine Sanchez Lerazan 12,025.00

P48,100.00
plus ten (10%) percent Attorney's Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED
TEN (P52,910.00).
Respondent Veneranda C. Sy is absolved from any liability.
SO ORDERED. 13
However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction to interpret and apply the
agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor Code.
Respondents' counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on August 27, 2001, while the
other respondents received theirs on September 8, 2001. Respondents signed and filed their Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal, conformably with Section 5, Rule
V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC, while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for more than
thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law;
3. That the Labor Arbiter erred in denying respondent's Motion for Reconsideration on an interlocutory order on the ground that
the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive leave pay
and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorney's fees. 14
On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and
VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the
aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75

Total - P2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing their rice
subsidy in the CBA, broken down as follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks

Total 233 Sacks; and

3. To grant to the complainants all the benefits of the CBA after 30 September 2002.
SO ORDERED. 15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents' motion to refile the complaint and admit
their position paper. Although respondents were not parties to the CBA between petitioner and the ABS-CBN Rank-and-File Employees Union, the
NLRC nevertheless granted and computed respondents' monetary benefits based on the 1999 CBA, which was effective until September 2002. The
NLRC also ruled that the Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their individual capacities and not as
members of the union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code. The validity of respondents' claim
does not depend upon the interpretation of the CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who contributed to the profits of
petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific Timber & Supply Company v. National Labor Relations Commission.
16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and substantive issues, as follows:
(a) whether the NLRC acted without jurisdiction in admitting the appeal of respondents; (b) whether the NLRC committed palpable error in scrutinizing
the reopening and revival of the complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the
July 30, 2001 Order of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in
entertaining and resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary Arbitrators as provided in the CBA;
and (e) whether the NLRC acted with grave abuse of discretion when it awarded monetary benefits to respondents under the CBA although they are not
members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be upon the expiration of the last
day to appeal by all parties, should there be several parties to a case. Since respondents received their copies of the decision on September 8, 2001
(except respondent Nazareno who received her copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their
Appeal Memorandum. Moreover, the CA declared that respondents' failure to submit their position paper on time is not a ground to strike out the paper
from the records, much less dismiss a complaint.
Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular employees who perform tasks
necessary and desirable in the usual trade and business of petitioner and not just its project employees. Moreover, the CA added, the award of benefits
accorded to rank-and-file employees under the 1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular
employees.
Finding no merit in petitioner's motion for reconsideration, the CA denied the same in a Resolution 17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE
NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER'S DECISION
AND RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING
RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA
BENEFITS TO RESPONDENTS. 18
Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the NLRC, and entertained
respondents' appeal from the decision of the Labor Arbiter despite the admitted lapse of the reglementary period within which to perfect the same.
Petitioner likewise maintains that the 10-day period to appeal must be reckoned from receipt of a party's counsel, not from the time the party learns of
the decision, that is, notice to counsel is notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which
the Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had already
attained finality and can no longer be set aside. TaCDAH
Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioner's own timely appeal that empowered the NLRC to
reopen the case. They assert that although the appeal was filed 10 days late, it may still be given due course in the interest of substantial justice as an
exception to the general rule that the negligence of a counsel binds the client. On the issue of the late filing of their position paper, they maintain that this
is not a ground to strike it out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioner's contention that the perfection of an appeal within the statutory or reglementary period is not only mandatory, but also
jurisdictional; failure to do so renders the assailed decision final and executory and deprives the appellate court or body of the legal authority to alter the
final judgment, much less entertain the appeal. However, this Court has time and again ruled that in exceptional cases, a belated appeal may be given
due course if greater injustice may occur if an appeal is not given due course than if the reglementary period to appeal were strictly followed. 19 The
Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the greater principles of substantial
justice and equity. 20

In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 223 21 of the Labor Code a liberal application to prevent the
miscarriage of justice. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the
parties. 22 We have held in a catena of cases that technical rules are not binding in labor cases and are not to be applied strictly if the result would be
detrimental to the workingman. 23
Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary period therefor. However, petitioner
perfected its appeal within the period, and since petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give due course to
its appeal and render the decision of November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the
NLRC can still participate in a separate appeal timely filed by the adverse party as the situation is considered to be of greater benefit to both parties. 24

We find no merit in petitioner's contention that the Labor Arbiter abused his discretion when he admitted respondents' position paper which had been
belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every reasonable means to ascertain the facts in each case speedily
and objectively, without technicalities of law or procedure, all in the interest of due process. 25 Indeed, as stressed by the appellate court, respondents'
failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint. 26 Likewise,
there is simply no truth to petitioner's assertion that it was denied due process when the Labor Arbiter admitted respondents' position paper without
requiring it to file a comment before admitting said position paper. The essence of due process in administrative proceedings is simply an opportunity to
explain one's side or an opportunity to seek reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that would
suggest that petitioner had absolute lack of opportunity to be heard. 27 Petitioner had the right to file a motion for reconsideration of the Labor Arbiter's
admission of respondents' position paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be stressed
that Article 280 of the Labor Code was encoded in our statute books to hinder the circumvention by unscrupulous employers of the employees' right to
security of tenure by indiscriminately and absolutely ruling out all written and oral agreements inharmonious with the concept of regular employment
defined therein. 28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the Labor Arbiter's order dated 18 June 2001 as
violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That while suggesting
that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents impliedly submit that there is
not any substantial damage or prejudice upon the refiling, even so, respondents' suggestion acknowledges complainants right to
prosecute this case, albeit with the burden of repeating the same procedure, thus, entailing additional time, efforts, litigation cost
and precious time for the Arbiter to repeat the same process twice. Respondent's suggestion, betrays its notion of prolonging,
rather than promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without prejudice
beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the NLRC
which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from
receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the
arbitration branch of origin."
the same is not a serious flaw that had prejudiced the respondents' right to due process. The case can still be refiled because it
has not yet prescribed. Anyway, Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of
law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members
and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and
objectively and without regard to technicalities of law or procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants' Position Paper and Supplemental Manifestation which were belatedly
filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means to ascertain the
facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process.
Indeed, the failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for
dismissing a complaint in the case of the complainant. (University of Immaculate Conception vs. UIC Teaching and Non-Teaching
Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents' position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is
enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without
technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53).
The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had filed their
position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties are given the
opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the opportunities to submit position papers".
(Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of law. 29
We reject, as barren of factual basis, petitioner's contention that respondents are considered as its talents, hence, not regular employees of the
broadcasting company. Petitioner's claim that the functions performed by the respondents are not at all necessary, desirable, or even vital to its trade or
business is belied by the evidence on record.
Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they coincide with those of the Labor
Arbiter and the National Labor Relations Commission, when supported by substantial evidence. 30 The question of whether respondents are regular or
project employees or independent contractors is essentially factual in nature; nonetheless, the Court is constrained to resolve it due to its tremendous
effects to the legions of production assistants working in the Philippine broadcasting industry.
We agree with respondents' contention that where a person has rendered at least one year of service, regardless of the nature of the activity performed,
or where the work is continuous or intermittent, the employment is considered regular as long as the activity exists, the reason being that a customary
appointment is not indispensable before one may be formally declared as having attained regular status. Article 280 of the Labor Code provides:
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. AHaETS
In Universal Robina Corporation v. Catapang, 31 the Court reiterated the test in determining whether one is a regular employee:
The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually

necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the
nature of work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has
been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to
the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists.
32
As elaborated by this Court in Magsalin v. National Organization of Working Men: 33
Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a "regular"
worker's security of tenure, however, can hardly be doubted. In determining whether an employment should be considered
regular or non-regular, the applicable test is the reasonable connection between the particular activity performed by the employee
in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is whether the work undertaken
is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of
the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It
is distinguished from a specific undertaking that is divorced from the normal activities required in carrying on the particular
business or trade. But, although the work to be performed is only for a specific project or seasonal, where a person thus engaged
has been performing the job for at least one year, even if the performance is not continuous or is merely intermittent, the law
deems the repeated and continuing need for its performance as being sufficient to indicate the necessity or desirability of that
activity to the business or trade of the employer. The employment of such person is also then deemed to be regular with respect
to such activity and while such activity exists. 34

Not considered regular employees are "project employees," the completion or termination of which is more or less determinable at the time of
employment, such as those employed in connection with a particular construction project, and "seasonal employees" whose employment by its nature is
only desirable for a limited period of time. Even then, any employee who has rendered at least one year of service, whether continuous or intermittent, is
deemed regular with respect to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent fees" instead of salaries, that they
did not observe the required office hours, and that they were permitted to join other productions during their free time are not conclusive of the nature of
their employment. Respondents cannot be considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility
employees. They are regular employees who perform several different duties under the control and direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those 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 activities in which they are employed. 35
The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation necessitates the succor of the
State. What determines whether a certain employment is regular or otherwise is not the will or word of the employer, to which the worker oftentimes
acquiesces, much less the procedure of hiring the employee or the manner of paying the salary or the actual time spent at work. It is the character of the
activities performed in relation to the particular trade or business taking into account all the circumstances, and in some cases the length of time of its
performance and its continued existence. 36 It is obvious that one year after they were employed by petitioner, respondents became regular employees
by operation of law. 37
Additionally, respondents cannot be considered as project or program employees because no evidence was presented to show that the duration and
scope of the project were determined or specified at the time of their engagement. Under existing jurisprudence, project could refer to two
distinguishable types of activities. First, a project may refer to a particular job or undertaking that is within the regular or usual business of the employer,
but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at
determined or determinable times. Second, the term project may also refer to a particular job or undertaking that is not within the regular business of the
employer. 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. 38
The principal test 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. 39
In this case, it is undisputed that respondents had continuously performed the same activities for an average of five years. Their assigned tasks are
necessary or desirable in the usual business or trade of the petitioner. The persisting need for their services is sufficient evidence of the necessity and
indispensability of such services to petitioner's business or trade. 40 While length of time may not be a sole controlling test for project employment, it can
be a strong factor to determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital,
necessary and indispensable to the usual trade or business of the employer. 41 We note further that petitioner did not report the termination of
respondents' employment in the particular "project" to the Department of Labor and Employment Regional Office having jurisdiction over the workplace
within 30 days following the date of their separation from work, using the prescribed form on employees' termination/dismissals/suspensions. 42
As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier pleadings, petitioner classified
respondents as program employees, and in later pleadings, independent contractors. Program employees, or project employees, are different from
independent contractors because in the case of the latter, no employer-employee relationship exists.
Petitioner's reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation 43 is misplaced. In that case, the Court explained why
Jose Sonza, a well-known television and radio personality, was an independent contractor and not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA'S services to co-host its television and radio programs because of SONZA'S peculiar skills, talent
and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and qualification as complainant belies respondent's claim of independent
contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship. If SONZA did not

possess such unique skills, talent and celebrity status, ABS-CBN would not have entered into the Agreement with SONZA but
would have hired him through its personnel department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of
fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABSCBN's employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, . . . and 13th month pay
which the law automatically incorporates into every employer-employee contract. Whatever benefits SONZA enjoyed arose from
contract and not because of an employer-employee relationship.
SONZA's talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZA'S unique skills, talent and celebrity status not possessed by ordinary
employees. Obviously, SONZA acting alone possessed enough bargaining power to demand and receive such huge talent fees
for his services. The power to bargain talent fees way above the salary scales of ordinary employees is a circumstance indicative,
but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement. 44
In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from them because they were
merely hired through petitioner's personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employer-employee relationship. Respondents did not
have the power to bargain for huge talent fees, a circumstance negating independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly dependent on the petitioner for
continued work.
Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the allegation that respondents
are independent contractors.
The presumption is that when the work done is an integral part of the regular business of the employer and when the worker, relative to the
employer, does not furnish an independent business or professional service, such work is a regular employment of such employee and not
an independent contractor. 45 The Court will peruse beyond any such agreement to examine the facts that typify the parties' actual relationship. 46
It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its rank-and-file employees. As
regular employees, respondents are entitled to the benefits granted to all other regular employees of petitioner under the CBA. 47 We quote with
approval the ruling of the appellate court, that the reason why production assistants were excluded from the CBA is precisely because they were
erroneously classified and treated as project employees by petitioner:

. . . The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABS-CBN under the 19961999 CBA is a necessary consequence of public respondent's ruling that private respondents as production assistants of
petitioner are regular employees. The monetary award is not considered as claims involving the interpretation or implementation
of the collective bargaining agreement. The reason why production assistants were excluded from the said agreement is precisely
because they were classified and treated as project employees by petitioner.
As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee but the
nature of the activities performed by such employee in relation to the particular business or trade of the employer. Considering
that We have clearly found that private respondents are regular employees of petitioner, their exclusion from the said CBA on the
misplaced belief of the parties to the said agreement that they are project employees, is therefore not proper. Finding said private
respondents as regular employees and not as mere project employees, they must be accorded the benefits due under the said
Collective Bargaining Agreement.
A collective bargaining agreement is a contract entered into by the union representing the employees and the employer.
However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits only to members of
the union without any valid reason would constitute undue discrimination against non-members. A collective bargaining
agreement is binding on all employees of the company. Therefore, whatever benefits are given to the other employees of ABSCBN must likewise be accorded to private respondents who were regular employees of petitioner. 48
Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the respondents. Moreover, under
Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent
living of the laborer."
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 76582 are AFFIRMED. Costs against petitioner.
SO ORDERED.
Panganiban, C.J., Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur.
Footnotes

1.Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Rodrigo V. Cosico and Rosalinda Asuncion-Vicente, concurring, rollo,
pp. 9-34.
2.Id. at 170-219.
3.Id. at 220-227.
4.Rollo, p. 180.
5.Id. at 183.
6.Id. at 213.
7.Id. at 174.
8.Id. at 248-250.
9.CA rollo, pp. 128-129.
10.Id. at 138-139.
11.See CA rollo, pp. 7-8.
12.Rollo, pp. 229-233.
13.Id. at 257-258.
14.Rollo, p. 172.
15.Rollo, p. 218.
16.385 Phil. 93 (2000).
17.Rollo, p. 36.
18.Id. at 58-59.
19.Mabuhay Development Industries v. National Labor Relations Commission, 351 Phil. 227, 234-235 (1998), citing City Fair Corporation v. National
Labor Relations Commission, 313 Phil. 464, 465 (1995).
20.Sublay v. National Labor Relations Commission, 381 Phil. 198, 204 (2000).
21.Art. 223. APPEAL
Decisions, 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. . . .
22.Buenaobra v. Lim King Guan, G.R. No. 150147, January 20, 2004, 420 SCRA 359, 364 (2004).
23.Huntington Steel Products, Inc. v. National Labor Relations Commission, G.R. No. 158311, November 14, 2004, 442 SCRA 551, 560.
24.See Sandol v. Pilipinas Kao, Inc., et al., G.R. No. 87530, June 13, 1990, 186 SCRA 491.
25.Panlilio v. National Labor Relations Commission, 346 Phil. 30, 35-36 (1997).
26.U.I.C. v. U.I.C. Teaching & Non-Teaching Personnel and Employees Union, 414 Phil. 522, 533 (2001).
27.Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005, 458 SCRA 609, 629-630.
28.Philips Semiconductors (Phils.), Inc. v. Fadriquela, Infra note 35, at 418.
29.CA rollo, pp. 51-52.
30.Lopez v. National Steel Corporation, G.R. No. 149674, February 16, 2004, 423 SCRA 109, 113.
31.G.R. No. 164736, October 14, 2005, 473 SCRA 189.
32.Id. at 203-204, citing Abasolo v. National Labor Relations Commission, 400 Phil. 86, 103 (2000), De Leon v. National Labor Relations Commission,
G.R. No. 70705, August 21, 1989, 176 SCRA 615, 621.
33.451 Phil. 254 (2003).
34.Id. at 260-261.
35.Philips Semiconductors (Phils.), Inc. v. Fadriquela, G.R. No. 141717, April 14, 2004, 427 SCRA 408, 419.
36.De Leon v. National Labor Relations Commission, supra note 32, at 624.
37.Kimberly Independent Labor Union for Solidarity v. Drilon, et al., G.R. Nos. 77629 and 78791, May 9, 1990, 185 SCRA 190, 204.
38.Villa v. National Labor Relations Commission, 348 Phil. 116, 143 (1998).
39.ALU-TUCP, et al. v. National Labor Relations Commission, G.R. No. 109902, August 2, 1994, 234 SCRA 678, 685.
40.Samson v. National Labor Relations Commission, 323 Phil 135, 148 (1996).
41.Tomas Lao Construction v. National Labor Relations Commission, 344 Phil. 268, 279 (1997).
42.Section 2.2 of Department Order No. 19, cited in Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission, G.R.
No. 152427, August 9, 2005, 466 SCRA 265, 273-274 and Samson v. National Labor Relations Commission, supra note 40, at 147.
43.G.R. No. 138051, June 10, 2004, 431 SCRA 538.

44.Id. at 595-596.
45.David Albert Pierce, Esq., "Management-side employment law advice for entertainment industry" with subtitle "Classification of Workers:
Independent Contractor versus Employee" http://www.piercegorman.com/Classification_of_Workers.html (visited July 14, 2006).
46.Id.
47.Cinderella Marketing Corporation v. National Labor Relations Commission, Second Division, G.R. Nos. 112535 and 113758, June 22, 1998, 291
SCRA 91, 96.
48.Rollo, pp. 121-122.

||| (ABS-CBN Broadcasting Corp. v. Nazareno, G.R. No. 164156, September 26, 2006)

SECOND DIVISION
[G.R. No. 169207. March 25, 2010.]
WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, and NOMINADA LANSANG,
petitioners, vs. JOCELYN M. GALERA, respondent.
[G.R. No. 169239. March 25, 2010.]
JOCELYN M. GALERA, petitioner, vs. WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER,
and NOMINADA LANSANG, respondents.
DECISION
CARPIO, Acting C.J p:
The Case
G.R. Nos. 169207 and 169239 are petitions for review 1 assailing the Decision 2 promulgated on 14 April 2005 as well as the Resolution 3 promulgated
on 1 August 2005 of the Court of Appeals (appellate court) in CA-G.R. SP No. 78721. The appellate court granted and gave due course to the petition
filed by Jocelyn M. Galera (Galera). The appellate court's decision reversed and set aside that of the National Labor Relations Commission (NLRC), and
directed WPP Marketing Communications, Inc. (WPP) to pay Galera backwages, separation pay, unpaid housing benefit, unpaid personal and accident
insurance benefits, cash value under the company's pension plan, 30 days paid holiday benefit, moral damages, exemplary damages, 10% of the total
judgment award as attorney's fees, and costs of the suit.
The Facts
The appellate court narrated the facts as follows:
Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States of America by private
respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a corporation based in
Hong Kong, China, to work in the Philippines for private respondent WPP Marketing Communications, Inc. (WPP), a corporation
registered and operating under the laws of Philippines. GALERA accepted the offer and she signed an Employment Contract
entitled "Confirmation of Appointment and Statement of Terms and Conditions" (Annex B to Petition for Certiorari). The relevant
portions of the contract entered into between the parties are as follows:
Particulars:
Name: Jocelyn M. Galera
Address: 163 Mediterranean Avenue
Hayward, CA 94544
Position: Managing Director
Mindshare Philippines
Annual Salary: Peso 3,924,000
Start Date: 1 September 1999
Commencement Date: 1 September 1999
(for continuous service)
Office: Mindshare Manila
6. Housing Allowance
The Company will provide suitable housing in Manila at a maximum cost (including management fee and other
associated costs) of Peso 576,000 per annum. AIDTHC
7. Other benefits.
The Company will provide you with a fully maintained company car and a driver.
The Company will continue to provide medical, health, life and personal accident insurance plans, to an amount not
exceeding Peso 300,000 per annum, in accordance with the terms of the respective plans, as provided by JWT Manila.
The Company will reimburse you and your spouse one way business class air tickets from USA to Manila and the
related shipping and relocation cost not exceeding US$5,000 supported by proper documentation. If you leave the
Company within one year, you will reimburse the Company in full for all costs of the initial relocation as described
therein.
You will participate in the JWT Pension Plan under the terms of this plan, the Company reserves the right to transfer
this benefit to a Mindshare Pension Plan in the future, if so required.
8. Holidays
You are entitled to 20 days paid holiday in addition to public holidays per calendar year to be taken at times agreed with
the Company. Carry-over of unused accrued holiday entitlement into a new holiday year will not normally be allowed.
No payment will be made for holidays not taken. On termination of your employment, unless you have been summarily
dismissed, you will be entitled to receive payment for unused accrued holiday pay. Any holiday taken in excess of your
entitlement shall be deducted from your final salary payment.
9. Leave Due to Sickness or Injury
The maximum provision for sick leave is 15 working days per calendar year.

12. Invention/Know-How
Any discovery, invention, improvement in procedure, trademark, trade name, designs, copyrights or get-ups made,
discovered or created by you during the continuance of your employment hereunder relating to the business of the
Company shall belong to and shall be the absolute property of the Company. If required to do so by the Company
(whether during or after the termination of your employment) you shall at the expense of the company execute all
instruments and do all things necessary to vest in ownership for all other rights, title and interests (including any
registered rights therein) in such discovery, invention, improvement in procedure, trademark, trade name, design,
copyright or get-up in the Company (or its Nominee) absolutely and as sole beneficial owner.
14. Notice
The first three months of your employment will be a trial period during which either you or the Company may terminate
your employment on one week's notice. If at the end of that period, the Company is satisfied with your performance,
you will become a permanent employee. Thereafter you will give Company and the Company will give you three
months notice of termination of employment. The above is always subject to the following: (1) the Company's right to
terminate the contract of employment on no or short notice where you are in breach of contract; (2) your employment
will at any event cease without notice on your retirement date when you are 60 years of age. TSIaAc
SIGNED JOCELYN M. GALERA 8-16-99
Date of Borth [sic] 12-25-55
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction of the
CEO and upon signing of the contract, without any further action from the Board of Directors of private respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for petitioner
GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that she was
constrained to sign the application in order that she could remain in the Philippines and retain her employment.
Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent STEEDMAN that her
services had been terminated from private respondent WPP. A termination letter followed the next day. 4
On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service incentive leave pay, 13th month pay, incentive plan, actual and
moral damages, and attorney's fees against WPP and/or John Steedman (Steedman), Mark Webster (Webster) and Nominada Lansang (Lansang). The
case was docketed as NLRC NCR Case No. 30-01-00044-01.
The Labor Arbiter's Ruling
In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP, Steedman, Webster, and Lansang liable for
illegal dismissal and damages. Arbiter Madriaga stated that Galera was not only illegally dismissed but was also not accorded due process. Arbiter
Madriaga explained, thus:
[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman for a five (5) minute meeting on December 14,
2000 where she was verbally told that as of that day, her employment was being terminated. [WPP] did not give [Galera] an
opportunity to defend herself and explain her side. [Galera] was even prohibited from reporting for work that day and was told not
to report for work the next day as it would be awkward for her and respondent Steedman to be in the same premises after her
termination. [WPP] only served [Galera] her written notice of termination only on 15 December 2001, one day after she was
verbally apprised thereof.
The law mandates that the dismissal must be properly done otherwise, the termination is gravely defective and may be declared
unlawful as we hereby hold [Galera's] dismissal to be illegal and unlawful. Where there is no showing of a clear, valid and legal
cause for the termination of employment, the law considers the matter a case of illegal dismissal and the burden is on the
employer to prove that the termination was for a valid or authorized cause. The law mandates that both the substantive and
procedural aspects of due process should be observed. The facts clearly show that respondents were remiss on both aspects.
Perforce, the dismissal is void and unlawful. TECcHA
xxx xxx xxx
Considering the work performance and achievements of [Galera] for the year 2000, we do not find any basis for the alleged claim
of incompetence by herein respondents. Had [Galera] been really incompetent, she would not have been able to generate
enormous amounts [sic] of revenues and business for [WPP]. She also appears to be well liked as a leader by her subordinates,
who have come forth in support of [Galera]. These facts remain undisputed by respondents.
A man's job being a property right duly protected by our laws, an employer who deprives an employee [of] the right to defend
himself is liable for damages consistent with Article 32 of the Civil Code. To allow an employer to terminate the employment of his
worker based merely on allegations without proof places the [employee] in an uncertain situation. The unflinching rule in illegal
dismissal cases is that the employer bears the burden of proof.
In the instant case, respondents have not been able to muster evidence to counter [Galera's] allegations. [Galera's] allegations
remain and stand absent proof from respondents rebutting them. Hence, our finding of illegal dismissal against respondents who
clearly have conspired in bad faith to deprive [Galera] of her right to substantive and procedural due process. 5
The dispositive portion of Arbiter Madriaga's decision reads as follows:
WHEREFORE, premises considered, we hereby hold herein respondents liable for illegal dismissal and damages, and award to
[Galera], by virtue of her expatriate status, the following:
a. Reinstatement without loss of seniority rights.
b. Backwages amounting to $120,000 per year at P50.00 to US $1 exchange rate, 13th month pay, transportation and
housing benefits.

c. Remuneration for business acquisitions amounting to Two Million Eight Hundred Fifty Thousand Pesos
(P2,850,000.00) and Media Plowback Incentive equivalent to Three Million Pesos (P3,000,000.00) or a total of not less
than One Hundred Thousand US Dollars ($100,000.00).
d. US Tax Protection of up to 35% coverage equivalent to Thirty Eight Thousand US Dollars ($38,000).
e. Moral damages including implied defamation and punitive damages equivalent to Two Million Dollars
(US$2,000,000.00).
f. Exemplary damages equivalent to One Million Dollars ($1,000,000.00).
g. Attorney's fees of 10% of the total award herein.
SO ORDERED. 6 CAacTH
The Ruling of the NLRC
The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its Decision 7 promulgated on 19 February 2003, the NLRC stressed that
Galera was WPP's Vice-President, and therefore, a corporate officer at the time she was removed by the Board of Directors on 14 December 2000. The
NLRC stated thus:
It matters not that her having been elected by the Board to an added position of being a member of the Board of Directors did not
take effect as her May 31, 2000 election to such added position was conditioned to be effective upon approval by SEC of the
Amended By-Laws, an approval which took place only in February 21, 2001, i.e., after her removal on December 14, 2000. What
counts is, at the time of her removal, she continued to be WPP's Vice-President, a corporate officer, on hold over capacity.
Ms. Galera's claim that she was not a corporate officer at the time of her removal because her May 31, 2000 election as Vice
President for Media, under WPP's Amended By-Laws, was subject to the approval by the Securities and Exchange Commission
and that the SEC approved the Amended By-Laws only in February 2001. Such claim is unavailing. Even if Ms. Galera's
subsequent election as Vice President for Media on May 31, 2000 was subject to approval by the SEC, she continued to hold her
previous position as Vice President under the December 31, 1999 election until such time that her successor is duly elected and
qualified. It is a basic principle in corporation law, which principle is also embodied in WPP's by-laws, that a corporate officer
continues to hold his position as such until his successor has been duly elected and qualified. When Ms. Galera was elected as
Vice President on December 31, 1999, she was supposed to have held that position until her successor has been duly elected
and qualified. The record shows that Ms. Galera was not replaced by anyone. She continued to be Vice President of WPP with
the same operational title of Managing Director for Mindshare and continued to perform the same functions she was performing
prior to her May 31, 2000 election.
In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the definition of corporate officer for purposes of intracorporate controversy was even broadened to include a Comptroller/Assistant Manager who was appointed by the General
Manager, and whose appointment was later approved by the Board of Directors. In this case, the position of comptroller was not
even expressly mentioned in the By-Laws of the corporation, and yet, the Supreme Court found him to be a corporate officer. The
Court ruled that
(since) petitioner's appointment as comptroller required the approval and formal action of IBC's Board of Directors to
become valid, it is clear therefore that petitioner is a corporate officer whose dismissal may be the subject of a
controversy cognizable by the SEC . . . Had the petitioner been an ordinary employee, such board action would not
have been required.
Such being the case, the imperatives of law require that we hold that the Arbiter below had no jurisdiction over Galera's case as,
again, she was a corporate officer at the time of her removal.
WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo Madriaga dated January 31, 2002 and his
Order dated March 21, 2002, respectively, are granted. The January 31, 2002 decision of the Labor Arbiter is set aside for being
null and void and the temporary restraining order we issued on April 24, 2002 is hereby made permanent. The complaint of
Jocelyn Galera is dismissed for lack of jurisdiction. TSCIEa
SO ORDERED. 8
In its Resolution 9 promulgated on 4 June 2003, the NLRC further stated:
We are fully convinced that this is indeed an intra-corporate dispute which is beyond the labor arbiter's jurisdiction. These
consolidated cases clearly [involve] the relationship between a corporation and its officer and is properly within the definition of an
intra-corporate relationship which, under P.D. No. 902-A, is within the jurisdiction of the SEC (now the commercial courts). Such
being the case, We are constrained to rule that the Labor Arbiter below had no jurisdiction over Ms. Galera's complaint for illegal
dismissal.
WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied for lack of merit. We reiterate our February 19,
2003 Decision setting aside the Labor Arbiter's Decision dated January 31, 2002 for being null and void.
SO ORDERED. 10
Galera assailed the NLRC's decision and resolution before the appellate court and raised a lone assignment of error.
The National Labor Relations Commission acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it
reversed the decision of the Labor Arbiter not on the merits but for alleged lack of jurisdiction. 11
The Decision of the Appellate Court
The appellate court reversed and set aside the decision of the NLRC. The appellate court ruled that the NLRC's dismissal of Galera's appeal is not in
accord with jurisprudence. A person could be considered a "corporate officer" only if appointed as such by a corporation's Board of Directors, or if
pursuant to the power given them by either the Articles of Incorporation or the By-Laws. 12
The appellate court explained:

A corporation, through its board of directors, could only act in the manner and within the formalities, if any, prescribed by its
charter or by the general law. If the action of the Board is ultra vires such is motu proprio void ab initio and without legal effect
whatsoever. The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the
corporation. They are, in effect, written into the charter. In this sense, they beome part of the fundamental law of the corporation
with which the corporation and its directors and officers must comply.
Even if petitioner GALERA had been appointed by the Board of Directors on December 31, 1999, private respondent WPP's ByLaws provided for only one Vice-President, a position already occupied by private respondent Webster. The same defect also
stains the Board of Directors' appointment of petitioner GALERA as a Director of the corporation, because at that time the ByLaws provided for only five directors. In addition, the By-laws only empowered the Board of Directors to appoint a general
manager and/or assistant general manager as corporate officers in addition to a chairman, president, vice-president and
treasurer. There is no mention of a corporate officer entitled "Managing Director." STaIHc
Hence, when the Board of Directors enacted the Resolutions of December 31, 1999 and May 31, 2000, it exceeded its authority
under the By-Laws and are, therefore, ultra vires. Although private respondent WPP sought to amend these defects by filing
Amended By-Laws with the Securities and Exchange Commission, they did not validate the ultra vires resolutions because the
Amended By-Laws did not take effect until February 16, 2001, when it was approved by the SEC. Since by-laws operate only
prospectively, they could not validate the ultra vires resolutions. 13
The dispositive portion of the appellate court's decision reads:
WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The assailed Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered DIRECTING private respondent WPP
MARKETING COMMUNICATIONS, INC. to:
1. Pay [Galera] backwages at the peso equivalent of US$120,000.00 per annum plus three months from her summary
December 14, 2000 dismissal up to March 14, 2001 because three months notice is required under the
contract, plus 13th month pay, bonuses and general increases to which she would have been normally
entitled, had she not been dismissed and had she not been forced to stop working, including US tax
protection of up to 35% coverage which she had been enjoying as an expatriate;
2. Pay . . . GALERA the peso equivalent of US$185,000.00 separation pay (1 1/2 years);
3. Pay . . . GALERA any unpaid housing benefit for the 18 1/2 months of her employment in the service to the Company
as an expatriate in Manila, Philippines at the rate of P576,000 per year; unpaid personal and accident
insurance benefits for premiums at the rate of P300,000.00 per year; whatever cash value in the JWT
Pension Plan; and thirty days paid holiday benefit under the contract for the 1 1/2 calendar years with the
Company;
4. Pay . . . GALERA the reduced amount of PhP2,000,000.00 as moral damages;
5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;
6. Pay [Galera] an amount equivalent to 10% of the judgment award as attorney's fees;
7. Pay the cost of the suit.
SO ORDERED. 14
Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial reconsideration and/or clarification on the same date.
The appellate court found no reason to revise or reverse its previous decision and subsequently denied the motions in a Resolution promulgated on 1
August 2005. 15 DHECac
The Issues
WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207:
I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over [Galera's] complaint because she was not an
employee. [Galera] was a corporate officer of WPP from the beginning of her term until her removal from office.
II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has jurisdiction over [Galera's] complaint, it should
have remanded the case to the Labor Arbiter for reception of evidence on the merits of the case.
III. [Galera] is an alien, hence, can never attain a regular or permanent working status in the Philippines.
IV. [Galera] is not entitled to recover backwages, other benefits and damages from WPP. 16
On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of her petition:
The CA decision should be consistent with Article 279 of the Labor Code and applicable jurisprudence, that full backwages and
separation pay (when in lieu of reinstatement), should be reckoned from time of dismissal up to time of reinstatement (or payment
of separation pay, in case separation instead of reinstatement is awarded).
Accordingly, petitioner Galera should be awarded full backwages and separation pay for the period from 14 December 2000 until
the finality of judgment by the respondents, or, at the very least, up to the promulgation date of the CA decision.
The individual respondents Steedman, Webster and Lansang must be held solidarily liable with respondent WPP for the wanton
and summary dismissal of petitioner Galera, to be consistent with law and jurisprudence as well as the specific finding of the CA
of bad faith on the part of respondents. 17
This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a resolution dated 16 January 2006. 18
The Ruling of the Court
In its consolidated comment, the Office of the Solicitor General (OSG) recommended that (A) the Decision dated 14 April 2005 of the appellate court
finding (1) Galera to be a regular employee of WPP; (2) the NLRC to have jurisdiction over the present case; and (3) WPP to have illegally dismissed

Galera, be affirmed; and (B) the case remanded to the Labor Arbiter for the computation of the correct monetary award. Despite the OSG's
recommendations, we see that Galera's failure to seek an employment permit prior to her employment poses a serious problem in seeking relief before
this Court. Hence, we settle the various issues raised by the parties for the guidance of the bench and bar. EaDATc
Whether Galera is an Employee or a Corporate Officer
Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On the other hand, WPP, Steedman, Webster and Lansang
contend that Galera is a corporate officer; hence, any controversy regarding her dismissal is under the jurisdiction of the Regional Trial Court. We agree
with Galera.
Corporate officers are given such character either by the Corporation Code or by the corporation's by-laws. Under Section 25 of the Corporation Code,
the corporate officers are the president, secretary, treasurer and such other officers as may be provided in the by-laws. 19 Other officers are sometimes
created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional
offices as may be necessary.
An examination of WPP's by-laws resulted in a finding that Galera's appointment as a corporate officer (Vice-President with the operational title of
Managing Director of Mindshare) during a special meeting of WPP's Board of Directors is an appointment to a non-existent corporate office. WPP's bylaws provided for only one Vice-President. At the time of Galera's appointment on 31 December 1999, WPP already had one Vice-President in the
person of Webster. Galera cannot be said to be a director of WPP also because all five directorship positions provided in the by-laws are already
occupied. Finally, WPP cannot rely on its Amended By-Laws to support its argument that Galera is a corporate officer. The Amended By-Laws provided
for more than one Vice-President and for two additional directors. Even though WPP's stockholders voted for the amendment on 31 May 2000, the SEC
approved the amendments only on 16 February 2001. Galera was dismissed on 14 December 2000. WPP, Steedman, Webster, and Lansang did not
present any evidence that Galera's dismissal took effect with the action of WPP's Board of Directors.
The appellate court further justified that Galera was an employee and not a corporate officer by subjecting WPP and Galera's relationship to the four-fold
test: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control
the employee with respect to the means and methods by which the work is to be accomplished. The appellate court found:
. . . Sections 1 and 4 of the employment contract mandate where and how often she is to perform her work; sections 3, 5, 6 and 7
show that wages she receives are completely controlled by . . . WPP; and sections 10 and 11 clearly state that she is subject to
the regular disciplinary procedures of . . . WPP.
Another indicator that she was a regular employee and not a corporate officer is Section 14 of the contract, which clearly states
that she is a permanent employee not a Vice-President or a member of the Board of Directors.
xxx xxx xxx
Another indication that the Employment Contract was one of regular employment is Section 12, which states that the rights to any
invention, discovery, improvement in procedure, trademark, or copyright created or discovered by petitioner GALERA during her
employment shall automatically belong to private respondent WPP. Under Republic Act 8293, also known as the Intellectual
Property Code, this condition prevails if the creator of the work subject to the laws of patent or copyright is an employee of the
one entitled to the patent or copyright. HDacIT
Another convincing indication that she was only a regular employee and not a corporate officer is the disciplinary procedure under
Sections 10 and 11 of the Employment Contract, which states that her right of redress is through Mindshare's Chief Executive
Officer for the Asia-Pacific. This implies that she was not under the disciplinary control of private respondent WPP's Board of
Directors (BOD), which should have been the case if in fact she was a corporate officer because only the Board of Directors could
appoint and terminate such a corporate officer.
Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and Employment and the
application for a 9(g) visa with the Bureau of Immigration both of which stated that she was private respondent's WPP' Vice
President these should not be considered against her. Assurming arguendo that her appointment as Vice-President was a
valid act, it must be noted that these appointments occurred afater she was hired as a regular employee. After her appointments,
there was no appreciable change in her duties. 20
Whether the Labor Arbiter and the NLRC
have jurisdiction over the present case
Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present case. Article 217 of the Labor Code provides:
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 . . . the following cases involving all workers, whether agricultural or
non-agricultural:
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 employer-employee 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 other 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.
DTAHEC
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation of collective bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in said agreements.
In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code, states:
The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred
to the courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of
its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission
shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be
resolved within one year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned above, states:
b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or association of which they are stockholders, members or
associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their
individual franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or
associations.
Whether WPP illegally dismissed Galera
WPP's dismissal of Galera lacked both substantive and procedural due process.
Apart from Steedman's letter dated 15 December 2000 to Galera, WPP failed to prove any just or authorized cause for Galera's dismissal. Steedman's
letter to Galera reads:
The operations are currently in a shamble. There is lack of leadership and confidence in your abilities from within, our agency
partners and some clients.
Most of the staff I spoke with felt they got more guidance and direction from Minda than yourself. In your role as Managing
Director, that is just not acceptable. SACTIH
I believe your priorities are mismanaged. The recent situation where you felt an internal strategy meeting was more important
than a new business pitch is a good example.
You failed to lead and advise on the two new business pitches. In both cases, those involved sort (sic) Minda's input. As I
discussed with you back in July, my directive was for you to lead and review all business pitches. It is obvious [that] confusion
existed internally right up until the day of the pitch.
The quality output is still not to an acceptable standard, which was also part of my directive that you needed to focus on back in
July.
I do not believe you understand the basic skills and industry knowledge required to run a media special operation. 21
WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations in Steedman's letter. Galera, on the other hand, presented
documentary evidence 22 in the form of congratulatory letters, including one from Steedman, which contents are diametrically opposed to the 15
December 2000 letter.
The law further requires that the employer must furnish the worker sought to be dismissed with two written notices before termination of employment can
be legally effected: (1) notice which apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the subsequent
notice which informs the employee of the employer's decision to dismiss him. Failure to comply with the requirements taints the dismissal with illegality.
23 WPP's acts clearly show that Galera's dismissal did not comply with the two-notice rule.
Whether Galera is entitled to the monetary award
WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because she is an alien. They further state that there is no
guarantee that the Bureau of Immigration and the Department of Labor and Employment will continue to grant favorable rulings on the applications for a
9 (g) visa and an Alien Employment Permit after the expiry of the validity of Galera's documents on 31 December 2000. WPP's argument is a circular
argument, and assumes what it attempts to prove. Had WPP not dismissed Galera, there is no doubt in our minds that WPP would have taken action for
the approval of documents required for Galera's continued employment.
This is Galera's dilemma: Galera worked in the Philippines without a proper work permit but now wants to claim employee's benefits under Philippine
labor laws.
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction of
the CEO and upon signing of the contract, without any further action from the Board of Directors of private respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for
petitioner GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that
she was constrained to sign the application in order that she could remain in the Philippines and retain her employment. 24
HTDcCE
The law and the rules are consistent in stating that the employment permit must be acquired prior to employment. The Labor Code states: "Any alien
seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in
the Philippines shall obtain an employment permit from the Department of Labor." 25 Section 4, Rule XIV, Book 1 of the Implementing Rules and
Regulations provides:
Employment permit required for entry. No alien seeking employment, whether as a resident or non-resident, may enter the
Philippines without first securing an employment permit from the Ministry. If an alien enters the country under a non-working visa
and wishes to be employed thereafter, he may only be allowed to be employed upon presentation of a duly approved employment
permit.

Galera cannot come to this Court with unclean hands. To grant Galera's prayer is to sanction the violation of the Philippine labor laws requiring aliens to
secure work permits before their employment. We hold that the status quo must prevail in the present case and we leave the parties where they are.
This ruling, however, does not bar Galera from seeking relief from other jurisdictions.
WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and 169239. We SET ASIDE the Decision of the Court of Appeals
promulgated on 14 April 2005 as well as the Resolution promulgated on 1 August 2005 in CA-G.R. SP No. 78721.
SO ORDERED.
Brion, Del Castillo, Abad and Perez, JJ., concur.
Footnotes
1.Under Rule 45 of the 1997 Rules of Civil Procedure.
2.Rollo (G.R. No. 169207), pp. 10-43; rollo (G.R. No. 169239), pp. 40-73. Penned by Associate Justice Vicente Q. Roxas with Associate Justices
Renato C. Dacudao and Lucas P. Bersamin, concurring; Associate Justice Jose Catral Mendoza, concurring and dissenting; and Associate
Justice Celia C. Librea-Leagogo, dissenting.
3.Rollo (G.R. No. 169207), pp. 63-64; rollo (G.R. No. 169239), pp. 93-94. Penned by Associate Justice Vicente Q. Roxas with Associate Justices
Renato C. Dacudao and Lucas P. Bersamin, concurring; Associate Justice Jose Catral Mendoza, concurring and dissenting; and Associate
Justice Celia C. Librea-Leagogo, dissenting.
4.Rollo (G.R. No. 169207), pp. 12-15; rollo (G.R. No. 169239), pp. 42-45.
5.Rollo (G.R. No. 169207), pp. 337-341; rollo (G.R. No. 169239), pp. 299-303.
6.Rollo (G.R. No. 169207), p. 344; rollo (G.R. No. 169239), p. 306.
7.Rollo (G.R. No. 169239), pp. 140-150. Per Curiam decision signed by Commissioners Roy V. Seeres and Victoriano R. Calaycay.
8.Id. at 148-150.
9.Rollo (G.R. No. 169207), pp. 502-505; rollo (G.R. No. 169239), pp. 151-154.
10.Rollo (G.R. No. 169207), pp. 504-505; rollo (G.R. No. 169239), pp. 153-154.
11.Rollo (G.R. No. 169207), p. 18.
12.Rollo (G.R. No. 169207), p. 21; rollo (G.R. No. 169239), p. 51.
13.Rollo (G.R. No. 169207), pp. 33-34; rollo (G.R. No. 169239), pp. 63-64.
14.Rollo (G.R. No. 169207), p. 42; rollo (G.R. No. 169239), p. 72.
15.Rollo (G.R. No. 169207), pp. 63-64; rollo (G.R. No. 169239), pp. 93-94.
16.Rollo (G.R. No. 169207), pp. 83-84.
17.Rollo (G.R. No. 169239), pp. 18-19.
18.Rollo (G.R. No. 169207), p. 879; rollo (G.R. No. 169239), p. 470.
19.Easycall Communications Phils., Inc. v. King, G.R. No. 145901, 15 December 2005, 478 SCRA 102.
20.Rollo (G.R. No. 169207), pp. 34-36; rollo (G.R. No. 169239), pp. 64-66.
21.Rollo (G.R. No. 169239), p. 267.
22.Id. at 237-266.
23.Pepsi-Cola Bottling Co. v. NLRC, G.R. No. 101900, 23 June 1992, 210 SCRA 277, 286.
24.Rollo (G.R. No. 169207), pp. 14-15; rollo (G.R. No. 169239), pp. 44-45.
25.First paragraph, Article 40, Labor Code of the Philippines.
||| (WPP Marketing Communications, Inc. v. Galera, G.R. No. 169207, 169239, March 25, 2010)

SECOND DIVISION
[G.R. No. 167648. January 28, 2008.]
TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA, petitioners, vs. ROBERTO C.
SERVAA, respondent.
DECISION
TINGA, J p:
This petition for review under Rule 45 assails the 21 December 2004 Decision 1 and 8 April 2005 Resolution 2 of the Court of Appeals declaring Roberto
Servaa (respondent) a regular employee of petitioner Television and Production Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE to
pay nominal damages for its failure to observe statutory due process in the termination of respondent's employment for authorized cause.
TAPE is a domestic corporation engaged in the production of television programs, such as the long-running variety program, "Eat Bulaga!". Its president
is Antonio P. Tuviera (Tuviera). Respondent Roberto C. Servaa had served as a security guard for TAPE from March 1987 until he was terminated on 3
March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits against TAPE. He alleged that he was first connected with AgroCommercial Security Agency but was later on absorbed by TAPE as a regular company guard. He was detailed at Broadway Centrum in Quezon City
where "Eat Bulaga!" regularly staged its productions. On 2 March 2000, respondent received a memorandum informing him of his impending dismissal
on account of TAPE's decision to contract the services of a professional security agency. At the time of his termination, respondent was receiving a
monthly salary of P6,000.00. He claimed that the holiday pay, unpaid vacation and sick leave benefits and other monetary considerations were withheld
from him. He further contended that his dismissal was undertaken without due process and violative of existing labor laws, aggravated by nonpayment of
separation pay. 3
In a motion to dismiss which was treated as its position paper, TAPE countered that the labor arbiter had no jurisdiction over the case in the absence of
an employer-employee relationship between the parties. TAPE made the following assertions: (1) that respondent was initially employed as a security
guard for Radio Philippines Network (RPN-9); (2) that he was tasked to assist TAPE during its live productions, specifically, to control the crowd; (3) that
when RPN-9 severed its relationship with the security agency, TAPE engaged respondent's services, as part of the support group and thus a talent, to
provide security service to production staff, stars and guests of "Eat Bulaga!" as well as to control the audience during the one-and-a-half hour noontime
program; (4) that it was agreed that complainant would render his services until such time that respondent company shall have engaged the services of
a professional security agency; (5) that in 1995, when his contract with RPN-9 expired, respondent was retained as a talent and a member of the support
group, until such time that TAPE shall have engaged the services of a professional security agency; (6) that respondent was not prevented from seeking
other employment, whether or not related to security services, before or after attending to his "Eat Bulaga!" functions; (7) that sometime in late 1999,
TAPE started negotiations for the engagement of a professional security agency, the Sun Shield Security Agency; and (8) that on 2 March 2000, TAPE
issued memoranda to all talents, whose functions would be rendered redundant by the engagement of the security agency, informing them of the
management's decision to terminate their services. 4 DSIaAE
TAPE averred that respondent was an independent contractor falling under the talent group category and was working under a special arrangement
which is recognized in the industry. 5
Respondent for his part insisted that he was a regular employee having been engaged to perform an activity that is necessary and desirable to TAPE's
business for thirteen (13) years. 6
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent to be a regular employee of TAPE. The Labor Arbiter relied on the
nature of the work of respondent, which is securing and maintaining order in the studio, as necessary and desirable in the usual business activity of
TAPE. The Labor Arbiter also ruled that the termination was valid on the ground of redundancy, and ordered the payment of respondent's separation
pay equivalent to one (1)-month pay for every year of service. The dispositive portion of the decision reads:
WHEREFORE, complainant's position is hereby declared redundant. Accordingly, respondents are hereby ordered to pay
complainant his separation pay computed at the rate of one (1) month pay for every year of service or in the total amount of
P78,000.00. 7
On appeal, the National Labor Relations Commission (NLRC) in a Decision 8 dated 22 April 2002 reversed the Labor Arbiter and considered respondent
a mere program employee, thus:
We have scoured the records of this case and we find nothing to support the Labor Arbiter's conclusion that complainant was a
regular employee.
xxx xxx xxx
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. . . .
Respondent company is engaged in the business of production of television shows. The records of this case also show that
complainant was employed by respondent company beginning 1995 after respondent company transferred from RPN-9 to GMA7, a fact which complainant does not dispute. His last salary was P5,444.44 per month. In such industry, security services may
not be deemed necessary and desirable in the usual business of the employer. Even without the performance of such services on
a regular basis, respondent's company's business will not grind to a halt.
xxx xxx xxx
Complainant was indubitably a program employee of respondent company. Unlike [a] regular employee, he did not observe
working hours . . . . He worked for other companies, such as M-Zet TV Production, Inc. at the same time that he was working for
respondent company. The foregoing indubitably shows that complainant-appellee was a program employee. Otherwise, he would
have two (2) employers at the same time. 9
Respondent filed a motion for reconsideration but it was denied in a Resolution 10 dated 28 June 2002. CAScIH
Respondent filed a petition for certiorari with the Court of Appeals contending that the NLRC acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it reversed the decision of the Labor Arbiter. Respondent asserted that he was a regular employee considering the nature
and length of service rendered. 11

Reversing the decision of the NLRC, the Court of Appeals found respondent to be a regular employee. We quote the dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision dated 22 April 2002 of the public respondent
NLRC reversing the Decision of the Labor Arbiter and its Resolution dated 28 June 2002 denying petitioner's motion for
reconsideration are REVERSED and SET ASIDE. The Decision dated 29 June 2001 of the Labor Arbiter is REINSTATED with
MODIFICATION in that private respondents are ordered to pay jointly and severally petitioner the amount of P10,000.00 as
nominal damages for non-compliance with the statutory due process.
SO ORDERED. 12
Finding TAPE's motion for reconsideration without merit, the Court of Appeals issued a Resolution 13 dated 8 April 2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as those in its petition for certiorari before the Court of Appeals. These
matters may be summed up into one main issue: whether an employer-employee relationship exists between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered the case submitted for decision. 14
At the outset, it bears emphasis that the existence of employer-employee relationship is ultimately a question of fact. Generally, only questions of law are
entertained in appeals by certiorari to the Supreme Court. This rule, however, is not absolute. Among the several recognized exceptions is when the
findings of the Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the other, are conflicting, 15 as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in determining the existence of employer-employee relationship, namely: (a)
the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the
employee with respect to the means and method by which the work is to be accomplished. 16 The most important factor involves the control test. Under
the control test, there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only
the end achieved but also the manner and means used to achieve that end. 17
In concluding that respondent was an employee of TAPE, the Court of Appeals applied the "four-fold test" in this wise:
First. The selection and hiring of petitioner was done by private respondents. In fact, private respondents themselves admitted
having engaged the services of petitioner only in 1995 after TAPE severed its relations with RPN Channel 9. TAScID
By informing petitioner through the Memorandum dated 2 March 2000, that his services will be terminated as soon as the
services of the newly hired security agency begins, private respondents in effect acknowledged petitioner to be their employee.
For the right to hire and fire is another important element of the employer-employee relationship.

Second. Payment of wages is one of the four factors to be considered in determining the existence of employer-employee
relation. . . Payment as admitted by private respondents was given by them on a monthly basis at a rate of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the "control test" is the most important. . . .
The bundy cards representing the time petitioner had reported for work are evident proofs of private respondents' control over
petitioner more particularly with the time he is required to report for work during the noontime program of "Eat Bulaga!" If it were
not so, petitioner would be free to report for work anytime even not during the noontime program of "Eat Bulaga!" from 11:30 a.m.
to 1:00 p.m. and still gets his compensation for being a "talent." Precisely, he is being paid for being the security of "Eat Bulaga! "
during the above-mentioned period. The daily time cards of petitioner are not just for mere record purposes as claimed by private
respondents. It is a form of control by the management of private respondent TAPE. 18
TAPE asseverates that the Court of Appeals erred in applying the "four-fold test" in determining the existence of employer-employee relationship
between it and respondent. With respect to the elements of selection, wages and dismissal, TAPE proffers the following arguments: that it never hired
respondent, instead it was the latter who offered his services as a talent to TAPE; that the Memorandum dated 2 March 2000 served on respondent was
for the discontinuance of the contract for security services and not a termination letter; and that the talent fees given to respondent were the pre-agreed
consideration for the services rendered and should not be construed as wages. Anent the element of control, TAPE insists that it had no control over
respondent in that he was free to employ means and methods by which he is to control and manage the live audiences, as well as the safety of TAPE's
stars and guests. 19
The position of TAPE is untenable. Respondent was first connected with Agro-Commercial Security Agency, which assigned him to assist TAPE in its
live productions. When the security agency's contract with RPN-9 expired in 1995, respondent was absorbed by TAPE or, in the latter's language,
"retained as talent." 20 Clearly, respondent was hired by TAPE. Respondent presented his identification card 21 to prove that he is indeed an employee
of TAPE. It has been in held that in a business establishment, an identification card is usually provided not just as a security measure but to mainly
identify the holder thereof as a bona fide employee of the firm who issues it. 22
Respondent claims to have been receiving P5,444.44 as his monthly salary while TAPE prefers to designate such amount as talent fees. Wages, as
defined in the Labor Code, are 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 service rendered or to be rendered. It is beyond dispute that respondent
received a fixed amount as monthly compensation for the services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service proves that TAPE had the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He was required to report daily and observe definite work hours. To
negate the element of control, TAPE presented a certification from M-Zet Productions to prove that respondent also worked as a studio security guard
for said company. Notably, the said certificate categorically stated that respondent reported for work on Thursdays from 1992 to 1995. It can be recalled
that during said period, respondent was still working for RPN-9. As admitted by TAPE, it absorbed respondent in late 1995. 23 AaIDCS
TAPE further denies exercising control over respondent and maintains that the latter is an independent contractor. 24 Aside from possessing substantial
capital or investment, a legitimate job contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work
or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the
principal in all matters connected with the performance of the work except as to the results thereof. 25 TAPE failed to establish that respondent is an
independent contractor. As found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to prove that herein petitioner is indeed an independent
contractor. None of the above conditions exist in the case at bar. Private respondents failed to show that petitioner has substantial

capital or investment to be qualified as an independent contractor. They likewise failed to present a written contract which
specifies the performance of a specified piece of work, the nature and extent of the work and the term and duration of the
relationship between herein petitioner and private respondent TAPE. 26
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in classifying respondent as a program employee and equating him to be
an independent contractor.
Policy Instruction No. 40 defines program employees as
. . . those whose skills, talents or services are engaged by the station for a particular or specific program or undertaking and who
are not required to observe normal working hours such that on some days they work for less than eight (8) hours and on other
days beyond the normal work hours observed by station employees and are allowed to enter into employment contracts with
other persons, stations, advertising agencies or sponsoring companies. The engagement of program employees, including those
hired by advertising or sponsoring companies, shall be under a written contract specifying, among other things, the nature of the
work to be performed, rates of pay and the programs in which they will work. The contract shall be duly registered by the station
with the Broadcast Media Council within three (3) days from its consummation. 27
TAPE failed to adduce any evidence to prove that it complied with the requirements laid down in the policy instruction. It did not even present its contract
with respondent. Neither did it comply with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, still, classifying him as an independent contractor is misplaced. The Court of Appeals
had this to say:
We cannot subscribe to private respondents' conflicting theories. The theory of private respondents that petitioner is an
independent contractor runs counter to their very own allegation that petitioner is a talent or a program employee. An independent
contractor is not an employee of the employer, while a talent or program employee is an employee. The only difference between
a talent or program employee and a regular employee is the fact that a regular employee is entitled to all the benefits that are
being prayed for. This is the reason why private respondents try to seek refuge under the concept of an independent contractor
theory. For if petitioner were indeed an independent contractor, private respondents will not be liable to pay the benefits prayed
for in petitioner's complaint. 28
More importantly, respondent had been continuously under the employ of TAPE from 1995 until his termination in March 2000, or for a span of 5 years.
Regardless of whether or not respondent had been performing work that is necessary or desirable to the usual business of TAPE, respondent is still
considered a regular employee under Article 280 of the Labor Code which provides: CaASIc
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 engagement of the employee or where the work or service to be performed is seasonal in nature and 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 activity exists.
As a regular employee, respondent cannot be terminated except for just cause or when authorized by law. 29 It is clear from the tenor of the 2 March
2000 Memorandum that respondent's termination was due to redundancy. Thus, the Court of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case
of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year or service, whichever is
higher.

xxx xxx xxx

We uphold the finding of the Labor Arbiter that "complainant [herein petitioner] was terminated upon [the] management's option to
professionalize the security services in its operations. . . ." However, [we] find that although petitioner's services [sic] was for an
authorized cause, i.e., redundancy, private respondents failed to prove that it complied with service of written notice to the
Department of Labor and Employment at least one month prior to the intended date of retrenchment. It bears stressing that
although notice was served upon petitioner through a Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen
days from the start of the agency's take over which was on 3 March 2000. Petitioner's services with private respondents were
severed less than the month requirement by the law.
Under prevailing jurisprudence the termination for an authorized cause requires payment of separation pay. Procedurally, 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 notice 30 days prior to the effectivity of his separation. Where the dismissal is for an authorized
cause but due process was not observed, the dismissal should be upheld. While the procedural infirmity cannot be cured, it
should not invalidate the dismissal. However, the employer should be liable for non-compliance with procedural requirements of
due process.
xxx xxx xxx
Under recent jurisprudence, the Supreme Court fixed the amount of P30,000.00 as nominal damages. The basis of the violation
of petitioners' right to statutory due process by the private respondents 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. We believe this form of damages would serve to deter employer from future violations of the statutory due process
rights of the 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. Considering the circumstances in the case at bench, we deem it proper to fix it
at P10,000.00. 30
In sum, we find no reversible error committed by the Court of Appeals in its assailed decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent any showing that he acted with malice or bad faith in terminating
respondent, he cannot be held solidarily liable with TAPE. 31 Thus, the Court of Appeals ruling on this point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED with MODIFICATION in that only petitioner Television and
Production Exponents, Inc. is liable to pay respondent the amount of P10,000.00 as nominal damages for non-compliance with the statutory due process
and petitioner Antonio P. Tuviera is accordingly absolved from liability.
SO ORDERED.
Quisumbing, Carpio, Carpio-Morales and Velasco, Jr., JJ., concur.

Footnotes

1.Rollo, pp. 47-64. Penned by Associate Justice Japar B. Dimaampao and concurred in by Associate Justices Renato C. Dacudao and Edgardo F.
Sundiam.
2.Id. at 66-67.
3.Id. at 98.
4.Id. at 100-102.
5.Id. at 98, 103. DCHaTc
6.Id. at 103.
7.Id. at 106.
8.Id. at 107-118.
9.Id. at 115-117.
10.Id. at 119-120.
11.Id. at 130.
12.Id. at 63.
13.Id. at 66-67.
14.Id. at 284.
15.Molina v. Pacific Plans, Inc., G.R. No. 165476, 10 March 2006, 484 SCRA 498.
16.Dumpit-Murillo v. Court of Appeals, G.R. No. 164652, 8 June 2007, 524 SCRA 290, 302 citing Manila Water Company, Inc. v. Pena, G.R. No.
158255, 8 July 2004, 434 SCRA 53; Coca-Cola Bottlers v. Climaco, G.R. No. 146881, 5 February 2007, 514 SCRA 164, 177; Lakas sa
Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggagawang Promo ng Burlingame v. Burlingame Corporation, G.R. No.
162833, 15 June 2007, 524 SCRA 690, 695.
17.Leonardo v. Court of Appeals, G.R. No. 152459, 15 June 2006.
18.Rollo, pp. 56-57.
19.Id. at 30-34.
20.Id. at 101.
21.CA rollo, p. 37.
22.Villamaria v. Court of Appeals, G.R. No. 165881, 19 April 2006.
23.Id. at 16-17.
24.Id. at 28.
25.Department of Labor and Employment, Department Order No. 10 (1997).
26.Rollo, p. 55.
27.Department of Labor and Employment Policy Instruction No. 40 (1979).
28.Id. at 57-58.
29.LABOR CODE, Art. 279.
30.Rollo, pp. 60-63.
31.Kay Products, Inc. v. Court of Appeals, G.R. No. 162472, 28 July 2005, 464 SCRA 544. AaIDHS

||| (Television and Production Exponents, Inc. v. Servaa, G.R. No. 167648, January 28, 2008)

SECOND DIVISION
[G.R. No. 176484. November 25, 2008.]
CALAMBA MEDICAL CENTER, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS
AND MERCEDITHA * LANZANAS, respondents.
DECISION
CARPIO-MORALES, J p:
The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of medical doctors-spouses Ronaldo Lanzanas (Dr.
Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995, respectively, as part of its team of resident physicians.
Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents were paid a monthly "retainer" of P4,800.00 each. 1 It appears that
resident physicians were also given a percentage share out of fees charged for out-patient treatments, operating room assistance and discharge billings,
in addition to their fixed monthly retainer. 2 ScTCIE
The work schedules of the members of the team of resident physicians were fixed by petitioner's medical director Dr. Raul Desipeda (Dr. Desipeda). And
they were issued identification cards 3 by petitioner and were enrolled in the Social Security System (SSS). 4 Income taxes were withheld from them. 5
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently overheard a telephone conversation of
respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an extension telephone line. Apparently, Dr. Lanzanas and Miscala were
discussing the low "census" or admission of patients to the hospital. 6
Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr. Lanzanas a Memorandum of March 7, 1998 reading:
ECSHID
As a Licensed Resident Physician employed in Calamba Medical Center since several years ago, the hospital
management has committed upon you utmost confidence in the performance of duties pursuant thereto. This is the reason why
you were awarded the privilege to practice in the hospital and were entrusted hospital functions to serve the interest of both the
hospital and our patients using your capability for independent judgment.
Very recently though and unfortunately, you have committed acts inimical to the interest of the hospital, the details of which are
contained in the hereto attached affidavit of witness. EAHDac
You are therefore given 24 hours to explain why no disciplinary action should be taken against you.
Pending investigation of your case, you are hereby placed under 30-days [sic] preventive suspension effective upon
receipt hereof. 7 (Emphasis, italics and underscoring supplied) HEISca
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident, any work schedule after sending her husband
Dr. Lanzanas the memorandum, 8 nor inform her the reason therefor, albeit she was later informed by the Human Resource Department (HRD) officer
that that was part of petitioner's cost-cutting measures. 9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998, 10 admitted that he spoke with Miscala over the phone but that their
conversation was taken out of context by Dr. Trinidad. HcTSDa
On March 14, 1998, 11 the rank-and-file employees union of petitioner went on strike due to unresolved grievances over terms and conditions of
employment. 12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension 13 before the National Labor Relations Commission (NLRC)-Regional
Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal dismissal. 14
In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment (DOLE) certified the labor dispute to the NLRC for
compulsory arbitration and issued on April 21, 1998 return-to-work Order to the striking union officers and employees of petitioner pending resolution of
the labor dispute. 15
In a memorandum 16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the Secretary of Labor directing all union officers and members
to return-to-work "on or April 23, 1998, except those employees that were already terminated or are serving disciplinary actions". Dr. Desipeda thus
ordered the officers and members of the union to "report for work as soon as possible" to the hospital's personnel officer and administrator for "work
scheduling, assignments and/or re-assignments". aIETCA
Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998, indicating as grounds therefor his failure to report back to
work despite the DOLE order and his supposed role in the striking union, thus:
On April 23, 1998, you still did not report for work despite memorandum issued by the CMC Medical Director implementing the
Labor Secretary's ORDER. The same is true on April 24, 1998 and April 25, 1998, you still did not report for work [sic].
You are likewise aware that you were observed (re: signatories [sic] to the Saligang Batas of BMCMC-UWP) to be unlawfully
participating as member in the rank-and-file union's concerted activities despite knowledge that your position in the hospital is
managerial in nature (Nurses, Orderlies, and staff of the Emergency Room carry out your orders using your independent
judgment) which participation is expressly prohibited by the New Labor Code and which prohibition was sustained by the MedArbiter's ORDER dated February 24, 1998. (Emphasis and italics in the original; underscoring partly in the original and partly
supplied) HCDAcE
For these reasons as grounds for termination, you are hereby terminated for cause from employment effective today,
April 25, 1998, without prejudice to further action for revocation of your license before the Philippine [sic] Regulations [sic]
Commission. 17 (Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal dismissal. 18 His and Dr. Merceditha's complaints were consolidated and docketed
as NLRC CASE NO. RAB-IV-3-9879-98-L. TCaEAD
By Decision 19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for want of jurisdiction upon a finding that there
was no employer-employee relationship between the parties, the fourth requisite or the "control test" in the determination of an employment bond being
absent.

On appeal, the NLRC, by Decision 20 of May 3, 2002, reversed the Labor Arbiter's findings, disposing as follows:
WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the complainants their full backwages;
separation pay of one month salary for every year of service in lieu of reinstatement; moral damages of P500,000.00 each;
exemplary damages of P250,000.00 each plus ten percent (10%) of the total award as attorney's fees. cTESIa
SO ORDERED. 21
Petitioner's motion for reconsideration having been denied, it brought the case to the Court of Appeals on certiorari.
The appellate court, by June 30, 2004 Decision, 22 initially granted petitioner's petition and set aside the NLRC ruling. However, upon a subsequent
motion for reconsideration filed by respondents, it reinstated the NLRC decision in an Amended Decision 23 dated September 26, 2006 but tempered
the award to each of the spouses of moral and exemplary damages to P100,000.00 and P50,000.00, respectively and omitted the award of attorney's
fees. THcaDA
In finding the existence of an employer-employee relationship between the parties, the appellate court held:
. . . . While it may be true that the respondents are given the discretion to decide on how to treat the petitioner's patients, the
petitioner has not denied nor explained why its Medical Director still has the direct supervision and control over the
respondents. The fact is the petitioner's Medical Director still has to approve the schedule of duties of the respondents. The
respondents stressed that the petitioner's Medical Director also issues instructions or orders to the respondents relating to
the means and methods of performing their duties, i.e. admission of patients, manner of characterizing cases, treatment of
cases, etc., and may even overrule, review or revise the decisions of the resident physicians. This was not controverted by
the petitioner. The foregoing factors taken together are sufficient to constitute the fourth element, i.e. control test, hence, the
existence of the employer-employee relationship. In denying that it had control over the respondents, the petitioner alleged that
the respondents were free to put up their own clinics or to accept other retainership agreement with the other hospitals. But, the
petitioner failed to substantiate the allegation with substantial evidence. (Emphasis and underscoring supplied) 24
The appellate court thus declared that respondents were illegally dismissed.
. . . . The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his alleged participation in union
activities, specifically in joining the strike and failing to observe the return-to-work order issued by the Secretary of Labor. Yet, the
petitioner did not adduce any piece of evidence to show that respondent Ronaldo indeed participated in the strike. . . . .
In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her marriage to complainant Ronaldo has given
rise to the presumption that her sympat[hies] are likewise with her husband" as a ground for her dismissal is unacceptable. Such
is not one of the grounds to justify the termination of her employment. 25 (Underscoring supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision dated June 30, 2004, is SET
ASIDE. In lieu thereof, a new judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order dated September 24,
2002 of the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the MODIFICATION that the moral and
exemplary damages are reduced to P100,000.00 each and P50,000.00 each, respectively. aSTAIH

SO ORDERED. 26 (Emphasis and italics in the original; underscoring supplied)

Preliminarily, the present petition calls for a determination of whether there exists an employer-employee relationship 27 between petitioner and the
spouses-respondents. cSaADC
Denying the existence of such relationship, petitioner argues that the appellate court, as well as the NLRC, overlooked its twice-a-week reporting
arrangement with respondents who are free to practice their profession elsewhere the rest of the week. And it invites attention to the uncontroverted
allegation that respondents, aside from their monthly retainers, were entitled to one-half of all suturing, admitting, consultation, medico-legal and
operating room assistance fees. 28 These circumstances, it stresses, are clear badges of the absence of any employment relationship between them.
This Court is unimpressed.
Under the "control test", an employment relationship exists between a physician and a hospital if the hospital controls both the means and the details of
the process by which the physician is to accomplish his task. 29
Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or conditions of work, and is
compensated according to the result of his efforts and not the amount thereof, the element of control is absent. 30
As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical director, which consisted of
24-hour shifts totaling forty-eight hours each week and which were strictly to be observed under pain of administrative sanctions. CDaTAI
That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the operating room, or any
department or ward for that matter, respondents' work is monitored through its nursing supervisors, charge nurses and orderlies. Without the approval or
consent of petitioner or its medical director, no operations can be undertaken in those areas. For control test to apply, it is not essential for the employer
to actually supervise the performance of duties of the employee, it being enough that it has the right to wield the power. 31
With respect to respondents' sharing in some hospital fees, this scheme does not sever the employment tie between them and petitioner as this merely
mirrors additional form or another form of compensation or incentive similar to what commission-based employees receive as contemplated in Article 97
(f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or earning, 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. . . . (Emphasis and
underscoring supplied),

Respondents were in fact made subject to petitioner-hospital's Code of Ethics, 32 the provisions of which cover administrative and disciplinary measures
on negligence of duties, personnel conduct and behavior, and offenses against persons, property and the hospital's interest. cADSCT
More importantly, petitioner itself provided incontrovertible proof of the employment status of respondents, namely, the identification cards it issued
them, the payslips 33 and BIR W-2 (now 2316) Forms which reflect their status as employees, and the classification as "salary" of their remuneration.
Moreover, it enrolled respondents in the SSS and Medicare (Philhealth) program. It bears noting at this juncture that mandatory coverage under the SSS
Law 34 is premised on the existence of an employer-employee relationship, 35 except in cases of compulsory coverage of the self-employed. It would
be preposterous for an employer to report certain persons as employees and pay their SSS premiums as well as their wages if they are not its
employees. 36
And if respondents were not petitioner's employees, how does it account for its issuance of the earlier-quoted March 7, 1998 memorandum explicitly
stating that respondent is "employed" in it and of the subsequent termination letter indicating respondent Lanzanas' employment status. EaIcAS
Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-employee relationship exists between the
resident physicians and the training hospitals, unless there is a training agreement between them, and the training program is duly accredited or
approved by the appropriate government agency. In respondents' case, they were not undergoing any specialization training. They were considered
non-training general practitioners, 37 assigned at the emergency rooms and ward sections.
Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that private respondents were illegally dismissed. aSIATD
Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file. This is the import of the Secretary of Labor's Resolution
of May 22, 1998 in OS A-05-15-98 which reads:
xxx xxx xxx
In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24 members of petitioner are
supervisors, namely . . . Rolando Lanzonas [sic] . . . .
A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer only proves that except for the
contention that these employees allegedly supervise, they do not however recommend any managerial action. At most, their job
is merely routinary in nature and consequently, they cannot be considered supervisory employees.
They are not therefore barred from membership in the union of rank[-]and[-]file, which the petitioner [the union] is seeking to
represent in the instant case. 38 (Emphasis and underscoring supplied) DaTISc
xxx xxx xxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered indispensable to the national interest. In labor disputes adversely
affecting the continued operation of a hospital, Article 263 (g) of the Labor Code provides:
ART. 263. Strikes, Picketing, and Lockouts.
xxx xxx xxx
(g) . . .
. . . . In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it
shall be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce of medical
and other health personnel, whose movement and services shall be unhampered and unrestricted, as are necessary to insure the
proper and adequate protection of the life and health of its patients, most especially emergency cases, for the duration of the
strike or lockout. In such cases, the Secretary of Labor and Employment is mandated to immediately assume, within twenty-four
hours from knowledge of the occurrence of such strike or lockout, jurisdiction over the same or certify to the Commission for
compulsory arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the Commission, under pain
of immediate disciplinary action, including dismissal or loss of employment status or payment by the locking-out
employer of backwages, damages and other affirmative relief, even criminal prosecution against either or both of them.
xxx xxx xxx (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of all striking workers, whether a corresponding
return-to-work order had been issued. 39 The DOLE Secretary in fact issued a return-to-work Order, failing to comply with which is punishable by
dismissal or loss of employment status. 40
Participation in a strike and intransigence to a return-to-work order must, however, be duly proved in order to justify immediate dismissal in a "national
interest" case. As the appellate court as well as the NLRC observed, however, there is nothing in the records that would bear out Dr. Lanzanas' actual
participation in the strike. And the medical director's Memorandum 41 of April 22, 1998 contains nothing more than a general directive to all union
officers and members to return-to-work. Mere membership in a labor union does not ipso facto mean participation in a strike. IECcaA
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9, 1998, he was never given any work schedule 42 was not
refuted by petitioner. Petitioner in fact never released any findings of its supposed investigation into Dr. Lanzanas' alleged "inimical acts".
Petitioner thus failed to observe the two requirements,before dismissal can be effected notice and hearing which constitute essential elements of
the statutory process; the first to apprise the employee of the particular acts or omissions for which his dismissal is sought, and the second to inform the
employee of the employer's decision to dismiss him. 43 Non-observance of these requirements runs afoul of the procedural mandate. 44
The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and only time that he was apprised of the reason for his
dismissal. He was not afforded, however, even the slightest opportunity to explain his side. His was a "termination upon receipt" situation. While he was
priorly made to explain on his telephone conversation with Miscala, 45 he was not with respect to his supposed participation in the strike and failure to
heed the return-to-work order. HCEcAa

As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or authorized cause and without observance of due
process. In fact, petitioner never proffered any valid cause for her dismissal except its view that "her marriage to [Dr. Lanzanas] has given rise to the

presumption that her sympath[y] [is] with her husband; [and that when [Dr. Lanzanas] declared that he was going to boycott the scheduling of their
workload by the medical doctor, he was presumed to be speaking for himself [and] for his wife Merceditha." 46
Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike remained just that. Its termination of her
employment on the basis of her conjugal relationship is not analogous to any of the causes enumerated in Article 282 47 of the Labor Code. Mere
suspicion or belief, no matter how strong, cannot substitute for factual findings carefully established through orderly procedure. 48
The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr. Merceditha's case. There is thus no gainsaying that
her dismissal was both substantively and procedurally infirm. TacSAE
Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list" 49 including therein the names of respondents. Consider the
following portions of Dr. Merceditha's Memorandum of Appeal:
3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other hospitals, one of which [was] procured
from Foothills Hospital in Sto. Tomas, Batangas [that] contains her name. The object of the said list is precisely to harass
Complainant and malign her good name and reputation. This is not only unprofessional, but runs smack of oppression as CMC is
trying permanently deprived [sic] Complainant of her livelihood by ensuring that she is barred from practicing in other hospitals.
aEDCSI
4. Other co-professionals and brothers in the profession are fully aware of these "watch out" lists and as such, her reputation was
not only besmirched, but was damaged, and she suffered social humiliation as it is of public knowledge that she was dismissed
from work. Complainant came from a reputable and respected family, her father being a retired full Colonel in the Army, Col.
Romeo A. Vente, and her brothers and sisters are all professionals, her brothers, Arnold and Romeo Jr., being engineers. The
Complainant has a family protection [sic] to protect. She likewise has a professional reputation to protect, being a licensed
physician. Both her personal and professional reputation were damaged as a result of the unlawful acts of the respondents. 50
While petitioner does not deny the existence of such list, it pointed to the lack of any board action on its part to initiate such listing and to circulate the
same, viz.:
20. . . . . The alleged watchlist or "watch out list", as termed by complainants, were merely lists obtained by one Dr. Ernesto Naval
of PAMANA Hospital. Said list was given by a stockholder of respondent who was at the same time a stockholder of
PAMAN[A] Hospital. The giving of the list was not a Board action. 51 (Emphasis and underscoring supplied) ETDHaC
The circulation of such list containing names of alleged union members intended to prevent employment of workers for union activities similarly
constitutes unfair labor practice, thereby giving a right of action for damages by the employees prejudiced. 52
A word on the appellate court's deletion of the award of attorney's fees. There being no basis advanced in deleting it, as exemplary damages were
correctly awarded, 53 the award of attorney's fees should be reinstated. cHAaEC
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with MODIFICATION in that the award by the National
Labor Relations Commission of 10% of the total judgment award as attorney's fees is reinstated. In all other aspects, the decision of the appellate court
is affirmed.
SO ORDERED.
Quisumbing, Tinga, Velasco, Jr. and Brion, JJ., concur.
Footnotes
*Mercedita in some pleadings and annexed documents. STcAIa
1.Rollo, p. 10.
2.Id. at 11.
3.NLRC records, pp. 79-80; Annexes "E" and "F" of Complainants' (herein private respondents) Joint Reply and Rejoinder.
4.Id. at 74-75; Annexes "A" and "B".
5.Id. at 76-78; Annexes "C" and "D". ADCIca
6.Id. at 12.; NLRC records, pp. 99-100, Affidavit of Dr. Meluz Trinidad.
7.NLRC records, p. 171.
8.Rollo, p. 12.
9.NLRC records, p. 16.
10.Id. at 174.
11.The actual date of the union strike as reflected in the order of the Secretary of Labor and Employment. Id. at 50-51. IcHDCS
12.Rollo, p. 11.
13.NLRC records, p. 1.
14.Id. at 7.
15.NLRC records, pp. 50-51.
16.CA rollo, p. 198.
17.NLRC records, p. 175. AHCETa
18.Id. at 12.
19.Id. at 117-130.

20.Id. at 280-305.
21.Id. at 304.
22.Rollo, pp. 94-99. Penned by Justice Elvi John S. Asuncion with the concurrence of Justices Mariano C. Del Castillo and Hakim S. Abdulwahid.
23.Id. at 32-43. Penned by Justice Hakim S. Abdulwahid with the concurrence of Justices Remedios A. Salazar-Fernando and Mariano C. del Castillo.
2005jur
24.Id. at 40.
25.Id. at 40-41.
26.Id. at 42.
27.Applying the four-fold test which has the following elements: a) selection and engagement of the employee; b) payment of wages or salaries; c)
exercise of the power of dismissal; and d) exercise of the power to control the employee's conduct.
28.Rollo, p. 26.
29.Nogales v. Capitol Medical Center, G.R. No. 142625, December 19, 2006, 511 SCRA 204, 221 citing Diggs v. Novant Health, Inc., 628 S.E.2d 851
(2006). cACDaH
30.Encyclopedia Britannica v. NLRC, G.R. No. 87098, November 4, 1996, 264 SCRA 1, 10.
31.Equitable Banking Corp. v. NLRC, G.R. No. 102467, June 13, 1997, 273 SCRA 352, 371.
32.NLRC records, pp. 179-184; Annex "H".
33.Id. at 89; Annex "J".
34.Vide Section 9 of REPUBLIC ACT NO. 8282.
35.Social Security System v. Court of Appeals, 401 Phil. 132, 141 (2000).
36.Nagasura v. NLRC, G.R. Nos. 117936-37, May 20, 1998, 290 SCRA 245, 251; Equitable Banking Corporation v. NLRC, supra note 31. aSATHE
37.Rollo, p. 58.
38.NLRC records, pp. 90-93.
39.Telefunken Semiconductors Employees Union-FFW v. Sec. of Labor and Employment, G.R. Nos. 122743 and 127215, December 12, 1997, 283
SCRA 145-146.
40.Marcopper Mining Corp. v. Brillantes, G.R. No. 119381, March 11, 1996, 254 SCRA 595, 602.
41.CA rollo at 198.
42.Rollo, p. 79. EIcSDC
43.PNB v. Cabansag, G.R. No. 157010, June 21, 2005, 460 SCRA 514, 530-531.
44.Condo Suite Club Travel v. NLRC, G.R. No. 125671, January 28, 2000, 323 SCRA 679, 690 citing Vinta Maritime v. NLRC, 284 SCRA 656, 671672 (1998).
45.Supra note 10.
46.NLRC records, p. 43; Respondent's (Petitioner herein) Position Paper.
47.Article 282. Termination by employer. An employer may terminate an employee for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his 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 duly authorized representative; cDCSTA
(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.
48.Austria v. NLRC, G.R. No. 123646, July 14, 1999, 310 SCRA 293, 303.
49.NLRC records, pp. 197-199.
50.Id. at 20-21.
51.Id. at 59. TAECaD
52.Article 28 of the Civil Code states "Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force,
intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who
thereby suffers damage."
53.Article 2208 of the Civil Code states "In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) . . .; ETDSAc

xxx xxx xxx"

||| (Calamba Medical Center, Inc. v. NLRC, G.R. No. 176484, November 25, 2008)

SECOND DIVISION
[G.R. No. 119268. February 23, 2000.]
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL
ORDENIZA and AMADO CENTENO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN
TAXI (PHILJAMA INTERNATIONAL, INC.), respondents.
Ceferino Padua Law Office for petitioners.
The Solicitor General for public respondent.
Gonzalez Dimaguila Gonzales for Philjama Int'l., Inc.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; GRAVE ABUSE OF DISCRETION; CONSTRUED. The phrase "grave abuse of
discretion amounting to lack or excess of jurisdiction" has settled meaning in the jurisprudence of procedure. It means such capricious and whimsical
exercise of judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of power. In labor cases, this Court has declared in
several instances that disregarding rules it is bound to observe constitutes grave abuse of discretion on the part of labor tribunal.
2. LABOR AND SOCIAL LEGISLATION; LABOR CODE; NATIONAL LABOR RELATIONS COMMISSION (NLRC); SECOND MOTION FOR
RECONSIDERATION FROM THE SAME PARTY; NOT ALLOWED; RATIONALE. In this case, private respondent exhausted administrative remedy
available to it by seeking reconsideration of public respondent's decision dated April 28, 1994, which public respondent denied. With this motion for
reconsideration, the labor tribunal had ample opportunity to rectify errors or mistakes it may have committed before resort to courts of justice can be had.
Thus, when private respondent filed a second motion for reconsideration, public respondent should have forthwith denied it in accordance with Rule 7,
Section 14 of its New Rules of Procedure which allows only one motion for reconsideration from the same party, thus: "Sec. 14. Motions for
Reconsideration. Motions for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision
with proof of service that a copy of the same has been furnished within the reglementary period the adverse party and provided further, that only one
such motion from the same party shall be entertained." The rationale for allowing only one motion for reconsideration from the same party is to assist the
parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be countenanced in the resolution of
labor disputes. The dispute may involve no less than the livelihood of an employee and that of his loved ones who are dependent upon him for food,
shelter, clothing, medicine, and education. It may as well involve the survival of a business or an industry.
3. ID.; ID.; ID.; ID.; PROHIBITED PLEADING WHICH SHOULD NOT HAVE BEEN ENTERTAINED; VIOLATION IN CASE AT BAR. The second
motion for reconsideration filed by private respondent is indubitably a prohibited pleading which should have not been entertained at all. Public
respondent cannot just disregard its own rules on the pretext of "satisfying the ends of justice," especially when its disposition of a legal controversy ran
afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly, disregarding a settled legal
doctrine enunciated by this Court is not a way of rectifying an error or mistake. In our view, public respondent gravely abused its discretion taking
cognizance and granting private respondent's second motion for reconsideration as it wrecks the orderly procedure in seeking reliefs in labor cases.
4. ID.; ID.; LABOR RELATIONS; TERMINATION OF EMPLOYMENT; VALIDLY EFFECTED ONLY FOR JUST AND AUTHORIZED CAUSE AND
AFTER AFFORDING PRIOR NOTICE AND HEARING; NOT PRESENT IN CASE AT BAR. As consistently held by this Court, termination of
employment must be effected in accordance with law. The just and authorized causes for termination of employment are enumerated under Articles 282,
283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in Article 277 (b) of the said Code. Hence, petitioners, being
employees of private respondent, can be dismissed only for just and authorized cause, and after affording them notice and hearing prior to termination.
In the instant case, private respondent had no valid cause to terminate the employment of petitioners. Neither were there two (2) written notices sent by
private respondent informing each of the petitioners that they had been dismissed from work. These lack of valid cause and failure on the part of private
respondent to comply with the twin-notice requirement underscored the illegality surrounding petitioners' dismissal.
5. ID.; ID.; ID.; ID.; REMEDY FOR AN ILLEGALLY DISMISSED EMPLOYEE; CONSTRUED. Under the law, 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. It must be emphasized, though, that recent judicial pronouncements distinguish between employees illegally dismissed prior to the
effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal dismissals were effected after such date. Thus, employees illegally
dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction or qualification, while those illegally dismissed after
that date are granted full backwages inclusive of allowances and other benefits or their monetary equivalent from the time their actual compensation was
withheld from them up to the time of their 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 petitioners were terminated from work on August 1, 1991, they are entitled to full backwages on the basis of their last daily
earnings.
DECISION
QUISUMBING, J p:
This special civil action for certiorari seeks to annul the decision 1 of public respondent promulgated on October 28, 1994, in NLRC NCR CA No.
003883-92, and its resolution 2 dated December 13, 1994 which denied petitioners motion for reconsideration. cdll
Petitioners were drivers of private respondent, Philjama International, Inc., a domestic corporation engaged in the operation of "Goodman Taxi."
Petitioners used to drive private respondent's taxicabs every other day on a 24-hour work schedule under the boundary system. Under this arrangement,
the petitioners earned an average of P400.00 daily. Nevertheless, private respondent admittedly regularly deducts from petitioners' daily earnings the
amount of P30.00 supposedly for the washing of the taxi units. Believing that the deduction is illegal, petitioners decided to form a labor union to protect
their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs when they reported for work on August 6,
1991, and on succeeding days. Petitioners suspected that they were singled out because they were the leaders and active members of the proposed
union. Aggrieved, petitioners filed with the labor arbiter a complaint against private respondent for unfair labor practice, illegal dismissal and illegal
deduction of washing fees. In a decision 3 dated August 31, 1992, the labor arbiter dismissed said complaint for lack of merit. cdrep

On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the judgment of the labor arbiter. The labor
tribunal declared that petitioners are employees of private respondent, and as such, their dismissal must be for just cause and after due process. It
disposed of the case as follows:
"WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed from is hereby SET ASIDE
and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to reinstate the complainants,
namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis
de los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to their former positions
without loss of seniority and other privileges appertaining thereto; to pay the complainants full backwages and other benefits, less
earnings elsewhere, and to reimburse the drivers the amount paid as washing charges; and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED." 4
Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed another motion for reconsideration. This
time, public respondent, in its decision 5 dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled that it lacks jurisdiction
over the case as petitioners and private respondent have no employer-employee relationship. It held that the relationship of the parties is leasehold
which is covered by the Civil Code rather than the Labor Code, and disposed of the case as follows:
"VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET ASIDE. The Decision of the
Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of
jurisdiction. Cdpr
No costs.
SO ORDERED." 6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave abuse of discretion in rendering the
assailed decision, arguing that:
"I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR RECONSIDERATION WHICH
IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON GROUNDS NOT
EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A SETTLED
ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR
MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT PETITIONERS-TAXI DRIVERS
ARE EMPLOYEES OF RESPONDENT TAXI COMPANY." 7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the jurisprudence of procedure. It means such
capricious and whimsical exercise of judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of power. 8 In labor cases,
this Court has declared in several instances that disregarding rules it is bound to observe constitutes grave abuse of discretion on the part of labor
tribunal. Cdpr
In Garcia vs. NLRC, 9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the labor arbiter who rendered the decision
and expressed dismay over the judgment. Neither notice of appeal was filed nor cash or surety bond was posted by private respondent. Nevertheless,
the labor tribunal took cognizance of the letter from private respondent and treated said letter as private respondent's appeal. In a certiorari action before
this Court, we ruled that the labor tribunal acted with grave abuse of discretion in treating a mere letter from private respondent as private respondent's
appeal in clear violation of the rules on appeal prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC, 10 we held that the labor arbiter committed grave abuse of discretion when he failed to resolve immediately by
written order a motion to dismiss on the ground of lack of jurisdiction and the supplemental motion to dismiss as mandated by Section 15 of Rule V of
the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC, 11 we held that the NLRC gravely abused its discretion by allowing and deciding an appeal without an
appeal bond having been filed as required under Article 223 of the Labor Code.
In Maebo vs. NLRC, 12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule governing position papers. In this case,
the parties have already filed their position papers and even agreed to consider the case submitted for decision, yet the labor arbiter still admitted a
supplemental position paper and memorandum, and by taking into consideration, as basis for his decision, the alleged facts adduced therein and the
documents attached thereto.
In Gesulgon vs. NLRC, 13 we held that public respondent gravely abused its discretion in treating the motion to set aside judgment and writ of execution
as a petition for relief of judgment. In doing so, public respondent had, without sufficient basis, extended the reglementary period for filing petition for
relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking reconsideration of public respondent's decision
dated April 28, 1994, which public respondent denied. With this motion for reconsideration, the labor tribunal had ample opportunity to rectify errors or
mistakes it may have committed before resort to courts of justice can be had. 14 Thus, when private respondent filed a second motion for

reconsideration, public respondent should have forthwith denied it in accordance with Rule 7, Section 14 of its New Rules of Procedure which allows
only one motion for reconsideration from the same party, thus:
"SEC. 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or decision of the Commission
shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within
ten (10) calendar days from receipt of the order, resolution or decision with proof of service that a copy of the same has been
furnished within the reglementary period the adverse party and provided further, that only one such motion from the same party
shall be entertained." [Emphasis supplied] LexLib
The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in obtaining an expeditious and inexpensive
settlement of labor cases. For obvious reasons, delays cannot be countenanced in the resolution of labor disputes. The dispute may involve no less than
the livelihood of an employee and that of his loved ones who are dependent upon him for food, shelter, clothing, medicine, and education. It may as well
involve the survival of a business or an industry. 15
As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is indubitably a prohibited pleading 16 which
should have not been entertained at all. Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of justice," 17
especially when its disposition of a legal controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the
subsequent discussion. Clearly, disregarding a settled legal doctrine enunciated by this Court is not a way of rectifying an error or mistake. In our view,
public respondent gravely abused its discretion in taking cognizance and granting private respondent's second motion for reconsideration as it wrecks
the orderly procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public respondent. As mentioned earlier, its
October 28, 1994 judgment is not in accord with the applicable decisions of this Court. The labor tribunal reasoned out as follows:
"On the issue of whether or not employer-employee relationship exists, admitted is the fact that complainants are taxi drivers
purely on the 'boundary system.' Under this system the driver takes out his unit and pays the owner/operator a fee commonly
called 'boundary' for the use of the unit. Now, in the determination the existence of employer-employee relationship, the Supreme
Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988) has applied the following four-fold test:
'(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of
control the employees conduct.'
'Among the four (4) requisites,' the Supreme Court stresses that 'control is deemed the most important that the other requisites
may even be disregarded.' Under the control test, an employer-employee relationship exists if the 'employer' has reserved the
right to control the 'employee' not only as to the result of the work done but also as to the means and methods by which the same
is to be accomplished. Otherwise, no such relationship exists.' (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not pay the drivers, the
complainants herein, their wages. Instead, the drivers pay a certain fee for the use of the vehicle. On the matter of control, the
drivers, once they are out plying their trade, are free to choose whatever manner they conduct their trade and are beyond the
physical control of the owner/operator; they themselves determine the amount of revenue they would want to earn in a day's
driving; and, more significantly aside from the fact that they pay for the gasoline they consume, they likewise shoulder the cost of
repairs on damages sustained by the vehicles they are driving. cdphil

Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or one that is covered by a
charter agreement under the Civil Code rather than the Labor Code." 18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court, 19 we ruled that the relationship between jeepney owners/operators on one hand and jeepney drivers on the
other under the boundary system is that of employer-employee and not of lessor-lessee. We explained that in the lease of chattels, the lessor loses
complete control over the chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for the damages
to the lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The management
of the business is in the owner's hands. The owner as holder of the certificate of public convenience must see to it that the driver follows the route
prescribed by the franchising authority and the rules promulgated as regards its operation. Now, the fact that the drivers do not receive fixed wages but
get only that in excess of the so-called "boundary" they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of
employer and employee. We have applied by analogy the abovestated doctrine to the relationships between bus owner/operator and bus conductor, 20
auto-calesa owner/operator and driver, 21 and recently between taxi owners/operators and taxi drivers. 22 Hence, petitioners are undoubtedly
employees of private respondent because as taxi drivers they perform activities which are usually necessary or desirable in the usual business or trade
of their employer.
As consistently held by this Court, termination of employment must be effected in accordance with law. The just and authorized causes for termination of
employment are enumerated under Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in Article 277 (b) of
the said Code. Hence, petitioners, being employees of private respondent, can be dismissed only for just and authorized cause, and after affording them
notice and hearing prior to termination. In the instant case, private respondent had no valid cause to terminate the employment of petitioners. Neither
were there two (2) written notices sent by private respondent informing each of the petitioners that they had been dismissed from work. These lack of
valid cause and failure on the part of private respondent to comply with the twin-notice requirement underscored the illegality surrounding petitioners'
dismissal. llcd
Under the law, 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. 23 It must be emphasized, though, that recent judicial pronouncements 24 distinguish
between employees illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal dismissals were
effected after such date. Thus, employees illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction
or qualification, while those illegally dismissed after that date are granted full backwages inclusive of allowances and other benefits or their monetary
equivalent from the time their actual compensation was withheld from them up to the time of their 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 petitioners were terminated from work on August 1, 1991, they are
entitled to full backwages on the basis of their last daily earnings.

With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the same as not illegal in the
context of the law. We note that after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition when he
took it out. Car washing after a tour of duty is indeed a practice in the taxi industry and is in fact dictated by fair play. 25 Hence, the drivers are not
entitled to reimbursement of washing charges.
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October 28, 1994, is hereby SET ASIDE. The
DECISION of public respondent dated April 28, 1994, and its RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to
MODIFICATION. Private respondent is directed to reinstate petitioners to their positions held at the time of the complained dismissal. Private respondent
is likewise ordered to pay petitioners their full backwages, to be computed from the date of dismissal until their actual reinstatement. However, the order
of public respondent that petitioners be reimbursed the amount paid as washing charges is deleted. Costs against private respondents. Cdpr
SO ORDERED.
Bellosillo, Mendoza, and De Leon, Jr., JJ., concur.
Buena, J., is on official leave.
Footnotes
1.Rollo, pp. 16-22.
2.Id. at 23.
3.Id. at 25-32.
4.Id. at 41.
5.Id. at 16-22.
6.Id. at 21.
7.Id. at 3.
8.Arroyo vs. De Venecia, 277 SCRA 268, 294 (1997).
9.264 SCRA 261, 267 (1996).
10.263 SCRA 638, 657 (1996).
11.261 SCRA 573, 583-584 (1996).
12.229 SCRA 240, 248 (1994).
13.219 SCRA 561, 566 (1993).
14.Biogenerics Marketing and Research Corp. vs. NLRC, 122725, September 8, 1999, p. 6.
15.Maebo vs. NLRC, 229 SCRA 240, 248 (1994).
16.Rollo, p. 8.
17.Id. at 17.
18.Rollo, pp. 18-20.
19.National Labor Union vs. Dinglasan, 98 Phil. 649, 652 (1956); Magboo vs. Bernardo, 7 SCRA 952, 954 (1963); Lantaco, Sr. vs. Llamas, 108 SCRA
502, 514 (1981).
20.Doce vs. Workmen's Compensation Commission, 104 Phil. 946, 948 (1958).
21.Citizen's League of Freeworkers vs. Abbas, 18 SCRA 71, 73 (1966).
22.Martinez vs. NLRC, 272 SCRA 793, 800 (1997).
23.Article 279, Labor Code.
24.Bustamante vs. NLRC, 265 SCRA 61, 69-70 (1996); Highway Copra Traders vs. NLRC, 293 SCRA 350, 356 (1998); Jardine Davies Inc. vs.
NLRC, GR-76272, July 28, 1999, p. 8; Pepsi-Cola Products Philippines Inc. vs. NLRC, GR-121324, September 30, 1999, p. 9.
25.Five J Taxi vs. NLRC, 235 SCRA 556, 562 (1994).

||| (Jardin v. NLRC, G.R. No. 119268, February 23, 2000)