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G.R. No. 182295, June 26, 2013 - 7K CORPORATION, Petitioner, v. EDDIE ALBARICO, Respondent. : JUNE 2013 - PHILIPPINE SUPREME COUR

FIRSTDIVISION
G.R.No.182295,June26,2013
7KCORPORATION,Petitioner,v.EDDIEALBARICO,Respondent.
DECISION
SERENO,C.J.:
This is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of Court, asking the Court to
determinewhetheravoluntaryarbitratorinalabordisputeexceededhisjurisdictionindecidingissuesnotspecified
in the submission agreement of the parties. It assails the Decision1 dated 18 September 2007 and the
Resolution2dated17March2008oftheCourtofAppeals(CA).3
FACTS
Whenhewasdismissedon5April1993,respondentEddieAlbarico(Albarico)wasaregularemployeeofpetitioner
7K Corporation, a company selling water purifiers. He started working for the company in 1990 as a
salesman.4Becauseofhisgoodperformance,hisemploymentwasregularized.Hewasalsopromotedseveraltimes:
fromsalesman,hewaspromotedtoseniorsalesrepresentativeandthentoactingteamfieldsupervisor.In1992,he
wasawardedthePresidentsTrophyforbeingoneofthecompanystopwaterpurifierspecialistdistributors.InApril
of 1993, the chief operating officer of petitioner 7K Corporation terminated Albaricos employment allegedly for his
poor sales performance.5Respondent had to stop reporting for work, and he subsequently submitted his money
claims against petitioner for arbitration before the National Conciliation and Mediation Board (NCMB). The issue for
voluntary arbitration before the NCMB, according to the parties Submission Agreement dated 19 April 1993, was
whether respondent Albarico was entitled to the payment of separation pay and the sales commission reserved for
himbythecorporation.6
While the NCMB arbitration case was pending, respondent Albarico filed a Complaint against petitioner corporation
withtheArbitrationBranchoftheNationalLaborRelationsCommission(NLRC)forillegaldismissalwithmoneyclaims
for overtime pay, holiday compensation, commission, and food and travelling allowances.7 The Complaint was
decided by the labor arbiter in favor of respondent Albarico, who was awarded separation pay in lieu of
reinstatement,backwagesandattorneysfees.8
On appeal by petitioner, the labor arbiters Decision was vacated by the NLRC for forum shopping on the part of
respondentAlbarico,becausetheNCMBarbitrationcasewasstillpending.9TheNLRCDecision,whichexplicitlystated
that the dismissal was without prejudice to the pending NCMB arbitration case,10became final after no appeal was
taken.
On17September1997,petitionercorporationfileditsPositionPaperintheNCMBarbitrationcase.11Itdeniedthat
respondentwasterminatedfromwork,muchlessillegallydismissed.Thecorporationclaimedthathehadvoluntarily
stopped reporting for work after receiving a verbal reprimand for his sales performance hence, it was he who was
guilty of abandonment of employment. Respondent made an oral manifestation that he was adopting the position
paper he submitted to the labor arbiter, a position paper in which the former claimed that he had been illegally
dismissed.12
On12January2005,almost12yearsafterthefilingoftheNCMBcase,bothpartiesappearedinahearingbeforethe
NCMB.13Respondentmanifestedthathewaswillingtosettlethecaseamicablywithpetitionerbasedonthedecision
ofthelaborarbiterorderingthepaymentofseparationpayinlieuofreinstatement,backwagesandattorneysfees.
Onitspart,petitionermadeacountermanifestationthatitwaslikewiseamenabletosettlingthedispute.However,it
waswillingtopayonlytheseparationpayandthesalescommissionaccordingtotheSubmissionAgreementdated
19April1993.14
Thefactualfindingsofthevoluntaryarbitrator,aswellasoftheCA,arenotclearonwhathappenedafterwards.Even
therecordsarebereftofsufficientinformation.
On 18 November 2005, the NCMB voluntary arbitrator rendered a Decision finding petitioner corporation liable for
illegal dismissal.15 The termination of respondent Albarico, by reason of alleged poor performance, was found
invalid.16Thearbitratorexplainedthatthepromotions,increasesinsalary,andawardsreceivedbyrespondentbelied
theclaimthatthelatterwasperformingpoorly.17ItwasalsofoundthatAlbaricocouldnothaveabandonedhisjob,
as the abandonment should have been clearly shown. Mere absence was not sufficient, according to the arbitrator,
butmusthavebeenaccompaniedbyovertactspointingtothefactthattheemployeedidnotwanttoworkanymore.
Itwasnotedthat,inthepresentcase,theimmediatefilingofacomplaintforillegaldismissalagainsttheemployer,
with a prayer for reinstatement, showed that the employee was not abandoning his work. The voluntary arbitrator
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alsofoundthatAlbaricowasdismissedfromhisworkwithoutdueprocess.
However, it was found that reinstatement was no longer possible because of the strained relationship of the
parties.18Thus, in lieu of reinstatement, the voluntary arbitrator ordered the corporation to pay separation pay for
twoyearsatP4,456foreachyear,oratotalamountofP8,912.
Additionally,inviewofthefindingthatAlbaricohadbeenillegallydismissed,thevoluntaryarbitratoralsoruledthat
theformerwasentitledtobackwagesintheamountofP90,804.19Finally,thearbitratorawardedattorneysfeesin
respondentsfavor,becausehehadbeencompelledtofileanactionforillegaldismissal.20
PetitionercorporationsubsequentlyappealedtotheCA,imputingtothevoluntaryarbitratorgraveabuseofdiscretion
amountingtolackorexcessofjurisdictionforawardingbackwagesandattorneysfeestorespondentAlbaricobased
ontheformersfindingofillegaldismissal.21Thearbitratorcontendedthattheissueofthelegalityofdismissalwas
notexplicitlyincludedintheSubmissionAgreementdated19April1993filedforvoluntaryarbitrationandresolution.
It prayed that the said awards be set aside, and that only separation pay of P8,912.00 and sales commission of
P4,787.60beawarded.
TheCAaffirmedtheDecisionofthevoluntaryarbitrator,buteliminatedtheawardofattorneysfeesforhavingbeen
madewithoutfactual,legalorequitablejustification.22PetitionersMotionforPartialReconsiderationwasdeniedas
well.23
Hence,thisPetition.

ISSUE

The issue before the Court is whether the CA committed reversible error in finding that the voluntary arbitrator
properlyassumedjurisdictiontodecidetheissueofthelegalityofthedismissalofrespondentaswellasthelatters
entitlementtobackwages,evenifneitherthelegalitynortheentitlementwasexpressedlyclaimedintheSubmission
Agreementoftheparties.
ThePetitionisdeniedforbeingdevoidofmerit.
DISCUSSION
Preliminarily, we address petitioners claim that under Article 217 of the Labor Code, original and exclusive
jurisdictionoverterminationdisputes,suchasthepresentcase,islodgedonlywiththelaborarbiteroftheNLRC.24
Petitioneroverlookstheprovisointhesaidarticle,thus:

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Art.217.JurisdictionoftheLaborArbitersandtheCommission.
a.Except as otherwise provided under this Code,the Labor Arbiters shall have original and exclusive
jurisdictiontohearanddecide,withinthirty(30)calendardaysafterthesubmissionofthecasebythe
partiesfordecisionwithoutextension,evenintheabsenceofstenographicnotes,thefollowingcases
involvingallworkers,whetheragriculturalornonagricultural:
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xxxx
2.Terminationdisputes
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
otherclaimsarisingfromemployeremployeerelations,includingthoseofpersonsindomesticor
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whetheraccompaniedwithaclaimforreinstatement.(Emphasessupplied)
Thus,althoughthegeneralruleundertheLaborCodegivesthelaborarbiterexclusiveandoriginaljurisdictionover
termination disputes, it also recognizes exceptions. One of the exceptions is provided in Article 262 of the Labor
Code.InSanJosev.NLRC,25wesaid:
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ThephraseExceptasotherwiseprovidedunderthisCodereferstothefollowingexceptions:

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A.Art.217.JurisdictionofLaborArbiters...
xxxx
(c) Cases arising from the interpretation or implementation of collective bargaining agreement and
those arising from the interpretation or enforcement of company procedure/policies shall be disposed
of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitrator as
maybeprovidedinsaidagreement.
B. Art. 262. Jurisdiction over other labor disputes. The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other
labordisputesincludingunfairlaborpracticesandbargainingdeadlocks.(Emphasissupplied)
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Wealsosaidinthesamecasethat[t]helabordisputesreferredtointhesameArticle262[oftheLaborCode]can
include all those disputes mentioned in Article 217 over which the Labor Arbiter has original and exclusive
jurisdiction.26
Fromtheabovediscussion,itisclearthatvoluntaryarbitratorsmay,byagreementoftheparties,assumejurisdiction
overaterminationdisputesuchasthepresentcase,contrarytotheassertionofpetitionerthattheymaynot.
We now resolve the main issue. Petitioner argues that, assuming that the voluntary arbitrator has jurisdiction over
thepresentterminationdispute,thelattershouldhavelimitedhisdecisiontotheissuecontainedintheSubmission
AgreementofthepartiestheissueofwhetherrespondentAlbaricowasentitledtoseparationpayandtothesales
commissionthelatterearnedbeforebeingterminated.27PetitionerassertsthatunderArticle262oftheLaborCode,
the jurisdiction of a voluntary arbitrator is strictly limited to the issues that the parties agree to submit. Thus, it
contends that the voluntary arbitrator exceeded his jurisdiction when he resolved the issues of the legality of the
dismissalofrespondentandthelattersentitlementtobackwagesonthebasisofafindingofillegaldismissal.
Accordingtopetitioner,theCAwronglyconcludedthattheissueofrespondentsentitlementtoseparationpaywas
necessarily based on his allegation of illegal dismissal, thereby making the issue of the legality of his dismissal
implicitly submitted to the voluntary arbitrator for resolution.28 Petitioner argues that this was an erroneous
conclusion, because separation pay may in fact be awarded even in circumstances in which there is no illegal
dismissal.
We rule that although petitioner correctly contends that separation pay may in fact be awarded for reasons other
than illegal dismissal, the circumstances of the instant case lead to no other conclusion than that the claim of
respondent Albarico for separation pay was premised on his allegation of illegal dismissal. Thus, the voluntary
arbitratorproperlyassumedjurisdictionovertheissueofthelegalityofhisdismissal.
True,undertheLaborCode,separationpaymaybegivennotonlywhenthereisillegaldismissal.Infact,itisalso
given to employees who are terminated for authorized causes, such as redundancy, retrenchment or installation of
laborsavingdevicesunderArticle28329oftheLaborCode.Additionally,jurisprudenceholdsthatseparationpaymay
alsobeawardedforconsiderationsofsocialjustice,evenifanemployeehasbeenterminatedforajustcauseother
thanseriousmisconductoranactreflectingonmoralcharacter.30TheCourthasalsoruledthatseparationpaymay
beawardedifithasbecomeanestablishedpracticeofthecompanytopaythesaidbenefittovoluntarilyresigning
employees31ortothosevalidlydismissedfornonmembershipinaunionasrequiredinaclosedshopagreement.32
Theabovecircumstances,however,donotobtaininthepresentcase.Thereisnoclaimthattheissueofentitlement
to separation pay is being resolved in the context of any authorized cause of termination undertaken by petitioner
corporation.Neitheristhereanyallegationthataconsiderationofsocialjusticeisbeingresolvedhere.Infact,even
in instances in which separation pay is awarded in consideration of social justice, the issue of the validity of the
dismissalstillneedstoberesolvedfirst.Onlywhenthereisalreadyafindingofavaliddismissalforajustcausedoes
thecourtthenawardseparationpayforreasonofsocialjustice.Theothercircumstanceswhenseparationpaymay
beawardedarenotpresentinthiscase.
The foregoing findings indisputably prove that the issue of separation pay emanates solely from respondents
allegationofillegaldismissal.Infact,petitioneritselfacknowledgedtheissueofillegaldismissalinitspositionpaper
submittedtotheNCMB.
Moreover,wenotethateventheNLRCwasoftheunderstandingthattheNCMBarbitrationcasesoughttoresolvethe
issueofthelegalityofthedismissaloftherespondent.Infact,theidentityoftheissueofthelegalityofhisdismissal,
whichwaspreviouslysubmittedtotheNCMB,andlatersubmittedtotheNLRC,wasthebasisofthelattersfindingof
forum shopping and the consequent dismissal of the case before it. In fact, petitioner also implicitly acknowledged
this when it filed before the NLRC its Motion to Dismiss respondents Complaint on the ground of forum shopping.
Thus,itisnowestoppedfromclaimingthattheissuebeforetheNCMBdoesnotincludetheissueofthelegalityofthe
dismissal of respondent. Besides, there has to be a reason for deciding the issue of respondents entitlement to
separationpay.Tothinkotherwisewouldleadtoabsurdity,becausethevoluntaryarbitratorwouldthenbedeciding
that issue in a vacuum. The arbitrator would have no basis whatsoever for saying that Albarico was entitled to
separationpayornotiftheissueofthelegalityofrespondentsdismissalwasnotresolvefirst.
Hence, the voluntary arbitrator correctly assumed that the core issue behind the issue of separation pay is the
legalityofthedismissalofrespondent.Moreover,wehaveruledinSimeDarbyPilipinas,Inc.v.DeputyAdministrator
Magsalin33that a voluntary arbitrator has plenary jurisdiction and authority to interpret an agreement to arbitrate
andtodeterminethescopeofhisownauthoritywhenthesaidagreementisvaguesubjectonly,inapropercase,
tothecertiorarijurisdictionofthisCourt.
HavingestablishedthattheissueofthelegalityofdismissalofAlbaricowasinfactnecessarilyalbeitnotexplicitly
included in the Submission Agreement signed by the parties, this Court rules that the voluntary arbitrator rightly
assumedjurisdictiontodecidethesaidissue.
Consequently, we also rule that the voluntary arbitrator may award backwages upon a finding of illegal dismissal,
even though the issue of entitlement thereto is not explicitly claimed in the Submission Agreement. Backwages, in
general, are awarded on the ground of equity as a form of relief that restores the income lost by the terminated
employeebyreasonofhisillegaldismissal.34
InSimeDarbyweruledthatalthoughthespecificissuepresentedbythepartiestothevoluntaryarbitratorwasonly
the issue of performance bonus, the latter had the authority to determine not only the issue of whether or not a
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performance bonus was to be granted, but also the related question of the amount of the bonus, were it to be
granted.Weexplainedthattherewasnoindicationatallthatthepartiestothearbitrationagreementhadregarded
theissueofperformancebonusasatwotieredissue,ofwhichonlyoneaspectwasbeingsubmittedtoarbitration.
Thus, we held that the failure of the parties to limit the issues specifically to that which was stated allowed the
arbitratortoassumejurisdictionovertherelatedissue.
Similarly, in the present case, there is no indication that the issue of illegal dismissal should be treated as a two
tiered issue whereupon entitlement to backwages must be determined separately. Besides, since arbitration is a
finalresortfortheadjudicationofdisputes,thevoluntaryarbitratorinthepresentcasecanassumethathehasthe
necessary power to make a final settlement.35 Thus, we rule that the voluntary arbitrator correctly assumed
jurisdictionovertheissueofentitlementofrespondentAlbaricotobackwagesonthebasisoftheformersfindingof
illegaldismissal.
WHEREFORE,premisesconsidered,theinstantPetitionisDENIED.The18September2007Decisionand17March
2008ResolutionoftheCourtofAppealsinCAG.R.SPNo.92526,areherebyAFFIRMED.
SOORDERED.
LeonardoDeCastro,Bersamin,Villarama,Jr.andReyes,JJ.,concur.

Endnotes:
1Rollo,pp.2643.

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2Id.at44.

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3BoththeDecisionandtheResolutioninCAG.R.SPNo.92526werepennedbyCAAssociateJustice

Sixto C. Marella, Jr. and concurred in by Associate Justices Amelita G. Tolentino and Lucenito N.
Tagle.
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4Rollo,p.27CADecision,p.2.

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5Id.at28CADecision,p.3.

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6Id.

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7Id.

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8Id.at6065,LaborArbitersDecision.
9Id.at96102,NLRCDecision.

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10Id.at101NLRCDecision,p.6.

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11Id.at29CADecision,p.4.

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12Id.at10InstantRule45Petition,p.8.

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13Id.at30CADecision,p.5.

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14Id.

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15Id.at8995VoluntaryArbitratorsDecision.

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16Id.at8995VoluntaryArbitratorsDecision,p.4.

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17Id.

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18Id.at93VoluntaryArbitratorsDecision,p.5.

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19Id.

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20Id.at94VoluntaryArbitratorsDecision,p.6.

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21Id.at121136PetitionersCAMemorandum.

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22Id.at2643CADecision.

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23Id.at44CAResolution.

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24Id.at15InstantRule45Petition,p.13.

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25355Phil.759(1998).

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26Id.

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27Id.at1415InstantRule45Petition,pp.1213.

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28Id.at1617InstantRule45Petition,pp.1415.

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29Art.283.Closureofestablishmentandreductionofpersonnel.Theemployermayalsoterminatethe

employmentofanyemployeeduetotheinstallationoflaborsavingdevices,redundancy,retrenchment
to prevent losses or the closing or cessation of operationof the establishment or undertaking unless
theclosingisforthepurposeofcircumventingtheprovisionsofthisTitle,byservingawrittennotice
ontheworkersandtheMinistryofLaborandEmploymentatleastone(1)monthbeforetheintended
datethereof.Incaseofterminationduetotheinstallationoflaborsavingdevicesorredundancy,the
workeraffectedtherebyshallbeentitledtoaseparationpayequivalenttoatleasthisone(1)month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of
retrenchmenttopreventlossesandincasesofclosuresorcessationofoperationsofestablishmentor
undertaking not due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least onehalf (1/2) month pay for every year of service,
whicheverishigher.Afractionofatleastsix(6)monthsshallbeconsideredone(1)wholeyear.
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30EasternPaperMills,Inc.v.NLRC,252Phil.618(1989).

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31HinatuanMiningCorporationv.NLRC,335Phil.1090(1997).

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32UnitedStatesLines,Inc.v.ActingMinisterofLabor,202Phil.729(1982).

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33259Phil.658(1989).

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34Torillov.Leogardo,274Phil.758(1991).

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35Ludov.Saornido,443Phil.554(2003).

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